The Security Traders Association has released a special report on U.S. market structure to the Securities and Exchange Commission.
"We thought it was an appropriate time to comment in the post-Reg NMS world and with the collateral changes it has ignited," explains John Giesea, president and CEO of the STA. "It's a good time to take a look at market structure."
He says a committee of 10 STA leaders was formed to address various issues and ideas the association wanted to address. The committee was divided into four groups focused on volatility, technology, exchange structure and regulation. "We began to weave these discussions together and the issues that came out of them were fourfold," says Giesea.
First was the consolidation or improvement around the exchange opening processes. "The opening is so unique that having some transparent and efficient way to have a single-priced opening would be best for price discovery," he says. "Split prices at the opening cause investor confusion and some technology confusion in terms of what price to pick up as the opening price- it has implications for algorithms or other programs that are impacted too."
The suggestion from the report would be a holistic single price opening. Giesea says this won't happen overnight but he hopes the report will inspire a dialogue and discussion around the issue.
The order protection rule was the second area of focus for the report and the stance that the market would be better served without it, says Giesea. The third area focuses on Reg SHO and the association's support for eliminating the price test. "But we support other rules within Reg SHO having to do with delivery and location and anything that can prevent abusive short selling," he adds.
The fourth area addressed in the report is market data fees. "Every aspect of these fees appear to be confusion from pricing to collecting to the pool and distribution via rebate. We don't have a recommendation or resolution other than to enforce the move that the commission take a holistic approach to market data fees and get something done," says Giesea. "It's been lingering for too many years."
Giesea emphasizes that the STA is positive in its approach to the SEC in the report and is a strong proponent of competition. "If you look at the market and volumes and the dramatic economic and political news the market has absorbed, the SEC is to be commended. It set out to modernize and strengthen the market and I think that has largely been achieved. We're identifying a couple of areas that might enhance the market more."
The STA is gearing up for its annual Washington Conference May 6-8.