The proposal would also modify the existing order size categories to base them on round lots — typically 100 shares of a stock or a multiple of 100 — rather than number of shares and include additional order size categories for fractional share, odd-lot, and larger-sized orders, according to an SEC fact sheet.
The Rule 605 proposal and three others approved Wednesday will be open for comment through March 31 or 60 days after publication in the Federal Register, whichever is longer, SEC Chairman Gary Gensler said.
Next, the commission in a unanimous vote approved a proposal to lower trading increments and access fees on exchanges. Of note, the proposal would amend minimum pricing increments, also known as tick sizes, to establish a variable minimum pricing increment model that would apply to both the quoting and trading of NMS stocks.
The Investment Company Institute said in a statement that a "reduced tick size could present a sensible first step towards relieving tick-constrained stocks and promoting competition. We will review the proposal to assess whether the proposed pricing increments present the most efficient way to achieve these goals."
Also, in a 3-2 vote with the two Republicans commissioners dissenting, the commission approved a proposal to require certain retail equity orders be exposed to open auctions before such orders could be executed internally by any trading center that restricts order-by-order competition.
The commission, in an another 3-2 vote with the two Republicans commissioners dissenting, approved a proposal that would establish a best execution standard for brokers, dealers, government securities brokers, government securities dealers and municipal securities dealers. Specifically, broker-dealers would be required to use "reasonable diligence to ascertain the best market for the security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions," according to a fact sheet. Moreover, broker-dealers would be required to establish, maintain and enforce written policies and procedures reasonably designed to comply with the best execution standard.
Kenneth E. Bentsen, Jr., president and CEO of the Securities Industry and Financial Markets Association, said in a statement that the SEC proposals are incredibly complex with material impact to all market participants, but particularly to investors.