Securities and Exchange Commission proposals governing order routing on US options exchanges have been welcomed by officials at electronic communications network Island.
Under the SEC "trade-through disclosure" proposal, a broker would be permitted to route orders to an options exchange based on customer desire for criteria such as better speed or certainty of execution, rather than based solely on lowest "advertised" price.
Island president Matthew Andresen says the ruling recognises a principle that many market participants have long known: "Price should never be the sole criterion in determining which market should receive an order; speed, certainty of execution, and reliability all count."
While the current proposal focuses on the options exchanges, the SEC has also indicated that it is considering applying the same principles to the US equity markets. Specifically, the SEC would permit ECNs to accept and execute investors' orders even if "better" prices are advertised in other markets, as long as the broker-dealer that sent the order to the ECN discloses to its customers the quoted market at the time of execution.