Council of Institutional Investors

CII, ICI File Amicus Brief Urging Court to Allow SEC’s Transaction Fee Pilot to Progress
Thursday, August 1, 2019
by: CII Staff

Section: Stock Exchanges




CII and the Investment Company Institute (ICI) filed an amicus brief August 1 in the D.C. Circuit Court of Appeals urging the court to deny the stock exchanges’ petitions for review of the SEC’s transaction fee pilot and to allow the pilot to proceed.

The SEC launched the pilot in December to study the effects that transaction-based fees and rebates may have on order routing behavior, execution quality and market quality more generally. Stock exchanges have asked the court to rule the program unlawful. CII and ICI argue in the amicus that the exchanges’ contention that the maker-taker model presents no problems worthy of investigation is false. They assert that the model harms investors by creating conflicts of interest that can lead brokers to route investors’ orders based on where the brokers will receive the highest rebates or incur the lowest fees, rather than based on where investors will receive the best execution.

“The transaction fee pilot is a constructive and long overdue first step toward fixing an outdated and byzantine pricing model that is badly in need of reform. It should be allowed to proceed,” assert CII and ICI in the brief. “The SEC’s ability to address the harm from rebates is critical to the interests of pension funds and all institutional investors,” said CII General Council Jeff Mahoney.