Taking Stock of Equity Market Structure Priorities

The U.S. stock market is largest in the world – nearly two and a half times the next largest, the EU – and represents about 38% of the $85 trillion in equities around the globe. On average, around 7.3 billion shares are traded on U.S. equity markets every day. Businesses choose to list in the U.S. knowing they can be supported by the most robust secondary markets in the world. In this way, the U.S. equity markets are a fundamental driver of economic growth in this country: they provide all types of investors with financial opportunity and incentivize capital formation that spurs business innovation and job creation.

As Americans and as financial professionals, we are proud of our distinction as the deepest, most liquid and most efficient markets in the world. However, as SEC Commissioner Hester Peirce stated at SIFMA’s recent Equity Market Structure Conference, “a national market system is not a goal to be achieved; it needs to be agile enough to change to investor and issuer needs.” The evolution of equity market structure remains a key priority for SIFMA. We welcome SEC Chairman Jay Clayton’s upcoming roundtables on low-volume securities, access to markets and market data, and combatting retail fraud. Here is a rundown of the most topical issues on the SEC’s agenda explored at our recent event and SIFMA’s view on each.

Pilot Programs

Last month, the SEC proposed a transaction fee pilot. SIFMA has supported lowering the current cap on access fees, and the pilot would be a constructive way to gather evidence for the most optimal steps for reform in this area. We are examining the proposal and will be submitting comments to the SEC. SIFMA will urge the SEC to set specific metrics for determining the pilot’s success.

We wholeheartedly agree with Brett Redfearn, Director, Division of Trading and Markets at the SEC, who commented at our event that “pilots, when properly constructed should be a way to make progress on important policy issues without locking the markets into a suboptimal solution.”

Capital Formation

The April 23rd SEC roundtable on low-volume securities is particularly relevant. We urge the SEC to carefully consider whether there are changes in equity market structure that could improve capital formation. If there are structural changes to accomplish that goal, we should explore them. SIFMA recently co-authored a white paper on capital formation, which discusses this critical topic in more detail. 

Market Data

Market data is a key part of successful markets, and we have consistently maintained that market data must be timely, comprehensive, non-discriminatory, and accessible to all market participants at a reasonable cost. The SEC’s roundtable on this issue also will be a good place consider the NMS Plan structure used to operate the public market data feeds. We have repeatedly argued for governance reform in NMS Plans to include direct voting representation by industry representatives.

SRO Structure

We continue to believe that the role of exchanges as SROs needs to be modernized given the business and policy changes over that last 10-15 years. We urge all interested stakeholders, including legislators and regulators, to consider such critical issues as the appropriate scope of exchange SRO status and reasonable limits on exchanges’ operational liability.

SEC Chairman Jay Clayton has outlined his priorities and underscored his commitment to industry and market input in informing the market’s regulatory apparatus. We look forward to working with him and the entire Commission to implement appropriate safeguards for optimal market functioning.

Randy Snook
Executive Vice President of Business Policies & Practices

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