PALM DESERT, Calif. – The director of the Office of Compliance Inspections and Examinations at the Securities and Exchange Commission said Wednesday that the examiner should be in position to begin analyzing data collected from national exchanges on how new types of orders to buy or sell stocks are created before coming to the regulator for approval.
Carlo V. di Florio said the examiners are collecting data from national exchanges and responses could be ready for analysis by mid-year.
The office will be looking for patterns that warrant closer inspection, he said. The review should be complete by year’s end. In its first-ever statement of priorities, issued early this year, the Office of Compliance Inspections and Examinations said its Market Oversight unit would conduct inspections of equities exchanges to determine the types of orders available and the internal governance process around how order types are proposed, implemented, and monitored post-implementation.
Among the patterns to be monitored: Whether the same firms originate requests for different order types at more than one exchange.
Assessments are being conducted at all national stock exchanges, including the three operated by NYSE Euronext, including the New York Stock Exchange; the three operated by Nasdaq OMX Group, including the Nasdaq Stock Market; the two operated by BATS Global Markets; the two operated by Direct Edge, and NSX, the market once known as the Cincinnati Stock Exchange and now based in Jersey City, N.J.
Each of the exchanges has been sent documents seeking details on how they develop ideas for new order types and responded.
OCIE now is seeking additional information from each exchange. Additional follow-up inquiries likely will include on-site visits., John Polise, the head of market oversight at the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations told Traders Magazine earlier.
OUT OF ORDER: Are Controls Needed on Choice, Complexity and Competition?
How the SEC Approves an Order Type
The inspections come as the number of order types and the almost limitless permutations in the way they can be used to buy or sell shares have added what buyside and sellside traders have complained is undue complexity to trading.
