"All trade orders now have to be routed to whatever exchange offers the best price. This means markets like NYSE group's Big Board could lose share to smaller regional exchanges"
LAST week's market turbulence and technical glitches have over-shadowed an important regulatory change that kicks in this week in the US. Beginning Monday, all trade orders are supposed to be routed to whatever exchange offers the best price, meaning markets like the NYSE group's Big Board could lose share to smaller regional exchanges and electronic networks.
The impact won't be completely felt for another month, courtesy of a delaying action from the New York Stock Exchange (NYSE). Last week, the exchange received an extension from the Securities and Exchange Commission (SEC) that gives it until April 5 before it has to comply with all of the new rules, which are called Regulation NMS.
The NYSE says it needs more time to connect its systems to those of potential rivals, including the International Securities Exchange and Knight Trading's Direct Edge. The exchange made a similar request in January to get the deadline moved from February to March.
Last Friday, an NYSE spokesman downplayed the request for the extension, saying the exchange was already compliant with Regulation NMS and could route orders to 10 other exchanges or networks. "There's no drama here,” the spokesman said. But the request to hold off the change comes after several high-tension days at NYSE and growing concerns among traders that the initiation of Regulation NMS will jam up communications among exchanges. Late on Friday, the SEC said in a statement that "exceptional trading volume and price volatility of the equity market over the past few days raise the potential of even greater challenges” during NMS' phase-in. The agency said if problems arise, it will consult with the exchanges whether they are so serious that the NMS rules should be suspended.
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