By John McCrank

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission voted on Wednesday to propose some of the biggest changes to the structure of the U.S. stock market in nearly two decades, aimed at enhancing transparency and fairness while increasing competition for stock orders from retail investors.

The SEC said the proposals include a requirement that retail marketable stock orders be sent to auctions before execution, a new standard for brokers to show they have the best possible execution for clients’ orders, lower trading markups and access fees on exchanges.

“We feel that these reforms, if implemented, will ultimately help the price discovery process and save investors money,” said Joe Saluzzi, Co-Director of Trading at Themis Trading.

“Allowing orders to interact with each other, rather than splitting them up, will enhance competition and drive better prices.”

The SEC said opening individual investor orders that can be executed immediately in competitive auctions could lead to “significantly” better prices for investors. Under current practice, retail brokers send most of these orders to wholesale brokers, sometimes for a fee.

“Competitive shortfalls could be about $1.5 billion annually, compared to current practices — money that could go back into the pockets of retail investors,” said Gary Gensler, chairman of the SEC.

The changes, if adopted, would represent the biggest change in stock market rules since the Securities and Exchange Commission introduced the National Market Regulatory System in 2005, which was intended to modernize and enhance an increasingly fragmented and largely electronic market.

Ronan Ryan, president and co-founder of exchange operator IEX Group, said the reforms were “a constructive and positive effort to improve transparency, increase competition and ensure investors have access to the best rates available in the market.”

“It has been 17 years since the current equity rules were adopted, and since that time, the stock market has undergone significant change — including the advent of high-frequency trading, a significant reduction in the liquidity offered on the exchange, and a significant rise in over-the-counter trading,” Ryan said.

“Updating the regulations ensures that market competition between brokers, market makers and exchanges continues to benefit investors.”

A competition order rule, which requires marketable retail orders to be submitted to auctions, could lead to more such orders being matched on exchanges, such as the NASDAQ or Intercontinental (NYSE:) Inc’s New York Stock Exchange, rather than wholesale brokers, such as Citadel Securities and Virtu Financial (NASDAQ:).

Nasdaq said it believes in markets that are “transparent, fair, efficient, competitive and inclusive” and that it looks forward to reviewing the SEC’s proposals.

“Any proposed changes must provide demonstrable solutions to real problems while avoiding unintended consequences that would harm US investors,” Citadel Securities said in a statement.

Companies that benefit from the status quo, such as the wholesalers and retail brokers they receive payments from, are likely to fight the SEC’s proposals, said Stephen Hall, Better Markets’ legal director and securities specialist.

“It’s imperative that the SEC resist industry pressure, carefully consider all stakeholder input, and finalize a set of rules that will really help investors over the long term get a better deal on Wall Street,” Hall said.

The SEC also voted to propose requiring brokers to provide more information about the quality of their clients’ trades, while increasing the number of firms that must file order fulfillment reports.

The proposed changes will be put up for public comment until at least March 31 before the regulator moves to finalize the rules, which will also be voted on.

The regulator also voted to expand disclosures about trading in company shares by insiders, such as executives and directors, who are paid equity-based compensation.