SEC Prepares 'Best-Price' Trading-Regulation Overhaul
Monday November 22, 3:31 AM EST
NEW YORK -- Securities and Exchange Commission staffers are preparing to present an overhaul of rules that could radically alter the way billions of shares trade each day in the U.S. by establishing best price as the top priority for brokers handling investor stock orders, Monday's Wall Street Journal reported.
The proposed plan, which has been circulating among the SEC's five commissioners in recent days, expands a trading rule meant to ensure that investors secure the best price for stocks by extending the rule to all markets and to nearly all types of stock orders, rather than just certain ones, according to several people who have been briefed on the plan.
The revised rule - which would require better electronic linkages between all markets - mandates that no matter what, investors are entitled to the best price for most orders on both the New York Stock Exchange and the Nasdaq Stock Market, provided that the orders could be filled automatically and without human intervention, according to these people. In a new twist, the rule also would require that brokers "sweep" all markets to fill an order at the best price per share at a given time, these people add.
The 200-plus-page proposal, written by senior market-regulation officials, is scheduled for a vote Dec. 15 and may not be fully disclosed to the public before then. But that vote could be postponed if market participants such as the Big Board, Fidelity Investments, and at least two SEC Commissioners, Paul Atkins and Cynthia Glassman, prevail in arguing for more time to consider the proposal, say people with knowledge of their concerns. Among the issues are that the current iteration of the plan, a rule revision known as Regulation NMS that has been under consideration in various forms since February, was hastily prepared and should be subject to fuller public debate, these people say. To that end, the two Republican commissioners, Mr. Atkins and Ms. Glassman, have expressed worry that the rule will result in too much government regulation of the markets.
While details of the plan are still in flux, the revised rule is expected to be backed by SEC Chairman William Donaldson, a former NYSE chairman who believes strongly in more uniformity across markets and wants to protect retail investors, as well as institutional investors, say the people who have been briefed on the proposal. The SEC's two Democrats, Roel Campos and Harvey Goldschmid, also are expected to back the proposal, according to these people. Sunday, an SEC spokesman couldn't be reached for comment.
Wall Street Journal Staff Reporters Kate Kelly and Deborah Solomon contributed to this report.
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