WSJ reports the SEC is expected to ban flash orders on stock exchanges. But the fate of giving market participants a sneak peek at options trades is fuzzy.
The options market is much more dependent on flash trading than stock markets, which have received most of the scrutiny from lawmakers and regulators worried that some traders are getting an unfair advantage over other investors.
The SEC proposed a rule amendment in September that would eliminate flash orders, and the agency's staff is likely to make recommendations to the full commission early next year, an agency spokesman said. While flash orders are a relatively new and small part of stock markets, they are a major cog in options trading known as "step-up" orders.
An outright ban could trigger upheaval in the options markets, according to market participants. Some are urging the SEC to continue allowing step-up orders, claiming they save investors money.
In addition to potentially redirecting the flow of hundreds of millions of dollars in Wall Street profits, the outcome could shift power in the options markets, which give investors the right to buy or sell a stock at a given price within a set time frame. (Stocks mentioned: AMTD, NYX)