stock exchange

To help improve trading in low-volume stocks, U.S. securities regulators are seeking innovative ideas from the investment industry.

The U.S. Securities and Exchange Commission (SEC) issued a statement on Thursday that calls on exchanges and other market players to submit proposals for improving the secondary market structure for what are referred to as “thinly traded securities.”

The SEC says those who invest in stocks with low trading volumes may face higher transaction costs. They may also have a tougher time building and unwinding large positions, due to liquidity challenges.

Weak trading volume can also negatively impact an issuer’s cost of capital, the SEC says.

“As we have heard from issuers, exchanges, and other market participants, a one-size-fits-all approach to market structure does not work for many of our public issuers, particularly small- and medium-sized companies,” says SEC chairman Jay Clayton in a release.

“We want to know if more can be done to improve secondary market quality for thinly traded securities, and we look forward to seeing proposals geared to enhance trading and liquidity for this segment of the market while maintaining or improving market integrity,” he adds.