SEC Proposes Rules on Disclosure of Order Routing and Execution Practices

Washington, DC, August 10, 2000 - The Securities and Exchange Commission has proposed two rules relating to the disclosure of order routing and execution practices. The first proposed rule, Securities Exchange Act Rule 11Ac1-5, would require that market centers that trade national market system securities prepare and make available to the public monthly electronic reports that include information on execution quality on a security-by-security basis. The second proposed rule, Securities Exchange Act Rule 11Ac1-6, would require broker-dealers that route orders in equity and option securities on behalf of customers to make available to the public quarterly reports that describe their order routing practices and disclose the venues to which customer orders are routed for execution.

The proposed rules are in response to the concept release on market fragmentation issued by the SEC in February 2000 that proposed six potential options to address fragmentation, ranging from increased disclosure of order routing and execution practices to the establishment of a national market linkage system with price/time priority for all displayed trading interest.

The Release states that the SEC recognizes the potential operational and technological problems associated with mandating price/time priority across markets and that impending changes in the securities markets, particularly the move to decimal trading, could have a significant impact on market structure. The SEC therefore is not taking action at this time on the price/time priority alternatives described in the fragmentation concept release and is instead proposing rules implementing the first option requiring disclosure of order routing and execution practices.