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SEC Authorizes Access Fee Pilot Program

Traders Magazine Online News, March 15, 2018

John D'Antona Jr.

The Securities and Exchange Commission is going to examine transaction fees.

After much debate in the Division of Trading and Markets and in response to multiple calls asking for how transaction fees affect best execution, the SEC has announced a proposed rule, 610T, under Regulation NMS to conduct a transaction fee pilot for NMS stocks to study the effects that transaction-based fees and rebates, and changes to those fees and rebates, may have on order routing behavior, execution quality, and market quality.

The vote to approve the pilot program was unanimous.

This access fee pilot program, which was first floated back in mid-2016 by SEC anointed market experts, requires all public exchanges to test capping fees lower than their current levels across different buckets of stocks. This would reduce the amount any exchange would be able to pay out as a rebate. One of the pilot buckets wouldn’t allow the payment of rebates at all.

In test group 1 shares, rebates and linked pricing will be prohibited.

In test groups 2 and 3 caps of $0.0015 and $0.0005 for removing or providing displayed liquidity will be imposed.

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.

“The transaction-fee pilot should give the Commission significantly more robust data than we have now to assess how fees and rebates affect order routing, execution quality, and market depth,” SEC Commissioner Robert Jackson said in a  published statement.

More details are to follow, according to the SEC.

Bill Harts, veteran market structure commentator observed that the SEC fee pilot "seems" to exempt dark trading from the fee caps and rebates.

"This should help markets that don't have much lit liquidity and ATSs, but could harm price discovery," Harts said in a Tweet.

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