The Securities and Exchange Commission (SEC) announced major stock market rule changes intended to improve prices and transparency for small investors.
SEC proposals include reducing access fees for traders and enabling stock prices to be measured in fractions of a penny to reflect the best price for investors. Some of these rules have been adopted by dark pools and wholesale traders typically inaccessible to individual investors, according to the Financial Times.
US regulators will take the first step toward the most widespread revamp in more than a decade of the way stocks are traded https://t.co/nWIBC9bpc8
— Bloomberg (@business) December 14, 2022
A key proposal is the SEC’s plan to set up auctions between brokers for trading orders under $200,000 by small investors, FT reported. The system would pit high speed traders and hedge funds against each other, with the intention of creating better prices for investors according to The Wall Street Journal.
“Consistent with our mandate, guided by economic analysis, and shaped by public opinion, this proposal would enhance efficiency, competition, and fairness across our equity markets. That gets to the heart of our mission,” SEC Chair Gary Gensler said in a press release.
Other rules would fundamentally change the relationship between investors, high speed traders and stock exchanges, by increasing regulations of firms that profit from handling trades, according to the WSJ.
Brokerages and wholesaler trading firms which make billions in profits by trading shares at slightly higher prices will likely protest the SEC’s rule changes, WSJ added. (RELATED: Social Media Influencers Charged For Massive Stock ‘Pump And Dump’ Scheme)
Brokers currently send over 90% of orders to wholesalers for them to trade against retail stock flows, preventing other market players from filling orders, WSJ explained.
The five SEC commissioners have been split along party lines, with all three Democrats supporting the newly proposed rules. Republican commissioners have objected to two of the rules, which will be up for public comment until March 31.