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The SEC’s access fee pilot is a very big deal in restructuring the equity market. Huge profits are at stake for trading platforms, market makers and many, shall the rule be skewed one way or another. This one-page summary and the followings highlight my key comments submitted to the SEC:
- Recalibration of the access fee cap is a must if order protection, best execution rules and other NMS provisions remain as-is. The cap is in essence the maximum toleration of exploitation.
- By having a new rule to ban exchanges, alternative trading systems, and internalizers from running data and technology businesses (mutually exclusive), then access fee rule might be able to roll back.
- Via better delineation of rights, this separation replaces the wickedness of a distorted economy of scope with efficiency gains (fewer fight, more cooperation, and better economy of scale).
- Realigned privileges and obligations are necessary to fix “everybody owns, nobody owns” behaviors. Leverage HFTs’ ability to response in a timely fashion to flash warnings and liquidity crunch.
- This access fee pilot would be unnecessary, if these separation and realignment suggestions can be adopted and CAT can be revised for better market surveillance using stream analytics in real-time!
The full letter can be downloaded here.