Tuesday, June 27, 2017
There's about to be a showdown between America's biggest players in trading
Some of the biggest players in trading will be present at theHouse Financial Services Committee's US Equity Market Structure hearing on Tuesday, and things are likely to get heated.
The first panel includes Matt Lyons, Senior Vice President and Global Trading Manager at The Capital Group, Joseph Saluzzi from Themis Trading, and Ari Rubenstein, CEO of high-speed market-maker Global Trading Systems.
According to prepared remarks emailed to Business Insider, Rubenstein is going to take aim at Bats Global Markets, which has proposed an alternative to the closing auction at the end of the trading day. Bats, which is America's second-largest stock market, is now a part of the Chicago Board Options Exchange.
Rubenstein refers to the new model, titled Bats Market Close, as "nothing more than a money grab for Wall Street" in the prepared remarks. GTS is a designated market maker for the NYSE, bringing together buyers and sellers on the exchange. It recently acted as DMM on the initial public offering of Snap.
Rubenstein is set to argue that the proposal, which would allow NYSE and Nasdaq-listed securities to be matched on Bats at the end of the trading day, attempts to solve a problem that doesn't exist. (You can read more about how the Bats model works here). It would also have a negative impact on the already struggling IPO market, according to Rubenstein.
"Issuers want a centralized closing process for their shares because of the integrity of the closing price derived by the centralized auctions," Rubenstein said. "If we take away this most basic and fundamental feature of our equity market structure, issuers will have yet one more reason to forgo going public and listing on an exchange."
He attached a recent letter to the SEC as an appendix to his testimony, quoting four executives at NYSE-listed companies expressing concern about the proposals.
Of course, that's not the way Bats sees it. It argues the new offering will help bring down closing auction fees, which it says have increased by 16% to 60% at NYSE and Nasdaq. Rubenstein argues in his remarks that the fees are not excessive.
Chris Concannon, president and chief operating officer at Chicago Board of Options Exchange, will have a chance to respond shortly afterwards. He is set to sit on the second panel, which also includes NYSE president Tom Farley, IEX chief executive Brad Katsuyama, and Tom Wittman, global head of equities at Nasdaq.
Bats, NYSE, IEX, and Nasdaq have previously sparred over IEX's approval as a stock exchange, the cost of market data, listings for exchange-traded funds, rebates for brokers, and the NYSE's decision to launch IEX-type features on one of its markets. Up until now, they've taken shots at each other in comment letters to the Securities and Exchange Commission. Now, they're going to be doing so while sitting side by side in front of the House Financial Services Committee.
This is going to be fun to watch.