NYSE Glitch Caught Up in Fight Over SEC Rewrite of Trading Rules
Hooper, the Charles Schwab representative, said the firm was disappointed by NYSE’s handling of the problem, and that retail investors had “to go through a lengthy process to correct orders, with no guarantee of a reasonable outcome.”
A Robinhood spokesperson said that “this event and similar issues in the past further warrant against adoption of the SEC’s proposal mandating that all retail orders be executed in exchange-run qualified auctions.”
Auctions run by exchanges are subject to myriad rules, and problems like last week’s glitch are exceedingly rare, said Tyler Gellasch, president and CEO of the Healthy Markets Association, a trade group representing pension funds, endowments and other institutional investors.
‘Disingenuous’ Claims
“We have not seen widespread failures of those auctions,” he said, and claims that the NYSE mishap shows the shortcomings of the SEC proposal “are disingenuous at best.” While the human element always risks things going wrong, auction rules and procedures have dramatically reduced the frequency of such errors, he said.
When the SEC proposal was first unveiled in more than 1,000 pages of suggested changes, NYSE Chief Operating Officer Michael Blaugrund said the exchange “supports equity-market structure reform to benefit public investors and we are encouraged that the SEC’s proposals aim to level the playing field between on- and off-exchange trading.”
Others, including Charles Schwab and Robinhood, said the changes potentially threaten the current ecosystem.
“The SEC should not be playing politics with individual Americans’ ability to improve their financial lives,” Lucas Moskowitz, deputy general counsel at Robinhood, said at the time.
The commission is taking comments from interested parties through March. SEC staff will then take those recommendations and write a final plan that commissioners will have to approve before any new regulations take effect.
“This whole issue comes down to liability — who is on the hook when something goes awry,” said Larry Tabb, a Bloomberg Intelligence market-structure analyst. “Currently exchange liability is capped, and we’ve seen this occur in the past and last week. The SEC needs to revisit the issue of the cap if they want this auction proposal to go through smoothly.”
(Photo: Bloomberg)
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