Subject: JOBS Act: Title I Tick Size Study
From: Ernest Callipari
Affiliation: Equity Trader

September 2, 2014

The negative comments regarding the pilot program recently submitted do not understand the reason for the pilot program. This program only effects a select group of small-cap stocks to test if greater trading liquidity through larger spreads will attract meaningful institutional investor ownership and thus increase capital formation. Detractors are reacting as if this program will turn the existing market structure for all stocks on it's head. Truth is, they will not be effected.
Wider spreads makes market making profitable. I believe that any entity willing to risk capital making markets should be rewarded with a reasonable return for risk. In turn you will see more depth and liquidity in these stocks which will in turn attract more investors and traders into these stocks which will again increase depth and liquidity. In the long run, larger tick sizes will strengthen stocks and their underlying companies.
On a side note, It was never proven that the "optimal price spread" was a penny when the markets went to decimalization. The penny spread also had an unforeseen and dire consequence: the rise of the algo and the death of the human trading element. Trading volume across the board has collapsed. Today's market is no more than predatory algo's feeding off each other.