Ontario Teachers, CalPERS-Led Team Backs SEC Study of Stock Trading Fees

A $1.4 trillion-plus group of North American asset owners is supporting the SEC’s proposed transaction fee study for stock exchanges, which is aimed at incentives that the big investors say lead to higher prices for them.

The group, led by the $189.5 billion Ontario Teachers’ Pension Plan and the $351.8 billion California Public Employees’ Retirement System (CalPERS), submitted a letter to the commission, endorsing its proposed rule changes in regulating the national market.

The commission floated the proposed study in March and now is soliciting public comments. Later this year, it will vote on whether to create a study that will last up to two years and test curbing fees and rebates for brokers. The commission wants to examine “transaction fees and rebates and their impact on order routing behavior, execution quality, and market quality in general,” said SEC Chairman Jay Clayton.

Under the current setup, critics say, there’s a conflict of interest for brokers, who will choose an exchange that offers the best incentives, not the fastest or best trade executions. The study intends to create different collections of stocks and impose fee limits to see how they fare under different fee schedules, such as 15 cents per 100 shares or 5 cents.

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In their letter, the CalPERS and Ontario-led group called on the SEC to go beyond its limiting rebate payments to brokers, and simply eliminate them. Otherwise, its letter read, the pilot program “will be of limited use to long-term investors who question the importance of rebates to overall market quality.”

The test, which is under fire by exchanges like the CBOE and Nasdaq, should be allowed to wind on for its full two years, the pension group wrote. Keeping to the SEC timetable would “prevent certain participants from attempting to influence behavior and distort the results,” it contended.

Further, the SEC should ensure that all national market exchanges are in the pilot to avoid skewing the data. In addition, the consortium asked that companies not have the option to opt out of the pilot.

The pension plans “encourage the SEC to take the necessary steps to implement it as soon as possible,” the letter said.

Additional letter signatories include the $224.8 billion California State Teachers’ Retirement System (CalSTRS), the $194 billion New York City Retirement Systems, and the $117 billion State of Wisconsin Investment Board.

Tags: CalPERS, National Market System, Ontario Teachers' Pension Plan, SEC, Stocks

Ireland has launched a public consultation to help inform the design of a new Total Contributions Approach (TCA) to the state pension from 2020.

The approach, which was first announced in the 2010 National Pensions Framework and was also included in the government’s “Roadmap For Pension Reform 2018-2023” published earlier this year, assesses a person’s entitlement to a pension using their total social insurance contributions paid, rather than when they were paid.

The TCA requires consideration from both a policy and budgetary perspective, said Regina Doherty, Ireland’s Employment Affairs and Social Protection minister.

“This consultation process will allow all stakeholders an important opportunity to contribute to the design of the state pension system that will be used in Ireland for decades to come,” Doherty said in a release.

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She said a detailed report will be compiled on the proposals and observations made by those who take part in the consultation, which she said she will use to prepare her proposals on the shape of the final plan.

“It is also very important to ensure that all employees are putting aside sufficient funds for their old age, so that they won’t face an income shock in retirement,” said Doherty. “The government will establish an automatic enrolment system to enable employees who do not currently set aside personal retirement savings to do so,” she said, adding that there will be a separate consultation later this year on auto-enrollment.

The TCA consultation, which is open until Sept. 3, can be accessed online at the Department of Employment Affairs and Social Protection’s website at www.welfare.ie/consultations.

Doherty also said a TCA option will be available later this year, as an interim measure, for those who reached state pension age after Sept. 1 2012.

She said the interim TCA option will be legislated for later this year, shortly after which the Department of Employment Affairs and Social Protection will write to pensioners who may benefit from this reform to inform them of the steps they need to follow to seek a re-assessment of their pension, and to claim the new HomeCaring Credits that are part of the new system. The first payments are expected to be made in the first quarter of next year, including arrears due from March.

“The TCA reform is part of a broader process to improve pension outcomes as set out in the Roadmap for Pensions Reform, 2018-2023,” Doherty said. “Under the roadmap, we guarantee the state pension will remain the bedrock of the Irish pension system.”

Tags: Ireland, Pension, Regina Doherty, Total Contributions Approach