by James Toes, president and CEO of the Security Traders Association
In 2018, despite all efforts to do otherwise, I hit new lows in protecting my personal data. I started out the year by spitting into a tube only to discover what I already know: I am 75% Irish. Over the summer, I gave my fingerprints to CLEAR so I could “move at the speed of life" and "get through security faster at airports and stadiums.” Now, Hertz is in talks to acquire CLEAR so it is safe to assume that at some point, they’ll too have my fingerprints. No matter. As a Hertz Gold Plus Rewards Member I most likely would have given my prints to them anyway. In all my self-proclamations and efforts to protect my sensitive information, I keep handing it out, over and over.
I had an experience recently that caused me to reflect on my complacency. Towards the end of October, it was brought to my attention that an SRO had developed a new product that provides a T+1 data feed of U.S. equity market activity. At first glance, the data appears that it can be monetized by one type of market participant at the expense and unwitting knowledge of another. Furthermore, the unwitting participant most likely does not have the ability for their data to be omitted, or opt-out. Believing that this could not be good for investor confidence, I reached out for input from market participants hoping to get affirmation and enough support to lead a reformation effort quickly. While some respondents shared my opinion, most were either not aware of the product or felt the information is already being collected by other parties so in their opinion, this was a non-event.
When our opinions don’t get affirmed by others, our first response is to become defensive. Which is how I reacted and chalked this up to the complacent behavior of others. Upon further reflection, I came to realize something else. Our industry does not do complacency. We work hard and operate in the best interests of investors. The reality is that protecting data, whether it be our own or our clients’ is already a herculean effort 24/7/365. Thus, rallying interest to dig deeper into something new is extremely difficult because it stresses an already over-stressed situation.
I still don’t know if this product is detrimental or helpful to our markets and the investors we serve. But I do know that getting participants to drop what they’re doing to focus on this is asking a lot, which means that determinations as to whether change is needed with this product will take time.
Insatiable Demand
One of STA’s greatest strengths remains our history of writing on issues that impact our industry and the personal lives of the professionals within it. The topic of data is one such issue. I wanted to share a few quotes from a March 2013 comment letter that still resonates today. Our letter opposes a shortening of the reporting time on 13(f) filings from 45 days to 2 days. In it, we make the following observation:
“The need for information has always been at a premium and today's market is no different. The desire for market information, whether it is depth of book or institutional block crosses, has only increased. The interaction of the hyper-fast execution space coupled with the incessant need for more data has created a highly technological marketplace that at times is predatory between participants.”
Our letter then goes on to make several points on why shortening the reporting time of 13(f) filings was not in the interests of investors. One remark was in direct response to a claim by those parties in favor that the technological limitations that established the original 45-day standard no longer existed. In other words, new technology affords us the ability to do something, therefore we should do it. Which sparked this response from us: We (“STA”) strongly believe that the technological capabilities of the industry are only one variable to be considered in any decisions made regarding deadlines.
Trust
As we know, our financial system is built upon trust. Without it, our industry cannot exist. We can all also appreciate that there is a strong connection between safeguarding data and the level of trust investors bestow upon us. Failure to protect a clients' data leads to degradation in trust with the potential for severe consequences. Therefore, we must always remain diligent and behave in a responsible manner; and challenge our colleagues and competitors to do the same.