UPDATE 1-Wall St trade group proposes reforms to U.S. equity market

Mon Jul 14, 2014 1:09pm EDT

(Adds details on the plan, background and comments from SIFMA CEO)

By Sarah N. Lynch

WASHINGTON, July 14 (Reuters) - A major Wall Street trade group on Monday called on regulators to consider adopting a series of reforms aimed at improving the transparency and resiliency of the U.S. equity markets.

The Securities Industry and Financial Markets Association, whose membership includes about 400 banks, brokers and asset managers, said its proposal would help reduce some of the complexities in the marketplace and promote investor confidence.

"The evolution of our equity markets has shown that there are aspects that should be improved or corrected," said Curt Bradbury, chair of the SIFMA Board's Market Structure Task Force and chief operating officer of Stephens Inc, a financial services firm.

SIFMA's suggestions to the U.S. Securities and Exchange Commission include reducing or eliminating the "access fees" that exchanges charge brokerages for access to stock quotes and which take liquidity away from the marketplace.

SIFMA also proposed requiring brokerages to provide the public with better data on how they route customer orders. It also called for the SEC to eliminate regulatory requirements for brokerages to connect to trading venues that do not add "substantial liquidity" to the market, which SIFMA said would likely help reduce the number of trading venues and simplify the market structure.

"We are trying to take fragmentation head on," SIFMA's chief executive officer, Ken Bentsen, said.

In addition, SIFMA said the SEC should put more pressure on the exchanges to invest in securities information processors (SIPs), which provide market data feeds, so that all investors can get information at the same time.

Over time, the group said, SIPs should be phased out and replaced with "multiple processors that would distribute public market data and compete on performance and cost."

SIFMA's recommendations come at the same time that the SEC is working to craft a handful of equity market structure reforms.

SEC Chair Mary Jo White recently said she planned to unveil rules to combat disruptive trading, promote transparency on how anonymous "dark pool" trading venues operate, and require brokerages to disclose more details on how institutional clients' orders are routed.

Several elements of SIFMA's plan dovetailed with White's proposal, including the call to require brokers to provide institutional clients with venue execution reports.

White has not explicitly called for reducing or eliminating access fees, but in recent weeks there has been growing support for the idea.

Last week, several key Wall Street executives, including Intercontinental Exchange CEO Jeffrey Sprecher and Citadel CEO Ken Griffin, called for similar steps in U.S. Senate testimony.

Reducing or eliminating fees would likely help reduce conflicts of interest, because exchanges typically use those fees to provide rebates to brokerages that provide liquidity.

SIFMA said the fees, which are currently capped at 30 cents per hundred shares, should be cut to 5 cents or eliminated. (Reporting by Sarah N. Lynch; Editing by Susan Heavey and Leslie Adler)

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