Fixed Income Market Structure Comes to Fore


There may be a lot on the docket regarding changes to the US equities market structure, but industry watchers doubt that much will change in 2018. This relative quiet comes as scrutiny on fixed income markets ramps up.

“I expect a lot of continued talks and debates, but perhaps not a lot of action unless we see another crisis, ‘flash crash’, or major market failure that sparks a resurgence in conversations,” said Spencer Mindlin, an analyst at research firm Aite Group during a 2018-outlook webinar hosted by his firm.

Existing market-structure projects, such as the tick-size pilot and implementation of the Consolidated Audit Trail, will continue to advance, but whether they will yield fruitful results is another question, he added.

The listings market may perk up given US Securities and Exchange Commission Chairman Jay Clayton’s focus on encouraging small and mid-sized companies to go public, according to Mindlin.

“I anticipate seeing a few new listings on The Investors Exchange,” he added. “They’re throwing their hat into the ring to compete with NYSE and Nasdaq on listings.”

However, Mindlin expects to see the conversation from the SEC change somewhat as recently appointed staff start their official duties.

“We have a new Director of Trading and Markets, Brett Redfearn, who historically has had a focus on market data fees and costs,” he noted. “I anticipate conversations concerning what is to be done about market data fees to kick off.”

While Mindlin shared his outlook for the new year, Chairman Clayton on Jan. 11 welcomed the newly minted Commissioner Robert Jackson and Commissioner Hester Peirce to their first SEC event, the inaugural meeting of the regulator’s Fixed Income Market Structure Advisory Committee.

During his opening speech, Chairman Clayton also announced that the SEC would not renew the charter of its Equities Market Structure Advisory Committee, which expired this week.

“Going forward, rather than extending EMSAC, our plan is to organize targeted roundtables on discrete equity market structure issues, which will feature experts on each topic representative of a broad diversity of viewpoints,” he said. “We will provide more information on these plans in the future.”

Over its three-year existence, ESMAC provided recommendations to the SEC to reform limit-up/limit-down rules and the market-wide circuit breaker, modify Rule 605- and Rule 606-reporting change Reg NMS Plan governance, and create an access-fee pilot.

“ESMAC has provided the Commission with thoughtful perspectives and recommendations, some of which we are actively considering,” added Clayton.

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