I 
113TH CONGRESS 
1ST SESSION H. R. 3448 
To amend the Securities Exchange Act of 1934 to provide for an optional 
pilot program allowing certain emerging growth companies to increase 
the tick sizes of their stocks. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 12, 2013 
Mr. DUFFY (for himself and Mr. CARNEY) introduced the following bill; which 
was referred to the Committee on Financial Services 
A BILL 
To amend the Securities Exchange Act of 1934 to provide 
for an optional pilot program allowing certain emerging 
growth companies to increase the tick sizes of their 
stocks. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Small Cap Liquidity 
Reform Act of 2013’’. 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
SEC. 2. LIQUIDITY PILOT PROGRAM FOR SECURITIES OF 
CERTAIN EMERGING GROWTH COMPANIES. 
(a) IN GENERAL.—Section 11A(c)(6) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78k–1(c)(6)) is 
amended to read as follows: 
‘‘(6) LIQUIDITY PILOT PROGRAM FOR SECURITIES 
OF CERTAIN EMERGING GROWTH COMPANIES.— 
‘‘(A) QUOTING INCREMENT.—Beginning on the 
date that is 90 days after the date of the enactment 
of the Small Cap Liquidity Reform Act of 2013, the 
securities of a covered emerging growth company 
shall be quoted using— 
‘‘(i) a minimum increment of $0.05; or 
‘‘(ii) if, not later than 60 days after such 
date of enactment, the board of directors of the 
company so elects in the manner described in 
subparagraph (D)— 
‘‘(I) a minimum increment of $0.10; 
or 
‘‘(II) the increment at which such se-
curities would be quoted without regard to 
the minimum increments established under 
this paragraph. 
‘‘(B) TRADING INCREMENT.—The securities of 
a covered emerging growth company that are quoted 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
at a minimum increment of $0.05 or $0.10 under 
this paragraph shall be traded at— 
‘‘(i) such minimum increment; or 
‘‘(ii) such other increment as permitted by 
the Commission by regulation, as the Commis-
sion considers appropriate. 
‘‘(C) FUTURE RIGHT TO OPT OUT OR CHANGE 
MINIMUM INCREMENT.— 
‘‘(i) IN GENERAL.—At any time beginning 
on the date that is 90 days after the date of the 
enactment of the Small Cap Liquidity Reform 
Act of 2013, the board of directors of a covered 
emerging growth company the securities of 
which are quoted at a minimum increment of 
$0.05 or $0.10 under this paragraph may elect 
in the manner described in subparagraph (D)— 
‘‘(I) for the securities of such com-
pany to be quoted at the increment at 
which such securities would be quoted 
without regard to the minimum increments 
established under this paragraph; or 
‘‘(II) to change the minimum incre-
ment at which the securities of such com-
pany are quoted from $0.05 to $0.10 or 
from $0.10 to $0.05. 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
‘‘(ii) WHEN
ELECTION
EFFECTIVE.—An 
election under this subparagraph shall take ef-
fect on the date that is 30 days after such elec-
tion is made. 
‘‘(iii) SINGLE ELECTION TO CHANGE MIN-
IMUM INCREMENT.—A covered emerging growth 
company may not make more than one election 
under clause (i)(II). 
‘‘(D) MANNER OF ELECTION.— 
‘‘(i) IN GENERAL.—An election is made in 
the manner described in this subparagraph by 
informing the Commission and each exchange 
on which the securities of the covered emerging 
growth company are quoted or traded. 
‘‘(ii) CONSULTATION.—In making an elec-
tion under subparagraph (A)(ii), the board of 
directors shall first consult with the primary 
listing market and major shareholders of the 
covered emerging growth company and with any 
brokers and dealers that the board of directors 
considers relevant to the quality of the market 
for the securities of the company. 
‘‘(E) ISSUERS
CEASING
TO
BE
COVERED 
EMERGING GROWTH COMPANIES.— 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
‘‘(i) IN GENERAL.—If an issuer the securi-
ties of which are quoted at a minimum incre-
ment of $0.05 or $0.10 under this paragraph 
ceases to be a covered emerging growth com-
pany, the securities of such issuer shall be 
quoted at the increment at which such securi-
ties would be quoted without regard to the min-
imum increments established under this para-
graph. 
‘‘(ii) EXCEPTIONS.—The Commission may 
by regulation, as the Commission considers ap-
propriate, specify any circumstances under 
which an issuer shall continue to be considered 
a covered emerging growth company for pur-
poses of this paragraph after the issuer ceases 
to meet the requirements of subparagraph 
(L)(ii). 
‘‘(F) SECURITIES TRADING BELOW $1.— 
‘‘(i) INITIAL PRICE.— 
‘‘(I) AT
EFFECTIVE
DATE.—If the 
trading price of the securities of a covered 
emerging growth company is below $1 at 
the close of the last trading day before the 
date that is 90 days after the date of the 
enactment of the Small Cap Liquidity Re-
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
form Act of 2013, the securities of such 
company shall be quoted using the incre-
ment at which such securities would be 
quoted without regard to the minimum in-
crements established under this paragraph. 
‘‘(II) AT IPO.—If a covered emerging 
growth company makes an initial public of-
fering after the day described in subclause 
(I) and the first share of the securities of 
such company is offered to the public at a 
price below $1, the securities of such com-
pany shall be quoted using the increment 
at which such securities would be quoted 
without regard to the minimum increments 
established under this paragraph. 
‘‘(ii) AVERAGE TRADING PRICE.—If the av-
erage trading price of the securities of a cov-
ered emerging growth company falls below $1 
for any 90-day period beginning on or after the 
day before the date of the enactment of the 
Small Cap Liquidity Reform Act of 2013, the 
securities of such company shall, after the end 
of such period, be quoted using the increment 
at which such securities would be quoted with-
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
out regard to the minimum increments estab-
lished under this paragraph. 
‘‘(G) FRAUD OR MANIPULATION.—If the Com-
mission determines that a covered emerging growth 
company has violated any provision of the securities 
laws prohibiting fraudulent, manipulative, or decep-
tive acts or practices, the securities of such company 
shall, after the date of the determination, be quoted 
using the increment at which such securities would 
be quoted without regard to the minimum incre-
ments established under this paragraph. 
‘‘(H) INELIGIBILITY FOR INCREASED MINIMUM 
INCREMENT
PERMANENT.—The securities of an 
issuer may not be quoted at a minimum increment 
of $0.05 or $0.10 under this paragraph at any time 
after— 
‘‘(i) such issuer makes an election under 
subparagraph (A)(ii)(II); 
‘‘(ii) such issuer makes an election under 
subparagraph (C)(i)(I), except during the pe-
riod before such election takes effect; or 
‘‘(iii) the securities of such issuer are re-
quired by this paragraph to be quoted using the 
increment at which such securities would be 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
quoted without regard to the minimum incre-
ments established under this paragraph. 
‘‘(I) 
ADDITIONAL
REPORTS
AND
DISCLO-
SURES.—The Commission shall require a covered 
emerging growth company the securities of which 
are quoted at a minimum increment of $0.05 or 
$0.10 under this paragraph to make such reports 
and disclosures as the Commission considers nec-
essary or appropriate in the public interest or for 
the protection of investors. 
‘‘(J) LIMITATION OF LIABILITY.—An issuer (or 
any officer, director, manager, or other agent of 
such issuer) shall not be liable to any person under 
any law or regulation of the United States, any con-
stitution, law, or regulation of any State or political 
subdivision thereof, or any contract or other legally 
enforceable agreement (including any arbitration 
agreement) for any losses caused solely by the 
quoting of the securities of such issuer at a min-
imum increment of $0.05 or $0.10, by the trading 
of such securities at such minimum increment or 
such other increment as permitted by the Commis-
sion under subparagraph (B)(ii), or by both such 
quoting and trading, as provided in this paragraph. 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
‘‘(K) REPORT TO CONGRESS.—Not later than 6 
months after the date of the enactment of the Small 
Cap Liquidity Reform Act of 2013, and every 6 
months thereafter, the Commission, in coordination 
with each exchange on which the securities of cov-
ered emerging growth companies are quoted or trad-
ed, shall submit to Congress a report on the quoting 
and trading of securities in increments permitted by 
this paragraph and the extent to which such quoting 
and trading are increasing liquidity and active trad-
ing by incentivizing capital commitment, research 
coverage, and brokerage support, together with any 
legislative recommendations the Commission may 
have. 
‘‘(L) DEFINITIONS.—In this paragraph: 
‘‘(i) BOARD
OF
DIRECTORS.—The term 
‘board of directors’ means a board of directors 
or any person or persons performing similar 
functions. 
‘‘(ii) COVERED EMERGING GROWTH COM-
PANY.—The term ‘covered emerging growth 
company’ means an emerging growth company, 
as defined in the first paragraph (80) of section 
3(a), except that— 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS
‘‘(I) such paragraph shall be applied 
by 
substituting 
‘$750,000,000’ 
for 
‘$1,000,000,000’ each place it appears; 
and 
‘‘(II) subparagraphs (B), (C), and (D) 
of such paragraph do not apply.’’. 
(b) SUNSET.—Effective on the date that is 5 years 
after the date of the enactment of this Act, section 
11A(c)(6) of the Securities Exchange Act of 1934 (15 
U.S.C. 78k–1(c)(6)) is repealed. 
Æ 
VerDate Mar 15 2010 
20:12 Nov 13, 2013
Jkt 039200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6301
E:\BILLS\H3448.IH
H3448
emcdonald on DSK67QTVN1PROD with BILLS