Order routing, tech issues top ICI trading priorities
US buy-side trade body the Investment Company Institute
(ICI) will in 2014 focus on addressing key conflicts of interest around order
routing and supporting industry efforts to reduce the occurrence of disruptions
in the US equity market, according to its senior counsel.
Speaking to theTRADEnews.com, Ari Burstein, senior counsel
for ICI and its international counterpart ICI Global, said the organisation’s
top three priorities for US equity market reform were: addressing conflicts arising
from sell-side and exchange order routing and execution fees; highlighting buy-side
concerns over exchange infrastructure and technology; and promoting a pilot
program to widen tick sizes.
potential conflicts of interest raised by the current economic incentives for
routing and executing orders – like maker-taker, access fees and internalisation
to have an impact on end-investors,” Burstein said.
particular, Burstein said he would continue to gauge support for a potential
pilot programme banning maker-taker pricing for a subset of securities to build
data on the effects of liquidity rebates – an initiative several key buy-side
firms have called for in recent years.
Tick size reform
has given broad support for a pilot plan to widen tick sizes for small- and
medium-cap equities to generate liquidity in these names and promote
investment. Investment bank Citi last year put forward a comprehensive plan
although several issues still need to be decided upon, Burstein said.
key SEC regulatory initiatives, the tick size reform program – which was part
of the Jumpstart Our Business Startups Act – is not beholden to a certain
timeline, meaning the SEC can hold back on plans if occupied by other
added that ICI would also contribute to industry talks around exchange
technology following high-profile trading errors, such as the 22 August Nasdaq
outage, to ensure asset managers are properly represented.
October, SEC chair Mary Jo White suggested the Commission would pursue a
“holistic” review of the US equity market due to the interconnected nature of
regulation and its impact on trading. Burstein says the ICI broadly backs this
approach, citing likely advantages for formulating policy.
would support a holistic review of the US equity market as SEC staff members
have suggested in recent public comments: at the same time, there are a number
of key trading-related issues relevant to the buy-side that require more of a
short-term look,” he said.
last holistic regulatory review of the US equity market occurred in early 2010,
when the SEC put together its review of market structure, but the agency’s
resources were subsumed by its work on Dodd-Frank. Burstein said the market had
changed significantly since then, warranting a new wide-ranging review.
ICI will also work with asset managers in addressing issues
raised in an automated trading concept release issued by US derivatives
regulator the Commodity Futures Trading Commission (CFTC) in September. This
month, the CFTC re-opened industry submissions related to the concept release
until mid February. The Commission will also hold a meeting of its Technology Advisory
Committee to explore key issues within the concept release.
ICI Global will continue to consult buy-side market participants
in Europe as MiFID II moves from its level one political agreement to level two
implementation details driven by markets watchdog the European Securities and
Markets Authority. Burstein said greater cross-border activity amongst market
participants required greater cohesion at the rule-making level, particularly
for the derivatives market.
will continue to be very aggressive working with the regulators and policy
makers in the US and globally on all issues around trading and the reform of
the financial markets,” Burstein said.