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SEC Bans Brokers From Permitting Unsupervised Trades by Clients

The U.S. Securities and Exchange Commission banned brokers from letting clients make unsupervised trades on stock exchanges amid concern that a rogue transaction could roil markets.

SEC commissioners voted 5-0 today to approve a rule that targets so-called naked-sponsored access, in which a customer uses a broker’s identification code to trade directly on exchanges while bypassing security measures. The rule, which subjects all transactions to pre-trade risk controls, was proposed in January after SEC officials expressed concern that a computer malfunction or human error might trigger an order that would erode a broker’s capital.