Looks like Reg NMS Could be postponed again. Last week the New York Stock Exchange sent a letter to be sent to the Securities and Exchange Commission to ask for a one-month postponement of the new trading rule. The thinking is that the SEC likely will agree to a delay because if the new rule is set in motion and the largest market center is not ready, there might be a market disruption. This would be the second delay for the much-anticipated rule, as it was originally supposed to go into effect last June.

The NYSE is waiting on full implementation of its Hybrid market, which launched last year via a staged approach. In October, the exchange implemented Phase III, which included automatic execution of incoming orders and auto-routing of orders to protected quotations of other markets. Because this phase has experienced some delays, the NYSE won’t be able to complete and test the final phase, Phase IV, in time for the current Reg NMS go date, Feb. 5.

I’m sure the rest of the industry also will breathe a sigh of relief if the SEC grants the delay. Reg NMS has been anticipated for almost two years now, and preparation for the regulation has led to much innovation and change in the marketplace. Arguably, it is responsible for the recent rapid growth of electronic trading, the birth of dark pools, the closing of NYSE and other trading floors, the reduction of trading staff at many firms, and the enhancement of many trading systems. In particular, the execution management system will emerge post Reg NMS as an even more critical technology tool — for both the buy and sell sides.

All of these changes have created an evolution in the trading space that will culminate with the implementation of Reg NMS. Finally, the market will see how its preparation, based on theory, will play out in practice.

Of course, there has been much debate about the unintended consequences of Reg NMS, what the new rule will mean to the auction market and whether it is truly necessary. But while the unintended consequences are still unknown — and yes, the rule has taken its toll on the NYSE’s auction market — one thing is clear: The preparation alone for Reg NMS has created a much more efficient marketplace for all.

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