On Wednesday, the U.S. Securities and Exchange Commission (SEC) unanimously voted to revise market rules, allowing certain stocks to be quoted in increments of $0.005, down from the current one-cent minimum.
SEC Chair Gary Gensler stated, “This change will reduce investor costs and enhance market liquidity, competition, and price efficiency.” He emphasized that the existing one-penny minimum is outdated and often too broad for many stocks.
The rule aims to reduce bid-ask spreads, meaning investors will save more money with tighter spreads. Since 2005, stocks have been priced with a minimum tick size of one cent. Gensler noted that about 74% of trading volume involves quotes narrower than 1.5 cents, indicating that the current minimum does not reflect market realities for many stocks, such as Ford Motor and Snap, according to The Wall Street Journal.
The SEC’s new “tick size” regulation will come into effect in November 2025. Under this rule, a significant number of stocks—estimated at around 1,700—will be eligible for the new pricing increments.
Originally, the SEC had proposed implementing four different tick sizes: one-tenth, two-tenths, half, and a full penny. However, in response to concerns about increased complexity and costs, the Commission decided against this approach.
