SEC Equity Market Structure Advisory Committee Discusses Market Volatility (with Delta Group Summary)

The SEC Equity Market Structure Advisory Committee met to consider the volatile market events of August 24, 2015, and the consequent "issues affecting retail and institutional customers." Issues discussed included: "how certain order types used by customers operate, payment for order flow and execution quality and order routing disclosure." Four subcommittees formed during the previous Equity Market Structure Advisory Committee meeting also provided a brief status update on their activities. The subcommittees focused on (i) Regulation NMS, (ii) Trading Venues Regulation, (iii) Customer Issues and (iv) Market Quality, respectively.

In her remarks, SEC Chair Mary Jo White outlined a number of approaches to these market structure issues. She highlighted an SEC research note, the "August 24 paper" that addressed the operation of U.S. equity markets under the stressed market conditions on that day. The "rigorous data analysis" contained in the August 24 paper "and other such analyses" will help to provide a "sound empirical basis for further consideration of steps to refine current trading rules in order to optimize the operation of controls over volatility," she said.

Commissioner Michael S. Piwowar stated that "the events of August 24 provided a test of how our markets operate in times of extreme volatility, and revealed that there is room for improvement. The various customer issues that will be considered . . . – the risks of using certain order types, the potential conflicts presented by payment-for-order-flow arrangements and the development of more meaningful execution-quality reports – also represent opportunities for refinement of our regulatory approach."