Last year the Securities and Exchange Commission’s Division of Trading and Markets held a series of roundtables on issues related to structure of the U.S. equity market, including market data and access, thinly traded securities, and retail fraud and how to prevent it.
On Friday, SEC Chairman Jay Clayton and the division’s director, Brett Redfearn, in a public talk at Fordham University in New York City discussed how the agency plans to address this year some of the issues raised in those roundtables.
“I think it is evident that each of three roundtables from last year raised and framed important issues that require review,” Clayton said in his prepared remarks for the talk, titled ”U.S. Equity Markets: Looking Back and Moving Forward.” He added that the agency continues to seek input from market participants and investors in its efforts to update market structure “for 2019 and beyond.”
Here are some of the highlights from Friday’s talk, according to his prepared remarks:
Market Data and Market Access
The primary regulation governing equity market structure, Regulation NMS (National Market System), is almost 20 years old and hasn’t kept up with the changing technology that has “shifted the regulatory landscape in fundamental ways,” said Clayton.
He described a two-tiered system of market data and market access in U.S. equities: a consolidated public data feed, known as the core data, that is distributed as part of that national market system, which includes stock exchanges and the Financial Industry Regulatory Authority, and ”an array of proprietary data products and access services that exchanges and others sell, [which are] generally faster, more content-rich and more costly.”
Clayton said he has instructed the staff at the Division of Trading and Markets to develop recommendations for updating core data in order to better serve the needs of investors and market participants.
Redfearn said the staff intends to explore multiple core data issues where the NMS lags proprietary systems, including speed, odd lot quotes, order protection and best execution and depth-of-book liquidity.
In addition, Redfearn said SEC staff would study governance of NMS plans that oversee the structured investment products (SIPs), transparency related to costs and revenues associated with SIPs and fair and efficient access to markets at venues.