U.S. SEC votes to advance stock market overhaul proposals

NEW YORK, Dec 14 (Reuters) – The U.S. Securities and Exchange Commission on Wednesday voted to suggest a number of the largest adjustments to American fairness market construction in practically twenty years, aimed toward boosting transparency and equity whereas rising competitors for particular person buyers’ stock orders.

The proposals embody requiring marketable retail stock orders to be despatched to auctions earlier than they’re executed, a brand new customary for brokers to present they get the absolute best executions for consumer orders, and decrease buying and selling increments and entry charges on exchanges, the SEC mentioned.

“We feel that these reforms, if enacted, will ultimately help the price discovery process and save investor’s money,” mentioned Joe Saluzzi, co-manager of buying and selling at Themis Trading.

“Allowing orders to interact with each other, rather than segmenting them, will enhance competition and yield better prices.”

Opening up particular person investor orders that may be instantly executed to aggressive auctions may lead to “significantly” higher costs for buyers, the SEC mentioned. Under present follow, retail brokers ship most such orders to wholesale brokers, typically for a price.

“The competitive shortfall could be worth about $1.5 billion annually, compared with current practice — money that could go back into retail investors’ pockets,” mentioned SEC Chair Gary Gensler.

The adjustments, if adopted, would characterize the most important shakeup to stock market guidelines because the SEC launched Regulation National Market System in 2005, which was aimed toward modernizing and enhancing an more and more fragmented and largely digital market.

Ronan Ryan, president and co-founder of alternate operator IEX Group Inc mentioned the reforms have been a “constructive and positive effort to improve transparency, increase competition, and ensure that investors can access the best prices available in the market.”

“It has been 17 years since the existing equity rules were adopted, and since that time, the stock market has seen significant change – including the advent of high-frequency trading, a dramatic decline in displayed liquidity on exchange, and a substantial rise in off-exchange trading,” mentioned Ryan.

“Modernizing regulation ensures that market competitors amongst brokers, market makers, and exchanges continues to profit buyers.”

The order competitors rule, which might require marketable retail orders to be despatched to auctions, may lead to extra such orders being matched on exchanges, just like the Nasdaq (NDAQ.O) or Intercontinental Exchange Inc’s (ICE.N) New York Stock Exchange, relatively than by wholesale brokers, like Citadel Securities and Virtu Financial (VIRT.O). learn extra

Nasdaq mentioned it believes in “clear, truthful, environment friendly, aggressive and inclusive markets and that it appears ahead to reviewing the SEC’s proposals.

Citadel Securities mentioned in an announcement that “any proposed changes must provide demonstrable solutions to real problems while avoiding unintended consequences that will hurt American investors.”

Firms that profit from the established order, reminiscent of wholesalers and retail brokers that obtain funds from them, will probably combat the SEC’s proposals, mentioned Stephen Hall, Better Markets’ Legal Director and Securities Specialist.

“It is imperative that the SEC resist industry pressure, carefully consider all stakeholder input, and finalize a set of rules that will truly help investors at long last to get a better deal on Wall Street,” mentioned Hall.

The SEC additionally voted to suggest requiring brokers to present extra information on the standard of their buyer trades, whereas additionally increasing the variety of corporations that should file the order execution stories.

The proposed adjustments can be put up for public remark till no less than March 31 earlier than the regulator strikes to finalize the principles, which may even be voted on.

The regulator additionally voted to develop disclosures across the buying and selling of firm shares by insiders, reminiscent of executives and administrators, which have acquired equity-based compensation.

Reporting by John McCrank; Additional reporting by Sinead Carew and Caroline Valetkevitch; Editing by Marguerita Choy and Stephen Coates

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