By a vote of 3-2, the U.S. Securities and Exchange Commission has approved new rules on trading and prices, known as the Regulation National Market System (Reg NMS), according to Reuters.
A topic of Wall Street discussion for many months and possible congressional challenge, Reg NMS attempts to reconcile new electronic trading technologies with the goal of getting investors the best possible prices for their orders.
“Our actions today will, I am certain, irritate a handful of influential interests,” said SEC Chairman William Donaldson.
Among those irritated is Louisiana Republican Rep. Richard Baker who, at its proposal stage, called Reg NMS among “the worst public policy I have seen proposed for the markets in my years in Congress.”
Baker, chairman of the House Capital Markets Subcommittee, said he might introduce counter-legislation. Wall Street has lobbied the SEC and Congress heavily over NMS.
According to Reuters, the measure will link markets more tightly and focus order handling on getting investors the best price possible. To accomplish this, Reg NMS extends the trade-through rule, which bars brokers from bypassing the best price offered for a stock when executing an order, across all markets for quotes on automated execution systems, but not for quotes available only on the slow, human-managed NYSE floor.
In addition, NMS promotes inter-market linkages; caps fees charged for access to some markets’ systems; bans stock quotes at increments of less than a penny for stocks worth $1 or more; and reorders the sharing of market data revenues.
Besides the Big Board and the Nasdaq, electronic trading centers such as ArcaEx and Instinet Group Inc. will be affected by Reg NMS.