Markets as Guinea Pigs (and Other Notes from STA’s 84th Annual Market Structure Conference)

Spencer Doar

Spencer Doar

Associate Editor

The STA’s 84th Annual Market Structure Conference was held in Washington D.C. last week and its theme was “The Challenge of Change.”

SEC Commissioner Michael Piwowar was the first in the spotlight, highlighting those challenges which would be discussed over the course of the conference — the plight of ma and pa investors (now dubbed Mr. and Mrs. 401(k) courtesy of Commissioner Jay Clayton’s comments), capital formation for small and mid-cap companies and an array of regulatory qualms pertaining to the Consolidated Audit Trail (CAT), MiFID II and pilot programs.

The decrease in IPOs and inflated stock prices among some big names have been well covered, so on to the regulatory concerns.

The tick pilot program — which widened tick size to a nickel on select securities — and the proposed market access fee pilot were the subject of much loathing from market participants. Piwowar said he’s a big fan of market experimentation, but when the experiments affect live trading with unknown results, the industry shows its worry. Regarding market access fees, there is considerable debate over whether a pilot of that nature would actually address the underlying concern that brokers are conflicted in their routing due to exchange fee structures. And again, is tinkering with a car when it’s barrelling down the highway appropriate?  There is a desire for data-driven regulation, but the jury is out on how best to gather the requisite data to inform said regulation.

Piwowar cracked wise when queried about MiFID II, saying “What’s MiFID?,” but the January deadline was on attendees’ minds, though at STA quite a bit of the conversation revolved around the unbundling aspect (and not the proprietary trading aspects this observer is more accustomed to hearing about).

Then there is the CAT, which will require all securities and options trades to be reported into a central depository. Its security and the aggressive deadlines in place (not to mention its fees and internal costs of implementation and retirement of legacy systems) are equally perplexing for markets. All deadlines have been met thus far by Thesys CAT LLC (the organization working on the CAT’s implementation) and there will continue to be intense debate and interaction between the SEC, SROs and Thesys CAT before SROs begin reporting into the system in November.


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