Small-Cap Tick Sizes Pilot Programs On the Way

Proposals to study changing the tick sizes at which some U.S. stocks change hands may be getting closer to implementation.

As first reported in Bloomberg, executives from some U.S. exchanges are drafting a pilot program that would widen tick sizes on about 100 smaller and less-liquid securities for a year, according to a document seen by the news agency. Another would cover lower-priced, active stocks to see if smaller increments would benefit investors, the document showed.

Most American shares have been bought and sold at prices denominated in pennies for more than a decade.

Officials from the New York Stock Exchange and Nasdaq held discussions with the Securities and Exchange Commission in the past week on the pilots, according to a person with direct knowledge of the matter who asked not to be identified because the talks were private.

Spokespersons from NYSE Euronext, Nasdaq, BATS Global Markets and the SEC all declined to comment on the pilot programs.

The pilot programs would last six months and feature 100 securities, though participation by traders would be optional.

The SEC has asked the exchanges to flesh out how long the pilot would last and how to link the minimum quoting increment to variables such as market capitalization or trading volume.