Ken Jennings: This proposal would increase the transparency and integrity of the traditionally opaque over-the-counter security-based swap market.
Jeopardy! contestant: What is Rules for the Registration and Regulation of Security-Based Swap Execution Facilities?
Ken Jennings: Correct!
The U.S. Securities and Exchange Commission made an end-of-year splash on Dec. 14 when it unveiled not one, not two, not three, but four (4) proposals aimed at equity markets.
The regulator proposed amendments to enhance disclosure of order execution information; rules to amend minimum pricing increments and access fee caps; a rule to enhance competition for individual investor order execution; and Regulation Best Execution.
It was a fitting end to a year in which SEC Chair Gary Gensler was no shrinking violet, regularly appearing on the industry speaking circuit, in the media, and on Twitter to discuss how the regulator isn’t kidding about carrying out its three-part mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.
Many in the capital markets industry argue that the SEC’s activity has been too frenetic. By spreading itself too thin, this argument goes, the regulator isn’t able to give proper time or attention to any individual proposal, and plus it won’t be able to finish its business before a potential change in the White House administration in two year’s time.
We’ll leave the debate as to whether the SEC is biting off more than it can chew for another column. But is it at least provable that the SEC has more piled on its plate than usual?
That thesis is corroborated by a look-back at SEC press releases. SEC releases are fairly well standardized — most headlines start with “SEC” flush left, followed by a verb. It can be “SEC Announces…”, “SEC Charges…”, “SEC Awards…”, “SEC Adopts…”, “SEC Reopens…”, “SEC Publishes…”, and a couple others.
For many capital markets firms, the most dreaded SEC press release headline starter is “SEC Proposes…” (unless you’re the one being charged, in which case it’s “SEC Charges…”) This is because “SEC Proposes…” means the SEC is rolling out a new initiative. This new initiative will cost time and money to review, even more time and money to comply with if a rule is adopted, and the whole thing may or may not improve market structure.
So how often has the SEC proposed items this year? Well as per the below handy-dandy graph created by Traders Magazine, that number is 25, compared with 8 in 2021, 13 in 2020, and 19 in 2019.
The SEC proposed more stuff this year than in any other year since at least 2011, before SEC.gov press releases were searchable on the site. The 25 proposals in 2022 can be sliced and diced into five separate Jeopardy! categories, if the show’s writers were feeling especially evil.
TV quiz show references aside, if you think the SEC has been especially active, it’s not your imagination – they have been. It’s reasonable to expect proposals will be fewer in 2023, but there will be more comment periods and possibly rule adoptions as well.
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.
