Equities Market-Structure Revamp Unlikely in 2016


Any near-term changes in the U.S. cash equity’s market structure isn’t in the cards, according to participant consensus during Thursday’s FIX Americas Trading Briefing, which was held under the so-called Chatham House Rule.

“The U.S. Securities and Exchange Commission is (still) looking through its rear-view mirror,” said one participant. “It was truly scared by Bernie Madoff and the 2008 financial crisis.”

This person also stated that the SEC’s Division of Enforcement appears to have taken the lead role within the regulator, which does not bode well for the chance of a big reform come from the Trading and Markets group. “Last year, the SEC had a total of 807 enforcement actions,” the participant noted. “I would not be surprised if there was a greater number of enforcements this year.”

Although no changes are on the immediate horizon, the industry is busy trying to meet the deadline for the existing changes for market-wide initiatives, such as the SEC’s Penny Pilot that is set to go live in October. The pilot introduces several new messaging fields that broker-dealers need to integrate into their order and execution management systems along with a new order type, the trade-at intermarket sweep order.

“We have less amount of time to achieve this than we had integrating the changes made by Regulation NMS,” said another participant.

One the positive side, those organizations that fall under the jurisdiction of the SEC’s Regulation Systems Compliance and Integrity are making their required reports, but a different participant commented that the industry is over-reporting their incidents to err on the side of caution. “A lot of businesses are finding it difficult to properly categorize each event,” observed a different conference participant.

The SEC might address these concerns with its first round of audits for SCI entities slated for October. “The letters have already gone out,” said a participant.

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