Securities and Exchange Commission Chairman Gary Gensler has embarked on a mission to fundamentally overhaul the structure of U.S. securities markets, and he’s made a few enemies along the way.
Few are more vocal that Doug Cifu, CEO of Virtu Financial VIRT, -0.56%, the second-largest securities wholesaler in the country, whose more than $2 billion in annual revenue could be threatened by market reforms proposed by Gensler and the SEC last December.
In an interview with MarketWatch, Cifu argued that Gensler has become a political tool of “elements in the Democratic Party that don’t want to see self-directed trading and don’t want retail traders to have unfettered access to capital markets.”
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The most controversial of the four regulations proposed in December, the order competition rule, would take aim at this model by requiring brokers to submit retail to an auction process.
The public comment period for the changes ended in March, and the SEC will review that input before voting on a final rule package, though the timeline for such a vote is uncertain.
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... the industry reaction to the SEC proposals, particularly the order competition rule, which has been criticized even by groups that typically advocate for aggressive rule changes on behalf of retail investors.
Cifu pointed to a comment letter submitted by Citadel Securities, the New York Stock Exchange, and Charles Schwab — the largest wholesaler, U.S. exchange and retail broker, respectively — arguing against the order competition rule.
“I was frankly shocked,” he said. “It’s almost unprecedented. Who would have thought you could have the exchanges, the market makers, the buy side and the sell side all agreeing on something ?”
Despite broad industry skepticism toward the rule, Cifu remains worried that Gensler has been overcome by political considerations rather than what is best for markets.
“Gary is being driven by the Elizabeth Warren wing of the party that I find repugnant,” Cifu said, referring to the Democratic senator from Massachusetts.
That wing of the party wants “everybody putting their money into a 401(k), or using an adviser and that provides more political power to labor unions and 401(k) advisors and passive firms that tend to support woke policies,” he said.
“When the masses are able to actually make their own investment decisions and vote their proxies the way they want, that provides less power to left-leaning organizations that have traditionally aggregated retirement accounts.”
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Cifu noted that he is not the only Democrat with complaints about Gensler’s performance of late, pointing to a recent interview with New York Rep. Ritchie Torres, in which he said Gensler was “a politician pretending to be a regulator.”
“This is a rushed, political process driven by Gensler who is trying to score political points at the expense of potentially negatively impacting U.S. equities market structure,” Cifu said. “That’s not good policy, and it just demonstrates that he’s a politician, not a regulator.”
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