SEC to Examine Tick Size for Small Caps
Traders Magazine Online News, April 17, 2012
"I am sure that the SEC will carefully consider the results of its study of whether increased spreads would promote capital formation for smaller issuers before taking any regulatory action," the source said. "Conceivably, it could do a pilot program if the study suggests that such a step is warranted."
And a pilot study is something the Street will likely support, since it will make sure the SEC is aware of unintended consequences from changing tick size. Joe Ricciardi, managing director and head of cash trading at Knight Capital, favors a pilot program.
"It's definitely worth studying changing the tick size," Ricciardi said. "Due to the intricacies of market structure, everything in this industry should be done on a pilot program. I'm not against this type of study, whether it's to go to either wider or narrower spreads. You need to run a pilot program."
At least one industry executive is skeptical that the minimum increment will go back up.
"I wouldn't underestimate the difficulty of achieving wider spreads, said Greg Tusar, managing director and head of Goldman Sachs Electronic Trading, at the recent Security Traders Association of New York conference. "But from the standpoint of aggregating liquidity, it may make sense. It will be interesting to see."
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