The New York Stock Exchange has joined forces with retail broker Charles Schwab Corp and market maker Citadel Securities to oppose two proposed rules by the U.S. Securities and Exchange Commission (SEC) aimed at revamping how stocks are traded. The SEC’s proposed regulations are potentially the most impactful in its largest attempt to reform stock market rules in nearly two decades, but Wall Street firms are pushing back.
The Companies’ Comment Letter
In a comment letter to the SEC, the companies expressed their deep concerns about the proposed rules. They argued that the commission simultaneously issued multiple proposals that would dramatically overhaul the current market structure without adequately assessing the cumulative impact on the market or the potential for unintended consequences.
The SEC‘s Proposed Rules
The SEC proposed requiring nearly all retail stock orders to be sent to auctions and establishing a new standard for brokers to demonstrate that they get the best possible executions for their clients’ orders. In addition, the proposed rules include lower trading increments and access fees on exchanges, as well as more robust retail order execution disclosures. SEC Chair Gary Gensler said the aim of the proposals is to improve market quality and efficiency by boosting competition for retail stock orders and reducing unnecessary intermediation.
Wall Street’s Opposition
The NYSE, Schwab, and Citadel Securities urged the SEC to withdraw the auction and best execution proposals indefinitely. They argued that the rules could reduce market liquidity and create confusing regulatory overlap. The firms believe that a more targeted approach will result in significant benefits for U.S. equity market participants while meaningfully reducing the risk of negative outcomes for markets and investors. They believe that firms retreating from being liquidity providers would be particularly detrimental to retail investors.
The SEC has not yet responded to the comment letter from Wall Street firms. However, the pushback from these influential players in the financial industry is a significant obstacle to the SEC’s proposed reforms. As the debate continues, investors will be watching closely to see how the SEC responds and what impact any final rules will have on the market.