In a paper released today, the FIA Principal Traders Group recommends practical reforms to SEC Regulation NMS. FIA PTG has consistently advocated for comprehensive market structure reform for many years, including repeated calls for a holistic review of Reg NMS. Given the ongoing public discussion at the SEC, and the growing complexity of U.S. markets, FIA PTG believes that Reg NMS reform is timely and important and puts forward in this paper a set of discrete actionable reforms that can be evaluated and implemented now.

“This paper is the culmination of years of work by the members of FIA PTG whose members include many of the largest liquidity providers in the equity markets and bring a unique perspective to the market structure debate,” said Rob Creamer, Chairman of FIA PTG. “We believe that while U.S. equity market quality is among the best in the world, there is still room for structural improvements.  Given the ever-increasing complexity, targeted changes to simplify markets would bolster investor confidence and understanding of how our markets function. Our proposed changes also will increase healthy competition that will ultimately benefit all market participants.”

Specifically, FIA PTG suggests the following reforms:

• Rule 611: Repeal Rule 611, restate the importance of a robust, principles-based “best execution” framework, and vigorously enforce “best execution.”
• Rule 610: Repeal Rule 610’s prohibition on locked and crossed markets, and approve and implement the SEC’s July 2016 Order Handling Information Disclosure Proposal.
• Rule 612: Issue an SEC concept release to examine possible changes to the minimum pricing increment to create a flexible tick size regime, and propose a $.005 tick size for highly liquid securities.
• Rule 608: Modify: (i) Rule 608 to require industry and investor representation on NMS Plan Operating Committees; and (ii) Market Data Plans to allow competing securities information processors to collect and disseminate market data. Use SEC-direct NMS Plans sparingly (i.e., primarily for technical, rather than commercial matters) in favor of direct SEC rulemaking.

In addition to the proposed reforms to Reg NMS described above, FIA PTG offers its perspectives on off-exchange activity, order routing and execution disclosure, and market quality for less liquid securities.

Read the full paper here.