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

In 1975, Congress gave the Securities and Exchange Commission (SEC) responsibility for overseeing the development of a national market for trading securities. Such a market would ensure that all buyers and sellers of securities, regardless of geographic location, would have the opportunity to get the best prices when trading securities. Although GAO did not have time to formulate a reliable estimate of the possible savings that could result from a national market system, estimates from other sources ranged from 50 to 100 million dollars annually.

Because SEC had not developed an overall plan which would provide a basis for measuring progress, it was not possible to determine what progress had been made toward establishing a national market or when the market would become operational. It was determined that the SEC national market unit did not have the skills or personnel to carry out and evaluate national market activities. SEC said that it had given temporary approval for an industry group's system to transmit order information among six stock markets and approved an automated electronic trading system that used a central computer to receive and match orders. Drawing on its long experience in regulation, SEC took an evolutionary approach to forming a national market. It chose to make rules that directed industries to design and operate components that fit with those already in place rather than design an entirely new market system. Thus, it took 4 and 6 years respectively to bring about composite quotation and consolidated last-sale reporting components that industry spokesmen said could have been instituted in 9 months. Pursuant to congressional mandate that national market trading be conducted with accurate information supplied by neutral sources in a fair manner, SEC registered the Securities Industry Automation Corporation as an exclusive processor of national market information. However, SEC did not independently verify whether the firm could promptly disseminate reliable and accurate data and did not take steps to ensure the firm's neutrality.

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