While Congress called for competition between markets and greater investor access to quotation and transaction information, the exchanges set in place a structure that is stifling both. Over the years, the greatest barrier to competition has been the trade-through rule, which states that one market cannot trade at a price inferior to a price displayed by another market. Consider the following analogy. Now, should Federal shopper protection laws mandate that the shopper travel cross-town to purchase the cheaper suit, even if there is no guarantee that the less expensive suit is even available in his size. If we count on consumers to judge for themselves where to buy suits, why not allow investors the same option when it comes to purchasing stocks.
Price is one consideration to take into account when placing an order.
Other factors, such as speed and the likelihood of execution, are often just as important. The additional time it takes some markets to execute orders may result in an investor getting a worse price than the current quote, especially in a fast-moving market. The SEC recognizes that price alone cannot always adequately determine order execution, and that having price as a sole criterion leads to restricted competition between markets, and hampers innovation. Island s President, Matt Andresen, recently hailed the SEC s decision, affirming that, Nothing could make more sense to investors who are increasingly choosing the ECN s model over the traditional markets. Knowing in milliseconds whether or not you got your trade executed and knowing with absolute certainty can sometimes be the single most important thing for an investor to know.