By Chris Hurley, Director, Institutional Sales:
Earlier this month, CAPIS was proud to sponsor Security Traders Association’s (STA) 90th Annual Market Structure Conference in Washington DC. Our team had a great experience reconnecting with industry colleagues and friends, meeting with potential clients, and deepening our understanding of the biggest market structure issues facing the industry today.
Those issues varied widely, from the rise of 24-hour trading to new trends in asset classes like ETFs, options, and crypto. But if you’re curious about which issue generated the most buzz, it wasn’t even close. From the conference mainstage to the networking floor to the private meeting rooms, the recent pace of SEC rulemaking was the talk of the event.
This rulemaking has taken many forms. The SEC’s proposed equity market structure reforms, released last year, took the lion’s share of the spotlight, with just about every panel touching on best execution, tick size reform, or Rule 605 requirements in some way. Other topics included predictive data analytics, market data, and cryptocurrency regulation.
One of the highlights of the program was a fireside chat with SEC Commissioner Hester Peirce, who shared her views on the SEC’s recent moves – both those she supported and those she didn’t – and gave us a peek behind the curtain, sharing her thoughts on the working relationships that exist within the commission. To see that level of engagement from someone who plays such a key role in shaping our industry is terrific, and one of the best parts of our annual trip to the nation’s capital.
That said, there have been a few trends surrounding the SEC’s overall level of engagement with the industry that we would characterize as a bit worrisome. Under Chair Gary Gensler, the commission has shown a tendency to hold comment periods that are shorter than the usual 60 days. Beyond that, there have been minimal opportunities to discuss, assess, and refine proposed regulation in the form of industry roundtables or concept releases. These developments would be cause for unease in any context, but with so many sweeping regulations being actively considered, they are even more concerning.
As a compliance-driven broker, it is extremely important to us that we have a crystal-clear understanding of SEC regulations – and, more broadly, that the entire industry is equipped to comprehend these issues inside and out. Throughout the conference, speakers and attendees alike expressed concerns about their understanding of and ability to weigh in on the recent proposals. While we greatly respect the SEC, its leadership, and its staff, it didn’t exactly inspire confidence that the commission’s current approach to engaging with the industry is the right one.
This perspective was expressed by many of the individuals who took the stage.
“The SEC is proposing rules without concept releases and roundtables,” said Mehmet Kinak, Global Head of Equity Trading at T. Rowe Price. “They’re so extreme that when writing comment letters, we don’t even know how to make improvements.”
“Our markets are too complex for SEC staffers to put out rules, collect comments in 30 days, and then draft final rules that work for the markets,” said Dalia Blass, Partner at Sullivan & Cromwell and former senior leader at the SEC’s Division of Investment Management.
Even Commissioner Peirce offered some criticism: “If you want to do things right in an agency like ours, you need to gather feedback. Otherwise, you make mistakes, and I think we’ve seen that with recent proposals. Some of them would have benefited from starting as a concept release.”
While SEC regulation was the dominant topic, crypto also got significant focus – mostly around the desire to bring to market a spot Bitcoin ETF, with Grayscale’s proposal now being reconsidered by the SEC. It was also great to see other regulators in attendance, including CFTC Commissioner Rostin Behnam, FINRA CEO Robert Cook, and FINRA Head of Market Regulation and Transparency Services Stephanie Dumont. The chance to hear directly from those who shape our market structure and immediately discuss with colleagues and connections from throughout the industry is a testament to the continued power of live events like the STA Conference. That discussion will help inform our diligent work to ensure smooth compliance with any and all new regulations – and we stand ready to help our clients and industry colleagues adapt in the face of these potential changes. If you’d like to have a conversation about that topic or anything else we heard at STA, don’t hesitate to reach out.
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