|To: Kimberly Lee who wrote (79443)||3/19/2000 1:23:00 PM|
|From: Dave Gore||Respond to of 108040|
REUTERS NEWS: *** SEC to probe limit orders *** |
From another board:
WASHINGTON, March 16 The head of the
Securities and Exchange Commission said on
Thursday his agency will probe the mishandling
of certain stock orders by market-makers which
could threaten competition.
SEC CHAIRMAN Arthur Levitt also called on the
exchanges, in a move toward a more centralized market, to
ensure investors are seeing a full range of prices by opening
their books for limit orders ? which are requests to buy a
security at a set price.
The agency?s examiners found that one out of six limit
orders was not properly displayed at one stock exchange
and the problem was not isolated, Levitt said, according to
prepared remarks released ahead of his speech Thursday in
Chicago at Northwestern University School of Law.
Typically when a limit order is placed, a market-maker
must either immediately agree to make the trade at the
requested price or display it to the market so the trade
could possibly be made elsewhere.
?I am deeply troubled by this apparent disregard for
customer orders and systemic competition,? Levitt said. He
did not reveal which exchange was involved although it was
known to be a regional exchange. SEC officials declined to
The SEC is launching a 45-day review to determine
how widespread the problem is and and will publicly release
a report that examines the display of limit orders in the U.S.
equity and options markets.
?MORE EFFICIENT PRICES?
?Limit orders increase the information available to the
overall market and allow all market participants to better
determine prices,? Levitt said. ?They have begun to level the
playing field between dealers and the investing public.?
The self-regulatory organizations of the various markets
are supposed to monitor and ensure that brokers are
complying with the securities regulations, including the limit
While Levitt?s prepared remarks did not mention the
pending timetable for moving price quotes to decimals, he
did say in the speech text that decimals will narrow the
spread for bid and offers for orders made at the market
price since there will be smaller increments for quotes.
?This means better, more efficient prices for investors,?
Levitt said. But it could leave some limit orders unexecuted
and reduce the number of those price specific orders, which
could harm competition.
At the same time, the SEC chairman urged the private
sector to get involved and provide an avenue for the
markets to make their limit order books available to the
?Vendors could consolidate this data and package it in
a form that is most useful to their customers,? Levitt said.
?The ability of all investors to see the depth of supply and
demand in any stock would be a giant step toward a
National Market System.?
The top securities regulator said the SEC will hold a
round-table discussion on the issue with representatives of
the markets, dealers, market data vendors and other
interested parties and hoped the industry would hold talks
on the subject as well.
Levitt has been beating the drum for several months
seeking to prevent fragmentation in the U.S. markets as the
advent of new marketplaces and alternative trading systems
have created a slew of new places to process stock orders.
He said the SEC has not determined what, if any, regulatory
action should be taken to address the fragmentation of the
U.S. market place at this time.
Last month some of Wall Street?s top executives said it
is time to link the U.S. stock markets electronically so
investors get the best prices, although they were divided on
how to accomplish that goal.
?The linkages that the Commission has insisted upon
have been basic connections that protect customers from
pricing disparities,? Levitt said.
Earlier on Thursday, the SEC approved a proposal by
the National Association of Securities Dealers Inc., the
parent of the Nasdaq market, to link electronic
communications networks, or ECNs, through the
Intermarket Trading System, the electronic linkage through
which the nation?s stock exchanges communicate.
?Investors will be the winners as fuller, more robust
competition between ECNs and our equity exchanges
unfolds,? Levitt said.
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