Investment Operations

Coalition Greenwich Report Analyzes Buy-Side Perspective on 2022’s Biggest Regulatory and Market Structure Debates

Post Trade Transparency

In just one year after retail investors roiled markets and less than two years into the tenure of one of the most activist SEC Chairmen in recent memory, institutional investors are paying close attention to a host of regulatory proposals and other issues that will determine the future of equity market structure, according to a recent study by Coalition Greenwich.

Among these proposals, institutional equity traders in the U.S. are keeping a close eye on issues related to the increasing influence of retail trading. Approximately 40% of the equity traders participating in the study see regulatory proposals to address Payment for Order Flow (PFOF) as the most important initiatives relating to retail trading. 

“Depending on which camp you’re in, you might see PFOF as either a well-regulated part of the trading landscape or a part of an insidious system rigged against all but the biggest players,” says Shane Swanson, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of The Buy Side’s Take on Equity Market Structure: 2022

Traders are also watching the progress of proposals related to best execution and gamification. An SEC request for comments on gamification—officially termed Digital Engagement Practices—drew more than 2,300 comments. 

“There are valid concerns that gamification might incite overtrading or trading in inappropriate assets,” said Swanson. “But rule-makers need to balance rules that limit that risk against the possibility of regulatory overreach.”

The Bitcoin ETF Debate
Chairman Gensler has not been shy in his public pronouncements about most cryptocurrencies and many decentralized finance (DeFi) activities falling under the SEC’s mandate. To date, however, the only crypto ETFs to gain approval are based on Bitcoin futures. Fully 80% of institutional traders are in favor of the SEC approving a spot Bitcoin ETF,” continued Swanson. “With the recent increased volatility in cryptocurrencies overall, what may have seemed like an inevitability a year ago now seems like it may be a long shot in 2022,” he added. 

The Buy Side’s Take on Equity Market Structure: 2022 analyzes U.S. institutional equity traders’ perspective on a range of additional market structure and regulatory issues, including short-sale disclosures, the Consolidated Audit Trail (CAT), minimum market share requirements and other rules affecting new exchanges, TRF volumes and the movement to T+1 settlement.