SIFMA Urges Congress to Support "Small Cap Liquidity Reform Act" (with Lofchie Comment)

SIFMA submitted a letter to Congress urging members to support the Small Cap Liquidity Reform Act of 2013 (H.R. 3348). In the letter, SIFMA commended Representative Sean Duffy (R-WI) for putting forth a proposal that could, SIFMA asserted, improve the trading liquidity of small cap stocks.The legislation, according to SIFMA, would establish an SEC pilot program that widened the quoting increment for a basket of stocks from a penny to a nickel or dime. Additionally, the Act has a "Manager's Amendment" which would allow the SEC to determine whether a trading restriction on small cap stocks was appropriate for the tick size pilot program.

Lofchie Comment: This is an interesting statutory proposal in that it would allow an issuer to decide whether to establish a larger minimum tick size in the issuer's stock. Presumably, widening spreads (and likely dealer trading profits in a stock) would not only attract potential liquidity to the market for the stock, but might also encourage firms to write research on the stock.

See: SIFMA's Letter to Congress.