Potential market-altering rules in focus as exchange execs meet at Piper conference
Gary Gensler, chair of the Commodity Futures Trading Commission, (CFTC), is listening during a Financial Stability Oversight Council meeting (FSOC) at U.S. Treasury, Washington, D.C., U.S.A, U.S.A, U.S. on Monday, Dec. 9.
Andrew Harrer | Bloomberg | Getty Images
Piper Sandler’s Global Exchange Conference will host us live Wednesday, with the participation of all major crypto, fintech, and exchange heads (physically and virtually).
Speakers include Interactive Brokers CEO Thomas Peterffy, Robinhood CEO Vlad Tenev, Virtu CEO Doug Cifu, Charles Schwab CEO Walt Bettinger, CMETerry Duffy is Chair Intercontinental ExchangeJeffrey Sprecher is the Chair NasdaqAdena Friedman is the CEO.
Like crypto providers Galaxy Digital HoldingsMichael Novogratz, CEO of the Exchanges is also speaking.
Securities and Exchange Commission Chair Gary GenslerThe keynote address will be delivered by Willie Nelson. He is also expected to make proposals for payment flow.
But there is a bigger issue on the minds of the heads of the exchanges: Are tough times ahead for the trading business?
Trading volumes drive exchanges, and the performance of business is remarkable. The daily volume of equity has roughly doubled in the past year, going from roughly 7 billion shares per Day to approximately 14 billion shares.
Why? The first is that $0 commissions are a huge boon for trading. A higher level of volatility is associated with higher volumes, as we witnessed in 2020 and 2021. A surge in retail trading activity was the main reason behind much of this trading boom. While retail trading activity has declined in recent years, the rise of institutional trades has taken over much. Also, futures and options trading is more common.
Is it going to last? Concerns that the macro-environment will worsen later in the year have led to stock prices falling on major exchanges. This has caused stocks prices to fall for many retail traders. Trade volume will suffer from any slowdown or recession in the economy.
This is because the competition keeps getting harder. The Members Exchange and MIAX Pearl Equities Exchange were two of the new exchanges that were established in 2020.
This has led to fierce price competition. Exchanges have responded by looking to alternative revenue streams, like charging data fees, which now make up a substantial portion of both the revenue stream and the cost of trading. ICE(NYSE) Nasdaq.
Gensler is giving the keynote addressHe will be available to make suggestions about changes to the system of order flow payment. This is where brokers transmit orders to market makers for the exchange of payments. This allows some brokers to earn zero commissions. Gensler stated that there could be conflicts of interest between brokers and market makers, as well as too many people in control. Gensler likely to float proposalsThat would decrease the influence of wholesale markets makers such as Virtu Securities or Citadel Securities.
But, they are likely to resist any major changes. Gensler will provide data to show that the retail trader is truly disadvantageous and that the system has been broken.
Amy Lynch of FrontLine Compliance told CNBC, “Those wholesalers have a very strong argument in that payment to order flow has brought down commissions to zero.”
She stated that while the SEC might be able to reformulate how order flow payment works and disclose it, they won’t eliminate it entirely as it is too profitable for brokers.
The liquidity of the bond markets will be the subject of much debate.
Electronic platforms like Amazon and Google have high volatility which is great for them. MarketAxessAnd TradewebThese countries have witnessed their participation in bond trading rise over the past few years. Corporate bonds are now more expensive and spreads have widening. The new issue is smaller and the prices are falling.
Crypto providers have been speaking at this conference for several years, but the exchanges have been reluctant to dive into crypto in a big way due to regulatory uncertainties and turf wars between the Commodity Futures Trading Commission and the Securities & Exchange Commission.
However, a billSenators introduced Tuesday Kirsten GillibrandCynthia Lummis represents a first step in resolving the uncertainty. This would allow digital assets to be classified as commodities, and the CFTC to exercise primary regulatory authority. It is expected to be well received by the crypto speakers attending the conference.
Gensler’s refusal to approve an ETF for pure bitcoin trading has led to widespread disillusionment within the crypto community. The CFTC regulation would make regulations far easier than the SEC, according to them.