Home Investments U.S SEC adopts new rules for brokers on investors’ orders

U.S SEC adopts new rules for brokers on investors’ orders


The United States’ Securities and Exchange Commission (SEC) has adopted amendments that require broker-dealers to disclose to investors new and enhanced information about the way they handle investors’ orders.

Specifically, the Commission amended Rule 606 of Regulation NMS to require a broker-dealer, 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 firm’s handling of the customer’s orders.

According to the commission, the new disclosures will provide the customer with information about the average rebates the broker received from, and fees the broker paid to, trading venues, amongst other requirements.

The SEC stated that the new disclosures were designed to help investors better understand how the broker-dealer routes and handles their orders and assess the impact of their broker-dealers’ routing decisions on order execution quality.

Similarly, the Commission also adopted two exceptions designed to minimize the implementation costs of the new disclosure requirement on the broker-dealer industry, particularly small broker-dealers.

Other requirements set for dealer-broker to comply with include enhancements to the quarterly public reports that broker-dealers are already required to publish.

By the latest amendments, the public disclosures must now describe any terms of payment for order flow arrangements and profit-sharing relationships, among other things.

Commenting on the regulatory guidelines, the SEC Chairman, Jay Clayton, said: “In the eighteen 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.

“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”, the regulator added.