Common Sense on Market Structure –

Rare as it may be, there are times when a Senator actually makes sense. True to my allegence to good idea’s over party affiliation – I have to quote Senator Kaufman of Delaware who penned a comment letter to Mary Schapiro of the SEC:

“The proliferation of exchanges and other market centers that has increased fragmentation, the substantial rise in volume executed internally by broker-dealers or in dark pools, excessive messaging traffic, the dissemination of proprietary market data catering to high frequency traders, and order-routing inducements all may be combining in ways that cast doubts on the depth of liquidity, stability, transparency and fairness of our equity markets.”

Although this was written in August of 2010 – with no substancial movement in addressing any of these issues – I remain hopeful that the idea’s  it surfaces needs to become core components of any meaningful market reforms.  Specifically:

  • Stop proliferation of Exchange trading venues in general, and ‘Dark Pools’ Specifically
  • Prohibit internalization of order flow by ANY Broker Dealer on behalf of a customer
  • Limit excessive message traffic sent to exchanges, either by implementing a cancel fee or other monetary cost on unfilled orders.
  • Stop the dissemination and sale of ‘price for performance tiered” proprietary market data by market centers
  • Eliminate the practice of “payment for order flow” arrangements by all exchanges. Make it a simple fee per execution strategy.
  • Review & Simplify the various order types allowed by ALL exchanges

All in all, a pretty simply “Six Point Plan”





About bohicaman

Former Trader, Risk Manager, CRO, COO, etc. Global experience in all forms of listed and OTC derivative markets Citizen of the world Resident of the USA Favorite color is blue
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