Delay in SEC Tick Pilot Data Collection Likely

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By Rob Tricchinelli

Oct. 1 — A looming data collection deadline in the SEC's upcoming tick size pilot program is likely to get delayed in order for the agency to give firms more guidance on how to comply, a top agency official said Oct. 1.

The agency approved its pilot in May for certain groups of small-cap stocks to trade at nickel-sized increments, and data collection from exchanges, the Financial Industry Regulatory Authority and some firms is scheduled to begin Nov. 6 (47 SRLR 929, 5/11/15)(88 SLD, 5/7/15)(88 DER, 5/7/15).

“There are certain things that need to happen between now and November,” including for the agency to post frequently asked questions and for self-regulatory organizations to make relevant rule filings, Stephen Luparello, head of theSecurities and Exchange Commission's Division of Trading and Markets, said. “Our expectation is those things will happen very, very soon.”

“Is that going to happen in a time frame quick enough for the firms to do what they need to do to start gathering the data? It seems kind of unlikely,” he said at the annual Security Traders Association Equity Market Structure Conference inWashington.

Pilot Details

The pilot program applies to companies with $3 billion or less in market capitalization, provided they also have an average daily trading volume of a million shares or fewer and an average price of at least $2 during the course of the program.

The program will sort eligible securities into four groups, including a control group that will stay at a penny increment. A second group will be quoted in nickels but could trade at any presently allowable increment, and a third group will quote and trade at a nickel increment, subject to certain exceptions.

The fourth group will have nickel quoting and trading, subject to similar exceptions, and also face a “trade-at” requirement.

Data Collection

Data collection was slated to begin in November in order to give the SEC six months' worth of data from program participants before wider tick transactions are to begin on May 6.

The Securities Industry and Financial Markets Association raised concerns in late August that, even then, there was not enough time for stakeholders to get ready for November data collection without the FAQs or SRO filings.

That theme was repeated during the day's panels, and Luparello sought to quell those concerns.

“We’re not going to insist on adherence to a specific date if that date causes either a substantial amount of disruption or gives us data that isn’t the data we want,” Luparello said.


The exchanges and FINRA are still working out what the particular format of data to be collected will be.

FINRA head Richard Ketchum said Oct. 1 that a single reporting methodology has the most appeal, considering that the SRO's Order Audit Trail System is already in place.

“If in the end there are meaningful burdens with the respective firms meeting the OATS approach,” then some compromise will follow, Ketchum said, while on the same panel as Luparello.


Rep. Sean Duffy (R-Wis.), who sponsored a tick pilot bill that passed the House in 2014, spoke at the STA event after Ketchum and Luparello. There also was a stakeholder panel that was largely critical of the initiative.

The crowd of hundreds at the STA event was generally unsupportive of the tick pilot as well, but Duffy urged patience.

“We want to get the data to see what actually works and what doesn’t,” he said.

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