On September 18, 2024, the SEC made significant strides in the regulatory landscape by adopting amendments to the Regulation National Market System (Reg NMS). These changes are poised to address essential market structure issues and reshape the equities market significantly. In this blog post, we will explore the key aspects of these amendments, their implications for market participants, and what to expect moving forward. 

The New Landscape of Regulation NMS 

1. New Minimum Pricing Increments (Rule612)

One of the most notable changes in the recent amendments is the adjustment to minimum pricing increments for National Market System (NMS) stocks. Stocks priced at or greater than $1.00 will now have a minimum pricing increment based on the Time Weighted Average Quoted Spread (TWAQS) from an evaluation period. 

• If the TWAQS is 0.015 or less, the new increment is set to 0.015 or less, the new increment is set to 0.005. 

• For TWAQS greater than 0.015, the increment remains steady at 0.015, the increment remains steady at 0.01. 

This new rule not only increases transparency but also enhances trading efficiency by providing a clearer indication of market depth through a “minimum pricing increment indicator,” available via the Consolidated Tape (SIP) data. 

Revised Access Fee Caps (Rule610) 

The SEC’s amendments also focus on limiting access fees. The access fee cap for protected quotations and best bids/offers in NMS stocks have been lowered significantly: 

• For stocks priced at 1.00 or more, the cap decreases from 1.00 or more, the cap decreases from 0.003 to $0.001 per share. 

• For stocks priced below $1.00, the cap is revised from0.3% to 0.1% of the quotation price per share. 

Additionally, exchanges are now prohibited from imposing any fees or rebates based on current volume assessments. This move aims to foster a more equitable trading environment, minimizing the disparities that may arise from different fee structures. 

Acceleration of Market Data Infrastructure (MDI) Rule Changes 

Another critical aspect of the amendments involves changes to round lot definitions: 

• Stocks priced $250.00 or less: round lot of100 shares. 

• Stocks priced 250.01 to 250.01 to1,000.00: round lot of 40 shares. 

• Stocks priced 1,000.01 to 1,000.01 to10,000.00: round lot of 10 shares. 

• Stocks priced above $10,000.01: round lot of1 share. These changes serve to better align round lot sizes with share prices, making it easier for traders to navigate the market.  

The implementation of these changes has been expedited to November 2025; a decisive move aimed at streamlining trading operations. 

Additionally, odd lot orders priced better than the national best bid and offer are now slated to be included in public data streams, with compliance expected by May 2026. This inclusion is anticipated to enhance market transparency and provide traders with a more comprehensive view of market dynamics. 

Anticipated Compliance Dates 

To ensure that all market participants are prepared for these changes, the SEC has outlined key compliance dates for the implementation of the newly adopted rules: 

• Minimum Pricing Increments (Rule612): Effective from the first business day of November 2025. 

• Access Fee Caps (Rule610): Effective from the first business day of November 2025. 

• Round Lot Size Changes: Effective from the first business day of November 2025. 

• Odd Lot Order Changes: Effective from the first business day of May 2026. 

Conclusion 

The SEC’s amendments to Regulation NMS represent a significant shift in the U.S. equity markets, aiming to enhance trading efficiency, reduce costs, and improve market transparency. As we approach the compliance dates, market participants must stay informed and be prepared to adapt to these changes. By understanding and preparing for these new regulations, traders and investors can navigate the evolving market landscape more effectively, capitalizing on the opportunities that lie ahead. In a continuously evolving financial environment, keeping abreast of regulatory changes is not just beneficial; it’s essential for success. The future of equity markets is here, and it’s time to embrace it! 

Download the complete October 2024 Regulatory Update for the full details.