Thoughts on SEC/Finra Tick Test Pilot

Discussion in 'Trading' started by listedguru, Sep 14, 2016.

  1. Just wondering if anyone has any thoughts on the upcoming sec/finra tick test pilot that will expand the minimum increments that certain stocks can trade in from .01 to .05. This pilot begins getting phased in October 3rd and will run for 2 years.

    There is going to be a control group that will continue to trade the same as today and (3) different test groups.

    Here are the stocks involved:

    NYSE:

    ftp://ftp.nyxdata.com/Tick_Pilot/Tick_Pilot_Historical/NYSE_Group_Tick_Pilot_Assignments.txt

    Nasdaq:

    ftp://ftp.nasdaqtrader.com/files/ticksizepilot/Other/Tick%20Size%20Pilot%20Securities%20List%20with%20Group%20Assignments.txt

    Some more info on the pilot:

    https://fif.com/fif-working-groups/tick-size-working-group/tick-size-overview

    Brokers smell trouble: http://marketsmedia.com/brokers-smell-trouble-attempt-spur-smallcap-volume/

    I guess we'll know soon enough, lol.

    -Guru
     
  2. Baron

    Baron ET Founder

    I'm all for it. From day one, I thought the move to penny increments was totally overkill, so I'm glad to see them widening things up a bit on some test stocks.
     
  3. rmorse

    rmorse Sponsor

    I expect it will be very confusing for the public.
     
  4. Do these guys have nothing better to do?
     
  5. Occam

    Occam

    FYI, the complete list of all securities for all exchanges can be found here:

    http://www.finra.org/industry/oats/tick-size-pilot-data-collection-securities-files

    In my opinion, the 5c ticks will be helpful for increasing quote size at the NBBO and reducing quote flicker. However, internalization and fragmentation bear far more responsibility for reducing transparent liquidity in the US equity space than does the tick size. If the 5c spreads increase internalization significantly beyond where it is now, it will be a net-negative for most participants (aside from the 4 or so wholesaler firms who basically enjoy an oligopoly at this point).

    http://www.nanex.net/aqck2/3519.html

    I'm very happy that one of the test buckets has a "trade-at" provision to mitigate this, although it doesn't seem to go far enough as it gives a partial exemption for certain orders.
     
    Last edited: Sep 18, 2016