What You Need to Know
- The potential change would force trading firms to directly compete to execute trades from retail investors.
- Gensler is attempting to rein in payment for order flow.
The U.S. Securities and Exchange Commission is weighing changes to stock-market rules that could force trading firms to directly compete to execute trades from retail investors, according to people familiar with the matter.
A move by the SEC to press major wholesale brokerages to win auctions for orders by mom-and-pop investors would be a major change for the stock market. While nothing has been announced, the change is among those being considered by staff at Wall Street’s main regulator, said the people who asked not to be named discussing the plans which remain private.
The specifics of the SEC’s plans, which are still taking shape, follow a months-long review of regulations. Almost exactly one year ago, SEC Chair Gary Gensler said he’d asked the agency’s staff to examine best execution requirements — legal mandates that ostensibly force brokers to process customers’ orders at advantageous prices.
The SEC didn’t respond to a request for comment on the possible rule changes, which were earlier reported by The Wall Street Journal.
Gensler rattled financial firms last year when he refused to rule out prohibiting the practice of brokers getting paid to send customers’ stock orders to trading as part of the agency’s rule changes. Currently, firms including Virtu Financial Inc. and Citadel Securities pay retail brokerage firms to execute their clients’ trades, a practice known as payment-for-order-flow.