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Remarks at the Spring 2016 Equity Market Structure Advisory Committee Meeting

Commissioner Michael S. Piwowar

April 26, 2016

I am pleased to join you at this meeting of the Equity Market Structure Advisory Committee (the “Committee” or “MSAC”).

Before moving on to discussions about the Subcommittee recommendations, I want to make a few personal observations about four of them.

Access fee pilot. The Regulation NMS Subcommittee’s recommendation for an access fee pilot is provocative, judging from the reactions we have heard in the last week. I am delighted to see that is the case, because it means we can expect full engagement of market participants to help vet the framework. I anticipate today’s discussion will be animated, to say the least.

We have been told by many parties, including members of Congress,[1] to act prudently with respect to an access fee pilot. Indeed, because the key to the success of a pilot is the specifics of the design, I will be keenly focused on whether the design of the pilot is sound. To that end, let me share my initial reaction on a single piece of the access fee pilot framework. My preliminary view is that it lacks a key category for observation — namely, a zero access fee category — on the basis that the proposed bucket with the smallest access fee cap will itself result in a de minimis economic incentive. While that may be true under the Commission’s current minimum tick size regime, it may not be the case if the Commission decides to lower the minimum tick size in the future. I hope the possibility of a “zero fee bucket” is something we can further explore, and I encourage public comment on that permutation.

Self-Regulatory Organization (“SRO”) Immunity. Immunity for SROs is something that has been of significant interest in the marketplace, especially in light of several high-profile events in recent years. The much maligned concept is certainly worth exploring. The Trading Venues Subcommittee’s recommendation will give interested parties a single place to provide comment, rather than having views interspersed in and among various rule filings, which will facilitate consideration of this issue.

NMS Plan Governance. The topics the Trading Venues Subcommittee has identified with respect to Advisory Committees are particularly timely. Tomorrow, the Commission will have an open meeting on the consolidated audit trail (“CAT”). I hope that you will recognize some of the Subcommittee’s insightful work incorporated into questions in the CAT notice for comment. The information we gather in connection with the responses to the CAT NMS Plan can inform how we proceed on plan governance generally, and vice versa.

Centralization of Common Regulatory Functions. Speaking of CAT, it has the promise of creating new and powerful means of surveilling activity that is conducted on multiple markets. The Trading Venues Subcommittee is suggesting that responsibility for such cross-market surveillance and similar common functions be centralized in a single regulator. But I think it is worth considering whether, rather than centralizing common regulatory functions, there would be benefits to having SROs compete with one another for this purpose. Public comment will be particularly useful as I think through this issue.

Before I close, let me acknowledge the other two MSAC Subcommittees — the Market Quality Subcommittee and the Customer Issues Subcommittee. I understand you have been hard at work analyzing issues, and have developed a few preliminary recommendations that will be presented at future meetings. I very much look forward to hearing your ideas, and time permitting today, I hope you will provide us previews of those coming attractions; I would hate to lose several months simply because of scheduling issues.

I would also be remiss if I did not thank the panelists and the Staff for your contributions to today’s event. As usual, you have played an invaluable role in these proceedings.

At a prior meeting, I challenged the Committee to take ownership of the issues and generate forward momentum for an equity market structure review. You have done just that. Your work has matured into detailed proposals that will spur much-needed public debate. Keep bringing us thoughtful recommendations and challenge us to respond.

Thank you.

[1] See Letter from Senators Mark R. Warner and Mike Crapo to SEC Chair Mary Jo White (Apr. 22, 2016).

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