SEC Press press_release 6 KB 2,639 chars

Press Release: SEC Announces Positive Early Results of Penny Quoting Pilot Program

Release
2007-125
Source PDF JSON
summary

The SEC's 2007 Penny Quoting Pilot program successfully tested narrower option price increments to reduce retail trading costs, with no fraud or wrongdoing involved, and concluded on July 25, 2007, after showing improved spreads and increased quotation volume without system disruptions.

paragraph

The SEC launched the Penny Quoting Pilot in January 2007 to evaluate whether quoting options in penny increments instead of nickels or dimes would improve market efficiency for retail investors. Early results showed narrowed bid-ask spreads, reduced payment for order flow, and increased quotation volume, all handled without disruptions by exchanges or the Options Price Reporting Authority. The program, scheduled to end on July 25, 2007, demonstrated clear benefits but left open the question of broad expansion pending further analysis by the SEC.

narrative

The SEC initiated the Penny Quoting Pilot in January 2007 to assess whether pricing options in penny increments—rather than larger increments like nickels or dimes—would enhance market quality and reduce trading costs for retail investors. Early analysis revealed that the pilot successfully narrowed quoted spreads, lowered payment for order flow, and increased the volume of quotations, mirroring benefits previously observed in penny-priced stocks. Despite the surge in quotation volume, exchanges and the Options Price Reporting Authority managed the increased data flow without any operational disruptions. The SEC emphasized that while results were promising, it had not yet determined whether to expand the program broadly and stressed the need for careful evaluation before adopting permanent rule changes. The pilot was explicitly scheduled to conclude on July 25, 2007, with final reports from all six participating exchanges available for public review. No fraud, misconduct, or legal penalties were associated with the program; it was purely a market structure experiment aimed at investor protection and efficiency. The SEC’s focus remained on data-driven regulatory reform, not enforcement, and the initiative was widely regarded as a technical success in improving price discovery. Final decisions on expansion were deferred pending comprehensive analysis of the pilot’s full results.

Enriched metadata

Scheme
non-corporate (100%)
Classified non-corporate(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Parties
average quoted spreadschristopher coxpenny quoting pilotSecurities and Exchange Commission
Keywords
penny quotingquoting pilotpilotpennyoptionsquotingearly resultsresults pennypilot programoptions exchangessecannounces positivepositive earlyresultshttp

Exhibits & Attached Documents (6)

Extracted insights

Entities 4
  • person average quoted spreads
  • person christopher cox
  • person penny quoting pilot
  • agency Securities and Exchange Commission
Triples 9
  • SEC announced positive early results of Penny Quoting Pilot program
  • Penny Quoting Pilot shows lowered trading costs for retail trades
  • Penny Quoting Pilot narrowed average quoted spreads
  • Penny Quoting Pilot began January 2007
  • Christopher Cox urged options exchanges to begin quoting options in pennies
  • Penny Quoting Pilot reduced size quoted at the best price
  • Penny Quoting Pilot increased number of quotations in options
  • Penny Quoting Pilot scheduled to end July 25, 2007
  • SEC has not concluded penny quoting in all options is appropriate
PDF (from attached: pdf)
[OCR_UNRECOVERABLE route=tika reason=empty ts=2026-05-08T14:07:57.868Z] · Source
Text layers
Extracted body text (2,639c) 
SEC Announces Positive Early Results of Penny Quoting Pilot Program FOR IMMEDIATE RELEASE 2007-125 Washington, D.C., June 29, 2007 - The Securities and Exchange Commission announced today that early results from the Penny Quoting Pilot program show lowered trading costs for retail trades. An analysis of reports from the options exchanges by the Commission's Office of Economic Analysis indicate that the Pilot has been successful in narrowing average quoted spreads, which enables investors to trade options at better prices. The reduction in spreads also has led to a reduction in payment for order flow. The Penny Quoting Pilot began in January 2007 after SEC Chairman Christopher Cox urged each of the options exchanges to begin quoting a limited number of options in pennies. "The Penny Quoting Pilot is showing that smaller increments can result in better prices for investors," said Chairman Cox. "As we consider expanding the pilot to a broader number of options, however, we will want to proceed carefully to assure that the market quality in these options will improve, and that market participants can process the increased volume of quotations." The Penny Quoting Pilot has reduced the size quoted at the best price. This result is consistent with the move to penny quoting in stocks. Nonetheless, the average size of the best quote in the Pilot options is still large enough to fill the average individual investor order. At the same time, the number of quotations in these options has increased appreciably. This increase has been handled by the exchanges and the Options Price Reporting Authority without disruptions in the dissemination of quotes. The Commission has not concluded that penny quoting in all options is appropriate. Before approving exchange rules to expand the Pilot, the Commission will carefully analyze the results of the Pilot in assessing which additional options would most benefit investors if quoted in smaller increments. The Penny Quoting Pilot is scheduled to end on July 25, 2007. The reports from the options exchanges can be found on their Web sites: http://www.amex.com/amextrader/sysInfo/ANTE/ PennyPilotReport_06082007FINAL.pdf http://www.bostonoptions.com/PPP/Penny%20Pilot%20Review.pdf https://www.cboe.org/hybrid/CBOEPPReport06012007.pdf http://www.iseoptions.com/about/files/Penny_Report.pdf http://www.nyse.com/pdfs/PPSummary.pdf http://phlx.com/docs/SECPennyPilotReport.pdf # # # Additional materials: Options Exchanges Begin Penny Quoting Pilot: http://www.sec.gov/news/press/2007/2007-10.htm http://www.sec.gov/news/press/2007/2007-125.htm Home | Previous Page Modified: 06/29/2007
OCR text (2,639c · plain-text · 99% conf) 
SEC Announces Positive Early Results of Penny Quoting Pilot Program FOR IMMEDIATE RELEASE 2007-125 Washington, D.C., June 29, 2007 - The Securities and Exchange Commission announced today that early results from the Penny Quoting Pilot program show lowered trading costs for retail trades. An analysis of reports from the options exchanges by the Commission's Office of Economic Analysis indicate that the Pilot has been successful in narrowing average quoted spreads, which enables investors to trade options at better prices. The reduction in spreads also has led to a reduction in payment for order flow. The Penny Quoting Pilot began in January 2007 after SEC Chairman Christopher Cox urged each of the options exchanges to begin quoting a limited number of options in pennies. "The Penny Quoting Pilot is showing that smaller increments can result in better prices for investors," said Chairman Cox. "As we consider expanding the pilot to a broader number of options, however, we will want to proceed carefully to assure that the market quality in these options will improve, and that market participants can process the increased volume of quotations." The Penny Quoting Pilot has reduced the size quoted at the best price. This result is consistent with the move to penny quoting in stocks. Nonetheless, the average size of the best quote in the Pilot options is still large enough to fill the average individual investor order. At the same time, the number of quotations in these options has increased appreciably. This increase has been handled by the exchanges and the Options Price Reporting Authority without disruptions in the dissemination of quotes. The Commission has not concluded that penny quoting in all options is appropriate. Before approving exchange rules to expand the Pilot, the Commission will carefully analyze the results of the Pilot in assessing which additional options would most benefit investors if quoted in smaller increments. The Penny Quoting Pilot is scheduled to end on July 25, 2007. The reports from the options exchanges can be found on their Web sites: http://www.amex.com/amextrader/sysInfo/ANTE/ PennyPilotReport_06082007FINAL.pdf http://www.bostonoptions.com/PPP/Penny%20Pilot%20Review.pdf https://www.cboe.org/hybrid/CBOEPPReport06012007.pdf http://www.iseoptions.com/about/files/Penny_Report.pdf http://www.nyse.com/pdfs/PPSummary.pdf http://phlx.com/docs/SECPennyPilotReport.pdf # # # Additional materials: Options Exchanges Begin Penny Quoting Pilot: http://www.sec.gov/news/press/2007/2007-10.htm http://www.sec.gov/news/press/2007/2007-125.htm Home | Previous Page Modified: 06/29/2007

Related documents (6)