Talk on Wall Street is getting louder that the new order protection rule — the most contentious piece of the landmark Reg NMS passed in April 2005 by the SEC — will not be implemented on time, mainly because the commission has yet to approve the New York Stock Exchange's plan to become a hybrid market.
The order protection rule, better known as the trade-through rule, would require market centers that have automatic trade execution capabilities to route orders to the market center posting the best price when an order is received. The rule is scheduled to begin with a 250-stock pilot on June 29 and full implementation on Aug. 31.
"I see real potential for a delay," said David L. Brooks, senior vice president and director of global equity trading at Boston Company Asset Management LLC, Boston. "The concerns, primarily of (Wall Street brokers) that have been expressed in recent weeks are legitimate.
The brokers are "waiting on the SEC to approve the final hybrid structure for both the New York Stock Exchange and the American Stock Exchange before they can go forward with their plans to link into these new structures," he said.
Both exchanges have plans to convert into a hybrid, combining aspects of floor-based auction trading with automatic, electronic trading. The NYSE, however, handles around 70% of listed stock trading.