Despite the burden of dealing with Dodd-Frank, the Securities and Exchange Commission is plowing ahead with its work on market structure.
Robert Cook, in charge of the regulator’s Division of Trading and Markets, told trading executives last week that the SEC "is not just going to hit the pause button on the market structure stuff."
With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July, the SEC was saddled with an enormous workload to convert the legislation into rule-making. It has been estimated that the Commission must complete work on 95 rulemakings and conduct several studies within the next 18 months.
That has some industry executives wondering if the SEC has the capacity to continue its foray into market structure, which will involve a spate of rule proposals, a Concept Release and the issues raised by the May 6 "flash crash."
"How does throwing Dodd-Frank into the midst of all this market structure rule-making the SEC is engaged in impact the SEC’s agenda?" Len Amoruso, chief counsel at Knight Capital Group, asked Cook at the annual Security Traders Association conference in Washington last week.
Cook acknowledged that his group had much work to do to deal with Dodd-Frank, but insisted it was making progress on the issues affecting the equities markets.
For Dodd-Frank, the Division must impose a whole new regime for regulating over-the-counter derivatives, including defining swaps and swaps dealers and registering dealers and a new marketplace. It also must tackle new rules for credit-rating agencies and municipal bond advisers, Cook said. In addition, the group has to contend with the so-called Volcker rule, which regulates proprietary trading, executive compensation and a study on fiduciary duties.
Still, it must deal with market structure. "SEC chairman Mary Schapiro has been clear," Cook said, "We can’t set the market structure stuff aside for a year. We can’t wait until we get Dodd-Frank done."
At least one exchange executive was hopeful after Cook’s comments. Brian Hyndman, a Nasdaq OMX senior vice president responsible for U.S. transaction services who wants to see changes made to the rules surrounding alternative trading systems, or dark pools, said he was "optimistic" that the SEC would be able to keep up with its market structure workload. "Even though Dodd-Frank is being worked on, the Commission will still work on some of those dark pool rules," Hyndman told STA conference-goers.
