Trading options with shorter times until expiration has been a significant driver of growth in the options market in recent years. Keeping options markets open overnight may be a big driver of future growth.
The US Securities and Exchange Commission is broadly constructive on both trends, SEC Commissioner Hester Peirce signaled on Tuesday.
Speaking Tuesday afternoon in a ‘fireside chat’ at the Options Industry Conference in Palm Beach Gardens, Florida, Peirce said same-day options, commonly known as 0DTEs, have been a positive addition to the marketplace, but there are caveats. “Retail investors should be entering with eyes wide open,” and concurrently the options industry needs to continue to provide education about the relatively new contracts.
Peirce noted the SEC has given the go-ahead for 24-hour trading in options, but she said there needs to be additional collaboration between regulators and industry to hash out potential issues and questions.
The longest-serving current SEC Commissioner, Peirce was appointed by President Trump during his first term and she has served since January 2018.
When asked about the SEC’s direction under newly sworn-in Chair Paul Atkins, she said an early priority is to determine which proposals from the previous Gary Gensler-led SEC should be moved forward and which should be scrapped, and which areas have been comparatively neglected and need attention.
Equity market structure had lots of focus from the previous two SEC administrations, while capital formation can use a fresh look, especially to the question of why more companies aren’t going public. “I don’t think there’s an easy one answer to that, but regulation does play a role,” she said.
Peirce acknowledged the SEC lost some good staff members with recent job cuts, “but we have a deep bench, people willing to step up and fill gaps. We have people committed to investor protection” and well-functioning markets, she said.
To the topic of artificial intelligence, Peirce noted that AI isn’t new to the financial industry, but the recent rate of innovation has moved it to the forefront of people’s minds. “I’m optimistic about what AI can do in terms of making firms more efficient and giving more people access to financial services,” she said. “To the extent that we see a problem, let’s figure out how to tackle it. But let’s not assume problems with AI just because it seems big and scary.”
Lastly, Peirce was less constructive on the topic of the consolidated audit trail (CAT), which is widely acknowledged to have not met expectations. “I understand the rationale behind it and I thought it was originally a good plan, but I don’t think if you do a cost-benefit analysis now it would come out positive,” she said, adding that the CAT needs a rethink and likely a new way forward.