Managed Funds Association Calls for Regulatory Action to Strengthen U.S. Markets

 

February 8, 2022

Bryan Corbett: “The private funds industry supports a wide range of policies that will help modernize markets, improve efficiency, and best serve investors.”

WASHINGTON, DC – Managed Funds Association (MFA), the leading organization representing the global alternative investment and private funds industry, today released policy recommendations for market structure reform in the equity, Treasury, and security-based swaps markets.

In its proposals, MFA advocates for proactive ways financial regulators can modernize the U.S. market structure to enhance the strength and resiliency of markets and promote stability, liquidity, and integrity.

“U.S. financial markets are the envy of the world, but it’s important they evolve to stay competitive,” said MFA President and CEO Bryan Corbett. “The private funds industry supports a wide range of policies that will help modernize markets, improve efficiency, and best serve investors. We look forward to discussing our recommendations with regulators to achieve these shared objectives.”

MFA’s U.S. market structure policy recommendations can be found below.

  • Equity Markets—Enhance the transparency, liquidity, and efficiency of U.S. equity markets and adapt to new trading practices and technology by:
    • Providing investors with greater transparency of short interest in equities through disclosure of aggregated short positions per security across all broker-dealers weekly.
    • Shortening the settlement cycle for equity securities to the next day after a trade.
    • Reducing the minimum tick size to a half-penny price increment for the most liquid securities to improve market quality.
    • Reducing the maximum fees that a trading center can charge (or be allowed to charge) for the execution of an order against a protected quotation pursuant to Regulation NMS.
    • Implementing as soon as practicable its new round lot definition that is tiered based on the price of a stock.
  • Treasury Markets—Modernize the Treasury markets to meet the changing demands and growth of the markets by:
    • Expanding voluntary central clearing in the dealer-to-customer segment of the Treasury markets for both secondary cash market transactions and repos.
    • Enhancing regulatory data collection to improve the quality of Treasury data reported through TRACE.
    • Supporting FINRA in working with other relevant U.S. policymakers to gradually introduce post-trade price dissemination of anonymized data on Treasury secondary market transactions through TRACE.
    • Extending Regulation ATS to alternative trading systems that trade government securities or repo and reverse repo agreements on government securities.
  • Security-Based Swaps (SBS) Markets—Adopt a regulatory regime that provides sufficient flexibility to market participants while maintaining regulatory protections and market integrity by:
    • Developing SBS clearing alternatives through SEC-registered clearing agencies.
    • Adopting mechanisms that promote settlement certainty, such as straight-through processing requirements for SBSs, applicable to clearing brokers, exchanges, SBS execution facilities, and clearing agencies.
    • Implementing block trade public reporting thresholds for SBSs as soon as feasible.
    • Developing an SBS execution facility framework that promotes multilateral and competitive trading venues.
    • Ensuring centrally cleared transactions executed on SBS execution facilities that offer pre-trade anonymous trading protocols remain anonymous.

For more information, read the full recommendations here.

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About the Global Hedge Fund and Alternative Investment Industry

The global hedge fund and alternative investment industry, including hedge funds, credit, managed futures, and hybrid funds that invest in private companies, has assets under management of $4.3 trillion (Q2 2021). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.

About the Managed Funds Association

Managed Funds Association (MFA) represents the global hedge fund and alternative investment industry and its investors by advocating for regulatory, tax, and other public policies that foster efficient, transparent, and fair capital markets. MFA’s more than 150 member firms collectively manage nearly $1.6 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time. MFA has a global presence and is active in Washington, London, Brussels, and Asia. www.managedfunds.org