Big U.S. exchanges to sue SEC over 'overreaching' fee experiment

By John McCrank NEW YORK (Reuters) - The three largest U.S. stock exchange operators said they will sue the Securities and Exchange Commission for overstepping its authority by ordering a pilot program to test banning lucrative payments exchanges make to brokers for resting stock orders. 'We disagree with the government overreach, and this really represents an unprecedented attempt by the SEC to distort the free market mechanisms that govern the competition among trading venues,' Michael Blaugrund, head of transactions at NYSE, told reporters in New York on Friday.

Reuters February 16, 2019 03:05:21 IST
Big U.S. exchanges to sue SEC over 'overreaching' fee experiment

Big US exchanges to sue SEC over overreaching fee experiment

By John McCrank

NEW YORK (Reuters) - The three largest U.S. stock exchange operators said they will sue the Securities and Exchange Commission for overstepping its authority by ordering a pilot program to test banning lucrative payments exchanges make to brokers for resting stock orders.

"We disagree with the government overreach, and this really represents an unprecedented attempt by the SEC to distort the free market mechanisms that govern the competition among trading venues," Michael Blaugrund, head of transactions at NYSE, told reporters in New York on Friday.

Intercontinental Exchange Inc's NYSE, Nasdaq Inc, and Cboe Global Markets, which together operate 13 of the 14 U.S. stock exchanges, each filed separate notices that they intend to sue the SEC. At issue is a pilot program the regulator approved in December that will restrict the amount exchanges can charge for stock trade executions, as well as the rebates exchanges pay brokers for orders that others can trade against, for one to two years.

The program aims to shed light on whether rebate payments, collectively around $2.5 billion last year, create conflicts of interest by incentivising brokers to send customer orders to the exchanges that pay the biggest rebates rather than to those that would obtain the best results for the end clients.

The exchanges argue rebates are needed to compensate brokers for providing liquidity and that the SEC has not shown that they harm the market.

"The SEC is required by statute to determine there is a problem, not go on a fact-finding mission," Ed Tilly, chief executive officer of Cboe, said in an interview on Feb. 8.

Cboe, Nasdaq, and NYSE vigorously opposed the pilot when it was proposed early last year.

They argued it would create winners and losers, as private stock trading venues, which execute around 40 percent of U.S. stock transactions, would not be subject to the restrictions, giving them a competitive advantage. They also said bid-ask spreads would widen without rebates, creating hundreds of millions of dollars in new costs for investors.

The pilot was expected to begin later this year, but NYSE said it will request a delay while it pursues its lawsuit.

The SEC did not immediately respond to a request for comment.

"It's a very difficult decision to decide to take your primary regulator to court," said NYSE's Blaugrund. "That being said, we feel this is overreaching, and we need to draw a clear line in the sand."

(Reporting by John McCrank; Editing by Chizu Nomiyama)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.