Financial Market Rules Raise Risk Management and Control Issues
While international trade, tariffs and dollar dominance may now be preoccupying risk managers and strategists, let us not lose sight of financial market matters: the U.S. Market Data Infrastructure Rules (MDIR); Minimum Pricing Increments (a.k.a. Tick Size), Access Fees, and Transparency of Better Priced Orders (TBPO) that are set to be implemented in November 2025; and Odd Lot information to be included by May 2026.
Risk and compliance managers should not procrastinate in understanding changes that will affect their risk controls, volatility management, surveillance, duties to fulfill Rule 605 best execution and Rule 606 order routing disclosure requirements, and more.
Like throttle and brakes, controls ought to be embedded in the design, system and operational adjustments. They should correctly process the expanded contents and cater to latency improvement. The definition of “core data” will be expanded to include: quotation sizes; aggregate quotation sizes; best bid and best offer; national best bid and national best offer; protected bid and protected offer; transaction reports; last sale data; odd-lot; depth of book data; and auction information.
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