SEC eyes trading reform test that could lead to shift away from ‘dark pools’

“U.S. securities regulators are considering testing a proposed reform that could drive business to major stock exchanges and away from alternative trading venues such as ‘dark pools’ that critics say may be hurting investors by reducing the quality of pricing,” Sarah N. Lynch and John McCrank report for Reuters. “The proposal, which has so far only been discussed among staff involved in policymaking at the U.S. Securities and Exchange Commission, could limit how much trading occurs inside brokerages and in dark pools, according to people familiar with the matter.”

“The measure aims to address a concern among some regulators and academics about the increasing level of trading that happens outside of exchanges,” Lynch and McCrank report. “They say that the amount of trading being done in the ‘dark’ means that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is, meaning that investors may not be getting the best prices for their trades.”

“The measure under consideration, known as a ‘trade-at’ rule, has long been sought after by exchanges like Nasdaq OMX and the New York Stock Exchange as a way to win back market share against off-exchange competitors such as Credit Suisse’s Crossfinder, one of the largest dark pools in the United States,” Lynch and McCrank report. “The talks within the SEC are at an early stage, and the pilot program would need to be approved by the full five-member commission, as part of an order instructing the public exchanges to carry out the study.”

“If the SEC ultimately proposes a ‘trade-at’ test, it would be incorporated into a broader ‘tick size’ pilot that is being developed to study whether widening the increments, or ticks, at which stocks are priced could incentivize more trading in small and mid-sized companies, the people said,” Lynch and McCrank report. “The people familiar with the agency’s thinking said the move to include a trade-at test in the pilot has some support among the SEC staff. Republican SEC Commissioner Michael Piwowar has been among the most vocal agency members pushing for a tick-size pilot. In February, SEC Chair Mary Jo White also endorsed the idea, saying the pilot would become a reality.”

Read more in the full article here.

10 Comments

    1. I agree that high frequency trading needs to be addressed. I worry that ‘widening the ticks’ would give the high frequency traders more room to grab profits.

      1. You like it? Then you can appreciate how these traders are cheating the smaller investor by acting on “dark pool” money transactions, giving them a distinct advantage. HFT is not what you think it is. Sampling is so unfair.

        It is so un-american to cheat the underdog.

    2. One way to address the high-frequency trader is to impose a small tax on every stock sale. I think that something less than a dime a share would suffice to slow things down. That would give those of us who invest, rather than trade, a fair shake. It would curb the folks who trade fewer than a round lot many, many times to get a very small gain on each sale.

      It will never happen. Too much money is siphoned off by the high-frequency traders for them to let it happen.

  1. The leveling of the stock market playing fields by strict regulation and oversight is way overdue in every respect. Hedge fund managers and wall st brokerage firms are raping investors with tax free, private pools, naked Options trading and every other possible crooked conceivable manipulation possible.

    Not one conviction or incarceration …

    Thieves and pillagers.

  2. Its a sad fact that Wall Street is geared to making money for the guys who work it in. In the past when the number of small investors were low, the trading was simpler and easier to regulate.
    The influx of retirement 401K money, since the transition away from company ran pension plans, has provided too much of an incentive to bend the rules and rip off the average investor. There is also no incentive to change the rules since the SEC are paid off to look the other way and politicians are too afraid of losing their special interest money to do anything.

    1. Of course there is an incentive but it’s complicated by both good and bad people working within the system.

      But, for you state the SEC is on someone’s payroll is beyond the pale. No one would ask you to prove your specious drivel simply because we don ‘t want to hear you backpedal or split hairs.

      Cynical much?

      1. Agreed I am cynical and for good reason. The bank and securities industries has developed multiple avenues to control stock price and equities to benefit themselves.
        How about you – delusional much?

        1. Ah yes, splitting hairs.

          I specifically addressed your comments about a corrupt SEC and you explain your position using the antics of Wall Street, never having explained your outrageous statement that the SEC is paid to look the other way!

          There could very well be corrupt people in the SEC but the institution is sound and then you have the nerve to say I’m delusional?

          You seem to be trolling Americans.

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