By Rob Daly

SEC Commissioner Pushes Exchange Reform

Be it market data fees, rebates, or a market structure some perceive as oligarchic, U.S. Securities and Exchange Commission Robert Jackson is calling for reform.

“I believe the Commission is finally ready to take off the kid gloves we’ve been using on our stock exchanges and start to ask hard questions about your country’s stock market structure,” he said during a speech at George Mason University’s Antonin Scalia Law School Law & Economics Center.

The commissioner offered three personal proposals that he believes would introduce greater transparency into exchange operations and reconsider the limits of immunity for for-profit exchanges.

Jackson, an ardent supporter of the access-fee pilot that the SEC proposed earlier in the year, firmly stated that any pilot must include a “no-fee” bucket.

“To no one’s surprise, the exchanges have fought mightily against the proposal,” he said. “For my part, I think it is time has come for the SEC and investors to know the facts about rebates and other incentives.”

The commissioner later suggested that exchange operators adopt a uniform approach to revenue disclosure so that investors can have a clearer view regarding associated trading expenses.

Finally, Jackson wants an industry discussion on how exchange operators create their rules and prices.

“Exchanges filed more than 1,500 rule-related requests with the SEC in 2017, hundreds related to trading fees, data fees, and order types alone,” he said. “Each one affects the exchanges’ profits. It is our obligation to ensure that the exchanges’ actions do not unduly burden competition and are fair and reasonable.”

The SEC can disapprove price increases and cap exchanges fees, but exchange operators only offset them with increases in other fees, according to Jackson. “In a world where the cost of electronic connections are constantly falling, exchanges have asked us to raise these proves over and over again during the past three years.”

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