New York, NY, January 5, 2024 – In a comment letter filed today on the SEC’s proposal to prohibit national securities exchanges from offering volume-based transaction pricing in NMS stocks in connection with the execution of agency and riskless principal orders, SIFMA outlines how the proposal would negatively impact market competition and, ultimately, harm investors.

“In our view, this proposal would negatively impact market efficiency and competition both among exchanges and among broker-dealers, raise costs for smaller and medium-sized broker-dealers and investors, and reduce exchange liquidity by disincentivizing the routing of orders to exchanges,” said Ellen Greene, SIFMA managing director, equity and options market structure. “The SEC’s own economic analysis indicates that the proposal would reduce market efficiency and could harm lower-volume exchange members and result in wider spreads to the detriment of all market participants.”

SIFMA further notes the SEC has not identified a particular market harm or harm to investors which the proposal is intended to remedy. Instead, the SEC has premised the proposal on remediating a potential conflict of interest related to routing orders—without explaining why existing rules such as FINRA’s best execution rule or Regulation Best Interest do not already address such concerns—and theoretical enhancements to competition that do not survive scrutiny.

SIFMA also raises questions about how this proposal is intended to intersect with the four previously issued proposals relating to equity market structure, which it commented on in March 2023, noting the SEC failed to identify a market failure that would justify the dramatic structural changes proposed, yet the proposals, individually and together, would result in fundamental changes with uncertain and consequential results.

SIFMA urges the SEC to only consider moving forward with the proposal after any implementation of the equity market structure proposals, in particular after market participants and the SEC have had a chance to evaluate our equity market structure with the benefit of amended Rule 605 reports. At such time, the SEC should re-open the comment period on the proposal to allow market participants the opportunity to evaluate it under the new equity market structure.

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).