SEC Access Fee Pilot; Where’s your letter?

A core strength of our rulemaking process is the request for comment stage, which offers industry participants the opportunity to express opinions to regulators and also to have visibility into the opinions of others. The transparent and publicly available nature of this stage provides invaluable information for decision makers and produces well vetted outcomes with benefits that accrue to the investors we all serve. When conflicting opinions result in heated public debate, however, this stage of the process can be a little painful to watch. In other words, attributes that contribute to the strength of our industry’s rulemaking process, at times make it appear ugly to some. But, like beauty, ugly is in the eye of the beholder. When conflicting opinions result in heated public debate, however, this stage of the process can be a little painful to watch. In other words, attributes that contribute to the strength of our industry’s rulemaking process, at times make it appear ugly to some. But, like beauty, ugly is in the eye of the beholder.

Comment letters on the SEC’s Proposed Access Fee Pilot continue to be filed despite the already-passed May 25 deadline. Some of the more recent letters are in direct response to previously filed ones, creating a sort of “comment letters on comment letters” scenario. While commonalities exist across all of the letters, there are several elements in the Pilot’s proposed design and purpose that are clearly contentious and laden with remarks, indicating that there is and will continue to be, considerable heated debate. This reality dissuades many of us from leaning into the debate when in fact that’s exactly what we should be doing.

 

When conflicting opinions result in heated public debate, however, this stage of the process can be a little painful to watch. In other words, attributes that contribute to the strength of our industry’s rulemaking process, at times make it appear ugly to some. But, like beauty, ugly is in the eye of the beholder.

 

The list of reasons for why firms or individuals don’t express their opinions in writing is long. It is understandable from a risk-reward perspective why so many of us are reluctant to file comment letters but as practitioners we have a responsibility to do so. A policy of never commenting or always relying on trade associations to be your voice is not in the long term best interest of your firm, our industry or your career.

Yes, heated debate can be ugly, but it is demonstrative of a vibrant and efficient process that should be welcomed and never snuffed out. The SEC has a good history of reaching coherent and rational decisions from input which at times appears incoherent and irrational. So long as decisions are determined on data and facts, then there is beauty in the ugliness. Which is why for me personally, I’ll take heated debate over sloth any day. The former gives you something to work with whereas the later gives you nothing.

Should the SEC move forward with an Access Fee Pilot, the ramifications will likely be considerable. Therefore, it is incumbent for firms and individuals to become educated on it; formulate opinions on those parts that impact your interests and consider expressing those opinions through a comment letter. It is impossible for a single trade association to represent the interests of an entire industry or sector on issues like the Access Fee Pilot. But it is a trade association’s responsibility to raise awareness among its members and to serve as a consultant so that firms can write their own letters, thus enabling them to communicate effectively.

It’s not too late to submit your comment letter to the SEC. Should you have an interest to do so, read the letters that have already been filed. As you do, you’ll observe that some are as short as two pages and most offer comments on less than five elements of the Pilot’s proposed design. These elements include the number of securities in the Pilot; should ETPs, ATSs and a zero-rate access fee bucket be included; and, whether enhanced and new disclosures on order handling through Rule 606 is a better approach.

A common strand that runs through many of these letters is the principle that our markets are constantly evolving and therefore, a retrospective review of rules is in the best interests of investors. As it pertains to access fees, a majority of the letters express the opinion that the impact access fees have on our market and the corresponding primary concerns with their existence have evolved since they were originally allowed and capped at 30 mils. Therefore, conducting a review is in the interests of investors.

See all comment letters here