NYSE Group, the parent company of the New York Stock Exchange, has requested that the Securities and Exchange Commission extend by a month the implementation of a series of regulations designed to prepare U.S. financial markets for rapid trading technologies.
The nation's largest stock exchange wants to delay implementation of Regulation NMS to March 5 from Feb. 5.
The SEC in 2005 approved sweeping market reforms intended to modernize the regulatory structure of the national market system that was created in the 1970s.
Regulation NMS was designed so that trades would be routed to the market that offers the best price, and it forces U.S. stock exchanges to become faster and more accurate to stay competitive. It also comes amid increased competitive pressure for stock exchanges in the face of upstart electronic markets and consolidation throughout the entire industry.
"We believe that a brief extension of the Regulation NMS trading phase date is in the best interest of the industry and investors and will allow for an orderly implementation of Regulation NMS," the Big Board said in the letter.
The new guidelines would also affect NYSE rivals such as The Nasdaq Stock Market and smaller competitors like the American Stock Exchange and other regional equity markets. A spokeswoman for the Nasdaq declined to comment.
The NYSE has been rolling out since late last year its hybrid trading system, which blends electronic trading with traditional execution made by floor brokers. The exchange said in a letter to the SEC that delays in implementing the electronic system mean it would be unable to meet "automated quotation" mandates under the new rules.
This means the NYSE would be considered too slow on some transactions and would be unable to automatically execute stock trades within the regulator's expectations. The NYSE currently has 2,400 stocks that have the ability to trade electronically, with another 200 on tap to be added Wednesday, out of approximately 3,600 securities that trade there.
NYSE spokesman Rich Adamonis said he expects the third phase of the hybrid system rollout will be completed by the end of February. He would not comment about the request to delay Regulation NMS beyond the letter sent to the SEC.
The exchange said in the letter that NYSE quotes at the conclusion of the current phase of the rollout "will be automated and accessible." However, without extending the deadline, the exchange said it would temporarily be unable to meet the SEC's new guidelines because it would jeopardize best execution for investors.
"Rushing" the hybrid rollout would put the NYSE's "trading system, and thus, the industry and investors at unnecessary risk," the exchange said. The SEC in May postponed a prior deadline for exchanges to comply with Regulation NMS because of concerns that exchanges were not yet prepared.