SEC proposes to cut risk of error from brokerage customers with split-second market access

SEC proposes broker rules to curb disruptive error

WASHINGTON — Federal regulators are proposing new requirements for brokerage firms aimed at reining in risk from their trading customers who are able to get split-second access to markets to buy or sell stocks.

The Securities and Exchange Commission voted Wednesday to open the proposal for public comment

At issue is what is called “unfiltered” or “naked” sponsored access. Brokerages approved to trade on exchanges can rent out access to unregulated clients such as high-frequency traders.

Regulators are concerned that electronic errors from such high-speed trading could disrupt markets.

The proposed rule would require brokerages to enact controls to reduce risk or error from their sponsored trading customers.