SEC Delays Reg NMS Rules as Legal and Market Uncertainties Loom

The Securities and Exchange Commission (SEC) has issued a temporary exemptive order delaying compliance with several key provisions under Regulation NMS (Reg NMS), citing judicial uncertainty and concerns about market readiness during a potential lapse in appropriations. The order extends compliance deadlines for rules governing minimum pricing increments, access fees, and the determinability of exchange fees until late 2025 and early 2026, according to an SEC press release.

The exemptive relief, effective immediately, applies to Rules 600(b)(89)(i)(F) and 612 (minimum pricing increments), Rule 610(c) (access fee caps), and Rule 610(d) (fee determinability at execution). Compliance for these rules is now extended to November 2026, February 2026, and November 2026, respectively. The SEC also granted exchanges temporary relief from filing rule changes to update round lot definitions under Rule 600(b)(93) until 30 days after the end of the appropriations lapse, the press release said.

The decision follows a U.S. Court of Appeals for the D.C. Circuit's denial of a petition challenging the 2025 compliance dates. SEC Chairman Paul S. Atkins emphasized that the order "will provide clarity to the market regarding certain upcoming compliance dates" and is necessary to "facilitate orderly market functions" amid ongoing legal and budgetary uncertainties, the press release added.

These regulatory changes, first announced in 2022, aim to modernize U.S. equity markets by adjusting tick sizes, access fees, and lot sizes to improve liquidity and reduce transaction costs. For instance, stocks with average prices below $0.015 will transition to half-penny tick sizes, while round lot sizes will vary based on a security's price, as explained in a Traders Magazine report. High-value stocks like Tesla (TSLA) and Netflix (NFLX) will see round lot sizes shrink to 40 and 10 shares, respectively.

Market participants are already preparing for the shifts. According to BMLL Technologies' analysis, approximately 1,700 tickers—representing 40% of U.S. equity trading volume—will adjust tick sizes in November 2025. The firm noted that average spreads for 40-share lot sizes could improve by 25%, though disparities between round and odd-lot spreads may persist until 2026.

The changes also intersect with broader market data reforms, such as the New York Stock Exchange's August 2025 update to trade reporting, which now transmits individual trades to consolidated market data feeds. This shift has aligned odd-lot reporting between Level 3 and SIP (Securities Information Processor) data, enhancing transparency for traders.

Critics and proponents alike acknowledge the complexity of implementing these rules. Elliot Banks, Chief Product Officer at BMLL, warned that the "most dramatic changes in years" to U.S. equity data could disrupt execution algorithms and risk management strategies. "Understanding the impact of tick size, lot size, and dissemination changes is critical for market participants to adapt effectively," he stated.

With the SEC's delayed compliance deadlines, exchanges and brokers now have additional time to adjust systems and educate investors. However, the agency's partial stay of rule amendments remains pending judicial review, leaving the final timeline for implementation in flux.