Bravo to the SEC for Directly Attacking Some Dysfunctional/Predatory Market Structure Problems
SEC Chairman Jay Clayton and Director of Division of Trading and Markets, Brett Redfearn, appeared together at an event at Fordham University in New York City this week and addressed the SEC’s recent efforts in reforming our fragmented, dysfunctional and too often predatory market structure. They were joined by Craig Phillips, Counselor to Treasury Secretary Steve Mnuchin, who opened the event by discussing Treasury’s October 2017 “Capital Markets” report.
Chairman Clayton and Director Redfearn discussed SEC’s 2018 market structure accomplishments, including finalizing the Transaction Fee Pilot, the approvals of rules to increase transparency of order routing and to improve the regulation of Alternative Trading System. Chairman Clayton and Director Redfearn also discussed the roundtables the SEC organized last year on thinly-traded securities, combating fraud in retail markets, and market data and access. The regulators summarized the lessons they drew from these roundtables and announced their intentions to proceed with specific reform proposals.
Perhaps the most important of these proposals would be the improvement of the availability of market data (often referred to as “core data”) that market participants who serve investors and the public use to make informed investment decisions. Upgrades to the Securities Information Processor (SIP) in terms of speed, content, depth, governance, transparency, and fair and efficient access will be key to ensure that “core data” is available to and serves the market participants’ needs to satisfy their best execution regulatory obligations. Said simply, without upgrades to SIP, broker-dealers are forced to buy proprietary data from the large exchanges (who now profit more from selling data than offering trading facilities) just to satisfy their best execution obligations. Upgrades to the SIP and “core data,” if done right, has the potential to unleash free market forces and serve the interest of long-term investors and the integrity of our markets.
To accomplish this, they will need the courage to free themselves of the deeply self-serving and corrupt influence of the entrenched interests of some on Wall Street who facilitate practices that enrich a small handful by tens of billions of dollars a year picked from the pockets of America’s investors and savers.
So far, Chairman Clayton and Director Redfearn have shown courage, tenacity, thoughtfulness, and the tact necessary to overcome these difficult hurdles and pressures in the market structure space. We applaud their efforts thus far and stand ready to support them as they continue to make much-needed and long-overdue reforms.