FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
Industry conferences are an opportune time for attending companies to announce news.
Lots of clients and prospective clients are gathered under the same roof — with good vibes, a nice venue, and cocktails — to talk shop. So why not shoehorn your new product, splashy hire or latest M&A transaction into that shop talk?
At Traders Magazine and other Markets Media Group publications, we often see this dynamic at play with sponsored content, as brokerage firms and technology providers want the extra visibility of publishing on the first or second day of an industry conference.
It may have been just happenstance, but it sure seemed that the U.S. Securities and Exchange Commission took a page from this corporate marketing playbook when it dropped its long-awaited second shoe on tick sizes and access fee caps early on Wednesday, Sept. 18 – which just happened to be opening day of the Security Traders Association’s annual market structure conference, probably the year’s biggest US equity and options gathering.
[You could almost hear SEC Chair Gary Gensler over the intercom at the JW Marriott Grande Lakes: “Gooooooood morning Orlando!”]
The SEC’s announcement changed the tenor of the conference, at least from a content perspective. While regulation figured to be a prominent topic of discussion going in, it became even more front/center.
For example, a Sept. 18 afternoon panel that was meant to be about the impact of innovation and regulation generally on exchanges, alternative trading systems and broker-dealers, pivoted on the fly to a discussion exclusively about the SEC’s new rules.
In what the panel called a seminal and historic day for market structure, the SEC reduced the minimum tick size for certain NMS stocks from 1 cent to 0.5 cents; reduced the maximum exchange access fee from $0.003 per share to $0.001 per share; increased transparency requirements of exchange fees and rebates; and expedited the reduction of round-lot sizes for high-priced stocks.
Panelists expressed concerns that the new rules will damage liquidity, which ultimately would be costly for the end user investors the SEC is tasked to protect. They said the reduction in access fees amounts to unwarranted price controls that will fragment liquidity; and the new rules in aggregate add up to more than the sum of their parts.
When asked about possible positive outcomes that may come from the new rules, the panel offered that tick sizes are important, and if they’re set at the correct level that can improve trading efficiency. Also, there will be innovation as market participants and infrastructure providers adapt to the new rules.
Overall, despite the nearly 90-degree sunny, humid weather in Orlando, the SEC’s new rules received a decidedly cold welcome at STA. At times it felt a bit one-notey – this was corroborated by one brokerage veteran, who on a Sept. 20 flight back to Newark, said there was “too much blasting of the SEC” in the panel sessions.
But the SEC knows it isn’t winning any popularity contests. If the regulator’s goal was to capture the most industry eyeballs and eardrums two weeks ago, that mission was accomplished.
