This week, an advisory committee of the Securities Exchange Commission (SEC), chaired by Washington University Law School Dean Joel Seligman, issued its report concerning market information and systems.
The SEC’s Advisory Committee on Market Information issued the report titled A Blueprint for Responsible Change this week. The report addressed issues of market data availability and the options and equities markets.
The 25-person committee has met periodically since October 2000 in Washington, D.C., and concluded its work in July of this year.
Members of the committee suggested in the 102-page report issued to the SEC that a new system of sharing market information should be implemented. Under this system, competing consolidators can buy market information, such as real-time stock quotes, and could then sell the information to subscribers and other vendors.
Before reaching a decision, the advisory committee addressed complex issues of market transparency, consolidated market information and the methods of collecting market data. The main concern of the committee was to correct problems over the distribution of market data to different players in the market, both private and public. They addressed issues such as how to calculate market data fees and what would be appropriate governing structures relating to the implementation of these plans.
In the past a single distributor, such as Consolidated Tape Association, received all the information and then sold it. Many believed that, under a single distributor, the price charged for the information was excessive.
Disagreements between brokerage firms such as Charles Schwab and the exchanges over how this information regarding securities, stocks, and how bonds should be released to the public and others in the business world, initially led to the formation of this committee.
Some committee members wanted to keep the old system while others were intent on reform. They eventually reached a consensus, but Seligman said that the report reveals both the majority and minority opinions relating to these complex market issues.
The recommendations of the report include keeping the rules that require broker-dealers to provide accurate and timely information regarding sales transactions. This is important in ensuring educated traders who have the latest information and make the most informed trade, according to Seligman.
The minority in the committee found that technological risks associated with the plan did not outweigh the economic benefits. They found that switching systems could be detrimental to the securities industry.
Since the terrorist attack in New York City disrupted trading on Wall Street and crippled many financial firms, Seligman said that the report will likely go unnoticed when it is released, but its long-term effects are important.
Seligman noted the difficulty of consensus building on the committee and the differences between working with university faculty and with committee members.
“I used many of the same tools on the committee as I do here at WU,” said Seligman. “But the meetings were much more grueling and very technical.”
Seligman’s committee meetings sometimes lasted all day, from 9:00 a.m. to 5:00 p.m. in contrast with meetings at WU that last about two hours.
“Although my knowledge of this field is extensive, the process of chairing the committee was a learning experience,” said Seligman.
Seligman enjoyed working with a diverse group of individuals from all parts of the business and academic worlds, but he is glad to have more time now to spend on other interests, including teaching at the law school.
Seligman has authored numerous books, including The History of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance, considered to be one of the definitive books on the SEC.
Contact Erin Harkless at [email protected].