The SEC has posted the release proposing rules that would elimination of the flash order exception from Rule 602 of Regulation NMS. If adopted, the proposed amendment in effect would prohibit all markets - including equity exchanges, options exchanges, and alternative trading systems - from displaying marketable flash orders.
According to the Commission, these amendments are necessary because:
The Commission is concerned that the Rule 602 exception is no longer necessary or appropriate in today's highly automated trading environment. Among other things, the flashing of order information outside of the consolidated quotation data stream could lead to a two-tiered market in which the public does not have fair access to information about the best available prices for a security that is available to some market participants. Flash orders also may detract from the incentives for market participants to display their trading interest publicly.
Comments on the rule proposals are due by November 23, 2009
The full text of the Commission's proposing release, "Elimination of Flash Order Exception from Rule 602 of Regulation NMS" is available at: http://sec.gov/rules/proposed/2009/34-60684.pdf
A fact sheet about flash orders is available at: http://sec.gov/news/press/2009/2009-201-factsheet.htm