Cboe Global Markets suggests U.S. equity market structure reform

Cboe Global Markets

Exchange holding company Cboe Global Markets, Inc. (Cboe: CBOE) has released several recommendations in its latest report “Cboe’s Vision: Equity Market Structure Reform”. The company suggests a few updates to the U.S. equity market structure that it believes would further strengthen markets and enhance the overall trading environment for long-term investors without harming the markets.

Bryan Harkins, Executive Vice President and Head of Markets at Cboe, commented on the news:

The U.S. equity markets have undergone significant transformation over the past decade, and by most measures, the investor experience in today’s markets is the best that it has ever been, with lower execution costs, narrower spreads and access to efficient trading tools.

We believe our proposal calls for targeted, constructive, and achievable changes that would continue to preserve benefits for investors, while fostering competition and market efficiency, and look forward to industry feedback on our recommendations.

The proposed modifications include:

  1. Round Lots and Odd Lots – Reduce the standard round lot size from 100 shares to 10 shares or 1 share for high-priced securities, in order to enhance price discovery, reduce spreads and increase the transparency of limit orders with fewer than 100 shares in high-priced stocks.
  2. Distributed SIPs – Implement SIPs in multiple locations in order to reduce the geographic latency.
  3. Tick Size – Promote additional competition by implementing tick sizes that provide minimum price variation increments narrower than one cent for securities priced above $1 per share that are consistently quoted in one cent increments and traded off exchange in sub-penny increments.
  4. Sub-Penny Pricing – Establish sub-penny pricing standards that are designed to permit fair and competitive price-improvement opportunities between exchanges and off-exchange venues.

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