Is SEC Regulation Best Execution a Good Idea? Experts Weigh In

“That would give us better information about the execution quality from our brokers,” Angel said. “What I am concerned about is the micromanagement of market microstructure. I’m very concerned that the proposed auctions will be a field day for the flash boys, because auctions are prone to gaming and misfiring.”

Nicolas Morgan, a partner at Paul Hastings and former SEC attorney, added in another email that with a planned Regulation Best Execution, “the SEC should not lose track of the fact that different investors may have different preferences for how brokers handle their trades. Some may prefer execution price, some may prefer low upfront cost, some may want speed bumps (or want to avoid speed bumps).”

Morgan added: “The problem with the SEC defining directly what ‘best execution’ requires is that the SEC doesn’t know the preferences for every trader. The definition should permit traders and brokers to contractually define trading parameters by consent.”

Rep. Bill Huizenga, R-Mich., a member of the House Financial Services Committee, tweeted Thursday that “@Garygensler didn’t see the #FTX collapse coming, but now he wants to redo how our markets work … with little analysis or stakeholder engagement. I look forward to working with my colleagues to understand this soon to be released proposal.”