Central South Dakota News

U.S. Senator Mike Rounds (R-S.D.), a member of the Senate Banking Committee and Ranking Member of the Securities, Investments, and Insurance Subcommittee, led the Republican members of the Senate Banking Committee in sending a letter to the U.S. Securities and Exchange Commission (SEC) detailing concerns with its proposal to prohibit volume-based pricing for National Market System (NMS) stocks. Volume-based pricing in a securities context refers to a pricing strategy where transaction fees or costs are determined based on the volume of trades executed.

The Senators requested that the SEC withdraw the rulemaking to preserve market liquidity and efficiency. "Volume-based pricing is a long-standing practice that encourages a vibrant, competitive marketplace, benefiting a broad spectrum of market participants," they wrote. "Volume-based pricing is commonplace across various industries, promoting competition and rewarding entities for their contributions to the market."

"As the Commission concedes, the Proposal will likely lead to wider bid-ask spreads, reducing market depth and efficiency by diminishing incentives for large order placements by liquidity providers," they continued. "For investors, broader spreads mean higher trading costs, directly impacting their ability to execute trades efficiently and at optimal prices. These negative consequences would not only disrupt today’s well-functioning trading environment by making it costlier and less appealing for all market participants but also potentially increase market volatility."

Rounds was joined on this letter by Republican members of the Senate Banking Committee: Ranking Member Tim Scott (R-S.C.) and Senators Mike Crapo (R-Idaho), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), J.D. Vance (R-Ohio), Katie Britt (R-Ala.), Kevin Cramer (R-N.D.) and Steve Daines (R-Mont.).

In their letter addressed to SEC Chair Gensler, they expressed concerns regarding File No. S7-18-23, Release No. 34-98766. They stated that volume-based pricing enhances market liquidity, facilitates efficient price discovery, and maintains financial market stability.

"Despite these facts and without sufficient justification," they argued, "the Proposal would explicitly prohibit volume-based pricing." The Senators emphasized that such assumptions are inconsistent with existing market operations and competition realities.

They warned that prohibiting volume-based pricing could stifle smaller brokers' competitive capabilities leading to market consolidation, reduced choice, and increased costs for investors.

SEC Commissioner Hester Peirce’s view was cited: "This rulemaking appears to be the product of fear that is not rooted in reality" due to insufficient data supporting concerns driving the Proposal. Both Commissioners Peirce and Uyeda highlighted potential disruptions without clear evidence justifying such changes.

The letter concluded by requesting withdrawal of the rulemaking: "The Proposal’s overly simplified view fails to acknowledge the full extent of benefits that volume-based pricing brings to market dynamics and investors."

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