SEC Considering Changes to Best-Price Rule

The Securities and Exchange Commission may require that the New York Stock Exchange revise the rule that forces markets to get investors the best price, even if it means they have to go to a competing market to get it, the Wall Street Journal reported.

SEC staff favor allowing trade execution speed to take precedence over getting a better price, a recommendation that may be included in market structure changes the SEC will take up later this month, the Journal reported.

The NYSE’s chief competitors, including Nasdaq, Instinet Group and Archipelago Exchange, have long been in favor of the SEC eliminating the "trade through" rule, the Journal reported. The competitors believe the rule gives the Big Board unfair advantages. California controller Steve Westly agreed this week, writing to SEC Chairman William Donaldson saying, "the trade-through provision is obsolete."

Donaldson and other commissioners have said that investors should be able to decide whether they favor speed over best price. Other SEC officials told the Journal that the rule makes for inconsistencies between floor-based exchanges like the NYSE and electronic markets like Nasdaq that create disadvantages for investors.

Thain prefers that the SEC mandate automatic execution over an exception to getting investors the best price, the Journal reported. Yet the SEC has been clear that it wants to update the rule and the change could force the NYSE to better automate its systems, a move Thain said earlier this week that he supports.

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