By Jim Connolly
Earlier this month, the Securities and Exchange Commission adopted provisions that would, among other things, require investment companies to obtain the best price for electronic stock trades for consumers even if it is on a market exchange different from the one the broker is trading on.
The rule, Regulation NMS, will become fully effective in 2006 with the best price component fully effective on June 12, 2006. The “trade-through” rule is designed to prevent a trade on a market other than one offering the best price. The regulation is comprised of four proposals: order protection; intermarket access; sub-penny pricing; and, market data.
While the Investment Company Institute, Washington, supports the proposal, some mutual funds companies have expressed concern over the rule, which was adopted on April 6.
In a statement, ICI says Regulation NMS will create a regulatory structure that “governs the securities markets, encourages liquidity, transparency and price discovery in order to facilitate the trading of institutional sized orders.”