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SEC Reviewing Market Structure for Thinly-Traded Stocks, Access to Markets and Market Data

The SEC recently focused talks on the market for smaller, more thinly-traded companies, an issue of high priority for Chairman Jay Clayton.  Clayton noted that the current single equity market structure for all companies, large and small, liquid and illiquid may not meet the needs of all the types of companies seeking to go public.  In response to a Treasury Department recommendation, the SEC is considering allowing issuers of thinly-traded securities to suspend unlisted trading privileges for a stock so that it would trade on a smaller number of venues until liquidity reached a minimum threshold.  The Wall Street Journal recently reported on what it sees as worsening liquidity in the market. The SEC’s program could lead to a single market for thinly traded securities which could relieve some of the liquidity pressures for small cap stocks.  According to Clayton, the goal of the SEC’s review “is to identify pragmatic steps that should make it easier for buyers and sellers to find each other and consummate trades in smaller cap segments of the market.”  Clayton in remarks also discussed SEC pilot programs focused on investor access to markets, market data and transaction fees. The agency will hold roundtables to discuss questions raised by differential access to market data, including whether the SEC’s approach to this area is appropriate. The SEC recently rejected three stock exchanges’ request to increase the fee caps on certain market data charged to brokers and investors.