Better Markets filed a comment letter in response to a proposed rule change that the Financial Industry Regulatory Authority, Inc. (“FINRA”) submitted to the Securities and Exchange Commission (“SEC”) seeking to add IntelligentCross ATS (“IC”) as a new entrant to the Alternative Display Facility (“ADF”).

Why It Matters. Better Markets has repeatedly highlighted the many drawbacks associated  with the bifurcation of the current equity market structure and the increasing number of transactions that occur off-exchanges in dark markets. Not only does this trend away from lit, public markets harm investors, it has an equally deleterious effect on financial stability and competition in our markets. The SEC should be fostering regulatory policies that reverse this trend, not further incentivizing off-exchange trading at the expense of our well-regulated, lit, public markets. The proposed rule change would, if approved, be another step in further blurring the regulatory lines between lit, public markets (exchanges) and off-exchange, dark markets (ATSs).

What We Said. We urge the Commission to issue an order disapproving the proposed rule change because it would violate the Securities Exchange Act of 1934 in multiple ways. It would harm investors and the public interest more broadly, and it would undermine fair competition.  In addition, approving the proposed rule change based on the current record would be arbitrary and capricious, since the proposed rule change contains far too little concrete and detailed information about how IntelligentCross ATS’s trade matching engine operates and how it incorporates artificial intelligence. Moreover, under the proposed rule change, the operational aspects of IntelligentCross ATS’s platform would be subject to material changes over time without an adequate review and approval process.

Bottom Line. Better Markets urges the Commission to disapprove of the proposed rule change because it would conflict with securities law, harm investors, and produce anti-competitive effects.

Read our full Comment Letter here or click the button below.