What is the responsibility of the Security Traders Association chairman?
Art Kearney: Mostly to help focus the organization.
The chairman has to work with the regulators and stay on top of the issues. He must influence the design and the structure of the business at hand.
The chairman has to continue to create the visibility that the STA needs in the trading community. We want to be looked upon as a source of information and an authority on the issues. We need to address the issues affecting market making. We don't want to get into a position again where a regulator has to come in and investigate our industry.
What would you like to see the STA do in the years ahead?
AK: We have to sit down with the regulators and solve some of the key problems with our markets. I would like to get some of the key issues in front of the people who can make a decision and get them fixed, without all of the rhetoric.
Is it difficult to meet with the regulators to address the issues?
AK: I think they have so much on their plates. We tend to have myopic vision, thinking that we're the only people pounding on the door to the Securities and Exchange Commission with issues. But the SEC has the exchanges and investors pounding on their door also.
This is a crucial time for the future of market making. You're going to have a lot of firms, in the next two years, taking a hard look at their Nasdaq market making and deciding if they want to stay in the business. If we don't push to get some of these issues fixed, a lot of these firms may choose to abandon the marketplace.
So what are the issues in Washington that the STA is most vocal about?
AK: Right now, we're pushing the SEC 31(a) transaction fees. If we can get 31(a) fees reduced, it could really catch the attention of our membership. We've already seen some relief proposed. Relief would mean savings of literally hundreds of millions of dollars each year for the brokerage community.
It seems the National Association of Securities Dealers has been more supportive recently of getting 31(a) fees reduced.
AK: The NASD has always been supportive of a reduction in fees, but I think they've had to be very careful. The SEC oversees the NASD, and the NASD has to be cautious of what it says. They've always been in favor of having the fees reduced, but they haven't always been able to come right out and say it.
The NASD is considering changing the way Nasdaq counts riskless principal trades. The change would eliminate double-counting, as each trade for a customer order would be counted as one transaction. Would that lessen the burden of 31(a) fees?
AK: That may well be the NASD's way of giving us some relief from the fees. But to be truthful, that's not the relief we're looking for. That would only generate a savings of maybe $14 million a year. We're looking for something in the area of $60 million to $90 million. Stopping double-counting is a step in the right direction, but it's not the solution to the problem.
