The Securities and Exchange Commission headquarters in Washington.
The SEC on March 6 adopted rule amendments that will change the disclosure requirements for certain order executions in national market system stocks, or stocks listed on a national securities exchange.
Specifically, the amendments affect Rule 605, which the SEC adopted in 2000 "to help the public compare and evaluate execution quality among national securities exchanges, national securities associations, market makers, and alternative trading systems," according to an SEC fact sheet.
"In the 24 years since Rule 605 was adopted, our equity markets have been transformed by ever-evolving technologies and business models," SEC Chair Gary Gensler said in a news release. "I am pleased to support this adoption because it will improve transparency for execution quality and facilitate investors' ability to compare brokers, thereby enhancing competition in our markets."
The commission adopted the rule amendments at the same meeting in which it finalized its controversial climate disclosure rules.
The amendments expand the scope of Rule 605 to include broker-dealers that introduce or carry at least 100,000 customer accounts and require "broker-dealers operating single dealer platforms must prepare a separate report for activity specific to these platforms," the fact sheet said.
In addition, the amendments expand the scope of orders that are covered by the rule, capturing certain orders submitted outside of regular trading hours, certain orders submitted with stop prices, and certain short-sale orders. Nonmarketable orders and orders submitted with stop prices would also be subject to the rule if they become executable during regular trading hours.
The amendments modify the categories of the orders "to base them on both notional dollar value and whether an order is for a fractional share, for an odd-lot, or for a round lot or greater rather than number of shares," establishing new order type categories and replacing some old ones, according to the fact sheet.
Further, the amendments will alter the content of the reports required under Rule 605, requiring new statistical measures such as percentage-based effective and realized spread statistics, a size improvement benchmark and size improvement statistic, and statistical measures that could be used to measure execution quality of nonmarketable orders, according to the fact sheet.
Under the amendments, all entities subject to the rule would be required to make a summary report publicly available as well.
The amendments will become effective 60 days after the date of publication in the Federal Register.
