Members of the Securities and Exchange Commission proposed, on a 5-0 vote, requiring exchanges to maintain an "audit trail" covering trading orders from start to routing to execution.
The regulators say that would make it easier to investigate market disruptions like the so-called "flash crash" earlier this month that sent the Dow Jones industrials down nearly 1,000 points in less than 30 minutes.
The new system, however, would be phased in under the SEC proposal and wouldn't be fully operational until about three years from now, SEC officials said at a public meeting. It would cost market players, including exchange monitoring bodies and brokerage firms, about $4 billion to put into place and $2 billion a year to operate, according to SEC estimates.
The proposed rule could be formally adopted sometime after a 60-day public comment period, possibly with changes.
More than 19 billion shares changed hands on May 6, when a drop briefly wiped out $1 trillion in market value as some stocks traded as low as a penny. Requirements for keeping "audit trails" vary among exchanges and markets, making it hard for regulators to get their hands on current order data.
The technology used by regulators for market oversight and surveillance hasn't kept pace with fast-evolving and splintering markets, where sleek electronic trading platforms compete with the traditional exchanges and powerful computers give traders a split-second edge in buying or selling stocks.
But a systemwide audit trail might not eliminate every gap in tracking trades, said Menachem Brenner, a research professor of finance at New York University Stern School of Business. For instance, trades of U.S. stocks executed on overseas exchanges likely won't be included in the audit trail, Brenner said.
Still, he said, the plan should help regulators avoid future market irregularities.
"Hopefully by knowing what causes the problem, they'll be better able to come up with a solution," Brenner said.