I 113th CONGRESS 1st Session H. R. 1952 IN THE HOUSE OF REPRESENTATIVES May 13, 2013 Mr. Schweikert introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission to allow publicly traded companies with a certain sized public float to change their stocks’ tick sizes to increase liquidity by incentivizing capital commitment, research coverage, and brokerage support, thereby increasing the stocks’ liquidity and investor interest, and for other purposes.

1. Short title This Act may be cited as the Spread Pricing Liquidity Act of 2013 . 2. Tick size for certain issuers (a) In general Section 11A(c)(6) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78k–1(c)(6) ) is amended to read as follows: (6) Tick size for certain issuers (A) Selection (i) In general The board of directors of an issuer with a public float of $500,000,000 or less (based on a rolling average over the course of the preceding 3-month period) and an average daily trading volume of less than 500,000 shares may select to have the securities of the issuer quoted and traded using an increment of either $0.05 or $0.10. (ii) Manner of selection A selection under this subparagraph shall be made by informing the Commission and each exchange on which the securities of the issuer are quoted or traded. (iii) Limitation on certain issuers With respect to the average trading price in the most recent 1-month period for the securities of an issuer— (I) if such average price is less than $1, the issuer may not make the selection under this subparagraph; and (II) if such average price is $1 or more, but less than $2, the issuer may only select to have the securities of the issuer quoted and traded using an increment of $0.05. (iv) Consultation In making a selection under this subparagraph, the board of directors shall first consult with the issuer’s primary listing market. (B) Trading requirements If an issuer has made the selection under subparagraph (A)— (i) all quotes of the securities of such issuer shall be done using only the increment selected; (ii) an exchange on which the securities of such issuer are traded may not charge a fee for a person engaging in such a trade, unless such fee is uniform for all trades and based solely on the number of shares traded; and (iii) such selection shall not prevent the securities of the issuer being traded at increments other than the increment selected. (C) Right to opt out of selection (i) In general An issuer that has made the selection under subparagraph (A) may choose to opt out of such selection at any time after the 6-month period beginning on the date such selection was made. (ii) Manner of opt out An issuer that chooses to opt out of the selection under subparagraph (A) shall do so by informing the Commission and each exchange on which the securities of the issuer are quoted or traded. (iii) Future selection Subject to subparagraph (D), an issuer that opts out of the selection under subparagraph (A) may make the selection under subparagraph (A) again at any time after the 1-year period beginning on the date of the opt out. (D) Treatment of issuers surpassing cap If the public float of an issuer that has made the selection under subparagraph (A) rises above $500,000,000 (based on a rolling average over the course of a 3-month period) or the average daily trading volume of the issuer raises above 500,000 then, after the end of the 3-month period beginning on the date of such occurrence— (i) the issuer shall no longer be considered to have made the selection under subparagraph (A); and (ii) the issuer shall be ineligible to make a selection under subparagraph (A) during the 2-year period beginning after the end of such 3-month period, regardless of the issuer’s public float or average daily trading volume. (E) Study and Report (i) In general Not later than the end of the 9-month period beginning on the date of the enactment of this paragraph, and annually thereafter, the Commission shall carry out a study of the quoting and trading of securities in increments of $0.05 and $0.10 permitted by this paragraph, and the extent to which such a system is increasing liquidity by incentivizing capital commitment, research coverage, and brokerage support. (ii) Report to Congress Upon the completion of each study described under clause (i), the Commission shall issue a report to the Congress containing all of the findings and determinations made in carrying out such study, along with any legislative recommendations the Commission may have. (F) Definitions For purposes of this paragraph: (i) Average daily trading volume With respect to a security, the term average daily trading volume means the average, over the previous 3-month period, of— (I) the aggregate daily volume for bids made on the security within the price band; and (II) the aggregate daily volume for offers made on the security within the price band. (ii) Price band With respect to a security, the term price band means the range between the price that is 25 cents below the trading price of the security and the price that is 25 cents above the trading price of the security. (iii) Public float The term public float means the amount of equity of an issuer that is held by persons who are not affiliated with the issuer, determined by multiplying the number of shares of such stock by the price of one of such shares. . (b) Effective Date (1) In general Section 11A(c)(6) of the Securities Exchange Act of 1934, as amended by subsection (a), shall take effect— (A) with respect to an issuer with a public float of $100,000,000 or less (based on a rolling average over the course of the preceding 3-month period) and an average daily trading volume of less than 100,000, on the date of the enactment of this Act; (B) with respect to an issuer that is not described under subparagraph (A) and that has a public float of $250,000,000 or less (based on a rolling average over the course of the preceding 3-month period) and an average daily trading volume of less than 250,000, after the end of the 3-month period beginning on the date of the enactment of this Act; and (C) with respect to an issuer that is not described under subparagraph (A) or (B) and that has a public float of $500,000,000 or less (based on a rolling average over the course of the preceding 3-month period) and an average daily trading volume of less than 500,000, after the end of the 6-month period beginning on the date of the enactment of this Act. (2) Definitions For purposes of this subsection, the terms average daily trading volume and public float have the meaning given those terms, respectively, under section 11A(c)(6)(F) of the Securities Exchange Act of 1934.