Improvements Needed in the Securities and Exchange Commission's Efforts To Establish a National Securities Market

Congress, through the Securities and Exchange Commission (SEC), is trying to establish a national market system for trading securities. The purpose of the system is to assure that all buyers and sellers of securities, regardless of their geographic location, would have the opportunity to get the best price when they trade securities. The objectives require that modern data processing and communications technology be used to improve operational efficiency and to enhance competition in the securities industry. Thus far, SEC has not developed an overall plan to guide development of a national market and to monitor progress toward that goal. The Intermarket Trading System has been established as a communications connection between six stock exchanges although it is not considered a large step toward the national system because of its limitations. One exchange is using another automated electronic trading system that relies on a central computer to match buy and sell orders. It is not believed that this piecemeal procedure is an effective way to develop a system as significant as the national market. The personnel assigned to the SEC national market unit do not have the technical skills needed to evaluate industry proposals dealing with sophisticated data processing systems. The size of the unit does not appear adequate to perform work on the system in a timely manner. In registering the Securities Industry Automation Corporation, the exclusive data processor of securities information, SEC did not independently verify whether the firm could promptly process reliable and accurate data, it did not do any testing, and it did not assess the firm's neutrality. Proper planning of national market activities activities is needed for prompt and effective completion of an integrated system.