SIFMA Says Nasdaq Fee Reduction Proposal Falls Short

The Securities Industry and Financial Markets Association (SIFMA) thinks the recent Nasdaq OMX proposal to lower access fees is a good idea.

But, the industry trade group stopped short of giving the proposal a ringing endorsement, noting it or any data it supplies with not help address some of the larger market structure issues – such as fairness, myriad order types, routing or dark pool transparency.

See Also:Nasdaq Launches Experimental Lower Access Fee Program

SIFMA recently provided comments to the Securities and Exchange Commission (SEC) on the Nasdaq proposal that would see Nasdaq’s fees assessed for accessing liquidity and the credits provided for adding liquidity for a pre-selected set of 14 securities. The fee reduction will apply only to transactions in those securities on NASDAQ.

“SIFMA supports the underlying concept of NASDAQ’s proposal, which is consistent with our recommendation to reduce access fees. However, SIFMA believes NASDAQ’s proposal will not contribute meaningful data to any larger market structure questions at hand. In particular, the proposal’s limited scope and application cannot act as a substitute for a market-wide access fee reduction that would change the dynamics of access fees and rebates across the entire market,” SIFMA wrote in its SEC comment letter.

For the proposal to accurately measure the structural impact of reduced access fees, the proposal should be carried out across all exchanges and with a larger sampling of symbols, TR Lazo, managing director and associate general counsel at SIFMA told Traders in phone interview.

For Nasdaq, this is a good first step, Lazo said. But were not sure what kinds of metrics Nasdaq will use to determine if this pilot is a success or not.

Furthermore, due to the inclusion of only Nasdaq stocks and the limited number that would be subject to lower access fees, Lazo added that a lot of different factors go into a traders routing decisions, not just access fees.

We think access fees should be reduced and have said so before, Lazo said. But we are concerned about drawing any broad conclusions from a broad pilot that only looks at access fees and nothing else.