To: Kimberly Lee who wrote (79443 ) 3/19/2000 1:23:00 PM From: Dave Gore Respond to of 108040
REUTERS NEWS: *** SEC to probe limit orders *** From another board: WASHINGTON, March 16 The head of the Securities and Exchange Commission said on Thursday his agency will probe the mishandling of certain stock orders by market-makers which could threaten competition. SEC CHAIRMAN Arthur Levitt also called on the exchanges, in a move toward a more centralized market, to ensure investors are seeing a full range of prices by opening their books for limit orders ? which are requests to buy a security at a set price. The agency?s examiners found that one out of six limit orders was not properly displayed at one stock exchange and the problem was not isolated, Levitt said, according to prepared remarks released ahead of his speech Thursday in Chicago at Northwestern University School of Law. Typically when a limit order is placed, a market-maker must either immediately agree to make the trade at the requested price or display it to the market so the trade could possibly be made elsewhere. ?I am deeply troubled by this apparent disregard for customer orders and systemic competition,? Levitt said. He did not reveal which exchange was involved although it was known to be a regional exchange. SEC officials declined to comment. The SEC is launching a 45-day review to determine how widespread the problem is and and will publicly release a report that examines the display of limit orders in the U.S. equity and options markets. ?MORE EFFICIENT PRICES? ?Limit orders increase the information available to the overall market and allow all market participants to better determine prices,? Levitt said. ?They have begun to level the playing field between dealers and the investing public.? Advertisement The self-regulatory organizations of the various markets are supposed to monitor and ensure that brokers are complying with the securities regulations, including the limit order rules. While Levitt?s prepared remarks did not mention the pending timetable for moving price quotes to decimals, he did say in the speech text that decimals will narrow the spread for bid and offers for orders made at the market price since there will be smaller increments for quotes. ?This means better, more efficient prices for investors,? Levitt said. But it could leave some limit orders unexecuted and reduce the number of those price specific orders, which could harm competition. At the same time, the SEC chairman urged the private sector to get involved and provide an avenue for the markets to make their limit order books available to the public. ?Vendors could consolidate this data and package it in a form that is most useful to their customers,? Levitt said. ?The ability of all investors to see the depth of supply and demand in any stock would be a giant step toward a National Market System.? The top securities regulator said the SEC will hold a round-table discussion on the issue with representatives of the markets, dealers, market data vendors and other interested parties and hoped the industry would hold talks on the subject as well. Levitt has been beating the drum for several months seeking to prevent fragmentation in the U.S. markets as the advent of new marketplaces and alternative trading systems have created a slew of new places to process stock orders. He said the SEC has not determined what, if any, regulatory action should be taken to address the fragmentation of the U.S. market place at this time. Last month some of Wall Street?s top executives said it is time to link the U.S. stock markets electronically so investors get the best prices, although they were divided on how to accomplish that goal. ?The linkages that the Commission has insisted upon have been basic connections that protect customers from pricing disparities,? Levitt said. Earlier on Thursday, the SEC approved a proposal by the National Association of Securities Dealers Inc., the parent of the Nasdaq market, to link electronic communications networks, or ECNs, through the Intermarket Trading System, the electronic linkage through which the nation?s stock exchanges communicate. ?Investors will be the winners as fuller, more robust competition between ECNs and our equity exchanges unfolds,? Levitt said. ¸ 2000 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.