“Clear Eyes” by SEC Mary Jo White

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by Jim Toes

Building upon her speech last fall at STA’s Washington DC Conference, SEC Chair White outlined the Commission’s market structure policy direction at a Sandler O’Neill Conference yesterday. Chair White expressed expansive opinions on dark liquidity, high frequency trading and market instability. The breadth and depth of Chair White’s remarks will require time before the industry is able to digest and respond accordingly. However, there is one conclusion that can be definitively made at this time; Chair White’s speech was not in response to a book or Attorney General Investigation. The amount of detail, thoughtfulness and substance found in her remarks cannot be achieved in 10 weeks.

We have heard other Commissioners remark that “there will be no sacred cows” when it comes to a holistic review of market structure, well Chair White’s speech was very consistent with that requirement.

Let me now outline the initiatives we are advancing across five broad sets of issues: market instability, high frequency trading, fragmentation, broker conflicts, and the quality of markets for smaller companies.

“However, there is one conclusion that can be definitively made at this time; Chair White’s speech was not in response to a book or Attorney General Investigation. The amount of detail, thoughtfulness and substance found in her remarks cannot be achieved in 10 weeks.”

Chair White left no stone unturned and each initiative carried with it a substantive action item. A few examples are:

I have directed the staff to develop a recommendation to the Commission for an anti-disruptive trading rule.

I have asked the SEC staff to prepare two recommendations for the Commission: the first, a rule to clarify the status of unregistered active proprietary traders to subject them to our rules as dealers; and second, a rule eliminating an exception from FINRA membership requirements for dealers that trade in off-exchange venues.

I fully support FINRA in considering an expansion of its trading volume disclosure regime to off-exchange market makers and other broker-dealers.

I also asked the SEC staff to prepare a recommendation to the Commission to expand the information about ATS operations submitted to us and to make the information available to the public.

Chair White reiterated the Commission’s approach to all these initiatives will be disciplined, and data-driven and left the audience with a memorable quote.

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. -SEC Chair White. June 2014

STA would like to personally thank and congratulate Rich Repetto of Sandler O’Neill on hosting this conference. Rich’s hands-on approach during the event assured his promise to attendees that the content would be a “balanced view on market structure” was achieved. Congratulations, Rich and to your team.

For those interested in seeing her remarks first-hand, view Here

SEC Chair White Speech, STA’s Market Structure Conference – Oct 2013 Here

Save the Date! STA 81st Annual Market Structure Conference Details

Did you see our May Newsletter? Here