Managed Funds Association is calling on federal regulators to consider further structural reforms in equity markets.
On Wednesday, the group representing hedge fund and managed futures firms published reform recommendations for the Securities and Exchange Commission aimed at increasing disclosure and transparency measures and risk management practices.
Transparency would be enhanced, the MFA said in its recommendations, with more published trading venue information, timely market data from data processors, and more disclosure of order routing and execution practices.
To improve risk management practices, the MFA is calling on the SEC or Financial Industry Regulatory Authority for more guidance and uniformity of pre-trade controls, and to require exchanges to have standardized kill switches.
The MFA also questioned the SEC’s proposed tick-size pilot program, which is awaiting commission approval. Created by FINRA and national securities exchanges, the pilot program would divide stocks of firms with market capitalizations of up to $5 billion into a control group trading small-cap shares at currently permitted price increments, plus three test groups trading under different requirements. MFA officials, who argue that could artificially widen spreads and increase costs, are urging the SEC to limit the pilot program to small-cap stocks of firms with gross revenue under $750 million.
“Our recommendations will help the SEC build on the success of recent reforms and continue reducing operational risk while improving the overall quality of our markets and strengthening investor confidence,” said MFA President and CEO Richard H. Baker in a statement.
