#USHouseMarketStructureDraft US MARKET STRUCTURE DRAFT
The U.S. Securities and Exchange Commission (SEC) has released a draft proposal aimed at overhauling the current equity market structure, marking one of the most significant regulatory shifts in decades. The reform seeks to improve transparency, competition, and investor outcomes, particularly for retail investors.
Key Components of the Draft
1. Order-by-Order Competition: A proposal to route retail orders to auctions, allowing multiple market makers to compete for best execution.
2. Revised Tick Sizes: Introducing smaller price increments (sub-penny pricing) to increase price competitiveness across venues.
3. Changes to Payment for Order Flow (PFOF): Reevaluating or limiting PFOF arrangements, which are common among commission-free brokers.
4. Enhanced Transparency: New rules requiring brokers and trading venues to disclose more data about execution quality and routing decisions.
Will It Spark Dispute?
Yes, likely. Here’s why:
Market Makers and Brokers Push Back: Firms that benefit from the current structure—especially those profiting from PFOF—are expected to lobby aggressively against the changes, citing reduced liquidity and higher costs.
1. Retail Brokerages at Risk: Commission-free brokers like Robinhood may argue that reforms threaten their business models, potentially raising costs for retail investretail.
2. Exchange vs. Off-Exchange Tension: The proposal could shift volume from off-exchange venues (like wholesalers) back to public exchanges, intensifying competition and power struggles.
3. Legal and Legislative Challenges: If the SEC finalizes these reforms, expect lawsuits or Congressional inquiries from industry players claiming regulatory overreach.
While the draft aims to level the playing field and enhance fairness, its impact could reshape the entire trading landscape. Whether it brings progress or controversy will depend on how the SEC navigates stakeholder feedback in the coming months.