Lev Bagramian, the Senior Securities Policy Advisor, issued the following statement in response to the actions taken by the Securities and Exchange Commission (SEC) today at the meeting that approved on a party-line 3-2 vote a proposal regarding stock exchanges and market structure: “This SEC has made some commendable efforts to improve market integrity and proposed to fix parts of our capital markets’ structure. But rather than continuing to take long-overdue, concrete actions to address well-known conflicts of interest that pick the pockets of Main Street investors, the SEC today risks reverting to the sad legacy of regulatory timidity and confusion. This lack of meaningful action will be harmful to investors and bad for the markets, and we hope the Commission will get back to doing what’s best for investors and markets.
The exchanges are self-regulatory organizations (SROs) with duties to act in the best interests of investors and at the same time profit-maximizing private corporations. That is a fundamental conflict of interest. The exchanges make money by providing the largest, fastest trading firms with all sorts of privileged access and benefits unavailable to Main Street investors. Those include the legalized bribery of ‘maker-taker’ rebates and co-location to high-speed data feeds and predatory order types. That’s how exchanges today make most of their money, not from stock trading.
But that money comes from the pockets of Main Street investors. Everyone in the markets knows this, as does the SEC. The SEC was supposed to take action today to stop some of this, require transparency for some, and take other actions to protect investors from these egregious conflicts of interest. It did none of that; it merely proposed to maybe do something in the future.
Today’s lack of action by the SEC, along with others like the misleading anti-investor ‘Regulation Best Interest’ and its dead-cat bounce of the consolidated audit trail (CAT), leaves in place deeply rooted conflicts of interest. We continue to hope that the Commission will earnestly re-engage on issues beneficial to investors and markets.”
