SEC

Bloomberg News

A nonprofit consumer advocacy group is taking aim at computerized markets, arguing that markets have become too opaque, complex and “riddled with conflicts of interest.”

In a 44-page white paper scheduled for release Tuesday, the Consumer Federation of America called for a series of changes to the stock market it said would benefit regular investors. Today’s “technological arms race has led to trading activities that disadvantage long-term investors, expose the financial system to excessive risks and shake investor confidence,” Micah Hauptman, financial services counsel to the association, wrote in the paper.

Among the changes Mr. Hauptman is calling for are a “trade at” rule that would require off-exchange trading platforms to give clients better deals. the elimination of “maker taker” fees on exchanges (or a Securities and Exchange Commission study of their elimination), fairer distribution of market data to trading firms and stricter oversight of practices by high-frequency traders he says are “harmful to other market participants.”

The paper is just the latest salvo in a widening groundswell of concern about the U.S. stock market. In June, SEC Chairman Mary Jo White vowed to ratchet up oversight of computer-driven trading and said she’s worried about the lack of transparency in off-exchange markets such as dark pools. “Transparency has long been a hallmark of the U.S. securities markets, and I am concerned by the lack of it in these dark venues,” she said.

More In Stocks

The SEC is working with Wall Street’s self-regulator, the Financial Industry Regulatory Authority, to expand trading disclosures for dark pools. The SEC is also looking into requiring that brokers disclose routing decisions for large, institutional orders. Nearly 40% of all trading takes place away from exchanges, market data show.

Pressure on regulators to improve oversight of the markets has been building for years, especially since the “flash crash” of May 6, 2010, when markets swung wildly amid breakdowns in computer trading across the country. Headline grabbing glitches such as the fumbled IPO of Facebook Inc. in May 2012, the trading debacle at Knight Capital Group in August 2012 and a failure of a data feed that forced Nasdaq to shut trading for hours in August 2013 have highlighted the market’s fragility.

But while Congress has held numerous hearings on the issue and the SEC has promised more rigorous oversight, critics such as Mr. Hauptman believe more needs to be done.

That doesn’t mean the market is “rigged,” Mr. Hauptman says. “Indeed, meaningful changes to improve our equity market structure are required but they are not beyond our reach,” he writes.