Nasdaq Publishes Blueprint for New Equities Markets Regulations

The exchange operator wants to cut regulations to support growth for smaller firms and retail investors

Nasdaq published a paper titled ‘TotalMarkets’ this Wednesday that the firm says will act as a blueprint for regulatory changes it wants to see in the US equity markets.

The announcement comes two years after the company first launched its ‘Revitalise’ campaign.

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This was aimed at bolstering US equity markets, with the exchange operator saying at the time that much US legislation is outdated and restrictive.

In many ways, Revitalise was a success. Nasdaq was able to work with US legislators, who passed seven bills in committee or on the house floor to improve capital formation.

The exchange operator also convinced regulators to issue thirteen rules and announcements addressing equity markets.

But it seems that wasn’t enough for the firm.

“It is time we expand Revitalize to a serious and balanced debate focused on the market structure that supports trading of public companies,” said Adena Friedman, Nasdaq’s chief executive officer.

“Our drive for progress is focused on reforming the vast array of regulations that have created a patchwork of complexity for investors and public companies of all types and sizes.”

Centralize liquidity for smaller firms

In ‘TotalMarkets’, Nasdaq lays out a set of changes it wants to see in the equities markets.

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Notably, the exchange operator wants to centralize liquidity for small companies by exempting them from unlisted trading privileges (UTPs).

In existence since 1934, UTPs mean that securities on any national exchange can be traded on all such exchanges in the US.

On a similar track, Nasdaq also called on regulators to scrap the Order Protection Rule, a piece of legislation that means trades must be executed at a price equivalent to those being quoted at other exchanges, for smaller markets.

The exchange operator said that, by ditching the rule, smaller markets would be more innovative and better able to compete with off-exchange dark pools.

Alongside these requests, Nasdaq said that it wants to change rules for the benefit of retail brokers and investors.

The firm said that this could be done by changing the definitions of ‘professional’ and ‘non-professional’ in market data agreements.

Nasdaq claims that current definitions, which are particularly bureaucratic for professional investors, are more complex than necessary and are burdensome for both firms and individual traders.

The New York-based exchange group said that this change, along with others, will open up more markets to retail traders.

“Challenges continue for our markets, with significant imbalances going unaddressed between larger and smaller participants, which threaten investor choice,” said Friedman.

“As stewards of the markets we need to make sure the regulations match investors’ needs, and advances in technology.”

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