SEC Set to Let Wall Street Keep Payment-for-Order-Flow Deals
Gensler has held the practice up as an example of a lack of transparency in markets. He’s called for changes to create “a level playing field” for retail investors.
The decision by the SEC not to seek a ban could be a victory for brokerages like Robinhood, which rely on revenue from payment-for-order-flow arrangements. However, the firms may still face tough new regulations from the agency.
As part of its overhaul, the SEC is considering a move to lower access fees that exchanges charge brokerages to execute trades for some stocks, which could push more trading onto the exchanges, the people said.
The agency also may propose changes that could affect the complicated system of rebates that exchange operators use to lure trading volume, they said. Additionally, the regulator is weighing a plan to force brokers to disclose more about how much trading with them costs compared with benchmarks, a metric known as price improvement, said the people.
The SEC may also seek to clarify requirements for brokerages to provide “best execution” for stock orders, according to the people.
No final decision has been made on the scope of the overhaul. Even without a ban, taken together, the changes could make payment for order flow less profitable.
When broadly sketching out his plans in a June speech, Gensler suggested that the agency could also create auctions for equities trading similar to those that are commonplace in the options market. The agency’s staff is still weighing such a move, the people said.
Over the past three months, Gensler and some of his top deputies have held extensive talks with trading firms, exchanges, broker-dealers and lobbyists about equity market structure reform, according to the people.
That’s more engagement than previously, with longer and more frequent calls with the chair, the people said.
(Photo: Diego M. Radzinschi/ALM)
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