The Securities and Exchange Commission voted yesterday to propose banning brokers from providing clients with unsupervised access to stock exchanges, a practice that accounts for about two of every five shares that trade in the United States.
Chairwoman Mary Schapiro said so-called naked sponsored access, in which a customer bypasses the broker’s controls and accesses exchanges directly, may expose the market and firms that offer the service to too much risk.
“We are concerned that order-entry errors in this setting could suddenly and significantly make a broker-dealer or other market participants financially vulnerable within mere minutes or seconds,’’ Schapiro said in Washington.
Commissioners met yesterday to begin formulating the next round of stock market regulation, focusing on strategies used by professional investors, such as sponsored access and “dark pool’’ trading venues. The panel voted 5 to 0 to approve the market-access proposal.
Sponsored access represents about half of US equities trading, with unfiltered access accounting for 38 percent, Aite Group LLC, a financial services firm in Boston, said in a December report.
The SEC has been under pressure from Senator Ted Kaufman, Democrat of Delaware, and others to address concerns that so-called high-frequency firms could disrupt the market with trading that is not properly monitored through tactics such as unfiltered market access.
Accidental orders and those that don’t comply with regulations could enter the market, jeopardizing the firm getting sponsored access or its executing and clearing brokers, Schapiro said.
Sponsored access refers to arrangements in which a broker gives customers its identification number so they can trade on exchanges or other venues.
In addition to the potential for erroneous trades, naked sponsored access may allow fraud and other illegal trading, such as improper short selling, to go unmonitored, according to the SEC.
Also yesterday, the SEC named six people to lead new investigative units as it reorganizes enforcement efforts.
The SEC was scorched by its failure to detect the stunning, long-running fraud by money manager Bernard Madoff, despite numerous red flags and credible warnings.
The new units and their leaders are:
■Asset management, headed by Bruce Karpati and Robert Kaplan.
■Market abuse, led by Daniel Hawke.
■Structured and new products, Kenneth Lench.
■Foreign corrupt practices, Cheryl Scarboro.
■Municipal securities and public pensions, Elaine Greenberg.
The commission’s enforcement director, Robert Khuzami, also unveiled new measures designed to encourage companies and individuals to cooperate in providing information.
The SEC also set up a new Office of Market Intelligence to analyze the hundreds of thousands of tips and complaints that come in each year. It will be headed by Thomas Sporkin, deputy chief of the SEC’s Office of Internet Enforcement since 2001.
