The Securities and Exchange Commission (SEC) has adopted amendments requiring broker-dealers to provide investors with new and enhanced information about the manner in which their orders are handled.
The SEC has amended Rule 606 of Regulation NMS to require a broker-dealer, upon request of a customer who places a not held order, also known as one in which the customer gives the firm price and time discretion, to provide the customer with a standardized set of individualized disclosures concerning the firm’s handling of the customer’s orders.
The new disclosures are also expected to provide the customer with information about the average rebates the broker received from, and fees the broker paid to, trading venues.
“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,” SEC Chairman Jay Clayton said. “This 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.”
SEC officials said the actions are designed to aid investors in gaining a better understanding of how broker-dealer routes and handles their orders while assessing the impact of their broker-dealers’ routing decisions on order execution quality.
The SEC also adopted two exceptions to minimize the implementation costs of the new disclosure requirement on the broker-dealer industry, particularly small broker-dealers.