For cinema lovers, the Securities and Exchange Commission (“SEC”) appears to have addressed financial issues reminiscent of those touched in the 1999 satirical comedy, Office Space—i.e., impact of fractional pennies—and 2013 black comedy, The Wolf of Wall Street—i.e., volatile penny stocks. On September 18, 2024, the SEC adopted amendments for Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders: (1) a second minimum pricing increment of half-penny was established for Regulation National Market System (“NMS”) stocks valued $0.015 or less; (2) a reduction of access fee caps and an increased requirement for submitted orders (all fees and rebates must be determined by execution); and (3) a faster turnaround deadline for sharing data from NMS orders. The SEC hopes these amendments will “prevent[] bid-ask spreads for [NMS] stocks from being less than $0.01[,]” “ensure that market participants have fair access to the best displayed prices[,]” and “increase transparency regarding the cost of executing transactions in NMS stocks.”[1]
In other words, now penny stocks can be quoted in half-penny increments, which Office Space highlighted how lucrative fractional pennies can be. The SEC hopes the update “will help drive greater efficiency, competition and fairness[.]”[2] The Wolf of Wall Street parodied the complexity of the market-structure, and the new rules should help investors know the rebates and fees resulting from their trades as soon as the orders are executed as opposed to days or weeks after the trades.
[1] SEC, Tick Sizes, Access Fees, and Transparency of Better Priced Orders, www.sec.gov/files/34-101070-fact-sheet.pdf.
[2] Lydia Beyoud & Katherine Doherty, SEC Half-Penny Stock Quote Rules Prompt Investor Challenge (2), Bloomberg Law, September 18, 2024, https://www.bloomberglaw.com/product/blaw/bloomberglawnews/securities-law/BNA%200000019205e8de35a5bf2dff9e450004.
[3] We the Investors, et al v. SEC, Docket No. 24-01319 (D.C. Cir. Oct 08, 2024), Court Docket.
[4] Ben Miller, SEC Half-Penny Stock Quote Rules Prompt Investor Challenge (1), Bloomberg Law, October 8, 2024, https://www.bloomberglaw.com/product/blaw/bloomberglawnews/securities-law/BNA%2000000192-6ce5-d82d-a79b-fff7f67c0001.
[5] Beyoud & Doherty, supra note 2.
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About Thanh T. Hoang
Thanh T. Hoang's practice focuses on securities litigation. Thanh is an associate in the firm's New York office.Before joining Faruqi & Faruqi, LLP, Thanh began her legal career as an Assistant District Attorney at the Kings County District Attorney's Office. There, she represented the People of the State of New York in criminal proceedings and gained experience in complex investigations and litigation issues. Thanh earned her dual degree Master of Public Administration and Juris Doctorate with an Advanced Certificate in Forensic Accounting from John Jay College of Criminal Justice and City University of New York School of Law (2021). Thanh earned her Bachelor of Science in Physics and Mathematics from University of Arkansas (2014).
Thanh T. Hoang
Associate at Faruqi & Faruqi, LLP
New York office
Tel: (212) 983-9330
Fax: (212) 983-9331
E-mail: thoang@faruqilaw.com
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