Trade and public interest groups clash with exchanges over proposed NMS fee pilot

By John M. Jascob, J.D., LL.M. Industry trade and watchdog groups and exchanges are divided in their reactions to the SEC’s proposed pilot program to assess how exchange transaction fees and rebates affect market quality for national market system (NMS) stocks. As the comment period ended, the Investment Company Institute (ICI) urged the SEC to go forward with the proposal, writing that current exchange pricing models may create conflicts of interest for broker-dealers, decrease market transparency, and increase market complexity and fragmentation. Industry watchdog Better Markets agreed, saying that payments by the exchanges that incentivize and induce routing decisions at the expense of best execution and market quality represent an “entrenched and insidious” market practice that requires forceful intervention by the Commission. Nasdaq and Cboe Global Markets sharply disagreed, however, with Nasdaq even writing that the current proposal will likely harm…

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