Citadel Securities Proposes Smaller Stock Price Jumps to SEC
Citadel Securities proposed a pilot program to the Securities and Exchange Commission that would test smaller increments for stock price changes. The trading firm wants to study how reducing tick sizes affects stock market trading.
Citadel Securities, one of the largest stock trading firms, has pitched a pilot program to the SEC to test smaller tick sizes in the stock market. Tick sizes are the minimum amount a stock price can move up or down.
Currently, most stocks trade in penny increments. The SEC has been considering changes to these rules, but Citadel argues the proposed changes would reduce liquidity and create less stable prices.
This isn't the first time regulators have tested tick size changes. A previous pilot program from 2016-2018 studied different tick sizes across roughly 1,600 stocks. That program tested groups with 5-cent increments for both quoting and trading.
Citadel's proposal comes as the SEC weighs new rules for market structure. The firm believes its pilot would provide better data on how tick size changes actually affect investors and market quality.
The debate centers on finding the right balance between tight spreads that benefit investors and adequate compensation for market makers who provide liquidity.
Tick sizes determine how much stock prices can move up or down at once. Smaller jumps could mean tighter spreads between buy and sell prices, potentially saving investors money on trades. But Citadel warns the wrong changes could make trading more expensive.
The SEC will review Citadel's proposal and decide whether to approve the pilot program or pursue its own tick size changes.
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