We have often discussed ways to make trading more efficient for investors. Much has centered around proposals to trade at more economically suitable ticks, through stock splits or tick size correction.
Today, we revisit this topic in three sections:
- Revisit our list of the stocks we said had the most trading inefficiencies For investors. As it turns out, many people have diverged, and as a result investors are saving around $500,000 every day.
- Update our list Stocks where a split would yield the most savings to investors.
- Check out the new US Securities and Exchange Commission (SEC) rules improving round lot sizes That also (at least partially) fixes some of the problems listed above. The round lot size changes are scheduled to take effect on November 3, 2025 (so companies should be aware of these now).
Please note that this analysis is for stocks of companies, not exchange-traded funds (ETFs).
1. Revisiting our 2022 list of the most expensive stocks to trade
In May 2022 (Chart 8), we identified the 20 stocks that cost investors the most unnecessary trading costs due to ineffective ticks and spreads.
We began using our true stock price formula to predict which stocks had spreads that were unnecessarily wide (due to stock prices and 1-cent ticks).
We then estimated the cost to investors using the following:
- Research shows that US institutional investors (mutual or pension funds) cross the spread 20% more often than hold it (even though institutions use algorithms to hold the spread).
- Other research we have done shows that institutions add about 21% of one-way value to businesses. Using that data, we estimated the additional institutional trading costs caused by unnecessarily wide spreads.
Multiplying all these estimates together, we see that additional spread costs have increased, especially for stocks that are heavily traded. We estimated that the highest spread cost came from the stock in Chart 1, where:
- Purple points indicate the spread in cents.
- The width of the green bars is the average daily volume or ADV (share).
- The height of the green bars estimates the additional costs of trading.
The most obvious recommendation at that time was to split these shares. Since then, eight of these stocks have completed splits (ticks in the chart below). One stock (PANW) even split two.
Chart 1: Stocks with the most additional trading friction due to ticks and spreads in 2022
Total 64 Stock Splits
In fact, since 2023, there have been 64 stocks that have split 2:1 or more.
The data shows that these divisions:
- The compressed spread is 34%, making it cheaper to trade per share.
- Increased liquidity 7%.
- Volatility reduction during market hours by 9%.
- A 33% reduction in odd lot volume share, which means higher volumes traded that update past sales information, improved price transparency and a reduction in the volume traded in odd lots inside NBBO quotes.
In short, stock splits are an easy way for issuers to improve the trading quality of their stocks.
Chart 2: Stock splits save investors costs across market caps
Investors saved $500,000 per day
Using the same math as before, we estimate that these eight splits saved investors approximately $500,000 per day. We show the breakdown in Chart 3. Most of the savings come from stocks with the highest ADV (shares traded); However, since these frictions come from stocks whose prices are generally very high, it has no relation to market capitalization or liquidity (in dollars).
Chart 3: Stock split savings to investors (by ticker, market cap and ADV)
2. Which stocks have the highest 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 additional trading costs for these twenty stocks come to $936,000 per day.
If we could help all stocks trade at their true stock price, we estimate that investors would save $4.8 million per day.
Chart 4: Top 20 most expensive stocks to trade in 2025
All these stocks trade at prices above $250
Interestingly, the 20 most expensive stocks to trade all had prices above $250.
We might recommend a split for these stocks too, but companies should also be aware that the SEC is about to change round lots – in a way that at least partially – fixes the inefficiencies of higher priced stocks.
3. New round lots coming in November
For high-priced stocks, the SEC Regulation NMS changes will be effective November 3, 2025:
- New round lot sizes for higher priced stocks.
In Chart 5, we show the impact of round lot changes:
- More than 200 company shares likely to get new, smaller round lots (Now below 100-share standard):
- There will be 40-share round lots in about 200 stocks priced between $250 and $1,000, including TSLA, AVGO, META and ASML.
- There will be 10-share round lots in about 15 stocks priced between $1,000 and $10,000, including MELI, AZO and BKNG.
- Stocks priced above $10,000 will have 1-share round lots, especially BRK.A, which already has 1-share round lots.
- About 4,700 company shares will see no change (gray circle). These companies will keep round lots of 100-shares.
Chart 5: Stocks getting new (small) round lots (by stock price and spread)
Round lot changes ensure that the NBBO for the above stock is at least $10,000
Round lots are important because they not only set the NBBO, which is displayed on traders’ screens, but are also used for execution quality (605) measurement, and are (for now) “protected”.
Today the round lot for each company stock (except BRK.A) is 100 shares. However, this means that for a $2,000 stock, only a $200,000 order will count towards NBBO. In today’s automated markets, this is much larger than most trades.
We have seen that supply and demand for stocks form a V-shape, so having smaller round lots should tighten the spread, as smaller orders matter for NBBOs.
You may ask why do we need round lots at all?
The answer is about helping big traders. This solution ensures that for all shares above the $100 price, the NBBO will represent at least $10,000 of liquidity. (40 shares x $250 = 1,000 shares x $1,000 = $10,000, as shown by the black line in Chart 6).
Chart 6: Stocks are getting new (small) round lots (by stock price and depth)
How narrow can the spread get?
In Chart 7, we show the current average spread based on the current tick size of one cent and the round lot value (orange line).
We then use actual odd-lot data in the market to estimate the best available odd-lot spread (yellow line). We highlight that there will almost always be smaller lots in which few symbols will trade compared to the new round lot sizes. So, the new spread will be between the yellow and orange lines for stocks above $250.
Importantly, the data suggests we will still see U-shaped spreads. For us, this highlights the additional costs of trading stocks that can easily occur:
- “Penid” (blue “tick” line indicates difference).
- There is still trading in small odd-lots (as indicated by the expanding light green box).
Chart 7: Spreads will still remain U-shaped with the new round lot rules
Stock splits may still matter
The new SEC round lot regime improves the round lot barrier problem. Starting in November, on-screen spreads should be better (lower) for the highest priced stocks.
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 “paid out” – losing their position at the front of the queue – for often immaterial economic costs).
One thing to remember for companies: You can still customize your own listings, so you’re trading at your own true stock price – not some regulated round lot that applies to everyone. Nasdaq can help you find out what that price is.
