The Security Traders Association (STA), the leading advocacy and education organization for trading professionals of the financial industry in the U.S., today noted that the recently released report on the May 6 Flash Crash by The CFTC-SEC Joint Advisory Committee on Emerging Regulatory Issues represents an appropriate “due process” approach to making recommendations, while responsive to a rapidly changing market structure. STA applauds the joint (SEC-CFTC) approach as being the most effective given the interconnectedness of markets that exists today. “We believe this is the correct beginning of a process that will yield optimum results following a thorough due diligence process” said STA Chairman Joseph Cangemi.
That the Joint Committee sought thought and guidance from a variety of constituencies was particularly important. The STA notes that any proposed specific rules or regulations that come from the Committee’s work need to be subject to the SEC’s formal rulemaking and comment process. As has been the case in the past, there are multiple effects for any change in market structure, and the “devil is in the details.” Now that they have tasked the various Regulatory agencies to review, analyze and consider certain micro-structure rule changes, it is imperative that the agencies adopt and utilize the same “due process”.
The STA appreciates the breadth of issues the Committee examined, and believes that while some issues require modification, others will benefit from monitoring - as STA holds that markets are both evolutionary and complex, requiring great care in the rule making process.
STA has long held U.S. markets must be liquid, transparent and fair as well as serve all investors and its members. Over its 77-year history, STA has participated in and supported ongoing dialogue with legislators and regulators, offering the consensus perspective of its members, who comprise all segments of market participants – including the buy and sell sides, exchanges and ATSs.
Said Joseph Cangemi, Chairman of STA: “Market structure is at the heart of whether issuers and investors have access to and are protected in markets. We have consistently supported an appropriate balance of regulation and competition when considering market structure changes, and expressed concern over reactive ‘micro’ regulation which has the potential for unintended consequences. It has been an ongoing opinion of STA that new regulatory policies never occur in a vacuum. The first driving principle always needs be to ‘do no harm’ to our markets. The systematic analysis and recommendations of the Joint Committee in response to the May 6 event are precisely the thoughtful approach that needs to be taken given the complexity of global markets. The Committee’s work is an important development in the process of considered regulation – and the next step is to have proposed rule changes subject to the SEC review and comment process to completely vet out implications for all industry participants and the market as a whole.
“The STA was pleased with the swift response and level of detail on requests for information by this Committee but traders are concerned about the implications and effects of some of the recommendations made and ask the Regulatory Agencies to review all the submitted responses to the SEC’s Concept release with respect to “Trade-At” and other market structure changes.
“The Association and its 4,200 members look forward to working with the SEC, as we have in the past, on these critical issues. We have tremendous expertise to offer as these topics are reviewed.”