In the US we have SEC Rule 612. Here is a decent FAQ about what the rule covers:
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| | | | Division of Market Regulation: Responses to Frequently Asked Questions Concerning Rule 612 (Minimum Pricing Increment) of Regulation NMS | |
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So clearly market makers can not post quotes (or brokers post limit orders) on Reg NMS securities below a penny increment when the price quote is over $1.00. However it is perfectly legal for a dark pool?to cross orders?or a broker / dealer to internalize two orders at sub-penny increments. You can easily observe this by looking at last trade prices as they come over the tape. You will see many sub-penny prints.
Various US Equity exchanges have been fighting this rule for some time since internalization and dark pool take revenue away from them. so far none have been successful in making a compelling case to the SEC. Although Nasdaq has some price improvement mechanism whereby certain participants (RMO's) can submit orders eligible for price improvement at sub-penny increment ?(http://nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-filings/2012/SR-NASDAQ-2012-129_Approval.pdf)
