06.24.2022 13 new Morning Note posts under Morning Note (9) and CAPIS Insights (4)


"Highlights From the 2022 STA DC Spring Update"

posted by CAPIS on 04/04/2022 at 9:20 am


04/04/2022 at 9:20 am

At CAPIS, we’re striving to engage market debate, promote critical thinking and be objective. To that end, the Security Traders Association recently held its Virtual Washington DC Spring 2022 Update via webinar and CAPIS was in attendance. We are pleased to provide select speaker highlights from the day-long event.

(Editor’s Note: CAPIS has shortened some quotes and added context when applicable.)

Market Structure

“The sub-penny trading has been a driver of trading activity on dark pools. Market makers and participants in dark pools can step ahead of the exchanges and trade in sub-pennies. I believe it is time to revisit this rule.”

“The old diversity rule did little to define diversity, so companies had little guidance & disclosures were of little value to investors. The Nasdaq Rule on board diversity is critical b/c it spells out what is required of companies, holding firms accountable.”

  • Representative Gregory Meeks

“Not terribly valuable in fostering competition is changes to the order protection rule. The SEC should focus on addressing the costs directly, not changing the rules around to require an exchange have a certain market share in order to enjoy order protection.”

“Most valuable would be changes in tick size rules.”

“The commissioner should focus on improving the NBBO. It doesn’t reflect where NMS stocks are now.  On one extreme, you have tick-constrained stocks & on the other end, you have a bunch of high-priced stocks. Much of the trading occurs in odd lots, not viewable by everyone.”

  • Jonathan Kellner, CEO, MEMX

“We need to grapple with the importance of PFOF in a new world where brokers like Robinhood have a tremendous amount of retail flow. To the degree that a lot of that flow ends up internalized, we need to understand and address that.”  – Former SEC official Robert Jackson, commenting on PFOF.

“Tick size and reduction in access fees is the easiest change for the SEC to implement. Changes to OPR require you to look at best execution rules at the same time.”

“The market data infrastructure plan was many years in the making. The SEC even hosted a roundtable on market data. We’ll see how this turns out but if that does get struck down, it will completely nullify what the SEC does, their rulemaking & their power.”

“We have to be clear in defining off-exchange liquidity. We need to be talking about actionable liquidity & measurable execution quality. On the ATSs, you have very accessible liquidity..”

  • Joe Wald, Managing Director, Co-Head of Electronic Trading at BMO

“Comment periods are short – there is a need for more time for participants to comment.” Commissioner Hester Peirce, remarking on how market commenters struggle to provide the SEC with feedback when several rules are under review.


“When hundreds of brokers don’t have the market power to negotiate sweetheart deals, those firms get hurt. It also hurts smaller exchanges, who can’t peel off market share.”

  • SEC Commissioner Robert Jackson, making the case against negotiated exchange pricing tiers.

“The SEC has the authority to define what is an exchange and we could broaden it. It could include firms not originally thought of as exchanges.”

“Congress believes Short Sale Rule disclosure modification is needed. More transparency would be helpful, but we must respect short seller confidentiality – they are beneficial to the market.”

“There is no shortage of things to work on here (at SEC.)

  • SEC Commissioner Hester Peirce

Crypto and Digital Assets

“How do we transition to the digital economy? Stablecoins and decentralized technology innovations can help us make the transition while preserving the financial privacy that underpins all other American rights and liberties”

  • Congressman Tom Emmer

“I would like us to use our exemptive authorities to allow experimentation in the crypto space. Regulatory clarity is important, but you need to provide it in a way that doesn’t stultify the technology where it is right now.”

“A spot-based #Bitcoin ETF would provide not only added credibility for the crypto industry, but also additional transparency and access.”

  • SEC Commissioner Hester Peirce

“I was excited to see the Biden Administration’s exec order on crypto. It seemed to strike the right balance between promoting innovation and protecting investors. This level of coordination & cohesion between regulators and agencies is very encouraging.”

  • Grayscale’s Craig Salm

“To me, the SEC’s enforcement has been highly selective, which has frustrated the market and scared a lot of capital out of the US. In crypto, 75-90% of liquidity is offshore, and that’s because there is more regulatory clarity outside of the US.”

“One thing that everyone on both sides of the aisle seem to agree on is that there should be a bright line test that defines for anyone what is and what is not a security. If we can’t get to that, it’ll going to be really hard to tackle the harder things.”

“To me, the SEC’s enforcement has been highly selective, which has frustrated the market and scared a lot of capital out of the US. In crypto, 75-90% of liquidity is offshore, and that’s because there is more regulatory clarity outside of the US.”

  • Congressman Warren Davidson

Climate Disclosure

“I view the larger issue around climate disclosure as one of market efficiency and transparency…You would never allow firms to use their own accounting metrics, but we do allow them to use their own carbon accounting metrics”

  • Congressman Sean Casten


“I cannot separate today’s Congressional hearing from the larger geopolitical issues we are dealing with. We must ensure that the United States competes successfully w/China, especially in areas in which we have previously excelled, such as financial services.”

  • Congressman Gregory Meeks


For questions or to learn more about CAPIS, please reach out to and follow us on Twitter (@capisinc) and LinkedIn for more updates and insight from our team.

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