SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Reg SHO Pilot Report DRAFT 9/14/2006
traded than those in the Russell 3000. However, some results, particularly those involving
volatility, suggest that the effect of the tick test and the bid test may be systematically related to
market capitalization.
We conclude with a few caveats. While the Pilot study was designed to facilitate a natural
experiment in a controlled environment, the results might not be entirely representative of
removing the rule permanently for all stocks. It is possible that traders might behave differently
if a rule were permanently and completely removed than if it is only temporarily or incompletely
removed. Moreover, it is possible that traders with manipulative intentions might be on good
behavior if they believe that heightened scrutiny during the Pilot increases their chances of
getting caught.
Prepared by the Office of Economic Analysis 57
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