21 Feb Tick Size Bill Passes House, Moves to Senate

After unanimously sailing through the House Financial Services Committee back in November, the full House of Representatives, in a lopsided 412-4 vote, last week passed HR 3448, known as The Small Cap Liquidity Act of 2013. The bill now moves to the US Senate for its consideration. House Reps Sean Duffy (R-WI) and John Carney (D-DE) were the key co-sponsors.

The bill creates a 5-year pilot program which would give public companies the option to have their stock traded in 5 or 10 cent increments between “bid” and “ask” instead of the current rule going as low as a penny between the two. The “decimalization” of these spreads back in 2001 is partially credited for decimating the smallcap IPO market. Under the bill, stock price would have to be above $1.00 for the company to have the right to alter its spread. The idea is to encourage more market participants to be involved with smaller stocks and use the spreads to earn more from trading activities, helping smaller companies raise capital.

I’m reminded of Schoolhouse Rock and the great educational ditty, “I’m Just A Bill” as we follow this law making its way through Congress. Will it pass as is and be signed into law by the President? Will it be incorporated into a larger, supposedly upcoming JOBS Act 2.0? One thing for sure, it looks like the tick size reform movement has strong bipartisan support.