SEC Voting On Flash Ban Today
It is very likely that today could mark the end of the Flash trading market manipulation phenomenon. The SEC will vote later today on a "proposal barring exchanges and trading platforms from letting clients see information about stock orders a fraction of a second before the market." This vote will likely not be followed by one in which the SEC votes to disband itself for having allowed Flash trading to continue as long as it did.
The SEC is considering the ban on flash orders after lawmakers including Senator Charles Schumer questioned whether it gives some traders unfair advantages. Direct Edge Holdings LLC has used the practice to take market share from NYSE Euronext. Nasdaq OMX Group Inc. and Bats Global Markets voluntarily stopped using flash orders last month.
The SEC’s proposal would require a second vote and a later public meeting to become binding.
And in further bad news for rating agencies, the Commission is also considering a significant overhaul to disclosure rules for the raters which would require them to announce revenue collected from their biggest clients. Some other considerations included on today's docket:
The SEC proposals include forcing banks selling securities to disclose any ratings received while shopping among credit- rating companies, according to people familiar with the matter. Such information would tell investors whether a competing ratings firm thought there was a greater risk of default.
The SEC will seek additional comment on a proposal, issued in June 2008, to drop requirements that the $3.5 trillion money- market mutual fund industry rely on assessments from ratings companies for purchase decisions, according to the people. House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, says including references to ratings in federal rules leads to undue reliance and deters investors from doing independent research.
Then again, seeing how this is the SEC voting after all, the same agency that will soon be forced to drop its charges against Bank of America for violating securities laws, it would be no surprise whatsoever if the vote were to turn out to be a dud and the current system is perpetuated. Although in the case of Flash trading, with the NYSE complex firmly against Flash, it would be rather difficult to see how at least this part of the vote is not enforced. We will provide the outcome as soon as we get it.