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August 01, 2013 at 09:37 AM
The Securities Industry and Financial Markets Association called on the Securities and Exchange Commission on Thursday to review the regulatory structure of broker-dealers, exchanges and the self-regulatory model, as technology advances have changed the way market participants operate and because SROs now compete with the BDs they regulate.
In a July 31 letter to the SEC, Theodore Lazo, SIFMA’s managing director and associate general counsel, said that the self-regulatory model is a “crucial area for immediate action,” and that SIFMA believes “a discrete review of the regulatory structure of broker-dealers, exchanges should be carried out now because that structure is widely viewed to be outdated and in need of reconsideration and reform.”
A part of that review, Lazo continued, ”should focus on SRO structure, because the markets have changed to the point that the current structure of the self-regulatory model is widely viewed to be outdated and in need of reform.”
The largest U.S. securities exchange operators, Lazo said, “have evolved from member-owned utilities to for-profit business enterprises,” all while “technological advancements have changed the way the securities markets and market participants operate, with securities exchanges and non-exchange venues operated by broker-dealers performing essentially identical functions in certain respects.”
However, the status of exchanges as self-regulatory organizations “has not changed, even as the exchanges have become active competitors with the broker-dealer members they are charged with regulating,” Lazo added. “This inconsistency has led to tensions, anomalies, and conflicts in the structure, operation and regulation of the securities markets.”
Lazo identified some key areas that SIFMA believes the SEC should review, noting that the review should not be exclusive to those areas.
