NDAQ - Schwab NYSE Citadel Securities make counterproposal to SEC's market revamp

2023-03-06 11:38:06 ET

Charles Schwab ( NYSE: SCHW ), Ken Griffin's Citadel Securities, and Intercontinental Exchange's ( NYSE: ICE ) New York Stock Exchange wrote a lotter to the U.S. Securities and Exchange Commission, saying they're "deeply concerned" about the impact of the regulator's proposals on the functioning of markets, Bloomberg reported Monday.

The companies, representing the U.S.'s largest exchange group, retail brokerage firm, and market maker, fear that the SEC hasn't taken into account the sweeping proposals' cumulative impact on the market and potential for unintended consequences. Instead, they suggest that the regulator takes a more targeted and measured approach.

Schwab ( SCHW ), the NYSE, and Citadel Securities suggest proceeding with two SEC's proposals (with modifications) — harmonizing and tightening pricing pricing increments; and strengthening disclosures on execution quality of orders, NYSE President Lynn Martin said Monday in a blog post . They recommend withdrawing the two remaining proposals until the effects of the first two are understood.

For the proposal on minimum pricing increments, access fees, and round lots, the companies seek to narrow the number of symbols covered by the proposal. They suggest reducing the minimum quoting increment to a half-penny for symbols trading at or above $1.00 per share that are tick-constrained. They also recommend a market-wide harmonized trading increment of $0.001 for all symbols trading at or above $1.00 per share. They back accelerating implementation of the revised round lot definition, but not the odd lot dissemination.

Regarding access fees, they suggest a reduction that is proportionate to the proposed reduction in the minimum quoting investment for tick-constrained symbols. That would reduce the current $0.0030/share cap to $0.0015/share for symbols with a half-penny minimum quoting increment.

The three companies recommend that the SEC withdraw its proposals for retail auctions and best executions.

"We are concerned that the current best execution proposal, with overly prescriptive and impractical requirements for managing a new category of so-called 'conflicted transactions' may unnecessarily disrupt decades of market progress for investors," the companies said .

Schwab ( SCHW ) stock has slipped 0.9% in Monday late morning trading and Intercontinental Exchange ( ICE ) gained 1.3% . Other affected stocks: Virtu Financial ( NASDAQ: VIRT ) -0.1% , Robinhood ( NASDAQ: HOOD ) +1.2% , Nasdaq ( NASDAQ: NDAQ ) +0.4% .

In December, BofA Securities took a bearish view of the SEC proposals regarding Robinhood and Schwab.

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