Sub-Pennying

A practice where brokers, dealers or high-frequency traders jump to the front of the line in the National BestBid and Offer (NBBO), which is the highest posted bid and the lower posted offer for a trading instrument, by making a price improvement in 1/100th of a penny increments. This allows the transaction to be executed first and provides the best opportunity to capture the spad.

Taobiz explains Sub-Pennying

Sub-pennying practices take fills away from investors who place orders on the National BestBid and Offer. The Securities and Exchange Commission (SEC) in 2005 implemented Rule 612 or the Sub-Penny Rule. With an increase in algorithmic trading, programs had been created to automatically sub-penny the NBBO. The SEC noticed and adopted Rule 612 to address the problem. It specifies that the minimum pricing increment for stocks over $1.00 must be $0.01; stocks under $1.00 have a minimum pricing increment of $0.0001. The rule, however, only banned sub-penny quoting - and not sub-penny trading - and as such the problem of sub-pennying still exists.