A group of market participants led by Cboe Global Markets has asked the SEC for permission to create a committee to analyze potential changes and improvements to the U.S. options market.
In a letter to the Securities and Exchange Commission, Cboe, along with the Securities Industry and Financial Markets Association and the Security Traders Association, warned of "unintended consequences" impacting the options market resulting from changes in equity market regulations, including Regulation National Market System in 2005.
Among the consequences, according to the letter, are decreased quoted liquidity and a reduction in the number of market-making participants, with about half the number of U.S. options market makers than five years ago. "This trend obviously has impacted market quality in the U.S. options markets," the letter said.
The signatories asked the SEC to allow them to create the committee, composed of representatives of each options exchange operator, SIFMA and STA. The committee would propose rule changes for SEC approval, the letter said, and "would also welcome the attendance and participation of commission staff in the working group's meetings."
The SEC currently has a fixed-income market structure advisory committee in operation and had a similar advisory committee targeting equity markets that was disbanded in 2017.
A spokesman for STA said the organization would not comment further; officials at Cboe and SIFMA could not be reached for comment.