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Statement on Disclosure of Order Execution Information

Dec. 14, 2022

Thank you, Mr. Chair.  And thank you to the staff who worked on this release and the rest of the package of proposed reforms to the structure of our capital markets we are considering today.  The four releases in that package are here before us because a lot of members of the staff worked late, worked weekends, and missed out on time with family and friends.  I appreciate the staff’s hard work over the past several months on all of these releases and your engagement with my office.  I hope that you all will find some time to relax over the holidays before the comment letters start pouring in.

As will become clear over the upcoming hours of discussion, the reforms embodied in these four proposals are complex and will likely have significant, overlapping, and unpredictable effects on the way our markets operate.  As will also become clear, I doubt that our markets require a significant overhaul now.  They have weathered quite well several remarkable stresses over the past three years, and retail and institutional investors continue to experience unparalleled execution quality, particularly in our equity markets.  There is no emergency in our markets that demands a comprehensive revamping of how broker-dealers and market makers handle customer order flows.  Commenters will struggle to conduct a thorough analysis of each of these voluminous and complicated proposals individually.  An even more daunting task will be understanding and analyzing them as what they clearly are: a package of comprehensive reforms that will interact both with the existing ruleset and each other in complex and likely unpredictable ways.  Moreover, the Market Data Infrastructure reforms we adopted two years ago have not taken effect, so uncertainties around how those changes will affect the market will be another wrinkle in the analysis.

Of course, the Commission always should be open to making adjustments to its rules to address discrete issues that we or market participants identify.  But effective regulation requires a good deal of prudence and humility on the part of the regulator.  Our financial markets are complex; our ability to comprehend fully how they function and predict the effects of significant changes is limited.  Accordingly, we should not be overconfident about our ability to make significant market structure overhauls in a market that is functioning – well, albeit not perfectly—especially for retail investors.  We need to recognize that our efforts are not guaranteed to produce even marginal improvements; indeed, the mere possibility of such improvements may not justify risking significant disruption to the market.

Some elements of today’s package, however, involve proposals to make certain fairly discrete changes that market participants have long discussed as possible ways of addressing particular problems in the market.  I can support those proposed changes, and I expect that many commenters will too.  Among these are the amendments to Rule 605 regarding disclosure of certain information about order execution that the staff has just described for us. 

Rule 605 was initially adopted in 2000[1] when the market was quite different, and its age shows.  By most accounts, the current rule does not provide sufficient information to judge execution quality under current market conditions.[2]  The proposal would establish more granular reporting requirements.  The largest broker-dealers would have to report order execution information that should make the statistics more useful for customers and others seeking to understand order-routing decisions and execution quality across a range of market centers and broker-dealers alike.

The proposal appears to be a reasonable attempt to address deficiencies of the current Rule 605, but the Commission will still need input from market participants to make a final judgment.  I look forward to hearing whether the proposed requirements will benefit investors.  I also look forward to hearing whether any benefits will come at the cost of being overly burdensome to the broker-dealers and market centers that will be required to report order execution data in considerably more complex detail than is required under the current rule.  Of particular interest to me are questions like the following:

  • Who will use these data?
  • Are the required data elements relevant to these users? 
  • Does it make sense to make certain broker-dealers report these data, and has the Commission identified the appropriate set of broker-dealers to subject to these requirements?
  • Are the monthly summary reports going to be informative to individual investors in a way that the more detailed data required under Rule 605 will not be, even if that data will be synthesized and made available by third-party providers?
  • Will the monthly summary reports create a different impression of order execution practices and quality than would be provided by the more detailed order execution information required under the rule?

I hope commenters will have the time to explain whether this rule, taken on its own, is a net improvement to useful disclosures available to investors.  I also look forward to hearing whether it would make sense to allow these changes to take effect before moving forward with some of the more fundamental changes we are proposing today.


[1] See Securities Exchange Act Release No. 43590 (Nov. 17, 2000), 65 FR 75414, 75416 (Dec. 1, 2000) (Disclosure of Order Execution and Routing Practices) (“Adopting Release”).

[2] See, e.g., Virtu Financial, Petition for Rulemaking to Amend Rule 605 (Sept. 20, 2021), available at; Letter from Financial Information Forum to Brett Redfearn, Director, Division of Trading and Markets, “Request for Comment—FIF Rule 605 Modernization Recommendations” (Jan. 30, 2019), available at; Letter from Financial Information Forum to Stephen Luparello, Director, Division of Trading and Markets, “Rule 605/606 Enhancements from a Retail Perspective,” (Oct. 22, 2014), available at

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