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June 30, 2003

Commissioner: Be Fair in Market Structure

By Gregory Bresiger

The persistent problems of market structure should be solved with a market neutral solution, a regulator has said.

"The commission should maintain market neutrality regarding market structures. We should not favor one over the other because the bottom line is that there will always be people who want something different than everyone else for whatever business or personal reasons and are willing to pay for it," said SEC Commissioner Paul Atkins, who recently addressed the American Enterprise Institute.

Atkins argued that regulators, over the past quarter century, have often paid undue attention to price. He argued that some SEC rules have clashed with the requirement of obtaining best execution.

"The brokers handling these orders are unable to provide their customers with best execution because they cannot trade better priced bids and offers for immediacy or better liquidity, which they may prize more highly than price alone," Atkins noted. Any changes in markets should come from "the natural course of competition and not from a government fiat."

Atkins cited Nasdaq as an example of the benefits of competition. He said its move to the automated SuperMontage platform was a result of "tough competition from other exchanges trading Nasdaq-listed securities."

Atkins' comments intimate that an intense debate is going on at the SEC and that many long delayed market structure issues are going to be resolved in the next year or so. Security Traders Association President John Giesea, in a recent memo to members, wrote that the market structure "bottleneck" is going to break.

"We frequently refer to the 1933 and 1934 Acts and to the 1975 review and introduction of the National Market System. I am now suggesting that many years hence people will be referring to the 2003-2004 period as equally, or more, important years in the evolution of market structure," Giesea said.