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Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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June 30, 2003

SEC Eyes Fees, Fragmentation, ECNs

By Gregory Bresiger

The Securities and Exchange Commission is still working on a series of concept releases on access fees, market fragmentation, the revamped Nasdaq market and payment for order flow in options trading. The much anticipated reports are expected later this year.

"They're years behind in working on this and now the staff has been told to make this a priority," said one trading industry official, who said he knew that officials of the Division of Market Regulation are still working on the package of proposed reforms.

SEC Chairman William Donaldson, in a recent address in New York, said the commission needed "to take a more comprehensive look at market structure." He also added that the SEC is "also moving forward on a review of practices in the mutual fund industry." He's asked staff to look into whether proxy rules need to be revised to better serve shareholders.

For many in the trading industry market structure issues begin with what they believe are unfair fees. Another priority for the Donaldson administration is tweaking and polishing rules for electronic communications networks. But a prominent market maker said that, if the SEC will dump access fees, then most of the problems of market structure will disappear.

"Access fees are very important to us. There are about half as many market makers today as there were about a year ago," said one trading industry executive.

The SEC, once the concept releases are made public, will ask for alternatives and comments. SEC officials declined comment.

Several trading industry officials have been frustrated by the slow pace at which the SEC has worked on market structure issues. They have asked for help from friends in Congress, but their efforts have been unavailing. "We've asked them to pay attention. I've asked them if Nasdaq has to go broke before you'll do something?" the same executive said.

SEC Commissioner Roel Campos, speaking at an STA Congressional Conference earlier this year about the pending concept releases, urged input from industry participants.