Joining Financial Forces: Highlights from STA’s Washington DC Spring Update

At STA, providing industry education and fostering collaboration among the many different players that comprise our nation’s constantly evolving financial services landscape are key aspects of our mission. Our events always seek to amplify diverse perspectives and provide opportunities for attendees to share ideas and strengthen relationships, helping everyone do their part to maintain a healthy market structure.

Our 2024 Washington DC Spring Update, hosted last month at the iconic St. Regis Hotel, was no exception. Held in person for the first time since the COVID-19 pandemic, this sponsor-exclusive event brought together congressional members, legislative staff, regulatory leaders and business decision-makers from across the industry to share their views on key issues and proposed reforms. Unsurprisingly, there was no shortage of topics to discuss.

This year’s event featured several members of the House Financial Services Committee, regulatory representatives from bodies like the SEC and FINRA, and senior executives from leading firms in retail trading and on the buy side. Read on for a snapshot of the key discussion topics that defined their panels and fireside chats.

Preparing for Rule 605

One recurring topic was the increased pace of SEC rulemaking. The official adoption of amendments to Rule 605 earlier this year will require many broker-dealers to provide execution quality reports at a far more granular level – and with the effective date just 18 months out, many industry firms are feeling the pressure. Speakers from the retail trading space expressed concern that the expanded requirements, such as new order type categories, new statistical measures and separate reports for single-dealer platforms, will present significant operational complexity and cause challenges from a compliance perspective. On the flipside, some of the regulatory speakers emphasized how much the market has evolved in the 24 years since Rule 605 was originally adopted, arguing that growing retail participation and increasingly sophisticated order types are driving the need for reform.

Predictive Data Analytics in Focus

Another key topic, particularly among the industry speakers, was the SEC’s proposed rule on predictive data analytics (PDA), which stipulates that firms must “eliminate or neutralize” the conflicts of interest that come with this technology. Panelists highlighted the operational challenges and financial burdens that such a regulation would impose. Retail players expressed concern about the balance between rulemaking and innovation, cautioning that overregulating an emerging technology could limit its potential. In contrast, some regulators argued that the rapid advancement of AI poses a unique threat to investors, requiring timely and proactive action to guard against the worst outcomes.

Insight into Regulatory Roadmaps

The conference also provided an opportunity to hear directly from regulators on their future priorities and roadmaps. Senior leaders from regulatory bodies like the SEC and FINRA spoke about a wide range of planned initiatives – one example was building a new centralization vehicle to enable industry firms to find all Rule 605 data requirements in one place.  The regulators expressed a collective desire to engage more closely with the industry to bridge disconnects and break down rules so market participants can better understand how and why they will be enforced.

Wide-Ranging Legislative Perspectives

With 2024 being a pivotal election year, several members of the House Financial Services Committee shared their views on how the current administration has approached the nation’s capital markets. Some members praised our regulators for striving toward a more bipartisan and collaborative approach, helping the US maintain its reputation as a thriving center of financial innovation and entrepreneurship. Others stated that some of the administration’s actions, particularly around the pace of regulation, have been hostile to the private sector. Other key topics included foreign affairs and government sanctions, small business laws and financial transaction tax (FTT) policy. Overall, the House members stressed the importance of open communication between the Street and the Hill, encouraging industry firms to work collaboratively with legislators and exchange ideas.

Conclusion: The Value of Coming Together

All things considered, our event succeeded in bringing together legislative, regulatory and industry perspectives to provide a more comprehensive understanding of the challenges and opportunities currently facing the capital markets ecosystem. Our hope is that attendees came away with a better sense of how to navigate the shifting landscape and find practical synergies based on the expertise and viewpoints shared. Effective collaboration has long been a cornerstone of not just our market structure, but the economy at large, and gathering in person lends itself to the focus and relationship-building opportunities required to make it a reality. We’d like to extend a sincere thanks all of our speakers, panelists and moderators for their participation, as well as to the STA members and sponsors who attended the event. See you all in September for our 91st Annual Market Structure Conference in Orlando!