SEC votes in favor of proposals benefitting small-time retail investors

The Securities and Exchange Commission (SEC) on Wednesday voted in favor of four proposals that aim to protect small-time retail investors and increase competition, transparency and fairness in trading.

These measures, if finalized, would cause the biggest changes to the US stock trading rulebook since 2005. 

The proposals came out of an SEC review prompted by the 2021 frenzied trading of GameStop Corp stocks that revealed bias against small-time retail investors by brokers like Robinhood and wholesalers like Citadel.

“Today’s markets are not as fair and competitive as possible for individual investors,” SEC Chair Gary Gensler said when announcing the proposals.

SEC economists estimated that increasing competition could save individual investors $1.5 billion a year.

What are the changes?
Most of the four rules proposed aim to make the American equity market structure more accessible and just for individual investors.

One of the proposals that passed with a 5-0 vote was to update and expand the 20-year-old rule that requires wholesalers and exchanges to publish monthly data about the quality of stock pricing they offer their investors. This rule is now expanded to brokerages with more than 100,000 customers, which includes Robinhood.

The other two proposals that passed in a 3-2 vote require brokers to seek out the most favorable markets for their customers’ securities trade and lower trading increments and access fees on exchanges.

These rules are open to public comment till March 2023, after which SEC will decide whether to finalize them.