January 11, 2023


I counted the times “issuer” appears in the SEC’s four new market-structure proposals.   

Investors and traders (and issuers), should you care?

Without issuers, there’s nothing to trade. These rules could push issuers onto the endangered species list.  You can read and comment

Photo 108381110 / Austin © Sean Pavone | Dreamstime.com

on the proposals here, and you should do both. At minimum, read the fact sheets here.

The word “issuer” never appears beneficially. I’ll explain.

We’re back from Austin TX and marking Karen’s mom’s 80th birthday. Friends and family turned out in droves.  We kids (using the term loosely) served 16 bottles of prosecco, white wine and red wine, plus all the trappings including over 80 Italian cream cupcakes.  The oldsters can party.

In the retirement facility where mom resides is a man named Walter Bradley.  He was a professor for 40 years at Colorado School of Mines, Baylor and Texas A&M. He’s got a PhD in polymer sciences. We talked to him, know who he is.

Turns out, everything is made of chemicals and proteins, inanimate or not.  How these compounds combine is what makes plastics. And humans. 

Walter Bradley is a Christian.  He pioneered a school of scientific thought on the origin of life called Intelligent Design.

Stay with me.  As ever, I’ve got a market-structure lesson. 

Ben Stein made a documentary called “Expelled: No Intelligence Allowed.” Walter Bradley is in it.

Whether you believe in God or don’t, how life happened here is a persistent mystery.  Delve into the science – not the ideologies and philosophies predominating on both sides – and you find convergence of opinion:

Nobody knows for sure.

You’d think the science was settled. There’s evolution with the answers. Ah, but no. Giant, whistling holes. Science can’t obviate God.

Dr. Bradley says the Second Law of Thermodynamics disproves a natural origin to life. The principle, called Entropy (that’s what I’d call my rock band), holds that all things move from a state of order to a state of disorder, like kids’ bedrooms.

Life depends on a precise combination of proteins and chemical reactions, which can only arise from the opposite: Moving from disorder to order. It doesn’t occur in nature.

Nobody in science disputes that, believers and atheists alike.

As Ben Stein’s documentary says, the probability that the right string of proteins combines randomly to foster cellular replication is so monstrously unlikely as to accrue gaggles of zeros.  It’s all the same as impossible.

But it happened.

Which brings us back to the word “issuer.” 

It’s in these SEC documents 24 times by my count.  Just six mean “public companies.”

Three times on page 397 (472 total) of the filing called Disclosure of Order Execution Information – do we need almost 500 pages on that? – we’re told issuers are hurt by “financial frictions.”

Says the SEC: “Financial frictions may have an adverse impact on capital formation. In particular, higher transaction costs may hinder customers’ trading activity that would support efficient adjustment of prices and, as a result, may limit prices’ ability to reflect fundamental values. Less efficient prices may result in some issuers experiencing a cost of capital that is higher than if their prices fully reflected underlying values…”

That’s demonstrably false. Like claiming things naturally move from disorder to order.

Trillions of dollars are raised and deployed in private investments without any stock exchanges or “financial friction.” It proves irrefutably that “fundamental values” do not depend on trading.

But that’s still not the point. 

The market started with issuers. It’s the origin of species, so to speak, for stocks.  There were first, before brokers, which in turn created the exchanges that now compete with them, shares of companies. Without them, there is no stock market.

In a 399-page proposal called The Order Competition Rule, the term “issuers” appears three times in reference to the Securities and Exchange Act’s prohibition on discrimination against issuers and unfair allocation of dues and fees.


There are three big exchange groups: The NYSE, with 19.4% of volume across five platforms, most of that at the NYSE floor, and NYSE Arca, its derivatives market.

There is the Nasdaq, with 16.9% on three (not one) platforms.

There’s CBOE, with 12.6% at four platforms.

Do the math. A majority of trading happens somewhere else. You companies listed at the NYSE and Nasdaq, over 80% of your trading occurs where you’re not listed. At no cost.

What are you paying for, then? You pay exchanges to trade your stock. But they’re not. 

Issuers, your fees are too high. What are you going to do about it? The SEC is violating the law. Will you defend yourselves?

Trading firms like Citadel are getting rich a tenth of a penny at a time, at your expense. Exchanges are financial behemoths. And there are half the number of public companies there were when the Nasdaq started. Half the investor-relations jobs.

And these 1,600 pages of new rules compound the divide.

Origins matter. The SEC has forgotten that the stock market originated with issuers.  And cannot exist without them.  Issuers, are you going to buy the myth, or the science?

Next time, we’ll talk about who benefits from these new rules – somebody does! – and what they mean to investors and traders.

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