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August 31, 2004

Will Reg NMS Go Up in Flames?

By Editorial Staff

The trade-through rule reform proposal is dead for the year as is much of the other Reg NMS proposals. That's the opinion of several trading industry officials who spoke privately to Traders Magazine. They also say that any action on access fees "is dead" at least right now. And the proposal on market data is "absolutely confusing" so it is going nowhere with the Securities and Exchange Commission this year, these officials add.

These sources cited several reasons why the Reg NMS proposal - with the exception of one part - is not likely to happen this year.

"The SEC would prefer the industry hammer things out themselves," says one executive who follows federal regulations for a mid-size trading firm. And the SEC is hoping that the NYSE's recent hybrid proposal may solve most of the problems, he adds.

Another issue, says a lobbyist for the securities industry, is that the SEC is having problems reaching a consensus. "Time and again, they're having three-to-two votes. They don't want to have such a narrow vote on such a big issue so they're betting that this thing can be tabled for the time being," the lobbyist says.

However, the lobbyists and trading official both agree that the one issue that may be settled is sub-penny trading. Since it is a non-controversial subject, with most traders agreeing that it is causing problems, it is possible that sub-pennies could be carved out of the Reg NMS plan and passed separately.

An SEC spokesman would only say that the Reg NMS proposals are under review.