President's Journal
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 consider proposals to restrict the practice of short selling”.
STA has assembled teams to address a broad 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)
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 consider 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)
STA - 2010 - A New Decade Begins
Written by: John Giesea
31 December 2009
The Officers and Governors of the Security Traders Association extend our wish for each of our members and friends of STA to enjoy a happy, healthy and prosperous New Year.
As STA enters its 77th year, we stand ready to accept the challenges that lay in wait for us. We have spent many years “investing” in an ever stronger presence in Washington and, today, enjoy a solid footprint in the Nation’s capital. We will enlarge the footprint in 2010!
In 2009 we have witnessed a trend that causes us concern. This concern centers on the rapid growth of political and emotional pressures that have been unleashed in market structure debate. Often overlooked is the very strong performance of equity and option markets during this period. The SEC built Reg NMS to “modernize and strengthen” our markets – it worked. The STA, in 2003, remarked that market structure is “evolutionary” by nature and recent issues in this area represent no more than a healthy part of this evolution.
We support the SEC as the appropriate body to oversee and insure that our market structure remains the world’s best. Today’s markets are extraordinarily complex and great care is required to prevent unintended market degradation owing to these external pressures. Proposed rules must emanate from empirical evidence, cost/benefit analysis and be subjected to full due process.
The facts suggest that investors, today, enjoy greater liquidity, transparency and substantially lower execution costs. Issues concerning transfer taxes, short sales, IOI’s, flash orders, dark liquidity, latency and access are representative of the evolving nature of our markets. Competition has driven our markets to “world class” and remains the most efficient tool in achieving the objectives of all investors. STA maintains that a proper balance between regulation and competition represents the optimum course.
STA conducted its 8th Annual Strategy Meeting in November and has targeted priority areas for 2010 focus. We desire to build on our successes of the past, shore up the “opportunities” and to create added value to our members, while attracting representation from all trading models. Consistent with our goal of continually improving communication of STA positions with regulators and legislators, we have enhanced our internal policy on due process. In addition, some 16 initiatives have been identified and undertaken for work in 2010.
Our 2010 Chairman, Brett Mock, is fully energized and our Board has a full compliment totaling 17 professionals. The Board recently approved Peggy Bowie, MFC Global Investment Management, John Russell, Franklin Templeton Investments, and Jim Smyth, EVP, Knight Equity Markets, as 2010 members. Our Organization will benefit from a strong board of senior professionals, representing multiple business models and who are committed to improving our markets and in representing STA member’s interests in Washington.
Lastly, we want to share that plans are underway for STA’s 77th Annual Conference, September 22-25, 2010, in Washington D.C. This location represents a significant shift from our previous 76! We will take full advantage of our venue to provide a unique and powerful conference. Be sure to mark your new calendars!
Read the rest of the post >STA Opposes Transaction Tax Proposal - H.R. 4191
Written by: John Giesea
8 December 2009
STA has posted the letter below to our STA Trader Advocate site (see link on this page) and invite you to join our grass roots effort to allow our representatives to know of our opposition to this bill.
On December 3, 2009, Congressman Peter DeFazio (D-OR) introduced H.R. 4191, a bill titled “Let Wall Street Pay for the Restoration of Main Street Act of 2009.” The bill would establish a “securities transaction tax [that] is applied to stock transactions (1/4 of 1 percent (0.25%)), futures (0.02%), swaps (0.02%), credit default swaps (0.02%), and options (at the rate of the underlying asset).”
I strongly oppose this legislation. Its enactment would lead to serious disruptions in the capital markets while burdening “Main Street” with paying the tax.
The authors of the legislation state that is intended to “make it clear to our constituents that we know Main Street is suffering and a restored Wall Street should now share in its recovery with everyone else.” In spite of exemptions for tax-deferred accounts and other specified trading, the incidence of the tax would ultimately impose a significant and open-ended burden on the individuals and businesses that make up “Main Street.” For example, while an individual trader may not accumulate $100,000 in trades annually, an individual investor in a mutual fund will pay this tax as the fund itself will vastly exceed that amount in trading in a year.
What the creators of this bill need to realize is that Wall Street and Main Street are not separate entities. Wall Street helps to build Main Street by raising the capital businesses need to operate and employ “Main Street. The vast majority of main street investors use managed accounts and mutual funds to invest their savings, the fees paid for such services help sustain Wall Street This tax would be passed through to those investors, the very people that the creators of this bill claim they are trying to protect.
The rate the bill would impose on equities transactions, 0.25% is meaningful in the context of stock trading, and could drive trades offshore to foreign venues. For example, the tax on a $10,000 trade would increase the cost of a round trip transaction by $50. This additional tax burden would result in less U.S. trading activity, less saving and investment by our citizens, and less domestic business. As the United States struggles to recover from economic recession this transactions tax could jeopardize our position as a leading global financial center.
The proposed 150 Billion dollar transaction tax would be counterproductive to the stimulus legislation. Tax increases to “pay for” the cost of stimulus will likely blunt or negate the economic stimulus that would otherwise be provided by such legislation.
Increasing the execution costs of an individual trade would greatly increase the cost of doing business for the essential liquidity providers on U.S. futures and options exchanges. These market makers, whose constant participation is the major source of market liquidity, operate on razor thin margins. This tax would expose them to the choice of continuing to provide liquidity at a profit level unjustified by the risks assumed, taking their business overseas, or simply closing their doors. A reduction in the number of liquidity providers would decrease efficiency of the markets, result in wider bid ask spreads, and increase volatility.
When you assess the far reaching implications of this tax, you find that you cannot tax Wall Street without harming those on Main Street. This transaction tax would cause harm to large and small businesses alike, regardless of address.
We respectfully, but strongly, urge you to oppose this bill which will cause irreparable harm to investors, U.S. capital markets and the economy.
Read the rest of the post >STA Opposes Transaction Tax Proposal H.R. 4191
Written by: John Giesea
2 December 2009
STA has posted the letter below to our STA Trader Advocate site (see link on this page) and invite you to join our grass roots effort to allow our representatives to know of our position.
On December 3, 2009, Congressman Peter DeFazio (D-OR) introduced H.R. 4191, a bill titled “Let Wall Street Pay for the Restoration of Main Street Act of 2009.” The bill would establish a “securities transaction tax [that] is applied to stock transactions (1/4 of 1 percent (0.25%)), futures (0.02%), swaps (0.02%), credit default swaps (0.02%), and options (at the rate of the underlying asset).”
I strongly oppose this legislation. Its enactment would lead to serious disruptions in the capital markets while burdening “Main Street” with paying the tax.
The authors of the legislation state that is intended to “make it clear to our constituents that we know Main Street is suffering and a restored Wall Street should now share in its recovery with everyone else.” In spite of exemptions for tax-deferred accounts and other specified trading, the incidence of the tax would ultimately impose a significant and open-ended burden on the individuals and businesses that make up “Main Street.” For example, while an individual trader may not accumulate $100,000 in trades annually, an individual investor in a mutual fund will pay this tax as the fund itself will vastly exceed that amount in trading in a year.
What the creators of this bill need to realize is that Wall Street and Main Street are not separate entities. Wall Street helps to build Main Street by raising the capital businesses need to operate and employ “Main Street. The vast majority of main street investors use managed accounts and mutual funds to invest their savings, the fees paid for such services help sustain Wall Street This tax would be passed through to those investors, the very people that the creators of this bill claim they are trying to protect.The rate the bill would impose on equities transactions, 0.25% is meaningful in the context of stock trading, and could drive trades offshore to foreign venues. For example, the tax on a $10,000 trade would increase the cost of a round trip transaction by $50. This additional tax burden would result in less U.S. trading activity, less saving and investment by our citizens, and less domestic business. As the United States struggles to recover from economic recession this transactions tax could jeopardize our position as a leading global financial center.
The proposed 150 Billion dollar transaction tax would be counterproductive to the stimulus legislation. Tax increases to “pay for” the cost of stimulus will likely blunt or negate the economic stimulus that would otherwise be provided by such legislation.
Increasing the execution costs of an individual trade would greatly increase the cost of doing business for the essential liquidity providers on U.S. futures and options exchanges. These market makers, whose constant participation is the major source of market liquidity, operate on razor thin margins. This tax would expose them to the choice of continuing to provide liquidity at a profit level unjustified by the risks assumed, taking their business overseas, or simply closing their doors. A reduction in the number of liquidity providers would decrease efficiency of the markets, result in wider bid ask spreads, and increase volatility.
When you assess the far reaching implications of this tax, you find that you cannot tax Wall Street without harming those on Main Street. This transaction tax would cause harm to large and small businesses alike, regardless of address.
We respectfully, but strongly, urge you to oppose this bill which will cause irreparable harm to investors, U.S. capital markets and the economy.
Read the rest of the post >STA Opposes Transaction Tax Proposal
Written by: John Giesea
2 December 2009
The letter below is posted on our STA Trader Advocate site and we have activated our grass roots effort to share our opinions with our individual elected representatives.
I understand that Congressman Peter DeFazio (D-OR) and four original cosponsors are introducing a bill titled “Let Wall Street PayThe letter below is posted on our STA Trader Advocate site and we have activated our grass roots effort to share our opinions with our individual elected representatives. for the Restoration of Main Street Act of 2009.” According to a November 18, “Dear Colleague” letter circulated by the bill’s sponsors, the legislation would establish a “securities transaction tax [that] is applied to stock transactions (1/4 of 1 percent (0.25%)), futures (0.02%), swaps (0.02%), credit default swaps (0.02%), and options (at the rate of the underlying asset).”I strongly oppose this legislation. Its enactment would lead to serious disruptions in the capital markets while burdening Main Street with paying the tax.
The authors of the legislation state that is intended to “make it clear to our constituents that we know Main Street is suffering and a restored Wall Street should now share in its recovery with everyone else.” In spite of exemptions for tax-deferred accounts and other specified trading, the incidence of the tax would ultimately impose a significant and open-ended burden on the individuals and businesses that make up Main Street. For example, while an individual trader may not accumulate $100,000 in trades annually, an individual investor in a mutual fund will pay this tax as the fund itself will vastly exceed that amount in trading in a year.
What the creators of this bill need to realize is that Wall Street and Main Street are not separate entities. Wall Street helps to build Main Street by raising the capital businesses need to operate and employ Main Street. The vast majority of Main Street investors use managed accounts and mutual funds to invest their savings, the fees paid for such services help sustain Wall Street. This tax would be passed through to those investors, the very people that the creators of this bill claim they are trying to protect.
The rate the bill would impose on equities transactions, 0.25% is meaningful in the context of stock trading, and could drive trades offshore to foreign venues. For example, the tax on a $10,000 trade would increase the cost of a round trip transaction by $50. This additional tax burden would result in less U.S. trading activity, less saving and investment by our citizens, and less domestic business. As the United States struggles to recover from economic recession this transactions tax could jeopardize our position as a leading global financial center.
The proposed $150 billion transaction tax would be counterproductive to the stimulus legislation. Tax increases to “pay for” the cost of stimulus will likely blunt or negate the economic stimulus that would otherwise be provided by such legislation.
Increasing the execution costs of an individual trade would greatly increase the cost of doing business for the essential liquidity providers on U.S. stock, options and futures trading venues. These market makers, whose constant participation is the major source of market liquidity, operate on razor thin margins. This tax would expose them to the choice of continuing to provide liquidity at a profit level that would not sufficiently compensate them for the risks assumed, taking their business overseas, or simply closing their doors. A reduction in the number of liquidity providers would decrease efficiency of the markets, result in wider bid ask spreads, and increase volatility.
When you assess the far reaching implications of this tax, you find that you cannot tax Wall Street without harming those on Main Street. This transaction tax would cause harm to large and small businesses alike, regardless of address.
I respectfully, but strongly, urge you to oppose this bill which will cause irreparable harm to investors, U.S. capital markets and the economy.
Read the rest of the post >Comment [7]
In the Journal..
RSS Feed
Recent Posts
- STA Faces Several Key Market Structure Issues
- STA Faces Several Key Market Structure Issues
- STA - 2010 - A New Decade Begins
- STA Opposes Transaction Tax Proposal - H.R. 4191