Aug 17 (Reuters) – Citadel Securities, the market-making firm founded by billionaire Ken Griffin, on Monday urged the U.S. Securities and Exchange Commission to reconsider a proposal to scrap a longstanding Wall Street regulation requiring the execution of stock trades at the best available price.
The firm said the SEC’s proposal, which has become one of the biggest U.S. market structure issues in years because the rule sits at the center of how stocks are traded, could divert trading from public exchanges, harm retail investors and reduce market liquidity.
• In June, the SEC unanimously proposed to scrap the regulation, also known as the “order protection rule”, saying it drove up costs and complexity and was no longer necessary.
• If adopted, the proposal being pursued by SEC Chairman Paul Atkins’ commission would mark another step in the Trump administration’s plans to remake the structure of securities markets.
• In a letter to the SEC, Stephen John Berger, managing director and global head of government and regulatory policy at Citadel Securities, said the proposal would amount to a significant overhaul of U.S. equity market structure and described the SEC’s economic analysis as “fatally flawed.”
• Citadel Securities said the SEC had failed to show that the proposal’s expected benefits outweigh its risks, noting that projected compliance savings of about $250,000 per trading day are modest compared with the size of the U.S. stock market.
• The regulation was first adopted in 2005 to prohibit so-called trade-throughs, which occur when a trade happens at a bid or offering price that is worse than what is quoted on another venue.
• Citadel Securities said removing the rule would allow brokers to bypass the best displayed exchange prices more easily, encouraging more customer orders to be internalized or routed to alternative trading venues rather than public exchanges.
• That, Citadel Securities argued, would weaken incentives for market participants to display competitive quotes and could diminish price discovery.
• The firm also argued that eliminating the rule could benefit platforms offering tokenized equities, saying such venues could execute trades without matching better prices displayed elsewhere in the market and potentially expose investors to weaker protections.
• “We urge the Commission to reconsider this Proposal, including the far less risky alternative of imposing a minimum volume threshold for exchanges to receive protected quote status,” Citadel Securities said.
(Reporting by Mrinmay Dey in Mexico City; Editing by Lincoln Feast)
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