We have often discussed ways to make trading more efficient for investors. A lot centered around proposals to trade at more economically appropriate ticks, either through stock splits or tick size reform.
Today, we revisit this topic in three sections:
- Revisit our list of stocks we said had the highest trading inefficiencies for investors. As it turns out, many have split, and investors are saving around $500,000 each day as a result.
- Update our list of stocks where splits would save investors the most.
- Look at new U.S. Securities and Exchange Commission (SEC) rules reforming round lot sizes that also (at least partially) fix some of the problems listed above. Round lot size changes are scheduled to go into effect on Nov. 3, 2025 (so companies should be aware of them now).
Please note that this analysis is for companies’ stocks, not exchange-traded funds (ETFs).
1. Revisiting our 2022 list of most expensive stocks to trade
In May 2022 (Chart 8), we determined the 20 stocks that cost investors the most unnecessary trading costs due to inefficient ticks and spreads.
We started by using our perfect stock price formula to estimate which stocks’ spreads were unnecessarily wide (due to stock prices and the 1-cent tick).
We then estimated the costs to investors using:
- Research that shows U.S. institutional investors (mutual or pension funds) cross the spread 20% more often than they capture it (even though institutions use algorithms to capture spreads).
- Other research we have done suggests institutions add to about 21% of one-sided value traded. Using that data, we estimated the additional institutional trading costs due to unnecessarily wide spreads.
Multiplying all these estimates together, we see that additional spread costs have added up, especially for stocks that trade a lot. We estimated the highest spread costs came from the stocks in Chart 1, where the:
- Purple dots show the spread in cents.
- The width of the green bars is average daily volume, or ADV (shares).
- The height of the green bars is the estimate of additional cost to trade.
The most obvious recommendation at the time was for these stocks to do splits. Since then, eight of these stocks have completed splits (ticks in chart below). One stock (PANW) even did two splits.
Chart 1: Stocks with the highest additional trading frictions caused by ticks and spreads in 2022
A total of 64 stock splits
In fact, since 2023, there have been 64 stocks that split by 2:1 or more.
Data shows that these splits:
- Compressed spreads 34%, making it cheaper to trade per share.
- Boosted liquidity 7%.
- Decreased volatility during market hours 9%.
- Decreased odd lot volume share by 33%, meaning more volume traded that updates last sale information, improving price transparency and decreasing volume traded in odd lots inside the NBBO quote.
In short, stock splits are an easy way for issuers to improve their stock’s trading quality.
Chart 2: Stock splits save investors on costs across all market caps
Saved investors $500,000 per day
Using the same math as earlier, we estimate these eight splits saved investors around $500,000 a day. We show the breakdown in Chart 3. Most of the savings come from stocks with the highest ADV (shares traded); however, as these frictions come from stocks with prices that are typically too high, that’s not necessarily correlated to market capitalization or liquidity (in dollars).
Chart 3: Stock split savings to investors (by ticker, market cap and ADV)
2. What stocks have the most unnecessary trading costs today?
In the chart below, we use the same approach to update our list of the 20 most expensive stocks to trade for investors today. The total excess trading costs of these twenty stocks come to $936,000 per day.
If we could help all stocks trade at their perfect stock price, we estimate investors would save $4.8 million per day.
Chart 4: Top 20 most expensive stocks to trade in 2025
All of these stocks trade at prices above $250
Interestingly, all 20 of the most expensive stocks to trade had prices above $250.
We could recommend splits for these stocks, too, but companies should also know that the SEC is about to change round lots – in a way that at least partially – fixes the inefficiency of a high-priced stock.
3. New round lots coming in November
For stocks with a high price, a SEC Regulation NMS change goes into effect Nov. 3, 2025:
- New round lot sizes for high priced stocks.
In Chart 5, we show the impact of the round lot changes:
- Over 200 company stocks are likely to get new, smaller round lots (down from the 100-share standard now):
- Around 200 stocks priced between $250 and $1,000 will have 40-share round lots, including TSLA, AVGO, META, and ASML.
- Around 15 stocks priced between $1,000 and $10,000 will have 10-share round lots, including MELI, AZO, and BKNG.
- Stocks priced above $10,000 will have 1-share round lots, notably BRK.A, which is already a 1-share round lot.
- About 4,700 company stocks will see no change (grey circles). These companies will keep a 100-share round lot.
Chart 5: Stocks getting new (smaller) round lots (by stock price and spread)
Round lot changes ensure the NBBO is at least $10,000 for stocks above
Round lots are important because they not only set NBBO, which is displayed on traders’ screens, but are also used for execution quality (605) measurement, and are (for now) “protected.”
Today a round lot for every company stock (except BRK.A) is 100 shares. However, that means for a $2,000 stock, only an order of $200,000 will count for NBBO. In today’s automated markets, that’s much larger than most trades.
We’ve seen that supply and demand for stocks forms a V-shape, so having smaller round lots should tighten spreads, as smaller orders count for the NBBO.
You might ask why do we need round lots at all?
The answer is all about helping larger traders. This solution ensures that for all stocks above a price of $100, the NBBO will represent at least $10,000 of liquidity. (40 shares x $250 = 10 shares x $1,000 = $10,000, as the black line in chart 6 shows).
Chart 6: Stocks getting new (smaller) round lots (by stock price and depth)
How much might spreads compress?
In Chart 7, we show current average spreads, based on the current tick size of one cent and round lot value (orange line).
We then use actual odd-lots data in the market to estimate the best available odd lot spread (the yellow line). We highlight that there will almost always be smaller lots that some symbols will trade in than the new round lot sizes. So, the new spreads will be between the yellow and orange line for stocks over $250.
Importantly, the data suggests that we will still see spreads form a U-shape. To us, that highlights the additional costs of trading a stock that can easily be:
- “Pennied” (as the difference to the blue “tick” line shows).
- Still traded in even smaller odd-lots (as the rising light green box shows).
Chart 7: Spreads will still form a U-shape with new round lot rules
Stock splits might still matter
The new SEC round lot regime improves the round lot constraint problem. Starting in November, on-screen spreads for the highest priced stocks, should be better (lower).
However, odd lots will still exist for almost all stocks, and ticks that are too small will still make trading more difficult (as real investors can easily be “pennied” – losing their position at the front of the queue – often for immaterial economic cost).
One thing for companies to remember: You can still optimize your own listing, so you are trading at your own perfect stock price – not some regulated round lot that applies to everyone. Nasdaq can help you work out what that price is.
