We kicked off our Financial Markets Quality Conference with a conversation on market structure. Timothy Massad, Board Member, Georgetown Psaros Center for Financial Markets and Policy and former Chair of the U.S. Commodity Futures Trading Commission, asked the panelists about the SEC’s four major market structure proposals involving best execution, order competition, a change to minimum tick sizes and disclosure order execution.
Sapna Patel, Head of Americas Market Structure and Liquidity Strategy, Morgan Stanley, said the early onset of the COVID-19 pandemic was the biggest test of the market infrastructure — and that retail investors were able to continue trading because of the market structure. “We’re not saying don’t touch the market structure, but I don’t think we need to fundamentally throw it out and start over at this point.”
Chuck Mack, Vice President, Head of Strategy and Market Structure North American Markets, Nasdaq said that the tick size change alone would be a significant step forward and help with efficiency.
Catherine Clay, Executive Vice President, Global Head of Derivatives, Cboe Global Markets, said her greatest concern is that those who don’t understand the derivatives market will believe they can copy and paste equity market proposals into the derivatives market. Just take the fact that equity markets are order driven but options markets are quote driven, she said. Proposals moved directly from the equities market to derivatives “could have really poor outcomes for us” if done without due diligence.
Nandini Sukumar, Chief Executive Officer, The World Federation of Exchanges, added that it’s important to look at the ecosystem — not just one entity, like exchanges. “All of us need to look at the ecosystem, the checks and balances, and where the stressors are,” she said “Then you need to think about how together people can solve a problem.”