Dec. 21, 2012
Panel 1 — Evaluating Concerns Relating to Tick Size for Small and Middle Capitalization Companies
- Given the current market structure, does a one-cent minimum tick size inhibit IPOs or otherwise have any negative effects on small and middle capitalization companies?
- Are there other economic or regulatory developments during the timeframe that decimalization has been in place that may have had a more significant impact on U.S. IPOs?
- What are possible regulatory initiatives that might encourage small and middle capitalization companies to conduct IPOs?
- Will the provisions of Title I of the JOBS Act that provide additional flexibility to small and middle capitalization companies with respect to disclosure obligations, internal controls, auditing standards, research reports and other matters encourage these companies to conduct IPOs? If so, how much?
- Would increasing minimum tick sizes for trading the securities of small and middle capitalization companies materially impact the incentives for IPOs? If so, what should the minimum tick size be?
- Can issuers effectively address the tick size issue through reverse stock splits or stock price range selection at the time of the IPO?
- Should minimum tick sizes remain at a specific level only for a certain period after the IPO of small and middle capitalization companies? If so, what period would be necessary?
- What particular problems do small and middle capitalization companies face in the current market structure?
- Is the level of liquidity provided for securities of small and middle capitalization companies inadequate today? If so, to what extent has this problem been exacerbated by smaller tick sizes?
- Are there other factors that significantly impact the liquidity and trading of small and middle capitalization companies? If so, what are possible regulatory solutions to improve the market structure for them?
- Would increasing minimum tick sizes for trading the securities of small and middle capitalization companies improve their market structure by enhancing economic incentives for market making?
- Would increasing tick size improve the availability of research on small and middle capitalization companies?
- From the perspective of investors, would the potential benefits of increased liquidity outweigh the potential reduction in price competition?
- Is the impact different for institutional and retail investors?
Panel 2 — Evaluating Concerns Relating to Tick Size for the Securities Market Generally
- What impact has decimalization had on the securities market in general?
- What problems has decimalization caused? What benefits have been realized? Do the benefits of decimalization outweigh any such problems?
- Is it advisable to broadly re-evaluate minimum tick sizes in the U.S. securities market?
- Should consideration be given to reducing minimum tick sizes for other types of securities such as those of very liquid large capitalization companies?
- What should be the factors in determining optimal minimum tick sizes?
- Should the minimum tick size vary with the price of a security, its liquidity, the size of the issuer, or other characteristics?
- Are there international models that might provide a good example of tiered minimum tick sizes?
- Should the minimum tick size be mandated for all securities, or should issuers or primary listing markets be allowed to choose?
Panel 3 — Studying the Effects of Alternative Tick Sizes
- What is the best way to study the effects of decimalization on small and middle capitalization companies?
- Is it feasible to isolate the impact of decimalization on IPOs? If so, how?
- What data would be needed to support changing the minimum tick size for all or a subset of stocks?
- How can the Commission or exchanges generate additional studies of the impact of minimum tick sizes on the liquidity and trading of securities of small and middle capitalization companies? Is this best done through a pilot program in which the minimum tick size is actually changed for a control group of securities? If so, how should such a pilot program be designed?
- Should the Commission assess the impact of minimum tick sizes on the full range of equity securities, including those of large capitalization companies?
- Should OTC executions in increments less than the minimum tick size (i.e., subpenny price improvement) be prohibited during a pilot period?
- What criteria should be used to select securities for participation in a pilot?
- What minimum tick sizes should be used for a pilot program, and to which types of securities should they apply?
- To what extent should issuers have input into the participation of their securities in the pilot? How long should a pilot program last? What are the most useful research questions that could be examined from such a pilot program?
- Is public data sufficient for addressing these questions in the context of a pilot? If not, what questions cannot be addressed with public data and what additional data would be needed to address these questions?
- Who is likely to study and to provide analysis of a tick size pilot (e.g. academics, exchanges, industry groups, others)?
- Are there particular risks associated with conducting a pilot program? If so, what is the best way to mitigate these risks?
- What are the costs associated with a pilot and how does the design of a pilot affect those costs?
- Are there better ways to gather reliable data on the impact of minimum tick sizes on the securities of small and middle capitalization issuers?