kramerhj --
Thanks for your clarification. The good news is that I believe that
all of the information you are looking for can be found in one place.
And, it is also good news that the place is the website of the
Securities and Exchange Commission, since that agency has long been
noted for devoting a lot of attention to making its publicly available
information accessible and well-organized. The bad news (or let's
just call it a challenge) is that there is a very large amount of
hard-to-summarize information on the subject that interests you.
The proceeding in question is a sweeping reorganization and
modernization of the SEC's rules governing what it calls the NMS, or
"National Market System." It is entitled "Regulation NMS." It was
released on February 26, 2004, and is designated as File No. S7-10-04
and Release No. 34-49325. Final public comments were due by June 30,
2004.
Here is a link to the SEC's Web page that contains the reference to
the proceeding and some relevant links to textual material:
SEC: Proposed Rules (about 1/8 down the page in chronological order)
http://www.sec.gov/rules/proposed.shtml
The place for us to start is the text of the Rulemaking Notice itself,
which will be your primary source of the basic information on the
proceeding and the more detailed information that you may want to
review on your own. Here is a link to its text:
SEC: Regulation NMS: 34-49325
http://www.sec.gov/rules/proposed/34-49325.htm#II
Of most immediate interest to you is, as you put it, "What is it all
about?" Here's how the SEC puts it in its summary of the proceeding
near the beginning of the text linked above:
"Regulation NMS would incorporate four substantive proposals that are
designed to enhance and modernize the regulatory structure of the U.S.
equity markets. First, the Commission is proposing a uniform rule for
all NMS market centers [for example, NASDAQ, NYSE, etc.] that, subject
to certain exceptions, would require a market center to establish,
maintain, and enforce policies and procedures reasonably designed to
prevent ?trade-throughs??the execution of an order in its market at a
price that is inferior to a price displayed in another market. Second,
the Commission is proposing a market access rule that would modernize
the terms of access to quotations and execution of orders in the NMS.
The third proposal would prohibit market participants from accepting,
ranking, or displaying orders, quotes, or indications of interest in a
pricing increment finer than a penny, except for securities with a
share price of below $1.00. Finally, the Commission is proposing
amendments to the rules and joint industry plans for disseminating
market information to the public that, among other things, would
modify the formulas for allocating plan net income to reward markets
for more broadly based contributions to public price discovery."
This is five, rather that "two or three." sentences, but that's
because there are four distinct proposals (plus one sentence to
introduce them), but the SEC, as usual, speaks with unusual clarity
for a government agency.
You also ask specifically, "Why is it being proposed now?". The
answer is found in Commission's "Preliminary Statement," found
directly after the table of contents in the text:
"Giving the public an opportunity to comment on specific rule
proposals is the logical next step in the deliberate and systematic
review of market structure that the Commission has undertaken in
recent years. The central objective of this review is to determine how
the regulations governing the U.S. equity markets should be
modernized. Our markets are continually evolving because of such
factors as innovative trading technologies, new market entrants, and
changing investment patterns. We believe that one of our most
important responsibilities is to monitor these changes and to ensure
that the U.S. regulatory structure remains up to date. In this way, we
can help our markets retain their position as the deepest and most
efficient in the world ? markets that offer a fair deal to all types
of investors, large and small."
SEC: Regulation NMS: 34-49325
http://www.sec.gov/rules/proposed/34-49325.htm#IV
In your question, you also appear to have a special interest in the
third of the four proposals in this overall proceeding -- what the SEC
calls its "Market Access Proposal." That proposal is explained and
discussed in great detail in Section IV of the text of the Notice
linked above (at about 1/4 of the way down the page). Here, excerpted
from the introductory portion of that discussion, is its essence:
"In the market for equity securities today, multiple trading venues
seek to attract order flow by competing over liquidity, price, speed
of execution, and other significant terms. Currently, however, there
are few regulatory standards governing the manner of access among
competing market centers.. . . . Under Section 11A of the Exchange
Act, the Commission is charged with responsibility to facilitate the
development of the NMS.134 . . . .
"In 2002, the Commission convened a series of public hearings
concerning the structure of the U.S. equity markets. An impressive
assembly of investors, investment professionals, academics, and others
participated in a series of open hearings on market structure issues,
discussing the challenges with respect to market structure and
offering widely divergent views as to how the Commission should
confront those challenges. . . .
The participants [in the Commission's public hearings] expressed
general agreement that the Commission should further the interests of
investors by promoting a market structure that encourages the robust
interaction of buying and selling interest; that investors, both large
and small, are best served by a system that ensures prices are
established through fair and vigorous competition among competing
market centers; and that investors need to be able to execute
transactions in the best market efficiently. . . .
"Ensuring access to diverse marketplaces within a unified national
market would foster efficiency, enhance competition, and contribute to
the "best execution" of orders for securities.136 Accordingly, the
Commission today is proposing new standards governing access to
quotations and the execution of orders for equity securities
throughout the NMS. The proposed new access standards, proposed to be
designated as Rule 610 of Regulation NMS, would require market centers
to permit all market participants access to their limit order books,
at least indirectly, on a non-discriminatory basis. In addition, the
proposed rule would limit any fees charged by market centers and
broker-dealers for access to their quotations to a de minimis amount.
Finally, the proposal would require SROs to establish rules to reduce
the incidence of inter-market locked and crossed quotations . "
SEC: Regulation NMS: 34-49325
http://www.sec.gov/rules/proposed/34-49325.htm#IV
I hope and trust that the above excerpts from the comprehensive
rulemaking notice answer the general questions that you have posed on
this large and complex matter in a clear, jargon-free way.
To supplement this basic information, you may want to review the
prepared testimony of interested parties at the public hearings on
these proposals that were held in April. Here is a link to the list,
which in turn contains links to the text of all of the testimony, as
well as to a text file of the transcript of the entire hearing:
SEC: Spotlight on RegulationNMS
http://www.sec.gov/spotlight/regnms.htm#request
Finally, here is a page that contains links to the public comments
that have been filed in the proceeding:
SEC: Comments on Proposed Regulation NMS
http://www.sec.gov/rules/proposed/s71004.shtml
Search Strategy:
I was aware of the SEC reputation for public information that is easy
to find and easy to access, so I went directly to its website for the
information and spent my research time reviewing and excerpting the
available documents.
This proceeding is a large-scale regulatory undertaking. I hope that
the way I have presented and organized the available information has
succeeded in providing a concise but comprehensible answer to your
general questions, along with a path you can follow to explore more
about the proceeding on your own. If anything is unclear, please ask
for clarification before rating the answer.
markj-ga |
