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June 24, 2020

D.C. Circuit Strikes Down SEC’s “Maker-Taker” Pilot Program

The D.C. Circuit Court ruled on June 16 that the SEC doesn’t have the authority to implement a pilot program that would gather data on trading fees and rebates used by U.S. stock exchanges to attract trading volume. The court held that the SEC had acted outside its rulemaking authority, primarily because it had failed to identify a specific problem it was trying to solve and how the data would help address it. 

Better Markets said it was a setback for investors who need protection from “rigged markets and  predatory conduct.” Currently, exchanges and other trading venues are allowed to pay brokers to attract customer orders, and they profit handsomely from these kickbacks, known as “maker-taker” fees and rebates.  This is a form of legalized bribery that takes money out of the pockets of ordinary retail investors and puts that money into the pockets of brokers and exchanges. 

“Because markets are so complex and lack transparency, few investors are aware of the actual costs,” says Steve Hall, legal director and securities specialist for Better Markets. “But the losses add up every day, and that’s why the SEC had to step in.”

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