Post by GEORGE BUSH on Apr 6, 2005 13:28:58 GMT -5
Associated Press
Divided SEC Approves Rule for Stock Orders
Wednesday April 6, 1:36 pm ET
By Marcy Gordon, AP Business Writer
Divided SEC Approves Set of Rules Mandating Acceptance of Best Quoted Price for Any Transaction
WASHINGTON (AP) -- A divided Securities and Exchange Commission approved a set of rules Wednesday designed to protect investors by requiring traders to accept the best quoted price for any transaction, no matter which market it comes from.
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By a 3-2 vote, with the Commission's two Democrats siding with Republican Chairman William Donaldson, the commissioners extended the reach of a regulation requiring brokers to obtain the best possible price for customer orders even if it means going to another market and takes longer. Stock traders could no longer ignore a better price in favor of sending an order to a preferred market, which might allow for faster execution.
The five-member panel tentatively approved the plan, called Regulation National Market System, or Reg NMS, in December. SEC Chairman William Donaldson has since defended it before fierce Republican critics in Congress, who have raised the possibility of a legislative challenge to the agency.
"In formulating this proposal, we have kept our eye on one overriding objective, the protection of investors, with particular attention to small investors," Donaldson said. "The proposed trade-through rule would strengthen the confidence of all typs of investors in the U.S. equity markets."
As expected, Donaldson's two fellow Republican commissioners on the panel, Paul Atkins and Cynthia Glassman, attacked the plan as anti-competitive and voted against it; they reitereated their desire to see the trading rule to be abolished.
The two Democratic commissioners, Harvey Goldschmid and Roel Campos, sided with Bush appointee Donaldson, a former chairman of the New York Stock Exchange, in support of the plan.
A trial implementation, involving 100 stocks on the NYSE, 100 from the Nasdaq and 50 from the American Stock Exchange, will begin April 10, 2006. Full implementation of the rule is scheduled for June 12, 2006.
Proponents said the rule would save investors $321 million each year by ensuring that investors receive the best price for their stock. Commission studies said as many as 98,000 trades each day did not receive the best price posted on the various exchanges and markets.
GOP commissioners, however, noted that $321 million was a tiny fraction of the $18.7 trillion in stocks traded each year, and that the costs of implementing the rule and the time and resources brokers and traders would take in defending their trades to SEC regulators would outweigh the benefits.
"$321 million is only a rounding error," Glassman said. "And it comes at a very high price for market centers and traders, a price that would ultimately be passed on to individual investors."
Stretching the trading rule, critics say, would give an unfair advantage to the NYSE, which offers best price as its strong suit, over all-electronic rivals such as the Nasdaq Stock Market and a raft of smaller, newer electronic markets which offer speedier processing of trades.
"Reg NMS may allow the New York Stock Exchange to take one step forward, but in doing so may drag the rest of the market backward," Atkins said.
The so-called "trade-through rule" requiring brokers to get the best possible price would apply to all U.S. stock markets and nearly all types of trading orders, assuming that they could be filled electronically. In addition, brokers would be required to "sweep" all the markets to find the best possible price.
The 211-year-old NYSE uses an auction system involving human stock specialists on the exchange floor to link buyers with sellers and sometimes haggle on price for a match. It plans to revamp its floor-based auction system to create a hybrid structure that would allow for greater electronic trading while also retaining the human specialists who have executed trades since its inception.
The No. 2 Nasdaq and the other all-electronic markets that have proliferated in recent years enjoy a speed advantage.
The SEC's approved changes affecting U.S. stock markets and how they operate also included limits on the use of stock quotes in fractions of a penny and on the fees that markets charge for access to quotes.
Securities and Exchange Commission: www.sec.gov
New York Stock Exchange: www.nyse.com
Nasdaq Stock Market: www.nasdaq.com
fc
cmkxdiamond.proboards32.com/index.cgi?board=general&action=display&thread=1112810552
Divided SEC Approves Rule for Stock Orders
Wednesday April 6, 1:36 pm ET
By Marcy Gordon, AP Business Writer
Divided SEC Approves Set of Rules Mandating Acceptance of Best Quoted Price for Any Transaction
WASHINGTON (AP) -- A divided Securities and Exchange Commission approved a set of rules Wednesday designed to protect investors by requiring traders to accept the best quoted price for any transaction, no matter which market it comes from.
ADVERTISEMENT
By a 3-2 vote, with the Commission's two Democrats siding with Republican Chairman William Donaldson, the commissioners extended the reach of a regulation requiring brokers to obtain the best possible price for customer orders even if it means going to another market and takes longer. Stock traders could no longer ignore a better price in favor of sending an order to a preferred market, which might allow for faster execution.
The five-member panel tentatively approved the plan, called Regulation National Market System, or Reg NMS, in December. SEC Chairman William Donaldson has since defended it before fierce Republican critics in Congress, who have raised the possibility of a legislative challenge to the agency.
"In formulating this proposal, we have kept our eye on one overriding objective, the protection of investors, with particular attention to small investors," Donaldson said. "The proposed trade-through rule would strengthen the confidence of all typs of investors in the U.S. equity markets."
As expected, Donaldson's two fellow Republican commissioners on the panel, Paul Atkins and Cynthia Glassman, attacked the plan as anti-competitive and voted against it; they reitereated their desire to see the trading rule to be abolished.
The two Democratic commissioners, Harvey Goldschmid and Roel Campos, sided with Bush appointee Donaldson, a former chairman of the New York Stock Exchange, in support of the plan.
A trial implementation, involving 100 stocks on the NYSE, 100 from the Nasdaq and 50 from the American Stock Exchange, will begin April 10, 2006. Full implementation of the rule is scheduled for June 12, 2006.
Proponents said the rule would save investors $321 million each year by ensuring that investors receive the best price for their stock. Commission studies said as many as 98,000 trades each day did not receive the best price posted on the various exchanges and markets.
GOP commissioners, however, noted that $321 million was a tiny fraction of the $18.7 trillion in stocks traded each year, and that the costs of implementing the rule and the time and resources brokers and traders would take in defending their trades to SEC regulators would outweigh the benefits.
"$321 million is only a rounding error," Glassman said. "And it comes at a very high price for market centers and traders, a price that would ultimately be passed on to individual investors."
Stretching the trading rule, critics say, would give an unfair advantage to the NYSE, which offers best price as its strong suit, over all-electronic rivals such as the Nasdaq Stock Market and a raft of smaller, newer electronic markets which offer speedier processing of trades.
"Reg NMS may allow the New York Stock Exchange to take one step forward, but in doing so may drag the rest of the market backward," Atkins said.
The so-called "trade-through rule" requiring brokers to get the best possible price would apply to all U.S. stock markets and nearly all types of trading orders, assuming that they could be filled electronically. In addition, brokers would be required to "sweep" all the markets to find the best possible price.
The 211-year-old NYSE uses an auction system involving human stock specialists on the exchange floor to link buyers with sellers and sometimes haggle on price for a match. It plans to revamp its floor-based auction system to create a hybrid structure that would allow for greater electronic trading while also retaining the human specialists who have executed trades since its inception.
The No. 2 Nasdaq and the other all-electronic markets that have proliferated in recent years enjoy a speed advantage.
The SEC's approved changes affecting U.S. stock markets and how they operate also included limits on the use of stock quotes in fractions of a penny and on the fees that markets charge for access to quotes.
Securities and Exchange Commission: www.sec.gov
New York Stock Exchange: www.nyse.com
Nasdaq Stock Market: www.nasdaq.com
fc
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