Tick size and sub-penny rules: why some quotes move in fractions of a cent
Rule 612 sets the smallest price step for quotes: one cent at $1 and above, a hundredth of a cent below. A half-penny step for tightly quoted stocks is adopted but postponed to November 2027. Tick size changes spread, queues and cost math.
Start in plain English
Quotes in US stocks cannot be any price. The tick size is the smallest step a quote or order can move. For most stocks it is one cent. Below $1.00 it is a hundredth of a cent, which is why a sub-dollar small cap shows prices like $0.4135. For a scalper, the tick decides how tight a spread can be, how long the line is at each price, and how big per-share costs are next to the move.
The core idea: SEC Regulation NMS Rule 612 sets the minimum increment for quotes and orders, not for trades. At $1.00 and above, quotes move in $0.01 steps; below $1.00, in $0.0001 steps. In 2024 the SEC adopted a $0.005 step for tightly quoted stocks, but as of 2026-10-05 compliance is postponed until the first business day of November 2027. Trades can still print at sub-penny prices, through price improvement and midpoint executions.
US Day Trading Fundamentals introduces tick size in Bid, ask and spread. This lesson covers what the rule does to a scalp.
Two paths from the same start
All prices, sizes and fees in this example are Illustrative. Glimmerton Bio is fictional.
The setup at 10:22:00 ET. Glimmerton trades below $1, so it quotes in four decimals: $0.4120 bid, $0.4135 ask. The spread is $0.0015, less than a sixth of a cent.
Glimmerton Bio (fictional), Level 2 at 10:22:00, ET (Illustrative)
| Side | Price | Size | Source |
|---|---|---|---|
| ask | 0.4135 | 25,000 | EXCH1 |
| ask | 0.4140 | 60,000 | ECNB |
| ask | 0.4150 | 120,000 | EXCH2 |
| ask | 0.4200 | 300,000 | EXCH1 |
| bid | 0.4120 | 40,000 | EXCH2 |
| bid | 0.4118 | 15,000 | ECNB |
| bid | 0.4110 | 90,000 | EXCH1 |
| bid | 0.4100 | 250,000 | EXCH2 |
Venue labels are fictional. Sizes cluster at round prices ($0.4100, $0.4150, $0.4200) even though the tick is $0.0001.
The plan, written before 10:22:00. Buy 10,000 shares at the $0.4135 ask. Stop $0.4035 (one cent below entry). Target $0.4335 (2R). Time stop 10:35. Planned risk $0.0100 per share, $100. Commissions and fees $0.003 per share round trip, $30 (Illustrative). Note how large the fee is next to the risk: 0.3R before anything happens.
Path AThe two-cent move happens
Price trades through $0.4200 and reaches $0.4340 at 10:29. The $0.4335 limit sell fills.
Path BThe stop fills below its price
Bids at $0.4100 are pulled. The $0.4035 stop triggers and fills at $0.4010.
Path CNothing much happens
Price chops between $0.4110 and $0.4180. At 10:35 the time stop exits at $0.4130.
The review note is the same for all three: "Two-cent scalp on a sub-$1 stock; plan followed; 1R planned." What stands out is the cost line: per-share fees took 0.3R off every outcome, because a two-cent move on a $0.41 stock is a 4.8% move (Illustrative), and the share count needed for a $100 risk is large. The rest of this lesson covers the rule itself, its postponed amendment, and how tick size changes spreads, queues and costs.
Rule 612, as it operates today
Regulation NMS Rule 612 (17 CFR 242.612) prohibits displaying, ranking or accepting quotes and orders in NMS stocks in increments smaller than the minimum:
- $1.00 or more: $0.01 in practice today.
- Below $1.00: $0.0001.
The rule restricts quotes and orders, not trades. In the SEC's words, it "does not restrict trading in sub-penny increments." That is why a stock above $1 can print at $3.5875: a wholesaler fill with price improvement, or a midpoint execution. Dark pool prints covers how those appear on the tape.
How common is the sub-dollar case on gappers?
The study measured highs, not spreads; it does not say how wide those stocks' spreads were.
The 2024 amendments and their postponed dates
On September 18, 2024 the SEC adopted amendments to Rule 612 and related rules (Release No. 34-101070). The parts that matter to a scalper:
- Half-penny tick (Rule 612). NMS stocks priced at $1.00 or more whose time-weighted average quoted spread was $0.015 or less during an evaluation period would quote in $0.005 steps. Evaluation periods run January–March and July–September; a new increment would take effect on the first business day of May or November.
- Access fee caps (Rule 610(c)). The cap on fees for taking a protected quote would fall from $0.003 to $0.001 per share at $1.00 and above, and from 0.3% to 0.1% of the price below $1.00.
Compliance was first set for the first business day of November 2025, moved to November 2026 by an SEC order of October 31, 2025, and moved again by an order of June 11, 2026 (Release No. 34-105656) to the first business day of November 2027 for both the half-penny tick and the fee caps. The text in the Code of Federal Regulations already shows the amended rule; the exemption is what keeps the penny tick and the $0.003 cap in practice (all checked 2026-10-05).
Why change it at all? The SEC's adopting release describes tightly quoted stocks whose spreads are constrained by the one-cent tick, so that long queues form at each price and some trading moves off-exchange, where sub-penny prices are allowed. A smaller tick for those stocks lets displayed quotes compete in finer steps. The fee caps were lowered alongside, because an access fee of $0.003 is a large share of a half-cent spread.
The half-penny tick targets stocks that are already tightly quoted. Thin small caps with spreads of several cents are unlikely to qualify under the $0.015 test, so for most of them the amendment's main effect would come through the fee cap.
What tick size does to a scalp
The same two-cent move, two fictional stocks (Illustrative):
| Illustrative | Glimmerton at $0.41 | Harrowgate Robotics at $5.00 |
|---|---|---|
| Minimum quote step | $0.0001 | $0.01 |
| Two cents as a % of price | about 4.8% | 0.4% |
| Shares for $100 risk on a 1-cent stop | 10,000 | 10,000 |
| Fees at $0.003 per share round trip | $30 (0.30R) | $30 (0.30R) |
| Fees as a % of position value | about 0.73% | 0.06% |
| Tightest possible spread | $0.0001 | $0.01 |
Three effects follow:
- Queues are shorter but more numerous. With 100 possible prices per cent, size spreads across more levels, and it often still clusters at round prices, as the replay shows. Small price changes can jump your order to the front or the back.
- Per-share costs scale with share count, not with price. A sub-$1 stock needs many shares for a meaningful dollar risk, so per-share fees weigh more. Some brokers cap fees as a percentage of trade value on low-priced stocks; check yours. ECN fees covers plans.
- Spread in percent, not cents. A $0.0015 spread is tiny in cents and 0.36% of price (Glimmerton, Illustrative). Compare spreads as a percentage of price and of your target; Is it liquid enough to scalp? covers this.
Observe vs. infer
| Observed at 10:22:00 | Inferred | Why it is not established |
|---|---|---|
| Spread $0.0015 | "Cheap to trade" | Fees per share and the stop's fill matter more than the spread here |
| 250,000 shares bid at $0.4100 | "Strong floor" | Round-price size can be cancelled; see Iceberg orders |
| Four-decimal quotes | "Precise pricing means precise exits" | Stops still fill at the next available price |
What shifts the odds
Tick size does not change which way a stock moves. It changes the arithmetic around the move. These are hypotheses to record, not findings:
- Price tier. Sub-$1, $1–$3 and above $3 behave differently in spread, share count and fee drag.
- Spread in percent of price and of target. A $0.0015 spread is 0.36% of Glimmerton's price (Illustrative) and 7.5% of a two-cent target.
- Where size clusters. Round prices such as $0.4100 often hold far more displayed size than the levels between them.
- Fee plan. Per-share plans, per-trade plans and plans with a percentage cap on low-priced stocks give very different R costs.
- Halt band tier. Stocks from $0.75 to $3.00 have 20% LULD bands; below $0.75 the band is the lesser of $0.15 or 75% (LULD Plan, as of 2026-10-05).
Cost of being wrong
Using the Glimmerton plan at 10,000 shares (Illustrative):
| Outcome | Exit | R after costs | Dollars after costs |
|---|---|---|---|
| Path A: target | $0.4335 | +1.70R | +$170.00 |
| Path B: stop, $0.0025 slippage | $0.4010 | −1.55R | −$155.00 |
| Path C: time stop | $0.4130 | −0.35R | −$35.00 |
| Path B, round-number bids pulled, stop fills $0.3950 | $0.3950 | −2.15R | −$215.00 |
How many trades before this means anything
Tick-size effects are easiest to measure as costs: over 20 trades, log fees and slippage in R by price tier. A cost difference of 0.2R per trade between tiers needs dozens of trades before it stands out from fill-to-fill noise. See How many trades before your numbers mean anything.
What this lesson does not claim
- It does not claim sub-$1 stocks are better or worse to trade.
- Rule descriptions and dates summarize eCFR text and SEC orders checked on 2026-10-05; the compliance date has moved twice and is on FennEdge's re-verification list.
- Glimmerton Bio and Harrowgate Robotics are fictional; their figures are Illustrative. The gapper share below $1 is measured as stated.
Go deeper
- FennEdge first. The Gapper HOD Timeline (guests, Free and Plus: latest completed session; earlier sessions need Pro or Max, as of 2026-10-05) shows gappers' highs by session; the research article includes the open-price split used above.
- Round lots. The 2024 amendments also redefined round lots by price tier for higher-priced stocks; that part took effect on November 3, 2025. It rarely affects small caps.
- Fee caps and routing. Order routing.
- Sub-penny prints on the tape. Dark pool prints.
Exercises
Five exercises follow this lesson: three concept checks and two calculations (spread as a percentage of price for a sub-$1 quote; per-share fees expressed in R). Exercises, answers and progress are available after signing in.
Primary sources
- SEC. Rule 612, Minimum pricing increment, 17 CFR 242.612, and Rule 610 (eCFR).
- SEC. Release No. 34-101070 (September 18, 2024), Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders.
- SEC. Exemptive order, Release No. 34-104172 (October 31, 2025).
- SEC. Exemptive order, Release No. 34-105656 (June 11, 2026).
- LULD Plan. Limit Up-Limit Down Plan.
Sources checked 2026-10-05. Glimmerton Bio, Harrowgate Robotics and all quotes, fees and outcomes in this lesson are fictional and Illustrative. Measured figures come from the FennEdge archive as stated. This lesson is education, not a recommendation to buy or sell any security. Past patterns do not indicate future results.