Tags: SEC

An SEC Chairman Like Jay Clayton

There are few more important or influential roles in the financial markets than that of U.S. Securities and Exchange Commission (SEC) Chairman. The person who assumes this responsibility is charged with fulfilling the SEC’s mission to protect the interests of investors, ensure fair and orderly markets, and facilitate capital formation. This mission statement carries with it a certain degree of diversity and as such, requires distinct skill sets in ensuring its success. Finding a Chairman with expertise in all three is extremely difficult, if not impossible, in today’s complex financial system and markets.

Recently, Jay Clayton, an investment banking attorney was nominated to fill the position of SEC Chairman and since his announcement many of us have been trying to learn more about this man as we ponder an SEC under a Donald Trump Administration. As for myself, I have never met Mr. Clayton, therefore am not qualified to determine what type of Chairman he would be or if he is qualified. That decision will be made by individuals closer to the process with better information. Having said that, it is natural to wonder how the SEC would look and what its impact on our economy would be, if the incoming Chair has a skill set like Mr. Clayton’s. In particular, as it relates to board diversity and capital formation.

Like many former Chairmen, Mr. Clayton is an attorney; however he has never worked in a regulatory or law enforcement capacity. Rather his expertise is in investment banking. At first glance, a Chairman such as this would add diversity, as measured by skill set to an eventual five-person Commission that historically has been characterized with individuals with enforcement and regulatory backgrounds. Board diversity has been greatly studied and proven to provide certain efficiencies and incremental value to shareholders in corporations. Whether efficiencies can also be obtained within a regulatory agency comprised of a diverse board is difficult to predict because the frequency of such occurrences and data is limited. However, when one considers the trilateral mission of the SEC most would conclude that a diverse five-person “board” is exactly what is needed and not just today, but going forward.

Protecting the interests of investors requires enforcement expertise; ensuring fair and orderly markets requires quantitative expertise in understanding market structure; and, capital formation requires investment banking expertise. Given the unlikelihood that there exists an individual with the expertise of an attorney general, an economist and investment banker, charting a path towards building a diverse SEC board appears to be a natural course of action.It is important to note that board diversity does not equate to equal power among board members. It is the Chairman who sets the agenda and prioritizes resources for the SEC. Therefore, the skill set of the Chairman does carry influence in the approval process for anyone nominated. Although it does not suggest that a Chairman with investment banking expertise could not be effective in ensuring that the SEC fulfills its enforcement and fairness roles.

The mandates in the SEC’s mission are defined and always present. However, they do not possess weightings, such as; 70% investor protection, 20% fair and orderly markets and 10% capital formation, which need to be maintained at all times. Whether this was done intentionally, I don’t know. In the absence of clarity, it is rational to assume that there is some flexibility on the weightings based on the changing needs of our economy. This begs an important question that those in deciding on Mr. Clayton’s nomination will undoubtedly ask themselves: What does our country and economy need in its SEC Chairman at this moment in time? To those making this decision, I hope you will keep an open mind to someone like Mr. Clayton, as the role of capital formation is critical for companies of all sizes and is a catalyst for driving economic strength, overall security and well-being of our nation.

See Light House article here

SEC Proposed Amendments on Order Routing Disclosures Part II – RETAIL

At a July 13, open meeting the Securities and Exchange Commission (SEC) voted unanimously “to propose amendments to Rules 600 and 606 of Regulation NMS to require new disclosures by broker-dealers to institutional customers about the routing and execution of their orders, and to propose targeted enhancements to current order routing disclosures for retail customers”.


David Weisberger
Managing Director
Global Head of Trading Analytics Products
IHS Markit


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SEC Order Handling Disclosure Proposal – Part I – Overview

STA has made multiple trips to Washington DC over the summer using two (2) sets of Talking Points:
-Talking Points July 13, 2016
-Talking Points June 15, 2016

Approval of Lisa Fairfax (Democrat) & Hester Peirce (Republican) for the open SEC Commissioner positions is unlikely to happen in 2016. While both candidates passed the Senate Banking Subcommittee, they have yet to receive approval from the entire U.S. Senate. This is the result of a backlog in government appointments and a few vocal Senators who object to the candidates.


Manisha Kimmel
Chief Regulatory Officer
Thomson Reuters


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“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.

Read our April Newsletter here >

Venture Markets & Senate Hearing on SEC Nominees

On March 16th, the STA hosted an Open Call on venture markets and the Main Street Growth Act (H.R. 4638) which would allow for the creation of venture exchanges. All attendees received a complimentary report on the Senate Banking nomination hearing for Lisa Fairfax and Hester Peirce to the Securities & Exchange Commission.


Cromwell Coulson
President, Chief Executive Officer and Director
OTC Markets


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STA Open Call Notes are free for members.
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Please consider a $10 donation to the STA Foundation here>