The top US securities regulator Thursday announced plans to tighten oversight of high-frequency trading and "dark pool" trading venues that disclose limited pricing information.
Mary Jo White, chair of the Securities and Exchange Commission, highlighted the proposals at an exchange and brokerage conference in New York, characterizing the current market structure as "not fundamentally broken, let alone rigged."
Empirical data showing lower costs for executing trades and less trading volatility compared with 2006 do not mean "that the current market structure is without issues," she said in a speech, according to the prepared text.
Improving the system "demands careful study and deliberate action when considering fundamental changes," White said, as she outlined a series of ideas at various stages of development.
Responding to concerns about high-frequency trading, White enlisted SEC staff to prepare rules to require high-speed traders to register as dealers with the SEC and to bring more of this trading population under the Financial Industry Regulatory Authority, a self-regulating organization.
These steps "should significantly strengthen regulatory oversight over active proprietary trading firms and the strategies they use," White said.
White expressed concerns that high-speed trading firms had an unfair advantage over average investors. The agency will consider steps such as batch auctions "designed to minimize speed advantages," she said.
Concerns about high-speed trading rose on the public agenda after author Michael Lewis in March argued in a best-selling book that markets were "rigged" in favor of high-speed traders.
White also expressed worry about the rise of so-called "dark venues," where there is often little pre-trade pricing transparency.
The SEC estimates that volume on dark pools, or "alternative trading systems," currently comprises 10-15 percent of US equity trading volume.
White has directed SEC staff to prepare a rule to expand the information about ATS and to make the information available to the public.
The agency will consider additional steps to guard against market instability.
"While this expanded information will be an important tool for investors, we must continue to examine whether dark trading volume is approaching a level that risks seriously undermining the quality of price discovery provided by lit venues," White said.