01.27.2014
By Terry Flanagan

The Maker-Taker Model and Access Fees: It’s Time for the SEC to Correct the Prisoner’s Dilemma

The following comment is the opinion of the author and not necessarily the opinions of my employer, Bloomberg Tradebook, or our parent company, Bloomberg Financial L.P.

The SEC created a prisoner’s dilemma by setting a cap on “access fees” with Regulation NMS in 2005. The SEC must act and cut the fee they set in order to minimize the market structure distortions that are caused by this fee model. Recently, some have called for this system/model to be dismantled completely. It is the author’s opinion that the SEC is unlikely to do this, as such a move would be too radical; an easier and more consistent action would be to simply cut the cap. It is the author’s opinion that lowering the cap will serve to minimize the distortions. This topic is a little complicated. I, hopefully, will simplify it.

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