The Securities and Exchange Commission voted on January 13 to undertake a far-reaching review of the current equity market structure. The initiative was in response to widely recognized industry changes that have occurred in connection with recent trends away from floor-based trading to sub-millisecond electronic markets. The SEC approved the issuance of a concept release prepared by staff that would address, among other things, issues relating to high frequency trading strategies, co-location of trading servers and the proliferation of “dark pools” that do not publicly display price quotations. Chairman Mary Schapiro stated that “we must continually assess how changes in the market are affecting investors... and try to understand how these changes may impact the markets in the future, so we can steer clear of any unnecessary risks to investors.” Public comments are due within 90 days after the concept release is published in the Federal Register.
In connection with the Commission’s vote on the concept release, it also (1) voted to approve the proposal of a new SEC rule that would effectively ban broker-dealers from providing customers with “naked” access to markets and (2) approved a new Nasdaq rule that requires broker-dealers offering sponsored access to Nasdaq to establish certain controls over the financial and regulatory risks of that activity.