The International Organization of Securities Commissions today published its final report on Trading Fee Models and their Impact on Trading Behaviour, which provides a comprehensive overview of trading fees and trading fee models around the globe and how they influence trading behaviour.
In recent years, securities regulators in many jurisdictions have introduced regulatory frameworks that foster competition among trading venues. Advances in technology also have played a critical role in enhancing competition among trading venues by reducing the cost of establishing new trading venues and providing access to new pools of liquidity.
Trading is now fragmented with multiple venues trading the same instruments and competing, both within a jurisdiction and across jurisdictions where securities are cross-listed. Competition has provided investors and intermediaries with greater choice as to where and how they trade. These venues compete with trading systems and technology, market models and trading fees, including trading fee structures.
To gain an understanding of the fee models currently in use and the approaches taken by various regulators to regulate them in this competitive context, IOSCO distributed a short questionnaire among regulators and trading venues in different jurisdictions.
The questionnaire included questions regarding:
- The types of fee models currently being used;
- The way in which fees and fee models are being regulated; and
- The work done to identify the potential or actual impacts of trading fee models.
- Twenty-two jurisdictions responded to the survey. Approximately 70 trading venues either responded themselves or their views were reflected in the responses provided by regulators.
The final report is intended to provide a summary of the responses received to the survey. In the summary, the report explains the key findings related to:
- Market context, including the state of competition and the regulatory environment in different jurisdictions
- Description of Trading Fee Models and Trading Fees
- The Incentives and Effects of Trading Fee Models and Trading Fees, including the beneficiaries of incentives and the effects
The data collected did not provide enough clear evidence to enable IOSCO to draw definitive conclusions about the impact or effect of trading fees or trading fee models on trading behaviours. But the process was useful for gaining insight into the structure of fee models in use globally, the extent to which regulators are involved and, in many cases, the standards used by regulators when oversight is performed.
IOSCO will continue to monitor trading fee models and trading fees. If issues arise that warrant further investigation, IOSCO will consider further work on the subject.
