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Legislation Introduced to Require Maker-Taker Elimination Pilot

Representative Stephen Lynch (MA-08) introduced a bill recently that would have the SEC conduct a pilot program to assess alternatives to maker-taker exchange pricing. The bill, the Maker-Taker Conflict of Interest Reform Act of 2015 (HR 1216), would require the SEC to prohibit the payment of rebates for a six month period by exchanges on a random sample of 50 of top 100 stocks by daily trading volume. According to Lynch, the bill “is an important step towards significant reform of the maker-taker pricing model, as we seek to eliminate a system based on complex order routing and unfair advantages for certain participants on our exchanges.” However, a recent survey conducted by the Tabb Group on the most impactful ways to reduce market fragmentation and complexity finds that reforming the maker-taker model is “most important” to only 12 percent of those surveyed, compared to 55 percent of respondents who felt that updating best execution obligations is most important. The survey queried 140 broker-dealers, asset managers/hedge funds, execution venues, academics and vendors regarding the recent proposal for a “grand bargain” to reform market structure lead by Intercontinental Exchange Inc.