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SEC Proposes Transaction Fee Pilot for NMS Stocks

(HedgeCo.Net) The Securities and Exchange Commission has voted to propose new Rule 610T of Regulation NMS to conduct a Transaction Fee Pilot in NMS stocks. The proposed pilot would subject stock exchange transaction fee pricing, including “maker-taker” fee-and-rebate pricing models, to new temporary pricing restrictions across three test groups, and require the exchanges to prepare and publicly post data.

“The proposed pilot is designed to generate data that will provide the Commission, market participants, and the public with information to facilitate an informed, data-driven discussion about transaction fees and rebates and their impact on order routing behavior, execution quality, and market quality in general,” said SEC Chairman Jay Clayton. “I applaud the staff for their work in this important area and their enthusiasm for moving this issue forward.”

The proposed pilot includes a test group that would prohibit rebates and linked pricing, as well as test groups that would impose caps of $0.0015 and $0.0005 for removing or providing displayed liquidity. The pilot would apply to all NMS stocks of any market capitalization and would include all equities exchanges, including “taker-maker” exchanges. The pilot would last for up to two years with an automatic sunset at one year unless the Commission extends the pilot. In preparing its proposal, the Commission considered a recommendation from the Equity Market Structure Advisory Committee to conduct an access fee pilot, as well as the views of those submitting comment letters on that recommendation.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.

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