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The STA affirms its support of the importance of liquidity providers regardless of the market capitalization of any particular stock. The US securities markets provide for the health and growth of the overall economy as well as the engine for raising capital. Absent the provision of liquidity, our securities markets would not exist. Historically, liquidity has been provided in exchange listed securities by specialists and market makers and in OTC securities by market makers. Both take risk to secure fair, liquid, and orderly trading.
Over the course of recent decades technology has evolved this function but its importance to investors and issuers remains the same.
Consistent with this, STA’s history has been one of participation by, and support of “liquidity providers.” Representation of liquidity providers and their perspective is a core mission of the STA. The importance of their role in the market is essential to any debate regarding market structure, or rules and regulation of exchanges, brokers, or ATSs.
In addition to this support of liquidity providers, in its recent testimony before the hearing of Securities Subcommittee of the Senate Banking, Housing and Urban Affairs Committee, the STA highlighted the following:- All regulators should use the regular notice and comment rulemaking process, as it affords all market participants the opportunity to comment on any proposed rules and discuss any concerns about their effect on the markets.
- It is appropriate for the Commission to evaluate dark pool access and transparency standards.
- Dark pools or alternative liquidity pools as the STA generally refers to them, increase efficiency by lowering execution costs and provide competitive choices in the execution process.
- We can have an efficient market structure and effective price discovery through the coexistence of alternative liquidity pools and public quoting venues.
- The limiting of the successful dark pools to de minimus percentages of volume is not the appropriate answer. Trimming the thresholds to unrealistically low levels could result in an explosion of new ATSs and a further fragmenting of the market.
- Dark pool post-trade transparency must be upgraded in such a way as to allow other market participants to see which pools are attracting flows in which issues while preserving the anonymity of pool participants.
- The regulatory gap between ATS regulation and exchange regulation should be rationalized. Balancing the regulations will allow all venues to compete more robustly.
- Some high frequency traders provide liquidity and help keep exchange fees low.
- Market data revenue allocation formulas should only reward quality and tradable quotes and should discourage quotes that serve only commercial interest.
- The SEC and the Congress should avoid “picking winners and losers” and allow competition and innovation to drive market changes whenever possible.
The full text of the STA testimony can be accessed at the STA’s website: www.securitytraders.org
Said Peter Driscoll, STA Chairman: “The STA, by representing different segments of the professional trading community, is able to develop consensus positions representing what is best for markets, issuers and investors, based on our expertise. We appreciate the opportunity the Committee has given us to present our perspective on these critical issues as well as the dialogue we have established with other Committees on the Hill and with the SEC and other regulatory bodies.”
