On March 5th 2007, Regulation National Market System ("Reg NMS") will go into effect for the United States stock markets. Designed to even the playing field between U.S. stock exchanges and rival electronic trading platforms, these regulations require one exchange to route customer orders to other trading venues that display a superior price execution. The goal is to ensure that customers get 'best execution' on each and every one of their stock and equity option transactions, while eliminating the current practice of 'trade-throughs' (ie executing an order at an inferior price than that currently available nationally) and encouraging the greater use of limit orders.

Late on Friday March 2nd 2007, the New York Stock Exchange ("NYSE") asked the Securities and Exchange Commission for a partial delay in adopting the new Reg NMS rules with certain alternative display facilities such as Direct Edge, LavaFlow Inc., and Track Data Securities Corp. The NYSE also apparently needs more time to connect with the International Securities Holdings Inc., which is in the midst of rolling out its equities trading. None of those trading platforms are plugged into the broadly used Intermarket Trading System, which is what the NYSE and other major exchanges use to route orders. There is no indication yet of how the S.E.C. will react to yet another request for a delay.

The full implementation of Reg NMS is expected to sharply increase the message traffic among the many exchanges and various trading centers that internalize customer order flow. Electronic trade execution is expected to significantly increase as well as the use of quantitative strategies like those used in algorithmic trading programs. The interesting question is when will the equity markets be able to draw conclusions on just how effective are these new Reg NMS regulations and associated changes? Toomre Capital Markets LLC welcomes your thoughts and comments.