The US Securities and Exchange Commission (SEC) made a significant change on Wednesday by approving a measure that will allow some stocks to be quoted in half-penny increments. This decision, which was made unanimously, is aimed at reducing costs for investors and improving liquidity, competition, and price efficiency in the markets, according to SEC Chair Gary Gensler.
The rule change will narrow bid-ask spreads, ultimately saving investors money. Prior to this adjustment, stocks had been priced at a one-penny minimum since 2005, which was deemed outdated by Gensler. The SEC chair noted that around 74% of share volume is quoted at under 1.5 pennies, indicating the need for a change in pricing structure.
As a result of this decision, as many as 1,700 stocks could be impacted by the shift to half-penny increments. Stocks with bid-ask spreads of around 1 cent will now have more room to fluctuate, including well-known names such as Ford Motor and Snap.
While the SEC initially proposed introducing four separate tick sizes, ultimately they decided against this approach due to industry concerns about complexity and added costs. The change is set to take effect in November 2025.
Overall, the SEC's decision to allow some stocks to be quoted in half-penny increments is seen as a positive step towards reducing costs for investors and improving market efficiency. This adjustment is expected to have a significant impact on a large number of stocks, ultimately benefiting investors and promoting greater liquidity in the markets.