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Tick Size Pilot Program: A Few Pennies Make a Big Difference

May 11, 2015
Earlier this week, the Securities and Exchange Commission (SEC) approved a tick size pilot program that will begin next year. We issued this statement, praising the SEC for finalizing this program, which could improve liquidity and enhance capital formation for emerging biotech companies.

Under current SEC rules, all securities on the public market are priced in $0.01 increments known as “tick sizes.” The switch to the standard tick size of a penny was enacted in 2000 in order to boost trading in large company stocks, but many smaller issuers have experienced the opposite effect. The pilot program will test the impact of a $0.05 tick on certain small companies in order to spur trading activity in their stock.  We believes that the pilot will increase the liquidity and capital availability necessary for emerging biotech companies to be successful on the public market.

As background, we have been heavily engaged on this issue for quite some time, for example:

  • We were strong advocates for the Jumpstart Our Business Startups (JOBS) Act, enacted in April 2012, which included a provision requiring the SEC to study tick size reform.  To date, the JOBS Act has spurred over 150 biotech IPOs.

  • Since the passage of the JOBS Act, BIO’s representatives on the Equity Capital Formation Task Force, SEC Advisory Committee on Small and Emerging Companies, and SEC Government-Business Forum on Small Business Capital Formation have been instrumental in developing tick size proposals within those groups.

  • In July 2013, we testified before the House Capital Markets Subcommittee supporting tick size flexibility via a pilot program.

  • In November 2013, we issued a statement lauding Reps. Sean Duffy (R-WI) and John Carney (D-DE) for introducing the Small Cap Liquidity Reform Act (H.R. 3448), which would have created a pilot program to widen tick size for small companies.

  • In January 2014, we submitted comments to the SEC’s Investor Advisory Committee on decimalization and tick sizes.

  • In February 2014, we issued a statement recognizing Reps. Duffy and Carney and members of the House for passing the Small Cap Liquidity Reform Act.  With BIO’s support, the bill passed the House by a vote of 412-4.

  • In December 2014, we submitted comments to the SEC on the then-proposed plan to implement the tick size pilot program.

Going forward, we will continue to work with the SEC to implement the pilot so that it will spur capital availability, company growth, and next generation research among emerging biotech companies.

For more information on the pilot program, please check out the SEC press release with text of the full plan here: