The U.S. stock market will likely see its biggest changes in nearly two decades after the Securities and Exchange Commission on Wednesday voted to propose some adjustment to the market structure in order to boost transparency and fairness as well as increasing competition for individual investors’ stock orders.
According to the SEC, the proposals include requirements of marketable retail stock orders to be sent to auctions before being executed as well as a new standard for brokers in display that they get the best possible executions for client orders and also a change in lowering trading increments and access fees on exchanges.
In an attempt to raise competitive auctions within the brokerage sector, the regulators said that individual investors could get significantly better prices by opening up individual investor orders that can be immediately executed to competitive auctions, in which, under current practice in the equity market, retail brokers send most such orders to wholesale brokers, sometimes for a fee.
SEC Chair Gary Gensler said that the competitive shortfall could be worth about $1.5 billion annually, compared with current practice — money that could go back into retail investors’ pockets.
The regulators also voted to propose further requirements from brokers to submit more information on the quality of their customer trades. SEC also put more firms on the list that must file the order execution reports.
The proposed changes will be put up for public hearing until March 31 before finalization by regulators.