The U.S. Securities and Exchange Commission (SEC) Wednesday voted to propose rules that would require broker dealers to step up disclosure about their handling of clients’ trading orders.
Under the proposals, brokers would, for the first time, be required to disclose their handling of institutional orders. Dealers would also be required to expand the information included in existing retail order disclosures.
“These proposed rules are intended to bring order handling disclosure in line with modern technology and market practice, providing valuable information to retail and institutional investors about how their orders are treated,” said Mary Jo White, SEC chairwoman, in a statement.
The new institutional order disclosure requirements would require a broker-dealer to provide customers with a report on its handling of their orders containing specified monthly data for the previous six months. The reports would have to include detailed order handling information for each venue that the broker routed to, including aggregate numbers, and data broken down by passive, neutral, and aggressive order routing strategies.
The proposals would also require broker-dealers to publish aggregated reports of their handling of all institutional orders on a quarterly basis. For retail clients, the proposals would require firms to report more detailed information about payments received from, or paid to, trading venues; along with other disclosure enhancements.
“This information should provide investors more transparency and a powerful new tool to more effectively monitor broker-dealer routing decisions, especially when combined with the additional disclosures from alternative trading systems proposed by the commission late last year,” White added.
The proposals are going out for a 60-day comment period.