Some of the biggest names in Wall Street trading are urging the US Securities and Exchange Commission to pull back on plans to overhaul rules for the stock market.
The New York Stock Exchange, Citadel Securities and Charles Schwab & Co. on Monday warned that a suite of proposals the SEC released in December could harm investors. The new regulations, if finalized, could damp liquidity in the market, the firms said.
“We are deeply concerned that the commission has simultaneously issued multiple far-reaching proposals that would dramatically overhaul current market structure without adequately assessing the cumulative impact on the market or the potential for unintended consequences,” the companies said in a letter obtained by Bloomberg News.
The SEC “benefits from robust engagement from the public and will review all comments submitted during the open comment period,” the agency said in a statement. “Generally, we respond to comments received as part of the final rulemaking and not beforehand.”
The SEC released four proposals on Dec. 14 that Chair Gary Gensler has said would boost transparency and competition. They are a cornerstone of his rulemaking agenda and delve into the guts of how the market works, affecting everything from order routing to pricing and disclosures that brokers must make to clients.
In their letter, NYSE, Citadel Securities and Schwab urged the regulator to take a more deliberative approach to changes.
They recommended that the SEC set minimum quoting increments to a half-penny for some stocks and to harmonize trading increments for all symbols trading at or above $1 a share.
They also called on the agency to withdraw a proposal requiring many more equity orders to be sent to an auction mechanism. “At a minimum, the proposal should be indefinitely paused” until the execution-quality impact of other suggested changes is known, they wrote.
‘Best Execution’
Another proposal would force broker-dealers for all assets, including fixed-income and options, to obtain “best execution” on their clients’ trades. That measure would create an SEC-specific rule for the industry, which currently operates under guidelines and rules set by the Financial Industry Regulatory Authority, an industry-backed watchdog.
That proposal should also be withdrawn, according to the NYSE, Citadel Securities and Schwab. “We are concerned that the current best execution proposal, with overly prescriptive and impractical requirements for managing a new category of so-called ‘conflicted transactions’ may unnecessarily disrupt decades of market progress for investors,” they said.
The joint letter should be taken “in the spirit of compromise and collective progress — to ensure the “gold standard” status of our markets is maintained,” NYSE president Lynn Martin said in a website post Monday.
In an emailed statement, Schwab said it was still reviewing the four proposals and their “likely impact” on clients. It said it “will offer additional comments for the commission’s consideration in the near future.”
(Updates with SEC and company comments, industry recommendations starting in fourth paragraph)
