WASHINGTON — Rep. Richard Baker, R-La., chairman of the House subcommittee that oversees U.S. capital markets, is investigating how he might change the recently passed SEC regulation governing how stocks are traded — but industry experts doubt such a major rule will be repealed by Congress.
How to modify Reg NMS, which SEC commissioners passed in a divisive 3-2 vote last April, "is something he's got his staff looking into diligently," said Michael DiResto, Mr. Baker's press secretary. "There are some legislative routes that they're exploring." The rule is to be implemented next year.
Mr. DiResto explained that any legislation that would supercede or override Reg NMS — Regulation National Market System — would begin in the Capital Markets, Insurance and Government Sponsored Enterprises subcommittee.
"Outright repeal is unlikely. If that were to happen, it would be unique," said Jeff Brown, director of product development at UNX Inc., Burbank. Calif., an agency broker. "That being said, major rules of this sort are explicitly subject to interpretive guidance, no-action letters and ongoing guidance from the SEC staff. That is not to be underestimated."
He called congressionally mandated changes "the least likely scenario."
Sang Lee, managing partner at consulting firm Aite Group LLC, Boston, said there is no precedent for altering a major new regulation. In addition, materially changing a rule that was years in the making would only create undue uncertainty for market participants.
"I would be shocked if they either tried to change or repeal it," he said. "I don't agree with a lot of it, and I think it's going to be hard to implement and hard to enforce, but at the same time, it's done.
"Actually, it would be better if they adjust the implementation schedule" to give market participants more time to prepare for the changes, he added.