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From Securities Regulation Daily, March 24, 2017

Acting SEC Chair Piwowar applauds new special study of securities markets

By Amy Leisinger, J.D.

In a recent address, Acting SEC Chair Michael Piwowar applauded the upcoming special study of the securities markets by Columbia University’s Program in the Law and Economics of Capital Markets. With the most recent comprehensive special study completed in 1963, a renewed analysis is "long overdue," according to the official, and analysts should be open to considering issues that may arise outside of the stated areas of focus and be willing to make policy recommendations for future reforms.

The original independent special study, initiated at the urging of then-SEC chairman, was designed to assess the adequacy of the rules of national securities exchanges and national securities associations and was conducted during a time of prosperity, Piwowar noted. It serves as a useful collection of data and analysis, according to the official, but much of the content has become obsolete, given the tremendous changes in the markets over the last 54 years. Scarce resources and a large Dodd-Frank rulemaking agenda have led to a delay in thorough evaluation of the operation of the SEC’s rules, but the new study will be able to use the work already completed by the SEC's Equity Market Structure Advisory Committee, he explained.

"A special study can provide a much broader and deeper perspective on basic developments than can be attained by an already overburdened Commission and staff who continuously must deal with a torrent of routine and not-so-routine matters," Piwowar said. Moreover, he continued, unbiased and expert consideration and opinions and the new study’s emphasis on economics will serve to provide a sophisticated, useful analysis of the operations of and issues within the securities markets.

The SEC will continue to work to enhance market structure while the study is conducted, including the implementation of the recently adopted T+2 settlement cycle for equities trading, the official noted. The Commission is also considering an access fee pilot to test how various access fee caps affect equities trading, Piwowar said. The design of a pilot could involve an NMS plan or as an SEC rulemaking, approaches designed by plan participants or the Commission staff, respectively, but a rulemaking process would be more appropriate, avoiding conflicts between participants, Piwowar opined. The SEC staff has been asked to design an access fee pilot that can be proposed as a rulemaking, according to the official.

In closing, Piwowar offered "some unsolicited advice" for those involved in the new special study, urging them to engage in analysis with an open mind and remain flexible in approach and scope. It is important to consider previously unrecognized issues that arise during the course of process and explore interconnected areas, he said. He also encouraged the analysts to feel free to disagree with each another and use their individual talents and expertise to foster a dialog and to specifically evaluate whether and how particular incentives lead to increasing complexity and varying, competing business models. As the study continues, analysts should not hesitate to discuss policy recommendations and ultimately offer suggestions for practical reforms, Piwowar concluded.

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