June 9, 2022
SEC Chair Gensler on Market Structure
SEC Chair Gary Gensler generated a lot of headlines with a speech that he gave at the Piper Sandler Global Exchange Conference on Wednesday. Gensler outlined the SEC’s work in six areas of the equity markets: (i) minimum pricing increment; (ii) national best bid and offer; (iii) disclosure of order execution quality; (iv) best execution; (v) order-by-order competition; and (vi) payment for order flow, exchange rebates, and related access fees.
One of the most controversial topics Gensler discussed was order-by-order competition, and on this issue Gensler noted that he has asked the Staff to make recommendations for the Commission’s consideration around how to enhance order-by-order competition, which could be through open and transparent auctions or other means, unless investors get midpoint or better prices. Changes in this area could compel brokers to route retail investors’ orders to buy or sell stocks into auctions, rather than to “wholesalers” as is often done today.
While it seems that the SEC is always looking at market structure regulations, the meme stock debacle from last year and other significant developments have once again put the spotlight on the market structure issues that Gensler highlighted in his speech.
– Dave Lynn