A note to Congress: Please stop casually messing around with market structure in the equities marketplace. If there are going to be any major changes, we’d much rather they be handled by the Securities and Exchange Commission. Or at least not be tacked onto another bill as an afterthought.
That’s the message the Security Traders Association has been sending to Washington. As lawmakers push ahead with making it easier for small companies to go public, the industry group is discouraging amendments that would allow companies to decide where their stock can and cannot be traded.
Last month, Congressman Jim Renacci, a Republican from Ohio, drew the industry group’s attention when he proposed an amendment to the Jumpstart Our Business Start-ups (JOBS) Act. Though the JOBS Act is aimed at lowering reporting requirements for small public companies, the amendment would have gone into a different area, allowing issuers to have their stock traded on some venues but not others.
Many in the industry believe Nasdaq OMX is pushing this issue in order to gain special status for its upcoming BX Venture Market. The exchange reportedly wants to be able to guarantee issuers their stocks would not trade in other venues. Nasdaq did not respond to a phone inquiry.
Renacci withdrew his amendment after the STA asked Congress to refrain from injecting itself into major market-structure issues without getting industry input first.
“We don’t like to see major market-structure issues being attached to bills and not properly vetted with the market participants, as they would be if handled by the regulators,” said Jennifer Setzenfand, chairman of the STA. “That is worrisome to us.”
After Renacci withdrew his amendment to the JOBS bill, the bill was approved by the House Financial Services Committee and subsequently passed on the House floor with wide bipartisan support. However, the STA is concerned that a similar provision could be introduced into parallel legislation in the Senate.
“The risk is there, and it’s something that we need to be in front of,” Setzenfand said. “We need to be ready.”
Jim Toes, president and chief executive officer of the STA, said if a similar provision is introduced on the Senate side, the organization hopes it will be rejected and not attached to any bill.
The STA is planning on sending a letter to the Senate Banking Committee expressing the group’s views. Currently, the STA has not taken any position on the proposed modifications to market structure, but stresses that the SEC is the best venue to handle any major changes.
