By James Langton

(January 15 – 11:35 ET) – The Toronto Stock Exchange is moving to penny increment trading.

The TSE says it will implement trading in penny increments for all securities selling above $5 on January 29. Securities trading between 50¢ and $5 already trade in penny increments, and those trading under 50¢ will continue to trade in half-penny increments.

The move comes in response to a similar one by the New York Stock Exchange. On December 4, the NYSE expanded its test of decimal pricing to include a number of securities which are presently inter-listed with the TSE. The TSE introduced a pilot project to trade in penny increments on six of the inter-listed securities on the same day.

Now the NYSE has announced that all equity securities will trade in decimals with a minimum price variation of a penny starting on January 29. On December 1, 2000, the Ontario Securities Commission approved amendments to the TSE’s rules to allow for penny trading.

The hope is that penny increments will lower spreads and costs for investors, possibly boosting trading volume. The fear for brokers is that market making becomes intolerably unprofitable in some stocks. But with the NYSE making this move and most of the TSE’s most important stocks interlisted, Toronto didn’t have much choice but to follow New York’s lead.