Wall Street Brokers Seek to Strip Exchanges’ Legal Shield - Bloomberg

Wall Street Brokers Seek to Strip Exchanges’ Legal Shield - Bloomberg

The government should strip U.S. stock exchanges of the legal status that protects them from most lawsuits, a trade group for brokers said.
In a letter to the Securities and Exchange Commission, the Securities Industry and Financial Markets Association said the self-regulatory model of organizations such as the New York Stock Exchange (NYX) and Nasdaq Stock Market is outdated. Though the SEC fined Nasdaq for mishandling Facebook Inc.’s initial public offering last year, the legal protections may shield the market operator from liabilities.
Being an SRO brings both costs and benefits to exchanges. They are under more regulatory scrutiny than the broker-dealer venues, which are known as alternative trading systems. Joe Mecane, head of U.S. equities at NYSE Euronext, said in a December Senate hearing that ATSs “are able to employ different practices than exchanges with far less oversight and disclosure.”
Richard Adamonis, NYSE spokesman, said the proposal is motivated by the firms’ commercial interests.
‘Heavily Conflicted’
“We have long been supportive of a comprehensive review of the balance of benefits and obligations among exchanges and non-exchange trading venues, which we do not believe is accurately represented in the Sifma letter,” Adamonis said in an e-mail. “We also continue to be discouraged by the efforts by heavily conflicted brokers to reduce the influence of exchanges and interests of investors, further decrease transparency and price discovery in the equities marketplace, and generate additional profits for the broker community.”