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Finra to Release Tick Pilot Stocks Next Week

Written by John D'Antona | Sep 1, 2016 5:13:18 PM

The U.S. Securities and Exchange Commission’s tick-size pilot is taking one more step towards implementation.

According to Financial Industry Regulatory Authority, the actual symbols or companies whose stocks will be included in the pilot will be posted on the regulator’s website on Tuesday, September 6.

On May 6, 2015, the SEC issued its order approving the National Market System Plan to implement a Tick Size Pilot Program by the National Securities Exchanges and Finra.

This group of securities will be constant for the duration of the pilot program, which is scheduled to begin on October 3 and last for two years. The tick size pilot is a data-driven test to evaluate whether or not widening the tick size for securities of smaller capitalization companies would impact trading, liquidity, and market quality of those securities.

However, securities might move between the three test buckets within the pilot on a daily basis as trading conditions allow. Any changes in test buckets will posted on Finra’s website. Also, As a result, beginning on September 3, firms must migrate from using Finra’s published Pre-Pilot Data Collection Security List and begin using the “TSPilotSecurities” and “TSPilotChanges” lists available on Finra’s Consolidated List of Pilot Securities webpage.

The total number of securities will be fixed at 3,000 names and Finra will assign the securities for each of the three test buckets, roughly 400 securities in each bucket.

The control group will have 1,800 securities in it that will trade under existing rules or at one cent increments and possibly in sub-penny increments.

The three test buckets will trade in nickel or 5 cent increments. Test Group A will trade under existing rules and can trade within the spread. Test Group B symbols will trade only in 5 cent increments and I certain cases only, with exceptions. The last group, Group C, will trade in 5 cent increments as the other test groups but subject to a “trade-at” provision.

Market quality statistics, market and marketable limit order data, and market maker profitability acquired from the pilot program will be collected and provided to the SEC on a monthly basis.  Market quality data and aggregated market maker profitability data will also be made publicly available on a monthly basis.

On April 2, 2018, market data collectors for the pilot will publish a review – the Joint Assessment – to the SEC on the data they have collected. Then on October 8, 2018, post pilot data collection will begin and carry on until April 1, 2019.

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