SEC Allows Access to Trading Data

WASHINGTON – Investors can find out how their buy and sell orders are executed and get information on their brokers under government rules that took effect Friday.

The Securities and Exchange Commission first proposed the rules in July 2000 out of concern that investors often don't get the best price for their stock-trading orders and often don't know what happens to their orders after they make them.

The rules require brokers to disclose how often they route their customers' stock orders to other brokers for execution. Brokerage houses also must disclose whether they have financial relationships with the trading firms to which they send the orders. The information is to be published every quarter on free Web sites.

In addition, trading firms, specialists on stock exchanges and the new electronic communications networks that trade stocks, known as ECNs, must issue monthly data on speed of order execution and other measures for each stock traded.

Change has swept the securities markets in recent years, as millions of new investors and increasing competition from the ECNs put pressure on the nation's two biggest exchanges, the Nasdaq Stock Market and the New York Stock Exchange.

Securities regulators, including former SEC chairman Arthur Levitt, have expressed concern that the sprouting of competing markets that don't share price information with each other could prevent investors from getting the best price on their orders.

Regulators have warned that the nation's stock markets will lose their competitive edge to foreign markets if investors lose confidence in the ability to get their trades completed at the best prices, commonly known as best execution.

The SEC found in July 2000 that about 85 percent of market orders executed on the all-electronic Nasdaq were routed to brokers that were not quoting the best price.

Market orders are executed without regard to price. In volatile markets, execution may be at a price that is very different from the current quoted price of the stock. Limit orders, by contrast, are executed only at a price specified by the investor or better. Roughly 40 percent of orders on the Nasdaq were market orders in July 2000.