© Reuters. FILE PHOTO: The Wall Street entrance to the New York Stock Exchange (NYSE) is seen in New York City, U.S., November 15, 2022. REUTERS/Brendan McDermid/File Photo
By John McCrank
NEW YORK (Reuters) -The U.S. Securities and Exchange Commission on Wednesday voted to propose some of the biggest changes to American equity market structure in nearly two decades, aimed at boosting transparency and fairness while increasing competition for individual investors’ stock orders.
The proposals include requiring marketable retail stock orders to be sent to auctions before they are executed, a new standard for brokers to show they get the best possible executions for client orders, and lower trading increments and access fees on exchanges, the SEC said.
Opening up individual investor orders that can be immediately executed to competitive auctions could lead to “significantly” better prices for investors, the SEC said. Under current practice, retail brokers send most such orders to wholesale brokers, sometimes for a fee.
“The competitive shortfall could be worth about $1.5 billion annually, compared with current practice — money that could go back into retail investors’ pockets,” said SEC Chair Gary Gensler.
The changes, if adopted, would represent the biggest shakeup to stock market rules since the SEC introduced Regulation National Market System in 2005, which was aimed at modernizing and enhancing an increasingly fragmented and largely electronic marketplace.
The regulator also voted to propose requiring brokers to provide more information on the quality of their customer trades, while also expanding the number of firms that must file the order execution reports.
The proposed changes will be put up for public comment until at least March 31 before the regulator moves to finalize the rules, which will also be voted on.
The regulator also voted to expand disclosures around the trading of company shares by insiders, such as executives and directors, that have received equity-based compensation.
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