What is a significant consequence of the Sub Penny Rule?

The Sub Penny Rule refers to regulations put in place by the SEC to address the pricing of stocks and other equity securities. Specifically, this rule dictates minimum price increments, prohibiting the execution of trades in increments smaller than a penny. This is particularly relevant in exchange-based trading and aims to enhance market quality by simplifying price quoting and reducing the potential for market manipulation through excessive price fragmentation.

The focus on minimum price increments helps ensure that markets operate more smoothly, as it prevents millions of orders from trickling down to sub-penny pricing, which can complicate order execution and reporting. This uniformity aids in price discovery and provides traders with a basic framework within which they can operate, enhancing overall market integrity.

Other options, such as establishing uniform trading hours, controlling derivatives pricing, or mandating reporting requirements, do not accurately capture the primary function and significant consequence of the Sub Penny Rule, which is distinctly centered on how securities are priced and traded.