STA Faces Several Key Market Structure Issues

Written by: John Giesea

7 February 2010

STA’s Committees and Board are undertaking to review and comment on several key proposals which, collectively, represent the potential for significant impact on market structure going forward.

While a “ban” on flash orders is widely expected, it is not yet known what the SEC will propose in the short sale debate. There have been rumors of restricting shorts to being “passive” in a circuit breaker scenario. The most recent quote from Chairman Schapiro (February 5, 2010) was:

“Finally, in the past year, we adopted rules that seek to reduce the potential for abusive “naked” short selling in the securities market. These rules have significantly reduced the number of times short sellers failed to deliver securities. Looking ahead, in the coming weeks, we will condsider proposals to restrict the practice of short selling”.

STA has assembled teams to address abroad range of issues imbedded in the SEC’s recent Concept Release on Equity Markets. We have a track record of contributing significantly to market structure issues evidenced by our Special Reports in 2003 and 2008 as Regulation NMS was born and implemented. We expect our comments in 2010 to be of equal importance and, hopefully, influence.

As we have stated repeatedly, our markets have been working extremely well and that a healthy market “evolves” best through a balance of competition and regulation. Great care must be taken in making adjustments – change must be based on real data and being subjected to full “due diligence” and not based upon political and/or emotional pressures.

We support the SEC’s wide ranging request for comment. This process is deliberate and properly executed will yield results that serve to maintain our markets as the world’s best.

Equity markets play a key role in our overall economy. As the nation focuses on job creation, we are reminded that without efficient markets, the ability to raise capital for businesses, to grow, and hire, is impeded.

Regulation

Amendment to Reg SHO Final rule expected any time

Elimination of Flash Order Exemption Final rule due

FINRA – Quotation Consolidation Facility STA comment submitted February 4, 2010

Reg of Non-Public Trading Interest Comments due February 22, 2010

Risk Management Controls (Access) Comments due March 29, 2010

Concept Release – Equity Markets Comments due April 21, 2010

Legislation

Transaction Tax Proposal(s) STA Trader Advocate activated
(Bills introduced in both Senate and House) (Coalitions to oppose imposition)

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