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Tim Quast
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We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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November 1, 2000

Order Flow Disclosure Plan Slammed

By Staff Reports

A securities industry group says the SEC is wrong in asking brokerages to give retail customers quarterly reports on order routing destinations.

The Securities Industry Association said the SEC proposal, aimed at improving price quote competition, was wrong in using price and speed as the determinants of execution quality.

"Order flow may therefore be directed based on a superficial analysis of too few criteria," the letter stated. Some customers may welcome speed over price, or anonymity over either speed or price, according to Mark Sutton, chairman of the SIA's market structure committee.

The SIA also criticized the proposal for not making a distinction between firms acting as principals and agents. A firm acting as principal may execute the full customer order at the best bid and offer. A firm acting as agent, however, may offer price improvement but may only execute a small number of shares.

The SIA was not alone in its criticism. Morgan Stanley Dean Witter said the plan could hurt the quality of in-house trade executions. The firm, like the SIA, is in favor of encouraging electronic market linkages.