Levin calls on SEC to take action against stock market conflicts of interest

WASHINGTON – Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, today released a letter [PDF] he has written to Securities and Exchange Commission Chair Mary Jo White calling on the SEC to take immediate action to eliminate two conflicts of interest in U.S. stock markets highlighted in a recent subcommittee hearing. “Conflicts of interest are inherent in the maker-taker system and payments for order flow. The SEC should immediately initiate action to eliminate them,” Levin wrote. His letter comes after a June 17 hearing on conflicts of interest and high-speed trading in U.S. stock markets. The hearing focused on two practices: the so-called “maker-taker” system, in which stock exchanges and alternative trading venues pay market participants for placing some kinds of trade orders and charge fees for others; and “payment for order flow,” the practice by some wholesale stock brokers of paying retail brokers for their orders. Both practices give market participants a financial incentive to fill client orders using methods that boost broker profits but interfere with their duty to provide clients with the best possible execution of their trades. “Conflicts of interest erode public confidence in the markets and have the potential to harm investors and I believe the SEC should take prompt action to eliminate these conflicts of interest,” WASHINGTON – Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, today released a letter [PDF] he has written to Securities and Exchange Commission Chair Mary Jo White calling on the SEC to take immediate action to eliminate two conflicts of interest in U.S. stock markets highlighted in a recent subcommittee hearing. “Conflicts of interest are inherent in the maker-taker system and payments for order flow. The SEC should immediately initiate action to eliminate them,” Levin wrote. His letter comes after a June 17 hearing on conflicts of interest and high-speed trading in U.S. stock markets. The hearing focused on two practices: the so-called “maker-taker” system, in which stock exchanges and alternative trading venues pay market participants for placing some kinds of trade orders and charge fees for others; and “payment for order flow,” the practice by some wholesale stock brokers of paying retail brokers for their orders. Both practices give market participants a financial incentive to fill client orders using methods that boost broker profits but interfere with their duty to provide clients with the best possible execution of their trades. “Conflicts of interest erode public confidence in the markets and have the potential to harm investors and I believe the SEC should take prompt action to eliminate these conflicts of interest,” 

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