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Commissioner Jackson Assails Lack of Competition Among Exchanges, Seeks Reform

SEC Commissioner Robert Jackson is calling for reform in the way stock exchanges are regulated to counter their focus on profit-making and potential conflicts of interest that pose harm to investors. In a recent speech Jackson noted, for example, differences in the public and private data feeds through which exchanges deliver stock-price information to investors. The private data feeds, which exchanges sell, can be faster and more robust than the public data feeds available to all investors. He also pointed to the payments, or rebates, exchanges make to brokers who route large orders to the exchanges as a threat to competition. Jackson criticized the exchanges’ non-profit status, noting the legal limits on the exchanges’ liability when they harm investors and the overall structure of stock exchanges themselves as potentially problematic.  He stated that the SEC’s “oversight of the stock markets has drawn understandable criticism from market participants and the federal courts. They wonder why we allow conflicts of interest in this area to persist, and why basic principles of competitive economics don’t govern our review of exchange demands.” He recommended reforms and lauded a current pilot program to study the effects of rebates on market conditions. He called for greater transparency in the ways exchanges make money and for regulators to review the exchanges’ immunity from liability.