Series 24: 5.10.6. Minimum Price Increments (Sub-Penny Pricing Rule)

5.10.6.  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 OTC stocks. 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