SEC eyes shift to twice-yearly earnings reports

The SEC is preparing a proposal to allow public companies to report earnings semiannually instead of quarterly, changing a 50+-year mandatory quarterly requirement. The proposal could be released within weeks, would go through a public comment period and vote, and has vocal support from SEC Chair Paul Atkins and President Trump with exchanges already in preliminary talks. Proponents say the move would lower the cost and burden of reporting, potentially encouraging more companies to IPO or remain public; the EU and U.K. adopted similar semiannual regimes about a decade ago.

Analysis

If regulators allow materially less frequent mandatory reporting, the near-term winners will be infrastructure owners (exchanges) and financing banks because listing and underwriting are a fixed-fee business that scales with issuance volume. A conservative scenario: a 5-10% lift in listings over 12–36 months would translate to a mid-single-digit revenue tailwind for NDAQ/ICE given fee concentration in the top-tier issuers, with most of the upside realized in the first 12–24 months as deferred deals come to market.

Microstructure and volatility effects are second-order but actionable: fewer scheduled disclosure events removes many predictable, high-IV spikes, compressing the earnings-driven skew across single-name options. Expect median event-driven IV spikes for small/mid caps to fall by 20–40% on scheduled windows, which benefits short-dated option sellers and hurts funds monetizing quarterly-guidance flows; conversely, realized volatility around the less frequent reports should increase in magnitude (larger surprise risk) leading to fatter tails on semiannual release days.

Adverse selection is the key contrarian risk — higher-quality issuers and the largest caps will likely continue frequent updates by choice, concentrating opt-outs among more opaque or cost-sensitive firms. That selection could widen small-cap bid/ask spreads by ~5–20 bps and increase these companies’ cost of capital by 100–200 bps, creating a bifurcation where active managers and activists reallocate toward names that maintain quarterly transparency. Timing: market structure and listing impacts are 12–36 months; options/IV re-pricing will begin within weeks of any formal rule change and persist as behavior shifts.

Key Decisions for Investors

• Initiate a 12–24 month overweight in Nasdaq (NDAQ) and/or Intercontinental Exchange (ICE): 2–3% position size each. Trade rationale — capture listing/market-structure revenues from incremental IPOs and higher advisory cadence; target 15–25% upside if listings rise 5–10%, stop-loss 12% for execution risk and regulatory pushback.
• Add exposure to equity capital markets/IB revenue via Goldman Sachs (GS) or Morgan Stanley (MS) overweight for 6–18 months. Underwriting/ECM fees re-rate with increased issuance; 2% position size, target +20% vs downside ~15% if issuance stays muted or macro funding costs spike.
• Implement an options income strategy on small/mid-cap exposure over the next 3–9 months: sell 30–45 day straddles/strangles on IWM against a funded hedge (buy 3-month OTM puts). Rationale — capture expected compression in scheduled-event IV; size to risk model with defined tail hedges to cap drawdowns from surprise semiannual reports.
• Buy cheap 9–12 month protective put spreads on small-cap exposure (IWM 9–12m OTM puts or put spreads) as insurance against adverse-selection-driven jumps in realized volatility. Cost should be <1–2% of portfolio; payoff asymmetry protects against clustered surprise risk if transparency decreases selectively.