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Washington Wrap — SEC floats new data rules; Brainard outlines Fed's CRA plan

The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to polo.rocha@spglobal.com, david.hood@spglobal.com and declan.harty@spglobal.com.

At the SEC

The top U.S. securities regulator has taken the first step toward modernizing the public stock trading tapes.

On Jan. 8, the SEC, following a 3-2 vote among its commissioners, issued a proposal that could lead to a new governance regime for the consolidated market data feeds that collect information from each U.S. stock exchange to create a snapshot of trading activity across the market.

Under the plan, the SEC would task the exchanges and the Financial Industry Regulatory Authority with drafting what it says will be called the "New Consolidated Data Plan."

The proposal comes after years of infighting on Wall Street over market data. Brokers, banks and other industry participants have long complained that certain exchanges are intentionally not improving the consolidated feeds so their costlier proprietary data feeds retain dominant positions in the market. The SEC plan would strip some exchange oversight of the consolidated feeds and provide it to various members of the brokerage and investing communities.

"We currently have what can be generally described as a tiered system of market data access in the U.S. equity markets," Chairman Jay Clayton said in the meeting.

At the Fed

The Federal Reserve unveiled its own proposal to overhaul the Community Reinvestment Act that stands in sharp contrast to an existing proposal recently released by the Fed's banking oversight counterparts.

Fed Governor Lael Brainard laid out the differences between the central bank's proposal and that of the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp., which was introduced in December 2019.

The Fed's proposal excludes a "single ratio" that would provide a quick look into a bank's overall CRA activity. The single ratio, under the OCC and FDIC's proposed rule, is the total dollar amount of a bank's CRA activity relative to its total retail deposits. But the single ratio is informed by several other tests, which the OCC says would discourage banks from manipulating their activities to earn a more favorable CRA rating.

Brainard, speaking Jan. 8 at the Urban Institute, said the single ratio introduces a loophole through which banks could meet their requirements but brush off the actual needs of distressed communities.

However, she said it is still the central bank's goal to release a unified proposal with the other two agencies, despite their different approaches.

"Given that reforms to the CRA regulations are likely to set expectations for a few decades, it is more important to get the reforms done right than to do them quickly," she said in prepared remarks.

The House Financial Services Committee is scheduled to hear from community groups and consumer stakeholders on Jan. 14 for a subcommittee hearing examining the OCC and FDIC's proposed rule.

Comptroller of the Currency Joseph Otting, who spearheaded the effort to develop the rule, is expected to testify before the full committee later in the month.

The pair of hearings, scheduled in January two weeks apart, fulfills a promise made by committee Chair Maxine Waters, D-Calif., to examine the proposed rule.

On the monetary policy front, Fed officials displayed cautious optimism about the U.S. economy's prospects in 2020 at several appearances this week, showing little hurry to change interest rates again after their three rate cuts in 2019.

The latest U.S. jobs report did little to detract from that plan, analysts say. The report showed the U.S. added 145,000 jobs in December 2019, a decrease from a downwardly revised 256,000-job gain in November 2019. The slowdown in the headline number was expected, though the consensus forecast of those polled by Econoday indicated that analysts expected a gain of 158,000 jobs.

Average hourly earnings rose 2.9% on a yearly basis, marking the slowest pace of wage growth since a 2.8% increase in July 2018.

"The jobs report, with its depiction of steady job growth, low joblessness and still-subdued wage inflation, suggests little reason for the Fed to budge from the sidelines," Sal Guatieri, senior economist at BMO Capital Markets, wrote in a note to clients.

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