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SEC Commissioner Piwowar Calls for Comprehensive Market Structure Review

In a December 9 speech at the 2013 ICI Global Trading and Market Structure Conference in London, SEC Commission Piwowar discussed the second part of the SEC’s mission, maintaining fair, orderly, and efficient markets.  He used the 1962 market “break” to inform thoughts about issues in today’s markets.  For example, he stated that the 1962 break illustrates that high frequency trading may not be the problem in our markets, stating that “speed may actually help mitigate problems once they begin.”  Further, he stated the fact that the break of 1962 occurred at a time of trading concentration seems to indicate that fragmentation is not the sole or primary cause of market disruptions today.

Commissioner Piwowar discussed the SEC’s 1962 review “Report of the Special study of Securities Markets of the Securities and Exchange Commission (Study).”  He felt that the description of market conditions in 1962 remain relevant today.  In addition to the study’s characterization of the issue, Commissioner Piwowar applauded the method used in preparing the report.  In addition to the breadth of the issues contained in the report, he also praised the authors of the report, a group comprised of both SEC staff members and members of the private sector.  He contrasted that group to the group who prepared the report on the 2010 flash crash, which was composed entirely of staff members of the SEC and CFTC.

Commissioner Piwowar called for the SEC to do a comprehensive review of market structure issues in order to “confront the challenge of making sure our regulatory structure does not conflict with how our securities markets operate and how market participants interact with one another.”  He called for the review to include issues of “market infrastructure (i.e., technology and interconnectivity of market centers), the classification and treatment of different types of market participants, undisplayed liquidity, exchange pricing models, off-exchange trading, self-regulatory organization oversight, and a Regulation NMS “regulatory lookback.””  He anticipated that while the thorough review he calls for would take years to complete, that modest changes could take place in the interim to improve market efficiency.