Feb. 23, 2023
February 23, 2023
The SEC's proposed rule aims to promote competition and protect the interests of individual investors by prohibiting restricted competition trading centers from internally executing certain orders of individual investors without first exposing them to competition at that price in a qualified auction operated by an open competition trading center. While this approach can potentially increase transparency and fairness in trading, it may not be the most effective way to achieve these goals.
One alternative approach that the SEC could consider is requiring all trading centers to publicly disclose their order book data in real-time. This would allow investors to see the available bids and asks for a particular security at any given time, and make more informed trading decisions. Such transparency measures would also reduce information asymmetry among market participants, promote competition, and ultimately lead to better execution quality and pricing.
Another potential approach that the SEC could consider is incentivizing trading centers to offer better execution quality and pricing to individual investors. This could be achieved through a variety of mechanisms, such as providing rebates or discounts to investors who receive better execution quality or pricing, or requiring trading centers to publicly disclose their execution quality metrics.
In summary, while the SEC's proposed rule is a step in the right direction towards promoting fairness in the market, it may not be the most effective approach. Instead, the SEC should consider implementing greater transparency and disclosure measures, as well as incentivizing trading centers to offer better execution quality and pricing to individual investors.