I 114th CONGRESS 1st Session H. R. 1216 IN THE HOUSE OF REPRESENTATIVES March 3, 2015 Mr. Lynch (for himself, Mr. Capuano , Mr. Ellison , and Mr. Hinojosa ) introduced the following bill; which was referred to the Committee on Financial Services A BILL To require the Securities and Exchange Commission to carry out a pilot program to examine maker-taker pricing, and for other purposes.

1. Short title This Act may be cited as the Maker-Taker Conflict of Interest Reform Act of 2015 . 2. Pilot program to examine maker-taker pricing (a) In general Not later than 90 days after the date of the enactment of this Act, the Securities and Exchange Commission shall begin a 6-month pilot program to examine of maker-taker pricing, under which the Commission shall— (1) identify a random sample of 50 issuers (the sample group ) out of the 100 issuers with the most frequently-traded securities; (2) during such 6-month period, prohibit the payment of rebates (or comparable inducements) on any trade of securities of the issuers in the sample group; and (3) compare the effects of such prohibition on the issuers in the sample group compared to the 50 issuers not so chosen (the control group ). (b) Report (1) In general Not later than 6 months after the end of the program required under subsection (a), the Commission shall issue a report to the Congress containing all of the findings and determinations made in carrying out such program, along with any legislative or regulatory recommendations the Commission may have. (2) Factors to consider In preparing the report required under paragraph (1), the Commission shall consider factors relevant to the impact of rebates (or comparable inducements) on equity markets, including— (A) whether maker-taker pricing creates a potential conflict of interest between brokers and their clients by incentivizing brokers to use routing that may be cost-effective for them, but which may not be the best method of execution for their clients; (B) whether maker-taker pricing reduces, or potentially reduces, market transparency and distorts price discovery insofar as rebates and fees are not disclosed in displayed quotes, thereby causing displayed spreads to be narrower or wider than actual spreads; and (C) whether maker-taker pricing compromises, or potentially compromises, efficiency and liquidity by— (i) contributing to increased length in exchange queues; (ii) causing passive market participants to trade more aggressively to access liquidity; (iii) contributing to a reduction in liquidity in times of market stress, particularly for less liquid securities; (iv) incentivizing a proliferation of order types, rebates, and fees, thereby resulting in increased fragmentation of order flow; and (v) fostering excessive intermediation by certain market participants that trade in part or in whole to capture rebates (or comparable inducements) or avoid fees. (c) Commission authority The Commission may make such adjustments to the pilot program under this section as the Commission considers necessary or appropriate to ensure that such program can provide statistically meaningful or reliable results. (d) Definitions For purposes of this section: (1) Maker-taker pricing The term maker-taker pricing means any pricing model by any trading venue that provides rebates (or comparable inducements) or fees to market participants to either provide liquidity to, or to take liquidity from, that trading venue. (2) Rebates The term rebates means funds provided by a trading venue to certain participants in a transaction on that venue. (3) Comparable inducements The term comparable inducements means items or services of value (other than rebates) provided by a trading venue to certain participants in a transaction on that venue, including free or reduced-cost market data, connectivity ports, co-location space, and technology services.