Proposed SEC Rule Would Significantly Affect Direct Market Access

February 16, 2010

The SEC recently proposed a controversial new rule addressing direct market access arrangements and also approved a related Nasdaq rule filing. Among other things, these rules require brokers offering electronic order routing to their buy side customers to employ pre-trade filters that reject both erroneous trades and trades that may violate the rules of the SEC or exchanges. Both rules may have a profound effect on electronic trading and alter the relationship between brokers and their buy side customers. The attached article examines both rules and identifies some of the important issues that they present.

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