The U.S. Securities and Exchange Commission is weighing a proposal that would require brokers to tell investors exactly where their stock trades go to be executed, Bloomberg reported on Saturday.
The proposed provision could give traders more insight on whether they were getting the best prices for block orders they entrust to brokers, who can choose from dozens of stock exchanges and dark pools, the report said, citing three people familiar with the matter.
The SEC, whose responsibility is to regulate and analyze the securities market’s structure while protecting investors against fraudulent and manipulative practices, is reviewing all aspects of how stocks are traded and seeking to identify changes that could quickly be implemented, the report said.
So-called high-frequency trading firms, which use superfast computer systems to move rapidly in and out of markets in fractions of seconds, have faced fresh scrutiny by securities regulators in the wake of Michael Lewis’ book “Flash Boys,” which alleges that high-speed trading firms have advantages on stock and futures exchanges not typically available to regular investors.
“The United States stock market, the most iconic market in global capitalism, is rigged….by a combination of the stock exchanges, the big Wall Street banks and high-frequency traders,” Lewis said in an interview with CBS’ “60 Minutes” last month.
“We’ve actually started this conversation about what can we do right now,” SEC Commissioner Kara Stein said in an interview with Bloomberg. “All five commissioners are very focused on these issues and are committed to making sure the market is fair and efficient and promoting capital formation.”
While better late than ever expression seems to clearly apply here to Stein’s comments, the reality is so far, a balanced regulatory regime hasn’t been implemented and the market watchdogs have done little to prevent such trading as the high frequency one, which has boomed and now makes up about half of all stock-market volume.
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