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The Nasdaq is recommending regulatory changes to the SEC, including a change to rules that could impact smaller public companies, investors' access to market data and the cost of trading — all of which, the exchange says, could spur more innovation.
Why it matters: It's the latest attempt by a stock exchange to shift current rules in a way that it says will benefit investors.
- SEC chairman Jay Clayton, appointed by Trump in 2017, has taken a harder line on stock exchange practices in the "interests of America’s retail investors" — most recently by trying to implement a controversial pricing program pricing program that's since been halted while a judge decides whether or not to take up NYSE, Nasdaq and Cboe Globals Markets' suit to block the initiative.
Among the Nasdaq's proposals ...
- Allow smaller companies with thinly-traded stocks the choice to centralize trading on one exchange, instead of being spread across other markets and venues, which the Nasdaq argues makes trading more expensive and the stocks more volatile.
- Change how investors are charged for market data — containing current stock prices, recent trades and "how much supply and demand there is for stocks at different price levels," per WSJ — by how and how often they use it, instead of pricing it by what they do. The current process prices data depending on whether a trader is a "professional" versus a retail investor.
But, but, but: Don't expect immediate action — if any — by the SEC, which tends to move slowly.
- The Nasdaq unveiled a slate of reform proposals in 2017. The SEC has held hearings on some of the issues, including on the hotly debated market data pricing, but made no final changes to current rules.
- What to watch: Clayton said in a recent speech that the SEC would spend the year "reviewing equity market structure rules and practices to see if they can be improved to protect investors and market participants," Pensions & Investments reports.