NYSE says regulation hits retail investors Professional traders are able to benefit at the expense of retail investors due to a combination of technology and the rules that govern US equity markets, the New York Stock Exchange will tell a congressional committee on Tuesday. The testimony from a senior executive at the bourse, which has faced competitive pressure from shifting trading volumes, amounts to plea for regulators to revisit and simplify US market structure guidelines. It comes as congressional leaders are set to hear from four executives from the US securities industry on Tuesday on the topic of computerised trading venues. Trading away from bourses on venues such as dark pools and broker-crossing networks have risen 50 per cent in the last three years, to account for nearly a third of total US market volume. Trading has fragmented across multiple venues in the six years since US regulators adopted Regulation NMS, which was designed to ensure investors the best available transaction price across any venue when buying and selling securities. The fragmentation - stocks are now traded on 13 exchanges and about 50 non-exchange venues - has helped trigger a technological arms race among brokers, many of whom now transact orders at millisecond speeds. Joseph Mecane, head of US equities at NYSE Euronext, the exchange's parent company, said the developments in market infrastructure have created an environment where skilled traders can abuse retail investors, hurting market integrity. Exchanges have responded to pressure from fragmentation by designing sophisticated order types, which have been criticised as a method of favouring high-frequency traders, to re-attract lost order flow. The Securities and Exchange Commission is best suited to propose meaningful market structure changes, he added, and should begin by making an "unfinished" review process started in 2010 a priority. Mr Mecane said: "We believe that changes to be considered should include a review of market maker obligations, the sub-penny rule, the order protection rule, tick sizes for illiquid securities and addressing the conflicts and overlap between broker-dealers and exchanges, including the obligations and responsibility of each when providing like services." Among the other panellists, the head of US equity trading for Credit Suisse is set to renew calls for exchanges to be stripped of their self-regulatory status, citing the Facebook public offering as an example of the failures of current market structure. Brokers are seeking to reclaim $500m in losses, which they say were suffered due to technology glitches on Nasdaq, another leading US stock exchange, during Facebook's IPO in May. Dan Mathisson said: "It is a dangerous situation when a for-profit enterprise can cause half a billion dollars of losses for others, and not have the risk of being held legally liable." Earlier this year, one SEC commissioner called for the self-regulatory framework governing the activities of exchanges to be reviewed. The hearing comes as a series of technology errors and trading glitches since the flash crash of May 2010 have drawn attention to a host of concerns regarding the fairness and stability of the US equity market. In his testimony, Eric Noll, head of Nasdaq OMX transactions services, said: "I believe these are isolated technology incidents and not symptoms of deeper market structure concerns." Meanwhile, retail investors continue to pull funds out of the sector as more than $500bn has been pulled from US equity mutual funds since the start of 2008, according to the Investment Company Institute. "We need to restore investor confidence, but not at the cost of disturbing the progress that has been made," said Rob Gasser, chief executive of ITG, a high-frequency trading company also set to appear on the panel.