SIFMA Equity Market Structure Recommendations

SIFMA published a set of recommendations on equity market structure for enhancing fairness, stability and transparency in the U.S. stock market. The Recommendations are a set of tangible and actionable market structure reforms developed by a broad-based task force of SIFMA’s members from across the country and across the industry, including retail and institutional dealers and asset managers. They are designed to promote fair and timely access to market data, address the complexity and fragmentation caused by the current order system, and enhance transparency for retail and institutional investors.

See Also:
Press Release: SIFMA Publishes Recommendations for Enhancing Fairness, Stability and Transparency in US Equity Markets (July 14, 2014)

SIFMA President and CEO Kenneth E Bentsen, Jr Statement on SIFMA’s Market Structure Recommendations before Roundtable on Equity Market Structure  (July 28, 2014)



Access Fees

  • The fees for accessing quotes at market centers should either be significantly reduced or eliminated. As a
    first step, the cap on access fees should be lowered to no higher than 5 cents/100 shares. Accordingly,
    the SEC should amend Rule 610 of Regulation NMS to implement that reduction.

Number of Trading Venues

  • The displayed quotations of a market center should be protected under Regulation NMS only if the
    market center executes a specified aggregate trading volume over a sustained period of time. In this
    regard, the SEC should amend the definition of “protected quotation” under Regulation NMS so that it
    applies only to the displayed quotations of a market center with one percent (1%) or more of the average
    daily dollar volume in all NMS stocks over a period of three consecutive calendar quarters. A market
    center would lose its protected quotation status if its volume fell below 1% for three consecutive calendar
  • The standards for identifying automated quotations should be updated to reflect the reality of today’s
    markets. In this regard, the SEC should amend the definition of the term “automated quotation” to
    provide that it must be executable within a millisecond, in contrast with current SEC guidance that allows
    for a one second execution time.

Order Types

  • The SEC should review the use and interaction of existing order types to ensure that all market
    participants have equivalent information about them. In this regard, the SEC should conduct a review to
    determine whether certain order types contribute to or create activity that otherwise should be
    discouraged (e.g., excessive message traffic, routing based on rebate capture). Exchanges also should
    amend their rules to provide transparency on available order types, including fill rates and typical usage of
    each order type offered.

Message Traffic

  • The SEC should take steps to discourage excessive message traffic (measured through order to fill ratios)
    that is not the result of providing meaningful liquidity to the marketplace. In this regard, mechanisms
    designed to minimize or prevent excessive message traffic should take into account and recognize that
    higher volumes of message traffic may be the result of bona fide trading behavior (e.g. market making

Kill Switches

  • Kill switches at the various exchanges should use standardized protocols and methodology. In addition,
    Regulators, exchanges, and industry members should work toward developing a centralized kill switch