Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - Comment Letters

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Comment letters related to Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.

CME Group - March 25, 2011[edit]

Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010
March 25, 2011

From the comment letter:

"Supply and demand imbalances driven by market fundamentals cannot be wished away, and as the events of May 6th demonstrated, in even the most liquid markets demand for liquidity can at times legitimately overwhelm its supply. The examination of the events of May 6th have also clearly revealed, however, that structural issues and rules which breed uncertainty can exacerbate these imbalances by adversely affecting liquidity supply and undermine the effective and efficient functioning of the markets. By contrast, sound structures and rules can strengthen the orderliness and resilience of markets during periods of turbulence. CME Group concurs with the Committee’s view that market centers, regulators and the broader industry should focus their efforts on eliminating the former, extending the latter, and continually exploring new ideas for hardening the markets against instability and disruption."

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Investment Company Institute - March 21, 2011[edit]

Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010
March 21, 2011

From the comment letter:

"The Report provides several recommendations to address issues relating to volatility in the financial markets, particularly issues that were raised by the events of May 6. The flash crash highlighted the evaporation of liquidity in individual securities during times of sudden market volatility. To this end, ICI strongly supported efforts post-May 6 to implement single-stock circuit breakers to limit extreme price moves and allow for liquidity to re-enter the market." Additional comments:

  • "We also support implementing a more flexible “limit up/limit down” process to supplement the existing circuit breakers."
  • "ICI would not support the Committee’s recommendation for peak load pricing without further clarity regarding the potential impact of such a pricing model on markets and investors."
  • "The Committee also recommends that the CFTC and SEC explore ways to fairly allocate the costs imposed by high levels of order cancellations, including requiring a uniform fee across all exchange markets that is assessed based on the average of order cancellations to actual transactions effected by a market participant."
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Knight Capital Group - March 21, 2011[edit]

Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010
March 21, 2011

From the comment letter:

"Currently, there are five (5) marketplace rules which could halt, pause or otherwise restrict trading based on market movements: a. NYSE Liquidity Replenishment Points b. NASDAQ's recently approved Volatility Guards c. Alternative uptick rule under Regulation SHO d. Stock-by-stock circuit breakers e. Market-wide circuit breakers These five different trading frictions could all be triggered during volatile market periods, creating a great deal of confusion and uncertainty." Additionally, Knight offers the following comments:

  • "To move away from the current networked venue system, with its lit and dark venues that offer more execution flexibility, would be a step backward and would likely reduce the number of market making firms providing this critical liquidity to investors."
  • "A trade-at rule would discourage the competition and innovation in the equity markets that have driven down trading costs, increased liquidity, increased speed of execution and decreased trading friction."
  • Regarding a consolidated audit trail (CAT) proposal: "In our view, more data is not always the right answer -- as it could make it much harder to find the signal in the noise."
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Security Traders Association - March 29, 2011[edit]

Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues - Recommendations Regarding Regulatory Responses to the Market Events of May 6, 2010
March 29, 2011

From the comment letter:

  • "Incremental change is best."
  • "Regulations should not favor any one business model or platform".
  • "The “Trade-at” with Depth of Book Protection recommendation, has the potential to be extremely disruptive to our financial markets and would represent a major overhaul of our markets with risks of negative unintended consequences which regulators are not equipped to remedy within the current regulatory infrastructure."
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