ETFs seek shelter from Reg NMS

Some exchange traded fund providers are asking the Securities and Exchange Commission for exemption from a part of Regulation NMS, CCH Wall Street reported. The firms. which were not named in the report, say that the regulation’s order protection rule has cut down on ETFs’ liquidity, industry observers told CCH Wall Street. The order protection rule, which debuted as a pilot program last month, requires trading centers to seek the best price for a trade. In order to conform to Regulation NMS, broker-dealers have to track the intermarket sweep orders for all securities. However, by the time a broker-dealer sends out that data, stock prices may change, so the order sent out may not be the best one available, according to the report. Also, brokers who announce their trades may face other brokers who will buy at a better price, an industry official told CCH Wall Street. ETF firms have begun talks with the SEC, searching for an exemption, but there is no word on what action the SEC will take just yet, industry officials said to CCH Wall Street. "As the industry association looking at the Regulation NMS pilot program, we're tracking data and the facets of the industry that are affected by the pilot, said SIFMA spokesman Travis Larson. “We will be working with the industry and the SEC to see if there are any changes that need to be made before the full program goes into effect.”