Commentary

Jos Schmidt
Traders Magazine Online News

Reducing the Regulatory Burden on Public Companies, Yes Please But...

In this commentary, NEO's Jos Schmidt discusses regulatory requirements and needs in the Canadian equity markets.

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November 1, 2012

Getting Street Smart

By Gregory Bresiger

Longtime JonesTrading sales trader Tom Carter wants to be an educator. Jones, the incoming chairman of the Security Traders Association, is worried that investors misunderstand what traders do.

Carter, citing recent IPO blowups, compares today's level of public suspicion of equity markets to the height of the Great Depression in 1933. That's when an incoming president, Franklin Delano Roosevelt, lashed out at Wall Street and set up the modern regulatory structure with the creation of the Securities and Exchange Commission.

Carter wants to educate Main Street, Congress and the regulators about institutional trading the way his firm and its executives have educated him. The STA will advocate for a consistent regulatory framework that would reduce the possibility of market events like the Nasdaq Facebook snafu. This clear regulatory framework, Carter believes, will teach investors about markets.

"It's important because investors don't understand our marketplace. And when these seemingly unrelated issues keep arising, they could start to lose confidence in our marketplace. That would be tragic, and we don't want that to happen," said the trading vet.

Carter has been a sales trader with Jones for 19 years. His entire career has been with the same firm. And Carter also works as a branch office manager. He has been active in industry issues for 11 years.

Why, when he already has a busy career, does Carter spend time working with the STA?

"I feel like, more than ever, we need people advocating for the marketplace," he said. But taking on extra work, whether in or outside of the office, has been part of Carter's life for years.

Why work for the industry? He says the regulation, specifically micro-market structure rules, is important to both his clients and his business.

"I would say the process for how micro-market structure rules are approved is something we need to take a look at, to determine if an extra level of due diligence should be put in place for the interests of investors," Carter said.

For Carter, that means a principles-based regulatory framework that will fit all the micro-market structure rules-based regulation. Sometimes there is a disconnect between rules and micro-structure supported by regulators. And that has led to recent market events that could mean a further loss of investor confidence, if they continue to occur.

"I would say the process for how micro-market structure rules are approved is something we need to take a look at, to determine if an extra level of due diligence should be put in place for the interests of investors," he said. Regulators, he believes, need to consider not just one rule, but the significance of all rules for the market.

"By approving scores of micro-market rule requests, you end up with major changes in market structure," Carter said. Regulators must also understand that a principles-based set of guidelines must be applied to every rule, he added. And what should be the principle?

"It should be based," he said, "on what is best for investors and capital formation, and not what is best for a particular business model or market participant."

 

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