U.S. senators express concerns about SEC’s volume-based pricing plan

A group of U.S. Senate Banking Committee Republicans, led by U.S. Sen. Mike Rounds (R-SD), has urged the Securities and Exchange Commission (SEC) to withdraw its proposed rulemaking on volume-based transaction pricing for National Market System stocks.

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“Specifically, we believe the proposal would severely impact market liquidity, widen bid-ask spreads, and inadvertently undermine the competitive, efficient, and stable operation of the U.S. securities markets,” wrote the 11 members in a June 21 letter sent to SEC Chair Gary Gensler.

Volume-based pricing for National Market System (NMS) stocks refers to a pricing strategy where transaction fees or costs are determined based on the volume of trades executed, according to Sen. Rounds’ staff.

It is a long-standing practice that encourages a competitive marketplace, benefiting a broad spectrum of market participants, wrote the members, and it is commonplace across various industries.

“This practice has played a critical role in enhancing market liquidity, facilitating efficient price discovery, and maintaining the stability of financial markets,” wrote Sen. Rounds and his colleagues. 

But if approved, the SEC’s proposal would prohibit volume-based pricing, an assumption that’s inconsistent with the realities of existing market operations and competition, according to the committee members. 

“In fact, the proposal’s adverse impact on smaller brokers and the broader broker-dealer ecosystem is likely to be significant,” they wrote, “…and would likely stifle smaller brokers’ competitive capabilities and result in market consolidation, reduced choice, and potentially increased costs for investors.”

The SEC’s proposal fails to acknowledge the full extent of benefits that volume-based pricing brings to market dynamics and investors and ignores the superiority of market-based pricing mechanisms over central planning, they wrote. 

“Therefore, we request the commission withdraw the rulemaking in order to preserve market liquidity and efficiency,” wrote Sen. Rounds and his colleagues, who included U.S. Sens. Tim Scott (R-SC), Mike Crapo (R-ID), Thom Tillis (R-NC), John Kennedy (R-LA), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), J.D. Vance (R-OH), Katie Britt (R-AL), Kevin Cramer (R-ND) and Steve Daines (R-MT).