SEC Commissioner Elad Roisman Calls for Reassessment of Equity Market Structure Regulation

SEC Commissioner Elad L. Roisman called for a broad reassessment of equity market structure regulation. In an address at the SIFMA Equity Market Structure Conference, Mr. Roisman reviewed Regulation NMS's impact since the SEC adopted it in 2005. He noted that the 13 active equity exchanges attract the majority of on-exchange trading volume.

In his address, Mr. Roisman emphasized the complexity and interconnectedness of multiple regulatory obligations.

He suggested that the SEC reconsider the regulatory requirements for best execution, including whether best price fulfills best execution obligations over other relevant factors (e.g., best quality trading results) or whether the regulatory framework for best execution puts more emphasis on the process (i.e., requiring brokers to show their work) than the outcomes for customers.

He stated that the Order Protection Rule ("OPR") forces brokers to (i) connect to, (ii) buy market data from and (iii) take into account prices on all exchanges. Mr. Roisman asked market participants to consider whether OPR in its current state is best for investors and exchanges.

He urged meaningful consideration of Order Management Systems ("OMS") and questioned whether OMS' consolidation of several services raises new risks to investors.

Mr. Roisman also suggested review of the regulation of fee-based "finders" that aid small businesses to raise capital by identifying potential investors. He noted that while finders can help small businesses in their early stage financing, current regulation is ambiguous and should be reassessed.