FIA PTG: simplify markets by eliminating Trade-Through Rule and ban on locked and crossed markets

28 January 2015

Washington, D.C.—Jan. 28, 2015—The FIA Principal Traders Group today released a position paper offering new recommendations on how to simplify the U.S. equity markets.  The paper calls for a modernization of Reg NMS by eliminating the trade through rule and the requirement to avoid displaying locked and crossed markets.  Additionally, the paper calls for enhancements to broker best execution requirements and updates to certain disclosures.  The full paper is available under Resources on the right. 

“Our simplification proposals would reduce costs for investors, make markets more transparent, and increase investor confidence,” said Richard Gorelick, a member of FIA PTG’s executive committee.  “Simplification must be a foundational principle in the current debate on equity market structure reform.” 

Today’s position paper, which is being shared with the Securities and Exchange Commission, is the latest in a series of efforts by FIA PTG to contribute to an informed, data-driven, and principles-based discussion of equity market structure reform.  FIA PTG agrees with SEC Chair Mary Jo White on the need for changes to the regulatory framework for equity markets and last fall FIA PTG outlined a broad set of principles that addressed many of the issues she raised.

The reforms to Reg NMS proposed today would simplify the markets in meaningful ways, including:

  • Reducing the need for hundreds of exchange order types that are used today to prevent locks, crosses and trade-throughs.
  • Allowing exchanges to focus on their own markets by getting them out of the business of monitoring trading everywhere and routing orders to their competitors (a role best provided by brokers).
  • Reducing excessive fragmentation by removing a regulatory subsidy to inconsequential markets.
  • Eliminating complexity for brokers and regulators associated with intricate exceptions which would no longer be needed.
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