Minimum Price Increments (Sub-Penny Pricing Rule)
The sub-penny rule was put into place to prevent traders from pricing orders a fraction of a penny better than limit orders. Traders would place these fractionally lower orders in order to “step ahead” of the limit orders, and as a result, the SEC was worried that over time this practice would discourage the use of limit orders. Under the sub-penny pricing rule, NMS stocks that trade at over $1 can only be traded and quoted in $0.01 increments or more. NMS stocks that trade below $1 can be traded at increments of $0.0001 or more. In other words sub-penny pricing is allowed only for stocks that trade at less than $1. The SEC’s sub-penny pricing rule does not apply to non-NMS stocks (OTCBB or OTC Link). Instead, FINRA’s minimum pricing rule for OTC equity securities applies to those stocks. FINRA’s minimum pricing increments are similar to those of the SEC ($0.01 for securities traded at $1 or more, $0.0001 for securities priced at less than $1).
However, members may accept, but may not display, orders priced at less than $0.0001 in minimum increments of $0.000001.
SEC Rule 612
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Summary |
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Sub-Penny Pricing Rules |
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NMS Stocks (SEC Rules) |