What to Expect From New SEC Rules on Executions

A ways back when I wrote about the best online brokers overall for 2001, a reader wrote: "I think you've left out a key factor in the value of online trading -- execution speed. All this talk of commissions is meaningless if you lose a half point" in execution.

How true. Many things that investors now consider in judging a broker -- email alerts, IPO access, even commissions -- would seem trivial if we knew that a broker got great or lousy executions for its customers.

Until now, however, there really has been no reliable way to evaluate executions. This year that's expected to change. Two new Securities and Exchange Commission rules aim to shine the proverbial bright light on trade executions. One requires brokers like Merrill Lynch and Schwab to disclose where they send customer trades for execution. The other requires disclosure from the folks who execute trades, otherwise known as "market centers." When viewed in tandem, the rules are supposed to give investors an idea of whether their broker is sending trades to market centers in their brokers' best interests, or their own. ...