Sub-Penny Trading: Meaning, Rules and Regulations, FAQs

Sub-penny trading is a practice in which brokers and dealers trade in unregulated markets in increments of less than a penny. Sub-penny trading is a practice where brokers and dealers trade in unseen, unregulated markets in increments of less than a penny. They trade through wholesalers, dark pools, and lit exchanges. The Sub-Penny Rule (SEC Rule 612) of 2005 prevents exchanges governed by the U.S. Securities and Exchange Commission (SEC) from quoting trades in increments of less than a penny. This limitation can result in an artificially wide National Best Bid and Offer (NBBO) which is the pricing benchmark used by off-exchange market-makers. 1 Exchanges and electronic communication networks (ECNs) charge access fees to any market participant who takes a displayed offer or hits a displayed bid in exchange for providing liquidity. Participants who display the bid or offer are provided with a rebate in exchange for providing liquidity. The resulting fee is capped at $0.003 per share by

Sub-penny trading is a practice in which brokers and dealers trade in unregulated markets in increments of less than a penny. Sub-penny trading is a practice where brokers and dealers trade in unseen, unregulated markets in increments of less than a penny. They trade through wholesalers, dark pools, and lit exchanges. The Sub-Penny Rule (SEC Rule 612) of 2005 prevents exchanges governed by the U.S. Securities and Exchange Commission (SEC) from quoting trades in increments of less than a penny. This limitation can result in an artificially wide National Best Bid and Offer (NBBO) which is the pr