[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1216 Introduced in House (IH)]

114th CONGRESS
  1st Session
                                H. R. 1216

To require the Securities and Exchange Commission to carry out a pilot 
    program to examine maker-taker pricing, and for other purposes.


_______________________________________________________________________


                    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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Maker-Taker Conflict of Interest 
Reform Act of 2015''.

SEC. 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.
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