SEC Puts Reg NMS Review out for Comment


Industry members have the chance to share their views on Regulation NMS with the US Securities and Exchange Commission as the regulator has put a review of the rule out for comment.

“If you look at the comments files on the IEX’s exchange application, it sort of became a referendum on Reg NMS, which is a great thing,” said SEC Commissioner Michael Piwowar during a financial markets conference hosted by Baruch College’s Zicklin School of Business in Manhattan.

Now the industry can address the subject directly. Under the Regulatory Flexibility Act, the SEC annually publishes a list of rules that it looks to revisit to gauge their impact on small entities. This year, Reg NMS made the list, according to Piwowar.

“We put the list out for public comment and, on average, we get zero comments,” he said. “This year we put out our list in September, which included Reg NMS, It’s an opportunity for everyone to call for a more comprehensive review of market structure.”

Piwowar has suggested that the SEC implement a wholesale review of Reg NMS based on the model used in the Special Study of Securities Market published by the SEC in 1963 as well as the UK’s Foresight Programs.

“In the Foresight Programs, the government works with academics and market participants to leverage and apply the work that is out there,” he explained.

In other market structure issues, Piwowar is hopeful that the maker-taker access fee pilot proposed by SEC’s Market Structure Advisory Committee will go forward after a few questions have been answered.

Michael Piwowar, SEC

Michael Piwowar, SEC

“If we decide to do something, can we start that pilot before the end of the tick-size pilot,” he asked. “Even though it fundamentally would involve other securities, would there be any odd spillover effect?”

Then there is the question of how SEC would choose to implement such a pilot. The regulator could create it via an NMS plan, which the SEC used for the tick-size pilot.

“That means the SEC puts out an order to the SROs to design a plan and bring it back for SEC approval,” said Piwowar. “There’s a lot of back and forth and the benefit is that you get to start earlier.”

The other option is for the SEC to create a rule that specifies the rule and then puts it out for comment.

“This means we have to go through a lot of upfront thought regarding cost-benefit analysis and the alternatives,” he added. “Having said that, using the rule-making process, we would get to the end a lot quicker. With an NMS plan, it takes a lot of meetings with people from the SROs and those who are not part of the conversation.”

Piwowar also expects that the SEC plans to make US Treasury post-trade data public citing comments that SEC Chair Mary Jo White and counselor to US Treasury Secretary Antonio Weiss made during a conference hosted by the Federal Reserve Bank of New York in late October.

“They teed up the issue of public dissemination of data regarding those prices,” he said. “I think they both said that the question is not whether we will have post-trade transparency, but how we are going to have post-trade transparency.”

Piwowar then stated that he was a huge proponent of disseminating the data.

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