SEC 'Trade-Through' Rule Proposal For Nasdaq Criticized
Tuesday February 15, 8:31 PM EST
WASHINGTON (Dow Jones)--A controversial Securities and Exchange Commission proposal to overhaul rules for U.S. markets came under renewed criticism from industry members Tuesday, and a key House lawmaker suggested legislation may be warranted if the SEC adopts the plan as it currently stands.
At issue is an SEC proposal to extend best-price protections to the Nasdaq Stock Market. The New York Stock Exchange supports the idea, but Nasdaq and many brokerage industry members oppose it as unnecessary. Protections against " trading through" a market displaying a better price to another with an inferior price have long been in place for NYSE-listed stocks but don't exist for Nasdaq stocks, yet the level of trade-throughs is about the same on both markets, Nasdaq President and Chief Executive Robert Greifeld testified Tuesday at a House capital markets subcommittee hearing.
Witnesses from Charles Schwab Corp. (SCH), Knight Trading Group (NITE), Bloomberg Tradebook LLC, and Instinet Group (INGP) also opposed the SEC's plan, while NYSE officials endorsed it as the best way to ensure investors get the best price when buying or selling stocks.
House capital markets subcommittee chairman Richard Baker, R-La., sided with the SEC's critics and said he is considering whether Congress should step in.
"I would not like to see the trade-through rule applied to the Nasdaq," Baker told reporters after the hearing. He said that would be "going backwards" and harm competition.
Baker said he thinks the SEC is moving ahead with the proposal despite the criticism, and predicted the two Democrats on the five-member SEC would support extending trade-through protections to Nasdaq while Republican commissioners Paul Atkins and Cynthia Glassman would oppose that, leaving SEC Chairman William Donaldson as the swing vote. If Donaldson votes with Democrats, Baker said he is considering whether a "legislative response" would be in order. He said he won't make a decision on that before consulting with House Financial Services Committee Chairman Michael Oxley, R-Ohio. At Tuesday's hearing, Oxley asked industry witnesses what would be wrong with dropping the trade-through restrictions and relying on brokers' best-execution obligations to protect investors.
- By Judith Burns, Dow Jones Newswires, (202) 862-6692; judith.burns@ dowjones.com
Dow Jones Newswires
02-15-05 2031ET
|
