The regulatory body, SEC, has recently put forth a fresh new proposal designed to bolster transparency in the financial sector. The Securities and Exchange Commission (SEC) is taking steps to level the playing field for broker-dealers across the board.

The SEC has introduced a groundbreaking rule. This regulation prohibits national securities exchanges from providing lower transaction fees and rebates to brokerages with substantial trading volumes.

In a statement from Gary Gensler, the Chair of the SEC, the imperative for an equitable playing field is highlighted. Gensler points out that the current system places an unjust financial burden on mid-sized and smaller broker-dealers, who are subjected to higher fees compared to their larger counterparts when engaging in trades on most exchanges.

SEC New Proposal – Push for Fairness and Transparency

Gensler commented, “At present, the competitive landscape for broker-dealers is far from level. The prevalent volume-based transaction pricing structure results in mid-sized and smaller broker-dealers paying disproportionately higher fees than larger brokers for trading on most exchanges. We have received feedback from various market participants expressing concerns about the impact of volume-based transaction pricing and associated market practices on market competition.”

The SEC is now inviting public input on this proposal for a period of 60 days. Subsequently, the rule may undergo revisions based on the feedback received from the public before becoming official.

Notably, the SEC recently voted in favor of a rule that mandates securities lenders to report new loans and changes to existing ones by the close of each trading day, as reported by the Financial Times. Short selling involves speculating on the decline in the value of an asset, a strategy frequently employed by hedge funds. These funds borrow stocks and bonds, sell them, and subsequently repurchase them at a lower price before returning them to the lenders. The lenders are typically long-term owners of securities, such as fund managers, who earn fees for facilitating these transactions.

In addition to this, the SEC is going to vote on a separate final rule that will require US corporate executives to observe a four-month waiting period before selling shares after establishing a 10b5-1 plan. This mechanism permits insiders to sell shares without violating insider trading regulations. The proposed rule change is going to prevent executives from selling shares shortly after establishing a plan, potentially with access to privileged information.

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