the U.S. Securities and Exchange Commission
may require options brokers to compile and
publish data on how efficiently customer orders
are executed, a top official has says.
The SEC is considering a proposal to extend the so-called
execution quality rules in place for stock brokerages to the
options market, says Elizabeth King, SEC associate director
of market regulation, in a news release. King says extending
the rule would give brokers more information to help them
meet their obligations to their clients.
The SEC is also considering whether to reduce the
options market’s present trading increments of five cents or
10 cents, depending on the contract price, to one cent.
King says penny quotes would narrow bid-ask spreads.
Penny-increment trading was introduced in the stock markets
more than four years ago and has helped reduce payment for
order flow, the SEC says.
Payment for order flow
occurs when brokerages are
paid by trading specialists or
exchanges to steer orders
their way. The practice raises
questions about brokers’
duty to get the best price for
clients, say critics of the current
system.
But traders also say
options markets generate so
much data that penny price
points could present a capacity
problem for electronic
systems.