New SEC Rules Set to Tighten Market Orders

November 30, 2001 ( - Investors concerned that they're not getting the best prices on market orders can check how their trades are executed, following new rules implemented by the Securities and Exchange Commission (SEC).

The new rules, which follow last year’s SEC finding that 85% of market orders executed on Nasdaq were routed to brokers not quoting the best price, require brokers to disclose:

  • how often they route their customers’ stock orders to other brokers for execution
  • whether they have financial relationships with the trading firms to which they send the orders.

The disclosures are to be made every three months on a free Web site.

In addition, trading firms, specialists on stock exchanges, and the new electronic communications networks are required to issue monthly data on speed of order execution for each stock traded.

In contrast to limit orders, which are executed at a price specified by the buyer, market orders are executed without regard to price.

In volatile markets, trades are often executed at prices above the current quoted stock price.