The Gensler Market Structure Agenda

PETER HAYNES: Welcome to episode 48 of the TB Securities podcast series, Bid Out, Market Structure Perspective from North of 49. I'm your host, Peter HAYNES. And today we're joined by two guests that were with us in episode 47, where we started a discussion on the options market. And our friend Andrew Schulze from Susquehanna Group did a great job, for those of you that have listened to the previous episode, in educating us on how the options market works and how it's grown. And particularly, talking about retail auctions because it is a topic we're going to focus on here today, as it is part of SEC Chair Gary Gensler's agenda is somehow using the retail auctions that are used in options, and repurpose that into the equity market to deal with the exponential growth in off-exchange retail trading in equities. Today we are also joined by Matt Kinnock, who is, as many of you know, head trader at T. Rowe-- head of equity trading at T. Rowe. And I'm going to ask Matt some questions about what we learned in our previous episode about the options market and, particularly, how that relates to the equity. So this podcast is for informational purposes. The views described in today's podcast are of the individuals and may or may not represent the views of their firm. And, of course, content of this podcast should not be relied upon as investment, tax, or other advice. As we think about, Matt, the agenda that Gensler has, which he outlined at a very high level back in June, when speaking at The Piper Sandler Financial Services Conference, I think most of the market structure followers that were listening to that speech were in fact caught off guard by one of these suggestions. And in particular, the suggestion that I was just discussing, which is that order by order competition could be achieved by taking a page out of options market structure, and subjecting all stock orders for retail investors to an auction. What was the genesis of this idea, re-auctions? And based on what we heard in the previous episode from Andrew, do you think retail auctions will work in equities?

MATT KINNOCK: Thanks for having me back, Peter. I know you mentioned at the top of episode 47, the IEX podcast is a little bit more R-rated. I'll see if I can take this over to PG-13 at least with a couple of curse words and some negative commentary. But I get the notion. I understand what Chair Gensler is trying to accomplish. Look at the equity marketplace and you realize that, obviously, a lot of retail orders don't interact with a varying group of market participants. They traditionally get executed by wholesalers. And the notion is, if we can somehow expose them to other market participants, maybe they get a better price. There would be competition to interact with that order flow. And hopefully, not only is the retail participant, but other market participants are better off because of that engagement. That's the idea at least. Putting that theory, or idea, into practicalities is extremely difficult because, as you know, the equity market is so interwoven with different rules and policies that kind of connect, kind of keep things together, that it's difficult to say, hey, let's take retail out to an exchange, generate an auction, and then have other market participants interact with them. And then point to the options market and say, they do it in options. And let's break that down why that doesn't make sense. So in options, that interaction with institutional liquidity generally doesn't work anyway. I think Andrew pointed out before, in the options market when an auction is happening, it's already matched flow essentially. It's going as matched flow to the exchange in order to potentially get some price improvement on it. But, additionally, obviously if size can grow, that's great. But it's matched flow. So in this case, you're basically essentially saying, hey, retail orders come in. They should be matched, sent to an exchange, potentially have an auction light up, and cross them there. I don't know how that's beneficial, necessarily, for the retail experience, rather than what they're experiencing now. It certainly doesn't help institutions interact with retail flow if it's already matched up before it makes its way to an auction. And then one of the other ideas was maybe we'll get rid of this idea of payment for order flow. Maybe I'm jumping ahead too much, but we take this volume, and we put this interaction on exchange, then payment for order flow in the equity space will be less likely to be something that occurs. And obviously we've heard differently, and we've seen differently from data that there's more payment for order flow derived from options trading that there actually is in equity trading. So kind of taking models from the options world and saying, hey, let's apply this to equities, and it'll solve for these two problems specifically-- and that's what I heard out of the speech at least was, more institutional interaction with retail, and at least one way of addressing PFOF. I don't look at the options market and consider those two things resolved by bringing auctions to the equity marketplace. Again, I get the theory. I get the idea. I also worry about the fact that when people are trying to put this into practicality, they're looking at it on the simplest form. Hey, someone's trying to trade Apple. There's obviously a lot of industry participants that are trading Apple one way or the other. So it should be pretty easy to find a contra. We'll send the Retail Order out to an auction, and we should be able to find the match. What people don't consider is the tails in that scenario from a practicality perspective. Someone's trying to trade 4,000 shares of an obscure small cap name that only trades 22,000 shares all day. There is no contra or 4,000 shares. What happens to that order? Is it then sent back to a wholesaler and asked for that wholesaler to fill that order because they would have previously? Do they have any obligations at that point? Because now there's auctions being run by several exchanges. Is it their obligation still to kind of fill that order? Or does it have to now address the book on a particular exchange or multiple exchanges trying to get that filled. And I think that's where the problem happens where people look at, hey, 75% of retail activity should find a contra pretty naturally. What happens with the other percent? And My numbers may be way off. I'm not a retail market maker. Someone else that has a lot more experience in what type of names and the size of names that retail participants actually trade, they might come back and say it's not 75% that's needs to find a contra. It's 25% that's needs to find a contra. We're making a market in the other 75%. You do wonder, what is it-- $6,000 or so in MS names? Probably not even the entire S&P 500 is very liquid when you look at, say, the RESL 3,000. Maybe I can say 1,000 names trades pretty well. What happens the other 5,000? And I think that's the issue with trying to apply rules. One, I don't think they necessarily justify the means. But two, I don't know that it's going to work in practicality.

ANDREW SCHULZE: The one thing I would mention is very different between what I heard and how the options market work is that I don't think the options market would work well if everything went to an auction because then that does hurt the screens because then there'd be really no incentive to see what were the best prices. And so I think that that's how, in the options space, there are, as you mentioned, the auctions have that contra already attached to it, which is different than an order arriving and auctions just starting. So that screen, that market maker, that's kind of the advertisement for where the prices happen. I'm of the belief that if all things went to auctions like that, then the screens would kind of disappear, and you wouldn't have any sense of where those prices were.

PETER HAYNES: This is such a complicated topic. I actually believe what Chair Gensler says when he says the markets are good, but they could be better. Whereas, the people that are against any change suggest that they're the best they've ever been. So why would we change? Well, I believe they can be better. But the model suggests-- and we've learned so much from Andrew in the last episode about this process-- this doesn't really take the order by order competition the way I thought that the regulator wanted it out of the equation because you're still going to be routing that stock order to a wholesaler from Robinhood. And then they're just going to be taking down the paired order to an exchange somewhere. So you still leave the execution process in the hands of the wholesaler. When I really thought what they were trying to do is get the execution process in the hands of the retail broker themselves. I know in the recent GameStop report that came out from Congress, one of the comments that was made in there was that Robinhood didn't have any connections to exchanges, it only had connections to wholesalers. And thankfully, Citadel, had no outages during the GameStop fiasco. Or there may have been a point in time when Robinhood would not have had a firm to execute their orders because they didn't have any exchange connectivity. I don't think this model, as I've understood it, actually solves for that problem. So, Matt, one of the things that you and I have talked a little bit about is maybe we get to-- and we're going to talk about best execution in a second-- we get to, this order by order competition, that order is subjected to some competitive marketplace somewhere before it's wholesale. So in other words, instead of going to the wholesaler first and then exposing it, you go somewhere else first, and then give it to the wholesaler. What do you think of that idea?

MATT KINNOCK: Yeah, I've been a fan of proposals that have come out there where retail liquidity interacts with institutional type of liquidity. I know some of the exchanges have put out proposals. I know a few of them are live. Some have been kind of shot down by the SEC for the way the mechanisms might work. But I'm not opposed to those type of innovations that do actually introduce that order by order competition. You should put it on the back of the broker itself. And you don't have to do it on every single order, potentially, because there's an opportunity cost to go to the different venues. But to send order flow to particular venues, especially if those venues are indicating that they have liquidity in a particular name, to check those venues, potentially. And again, there has to be some understanding that you're not going to check every single venue that has a retail program. But checking one or two, obviously having best execution, measurements around, probability of getting a fill at a particular venue, or speed of getting a fill at a particular venue, or what happens to a quote as you get a fill at a particular venue-- using those metrics, going to those venues doesn't have to be on every single order. But as long as you incorporate that into part of your routing, you can send other things to the wholesaler, and then really measure the effects of am I getting a better execution? Does the quote change? Am I getting full-size fills when I send it to an exchange facility? Am I only getting a partial? There's a lot that goes into that, and unfortunately, I'm one of the folks probably on the side of saying there really isn't a retail problem. But at the same time, I would argue they're trying to take elements of retail and apply it to an institutional type of execution model, but with all the benefits that retail still gets. And that's where I think the disconnect happens. As I mentioned earlier, if you go to an auction and there's no contra side, what do you do? You address the book through depth. Retail doesn't have any idea of what that experience is like. What happens here if you send an order for retail to a facility, a retail program, and it only fills half your order, and the quote moves away? So those are things that we deal with, obviously, from an institutional perspective. I don't think retail actually has that experience the way that we do from an institutional side. And it's finding that mix of what is best execution for them. But at the same time, making sure that other industry participants can interact with retail flow. And I think if you propose it in that manner of, look, it's the obligation of the broker to route the order to really try to achieve best execution using whatever data points and metrics they're looking at, I don't think most of the industry would really look at that in a negative way. I think when you become too prescriptive by saying, hey, all orders have to go. Gensler's speech was light on detail. So we're not sure if the proposal of an auction means one exchange runs an auction, or 12 exchanges run an auction, or a wholesaler can actually participate in an auction-- we don't have a lot of those details. If you just kind of say, look, best execution framework means you have to go to other facilities, potentially, especially when you believe you can achieve a better price. And you can still interact with the wholesaler if that's what your data is telling you. I don't really see too many market participants that would be opposed to that notion.

PETER HAYNES: One of the pieces of rhetoric that frustrates me is this idea that if payment for order flow is ultimately eliminated in this process, that somehow this will bring back commissions for retail. Well, to me, that means that we're gearing our market structure, not so much for retail investors who are trading once in a while. We're focusing on retail traders that are trading all the time. And I don't really think that's the retail investor. I really think we need to differentiate the retail trader from the retail investor. And I think that's been a piece of rhetoric that has been frustrating to me. And as we move over to some of the other things that Gensler said in his Piper speech-- he had a whole bunch of conceptual ideas. So let's get through these one by one, Matt. First of all, he suggested that maybe SEC should reduce stock price trading increments to as low as 1/10 of a cent, and commensurately reduce marketplace access fees to a 3 mil cap from 30 currently. In other words, take everything down by 10 times. What do you think of that?

MATT KINNOCK: Well, first of all, the speech-- Gensler's speech-- was kind of the equivalent of my wife packing for a three-day trip. She showed up with two suitcases, and there's a lot to unpack there. Starting with tick, I've served on committees before. I was part of the NASDAQ intelligent tick committee that kind of looked at an approach that we've taken historically, which is one size fits all. And everything's decimal sized here in the US. And looked at models across the globe, and Europe probably has a much better model now. And the intelligent tick or smart ticks, as people refer to it, where each individual security is kind of looked at for different factors. And then a different tick is applied to it. So that being said, and by the way, I'm a fan of that-- I do recognize there are stocks that are constrained. Now, my definition of tick constrained is probably different than other people's definition of tick constrained. I think some people look simplistically at if it trades at a penny all day, then it's too constrained. I would add a little kicker to that and say, if it trades at a penny all day and has size at the touch, then it's tick constrained. Because that tells me that there's an incentive from people that are quoting at that price level to tighten that up because there's decent displayed quantity there. But if you were to look at those securities, and there are a bunch of them that do trade at a penny with good size, their need to potentially cut that penny? Sure. Am I opposed to that? Probably not. At half a penny, I think you can still achieve a better price, potentially. There is some competition to tighten it up to make those increments at half pennies. I think when you start talking about going to a tenth of pennies, again, you're addressing a retail market. And the idea of going tenths is to offer retail the same experience that they have now off exchange, which is in the form of price improvement, by giving them that same kind of numerical price improvement logic, but on exchange. And giving them that same experience. The problem is it fails to kind of really rationalize what it does to institutional trading. We actually had this argument back in 2001. I think the ICI wrote a letter about going to sub pennies. Way back 21 years ago, talking about how even when decimalization occurred, we lost size that was displayed at a price point. That would be exacerbated, obviously, if we went to a tenth of a penny because the size that is there now that we can interact with on those names would be diminished. Academics could sit here and tell me that if there's 10 price points within a penny, it would accumulate up to whatever size was displayed at the penny. I would disagree with them, and I think we've seen data before, and we even saw it with the tick-size pilot that that volume when the quote is smaller, or the increment is smaller, doesn't necessarily compute to the same size that was available at those increments. So from an institutional perspective, it'd be a little bit harder to find liquidity. And there'd be a lot of quotes fading, flickering, changing, basically complexity into the marketplace that would be difficult for us to navigate, both from a data perspective and just from a price perspective. So I'm not sure if going to a tenth is necessarily a good thing for institutions. I think it's really, really good for market-making firms that are very sophisticated. They don't have to put up as much capital when they get to the top of the quote. They can indicate things, especially when you put the kicker on that they can do this with new round lot sizes. They can put up smaller size at differing price increments, and like I said, adjust their quotes rapidly. And, again, I'm not saying this in a negative way. I understand that market making is a dynamic function. If someone were to address the market now at a penny, then $0.02, and $0.03, obviously, we expect the $0.02 and $0.03 offers to fade. And then reprice where they find kind of stability. Same thing would happen with sub pennies. If I wanted to take the 10 mil offer, I would expect a 20, 30, 40, 50 mill offers to fade on me. First of all, there wouldn't be as much displayed. And second, I wouldn't be able to interact with it at that same price point that I am kind of expecting, even up to the penny. It's not something I'm in favor of. Now, the only tangent to that makes it somewhat attractive is that the access fee would be dropped down to three mils, whereas, if we go to half a penny, it would be dropped down to 15 mills. Three mils, as you know would probably be as close to 0 as we could probably get to. I'm not sure we need to get that far low to kind of recognize the benefits of what fees have done, the intermediation that has caused, the conflict of routing that it's caused. I've always been vocal about the fact that it's the access fee, not the rebate. The access fee that causes the conflict of routing. And so at 3 mils, you would think that the conflict would be eradicated. But I'm not willing to go to tenths of a penny spreads to get the 3 mils.

PETER HAYNES: I'm not sure I understand why we have to keep it proportional. 1/10 price increments that we have to divide the access fee from 30 by 10. Why can't we go to half pennies and still go to the three mil cap? I don't see I really fully understand why that has to be related. With respect to that three mil cap, fairly de minimis, there was a conference in Toronto recently where there was a US market structure expert who suggested that three mil cap was close enough to zero that it could incentivize active retail flow to go on exchange because it's so much cheaper to execute. This gets into a controversial topic, but plays right into the hands of a theory by Gitesh Mattel. That routing of retail orders on exchange-- retail active orders on exchange-- would result in reduced toxicity for orders that are resting on exchanges. As a result, it would increase institutional order placemat on exchange through algos and others, and result in overall tighter spreads and better executions. Matt, where do you stand on this Gitesh Mattel theory that if you got that retail order flow on exchange, which this US market structure expert thinks might happen, with a 3 mil access fee cap, would that, in fact, be enough to get the institutional order flow routed to exchange, and therefore result in tighter spreads?

MATT KINNOCK: Yeah, this is where the interconnectedness of our markets makes this a difficult one to answer, in my opinion. When I look at retail engagement, they're generally held orders that want instantaneous executions. When I look at institutional liquidity, and I'll speak on behalf of T. Rowe, we're generally takers of liquidity. We're not necessarily providers of liquidity more often than not. I'm still kind of curious as to who's providing or posting liquidity out loud. I think there's this notion that if we knew that all retail activity was going on exchange, that the institutional community would line up with all these quotes, and we'd interact with all that retail liquidity. And obviously that would drive spreads to be tighter, and everyone would have a better experience. It's a great theory. I don't know if that's, in practice, going to ever come to fruition. First of all, I don't know that we traffic in the same names that retail does. I think the names where we do overlap are the names that we discussed before, the names that are most active-- the Teslas, the NVIDIAs, the Netflix, the Bank of Americas, Apples. I think they're pretty tight already, those spreads. I think the reason for that is there is a lot of industry participation in one particular ticker, and that drives the spreads to be narrower in those instances. I'm not sure retail coming into that phrase on exchange is really going to tighten that any further than it is already. In names where they're trading in sub $5 stocks that we don't necessarily traffic in, or in small cap names that only trade 50,000 shares or less a day that we do sometimes traffic in, I'm not sure that the retail on exchange experience is going to make anything better for us or for them. I'm not so sure, by the way, that going to three mils automatically disincentives a wholesaler from internalizing something. I think they're still probably going to internalize most of that flow. I'm not sure the take on that is necessarily the reason they don't go on exchange. Although, they obviously could push things to exchange further if they need to. They're not deterred by three mils. Then the question becomes what's the incentive to post for market makers, if you go to three mil take fee, especially in those types of names, Peter. Because right now they're penny spread, but you're collecting potentially 30 mils aside. If you go to a three mil take fee, I assume you have to take the rebate down as well. Let's assume the rebate is anywhere between two and four mils. Is there really an incentive to be there? And if the institutional community isn't the one kind of supplementing those quotes, what happens to the quote itself?

PETER HAYNES: Very interesting discussion, theoretical for sure. I think it's something that should be part of this overall review that the commission is working on right now. It's a great question whether or not three mils and the resulting reduction in incentives or rebates would be so low that the market makers wouldn't have an incentive to want to quote on exchange. And all of a sudden, spreads would widen out for that reason because you're not making up for it with the institutional flow that the Giteshes of the world suggests will come to the market. It is a very interesting discussion and debate. We certainly aren't going to solve that Rubik's cube right now. Let's just work through a couple more of the other suggestions that Gensler had made, as you say, very light on detail. In addition to reducing tick increments, I know Gensler does not appear to be-- or at least he didn't state outright-- that he wanted to ban payment for order flow. But he did say he wanted to harmonize off-exchange and on-exchange execution prices by eliminating what we think of as de minimis price improvement for retail. And that would effectively eliminate the wholesalers willingness to offer payment for order flow if you combine that with the reduction in tick increments. How important do you think it is that we harmonize trade prices on and off exchange, and that's not just for the wholesalers that would also be for institutional dark pools.

MATT KINNOCK: I'm not opposed to harmonization. I'm a little nervous about the next step function that harmonization gets to. So if we were to go to a half penny increment, the idea would be at half a penny, maybe a market maker or a wholesaler, for example, doesn't want to internalize some of that flow, would send it to an exchange, other people can interact with it. That's all well and good. They can provide price improvement. Now there's still benefits that wholesalers provides in retail executions, like size, obviously, being liable for any kind of issues that occur. I still think wholesalers are going to be where brokers send their order flow. And I think that's pretty consistent now. Even without payment for order flow, you see certain brokers still, obviously, prefer to send their flow to wholesalers than to do it themselves and send it to an exchange. If you harmonize and you kind of take away price improvement, I think you hurt the retail experience. And that's why I think they want to get to 10 mil increments so that retail has at least, in their mind, a similar experience or a similar price execution that they're getting today. Where I worry is that if you go to half a penny or even a tenth of a penny increment, and things are still going to the wholesaler because, again, everyone is harmonized to where they can trade, you removed the price improvement function away from the retail participant, but there's no regulatory obligation that they have to trade somewhere. And the choice is still wholesaler for other benefits that they provide, I'm worried that the next step is you have to provide price improvement of some significant magnitude or increment, or you have to trade it on exchange, which would be a trade out provision, obviously. That's what I'm concerned about because if we get there, I think that harms institutional liquidity again, or institutional executions. When I look at it in isolation and someone says, let's just harmonize, I don't see why harmonization necessarily means flow goes on exchange. I still haven't had anyone really explain that theory to me other than if we're down a half a penny, maybe it's less of a vig for a market maker to internalize some of that flow. Sure, I could buy that. Outside of that, I still think it's still going to a wholesaler, and what's the requirement to have to trade it on exchange?

PETER HAYNES: Well, we come back to just carrying on the discussion. Best execution, again, if you're suggesting that the retail broker will still be utilizing wholesalers exclusively, then that I don't think addresses the best execution concerns that Chair Gensler might have with respect to how retail orders are managed, which may be the reason why he's suggesting a new definition at the SEC for best execution. But this one's confusing to me, Matt. We already have a definition for best execution coming from FINRA in the United States. Does this mean we're going to have two different definitions for best execution? Which one do I follow? Is there one that trumps the other? And does this matter to the buy side, if all of a sudden the SEC now has a mandate on best execution? Could that potentially change how you manage your order flow?

MATT KINNOCK: Yeah, certainly again, lacking in details. But those are all great questions, Peter. I'm not sure does the SEC's best execution definition trumps FINRA's, I don't know. My Concern when I heard Chair Gensler speak was it almost sounded as if he was saying that when retail gets the execution that they get, and it's not midpoint, but it's potentially better than the bidder offer because they are receiving some price improvement, it's still not good enough. So it almost intimated the fact that where in the spread that you receive your execution is the definition of best execution. Again, that's a scary notion because if that's the determination, and again, we're large takers of liquidity, so we often pay spread on exchange-- are we going to be scrutinized for not receiving best execution because we should have received more of the spread before going in crossing? And especially with non held order flow where we have discretion of when we should cross when we shouldn't cross, is that going to be scrutinized? Because I'm not sure how you can say that someone's not receiving best X when they're in the confines of-- and again, we have a regulatory regime that basically says OPR is the de facto best execution model here. And if you're receiving an execution at or better than the MBBO, someone's going to then turn around and say you're not getting the best execution. You can still do better. Where does that stop? And exactly where in the spread is it determined that I've now received best execution?

PETER HAYNES: I really don't like the term best execution. I kind of wish the SEC was going to come up with something that could change the term for all the reasons you just mentioned a second ago. I want to just finish up here, Matt, with something that came out a couple of weeks ago. And that was the D.C. Circuit Court of Appeals that ruled in favor of the exchanges on the governance aspect of market data oversight, after denying the exchange petition on the market data infrastructure side of market data earlier in the spring. In the D.C. Circuit ruling on governance, the court agreed with parts of the SEC's governance proposal but did not agree with all of it. And as such, declared victory for the exchanges by sending the rule back to the SEC. Are there any takeaways from this ruling that could be read-throughs for the inevitable lawsuits that are going to follow Gensler's very broad and detailed equity market structure rule proposals?

MATT KINNOCK: Yeah, absolutely. I think the biggest thing is there was language that the court used to say while we agree with a couple of pieces of the SEC proposal, we disagree specifically on the non SRO representation. And they said, because we can't sever that piece of it from the other pieces that we do agree with, necessarily, we have to basically throw the entire proposal out inside in favor of the exchanges. I think that's an interesting precedent because we haven't seen that before. Historically, when it's gone to the D.C. Circuit, it's been an all or none type of yes or no. Chair Gensler's agenda, or at least some of the things that he intimated would be in this market structure proposal that's kind of pending, there's a lot in there. And so I think people would say, hey, look. Round lots are already part of the MDI. It's already on the agenda to happen. If he wants to accelerate that and add that to the MBBO, I think most people would be OK with that. If it's part of a bigger proposal-- along with ticks, by the way, I think there's a large group within the industry that's in favor of reducing ticks. Again, hopefully intelligently, and not just across the board on every name. But if you look at certain aspects of what he spoke of and in certain aspects when you look at order by order competition, potentially reducing access fees, you're going to get a lawsuit. And when you get a lawsuit, it's kind of interesting if the D.C. Circuit, again, looks at this as one package and says, while we might agree on certain components, we don't agree on other components. But we have to throw the whole thing out. If that's the case, I think that would be about three years or so of wasted energy and time for the industry. Hopefully, they'll come at this with-- I don't want to say six individual proposals because I think that would be a lot as well, but somehow linking some of these things together and allowing some things that I think would have less combativeness within the market, to come together, and really get approved and move ahead, so we can see some reform in areas that really do need it. I think most, like I said, in the industry would agree that tick size reform probably is a necessity, at this point. As I mentioned, round lots are already going to be adjusted as part of MDI. So keeping those things separate and not putting them in a bigger proposal probably makes sense. Hopefully, that's what they saw out of it. And that's the precedent that that D.C. Circuit rule kind of created. Separately, by the way, Peter, the governance thing is probably the most important aspect of what we've argued for from an institutional perspective, for the better part of five, six, seven years now. The reason for that is while we did get support from the D.C. Circuit Court on the infrastructure part of the proposal, we're asking for things at a point in time that are relevant at that point in time. What the market looks like, or what our ask looks like, or what the definition of core content might be, or definition of what that regime looks like from a competing aggregator perspective, what latencies look like, how the formula is for distributing fees, we have no say in that whatsoever. And if you think about market data in general, we derive market data, we use market data, but we have no say in kind of the constructor that whole regime. So that's the area I think we're most disappointed that, unfortunately, the courts didn't see our way of that one.

PETER HAYNES: Yeah, and just as late breaking news, I saw a headline on Bloomberg today that said that NASDAQ's trading volumes were down, but their recurring revenues were what saved their quarter. And all I can think about there is those fees that you just discussed that are quote, unquote, "recurring around market data," and other fees that we have to pay to the exchanges. And in listening to what you said, and we all know there's an inevitable lawsuit, or multiple lawsuits coming, I've definitely concluded that the best job on Wall Street is working for a Stock Exchange as a lawyer because these guys are kept busy, and they got lots of files on the go. And they're just definitely teeing it up right now, just got to fill in the blanks for the lawsuit that they're going to be filing against the SEC once Gensler actually comes out with this big market structure proposal. Just asking Matt, you live in Baltimore, which is close to Washington, not quite in Washington. Do you have any sense of when we will actually see this final rule proposal coming out of Gensler?

MATT KINNOCK: No, nothing definitive. I have no inside baseball on this. I've heard fall-- late fall. This thing may be massive, obviously, if they try to incorporate all of the different things that he intimated on his speech. It might end up being 1,000 pages, potentially. The best time to release a 1,000-page proposal is probably the day before Labor Day weekend. That's where I have my money, but I'm hearing late fall.

PETER HAYNES: I thought that market data one came out right before. There was a large one, maybe a Securities Lending that came out on the US long weekend, I remember-- the US Thanksgiving. So one thing just before we finish up here, Matt, that we talked about it coming potentially late fall. Late fall would actually be after the midterms. And I have read some musings that if both houses or both chambers of government, the House and the Senate, were to flip to the Republicans, and the recent Supreme Court ruling on West Virginia versus the EPA, and this whole deference to the agencies-- the so-called Chevron deference-- there is a school of thought that Congress will basically use their heavy hand and say no, we are giving this agency, the SEC, too much power. And we're going to claw back some of that power. And if the Republicans control both the House and the Senate, they might just try and shut Gensler down completely from what he's doing. It's an interesting theory. Neither of us went to law school or know much about what the Chevron deference is, and probably wish we'd never heard of it. But the fact of the matter is it is something that we live with regularly. So we'll have to watch that very closely. This has been very enlightening, Matt. Thank you very much for your feedback today. Andrew, thanks for joining us again. Throwing your two cents in on the options market. I learned so much about how the retail auctions work and how they fit in. I really feel like I have a better understanding of what this SEC concept is. And I'm with Matt. I just don't think it fits, as you said earlier, Andrew. The options market is not entirely auctions for retail. And that model, as you say, would probably be a worse outcome for the options market. And I think this model would be a worse outcome for equity. So we'll have lots more to talk about down the road. Thanks again, gentlemen, for joining us. And we'll talk soon.

MATT KINNOCK: Thanks again, Peter,

ANDREW SCHULZE: Thank you.

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