Jul 1, 2024

July 1, 2024

Summary of Chief Policy Officer John Ramsay’s Testimony before the U.S. House Financial Services Committee

IEX Exchange has consistently championed investor protection through transparency and innovation. In his recent testimony before the Subcommittee on Capital Markets, John Ramsay emphasized the necessity for updates to Regulation NMS, which was enacted nearly two decades ago. These proposed reforms, which IEX supports, are crucial to align market regulations with today’s complicated market structure and to ensure equity markets continue to effectively serve investors.

Key Points from the Testimony:

Modernization of Tick Sizes:

o The current one-cent tick size is outdated and no longer reflects market realities.

o Commenters overwhelmingly support a half-cent tick size for actively-traded stocks, one of the alternatives identified in the SEC’s proposal.

o A narrower tick size will improve the accuracy of quoted prices and reduce trading costs for investors.

Reduction of Access Fees:

o The proposal would substantially lower the fee cap for all listed stocks, which also has broad support, especially from institutional investors.

o High access fees distort the true cost of trading and drive investors to less transparent trading venues.

o This change would reduce costs for participants, particularly institutional investors, and enhance price transparency.

Increased Fee Transparency:

o Exchanges' complex fee and rebate schedules obscure the true cost of trades.

o The SEC proposed that fees and rebates should be set such that the net fee or rebate for each trade can be determined at the time of the trade.

o This transparency allows participants to better evaluate trading costs and for investors to seek the return of rebates paid on their accounts.

Implementation of New Lot Sizes:

o There has been a long-term substantial increase in trading "odd lot" amounts (less than 100 shares), particularly for high-priced stocks.

o The SEC aims to accelerate the integration of odd lot data into consolidated public data feeds.

o This change ensures that average investors can see the best available prices, for both large and smaller transaction amounts.

Immediate Action and Urgency:

o These changes represent common sense updates to existing rules and should be made without further delay. They are supported by an abundance of existing data. Arguments that more study is needed amount to a stall tactic.

John Ramsay’s testimony underscores the critical need for modernized rules that reflect the current market landscape. The proposed changes are designed to enhance market transparency, reduce costs for investors, and improve the overall efficiency of the equity markets.

IEX remains committed to advocating for reforms that protect investors and enhance market transparency and competitiveness.

Click here to download a PDF of the full Congressional testimony.