At Senate Hearing, Wall Street Executives Share Concerns About the Market

Wall Street has no shortage of ideas on how to improve the stock market. The question is whether regulators think those ideas are worth heeding.

A number of financial executives appeared before a Senate panel on Tuesday and shared some of their suggestions for changing how the stock market works, with each identifying different points of concern. The topics included high-frequency trading and dark pools, two areas of finance that have come under increased scrutiny in the last few months.

Regulators are taking a close look at the structure of the stock market, which has become fragmented across multiple trading venues and is dominated by high-speed traders. Last month, Eric T. Schneiderman, the New York State attorney general, filed civil fraud charges against Barclays, claiming that the bank favored high-frequency traders over other investors in its private market, known as a dark pool.

That lawsuit seemed to highlight the risks involved in today’s complex market. Tuesday’s hearing, before the Senate Banking Committee, was titled “The Role of Regulation in Shaping Equity Market Structure and Electronic Trading.”

Jeffrey C. Sprecher, the chief executive of the Intercontinental Exchange, which owns the New York Stock Exchange, said at the hearing that “the market is too complex.”

“There’s a difference between competing to get you, the investor, the best price, and simply all the intermediaries, exchanges included, trying to split up commission dollars,” he said.

Mr. Sprecher, whose company acquired the Big Board last year, has criticized certain aspects of the exchange’s business, including its numerous types of stock orders. Some market participants have complained that certain order types allow speedy investors to jump ahead of others.

The N.Y.S.E. recently announced that it would reduce its number of order types, though Mr. Sprecher said on Tuesday that this effort would be limited by the need to retain market share.

“I’m uncomfortable with having all these order types,” Mr. Sprecher said. “I don’t know why we have them.”

Another executive, Kenneth C. Griffin, the head of the hedge fund Citadel, said that complexity was not his top concern. He said he was more worried about the market’s ability to withstand malfunctions or other shocks.

Referring to the “flash crash” of 2010, when the Dow Jones industrial average plunged hundreds of points in minutes, Mr. Griffin said that brokerage firms “need to have solid and robust fail-safes.”

“We need to have broker-dealers and exchanges work hand in hand to prevent aberrant orders from having an undue and unfortunate — in fact, devastating — impact on investor confidence,” he said.

High-frequency trading came in for criticism during the session, particularly from Senator Elizabeth Warren, a Massachusetts Democrat. “I’m trying to figure out how that adds more liquidity to the market,” she said.

In response, Kevin Cronin, the global head of trading at the mutual fund company Invesco, said, “We are worried about excessive intermediation in the markets.”

He added that “investor confidence” was the primary weakness in today’s market. In particular, Mr. Cronin referred to a practice in which high-frequency firms can buy detailed data feeds directly from exchanges.

“Let’s make sure everybody gets the data at the same time,” he said.

But Mr. Griffin, whose firm does some high-speed trading, defended the practice. High-frequency trading firms, he said, can help exchange-traded funds adhere closely to the prices of the stocks they track.

The executives had plenty to criticize about the market, but only Mr. Sprecher offered sustained criticisms of his own organization. He praised IEX, an upstart trading venue, which he said had only four order types. Reducing the number of orders at the Big Board, he said, would make him “happy.”

“I live in a glass house,” Mr. Sprecher said. “I’m trying to clean it up before I criticize others.”