March 4, 2006
SEC eyes stock pricing and trading reform delay
By Kevin Drawbaugh
WASHINGTON (Reuters) - A postponement may be in the works
for approaching deadlines to implement new U.S. Securities and
Exchange Commission rules on stock market pricing and trading,
SEC officials said on Saturday.
"We think it's fair to ask whether the existing deadlines
remain realistic," said David Shillman, a senior official in
the SEC's Market Regulation Division during a panel discussion
at the annual SEC Speaks conference in Washington.
"The staff is discussing it internally. I would expect the
commission to decide in the near-term if an extension is
warranted and if so, for how long," Shillman said.
The SEC voted in April 2005 to adopt Regulation National
Market System (Reg NMS), a far-reaching set of pricing and
trading reforms. The vote came amid intense debate over its
most complex section, the order protection rule.
As adopted, the rule bars traders from ignoring the best
price for a stock when executing a buy or sell order, as long
as the price is available on a fast, automated market.
If the best quoted price is only available on a so-called
slow market, like the manual New York Stock Exchange trading
floor, then it may be bypassed.
The order protection rule is pressuring the NYSE to shift
trading onto automated systems. This is occurring in the midst
of implementing other new rules and as the NYSE and the Nasdaq
Stock Market work to complete major acquisitions.
Brokerages affected by Reg NMS have been pleading for more
time to work with new trading systems before the order
protection rule takes full effect.
At present, the compliance date for 250 large stocks is
June 29, with other stocks expected to comply by August 31.
The changes mean securities markets have a large workload
to reconfigure trading and surveillance systems. That has
raised questions about whether the SEC may delay the
implementation of the order protection rule.
"There's a lot of concern about the amount of data that
firms would have to retain in order to comply," Shillman said.
Robert Colby, acting director of the Market Regulation unit
of the SEC, said the full five-member commission would likely
have to act on any postponement of NMS implementation.
Other aspects of Reg NMS -- such as a ban on sub-penny
price quotes -- are being implemented on schedule.