SEC Pursuing Broad Review of Stock Market Structure, Chairman Says

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The Securities and Exchange Commission is considering changes to some of the stock market’s most fundamental rules in light of the surge in trading over the past year by individual investors in meme stocks such as AMC Entertainment Holdings Inc. and GameStop Corp.

Speaking to an industry conference Wednesday, SEC Chairman Gary Gensler outlined a broad examination of market structure, including the role high-speed traders play in executing many small investors’ orders and the rise of online brokers, whose technology can entice people to do more trading.

Mr. Gensler, who took over the SEC in April, renewed his criticism of the system that sends many of the orders placed by individual investors to be filled by high-speed traders known as wholesalers, including Citadel Securities and Virtu Financial Inc., instead of routing them to public exchanges.

That system, known as payment for order flow, benefits individual investors who are simply seeking to trade at the prevailing market price set at exchanges, according to brokerage firms. Wholesalers can offer such investors slightly better prices because their orders are small and don’t move the market.

Brokers say payment for order flow is a form of customer segmentation, similar to how wireless companies tailor cellphone prices and contracts to customers’ needs and willingness to pay. Mr. Gensler suggested that individual investors might get better prices if more trading were done on public exchanges. Only about 53% of all trading in January was done on exchanges, while the rest involved wholesalers and broker-run trading venues known as dark pools, Mr. Gensler said.