NEW YORK May 14 The Securities and Exchange
Commission must decide soon whether to ask U.S. stock exchanges
to enact a pilot program to try to boost trading in illiquid
stocks or let the exchanges put forward a plan first, an SEC
commissioner said on Wednesday.
Commissioner Michael Piwowar said a groundswell is building
in Congress to enact a pilot program that would look at the
"tick size," or the spread between the bid and ask price for
quotations for small- and micro-cap stocks.
Proponents for such a program have said widening the bid-ask
spread would provide brokerages more money to pay for research
and drive greater interest in illiquid stocks.
The SEC can either ask the exchanges to come forward with a
plan to develop a pilot program or the SEC can issue an order
telling the exchanges to do so, Piwowar said at a conference
sponsored by the Securities Industry and Financial Markets
An order would allow the SEC to better control the process,
which Piwowar said he preferred, but either way the SEC has
ultimate say in approving the program, he said.
Congress will mandate the SEC to enact a pilot program, so
it would be preferable that the SEC act before politicians
decide how such a program is structured, said Piwowar, a
Congress ordered the SEC to study a pilot program when it
passed the JOBS act in 2012.
A number of issues about the pilot need to be decided, such
as whether to include stocks based on their market
capitalization or volume of trade, and how many "buckets" to
create so as better study likely outcomes, Piwowar said.
A control sample where no change occurs also must be created
to compare with the stocks being tested, he said.
Stephen Luparello, recently appointed director of the SEC's
division that oversees markets and brokerages, said a program
would likely be announced in the next few weeks.
Whether a "trade at" rule is included in the pilot program
still has not been decided, Luparello said. The rule could limit
how much trading occurs inside brokerages and in alternative
trading venues known as dark pools.
(Reporting by Herbert Lash; Editing by Nick Zieminski and