Tick Size Pilot: Year in Review
On October 31, 2016 the Securities Exchange Commission (SEC) rolled out its implementation of the Tick Size Pilot (TSP). The pilot was designed to evaluate whether or not widening the tick size for 1,200 small cap securities would positively impact trading, liquidity and market quality of those securities.
After a year of collecting and analyzing data, it is Clearpool’s assessment that the pilot has not completely achieved its overall intended objective. That said, it has highlighted some interesting dynamics that affect market microstructure.
Clearpool noted that the pilot has been successful in transferring flow from maker/taker to inverted exchanges, and algorithms had to adjust accordingly to optimize passive trading while balancing increased costs as a result of the need to remove liquidity.
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Greenwich Associates says takeaway is that Congress should set the policy, and the SEC should make the rules.
Regulator opts to end pilot on Friday to allay tech concerns.
Vendor reports median implicit costs for the control group fell for first full 11 months of pilot.
One technology broker provides preliminary insight into the Tick Pilot program
The buy-side says regulators efforts to fix market structure fall short.