Committee Releases Blueprint For Fixing U.S. Stock Market

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BOSTON, July 28, 2016 /PRNewswire/ — The Securities and Exchange Commission’s rules for trading stocks have a dramatic impact on returns for long-term investors and they are in need of reform.

Today, the Committee on Capital Markets Regulation, which includes representation from the country’s largest banks, asset managers and hedge funds, is releasing a plan with 26 specific recommendations that would help create a transparent, resilient and competitive stock market.

According to Hal Scott, director of the Committee and professor of international financial systems at Harvard Law School, “Our report shows that, contrary to Sen. Elizabeth Warren and Michael Lewis’s assertions, our stock market is not rigged, but there is still much room for improvement.”

The report finds that the SEC provides stock exchanges with outdated regulatory advantages that are increasing the cost of trading for investors. And recommends that the SEC eliminate the exchange monopoly over stock market data that is costing investors close to $1 billion/year. It also recommends that the SEC consider lowering the fees that exchanges can charge for trading. A small change would save investors an additional $850 million/year.

The report also educates the public and policymakers about how high-frequency trading is affecting investors. “Most HFT strategies are just modern versions of market making and arbitrage strategies that have always existed and provide investors with significant benefits,” says John Gulliver, the Executive Director of Research at the Committee.

“We also need to make sure that the risk of another Flash Crash—when the stock market fell over $1 trillion in a matter of minutes—is virtually zero. Our reforms would take a big step in that direction,” says Gulliver.

According to Scott, “Our reforms for modernizing the transparency of our stock market would put more money into the pockets of investors. Brokers need to know where to find the best prices for their customers and their customers need to know whether their broker is doing his job. Today’s disclosure rules were designed when stocks traded on an exchange floor. It is time for a major change.”

The full report can be accessed here: http://capmktsreg.org/reports/us-equity-market-structure-report-2016/.

Press inquiries may be directed to the Committee’ Executive Director of Research, John Gulliver at: jgulliver@capmktsreg.org.

SOURCE Committee on Capital Markets Regulation