Stock Prices in Half-Pennies Are in Your Future

If you cut a penny in half, you could be charged under 18 US Code Section 331 for the mutilation of a US coin. But half-pennies might make life cheaper for investors if they’re used to price stocks.

That’s the logic of the Securities and Exchange Commission, which voted unanimously Wednesday to change market rules so that roughly 1,700 securities can be quoted in increments of $0.005 beginning in November 2025.

Copper Chopper

“The one-penny minimum has become outdated,” SEC Chair Gary Gensler said during the regulatory agency’s meeting Wednesday. It was an acknowledgment of longstanding complaints by market stakeholders that exchanges like the New York Stock Exchange and the Nasdaq, which were required to quote stocks in increments of at least 1 cent, were hamstrung against wholesaler competition that’s allowed to quote in finer increments. 

Investors were getting shortchanged, too, the SEC said:

• Officials noted the rule change will lower costs by shrinking the so-called bid-ask spread, or the difference between the buy and sell side price of a stock. If the spreads are closer, investors can save money when buying and selling.
• Some stocks will keep 1-cent ticks under a two-tiered system with two “tick sizes.” If the bid-ask spread hovers around 1 cent, the stock will be allowed to reduce increments to half-cents. The SEC didn’t provide a list of securities that would be eligible, but said there were about 1,700 based on trading in the past year.

Unlucky Number Eight: For over 200 years, the tick size was an eighth of a dollar, or 12.5 cents (yes, brokerages made a lot of money). But that changed dramatically in 1997 when exchanges cut them in half to 1/16. Tick size was reduced to 1 cent in the year 2000 — since Y2K didn’t crash the world and electronic trading started taking over, it made sense, or cents.