WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Ranking Member of the Senate Banking Subcommittee on Securities, Insurance and Investment, today applauded the Securities and Exchange Commission (SEC)’s announcement of a new pilot program placing restrictions on “maker-taker” pricing models for stock exchange transaction fees. For years, Sen. Warner and lawmakers from both parties have pressed the SEC to study and reconsider the pricing model, which has been shown to create conflicts of interest that prevent the average investor from receiving the best price on trades.

“This pilot program is an important step towards reforming a broken system and eliminating conflicts of interest that hurt ordinary investors. I am hopeful this study will produce data that will help Congress and the SEC craft needed reforms,” Sen. Warner said. “I’m glad the SEC has finally acted on the concerns I have been voicing along with my colleagues on this issue for several years.”

Under the maker-taker pricing model, securities exchanges pay rebates to brokers that send bids and offers not intended for immediate execution, in the hopes of incentivizing liquidity in the market. Brokers who immediately execute their orders pay fees, which offset the rebates paid to brokers who create liquidity by not immediately executing their orders. However, this model has come under Congressional scrutiny after a 2013 study found evidence it created a conflict of interest for brokers – who may be incentivized to send orders that generate the largest rebate for the broker, rather than the best trade for the client.

Since 2014, Sen. Warner has been raising concerns about the “maker-taker” model. In April 2016, Sen. Warner and Sen. Mike Crapo (R-ID) wrote to the SEC expressing support for a pilot program to study the effects of rebates on U.S. equity markets.  In July 2017, Warner wrote to newly-appointed SEC Chairman Jay Clayton and called for “…pursuing the full elimination of [maker-taker] rebates.” 

According to the SEC, the proposed pilot would subject stock exchange transaction fee pricing, including “maker-taker” fee-and-rebate pricing models, to new temporary pricing restrictions across three test groups, and require the exchanges to prepare and publicly post data.

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