Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders

<RULE> SECURITIES AND EXCHANGE COMMISSION <CFR>17 CFR Part 242</CFR> <DEPDOC>[Release No. 34-101070; File No. S7-30-22]</DEPDOC> <RIN>RIN 3235-AN23</RIN> <SUBJECT>Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Securities and Exchange Commission. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Securities and Exchange Commission (“Commission” or “SEC”) is adopting amendments to certain rules of Regulation National Market System (“Regulation NMS”) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) to amend the minimum pricing increments for the quoting of certain NMS stocks, reduce the access fee caps, and enhance the transparency of better priced orders. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective Date:</E> December 9, 2024. <E T="03">Compliance dates:</E> See section VI., titled “Compliance Dates,” for further information on transitioning to the final rules. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Kelly Riley, Senior Special Counsel, Johnna Dumler, Special Counsel, Steve Kuan, Special Counsel, Marc McKayle, Special Counsel, Leigh Roth, Special Counsel, and Alba Baze, Attorney-Advisor, at (202) 551-5500, Office of Market Supervision, Division of Trading and Markets, Commission, 100 F Street NE, Washington, DC 20549. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Commission is adopting amendments to the following rules under Regulation NMS: <GPOTABLE COLS="2" OPTS="L2,tp0,i1" CDEF="s50,18"> <TTITLE> </TTITLE> <ENT>§ 242.600(b)(69)</ENT> </ROW> <ROW> <ENT I="01">Rule 600(b)(89)</ENT> <ENT>§ 242.600(b)(89)</ENT> </ROW> <ROW> <ENT I="01">Rule 600(b)(93)</ENT> <ENT>§ 242.600(b)(93)</ENT> </ROW> <ROW> <ENT I="01">Rule 603</ENT> <ENT>§ 242.603</ENT> </ROW> <ROW> <ENT I="01">Rule 610</ENT> <ENT>§ 242.610</ENT> </ROW> <ROW> <ENT I="01">Rule 612</ENT> <ENT>§ 242.612</ENT> </ROW> </GPOTABLE> <EXTRACT> <FP SOURCE="FP-2">I. Introduction</FP> <FP SOURCE="FP1-2">A. Rule 612 Minimum Pricing Increments</FP> <FP SOURCE="FP1-2">1. Background</FP> <FP SOURCE="FP1-2">2. Proposed and Adopted Amendments</FP> <FP SOURCE="FP1-2">B. Rule 610 Fees for Access to Quotations and Transparency of Fees</FP> <FP SOURCE="FP1-2">1. Background</FP> <FP SOURCE="FP1-2">2. Proposed and Adopted Amendments</FP> <FP SOURCE="FP1-2">C. Transparency of Better Priced Orders</FP> <FP SOURCE="FP1-2">1. Background</FP> <FP SOURCE="FP1-2">2. Proposed and Adopted Amendments</FP> <FP SOURCE="FP1-2">D. Overarching Comments on the Proposing Release</FP> <FP SOURCE="FP-2">II. Equity Market Structure Initiatives and the Regulation NMS Proposal</FP> <FP SOURCE="FP-2">III. Final Rule 612 of Regulation NMS—Minimum Pricing Increment</FP> <FP SOURCE="FP1-2">A. Issues Raised in the Existing Market Structure Related to Tick Sizes</FP> <FP SOURCE="FP1-2">B. Proposal To Amend Rule 612</FP> <FP SOURCE="FP1-2">C. Final Rule—Minimum Pricing Increments for Orders Priced Equal to or Greater Than $1.00 per Share</FP> <FP SOURCE="FP1-2">1. General Comments and Discussion</FP> <FP SOURCE="FP1-2">2. Specific Comments on the Proposed Minimum Pricing Increments</FP> <FP SOURCE="FP1-2">3. Comments on the Number of Proposed Increments</FP> <FP SOURCE="FP1-2">4. Comments on Small- and Mid-Sized Stocks</FP> <FP SOURCE="FP1-2">5. Comments on Market Resiliency</FP> <FP SOURCE="FP1-2">6. Comments on Proposed Criteria for Assigning Minimum Pricing Increments</FP> <FP SOURCE="FP1-2">7. Rule 612(a)—Definitions</FP> <FP SOURCE="FP1-2">8. Rule 612(b)(1)—Semiannual Operative Dates</FP> <FP SOURCE="FP1-2">9. Rule 612(c)—New NMS Stocks</FP> <FP SOURCE="FP1-2">10. Rule 600(b)(89)—Regulatory Data</FP> <FP SOURCE="FP1-2">D. Minimum Pricing Increment for Trades</FP> <FP SOURCE="FP-2">IV. Final Rule 610 of Regulation NMS—Fees for Access to Quotations</FP> <FP SOURCE="FP1-2">A. Background</FP> <FP SOURCE="FP1-2">B. Issues Raised in the Existing Market Structure and the Need for the Amendments</FP> <FP SOURCE="FP1-2">1. Amendments to Rule 612</FP> <FP SOURCE="FP1-2">2. Exchange Fee Models</FP> <FP SOURCE="FP1-2">C. Proposal To Amend 610(c)</FP> <FP SOURCE="FP1-2">D. Final Rule 610(c)</FP> <FP SOURCE="FP1-2">1. Comments on Proposed Rule 610(c)</FP> <FP SOURCE="FP1-2">E. Final Rule 610(d) Requiring That All Exchange Fees and Rebates Be Determinable at the Time of an Execution</FP> <FP SOURCE="FP1-2">1. General Comments</FP> <FP SOURCE="FP-2">V. Final Rule—Transparency of Better Priced Orders</FP> <FP SOURCE="FP1-2">A. Background</FP> <FP SOURCE="FP1-2">B. Final Rule—Round Lots</FP> <FP SOURCE="FP1-2">1. Round Lot Definition</FP> <FP SOURCE="FP1-2">2. Proposed Acceleration of Round Lot Definition</FP> <FP SOURCE="FP1-2">3. Comments and Response</FP> <FP SOURCE="FP1-2">C. Final Rule—Odd-Lot Information</FP> <FP SOURCE="FP1-2">1. Proposed Acceleration of Odd-Lot Information Definition</FP> <FP SOURCE="FP1-2">2. Proposed Amendment to Odd-Lot Information Definition for Best Odd-Lot Orders</FP> <FP SOURCE="FP1-2">D. Display of Round Lots and Odd-Lot Information</FP> <FP SOURCE="FP1-2">1. Comments and Response</FP> <FP SOURCE="FP1-2">E. MDI Rules Implementation</FP> <FP SOURCE="FP-2">VI. Compliance Dates</FP> <FP SOURCE="FP1-2">A. Final Rule 612 Compliance Date</FP> <FP SOURCE="FP1-2">B. Final Rule 610 Compliance Date</FP> <FP SOURCE="FP1-2">C. Final Compliance Date for Round Lot and Odd-Lot Information</FP> <FP SOURCE="FP-2">VII. Economic Analysis</FP> <FP SOURCE="FP1-2">A. Introduction</FP> <FP SOURCE="FP1-2">B. Broad Economic Considerations</FP> <FP SOURCE="FP1-2">1. Liquidity and Spread</FP> <FP SOURCE="FP1-2">2. Economics of Minimum Pricing Increments</FP> <FP SOURCE="FP1-2">3. Economics of Access Fees</FP> <FP SOURCE="FP1-2">C. Baseline</FP> <FP SOURCE="FP1-2">1. Tick Sizes</FP> <FP SOURCE="FP1-2">2. Access Fees</FP> <FP SOURCE="FP1-2">3. Round Lots, Odd-Lots, and Market Data Infrastructure</FP> <FP SOURCE="FP1-2">4. Affected Entities and Markets</FP> <FP SOURCE="FP1-2">5. Amendments to Rule 605</FP> <FP SOURCE="FP1-2">D. Benefits, Costs, and Other Economic Effects</FP> <FP SOURCE="FP1-2">1. Modification of Rule 612 To Create a Half-Penny Tick</FP> <FP SOURCE="FP1-2">2. Lower Access Fee Cap</FP> <FP SOURCE="FP1-2">3. Exchange Fees and Rebates Determinable at the Time of Execution</FP> <FP SOURCE="FP1-2">4. Acceleration and Implementation of the MDI Rules and Addition of Information About Best Odd-Lot Orders</FP> <FP SOURCE="FP1-2">5. Compliance Costs</FP> <FP SOURCE="FP1-2">6. Interactions With Recently Adopted Rules</FP> <FP SOURCE="FP1-2">E. Effect on Efficiency, Competition, and Capital Formation</FP> <FP SOURCE="FP1-2">1. Efficiency</FP> <FP SOURCE="FP1-2">2. Competition</FP> <FP SOURCE="FP1-2">3. Capital Formation</FP> <FP SOURCE="FP1-2">F. Reasonable Alternatives</FP> <FP SOURCE="FP1-2">1. Tick Size Alternatives</FP> <FP SOURCE="FP1-2">2. Access Fee Alternatives</FP> <FP SOURCE="FP-2">VIII. Paperwork Reduction Act</FP> <FP SOURCE="FP1-2">A. Summary of Collection of Information</FP> <FP SOURCE="FP1-2">B. Proposed Use of Information</FP> <FP SOURCE="FP1-2">C. Respondents</FP> <FP SOURCE="FP1-2">D. Total Annual Reporting and Recordkeeping Burden</FP> <FP SOURCE="FP1-2">1. Initial Burden Hours and Costs</FP> <FP SOURCE="FP1-2">2. Ongoing Burden Hours and Costs</FP> <FP SOURCE="FP1-2">E. Collection of Information Is Mandatory</FP> <FP SOURCE="FP1-2">F. Confidentiality</FP> <FP SOURCE="FP1-2">G. Revisions to Current MDI Rules Burden Estimates</FP> <FP SOURCE="FP-2">IX. Regulatory Flexibility Act</FP> <FP SOURCE="FP1-2">A. Amendments to Rule 612—Final Regulatory Flexibility Analysis</FP> <FP SOURCE="FP1-2">1. Reasons for the Action</FP> <FP SOURCE="FP1-2">2. Small Entities Subject to the Rule</FP> <FP SOURCE="FP1-2">3. Reporting, Recordkeeping, and Other Compliance Requirements</FP> <FP SOURCE="FP1-2">4. Significant Alternatives</FP> <FP SOURCE="FP1-2">B. Amendments to Rule 610</FP> <FP SOURCE="FP1-2">C. Amendments to Rule 603 and Definitions Odd-Lot Information and Regulatory Data Under Rule 600</FP> <FP SOURCE="FP1-2">D. Certification</FP> <FP SOURCE="FP-2">X. Other Matters</FP> <FP SOURCE="FP-2">Statutory Authority and Text of Rule Amendments</FP> </EXTRACT> <HD SOURCE="HD1">I. Introduction</HD> Consistent with Congress's directive almost 50 years ago to facilitate the establishment of a national market system, <SU>1</SU> <FTREF/> the Commission is amending certain of its rules to respond to market developments since those rules were adopted, so that those rules continue to benefit investors and the markets. Specifically, the Commission is taking the following actions to continue to fulfill Congress's directive and advance the objectives of investor protection and the maintenance of fair and orderly markets: <FTNT> <SU>1</SU>   <E T="03">See</E> Public Law 94-29 (S.249), June 4, 1975, Securities Acts Amendments of 1975 (“1975 Amendments”). <E T="03">See also</E> 15 U.S.C. 78k-1. </FTNT> • <E T="03">Reduce Transaction Costs for Investors by Reducing Minimum Pricing Increments.</E> The amendments will relax existing restrictions on market-wide minimum pricing increments (“tick sizes”), thus reducing transaction costs for investors and relaxing a constraint on price discovery for certain stocks. The reduced tick size will benefit investors and market participants by: (i) allowing stocks to be priced more efficiently and competitively, therefore lowering costs for investors to trade in those stocks; and (ii) improving liquidity, competition, and price efficiency in the markets. • <E T="03">Improve Market Quality for Investors by Reducing Access Fee Caps and Increasing Tran ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 1379k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━