Did the 2025 Half-Cent Tick and Access-Fee Cut Tighten Spreads? A Daily-Data Difference-in-Differences, and Why It Cannot Yet Answer the Question

Abstract

In 2024, the SEC amended Regulation NMS to institute a $0.005 minimum tick size on some tick constrained stocks and lower the maximum allowable Rule 610(c) access fee. The initial study examined the effect of this regulation by setting November 3, 2025 as the event date, but later orders delayed the tick and fee provisions until November 1, 2027. The implementation of the new round lot definition, however, occurred on the initial event date. Because the provisions have not yet been implemented, the project cannot estimate their causal effects. The project uses CRSP daily closing consolidated NBBO data for 150 stocks as intraday TAQ data was not available. The difference-in-differences estimate obtained from the project is of the opposite sign as the expected narrowing of spread, but due to the problems with the study design, the estimate cannot be interpreted causally. Placebo testing is significant, nonparallel pre-trends occur in the event study, and treated and control stocks differ in prices and volumes. The closing daily spread of the treated stocks remains in the penny grid and hence cannot capture the half cent quotes allowed by the reform. The estimate may instead reflect preexisting group differences or marketwide changes. My contribution to the project is a source-verified timeline for the phase-in of the regulation. Future work will compare the project’s screen-based assignments with official exchange records. A stronger post-implementation design requires official assignments, better-matched controls, and intraday TAQ data.