Fidelity Urges Creation Of 'Time Stamp' Clearing House For Fund Trades

by Carla Johnson, Investors Offshore.com

05 January 2004

US mutual fund firm, Fidelity Investments is pushing for the National Securities Clearing Corporation's powers to be enhanced, in order to clamp down on illegal late trading, whilst not disadvantaging smaller investors.

Regulators have proposed a "hard close" time of 4pm in order to prevent trades from being made after the closing bell at the same day's prices. However, critics have pointed out that this would effectively impose a much earlier deadline on smaller investors, especially those on the US West Coast.

Under plans being developed by Fidelity and the NSCC, the latter would gain new powers to "time stamp" trades, a development which would likely be welcomed by investors, fund firms, and regulators alike.

"The advantage of a clearing house is that it would enable us to actually track an order back to the individual making it - something we currently cannot do," Fiedlity's chairman and chief executive, Edward Johnson explained last week.

He continued:

"If trades can be traced back to their source, it will be far more difficult for disruptive traders or arbitrageurs to hide. With such a system in place, it would be very difficult to execute a trade that was ordered after the market close because there always would be a check on the time stamp."

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