SEC raises stakes with trading reform proposal

Author: | Published: 1 Feb 2005

Almost a year after it originally released proposals that could radically overhaul the way securities are traded on US exchanges, the Securities and Exchange Commission re-proposed its controversial Regulation NMS (National Market System) in December. The months of feverish and extended comment periods cap years of extensive study and discussion, and the SEC hopes that this final draft addresses a range of issues regarding market structure. These issues include trade-throughs, fragmentation, flickering quotes, locked and crossed markets, trade shredding and tape revenue, sub-penny trading, electronic communication network (ECN) access fees, front-running by exchange specialists and slow manual markets on exchanges. In this one proposal the Commission is seemingly saying: "We are going to vote these ideas up or down; the discussion period is going to end."

The political pressure being exerted to influence the Commission's vote on Regulation NMS has been intense because the stakes are so great. Specialists, market-makers, exchanges, Nasdaq and...