Press Release: Statement of SEC Division of Market Regulation Director Erik Sirri Regarding the Start of the Trading Phase of Compliance With Regulation NMS on Monday, March 5, 2007
summary
The SEC announced the March 5, 2007, start of the Trading Phase of Regulation NMS to test trade-through protections and intermarket sweep orders, with no fraud or misconduct involved—only a regulatory rollout to improve market efficiency and system readiness.
paragraph
On March 5, 2007, the SEC’s Division of Market Regulation initiated the Trading Phase of Regulation NMS, requiring exchanges and ECNs to implement policies preventing trade-throughs of better-priced protected quotations. Securities firms were scheduled to comply with trade-through rules for 250 pilot stocks on July 9, 2007, while intermarket sweep orders (ISOs) were introduced to allow order execution without immediate regard to protected quotes, subject to follow-up routing. The SEC emphasized system monitoring and provided a 'self-help' exception to suspend trade-through rules during technical failures, with provisions for industry-wide relief if market-wide disruptions occurred—no fraud, penalties, or financial misconduct were alleged.
narrative
On March 5, 2007, the SEC’s Division of Market Regulation, under Director Erik Sirri, launched the Trading Phase of Regulation NMS to test market infrastructure before full implementation. Exchanges and electronic communication networks (ECNs) were required to prevent trade-throughs of better-priced protected quotations, while securities firms would join the requirements for 250 pilot stocks on July 9, 2007. The phase introduced intermarket sweep orders (ISOs), allowing trading centers to execute orders without immediately honoring better-priced quotes elsewhere, provided routers subsequently routed additional ISOs to capture those better prices. The SEC acknowledged potential system challenges amid high trading volume and volatility and established a 'self-help' exception under Rule 611(b)(1) to suspend trade-through rules during technical failures or malfunctions. In cases of widespread system issues, the SEC and NASD were prepared to issue an industry-wide exception, temporarily suspending all trade-through obligations to maintain market functionality. The initiative was purely operational and technical, aimed at enhancing market efficiency, interoperability, and resilience—not enforcement or fraud prosecution. No individuals, firms, or entities were accused of wrongdoing; the focus remained on system readiness, regulatory compliance, and contingency planning for market stability.
Classified non-corporate(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Parties
automated trading systemserik r. sirriregulation nmssec division of market regulationsec or nasdsec staffsecurities firmstrading centers
Keywords
tradingtrading phaseregulationphasenmssystemsstart tradingprotected quotationsequity marketsmarketsmarchdivision marketmarket regulationerik sirriregarding start
Extracted insights
Entities 8
- company automated trading systems
- person erik r. sirri
- person regulation nms
- agency sec division of market regulation
- agency sec or nasd
- agency sec staff
- person securities firms
- person trading centers
Triples 10
- Erik R. Sirri is Director of SEC Division of Market Regulation
- Exchanges and ECNs began complying with Trading Phase of Regulation NMS on March 5, 2007
- Exchanges and ADF Participants will implement Policies to prevent trade-throughs of better-priced protected quotations
- Securities Firms will comply with Trade-through provisions of Regulation NMS for 250 pilot stocks on July 9, 2007
- Exchanges and ADF Participants developed or modified Automated trading systems
- Trading centers may route Intermarket sweep orders (ISOs)
- SEC Staff will monitor Operation of equity markets during Trading Phase
- Regulation NMS addresses Systems problems through self-help exception
- SEC or NASD will issue Industry-wide exception under Rule 611(b)(1) if market-wide problems arise
- NASD is primary self-regulatory authority for Broker-dealers participating in multiple markets
Extracted body text (4,919c)
Statement of SEC Division of Market Regulation Director Erik Sirri Regarding the Start of the Trading Phase of Compliance With Regulation NMS on Monday, March 5, 2007 FOR IMMEDIATE RELEASE 2007-29 Washington, D.C., March 2, 2007 - Erik R. Sirri, Director of the Division of Market Regulation, U.S. Securities and Exchange Commission, made the following statement today regarding the start of the Trading Phase of Regulation NMS: On Monday, March 5, 2007, exchanges and electronic communication networks (ECNs) will begin complying with the Trading Phase of Regulation NMS. The Trading Phase was designed to identify and work out any problems before full effectiveness of Regulation NMS. Beginning March 5, 2007, the exchanges and ECNs participating in the Alternative Display Facility of the NASD will implement policies and procedures reasonably designed to prevent trade-throughs of better-priced protected quotations displayed by other exchanges and ADF participants. On July 9, 2007, securities firms also will comply with the trade-through provisions of Regulation NMS for 250 pilot stocks. In recent months, many of the exchanges and ADF participants have developed new automated trading systems or significantly modified their existing automated trading systems. Many of these systems route orders out to access better-priced protected quotations at other markets. In addition, many securities industry participants may choose during the Trading Phase to begin routing intermarket sweep orders (ISOs). An ISO allows a receiving trading center to execute the order without regard to any better-priced protected quotations at other trading centers. The router of an ISO, however, is required to route additional ISOs, as necessary, to execute against any better-priced protected quotations at other trading centers. The Trading Phase is designed to provide all industry participants with an opportunity to gain experience with the new trading rules, including ISOs, prior to Regulation NMS becoming fully effective. The start of the Trading Phase is a very important step in the implementation of Regulation NMS. The Commission staff, in consultation with the self-regulatory organizations and other securities industry organizations, has monitored the status of the industry's implementation efforts. The exchanges already have rolled out the most significant aspects of their new trading systems over the preceding weeks and months, but some will rollout new functionalities on March 5th. A market's rollout of new trading systems inevitably presents challenges for the market and its participants. In addition, the exceptional trading volume and price volatility of the equity markets over the last few days raise the potential of even greater challenges during the Trading Phase. Throughout the Trading Phase, the Commission staff will closely monitor the operation of the equity markets to assess whether any systems or other trading problems arise. Regulation NMS addresses systems problems through an exception for trades executed at a time when a trading center displaying a protected quotation is experiencing a failure, material delay, or malfunction of its systems or equipment. (Rule 611(b)(1), commonly referred to as the "self-help" exception.) The self-help exception also excepts the routing of ISOs. We recognize that use of this exception will be appropriate if systems problems arise at one or more markets. As a supplement to individual use of the self-help exception during the Trading Phase, if market-wide problems arise, the Commission staff intends to consult with the self-regulatory organizations to assess whether these systems problems are so serious that an industry-wide exception should be triggered under Rule 611(b)(1). Staff particularly will consult on this matter with the NASD, as the primary self-regulatory authority with responsibilities for broker-dealers participating in multiple markets. When appropriate, either the Commission or NASD will issue a public notice that the equity markets are experiencing conditions that appropriately trigger an industry-wide use of the self-help exception. This industry-wide exception would effectively suspend operation of all trade-through provisions. For example, it would allow all trading centers and order routers to execute trades and route ISOs without regard to the protected quotations displayed at any particular time. The exception would continue for the time period specified in the notice. The U.S. equity markets are the deepest and most liquid in the world and vitally important to the U.S. economy. Should serious systems problems or difficult market conditions arise, I believe that the first priority should be to enable the equity markets to continue trading and establishing the most efficient prices possible for investors. http://www.sec.gov/news/press/2007/2007-29.htm Home | Previous Page Modified: 03/02/2007
OCR text (4,919c · plain-text · 99% conf)
Statement of SEC Division of Market Regulation Director Erik Sirri Regarding the Start of the Trading Phase of Compliance With Regulation NMS on Monday, March 5, 2007 FOR IMMEDIATE RELEASE 2007-29 Washington, D.C., March 2, 2007 - Erik R. Sirri, Director of the Division of Market Regulation, U.S. Securities and Exchange Commission, made the following statement today regarding the start of the Trading Phase of Regulation NMS: On Monday, March 5, 2007, exchanges and electronic communication networks (ECNs) will begin complying with the Trading Phase of Regulation NMS. The Trading Phase was designed to identify and work out any problems before full effectiveness of Regulation NMS. Beginning March 5, 2007, the exchanges and ECNs participating in the Alternative Display Facility of the NASD will implement policies and procedures reasonably designed to prevent trade-throughs of better-priced protected quotations displayed by other exchanges and ADF participants. On July 9, 2007, securities firms also will comply with the trade-through provisions of Regulation NMS for 250 pilot stocks. In recent months, many of the exchanges and ADF participants have developed new automated trading systems or significantly modified their existing automated trading systems. Many of these systems route orders out to access better-priced protected quotations at other markets. In addition, many securities industry participants may choose during the Trading Phase to begin routing intermarket sweep orders (ISOs). An ISO allows a receiving trading center to execute the order without regard to any better-priced protected quotations at other trading centers. The router of an ISO, however, is required to route additional ISOs, as necessary, to execute against any better-priced protected quotations at other trading centers. The Trading Phase is designed to provide all industry participants with an opportunity to gain experience with the new trading rules, including ISOs, prior to Regulation NMS becoming fully effective. The start of the Trading Phase is a very important step in the implementation of Regulation NMS. The Commission staff, in consultation with the self-regulatory organizations and other securities industry organizations, has monitored the status of the industry's implementation efforts. The exchanges already have rolled out the most significant aspects of their new trading systems over the preceding weeks and months, but some will rollout new functionalities on March 5th. A market's rollout of new trading systems inevitably presents challenges for the market and its participants. In addition, the exceptional trading volume and price volatility of the equity markets over the last few days raise the potential of even greater challenges during the Trading Phase. Throughout the Trading Phase, the Commission staff will closely monitor the operation of the equity markets to assess whether any systems or other trading problems arise. Regulation NMS addresses systems problems through an exception for trades executed at a time when a trading center displaying a protected quotation is experiencing a failure, material delay, or malfunction of its systems or equipment. (Rule 611(b)(1), commonly referred to as the "self-help" exception.) The self-help exception also excepts the routing of ISOs. We recognize that use of this exception will be appropriate if systems problems arise at one or more markets. As a supplement to individual use of the self-help exception during the Trading Phase, if market-wide problems arise, the Commission staff intends to consult with the self-regulatory organizations to assess whether these systems problems are so serious that an industry-wide exception should be triggered under Rule 611(b)(1). Staff particularly will consult on this matter with the NASD, as the primary self-regulatory authority with responsibilities for broker-dealers participating in multiple markets. When appropriate, either the Commission or NASD will issue a public notice that the equity markets are experiencing conditions that appropriately trigger an industry-wide use of the self-help exception. This industry-wide exception would effectively suspend operation of all trade-through provisions. For example, it would allow all trading centers and order routers to execute trades and route ISOs without regard to the protected quotations displayed at any particular time. The exception would continue for the time period specified in the notice. The U.S. equity markets are the deepest and most liquid in the world and vitally important to the U.S. economy. Should serious systems problems or difficult market conditions arise, I believe that the first priority should be to enable the equity markets to continue trading and establishing the most efficient prices possible for investors. http://www.sec.gov/news/press/2007/2007-29.htm Home | Previous Page Modified: 03/02/2007