NYX Nyse Euronext

U.S. stock-market regulators will take another two months to review a proposal by NYSE Euronext (NYX) that would allow the exchange group a new way to compete for retail investors' trading business.

The Securities and Exchange Commission on Friday extended by 60 days its review of the proposed NYSE program, which would see the Big Board parent compete for individual investors' orders by using some of the same methods as the banks and trading firms that currently execute many of those trades.

An SEC spokesman confirmed the extension Friday.

NYSE Euronext originally submitted the program last fall, seeking to separate out stock orders coming from retail brokerage firms and make them eligible to receive improved prices on their trades. The exchange operator proposed to allow market makers and other traders to offer prices that improved upon the going market rate by as little as a tenth of a cent.

The proposal drew protest from banks and trading firms, who warned that allowing share prices to move to finer increments risked destabilizing those prices, because liquidity would be stretched out across a wider range of potential prices.

A handful of firms currently dominate the facilitation retail investor orders, including Knight Capital Group (KCG), UBS AG (UBS) and Citigroup Inc (C). Such firms pay fees to retail brokers in return for the first chance to trade their customers' orders. The firms also can choose to provide more competitive prices than may be available on the public markets.

If orders are unfilled by such firms, they are often sent on to rival trading houses or private stock markets known as dark pools where they may be filled before winding up on an exchange.

Exchange operators have complained that the process has minimized the presence of retail-level trading on their markets. Individual investors' orders are prized by faster-moving firms that can pocket profits by rapidly turning over the shares, while retail traders typically hold their investments for a longer period of time.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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