SEC pushing for more transparency of sell-side order routing

The US Securities and Exchange Commission (SEC) is calling for brokers to disclose more information about how they handle investors’ orders. The agency has passed amendments to Rule 606 of Regulation NMS, requiring the sell-side to provide, upon the request of a customer who places a “not held” order, a standardised set of disclosures regarding the company’s handling of that customer’s orders. The amendment aims to make it easier for investors to make informed decisions about brokers with which they do business, and how those brokers deal with their orders.

Rule 606 Amendment Pushes Brokers for More Order Routing Information

The brokers will have to open up their book just a little bit more these days.

The Securities and Exchange Commission recently passed amendments to Rule 606 of Reg NMS that require the sell-side to disclose more information about how they handle, route and treat orders and what they might be getting paid for those decisions.

Score one for more transparency for the buy-side and retail investor.

As first reported by ThinkAdvisor, the amended rule Rule 606(b)(3) requires a broker, upon a request of a customer who places a not held order (e.g., an order in which the customer gives the firm price and time discretion), to provide the customer with a standardized set of individualized disclosures concerning the firms handling of the customers orders, the agency explains.

The amendments will be out for a 60-day comment period.

To view the SEC release in full, please click here

It was also reported that SEC Chairman Jay Clayton said in announcing the amended rule that in the 18 years since the Commission originally adopted its order handling and routing disclosure rules, technology and innovation have driven significant changes in the way that our equities market functions and investors transact.

The rule amendment will make it easier for investors to evaluate how their brokers handle their orders and ultimately make more informed choices about the brokers with whom they do business.

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