May a market center provide sub-penny price improvement, compared to the NBBO, in an NMS stock for which sub-penny quotations are prohibited by the Rule?
Yes, provided that the execution does not result from an order, quotation, or indication of interest that was itself priced in an impermissible sub-penny increment. In addition, a broker-dealer must comply with any applicable rules governing trading ahead of customer orders (e.g., NASD IM-2110-2). Also, if the execution resulted from a guarantee of price improvement and if the guarantee were unconditional and detailed as to the amount of price improvement guaranteed, it is possible that such a guarantee would be deemed a prohibited quotation. The Staff does not believe it is practical to consider all the possible variations of price improvement guarantees in this document, but the Staff is available to provide additional guidance to market centers on a case-by-case basis.
Related Questions
- When must a trade in an NMS stock or an OTC Equity security that is executed outside normal market hours be reported?
- If the last sale price of an NMS stock is below $1.00, may a broker-dealer accept an order to sell at $1.001?
- Does every market trading NMS stocks have to accept sub-penny orders priced less than $1.00?
