The SEC Takes Aim At The Trade-Through Rule

WHAT YOU NEED TO KNOW:

On June 11, 2026, the Securities and Exchange Commission (SEC) voted to propose the rescission of Exchange Act Rule 611 (the “Order Protection Rule” or “trade-through rule”) and Rule 610(e) (the “locked and crossed markets” prohibition) of Regulation NMS, two provisions that have shaped the structure of US equity markets since 2005.¹ The proposal would eliminate both rules in their entirety, along with related defined terms in Rule 600, and make conforming amendments to other provisions.² Comments are due 60 days following publication in the Federal Register.³

The proposal represents one of the most significant potential changes to US equity market structure in two decades. Chairman Paul Atkins, who dissented from the original adoption of Rule 611 as a commissioner in 2005,⁴ described the rule as having “hindered—rather than enhanced—the long-term growth of our markets”⁵ and characterized the proposal as intended to “simplify market structure and reduce costs for market participants while allowing competition, innovation and other market forces to shape the continuing evolution of our equity markets.” ⁶

Background: The Order Protection Rule and Its Origins

Rule 611 was adopted in 2005 as the centerpiece of Regulation NMS.⁷ It requires every “trading center”—a term that encompasses national securities exchanges, alternative trading systems, over-the-counter market makers and any broker-dealer that internally executes orders—to establish, maintain, and enforce written policies and procedures reasonably designed to prevent “trade-throughs” of protected quotations in NMS stocks.⁸ 

In practice, this means that absent an applicable exemption, if a trading center wants to execute an order at a particular price, it must first satisfy any better-priced “protected quotation” displayed on another exchange. For example, if Exchange A is displaying a sell order at $29.99, Exchange B cannot execute a sell at $30.00 without first routing to satisfy the $29.99 quote on Exchange A. The rule protects only the best bid or offer displayed on each exchange, so-called top of book quotes, and applies only to round-lot quotations disseminated through the consolidated market data system.⁹

The trade-through rule was intended to promote displayed liquidity by ensuring that investors who post limit orders on exchanges receive the benefit of price priority across the national market system. The SEC reasoned that protecting displayed quotes would incentivize market participants to display aggressively priced orders, improving price discovery and overall market quality.¹⁰

Rule 611 was controversial from the outset. It was adopted on a 3–2 vote, with then-Commissioners Paul Atkins and Cynthia Glassman issuing a lengthy joint dissent.¹¹ The dissenters argued that the rule was inconsistent with Congress’s directive to protect competition among markets, would not enhance market efficiency, and would “prevent customers from obtaining the best execution, constrain competition and stifle innovation.”¹² They contended that the SEC should instead focus on efforts to “improve access to quotations, enhance connectivity among markets and market participants, clarify the broker’s duty of best execution, and reduce barriers to competition.”¹³

What the SEC Is Proposing and Why

Two decades later, the SEC has determined to revisit these concerns. The proposal advances several rationales for rescission:

• Exchange proliferation and fragmentation. In 2005, there were approximately eight exchanges trading NMS stocks. Today, there are 17 operating exchanges trading these stocks, with three more approved.¹⁴ The SEC argues that Rule 611 effectively guaranteed that any new exchange displaying a protected quote would receive order flow and connectivity revenue, because broker-dealers are practically required to connect, directly or indirectly, to every exchange with a protected quote, even those with minimal market share.¹⁵ This has driven up costs and fragmented liquidity across an increasing number of venues.
• Increased costs and complexity. Market participants must connect to, pay for data from and monitor every exchange, whether through direct proprietary feeds or indirectly via the SIP and commercial aggregators. The SEC estimates that a broker-dealer connecting to all exchanges spends approximately $5.7 million per year on market data and connectivity fees,¹⁶ and that onboarding a new exchange costs an estimated $1.5 million, with $200,000 in annual maintenance.¹⁷ Broker-dealers can rely on consolidated data or route directed orders through other exchanges, but only at the expense of latency and reduced certainty of execution. 
• Harm to institutional investors. For institutions executing large “parent” orders, the rule can force interaction with small-sized protected quotes across many venues,¹⁸ for example, requiring a broker to route to execute against a 100-share order on an exchange before executing the balance of the large order. The SEC notes that this practice potentially signals the trading intentions of institutions and increases slippage.¹⁹
• Proliferation of complex order types. In order to comply with, or navigate around, Rules 611 and 610(e), market participants developed dozens of specialized order types—including, for example, intermarket sweep orders, price-to-comply, price-to-display and post-only orders—adding layers of complexity to the market.²⁰
• Best execution as a sufficient safeguard. The SEC argues that broker-dealers’ existing duty of best execution, under common law anti-fraud provisions and FINRA Rule 5310, will continue to provide investor protection independent of Rule 611.²¹ Notably, even at the time of adoption, the SEC was careful to say that compliance with the trade-through rule did not constitute satisfaction of best execution obligations.²²
• Markets have fundamentally changed. Today’s markets are highly automated, deeply interconnected, and they operate at microsecond speeds. The technological advances in order routing and market data access that have occurred since 2005 have, in the SEC’s view, rendered the mechanical protections of Rule 611 obsolete.²³ In addition, the SEC notes that the growth of innovative technologies such as distributed ledger technology / tokenization raises challenges and questions related to current equity market structure.²⁴

Proposed Rescission of Rule 610(e): Locked and Crossed Markets

The proposal also seeks to rescind Rule 610(e), which requires each exchange and national securities association to adopt rules preventing their members from displaying quotations that “lock” (when a bid equals the offer) or “cross” (when a bid exceeds the offer) protected quotations on other exchanges.²⁵

The SEC argues that the prohibition on locking or crossing the market artificially widens spreads for tick-constrained stocks where the natural economic spread could be zero,²⁶ and that eliminating the rule could reduce effective transaction costs. The SEC also contends that the prohibition is no longer necessary given the sophistication of modern routing technology.²⁷

Roundtable Perspectives

In advance of the proposal, the SEC hosted two public roundtables to gather input from market participants, academics and investor advocates: the first on September 18, 2025, at SEC headquarters in Washington DC and the second on December 16, 2025, at the University of Austin in Austin, Texas.

The roundtables revealed a range of views, though there was general agreement that a change to the rules was needed.

Voices for repeal. Several roundtable participants advocated for outright recission. Some institutional investors argued that the trade-through rule forces brokers to interact with small quotes on distant exchanges rather than exercising judgment about the best way to execute large orders for their clients.²⁸ Some major retail brokers also publicly supported rescission, arguing that competitive forces and FINRA Rule 5310 (best execution) are sufficient to protect retail investors.²⁹

Cautionary voices. Others urged the SEC not to discard the rule’s protections without adequate safeguards. Some participants argued that any weakening of the rule “must be accompanied by improvements to best execution,” including implementing 605/606 reforms first, requiring trade-throughs to be disclosed on trade confirmations, adding odd lots to the SIP and considering a block-trading exemption.30 Others were more pointed, arguing that best execution as currently constituted is “neither enforced nor enforceable” and has been “likened to trying to nail Jello to a wall.”³¹

Best execution as the central question. A recurring theme across both roundtables was the interaction between Rule 611 and best execution. While the SEC was careful in 2005 to note that compliance with the trade-through rule did not satisfy best execution obligations, stating that Rule 611 would merely “backstop a broker’s duty of best execution on an order-by-order basis,”³² many participants acknowledged that Rule 611 had served as a practical backstop. For example, Bob Colby, chief legal officer of FINRA, noted that “best execution is a powerful concept, but it operates within a market structure” and that if Rule 611 is removed, the SEC and FINRA will need to “collectively work on what interpretations are necessary to give substance to best execution.”³³

Locked and crossed markets. On the proposed rescission of Rule 610(e), roundtable participants were largely aligned, with many arguing that locked markets should not be prohibited.³⁴ There was more debate around crossed markets, with some participants expressing concern about potential retail investor confusion.³⁵

Commissioner perspectives. Commissioner Hester Peirce described herself as having been “a skeptic of Rule 611 since its inception” 20 years ago and observed that the rule “has by now completed its work, and may be causing more mischief than good.”³⁶ Commissioner Mark Uyeda, in his roundtable remarks, described the effort as the beginning of a broader review of the SEC’s equity market structure rules and compared the existing regime to “the threads of a sweater—pull one thread, you inevitably stress others.”³⁷ Former commissioner Caroline Crenshaw struck a more cautious note, urging, “Let’s not assume that doing away with the order protection rule is a magic bullet that will solve increasing complexity and fragmentation.”³⁸

Key Questions for Comment

The proposing release solicits comment on a broad range of questions,³⁹ including, among others:

• Whether rescission of Rule 611 would reduce incentives to display limit orders and, if so, the potential impact on price discovery and market transparency;
• Whether broker-dealers’ existing best execution obligations are sufficient to protect investors in the absence of Rule 611, or whether additional guidance or rulemaking is needed;
• The potential effects of rescission on retail investors, institutional investors, and different categories of market participants;
• Whether certain alternatives, such as volume-based thresholds for protected quote status, should be considered in lieu of full rescission; and
• The potential impact of rescission on exchange competition, market data economics and the broader regulatory framework.

Looking Ahead

If approved, the rescission of Rules 611 and 610(e) of Regulation NMS would represent a significant restructuring of the equity markets. The proposal touches on fundamental questions about how orders are routed and executed across US equity markets, and the best way to promote competition in the market. The answers to these questions will affect exchanges, broker-dealers, institutional investors and retail investors alike. Market participants should carefully evaluate the proposal and provide the SEC with the benefit of their perspectives.

Comments may be submitted electronically through the SEC’s internet comment form or by email to rule-comments@sec.gov, referencing File Number S7-2026-20.⁴⁰

Footnotes

1 Proposing Rescission of Rules 611 and 610(e) of Regulation NMS, Exchange Act Release No. 34-105655 (June 11, 2026) (“Proposing Release”) at 1.

2 Id.

3 Id.

4 See Dissenting Statement of Commissioners Cynthia A. Glassman and Paul S. Atkins, Exchange Act Release No. 34-51808 (June 9, 2005) (hereinafter Atkins-Glassman Dissent).

5 Proposing Release at 7 & n.7 (Chairman’s statement).

6 Id.

7 SEC Press Release No. 2026-54, SEC Proposes Rescission of Regulation NMS Rules 611 and 610(e) (June 11, 2026), https://www.sec.gov/newsroom/press-releases/2026-54.

8 17 C.F.R. § 242.611(a); NMS Adopting Release at 27. “Protected quotations” generally are automated quotations disseminated by exchanges or the Financial Industry Regulatory Authority (FINRA) pursuant to an effective national market system plan. 17 C.F.R. § 600(b)(82).

9 NMS Adopting Release at 193.

10 NMS Adopting Release at 11 and 35–36.

11 See Atkins-Glassman Dissent.

12 Atkins-Glassman Dissent at 1 (“We do not believe, however, that Regulation NMS will achieve this goal, and we are concerned about its detrimental impact on competition and innovation.”).

13 Id. at 2–3.

14 Proposing Release at 12 & nn.36–37.

15 Proposing Release at 32, 34–35.

16 Proposing Release at 130 & nn.465–467.

17 Proposing Release at 131 & nn.472–473 (citing First TTR Roundtable Tr. at 68–69 (Pankil Patel, Bank of America)).

18 Proposing Release at 104–105.

19 Id.

20 Proposing Release at 120–121.

21 Proposing Release at 5, 28–29, 44.

22 NMS Adopting Release at 103 n.213 (“Rule 611 is designed to facilitate intermarket trade-through protection only. It does not lessen the best execution responsibilities of broker-dealers.”).

23 Proposing Release at 51.

24 Proposing Release at 14.

25 17 C.F.R. § 242.610(e); Proposing Release at 50–64.

26 Proposing Release at 54 & 205–06.

27 Proposing Release at 39.

28 First TTR Roundtable Tr. at 214–215, 234–236 (Mehmet Kinak, Global Head of Equity Trading, T. Rowe Price).

29 First TTR Roundtable Tr. at 226–230 (Matt Billings, VP of Brokerage, Robinhood®).

30 First TTR Roundtable Tr. at 135–136 (Chris Nagy, Healthy Markets Association).

31 Second TTR Roundtable Tr. at 56 (Dave Lauer, We the Investors).

32 NMS Adopting Release at 78.

33 First TTR Roundtable Tr. at 223–225 (Bob Colby, FINRA).

34 Mehmet Kinak of T. Rowe Price observed that “if the bid is $10 and the offer is $10, and I can trade at $10 … I’ve never understood, frankly” why that should be prohibited. Second TTR Roundtable Tr. at 56–57 (Mehmet Kinak, T. Rowe Price).

35 Second TTR Roundtable Tr. at 54–60.

36 Second TTR Roundtable Tr. at 11–12 (Commissioner Hester M. Peirce).

37 Second TTR Roundtable Tr. at 17 (Commissioner Mark T. Uyeda).

38 Second TTR Roundtable Tr. at 14 (Commissioner Caroline A. Crenshaw).

39 Proposing Release at 75–76.

40 Proposing Release at 1–2; see also SEC Press Release No. 2026-54 (June 11, 2026), https://www.sec.gov/newsroom/press-releases/2026-54-sec-proposes-rescission-regulation-nms-rules-611-610e.

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