On June 22, Securities and Exchange Commission Chairman Jay Clayton and Brett Redfearn, the Director of the SEC’s Division of Trading and Markets, spoke together on an SEC-sponsored virtual forum about modernizing the US Equity Market Structure. Chairman Clayton identified the market for thinly traded securities, retail fraud and National Market System (NMS) market data and access as three current targets for SEC initiatives.

Director Redfearn indicated that one such initiative with respect to thinly traded securities may be to provide incentives to market makers with regard to this segment of the markets. Director Redfearn also discussed the potential to adjust the market structure of Regulation NMS as it relates to thinly traded securities.

With respect to retail fraud, Chairman Clayton cited proposed amendments to Rule 15c2-11 that are designed to increase the availability of issuer information and modernize the rules governing quotations for over-the-counter (OTC) securities. Director Redfearn focused on enhancing transparency for OTC securities by requiring that information about the issuer and its security be current and publicly available and reducing regulatory burdens on broker-dealers with respect to OTC securities that are less susceptible to fraud and manipulation.

With respect to NMS market data and access, Chairman Clayton referred to SEC initiatives for this year intended to address the process for review of NMS market data fee changes, governance of the NMS market data plans and infrastructure for NMS market data. Director Redfearn indicated that the SEC would soon consider a staff recommendation to rescind an exception to the normal procedure for review and approval of NMS plan amendments under Rule 608 of Regulation NMS that allows fee changes to be immediately effective. Director Redfearn also highlighted the SEC’s requirement that self-regulatory organizations (SROs) submit a proposed new NMS plan to adjust the voting rights for exchange groups with multiple SROs and expand voting participation to key stakeholders with a diversity of views. Next, Director Redfearn discussed expanding the content of NMS market data and highlighted a proposal to lower the round lot size for many higher-priced securities while not expanding the scope of the trade-through rule, Rule 611 of Regulation NMS, to the new round-lot quotes. Further, Director Redfearn indicated that another majority objective of the Regulation NMS market data proposal is to reduce the latency of its infrastructure compared to the exchange proprietary data feeds.

Lastly, Chairman Clayton and Director Redfearn discussed the SEC’s role in ensuring that exchange fees for market data and connectivity comply with the Securities Exchange Act of 1934.

The SEC transcript of the speech is available here.