SIFMA President Bentsen Urges Review of Equity Markets

SIFMA President and CEO Kenneth E. Bentsen Jr. spoke at the AICPA and SIFMA Financial Management Society Conference on the Securities Industry, discussing equity market structure, market data dissemination, and transparent disclosure.

Mr. Bentsen explained that market structure has become increasingly complex and fragmented, opening the door to disparate treatment among market participants. To remedy this issue, SIFMA called on regulators to conduct a comprehensive review of equity market structure to ensure it is working in the best interest for all investors.

To address fragmentation, Mr. Bentsen suggested reviewing the "protected quote" practice, where brokers are required to route their orders to the exchange quoting the best price. Exchanges are allowed to charge relatively high fees for accessing these quotes. Mr. Bentsen explained that these fees represent a "significant percentage" of overall trading costs that are "several times higher" than access fees charged by off-exchange venues, adding complexity to the system. Mr. Bentsen recommended regulators take steps to reduce the number of trading venues that do not add true liquidity to the market.

Mr. Bentsen explained that SIFMA supports fairness in market data dissemination, ensuring Securities Information Processors ("SIPs") provide information to all users at the same time. He called on the SEC to direct the exchanges to improve the SIPs so that they provide the fastest commercially available services for data aggregation and distribution. Furthermore, Mr. Bentsen explained that SIPs should eventually be replaced with competitive multiple processors that would distribute public market data.

Lastly, Mr. Bentsen said retail and institutional investors should have more transparency and better disclosure in a standard and easily understood format. According to Mr. Bentsen, brokers should provide public reports of specific order routing statistics and metrics to retail investors. He said that the SEC should require the exchanges to provide standardized public disclosure of their trading volumes through undisplayed and partially undisplayed orders for investors to better understand how the markets work which would result in increased investor confidence.

See: Mr. Bentsen's Statement.