WASHINGTON The Securities and Exchange Commission today approvedrules designed to give stock market investors a better chance atgetting the best price available for their orders.
The so-called order handling rules, proposed in September, wereapproved in a 4-0 vote. They will require specialists at stockexchanges and market makers on Nasdaq to let customers view pricequotes from other electronic trading systems that may not be readilyavailable to them.
The rules will also require customer limit orders to bedisplayed with prices better than those available in quotes publiclyavailable at the time.
Specialists and market makers are companies or individualsqualified to maintain an orderly market in a stock. In a limitorder, investors specify the price at which they are willing to buyor sell, as opposed to a market order executed at prevailing prices.
"These rules are intended to empower all investors, by allowingtheir orders to compete on a level playing field, and by providingthe disclosure they need to make informed decisions," said SECChairman Arthur Levitt.
The SEC's goal, he said, was to create "one system where oneprice could be available to everybody."
The director of the SEC's division of market regulation,Richard Lindsey, said Wall Street firms will probably need to spendabout $7 million on improvements called for by the rules.
In proposing the rules last year, the SEC noted that whiletechnology has improved, common practices worked against investors'best interests. It said customers whose orders were not displayedlost the chance of getting the best price available in the market.
It also cited the potential problem of a two-tiered market, inwhich market makers quote one price to public investors while quotingbetter prices in private systems, thus robbing investors withoutaccess to "hidden" quotes the benefit of the best available prices.
This month, the SEC settled charges of alleged malpractices onNasdaq when the market's parent, the National Association ofSecurities Dealers, agreed to spend $100 million over five years toupgrade its oversight of brokers' trading practices.
The SEC dropped a third proposal that would have allowedinvestors with market orders to trade at a better price if there wereshifts in prices before their orders were executed.
The agency said it would monitor effects of the new rulesbefore considering the "price improvement" proposal again.
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