The acting head of the U.S. Securities and Exchange Commission has directed the regulator to launch a pilot plan that would test how the market would be affected if exchanges lowered the fees they charge brokers to execute trades.
Michael Piwowar, who is acting chairman while President Donald Trump's appointee for the post Jay Clayton awaits confirmation by the U.S. Senate, announced the plan in a speech at Columbia University in New York City. Piwowar said he thinks it will be better for the SEC's staff to set parameters for the pilot, as opposed to letting the exchanges design it.
"I have come to believe that the SEC rulemaking process would be more appropriate for such an important undertaking as the access fee pilot," said Piwowar in his prepared remarks.
Brokers have long complained that fees the exchanges charge are too high. They say this is one reason that many trades are executed on "dark pools," alternative trading platforms that compete with exchanges and offer less price transparency.
A pilot program driven by SEC rulemaking "would certainly be more labor intensive to initiate," he said, but "would avoid the inevitable struggles between market participants, each with its own point of view informed by its own business model."
"Access fees" are the fees that exchanges charge brokers for executing trades. Currently, every 100 shares that are executed on an exchange cost a broker 30 cents.
An SEC advisory panel had urged the commission to launch a test to see how lowering the fees might affect the marketplace.
Such a test can be designed by exchanges and submitted for approval, or the SEC can opt to structure it on its own through a formal rulemaking process, which Piwowar prefers.
"The time for an updated special study of securities markets is now," Piwowar said.
In Washington on Thursday, Clayton, the Wall Street attorney Trump has chosen to lead the SEC, defended himself against Democrats' charges that multiple conflicts of interest would force him to miss too many SEC votes.