Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

SEC Proposes Ban on Volume-Based Transaction Pricing

Published 10/19/2023, 01:20 AM
© Reuters.
NDX
-
QQQ
-
IXIC
-
IXK
-
QNET
-
NYA
-

In a move that could significantly reshape the world's largest equities market, the U.S. Securities and Exchange Commission (SEC) has proposed a ban on volume-based transaction pricing. The proposal, which was passed by a 3-2 SEC vote on Wednesday, targets a system used by the NYSE and Nasdaq to incentivize Wall Street brokerages for routing large trade orders.

The tiered setup, which offers reduced fees or rebates based on monthly trade volumes, has come under criticism for favoring larger trading firms and creating conflicts of interest. According to SEC Chair Gary Gensler, this arrangement could lead to better transaction prices for customers of larger firms, thereby pushing smaller brokers to route orders through them.

Under the proposed regulations, exchanges would still be allowed to offer lower fees and rebates to brokers and banks trading with their funds. However, they would be required to disclose their volume-based pricing tiers on a monthly basis.

The proposal does not prohibit all exchange fees or rebates, which are considered a cornerstone of the stock market. However, it specifically targets those based on transaction volume.

The proposal has been questioned by SEC Republican commissioner Hester Peirce. The largest banks or traders stand to be most affected by this plan. The proposal will undergo public comment before a final vote is taken. These regulations are part of sweeping changes that are still under consideration and could significantly alter how trades are ordered and executed.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.