Brokers' SI systems to keep some tick-size advantage over exchanges in EU plan

16 August 2018 7:41pm
Brokers will be able to keep an advantage over exchanges in their systems for stock trading with clients by quoting in smaller price increments when handling large orders, according to revised EU plans.

The European Commission has rejected regulators’ proposals for a wider crackdown on brokerage systems known as systematic internalizers, or SIs, offering smaller “tick sizes,” according to a letter obtained by MLex.

The commission instead plans a more narrowly drawn rule that still aims to prevent SIs from harming the flow of trading by chopping up orders into smaller moves, such as a tenth of a cent for stocks otherwise quoted in one-cent increments.

SIs will only be obliged to apply tick-size rules for orders “below the standard market size,” the EU executive said in the Aug. 10 letter to the European Securities and Markets Authority. The measure will cover stocks and depositary receipts, the stand-ins typically used for shares in companies based in other countries.