Tick Size Pilot Program Launches
The SEC's project to better understand the impact of changing the tick size for securities of small-cap companies kicks off today.

The industry won't have a true grasp of the impact of the pilot until the data collected is analyzed, with the first report being released in April 2018. However, in the meantime, here's all you need to know about the program going forward:
WHAT: In short, the SEC is interested in understanding if changing tick sizes will improve liquidity for securities of small-cap companies. Regulators approved the Tick Size Pilot program's National Market System (NMS) plan on May 6, 2015. The program starts today.
WHY: Some believe smaller spreads have negatively impacted the amount of liquidity available for securities of small-cap firms. This program intends to shed more light on how a different market structure would affect those securities.
WHO: The program consists of 1600 securities broken up into four groups of 400 securities each.
The Financial Industry Regulatory Authority (Finra) defines the four groups as follows:
- The control group will be quoted and trade at their current tick size increment.
- The first test group will be quoted in $0.05 increments, but will continue to trade at their current price increment.
- The second test group will be quoted and trade in $0.05 minimum increments, but would allow certain exemptions for midpoint executions, retail investor executions, and negotiated trades.
- The third test group will adhere to the requirements of the second test group, but will also be subject to a "trade-at" requirement. There will also be an exemption for block-size orders.
The entire list of participating securities can be found here.
WHEN: The program begins today, but real insight won't be gained from it until April 2, 2018, when participants publish a report assessing the impact of the pilot during its first year. The program ends Oct. 3, 2018. Finra published the program's entire timeline here.
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