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Raises concerns over the agency's rulemaking process
WASHINGTON, D.C. — Today, the American Securities Association (ASA) sent a comment letter to the U.S. Securities and Exchange Commission (SEC) regarding its market structure proposals and concerns over its rulemaking process.
“We applaud the SEC for proposing thoughtful changes to the current market structure and we are supportive of certain reforms,” ASA CEO Chris Iacovella said. "Specifically, we believe, if successful, the tick size and round lot reforms will narrow spreads and increase order competition—achieving the SEC's policy goals. However, we oppose the Order Competition Rule proposal because it seeks to 'solve' the same problem as the Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Order proposal—this makes adopting both proposals unnecessary. Not every firm has a sophisticated trading operation to match the speed necessary to compete on every order in today’s market, yet that’s exactly what Order Competition Proposal requires. This policy unfairly discriminates against every business model that outsources execution services to others to compete.”
In the letter, ASA provided the SEC with comments on the following proposals:
Disclosure of Order Execution Information: ASA believes the SEC should update the 605 disclosures for payment for order flow (PFOF) in a common-sense plain language manner.
Regulation NMS: Minimum Pricing Increments, Access Fees, and Transparency of Better Priced Orders:
ASA supports a reduction in the tick size to one-half cent for stocks that are currently tick-constrained and we oppose reducing the tick size below one-half cent for even the most liquid stocks;
ASA strongly supports reducing access fees to 10 mils for all NMS securities because it will reduce the overall cost of exchange trading;
ASA supports the inclusion of a best odd-lot bid/offer in the consolidated tape, but we caution the SEC from requiring broker-dealers to use this metric as a benchmark against execution quality.
Order Competition Rule: ASA does not believe the auction mechanism will work as intended and we fear it may harm the ability of certain firms to compete by impairing their use of third-party execution service providers who guarantee and provide certainty of order execution.
Regulation Best Execution (Reg Best Ex): ASA opposes Proposed Reg Best Ex because it is overly broad in scope, does not contemplate the interaction of existing best execution rules, ignores the unintended consequences, and has not identified any regulatory failure or concern with the rules that work well in practice today.
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