“Clear-Eyes” by SEC Chair Mary Jo White

At last week’s SEC Equity Market Structure Advisory Committee (EMSAC), Chair White ended her opening remarks with a statement that has become a hallmark on her approach in effecting regulatory changes, “As I have said before, while we do not require perfect solutions, our regulatory changes must be informed by clear-eyed, unbiased, and fact-based assessments of the likely impacts — positive and negative — on market quality for investors and issuers”.

The STA and the SEC were formed at the same time in our nation’s history. Over time the agendas of both organizations have been closely aligned…

Chair White is correct that she has spoken these words before. In fact it was June 2014 at a Sandler O’Neill Conference when she outlined the Commission’s market structure policy direction that I recall hearing them for the first time. As judged by her actions since then, the Chair has remained true to her words. While this most recent ESMAC meeting will be remembered by the lively debate and engagement among the committee members and exchange representatives the consistency found in Chair White’s words is something which should make us all feel that changes will be based on empirical data and a thorough vetting process.

For those who don’t already know, the STA and the SEC were formed at the same time in our nation’s history. Over time the agendas of both organizations have been closely aligned and their philosophies on rule-making have been based on the importance of, as Chair White mentioned, “…gathering a diverse set of market participants to address complex, potentially very significant market structure issues”.

Our markets are the most liquid in the world because they serve a variety of business models. Unfortunately, when groups or roundtables are put together to discuss improvements, the seats at these tables are not always equal. Just like Thanksgiving at the Toes household, someone always gets a shorter chair on the corner. Is that person sitting at the table, yes. Are they uncomfortable and feel out of place, yes. In the case of the SEC ESMAC there are groups of participants who are not represented.

The Commission has taken steps to address this, but their remedies still fall short of being 100% equal. Feelings of frustration are natural and will appear in the remarks of those impacted. We do however hope that these groups remain engaged and realize that ESMAC is an advisory committee and not the rule making authority. We also hope that committee members continue to reach out to those groups not represented in order to seek their opinions on these matters. We are all guardians of the market and it is critical that the lines of communication between groups with different business models and opinions always remain open.

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