More information is needed to assess the impact of proposed Regulation NMS changes on investors and markets
Washington, D.C. — MFA urged the Securities and Exchange Commission (SEC) to conduct a more comprehensive assessment of its proposal to rescind key Regulation NMS rules governing U.S. equity markets before moving forward with such significant changes. While the SEC seeks to simplify market structure, additional analysis is needed to determine whether the proposal would improve market outcomes or create unintended consequences for investors, market quality, and the broader regulatory framework.
“The alternative asset management industry supports SEC efforts to improve efficiency and reduce complexity of U.S. equity market structure, but major changes to market structure rules require a rigorous analysis of how they will affect investors, liquidity, and market quality,” said Jennifer Han, MFA Chief Legal Officer. “More analysis will help ensure any reforms strengthen the U.S. markets that businesses and investors rely on.”
U.S. equity markets are among the deepest and most efficient in the world, providing retail and institutional investors with liquidity, transparent pricing, and high-quality execution. Any changes to the existing framework should carefully account for those benefits. The proposal raises important questions about whether rescinding these longstanding rules would improve market structure or instead create unintended consequences. Before fundamentally altering that framework, the SEC should conduct further analysis, including:
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Conduct a more rigorous assessment of the proposal’s effects on execution quality, displayed liquidity, pre-trade price transparency, the National Best Bid or Offer (NBBO), and the many regulatory requirements that depend on it.
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Meaningfully evaluate more targeted alternatives, such as a volume threshold for protected quotations, before removing foundational market protections.
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Address the proposal’s implications to the broader regulatory framework, including best execution and the numerous SEC and self-regulatory organization rules that rely on protected quotations and the NBBO as an objective benchmark.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
