Exclusive: U.S. SEC scrutinizes fairness of stock exchange pricing
NEW YORK - The U.S. Securities and Exchange Commission is investigating whether the multi-tiered pricing system used by stock exchanges favors large brokers at the expense of small ones, according to a person familiar with the matter.
While the SEC has not launched a formal civil investigation, it is seeking information from the exchanges on the pricing system. If the SEC were to determine that the tiered structure is unfair, exchanges could be forced to simplify their pricing models, potentially costing them millions of dollars in fees.
More generally, exchanges say that fierce competition in the industry has resulted in tighter bid-ask spreads that benefit all investors. ICE, Nasdaq and Cboe have filed lawsuits or appeals challenging the SEC’s authority on those two mandates. “It discriminates against smaller broker dealers who end up almost perversely subsidizing the cost of the whole exchange relationship for the largest firms,” he said.
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