I voted yes on the motion to suspend the rules and pass #HR3448, Small Cap Liquidity Reform Act of 2013, which establishes an optional five-year pilot program to allow small publicly traded companies to increase the minimum pricing increment (known as a tick) at which their stocks will be quoted to $.05 or $.10, rather than the $.01 current law has required for most stocks since 2001. The smaller tick size has reduced the profitability of equity dealers, who previously used some of the profits earned on wider bid-ask spreads to fund analyst research, intended to help fuel interest in small capitalization stocks that face liquidity challenges. This bill is meant to help improve liquidity of small-cap companies by incentivizing banks and other market makers to trade more small-cap stocks. I am skeptical about the basis for this proposal, and I also recognize the benefits of one-cent increments for investors, who now enjoy relatively low transaction costs and may see those transaction costs rise if some companies are permitted larger tick sizes. Nonetheless, given the complexity of the market, this short-term, opt-in pilot program seems to be a reasonable way to gather information about the impact tick sizes have on all affected parties and whether alternate tick prices will increase or reduce market efficiency. It passed 412-4.
Posted on: Tue, 18 Feb 2014 18:12:33 +0000
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