Boston, MA, December 14, 2009 – A new report from Aite Group, LLC defines sponsored access and provides estimates of sponsored access penetration in the U.S. equities market. It examines the issues, including "naked" access, faced by the sponsored access market, the potential regulator changes that may impact sponsored access, and sponsored access's potential impact on the evolution of the U.S. equities market.
Though widely misunderstood, sponsored access became a regulatory hot button in 2009. Most of the marketplace controversy regarding sponsored access has been focused on the unfiltered, naked access model. The fear is that without real-time monitoring of sponsored participants' overall trading activities, certain trading restrictions can be overlooked and potentially lead to disaster. While sponsored access has recently taken a back seat to high frequency trading on the regulatory landscape, it would be impossible to debate about high frequency trading without first addressing the issues around sponsored access, and specifically "naked" sponsored access.
"Most major market participants agree that sponsored access arrangements should be standardized in some fashion," says Sang Lee, managing partner with Aite Group and author of this report. "That said, it would be a mistake to think that increasing regulatory oversight on the activities of non-broker/dealers in sponsored access arrangements would eliminate all systemic risk from the institutional trading market. Market participants must continue to monitor systemic risks and focus on truly understanding their customers."
This 25-page Impact Note contains 12 figures and seven tables. Clients of Aite Group's Institutional Securities & Investments service can download the report.