The FIA Principal Traders Group today released a position paper detailing targeted improvements to equity market structure. The paper is structured along the framework laid out by Securities and Exchange Commission (SEC) Chair Mary Jo White in a policy speech on June 5, 2014. In this position paper, FIA PTG shares recommendations on several points addressed in Chair White’s speech, including specific issues such as the Securities Information Processor (SIP), co-location, timestamps, order protection and pilot programs.
“The members of FIA PTG are committed to transparency, reduced complexity, and fair and open access to our nation’s markets,” said Rob Creamer, Chairman of FIA PTG. “We believe that while equity markets are currently robust, competitive, and innovative, there is room for structural adjustments that will ultimately benefit investors, traders, and all other market participants. This position paper represents a principled, data-driven approach to improving our markets.”
Specifically, FIA PTG recommends shedding more light on all operational aspects of markets, including exchanges, alternative trading venues, and dark pools. FIA PTG supports increased transparency into the way in which trades are routed, matched, and executed.
FIA PTG supports the goal of reducing the unnecessary complexity and costs of market fragmentation. Regulatory policy, including Reg NMS, has encouraged this fragmentation, which imposes costs on everyone who uses the markets. To address this, FIA PTG recommends that the SEC review the concept of protected quotes.
The paper also addresses the function of the SIP in the marketplace, and—in addition to supporting performance improvements for the SIP—also recommends that the SEC consider distributing SIP revenue in a manner that will incentivize price discovery rather than quote generation.
The entire position paper is available online here. “All of our recommendations are based on the principles of accessibility, liquidity, and transparency in our markets,” Creamer said. “We appreciate that SEC Chair Mary Jo White has supported a data-driven process as the agency considers how to improve equity markets, and we welcome the opportunity to participate in this critical dialogue.”