The Securities and Exchange Commission has approved a proposal by the Financial Industry Regulatory Authority (FINRA) to amend Minimum Price-Improvement standards. The FINRA proposal addresses the issue that the specified amount or upper limit on the minimum price improvement requirement of $0.01 was disproportionately high for securities trading below $0.01 and that it should vary proportionately with the amount of the limit order price. The proposal revises current price-improvement standards to:

  • Amend the standards set forth in Interpretive Material 2110–2 to add a number of tiers to the minimum price-improvement standard for customer limit orders priced below $0.01; 
  • Include a measure for OTC equity securities priced over $1.00 that the price improvement be the lesser of $0.01 or one-half of the current inside spread limit; 
  • Change the price improvement standards for customer limit orders priced outside the inside market; and
  • Require firms to protect any more aggressively priced customer limit orders triggered under IM–2110–2, even if those limit orders were not directly triggered by the minimum price improvement standards of IM–2110–2.22.

In approving the proposal, the SEC stated that the proposed rule change strikes a reasonable balance between protecting customer limit orders and enhancing the opportunity for investors to receive superior-priced limit order executions in OTC equity securities.

http://edocket.access.gpo.gov/2008/pdf/E8-22011.pdf