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- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

Conformed to Federal Register version
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240 and 242
[Release No. 34-99679; File No. S7-29-22]
RIN 3235-AN22
Disclosure of Order Execution Information
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
SUMMARY: The Securities and Exchange Commission (“Commission” or “SEC”) is adopting
amendments to a rule under the Securities Exchange Act of 1934 (“Exchange Act”) that requires
disclosures for order executions in national market system (“NMS”) stocks. First, the
amendments expand the scope of reporting entities subject to the preexisting rule that requires
market centers to make available to the public monthly execution quality reports to encompass
broker-dealers with a larger number of customers. Next, the amendments modify the definition
of “covered order” to include certain orders submitted outside of regular trading hours and
certain orders submitted with stop prices. In addition, the amendments modify the information
required to be reported under the rule, including changing how orders are categorized by order
size as well as how they are categorized by order type. The amendments, as part of the changes
to the order size categories, modify the rule to capture execution quality information for
fractional share orders, odd-lot orders, and larger-sized orders. Additionally, the amendments
modify reporting requirements for non-marketable limit orders (“NMLOs”) in order to capture
more relevant execution quality information for these orders by requiring statistics to be reported
from the time such orders become executable. The amendments modify time-to-execution
categories and require average time to execution to be measured in increments of a millisecond

or finer and calculated on a share-weighted basis for all orders. The amendments require that the
time of order receipt and time of order execution be measured in increments of a millisecond or
finer, and that realized spread be calculated at multiple time intervals. Finally, the amendments
enhance the accessibility of the reported execution quality statistics by requiring all reporting
entities to make a summary report available.
DATES: Effective date: The final rules are effective June 14, 2024.
Compliance date: See section VII, titled “Transition Matters,” for further information on
transitioning to the final rules.
FOR FURTHER INFORMATION CONTACT: Kathleen Gross, Senior Special Counsel,
Lauren Yates, Senior Special Counsel, Susie Cho, Special Counsel, Christopher Chow, Special
Counsel, David Michehl, Special Counsel, or Laura Harper Powell, Special Counsel at (202)
551-5500, Division of Trading and Markets, Commission, 100 F Street NE, Washington, DC
20549.
SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to 17 CFR
242.600 (“Rule 600”) to add new defined terms to and modify certain existing defined terms in
Rule 600 that are used in 17 CFR 242.605 (“Rule 605”) as amended, as well as amendments to
Rule 605; and to make conforming amendments to defined terms in 17 CFR 242.602, 242.611,
and 242.614; and conforming amendments to defined terms in 17 CFR 240.3a51-1, 240.13h-1,
242.105, 242.201, 242.204, and 242.1000.
Table of Contents
I.
A.
B.
C.
II.

Introduction and Background .......................................................................................... 4
Overview of Need for Rule Modernization ..................................................................... 7
Overview of the Proposal and Comments Received...................................................... 15
Overview of Final Rule 605 ........................................................................................... 21

Modifications to Reporting Entities ............................................................................... 24
A.
Larger Broker-Dealers ................................................................................................... 24
1. Proposed Approach ........................................................................................................ 24
2

2. Final Rule and Discussion .............................................................................................. 28
B.
Qualified Auction Mechanisms ..................................................................................... 51
1. Proposed Approach ........................................................................................................ 51
2. Final Rule and Discussion .............................................................................................. 52
C.
NMS Stock ATSs and SDPs .......................................................................................... 53
1. Proposed Approach ........................................................................................................ 53
2. Final Rule and Discussion .............................................................................................. 54
III.
A.
1.
2.
3.
B.
1.
2.
3.
4.

Modifications to Scope of Orders Covered and Required Information ......................... 62
Covered Order ................................................................................................................ 62
Orders Submitted Pre-Opening/Post-Closing ................................................................ 63
Stop Orders..................................................................................................................... 71
Non-Exempt Short Sale Orders ...................................................................................... 81
Required Information ..................................................................................................... 83
Categorization by Order Size ......................................................................................... 83
Categorization by Order Type ...................................................................................... 104
Timestamp Conventions and Time-to-Execution Statistics ......................................... 116
Execution Quality Statistics ......................................................................................... 128

IV.
Summary Execution Quality Report ............................................................................ 180
A.
Proposed Approach ...................................................................................................... 181
B.
Final Rule and Discussion ........................................................................................... 182
1. Required Information ................................................................................................... 188
2. Required Format ........................................................................................................... 205
3. Investor Testing and Education .................................................................................... 207
V.

Requirements for Making Rule 605 Reports Available to the Public ......................... 210
A.
Proposed Approach ...................................................................................................... 210
B.
Final Rule and Discussion ........................................................................................... 211
1. Accessibility of Rule 605 Reports ................................................................................ 211
2. Alternatives to Rule 605 Proposal ................................................................................ 215

VI.

Existing Commission Exemptive Relief and Staff Statements .................................... 221

VII.

Transition Matters ........................................................................................................ 223

VIII.
A.
B.
C.
D.

Paperwork Reduction Act ............................................................................................ 229
Summary of Collection of Information........................................................................ 230
Proposed Use of Information ....................................................................................... 231
Respondents ................................................................................................................. 231
Total PRA Burdens ...................................................................................................... 232

IX.
A.
B.
C.
1.
2.
3.
4.

Economic Analysis ...................................................................................................... 241
Introduction .................................................................................................................. 241
Market Failure .............................................................................................................. 242
Baseline ........................................................................................................................ 248
Regulatory Baseline ..................................................................................................... 249
Use of Reports under Rule 605 Prior to Rule Amendments ........................................ 264
Disclosure Requirements under Preexisting Rule 605 ................................................. 276
Markets for Brokerage and Trading Services for NMS Stocks under Preexisting Rule

3

D.
1.
2.
3.
E.
1.
2.
3.
4.
5.

605 Disclosure Requirements ...................................................................................... 338
Economic Effects ......................................................................................................... 349
Benefits......................................................................................................................... 350
Costs ............................................................................................................................. 440
Economic Effects on Efficiency, Competition, and Capital Formation ....................... 471
Reasonable Alternatives............................................................................................... 475
Reasonable Alternative Modifications to Reporting Entities ....................................... 475
Reasonable Alternative Modifications to Scope of Covered Orders ........................... 484
Reasonable Alternative Modifications to Required Information ................................. 493
Reasonable Alternative Modifications to Accessibility ............................................... 514
Other Reasonable Alternatives ..................................................................................... 522

X.

Regulatory Flexibility Act Certification ...................................................................... 524

XI.

Other Matters ............................................................................................................... 526

Statutory Authority ..................................................................................................................... 526
I.

Introduction and Background
On December 14, 2022, the Commission proposed amendments to Rule 605 under

Regulation National Market System (17 CFR 242.600 through 242.614) (“Regulation NMS”) to
update the disclosure of order execution quality statistics in national market system (“NMS”)
stocks.1 Rule 605, formerly known as Rule 11Ac1-5, was adopted in 20002 and requires market

1

See Securities Exchange Act Release No. 96493 (Dec. 14, 2022), 88 FR 3786 (Jan. 20, 2023) (“Proposing
Release”).

2

See Securities Exchange Act Release No. 43590 (Nov. 17, 2000), 65 FR 75414 at 75416 (Dec. 1, 2000)
(Disclosure of Order Execution and Routing Practices) (“Rule 11Ac1-5 Adopting Release”). Along with
Rule 11Ac1-5, the Commission also adopted Rule 11Ac1-6 as part of the Rule 11Ac1-5 Adopting Release.
See 17 CFR 242.606 (“Rule 606”). When the Commission later adopted Regulation NMS in 2005, Rule
11Ac1-5 was re-designated as Rule 605, and Rule 11Ac1-6 was re-designated as Rule 606. See Securities
Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (“Regulation NMS
Adopting Release”). Rule 606 requires the public disclosure of order routing practices and was amended in
2018. See Securities Exchange Act Release No. 84528 (Nov. 2, 2018), 83 FR 58338 (Nov. 19, 2018)
(“2018 Rule 606 Amendments Release”).

4

centers3 to make available standardized monthly reports of statistical information concerning
covered orders4 in NMS stocks5 that they received for execution.6 Prior to these amendments, the
Rule 605 report contained a number of execution quality metrics for covered orders.7 The

3

Regulation NMS defines the term “market center” to mean any exchange market maker, over-the-counter
(“OTC”) market maker, alternative trading system (“ATS”), national securities exchange, or national
securities association. See final 17 CFR 242.600(b)(55). “Exchange market maker” means any member of a
national securities exchange that is registered as a specialist or market maker pursuant to the rules of such
exchange. See final 17 CFR 242.600(b)(37). “OTC market maker” means any dealer that holds itself out as
being willing to buy from and sell to its customers, or others, in the United States, an NMS stock for its
own account on a regular or continuous basis otherwise than on a national securities exchange in amounts
of less than a block size. See final 17 CFR 242.600(b)(75). “Alternative trading system” or “ATS” means
any organization, association, person, group of persons, or system: (1) That constitutes, maintains, or
provides a market place or facilities for bringing together purchasers and sellers of securities or for
otherwise performing with respect to securities the functions commonly performed by a stock exchange
within the meaning of 17 CFR 240.3b-16; and (2) That does not: (i) Set rules governing the conduct of
subscribers other than the conduct of such subscribers’ trading on such organization, association, person,
group of persons, or system; or (ii) Discipline subscribers other than by exclusion from trading. See 17
CFR 242.300(a). See also final 17 CFR 242.600(b)(4) (stating that “alternative trading system” has the
meaning provided in 17 CFR 242.300(a)). “National securities exchange” means any exchange registered
pursuant to section 6 of the Exchange Act. See final 17 CFR 242.600(b)(63). “National securities
association” means any association of brokers and dealers registered pursuant to section 15A of the
Exchange Act. See final 17 CFR 242.600(b)(62).

4

Prior to these amendments, a “covered order” was defined to include any market order or any limit order
(including immediate-or-cancel orders) received by a market center during regular trading hours at a time
when a national best bid and national best offer (“NBBO”) is being disseminated, and, if executed, is
executed during regular trading hours, and did not include any orders for which the customer requests
special handling, including, but not limited to, market on open and market on close orders, stop orders, all
or none orders, and “not held” orders. See prior 17 CFR 242.600(b)(22). Generally, a “not held” order
provides the broker-dealer with price and time discretion in handling the order, whereas a broker-dealer
must attempt to execute a “held” order immediately. See 2018 Rule 606 Amendments Release, 83 FR
58338 at 58340, n.19 (Nov. 19, 2018).

5

“NMS stock” is defined under Regulation NMS as any NMS security other than an option. See final 17
CFR 242.600(b)(65). An “NMS security” is defined as any security or class of securities for which
transaction reports are collected, processed, and made available pursuant to an effective transaction
reporting plan, or an effective national market system plan for reporting transactions in listed options. See
final 17 CFR 242.600(b)(64).

6

See prior 17 CFR 242.605. The procedures for market centers to make their execution quality data
available to the public are set forth in the National Market System Plan Establishing Procedures Under
Rule 605 of Regulation NMS (“Rule 605 NMS Plan”). See prior 17 CFR 242.605(a)(2) and Securities and
Exchange Commission File No. 4-518 (Rule 605 NMS Plan). See also Securities Exchange Act Release
No. 44177 (Apr. 12, 2001), 66 FR 19814 (Apr. 17, 2001) (order approving the Rule 605 NMS Plan) (“Rule
605 NMS Plan Release”).

7

See prior 17 CFR 242.605(a)(1); Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75423-25 (Dec. 1,
2000).

5

information was categorized: by (1) individual security, (2) one of five order types,8 and (3) one
of four order sizes.9 Within each of the three categories, the Rule 605 report that was required
prior to these amendments included statistics about the total number of orders submitted, and the
total number of shares submitted, shares cancelled prior to execution, shares executed at the
receiving market center, shares executed at another venue, shares executed within different timeto-execution buckets, and average realized spread.10 For market and marketable limit orders
specifically, the report required by Rule 605 prior to these amendments also included statistics
about the (1) average effective spread; (2) number of shares executed better than the quote, at the
quote, or outside the quote; (3) average time to execution when executed better than the quote, at
the quote, or outside the quote; and (4) average dollar amount per share that orders were
executed better than the quote or outside the quote.11 To calculate the required statistics, the time
of order execution and time of order receipt were measured to the nearest second.12
At the time the Commission adopted Rule 11Ac1-5, there was little publicly available
information to enable investors to compare and evaluate execution quality among different

8

See prior 17 CFR 242.605(a)(1). Prior to these amendments, “Categorized by order type” referred to
categorization by whether an order is: (1) a market order, (2) a marketable limit order, (3) an inside-thequote limit order, (4) an at-the-quote limit order, or (5) a near-the-quote limit order. See prior 17 CFR
242.600(b)(14).

9

See prior 17 CFR 242.605(a)(1). Prior to these amendments, the size categories were: 100 to 499 shares;
500 to 1,999 shares; 2000 to 4,999 shares; and 5,000 or greater shares. See prior 17 CFR 242.600(b)(13).
On June 22, 2001, the Commission granted exemptive relief to any order with a size of 10,000 shares or
greater (“Large Order Exemptive Relief”), reasoning that the exclusion of very large orders would help
assure greater comparability of statistics in the largest size category of 5,000 or greater shares. See letter
from Annette L. Nazareth, Director, Division of Market Regulation to Darla C. Stuckey, Assistant
Secretary, NYSE Group, Inc., dated June 22, 2001 (“Large Order Exemptive Letter”).

10

See prior 17 CFR 242.605(a)(1)(i).

11

See prior 17 CFR 242.605(a)(1)(ii).

12

See prior 17 CFR 242.600(b)(91), (92).

6

market centers.13 Rule 605, along with Rule 606 of Regulation NMS, was adopted in 2000, and
together these rules required the public disclosure of execution quality and order routing
practices.14 The Commission intended Rule 11Ac1-5 to provide awareness about how brokerdealers responded to trade-offs between price and other factors, such as speed or reliability, and
establish a baseline level of disclosure in order to facilitate cross-market comparisons of
execution quality.15 The Commission reasoned that once investors could evaluate execution
performance provided by various broker-dealers, competitive forces could then be brought to
bear on broker-dealers both with respect to the explicit trading costs associated with brokerage
commissions and the implicit trading costs associated with execution quality.16
The information disclosed under Rule 605 has provided significant insight into execution
quality at different market centers.17 However, Rule 605 has not been substantively updated
since it was adopted in 2000. In the interim, equity market conditions have changed due in part
to many technological advancements that have altered the speed and nature of trading. In

13

See Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75416 (Dec. 1, 2000). For clarity, when this release
discusses the adoption of Rule 605, it is referring to the Rule 11Ac1-5 Adopting Release, supra note 2.

14

See Rule 11Ac1–5 Adopting Release, 65 FR 75414 at 75416 (Dec. 1, 2000).

15

See id. at 75418. Data obtained from Rule 605 reports are used by the third parties including academics and
the financial press to study a variety of topics related to execution quality, including liquidity measurement,
exchange competition, zero commission trading, and broker-dealer execution quality. See Proposing
Release, 88 FR 3786 at 3833, n.545-547 (Jan. 20, 2023) and accompanying text.

16

See Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75419 (Dec. 1, 2000). Although it is difficult to
isolate the effects of Rule 605 given the evolution of the equity markets over time, one academic study
examining the introduction of Rule 605 found that the routing of marketable order flow by broker-dealers
became more sensitive to changes in execution quality across market centers after Rule 605 reports became
available. See Ekkehart Boehmer et al., Public Disclosure and Private Decisions: Equity Market Execution
Quality and Order Routing, 20 REV. FIN. STUD. 315 (2007) (“Boehmer et al.”). Another study attributed a
significant decline in effective and quoted spreads following the implementation of Rule 605 to an increase
in competition between market centers, who improved the execution quality that they offered in order to
attract more order flow. See Xin Zhao & Kee H. Chung, Information Disclosure and Market Quality: The
Effect of SEC Rule 605 on Trading Costs, 42 J. FIN. QUANTITATIVE ANALYSIS, 657 (Sept. 2007) (“Zhao &
Chung”).

17

See Securities Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 at 3604, n.55 (Jan. 21, 2010)
(“Concept Release on Equity Market Structure”).

7

addition, the participation of individual investors in the equity markets has increased.18
Accordingly, the Commission is adopting amendments to Rule 605 to update and improve the
disclosure of execution quality information by expanding the scope of entities subject to Rule
605, modifying the information required, and making key execution quality metrics more
accessible to investors.
A.

Overview of Need for Rule Modernization

The U.S. equity markets have evolved significantly in the last couple of decades. For
instance, the equities markets have become increasingly fragmented, as both the market shares of
individual national securities exchanges have decreased and an increased percentage of order
flow has moved off-exchange. In 2000, there were nine registered national securities exchanges
and one registered national securities association.19 A large proportion of the order flow in listed
equity securities was routed to a few, mostly manual, trading centers,20 and the primary listing
exchanges maintained a high percentage of the order flow for exchange-listed equities.21

18

See Proposing Release, 88 FR 3786 at 3787-88 (Jan. 20, 2023). As used in this release, “individual
investor” refers to natural persons that trade relatively infrequently for their own or closely related
accounts.

19

See Securities and Exchange Commission, Annual Report for fiscal year 2000, at 38 available at
https://www.sec.gov/pdf/annrep00/ar00full.pdf.

20

See Securities Exchange Act Release Nos. 78309 (July 13, 2016), 81 FR 49432 at 49436 (July 27, 2016)
(“Rule 606 Amendments Proposing Release”); 42450 (Feb. 23, 2000), 65 FR 10577 at 10579-80 (Feb. 28,
2000) (“Fragmentation Release”).

21

See Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75415 (Dec. 1, 2000) (stating that in Sep. 2000, for
example, the New York Stock Exchange Inc. (“NYSE”) accounted for 83.3% of the share volume in NYSE
equities and that the American Stock Exchange, LLC (“Amex”) accounted for 69.9% of share volume in
Amex equities). See also Concept Release on Equity Market Structure, 75 FR 3594 at 3595 (Jan. 21, 2010)
(stating that in Jan. 2005, NYSE executed approximately 79.1% of the consolidated share volume in its
listed stocks, as compared to 25.1% in Oct. 2009). In addition, NYSE-listed stocks were traded primarily
on the floor of the NYSE in a manual fashion until Oct. 2006, at which time NYSE began to offer fully
automated access to its displayed quotations. See id. at 3594-95. However, stocks traded on the NASDAQ
Stock Market LLC (“NASDAQ”), which in 2000 was owned and operated by a national securities
association, were already trading in a highly automated fashion at many different trading centers. See id. at
3595; Fragmentation Release, 65 FR 10577 at 10580 (Feb. 28, 2000). See also Proposing Release, 88 FR
3786 at 3791, n.76 (Jan. 20, 2023).

8

In contrast, trading in the U.S. equity markets today is highly automated and spread even
more among different types of trading centers, allowing even more choices about where orders
may be routed. The types of trading centers that currently trade NMS stocks are: (1) national
securities exchanges operating self-regulatory organization (“SRO”) trading facilities;22 (2)
ATSs that trade NMS stocks (“NMS Stock ATSs”);23 (3) exchange market makers; (4)
wholesalers;24 and (5) any other broker-dealer that executes orders internally by trading as
principal or crossing orders as agent.25 Some OTC market makers, such as wholesalers, operate
single-dealer platforms (“SDPs”) through which they execute institutional orders in NMS stocks
against their own inventory.26 In the first quarter of 2023, NMS stocks were traded on 16
national securities exchanges, and off-exchange at 33 NMS Stock ATSs and at over 220 other
Financial Industry Regulatory Authority (“FINRA”) members.27 Approximately 56% of NMS

22

See final 17 CFR 242.600(b)(100) (defining “SRO trading facility” as, among other things, a facility
operated by a national securities exchange that executes orders in a security).

23

An “NMS Stock ATS” as used in this release is an ATS that has filed an effective Form ATS-N with the
Commission.

24

The term “wholesaler” is not defined in Regulation NMS, but is commonly used to refer to an OTC market
maker that seeks to attract orders from broker-dealers that service the accounts of a large number of
individual investors. The primary business model of wholesalers is to trade internally as principal with
individual investor orders. They do not publicly display or otherwise reveal the prices at which they are
willing to trade internally as a means to attract individual investor orders from broker-dealers.

25

See 15 U.S.C. 78c(a)(4)(A) (defining “broker” generally as any person engaged in the business of effecting
transactions in securities for the account of others); 15 U.S.C. 78c(a)(5)(A) (defining “dealer” generally as
any person engaged in the business of buying and selling securities for such person’s own account through
a broker or otherwise). The term “broker-dealer” is used in this release to encompass all brokers, all
dealers, and firms that are both brokers and dealers. See also final 17 CFR 242.600(b)(106) (defining
“trading center”). Broker-dealers that primarily service the accounts of individual investors (referred to in
this release as “retail brokers”) often route the marketable orders of individual investors in NMS stocks to
wholesalers.

26

See Proposing Release, 88 FR 3786 at 3860, n.768 (Jan. 20, 2023) and accompanying text.

27

See infra Table 6. See also Proposing Release, 88 FR 3786 at 3860, n.766 (Jan. 20, 2023) and
accompanying text; and 3861 (Table 7).

9

share volume was executed on national securities exchanges.28 The majority of off-exchange
share volume was executed by wholesalers, who executed over one quarter of total share volume
(26.9%) and about 61% of off-exchange share volume.29
In addition, developments in trading further point toward the utility of amending Rule
605. Average stock prices have continued to increase over time,30 and odd-lots31 and fractional
shares32 continue to trade with increasing frequency. In addition, odd-lot quotes in higher-priced
stocks continue to offer prices that are frequently better than the round lot NBBO for these

28

See infra Table 6. See also Proposing Release, 88 FR 3786 at 3860, n.767 (Jan. 20, 2023) and
accompanying text; and 3861 (Table 7).

29

See infra Table 6. See also Proposing Release, 88 FR 3786 at 3861 (Table 7) (Jan. 20, 2023).

30

See Securities Exchange Act Release No. 90610 (Dec. 9, 2020), 86 FR 18596 at 18606-07 (Apr. 9, 2021)
(“Market Data Infrastructure (“MDI”) Adopting Release”) (citing Securities Exchange Act Release No.
88216 (Feb. 14, 2020), 85 FR 16726 at 16739 (Mar. 24, 2020) (“MDI Proposing Release”)) (stating that
“between 2004 and 2019, the average price of a stock in the Dow Jones Industrial Average nearly
quadrupled”). See also Proposing Release, 88 FR 3786 at 3787, n.16 (Jan. 20, 2023).

31

See MDI Adopting Release, 86 FR 18596 at 18616 (Apr. 9, 2021) (describing analyses included in the
MDI Adopting Release confirming observations made in the MDI Proposing Release that a significant
proportion of quotation and trading activity occurs in odd-lots, particularly for frequently traded, highpriced stocks); and Proposing Release, 88 FR 3786 at 3792, n.91 (Jan. 20, 2023) (describing analysis using
the NYSE Trade and Quote database (obtained via Wharton Research Data Services (“WRDS”)) (“TAQ
data” or “NYSE TAQ data”) that found that odd-lots increased from around 15% of trades in Jan. 2014 to
more than 55% of trades in Mar. 2022). An analysis of data from the SEC’s Market Information Data
Analytics System (“MIDAS”) analytics tool available at
https://www.sec.gov/marketstructure/datavis.html#.YoPskqjMKUk shows that, in Q1 2023, odd-lots made
up 80.5% of on-exchange trades (37.3% of volume) for stocks in the highest price decile and 18.8% of onexchange trades (1.2% of volume) for stocks in the lowest price decile. See dataset “Summary Metrics by
Decile and Quartile” available at https://www.sec.gov/marketstructure/downloads.html. See also Proposing
Release, 88 FR 3786 at 3792, n.91 (Jan. 20, 2023).

32

Analysis using Consolidated Audit Trail (“CAT”) data for executed orders in Aug. 2023 found that an
estimated 67.4 million originating orders with a fractional share component were eventually executed onor off-exchange. Orders with a fractional share component represented approximately 4% of all executed
orders and 22% of executed orders from “individual” accounts. Generally, accounts classified as
“individual” in CAT are attributed to natural persons. See also Proposing Release, 88 FR 3786 at 3792,
n.92 (Jan. 20, 2023).

10

stocks,33 and this better-priced odd-lot liquidity is distributed across multiple price levels.34 In
addition, odd-lot rates35 have increased among lower priced stocks.36 Because Rule 605 size
categories prior to these amendments excluded orders smaller than 100 shares, a significant
proportion of market activity was excluded.37 An analysis of Rule 605 data shows that Rule 605
coverage has declined in the decades since the initial adoption of Rule 605.38 Further, because
order size categories were tied to the number of shares, the categories may have grouped orders

33

See MDI Adopting Release, 86 FR 18596 at 18729 (Apr. 9, 2021) (describing analysis using data from
May 2020 and finding that approximately 45% of all trades executed on exchange and approximately 10%
of all volume executed on exchange in corporate stocks and exchange-traded funds (“ETFs”) (6,926 unique
symbols) occurred in odd-lot sizes (i.e., less than 100 shares) and 40% of those odd-lot transactions
(representing approximately 35% of all odd-lot volume) occurred at a price better than the NBBO). In
addition, a recent academic working paper shows that odd-lots offer better prices than the NBBO 18% of
the time for bids and 16% of the time for offers. This percentage increases monotonically in the stock price,
for example, for bid prices, increasing from 5% for the group of lowest-price stocks in their sample, to 42%
for the group of highest-priced stocks. See Robert P. Bartlett, Justin McCrary, and Maureen O’Hara, The
Market Inside the Market: Odd-Lot Quotes (working paper Feb. 1, 2022), available at
SSRN: https://ssrn.com/abstract=4027099 (retrieved from SSRN Elsevier database) (“Bartlett, et al.”). See
also Elliot Banks, BMLL Technologies, Inside the SIP and the Microstructure of Odd-Lot Quotes
(observing an upward trend in odd-lot trading inside the NBBO from Jan. 2019 to Jan. 2022). See also
Proposing Release, 88 FR 3786 at 3792, n.93 (Jan. 20, 2023).

34

See MDI Adopting Release, 86 FR 18596 at 18613 n.202 (Apr. 9, 2021) (describing analysis included in
the MDI Adopting Release that examined quotation data for the week of May 22-29, 2020 for stocks priced
from $250.01 to $1000.00 and found that there is odd-lot interest priced better than the new round lot
NBBO 28.49% of the time, and, in 48.49% of those cases, there are better priced odd-lots at multiple price
levels). See also Proposing Release, 88 FR 3786 at 3792, n.94 (Jan. 20, 2023).

35

The odd-lot rate is the total number of odd-lot trades divided by the total number of all trades.

36

For example, odd-lot rates for corporate stock price deciles 1-3 (the lowest priced corporate stocks
comprising 30% of all corporate stocks) have been higher on average in 2021, 2022, and Sep. 2023 (34%,
34%, 34%) as compared to 2019 and 2020 (23%, 27%). Similarly, exchange-traded products (“ETPs”) also
exhibit higher average odd-lot rates in price quartiles 1 and 2 (the lowest priced ETPs comprising 50% of
all ETPs) on average in 2021, 2022, and Sep. 2023 (26%, 28%, 28%) compared to 2019 and 2020 (19%,
22%). Analysis has been updated based on MIDAS, available at https://www.sec.gov/opa/data/marketstructure/marketstructuredownloadshtml-by_decile_and_quartile. See also Proposing Release, 88 FR 3786
at 3792, n.95 (Jan. 20, 2023).

37

See Proposing Release, 88 FR 3786 at 3792, n.91-92 (Jan. 20, 2023). See also id. at 3840, n.619-622 and
accompanying text (estimating, based on analysis of Tick Size Pilot data, coverage of current Rule 605
reporting requirements).

38

See id. at 3841 (Figure 3) (describing analysis comparing one market center’s volume (NYSE) to TAQ data
that showed that an estimated 50% of shares executed during regular market hours were included in Rule
605 reports as of Feb. 2021, and showed that this number has been on a slightly downward trend since
around mid-2012).

11

of very different notional values, which might have complicated comparisons of aggregate
execution quality. Finally, the speed of trading in the market has increased exponentially since
2000,39 rendering the 1 second timestamp conventions of preexisting Rule 605 less informative.
Moreover, since the adoption of Rule 605, the Commission and its staff have continually
assessed market events and their impact on market structure, with much of this effort aimed at
achieving enhanced transparency for investors.40 In 2010, the Commission issued a Concept
Release on Equity Market Structure seeking public comment on, among other things, the metrics
for assessing the performance of the current market structure and the effectiveness of tools such
as Rule 605 reports to protect investor interests.41 In 2015, the Commission formed the Equity
Market Structure Advisory Committee (“EMSAC”), which considered issues related to
Regulation NMS and equity market structure.42 The EMSAC recommended that the Commission

39

Analysis of data from the SEC’s MIDAS analytics tool shows that the percent of on-exchange NMLOs that
are fully executed within 1 millisecond (as a percentage of all fully executed on-exchange NMLOs) has
increased from 2.1% in Q1 2012 to 11.7% in Q1 2023 for small cap stocks, and from 5.9% in Q1 2012 to
14.0% in Q1 2023 for large cap stocks. Further, in Q1 2023 nearly half (48.0%) of NMLOs executed in less
than 1 second in large market capitalization stocks. See dataset “Conditional Cancel and Trade
Distribution,” available at https://www.sec.gov/marketstructure/downloads.html. See also infra notes 12161217 and accompanying text. See also Proposing Release, 88 FR 3786 at 3792, n.98 (Jan. 20, 2023).

40

For example, since the adoption of Rule 605 in 2000, the Commission has periodically revised certain of its
NMS rules, including the adoption of Regulation NMS in 2005. See, e.g., Regulation NMS Adopting
Release, 70 FR 37496 (June 29, 2005); and MDI Adopting Release, 86 FR 18596 (Apr. 9, 2021).

41

See Concept Release on Equity Market Structure, 75 FR 3594 at 3605 (Jan. 21, 2010).

42

The archives of these meetings are available at https://www.sec.gov/spotlight/emsac/emsac-archives.htm.

12

amend Rule 605 to modernize it and increase the usefulness of available execution quality
disclosures.43 In addition, one broker-dealer petitioned the Commission to amend Rule 605.44
In 2018, the Commission modified Rule 606, which requires broker-dealers to disclose
the identity of market centers to which they route orders on behalf of customers.45 Rule
606(a)(1), which focuses on held orders,46 requires broker-dealers to produce quarterly public
reports regarding their routing of non-directed orders47 in NMS stocks that are submitted on a
held basis and these reports include the identity of regularly used venues, the percentage of
orders routed to each venue, and information about the broker-dealer’s relationship with each
venue.48 When adopting the 2018 Rule 606 Amendments, the Commission identified intensified
competition for customer orders, the rise in the number of trading centers, and the introduction of
new fee models for execution services as the main concerns with held orders for NMS stocks that
it sought to address with the proposal.49 The Commission adopted enhanced public disclosures

43

See Transcript from EMSAC Meeting (Aug. 2, 2016), available at
https://www.sec.gov/spotlight/emsac/emsac-080216-transcript.txt (“EMSAC I”); Transcript from EMSAC
Meeting (Nov. 29, 2016), available at https://www.sec.gov/spotlight/equity-market-structure/emsactranscript-112916.txt (“EMSAC II”); EMSAC Recommendations Regarding Modifying Rule 605 and Rule
606 (“EMSAC III”), Nov. 29, 2016, available at https://www.sec.gov/spotlight/emsac/emsacrecommendations-rules-605-606.pdf.

44

See Letter from Virtu Financial re Petition for Rulemaking to Amend SEC Rule 605 (Sept. 20, 2021)
(“Virtu Petition”), available at https://www.sec.gov/rules/petitions/2021/petn4-775.pdf.

45

The amendments to Rule 606 in 2018 (“2018 Rule 606 Amendments”) also modified Rule 605 to require
that the public order execution quality reports be kept publicly available for a period of three years. See
2018 Rule 606 Amendments Release, 83 FR 58338 (Nov. 19, 2018).

46

See supra note 4 (discussing held and not held orders).

47

A “non-directed order” means any order from a customer other than a directed order. See final 17 CFR
242.600(b)(66). A “directed order” means an order from a customer that the customer specifically
instructed the broker or dealer to route to a particular venue for execution. See final 17 CFR
242.600(b)(32).

48

See 17 CFR 242.606(a)(1). Held orders are typically used by individual investors. See, e.g., 2018 Rule 606
Amendments Release, 83 FR 58338 at 58372 (Nov. 19, 2018) (stating that retail investors’ orders are
typically submitted on a held basis and are typically smaller in size).

49

See 2018 Rule 606 Amendments Release, 83 FR 58338 at 58372 (Nov. 19, 2018).

13

pursuant to Rule 606(a)(1) that focused on increased transparency for the financial inducements
that broker-dealers face when determining where to route held order flow.50 The Commission
also adopted Rule 606(b)(3) to require detailed, customer-specific order handling disclosures that
can be requested by a customer that places, directly or indirectly, one or more orders in NMS
stocks that are submitted on a not held basis.51
At the time of the 2018 Rule 606 Amendments, the Commission considered suggestions
from the EMSAC and other commenters that the Commission include more or different
execution quality statistics in the required disclosures.52 But the Commission stated that the
enhancements to Rule 606(a) that it was adopting were appropriately designed to enable
customers—and retail customers in particular—to better assess their broker-dealers’ order
routing performance and, in particular, potential conflicts of interest that their broker-dealers face
when routing customer orders and how their broker-dealers manage those potential conflicts.53
The Commission further stated the limited modifications being adopted at that time were
reasonably designed to further the goal of enhancing transparency regarding broker-dealers’
order routing practices and customers’ ability to assess the quality of those practices, and that the
suggested execution quality statistics were not necessary to achieve that goal.54 However, the

50

See id. at 58373.

51

See 17 CFR 242.606(b)(3); 2018 Rule 606 Amendments Release, 83 FR 58338 at 58345 (Nov. 19, 2018)
(stating that by using the not held order distinction, Rule 606(b)(3) as adopted will likely result in more
Rule 606(b)(3) disclosures for order flow that is typically characteristic of institutional customers—not
retail customers—and will likely cover all or nearly all of the institutional order flow).

52

See 2018 Rule 606 Amendments Release, 83 FR 58338 at 58379 (Nov. 19, 2018). See also Proposing
Release, 88 FR 3786 at 3790, n.66 (Jan. 20, 2023) and accompanying text.

53

See 2018 Rule 606 Amendments Release, 83 FR 58338 at 58379 (Nov. 19, 2018).

54

See id. The Commission further stated that the amendments to Rule 606 provide an appropriate level of
insight into the widespread financial arrangements between broker-dealers and execution venues that may
affect broker-dealers’ order routing decisions. See id.

14

Commission stated that its determination not to adopt the additional specific disclosures was not
an indication that the Commission had formed a decision on the validity or usefulness of the
suggested execution quality statistics.55
Separately, each broker-dealer has a legal duty to seek to obtain best execution of
customer orders.56 The duty of best execution requires broker-dealers to execute customers’
trades at the most favorable terms reasonably available under the circumstances.57 When
adopting Rules 605 and 606, the Commission stated that these rules do not address and therefore
do not change the existing legal standards that govern a broker-dealer’s duty of best execution.58
The Commission recognized that the information contained in the Rule 605 reports (and Rule
606 reports) will not, by itself, be sufficient to support conclusions regarding a broker-dealer’s
compliance with its legal responsibility to obtain the best execution of customer orders.59 As the
Commission stated, any such conclusions would require a more in-depth analysis of the broker-

55

See id.

56

See, e.g., Regulation NMS Adopting Release, 70 FR 37496 at 37537 (June 29, 2005); Newton v. Merrill,
Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 269-70, 274 (3d Cir.), cert. denied, 525 U.S. 811
(1998); Certain Market Making Activities on Nasdaq, Securities Exchange Act Release No. 40900, 53 SEC
1150, 1162 (1999) (settled case) (citing Sinclair v. SEC, 444 F.2d 399 (2d Cir. 1971); Arleen Hughes, 27
SEC 629, 636 (1948), aff’d sub nom. Hughes v. SEC, 174 F.2d 969 (D.C. Cir. 1949)). In addition, the
Commission has separately proposed a rule concerning broker-dealers’ duty of best execution. See
Securities Exchange Act Release No. 96496 (Dec. 14, 2022), 88 FR 5440 (Jan. 27, 2023) (“Regulation Best
Execution Proposing Release”). See also Proposing Release, 88 FR 3786 at 3790, n.69 (Jan. 20, 2023).

57

See Regulation NMS Adopting Release, 70 FR 37496 at 37538 (June 29, 2005) (referring to the best
reasonably available price and citing Newton, 135 F.3d at 266, 269-70, 274). Newton also specified certain
other factors relevant to best execution—order size, trading characteristics of the security, speed of
execution, clearing costs, and the cost and difficulty of executing an order in a particular market. See
Newton, 135 F.3d at 270, n.2. See also Proposing Release, 88 FR 3786 at 3791, n.70 (Jan. 20, 2023).

58

See Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75420 (Dec. 1, 2000).

59

See id.

15

dealer’s order routing practices than will be available from the disclosures required by the
rules.60
B.

Overview of the Proposal and Comments Received

In acknowledgment of the myriad changes to the securities markets since the adoption of
Rule 605 more than two decades ago, the proposed amendments to Rule 605 sought to ensure the
continued transparency and utility of the execution quality statistics required by Rule 605. The
Commission proposed to amend Rule 605 by expanding the scope of reporting entities to include
broker-dealers with a larger number of customers (“larger broker-dealers”).61 The Commission
also proposed to modify the set of required data to capture execution quality information for
more order types and sizes, require time-based execution statistics to be at a more granular level,
and enhance the utility of the statistics.62 The Commission further proposed to require that
reporting entities provide a report of summary execution quality statistics, in addition to the more
detailed reports.63

60

See id. For example, the execution quality statistics included in Rule 605 do not encompass every factor
that may be relevant in determining whether a broker-dealer has obtained best execution, and the statistics
in a market center’s reports typically will reflect orders received from a number of different routing brokerdealers. See id. See also infra notes 1097-1098 and accompanying text for discussion of an investment
adviser’s fiduciary duty, including the duty to seek best execution of a client’s transactions where the
investment adviser has the responsibility to select broker-dealers to execute client trades. See also
Proposing Release, 88 FR 3786 at 3791 (Jan. 20, 2023).

61

See Proposing Release, 88 FR 3786 at 3796-3801 (Jan. 20, 2023). Throughout the release, the term “larger
broker-dealer” refers to a broker-dealer that meets or exceeds the “customer account threshold,” as defined
in final Rule 605(a)(7). See also infra section II.A.

62

See Proposing Release, 88 FR 3786 at 3804-22 (Jan. 20, 2023).

63

See id. at 3823-25.

16

The Commission received numerous comment letters in response to the Proposing
Release, a large portion of which were from individual investors.64 Many commenters supported
updating the disclosures required by Rule 605.65 Several commenters, including industry groups,
broker-dealers, financial services firms,66 and investor advocacy groups, suggested clarifications
or changes to the scope of reporting entities and to certain proposed metrics included in the
detailed report or summary report.67 Other commenters broadly supported the more detailed
recommendations of other commenters.68

64

The Commission received comments from a wide range of market participants, including individual
investors, broker-dealers, academics, securities industry groups, national securities exchanges, and investor
advocacy groups. Comments received on the Proposing Release are available on the Commission’s
website, available at https://www.sec.gov/comments/s7-29-22/s72922.htm.

65

See, e.g., letters from: Ellen Greene, Managing Director, Equity & Options Market Structure, SIFMA (Mar.
31, 2023) (“SIFMA Letter II”) at 2; Stephen John Berger, Managing Director, Global Head of Government
and Regulatory Policy, Citadel Securities (Mar. 31, 2023) (“Rule 605 Citadel Letter”) at 1; Stephen W.
Hall, Legal Director and Securities Specialist, Better Markets, Inc. (Mar. 31, 2023) (“Better Markets
Letter”) at 1-2.

66

As used in this release, “financial services firm” refers to an entity that includes multiple types of affiliated
entities providing financial services, including broker-dealers, investment advisers, or banks.

67

See, e.g., SIFMA Letter II at 27-28; and letters from: Howard Meyerson, Managing Director, Financial
Information Forum (Mar. 31, 2023) (“FIF Letter”) at 2-5; Tyler Gellasch, President and CEO, Healthy
Markets Association (Mar. 31, 2023) (“Healthy Markets Letter”) at 16-18; Douglas A. Cifu, Chief
Executive Officer, Virtu Financial, Inc. (Mar. 30, 2023) (“Virtu Letter II”) at 10-12. These and other
comment letters discussing the scope of reporting entities and proposed metrics included in the detailed
report or summary report are described infra throughout this release.

68

See, e.g., Rule 605 Citadel Letter at 5; and letters from: Ryan Kwiatkowski, Chairman of the Board, and
James Toes, President & CEO, Security Traders Association (Apr. 3, 2023) (“STA Letter”) at 4-5; Derrick
Chan, Head of Equities, Fidelity Capital Markets (Mar. 31, 2023) (“Fidelity Letter”) at 2, 8; Naureen
Hassan, President, UBS Americas, Robert Karofsky, President, UBS Investment Bank, and Suni Harford,
President, UBS Asset Management, UBS (Mar. 31, 2023) (“UBS Letter”) at 2; Tim Gately, Managing
Director, Head of Equities Sales, Americas, Citigroup Global Markets Inc. (Mar. 31, 2023) (“CGMI
Letter”) at 1-2, 3; Jason Clague, Managing Director, Head of Operations, The Charles Schwab Corporation
(Mar. 31, 2023) (“Schwab Letter II”) at 2, 30, 33. These and other comment letters discussing the
recommendations of other commenters are described infra throughout this release. Several individual
investors stated that in Dec. 2022, FINRA and the Commission sent out risk alerts regarding a lack of
compliance with reports pursuant to Rule 606 of Regulation NMS and that “one would suspect that brokers
will be as non-compliant with the new 605 reports.” Letter Type D; Letter Type E; and Letter Type H at
https://www.sec.gov/comments/s7-29-22/s72922.htm. The Commission will monitor the implementation of
the amendments to Rule 605.

17

One industry group recommended that the Commission reissue the proposed rule after
incorporating comments from it and other market participants “to ensure that the final rule
achieves the Commission’s intended purpose and allow market participants to identify additional
enhancements.”69 A broker-dealer stated that the Commission should provide market participants
the opportunity to review and comment on such a revised proposal prior to finalization.70 The
Commission does not agree with these commenters. Delaying the adoption of a final rule, and
thereby delaying the benefits of Rule 605, is not warranted. The Commission has reviewed and
carefully considered the extensive comment file,71 which included input from a broad array of
market participants, and as discussed below, has made certain changes in response to these
comments.72 For these reasons, re-proposal of the Rule 605 amendments is not necessary.
Contemporaneously with the proposal to modify Rule 605, the Commission issued three
other proposals related to separate aspects of equity market structure and Regulation NMS.73 A

69

Letter from Howard Meyerson, Managing Director, Financial Information Forum (June 22, 2023) (“FIF
Letter II”) at 11. See also letter from Howard Meyerson, Managing Director, Financial Information Forum
(Feb. 14, 2024) (“FIF Letter III”) at 2, 5.

70

See letter from Stephen John Berger, Managing Director, Global Head of Government & Regulatory
Policy, Citadel Securities (Dec. 5, 2023) (“Equity Market Structure Citadel Letter II”) at 3.

71

The Commission voted to issue the Proposing Release on Dec. 14, 2022. The release was posted on the
Commission’s website that day, and comment letters were received beginning the same day. The comment
period closed on Mar. 31, 2023. The Commission has considered comments received since Dec. 14, 2022.

72

In addition, as discussed above, the EMSAC and commenters responding to the Commission’s Concept
Release on Equity Market Structure and to the 2018 Rule 606 Amendments recommended that the
Commission update Rule 605 and one broker-dealer petitioned the Commission to amend the Rule. See
supra notes 40-44, 52, and accompanying text. The Commission considered these suggestions when
proposing amendments to Rule 605. See Proposing Release, 88 FR 3786 at 3792-95 (Jan. 20, 2022).

73

See Regulation Best Execution Proposing Release, 88 FR 5440 (Jan. 27, 2023) (proposing rule that would
establish Commission rule-based best execution standards); and Securities Exchange Release Nos. 96494
(Dec. 14, 2022), 87 FR 80266 (Dec. 29, 2022) (“Minimum Pricing Increments Proposing Release”)
(proposing amendments to Regulation NMS to reduce minimum pricing increments, add a minimum
trading increment, reduce access fee caps, improve transparency of exchange fees and rebates, and enhance
the transparency of market data infrastructure); 96495 (Dec. 14, 2022), 88 FR 128 (Jan. 3, 2023) (“Order
Competition Rule Proposing Release”) (proposing rule that would enhance competition for the execution of
marketable orders of individual investors).

18

number of commenters provided comments on all four proposals jointly.74 Some commenters
requested that the Commission publicly release anonymized subsets of CAT data used in
connection with the tables and figures in the proposals’ economic analyses.75
The Commission is not releasing anonymized subsets of CAT data used in connection
with the proposals, including CAT data used in connection with data and figures in the Proposing

74

See, e.g., SIFMA Letter II (Mar. 31, 2023); Equity Market Structure Citadel Letter II (Dec. 5, 2023); and
letters from: Michael Blaugrund, Chief Operating Officer, NYSE Group, Inc., Jason Clague, Managing
Director, Head of Operations, Charles Schwab & Co., and Joseph Mecane, Head of Execution Services,
Citadel Securities (Mar. 6, 2023) (“NYSE, Schwab, and Citadel Letter”); Christopher A. Iacovella,
President & Chief Executive Officer, American Securities Association (Mar. 31, 2023) (“American
Securities Association Letter II”); Hope Jarkowski, General Counsel, NYSE Group, Inc. (Mar. 31, 2023)
(“NYSE Letter”); Stephen John Berger, Managing Director, Global Head of Government & Regulatory
Policy, Citadel Securities (Mar. 31, 2023) (“Equity Market Structure Citadel Letter”); Jason Clague,
Managing Director, Head of Operations, The Charles Schwab Corporation (Mar. 22, 2023) (“Schwab
Letter”); Kirsten Wegner, Chief Executive Officer, Modern Markets Initiative (Mar. 24, 2023) (“Modern
Markets Initiative Letter”); Joanna Mallers, Secretary, FIA Principal Traders Group (Mar. 31, 2023) (“FIA
PTG Letter II”); Peter D. Stutsman, Global Head of Equity Trading, and Timothy J. Stark, Head of Equity
Markets and Transaction Research, The Capital Group Companies, Inc. (Mar. 31, 2023) (“Capital Group
Letter”); Andrew Hartnett, NASAA President and Deputy Commissioner, Iowa Insurance Division, North
American Securities Administrators Association, Inc. (Mar. 31, 2023) (“NASAA Letter”); David Howson,
Executive Vice President, Global President, Cboe Global Markets, Nathaniel N. Evarts, Managing
Director, Head of Trading, Americas, State Street Global Advisors, Kimberly Russell, Market Structure
Specialist, Global SPDR Business, State Street Global Advisors, Mehmet Kinak, Global Head of Equity
Trading, T. Rowe Price, Todd Lopez, Americas Head of Execution Services, UBS Securities LLC, and
Douglas A. Cifu, Chief Executive Officer, Virtu Financial, Inc. (Mar. 24, 2023) (“Cboe, State Street, et al.,
Letter”); John A. Zecca, Executive Vice President, Global Chief Legal, Risk & Regulatory Officer,
Nasdaq, Inc. (Mar. 30, 2023) (“Nasdaq Letter”); Jennifer W. Han, Executive Vice President, Chief Counsel
& Head of Global Regulatory Affairs, Managed Funds Association (Mar. 30, 2023) (“Managed Funds
Association Letter”); Jonathan Kanter, Assistant Attorney General, Antitrust Division, U.S. Department of
Justice (Apr. 11, 2023) (“DOJ Letter”); Nathanial N. Evarts, Managing Director, Head of Trading,
Americas, and Kimberly Russell, Market Structure Specialist, Global SPDR Business, State Street Global
Advisors (Mar. 30, 2023) (“State Street Global Advisors Letter”); Michael Markunas, Deputy General
Counsel, Chief Compliance Officer, B. Riley Securities, Inc. (Mar. 31, 2023) (“B. Riley Letter”).

75

See, e.g., Virtu Letter at 1; Equity Market Structure Citadel Letter at 16-17; Schwab Letter II at 3-4 (“there
is a distinct absence of economic data to support many aspects of the Proposals and to support the
Commission’s analysis of costs versus benefits . . . CAT data is not publicly available and thus public
commenters … do not have access to the very data on which the Commission relies”); and letters from:
Ellen Greene, Managing Director, Equity & Options Market Structure, SIFMA (Feb. 8, 2023) (“SIFMA
Letter”) at 3-4; Kristen Malinconico, Director, Center for Capital Markets Competitiveness, U.S. Chamber
of Commerce (Mar. 31, 2023) (“Chamber of Commerce Letter”) at 2-3. Some of these commenters also
requested that the Commission identify the specific broker-dealers whose Rule 605 and Rule 606 reports,
which are publicly available, were used in the proposals. See, e.g., SIFMA Letter at 2; Virtu Letter at 1-2.

19

Release. The CAT database contains highly sensitive and granular market information.76 The
Commission fully described in the Proposing Release and this Release the CAT data used, the
methodology for analysis, and the results of its analyses. This provides notice of the
Commission’s use and analysis of CAT data in support of this rulemaking.77
Market participants, such as broker-dealers, may analyze their own order and transaction
information as well as commercially available data and use this analysis to provide meaningful
comment on the Proposing Release from their own perspectives.78 The level of aggregation that
would be required to protect market and proprietary information so that it cannot be used, either
itself, or with other commercially or publicly available information, to reverse engineer or
otherwise reveal market participants’ identities, market positions, or trading strategies would also

76

See, e.g., Securities Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722 at 56978 (Aug. 1,
2012) (stating that maintaining the confidentiality of customer and other information reported to CAT “is
essential” and that “[w]ithout adequate protections, market participants would risk the exposure of highlyconfidential information about their trading strategies and positions”); Securities Exchange Act Release No.
84696 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (stating that a security breach involving CAT data
could, among other things, “leak highly-confidential information about trading strategies or positions,
which could be deleterious for market participants’ trading profits and client relationships” or “expose
proprietary information about the existence of a significant business relationship with either a counterparty
or a client, which could reduce business profits”).

77

In addition, the Commission declines to provide the identities of the specific broker-dealers whose Rule
606 reports were used in connection with the Proposing Release. See supra note 75. The reports themselves
are publicly available and interested parties can analyze these reports using their own selection of brokerdealers. As with the CAT data, the Commission has fully described in the Proposing Release the Rule 606
data used, the methodology for analysis, and the results of its analyses. This information provides notice of
the Commission’s use and analysis of Rule 606 data used in support of this rulemaking.

78

For example, the SEC’s MIDAS analytics tool collects and processes data from the consolidated tapes as
well as from the separate proprietary feeds made individually available by each equity exchange. See
MIDAS: Market Information Data Analytics System, SEC, available at
https://www.sec.gov/marketstructure/midas-system. See also letter from John Ramsay, Chief Market Policy
Officer, Investors Exchange LLC (“IEX”) (Oct. 13, 2023) (“IEX Letter”) at 3 (stating that there are
“myriad sources of information that . . . market participants draw on to consider how orders are handled
and how markets compete with and compare to each other,” including NYSE TAQ data, other exchange
proprietary and consolidated market data, and FINRA’s reports on off-exchange trading). See also, e.g.,
infra note 330 (FIF Letter) and accompanying text; notes 113-114 (Professor Christopher Schwarz,
University of California Irvine, Professor Brad Barber, University of California, Davis, Professor Xing
Huang, Washington University in St. Louis, Professor Philippe Jorion, University of California, Irvine,
Professor Terrance Odean, University of California, Berkeley (Feb. 7, 2023) (“Professor Schwarz et al.
Letter”)) and accompanying text.

20

mean that the dataset would be substantially dissimilar from the actual data used in the
Commission’s analysis.
In addition, several commenters suggested a sequencing of the equity market structure
proposals, such that the Commission would implement the amendments to Rule 605 and evaluate
the execution quality data from the updated reports, before undertaking further action on the
remaining equity market structure proposals.79 One group of members of Congress
recommended that no equity market structure rule “should be finalized or implemented” until the
Commission “[c]onduct[s] a comprehensive cost-benefit analysis of the aggregate impact of
[these rules] and seek[s] public comment on this analysis[,]” and proposes “a reasonable,
workable, and staggered schedule for public comment on the adoption and implementation of the

79

See, e.g., SIFMA Letter II at 2 (“[o]nce an amended Rule 605 is implemented, the Commission will have
the data it needs to fully assess market quality and consider whether additional rulemaking is needed and
how any such rulemaking should be designed”); Equity Market Structure Citadel Letter II at 1-3; NYSE,
Schwab and Citadel Letter at 1-2; STA Letter at 4; Modern Markets Initiative Letter at 2; Cboe, State
Street, et al. Letter dated Mar. 24, 2023 at 1-2; Managed Funds Association Letter at 2; T. Rowe Letter at 3;
UBS Letter at 1-2; Virtu Letter II at 2; SIFMA Letter II at 11; Professor Schwarz et al. Letter at 5; and
letters from Bill Foster, French Hill, Henry Cuellar, Bill Huizenga, Wiley Nickel, Andy Barr, Ritchie
Torres, Ann Wagner, Brittany Pettersen, Dan Meuser, Josh Gottheimer, Mike Flood, Vicente Gonzalez,
Byron Donalds, Mike Quigley, Michael V. Lawler, David Scott, Andrew R. Garbarino, Gregory W. Meeks,
Monica De La Cruz, Sean Casten, Scott Fitzgerald, Bradley S. Schneider, Erin Houchin, Jim Himes, Young
Kim, Steven Horsford, Ralph Norman, Gwen Moore, Tom Emmer, Marc Veasey, and Zach Nunn, United
States House of Representatives (Sep. 26, 2023) at 2; Michelle Bryan Oroschakoff, Managing Director and
Chief Legal Officer, LPL Financial (Mar. 31, 2023) (“LPL Financial Letter”) at 3-4; Chester Spatt, Pamela
R. and Kenneth B. Dunn Professor of Finance, Tepper School, Carnegie Mellon University and former
Chief Economist, U.S. Securities and Exchange Commission (2004-2007), Thomas Ernst, Assistant
Professor of Finance, Smith School of Business, University of Maryland, Andrey Malenko, Professor of
Finance, Carroll School of Management, Boston College, Jian Sun, Assistant Professor of Finance, Le
Kong Chian School of Business, Singapore Management University (Nov. 29, 2023) (“Professor Spatt et
al. Letter”) at 5; see also letter from Patrick McHenry, French Hill, Frank Lucas, Pete Sessions, Bill Posey,
Blaine Luetkemeyer, Bill Huizenga, Ann Wagner, Andy Barr, Roger Williams, Tom Emmer, Barry
Loudermilk, Alexander X. Mooney, Warren Davidson, John Rose, Bryan Steil, William Timmons, Ralph
Norman, Dan Meuser, Scott Fitzgerald, Andrew R. Garbarino, Young Kim, Byron Donalds, Mike Flood,
Michael V. Lawler, Zach Nunn, Monica De La Cruz, Erin Houchin, and Andy Ogles, United States House
of Representatives (Sept. 26, 2023) (“McHenry et al. Letter”) at 2. But see IEX Letter at 5 (“the premise
that Rule 605 updates must be a precondition to any other changes looks more like a calculated stall than an
argument for careful, reasoned decision making”); letter from Stephen W. Hall, Legal Director and
Securities Specialist, Better Markets, Inc. (Oct. 31, 2023) (“Better Markets Letter II”) at 5 (“argument that
the Commission should first get more information is a delaying tactic designed to forestall meaningful
reforms that are already clearly necessary and appropriate”).

21

proposals, considering their overlapping nature, significant compliance and operational burdens,
and if they may be insurmountable for smaller or emerging firms.”80 As discussed below in the
economic analysis, the Commission uses as a baseline the world as it exists today, including
adopted rules but not proposed rules.81 Comments on how the adoption of the Rule 605
amendments should affect the timing or sequence of the other equity market structure proposals
will be considered if and when those rules are acted on. Similarly, because the effects of the final
rule are measured against the existing regulatory baseline, which does not include rules that have
not been adopted, the Commission does not agree that an additional analysis of the aggregate
impact of the several equity market structure rules is necessary before the adoption of the Rule
605 amendments.82
The proposed amendments to Rule 605, as well as the costs and benefits of the proposed
amendments, were detailed in the Proposing Release and received substantial public comment.
The proposed amendments to Rule 605 received broad support from many commenters. The
Commission has considered the comments received, updated its data analysis where needed, and,
in some instances, has modified the proposal in response to comments received.

80

See McHenry et al. Letter at 2. As discussed further below, Rule 605 as amended imposes reporting
requirements only on market centers and larger broker-dealers that meet the customer account threshold
(i.e., introduce or carry at least 100,000 customer accounts) and thus does not bring smaller or emerging
firms within scope on the basis of their customer-facing broker-dealer business. The Commission addresses
the impact of its rulemaking on smaller or emerging firms in its releases, including this release. See infra
section IX.D.1.d)(1). Further, the Regulatory Flexibility Act (“RFA”) (5 U.S.C. 601 et seq.) requires
Federal agencies, in promulgating rules, to consider the impact of those rules on small entities. See infra
section X for further discussion of the Commission’s consideration of the impact of the amendments on
small entities.

81

See infra note 981.

82

See id. The Order Competition Rule Proposing Release, the Regulation Best Execution Proposing Release,
and the Minimum Pricing Increments Proposing Release mentioned by commenters remain at the proposal
stage. To the extent that the Commission takes final action on any or all of those proposals, the baseline in
each of those subsequent rulemakings will reflect the regulatory landscape that is current at that time. See
also infra section IX.C.1.d).

22

C.

Overview of Final Rule 605

After reviewing the comments received and considering the recommendations from
commenters,83 the Commission has determined to adopt the proposal with several modifications.
In some cases, final amendments to Rule 605 add new data elements that provide additional
context and information for both the detailed and summary execution quality reports. In adopting
the final amendments to Rule 605, the Commission aims to provide individual investors,
institutional customers, and broker-dealers with information that they can use to choose market
centers or broker-dealers that align with their investment and execution objectives. Further, as
with Rule 605 reports prior to these amendments,84 the Commission anticipates that third parties,
such as academics and journalists, will also utilize the reported execution quality data for
comparison purposes and analysis of market conditions.
As discussed in section II (Modifications to Reporting Entities) below, the Commission is
adopting the amendments to the scope of reporting entities largely as proposed, with a few
modifications. The Commission is retaining in the adopted amendments to Rule 605 the
proposed requirements that brokers and dealers introducing or carrying 100,000 or more
customer accounts prepare Rule 605 reports and that separate reports be prepared for a firm’s
broker-dealer activity and its market center activity. The Commission is also providing
additional explanation of these requirements. The Commission has determined not to require
market centers that operate a proposed qualified auction to prepare a separate report for covered
orders received for execution in the qualified auction. The Commission is specifying that ATSs
must prepare Rule 605 reports separately from their broker-dealer operators as proposed and is

83

See, e.g., FIF Letter, SIFMA Letter II.

84

See, e.g., supra note 16 (discussing studies by Boehmer et al. and Zhao & Chung).

23

also retaining the proposed requirement that a broker-dealer that operates an SDP prepare a
separate report for activity specific to the SDP, but with a modified description of what
constitutes an SDP.
In addition, as discussed in section III (Modifications to Scope of Orders Covered and
Required Information) below, the Commission is adopting amendments to the information
required to be reported in the detailed report required by Rule 605(a)(1) with modifications from
the proposal. The Commission is adopting amendments to the scope of covered orders largely as
proposed, with changes to the coverage of orders with stop prices. The Commission is also
revising the categorization by order size from the proposal to incorporate notional size buckets
and whether an order is for less than a share, is an odd-lot, or is a round lot. With respect to the
categorization by order type, the Commission is adopting the categorization of executable
NMLOs as proposed, but is modifying the categorization of NMLOs priced at or better than the
midpoint and adding more categories of immediate-or-cancel orders and more categories related
to orders submitted with stop prices. The Commission is also adopting a timestamp convention
of at least a millisecond as proposed, but eliminating the proposed statistics for median and 99th
percentile time to execution in favor of utilizing more granular time-to-execution buckets.
Further, the Commission is adopting the other required statistics for inclusion in the detailed
report with several changes from the proposal, including: (1) adding realized spread statistics for
more time intervals; (2) calculating effective spread and effective spread divided by quoted
spread for marketable order types and NMLOs priced more aggressively than the midpoint only;
(3) utilizing spread-based weighting to calculate effective spread divided by quoted spread; (4)
adding statistics for average quoted spread, average midpoint, and cumulative notional size; (5)
measuring size improvement at time of order receipt rather than time of execution, adding an

24

additional size improvement statistic focused on orders that can receive size improvement, and
calculating these size improvement statistics for marketable order types and NMLOs priced more
aggressively than the midpoint only; and (6) adding a relative fill rate statistic for NMLOs based
on order executions occurring on national securities exchanges.
Further, as discussed in section IV (Summary Execution Quality Report) below, the
Commission is adopting a requirement for a summary report pursuant to Rule 605(a)(2), with
several changes from the proposal. The Commission is changing the weighting of certain
statistics and grouping orders into notional size buckets. The Commission is modifying the
required statistics related to average order size in shares; share-weighted average percentage
price improvement; and effective spread divided by quoted spread. The Commission is including
additional metrics in the summary report for share-weighted average midpoint; share-weighted
average notional size; average percentage quoted spread; and average percentage realized spread
as calculated at two time horizons. The Commission also is requiring that the summary report be
provided in an alternative format.
Finally, as discussed in section V (Requirements for Making Rule 605 Reports Available
to the Public) below, the Commission is adopting procedures for making the Rule 605 reports
publicly available as proposed.
The Commission endeavors to ensure that investors are provided with timely and
accurate information needed to make informed investment decisions, and the final amendments
to Rule 605 reflect the Commission’s ongoing commitment to enhance transparency for
investors. Facilitating the ability of the public to compare and evaluate execution quality among
different market centers, brokers, and dealers, is an effective means of reconciling the need to
promote both vigorous price competition and fair competition among market centers and broker-

25

dealers, to the benefit of individual investors. Section 11A of the Exchange Act85 grants the
Commission the authority to promulgate rules necessary or appropriate to assure the fairness and
usefulness of information on securities transactions86 and to assure that broker-dealers transmit
and direct orders for the purchase or sale of qualified securities in a manner consistent with the
establishment and operation of a national market system.87 By requiring the uniform public
disclosure of useful and accessible statistics, amended Rule 605 will better promote competition
among market centers and broker-dealers on the basis of execution quality and ultimately
improve the efficiency of securities transactions, consistent with the objectives of our national
market system.88
II.

Modifications to Reporting Entities
A.

Larger Broker-Dealers
1.

Proposed Approach

Prior to the adopted amendments, Rule 605 of Regulation NMS required only market
centers, such as national securities exchanges, OTC market makers, and ATSs, to produce
publicly available, monthly execution quality reports. The Commission proposed to expand the
scope of entities that must prepare Rule 605 reports to include larger broker-dealers that
introduce or carry at least 100,000 customer89 accounts. The Commission reasoned that the

85

15 U.S.C. 78k-1.

86

15 U.S.C. 78k-1(c)(1)(B).

87

15 U.S.C. 78k-1(c)(1)(E).

88

The national market system objectives of section 11A of the Exchange Act include the economically
efficient executions of securities transactions; fair competition among brokers and dealers, among exchange
markets, and between exchange markets and markets other than exchange markets; the availability of
information on securities quotations and transactions; and the practicability of brokers executing investor
orders in the best market. See 15 U.S.C. 78k-1(a)(1)(C).

89

“Customer” means any person that is not a broker or dealer. See final 17 CFR 242.600(b)(28).

26

proposed expansion would “improve the usefulness of execution quality statistics, promote fair
competition, and enhance transparency by providing investors with information that they could
use to compare the execution quality provided by customer-facing broker-dealers.”90 As
discussed further below, the proposed minimum reporting threshold of 100,000 customers was
intended to balance the benefits of having broker-dealers produce execution quality statistics
with the costs of implementation and continued reporting.91
To implement this proposed expansion, the Commission proposed to insert references to
“brokers” and “dealers” where prior Rule 605 referred to “market centers.”92 In addition, the
Commission proposed to revise the definition of “covered order” in prior Rule 600(b)(22), which
referred to any market order or any limit order (including immediate-or-cancel orders) “received
by a market center,”93 to refer to orders “received by a market center, broker, or dealer.”94
Proposed Rule 605(a)(7) stated that a broker or dealer that is not a market center shall not
be subject to the requirements of Rule 605 unless that broker or dealer introduces or carries
100,000 or more customer accounts through which transactions are effected for the purchase or
sale of NMS stocks (the “customer account threshold”).95 As explained in the Proposing Release,
the Commission analyzed available data to determine the proposed customer account threshold

90

Proposing Release, 88 FR 3786 at 3795 (Jan. 20, 2023).

91

See id. at 3797.

92

See id. at 3796 (discussing amendments to Rule 605 in proposed Rule 605 introductory text, (a) heading,
(a)(1) introductory text, (a)(1)(i)(D), and (a)(3), (4), (5), and (6)).

93

Prior 17 CFR 242.600(b)(22).

94

See Proposing Release, 88 FR 3786 at 3796 (Jan. 20, 2023); proposed Rule 605(b)(30). The Commission
also proposed to require all market centers and broker-dealers that would be subject to Rule 605’s reporting
requirements to produce summary reports with aggregated execution quality information. See infra section
IV for further discussion of the summary report.

95

See Proposing Release, 88 FR 3786 at 3797 (Jan. 20, 2023).

27

given the additional costs that broad expansion of the rule to broker-dealers would entail.96
Utilizing a 100,000 customer account threshold as proposed would allow the Rule 605 reporting
requirements to capture those broker-dealers that introduce or carry the vast majority of customer
accounts, while subjecting only a relatively small percentage of broker-dealers that accept
customer orders for execution to the reporting obligation and excluding those broker-dealers that
introduce or carry fewer customer accounts.97
The proposed customer account threshold also required brokers-dealers to include in their
calculations the public customer accounts that they introduce, as well as the customer accounts
that they carry.98 Because an introducing broker-dealer may use an omnibus clearing
arrangement and not disclose certain information about its underlying customer accounts to the
clearing firm, the Commission proposed that, for purposes of Rule 605, a broker or dealer that
utilizes an omnibus clearing arrangement for any of its underlying customer accounts would be
considered to carry such underlying customer accounts when calculating the number of customer
accounts that it introduces or carries.99

96

See id. at 3797, 3886-87.

97

See id. (discussing analysis of the estimated number of broker-dealers that would be subject to Rule 605
reporting requirements according to different definitions of the customer account threshold). See infra note
146 and accompanying text for a discussion of an updated analysis.

98

See Proposing Release, 88 FR 3786 at 3797 (Jan. 20, 2023). An introducing broker-dealer is a brokerdealer that has a contractual arrangement with another firm, known as the carrying or clearing firm, under
which the clearing/carrying firm agrees to perform certain services for the introducing firm. Usually, the
introducing firm transmits its customer accounts and customer orders to the clearing/carrying firm, which
executes the orders and carries the account. See Securities Exchange Act Release No. 31511 (Nov. 24,
1992), 57 FR 56973 at 56978 (Dec. 2, 1992) (Net Capital Rule). Alternatively, some broker-dealers utilize
an “omnibus clearing arrangement,” where the clearing firm maintains one account for all customer
transactions of the introducing firm, rather than a “fully disclosed introducing relationship.” In an omnibus
arrangement, the clearing firm does not know the identity of the customers of the introducing firm, whereas
in a fully disclosed arrangement, the clearing/carrying firm knows the names, addresses, securities
positions, and other relevant data as to each customer. See id. at 56978, n.16.

99

See Proposing Release, 88 FR 3786 at 3797-98 (Jan. 20, 2023); proposed Rule 605(a)(7).

28

Proposed Rule 605(a)(7) stated that any broker or dealer that meets or exceeds the
customer account threshold and is also a market center shall produce separate reports pertaining
to each function.100 Further, as proposed a broker-dealer is excluded from Rule 605’s reporting
requirements only with respect to its customer-facing broker-dealer function (as opposed to its
market center function, if applicable) if the number of customer accounts that it introduces or
carries is less than the customer account threshold.101 However, under the proposal, a brokerdealer that meets or exceeds the customer account threshold for the first time has a grace period
of three calendar months before being required to comply with Rule 605’s reporting
requirements.102
Prior to the amendments, Rule 605 required that reporting entities calculate certain
statistics based on the time of order receipt.103 Moreover, Regulation NMS defined “time of
order receipt” based on the time an order was received by a market center for execution.104 In

100

See Proposing Release, 88 FR 3786 at 3798 (Jan. 20, 2023).

101

See id. at 3798-99. Proposed Rule 605(a)(7) stated that a broker or dealer that meets or exceeds the
customer account threshold shall be required to produce reports pursuant to this section for at least three
calendar months (“Reporting Period”). See id. at 3799. As proposed, the Reporting Period shall begin the
first calendar day of the next calendar month after the broker or dealer met or exceeded the customer
account threshold, unless it is the first time the broker-dealer had met or exceeded the customer account
threshold. See id. Any time after a broker or dealer has been required to produce reports pursuant to this
proposed section for at least a Reporting Period, if a broker or dealer falls below the customer account
threshold, the broker or dealer shall not be required to produce a report pursuant to this paragraph for the
next calendar month. See id.

102

See id. at 3799. The Commission also proposed that after the three-calendar month grace period, the
Reporting Period shall begin on the first calendar day of the fourth calendar month after the broker or
dealer has met or exceeded the customer account threshold. See id. As proposed, a broker-dealer that
crosses the customer account threshold for the first time is required to comply with the reporting
requirements of Rule 605 for at least a Reporting Period, even if that broker-dealer falls below the customer
account threshold during the grace period. See id.

103

See, e.g., prior 17 CFR 242.605(a)(1)(ii)(D) (measuring, for shares executed with price improvement, the
share-weighted average period from the time of order receipt to the time of order execution).

104

See prior 17 CFR 242.600(b)(92). See also Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75423 (Dec.
1, 2000) (“The definition [of ‘time of order receipt’] is intended to identify the time that an order reaches
the control of the market center that is expected, at least initially, to execute the order.”).

29

conjunction with the proposed expansion of Rule 605 to cover larger broker-dealers, the
Commission proposed to modify the definition of “time of order receipt” to specify that, in the
case of a broker or dealer that is not acting as a market center, the time of order receipt is the
time that the order was received by the broker or dealer for execution.105
2.

Final Rule and Discussion

The Commission is adopting amendments to Rule 605 to include larger broker-dealers as
proposed and addresses certain commenters’ questions below. These amendments will provide
enhanced transparency to investors, allowing them to compare and evaluate execution quality
among different customer-facing larger broker-dealers and promoting competition among these
broker-dealers. As discussed in section II.A.2.a), the Commission is adopting the customer
account threshold as proposed. In addition, as discussed in section II.A.2.b), the Commission is
adopting as proposed the requirement that larger broker-dealers that are also market centers
produce separate reports pertaining to each function. Finally, as discussed in section II.A.2.c),
the Commission is adopting as proposed the requirement that all reporting entities, including
larger broker-dealers, measure certain statistics from the time of order receipt.
The Commission received comments from a variety of market participants on the
proposed expansion to require larger broker-dealers to provide Rule 605 reports. Certain
individual investors supported the proposed expansion of publicly available Rule 605 reports to
include broker-dealers because this expansion would increase transparency and encourage

105

See Proposing Release, 88 FR 3786 at 3799-800 (Jan. 20, 2023); proposed Rule 600(b)(109). The time that
the order is received by the market center for execution should be the same as the time that the order is
received by the broker-dealer for execution when the broker-dealer also acts as a market center for that
order.

30

competition among broker-dealers.106 One such commenter stated that the proposal would: (1)
require broker-dealers to provide more detailed information about the execution quality of their
trades, including data on execution speeds, price improvements, and order routing practices,
which would help retail investors “make more informed decisions about where to route our
orders and which broker-dealers to work with”; (2) provide more data on execution quality that
would “help level the playing field between individual investors and large institutional players
who currently have an information advantage”; and (3) “encourage broker-dealers to compete on
the quality of their executions, which would ultimately benefit all investors.”107 Two other
individual investors supported the inclusion of broker-dealers and the proposed rule overall,
stating that it would “provide a more detailed and comprehensive standard for broker-dealers to
follow, resulting in consistently robust best execution practices.”108 In addition, an academic and
an individual investor suggested expanding the Rule 605 reporting requirement to include all
broker-dealers, rather than just larger broker-dealers.109
For reasons similar to those offered by individual investors, financial services firms,
industry groups, and a group of academics supported the proposed expansion of Rule 605

106

See, e.g., letters from: Dylan Hodges (Dec. 27, 2022); Edward Murray (Dec. 26, 2022); Dr. Paul Pritchard
(Dec. 27, 2022); Cody Welch (Mar. 7, 2023) (“Welch Letter”); Abanes (Mar. 3, 2023) (“Abanes Letter”);
Ryan Macarthur (Feb. 24, 2023) (“Macarthur Letter”); David Genco, Jr. (Feb. 24, 2023) (“Genco Letter”).

107

Letter from Caleb C. (Mar. 18, 2023).

108

Letters from Justin West (Mar. 19, 2023); Ankit (Mar. 19, 2023).

109

See letter from Aswin Joy (Mar. 7, 2023) (“Joy Letter”); letter from James J. Angel, Georgetown
University (Mar. 31, 2023) (“Angel Letter”) at 2-3. See infra section II.A.2.a) for additional discussion
about the scope of the broker-dealer reporting requirement.

31

reporting requirements to larger broker-dealers.110 One financial services firm stated that the
proposed expansion would “fill a gap in coverage that currently obscures the order handling
practices of many broker-dealers” because many customer-facing broker-dealers do not meet the
definition of a market center and thus do not produce Rule 605 reports.111 This commenter stated
that the customers of these broker-dealers are left without any “reliable way to evaluate and
compare broker-dealer performance.”112 A group of academics that authored an academic
working paper concerning the execution quality of market orders received from various brokerdealers113 also submitted a comment letter supporting the proposed expansion and cited the need

110

See Fidelity Letter at 9 (stating that expanding Rule 605 reporting requirements to new entities will provide
greater transparency into execution quality differences and increase the ability to measure retail order
outcomes in a competitive environment); letter from Gregory Davis, Managing Director and Chief
Investment Officer, and Matthew Benchener, Managing Director, Personal Investor, The Vanguard Group,
Inc. (Mar. 31, 2023) (“Vanguard Letter”) at 3 (stating that the proposal will increase transparency by
empowering investors to compare execution quality across broker-dealers and make more informed
decisions about their choice of broker-dealer); Healthy Markets Letter at 16 (stating that Rule 605 reports
should cover large brokers that route orders for investors); Better Markets Letter at 5 (stating that the
proposed expansion of entities subject to Rule 605 disclosures will help the public compare and evaluate
execution quality among different market centers and broker-dealers, and thereby increase transparency of
order execution quality, increase information available to both retail and institutional investors, and help
promote competition among market centers and broker-dealers); Professor Schwarz et al. Letter at 2; and
letter from John L. Thornton, Co-Chair, Hal S. Scott, President, and R. Glenn Hubbard, Co-Chair,
Committee on Capital Markets Regulation (Mar. 31, 2023) (“CCMR Letter”) at 14 (stating that the
proposed expansion “will allow retail investors to determine the execution quality of their orders” and
“would likely enhance competition among retail broker-dealers based on price improvement and overall
execution quality”).

111

See Vanguard Letter at 3.

112

Id. at 3-4 (stating that requiring larger broker-dealers to make Rule 605 disclosures would address this
coverage gap and give their customers a “direct line of sight into broker-dealer performance”). See also
NASAA Letter at 5-6 (stating that the proposed expansion of reporting entities would “provide the public
with a more comprehensive view of order execution quality across the national market system” and “allow
brokerage customers to compare execution quality among different broker-dealers”).

113

See Proposing Release, 88 FR 3786 at 3832, n.529 (Jan. 20, 2023) and accompanying text (citing
Christopher Schwarz et al., The ‘Actual Retail Price’ of Equity Trades (Aug. 28, 2022)).

32

for improved public transparency based on their research.114 These commenters stated that, even
if retail investors do not pay attention to broker-level disclosures about execution quality if the
dollar cost to retail investors is low, such disclosures are likely to be scrutinized by brokers,
leading to greater competition and ultimately better execution for retail investors.115 A brokerdealer supported the proposed expansion to retail brokers, stating that it will make order
execution quality, and the marketplace generally, more transparent to retail investors.116 This
commenter also stated that, given the “highly competitive state of the current retail brokerage
market,” it is not certain that the proposed enhancements to Rule 605 would improve execution
quality for individual investors because outcomes for such investors could be “asymmetric.”117
However, this commenter stated that to the extent that there are opportunities to optimize
execution quality for individual investors, “empowering investors to compare execution quality

114

See Professor Schwarz et al. Letter at 1-2 (strongly supporting the inclusion of large broker-dealers given
their research study finding that shows economically and statistically significant price execution variation
across brokers; the level of such differences was previously unknown to retail traders and a large portion of
the financial industry). A group consisting of some of these academics submitted another comment letter in
which they cited a more recent academic working paper regarding competition among wholesalers and
stated that their results “emphasize the need for further price execution disclosure at the broker level.”
Letter from Xing Huang, Philippe Jorion, and Christopher Schwarz (Dec. 12, 2023) (“Huang et al. Letter”)
at 1 (attaching Xing Huang, Philippe Jorion, Jeongmin Lee & Christopher Schwarz, Who Is Minding the
Store? Order Routing and Competition in Retail Trade Execution (Nov. 19, 2023)).

115

See Professor Schwarz et al. Letter at 3. See also Better Markets Letter at 9-10 (stating that even though
some retail investors may not read Rule 605 reports, these investors will benefit indirectly by virtue of
enhanced disclosure that will “promote competition, improve regulatory oversight, and facilitate use by
third-party researchers and academics” to expose problematic order routing and execution practices).

116

See Virtu Letter II at 3.

117

See id. at 9. This commenter stated that the proposal “may lead to changes in the equilibrium mix of
customer types at each broker” because investors would migrate towards brokers that have better execution
quality statistics. See id. at 9, n.24. This commenter explained that “order execution quality tends to be
inversely related to the aggregate cost to provide liquidity to that broker’s customers’ orders because
market makers are willing to provide more price improvement to orders that are less expensive to service.”
Id. This commenter also stated that if the proposal “induces retail investors with more costly to service
orders to move to brokers that previously had less costly to service orders, it could cause execution quality
to worsen at the broker with previously less costly to service orders.” Id.

33

across retail brokers (and consequently to switch brokers based on this information) would be the
most efficient and effective way to address these concerns.”118
Some broker-dealers and financial services firms opposed the proposed expansion to
include larger broker-dealers, citing costs and the risk of confusion, especially for individual
investors.119 One such broker-dealer stated that retail customers are not asking for or seeking
information at the level of granularity required by the proposed rule, stating that the potential risk
of investor confusion seems disproportionate to the defined transparency benefits it may
provide.120 Another commenter opposed the proposed expansion because the 605 reports are
“overly complicated for the average investor” and may give a “false sense of comfort” about
order execution practices and quality.121
After considering the comments, the Commission is adopting the requirement for brokerdealers that meet the 100,000 customer account threshold to produce Rule 605 reports, as
proposed. To implement this requirement, the Commission also is adopting the related

118

Id. at 9.

119

See Robinhood Letter at 41-42 (stating that adding the proposed expansion to include larger broker-dealers
is not realistically going to get usable execution quality information in the hands of individual investors
because the voluminous data are in a format proven not to be particularly useful for them and that the
Commission underestimates the costs for a type of report not generally prepared by broker-dealers that are
not also market centers); letter from Seth A. Miller, President Advocacy & Administration, Cambridge
Investment Research, Inc. (Mar. 31, 2023) (“Cambridge Letter”) at 7 (stating in its capacity as a brokerdealer and investment adviser that the broad scope of the proposed inclusion of larger retail broker-dealers
will impose significant costs and is “likely to lead to misaligned, misleading comparisons between totally
different entities”); Schwab Letter II at 35 (stating that differences in certain execution statistics such as
E/Q may be attributable to different business models across firms rather than actual differences in E/Q
among comparable business models, and thus would create investor confusion rather than provide useful
information); Tastytrade Letter at 4-5 (observing that the proposal will significantly increase the number of
reported data points per ticker on approximately 10,000 NMS traded products, and expressing concern
about the ability of customers to digest the additional “confusing and complicated” data points in Rule 605
reports).

120

See Tastytrade Letter at 4 (“While we agree in general that greater transparency results in a level playing
field for retail customers, it seems counterproductive to do so in a manner that risks confusion.”).

121

See letter from Kelvin To, Founder and President, Data Boiler Technologies, LLC (Mar. 31, 2023) (“Data
Boiler Letter”) at 27-28.

34

amendments to Rules 600 and 605.122 The Commission agrees with commenters who recognized
the need for Rule 605 data pertaining to customer-facing larger broker-dealers. Larger brokerdealer reporting will be useful in increasing the transparency of larger broker-dealers’ order
execution quality so that investors have information available to compare and evaluate order
execution quality and order routing practices among market centers and larger broker-dealers. As
discussed further in section II.A.2.a) below, by limiting Rule 605 reporting requirements to
larger-broker dealers that meet the customer account threshold only, Rule 605 will balance the
benefits of broker-dealer reporting with the costs.
The Commission disagrees with commenters’ concerns that larger broker-dealer
reporting will be too confusing or misleading to investors, or will create a “false sense of
comfort” about order execution practices and quality.123 Individual investor commenters
expressed interest in receiving access to execution quality statistics pertaining to larger brokerdealers because this increased transparency would allow individual investors to make more
informed decisions and encourage competition among larger broker-dealers.124 Due to the
expansion of Rule 605 reporting requirements to larger broker-dealers, customers of these
broker-dealers, including individual investors, and other market participants will no longer need
to make inferences about these broker-dealers’ execution quality based on a combination of

122

See final 17 CFR 242.605(a)(7) (establishing the customer account threshold for larger broker-dealer
reporting requirements, production of separate reports, and applicable Reporting Period). See also final 17
CFR 242.605 (inserting references to “brokers” and “dealers” in introductory text, heading for (a), (a)(1)
introductory text, (a)(1)(i)(E), and (a)(3), (4), (5), and (6)). See also final 17 CFR 242.600(b)(27) (inserting
references to orders received by a “broker” or “dealer” in definition of “covered order”) and final 17 CFR
242.600(b)(103) (specifying that the definition of “time of order receipt,” in the case of a broker or dealer
that is not acting as a market center, is the time (at a minimum to the millisecond) that an order was
received by the broker or dealer for execution). For further discussion of these amendments, see Proposing
Release, 88 FR 3786 at 3796, 3798-99 (Jan. 20, 2023).

123

See supra notes 119-121 and accompanying text.

124

See supra notes 106-108 and accompanying text.

35

broker-dealers’ routing information contained in reports required by Rule 606 and market
centers’ Rule 605 reports. Instead, customers will be able to use execution quality information
contained in larger broker-dealers’ Rule 605 reports to make comparisons across these brokerdealers and select those broker-dealers that offer better execution quality. The availability of
information about larger broker-dealers’ execution quality also is expected to increase the extent
to which these broker-dealers compete on the basis of execution quality when making their order
routing decisions. Further, to the extent that broker-dealers increase the extent to which they
route orders to the market centers offering better execution quality, increased liquidity at those
venues may further improve execution quality, as a result of promoting the flow of orders to
market centers that offer better execution quality.
The stock-by-stock order execution information that will be provided in the detailed
report will allow market participants, including individual investors familiar with data analysis,
to make their own determinations about how to group stocks or orders when comparing
execution quality information across broker-dealers. However, the Commission is mindful that
the detailed report will contain a larger volume of statistical data and many market participants,
including individual investors, may not have the means to directly analyze the detailed report. As
discussed further below, the Commission is adopting a requirement that every market center,
broker, or dealer produce a summary execution quality report in addition to the more detailed
report required by Rule 605(a)(1).125 These summary reports will make available to market
participants and other interested parties readily accessible, aggregated data that will allow them
to compare some of the more significant aspects of the execution quality provided by specific

125

See infra section IV.B.

36

market centers and larger broker-dealers. These summary reports will provide human-readable
information that any investor, including individual investors, can assess without needing
technical expertise or relying on an intermediary.126 Moreover, even individual investors that do
not read Rule 605 reports from larger broker-dealers will benefit from independent analysts,
consultants, broker-dealers, the financial press, or market centers analyzing and producing more
digestible information using Rule 605 data.127
One industry group stated that it remains unclear whether broker-dealers’ Rule 605
reports would increase competition.128 This commenter stated its concern that producing Rule
605 statistics without accounting for different broker-dealer business models could lead investors
to make incorrect decisions regarding broker-dealer selection.129 This commenter further stated
that differences in execution quality could be the result of a myriad of factors, including “the
customers . . . different brokers serve and the equities the customers trade.”130 In response to this

126

See infra section IV.B.2. For a discussion of comments regarding investor education or testing related to
the summary reports, see infra section IV.B.3. As the new Rule 605 requirements, including the expansion
of scope to include larger broker-dealers, are implemented, the Commission will consider whether there is a
need for additional educational resources to assist investors.

127

See infra notes 1075-1077 and accompanying text (discussing ways in which third parties have used Rule
605 reports to produce information that is meant for public consumption).

128

See SIFMA Letter II at 29.

129

See id. at 30. This commenter also stated it does not understand on what basis the Commission believes
that differences in business models are well-known by market participants, and particularly retail investors,
for purposes of evaluating execution quality statistics. See id. (discussing Proposing Release, 88 FR 3786 at
3800 (Jan. 20, 2023)). However, the Commission’s statement in the Proposing Release was made in
specific reference to market participants’ use of Rule 605 reports to compare a market center and a brokerdealer, rather than use of Rule 605 reports to compare broker-dealers with one another. The Commission
agrees with the commenter that differences between broker-dealer business models may not be ex ante
well-known to market participants. However, market participants, including individual investors, will be
able to use the information in Rule 605 detailed reports and the Rule 605 summary reports to account for
differences in broker-dealer order flow, and broker-dealers are not precluded from separately providing
their customers with information that can be used to contextualize the information in the Rule 605 reports.

130

See id. at 30 (stating that when pointing to potential shifts in order flow from one broker-dealer to another,
the Commission does not account for any potential effects on execution quality caused by the shifting of
the order flow itself or the potential for order flow to consolidate among a smaller number of firms, thereby
reducing competition and ultimately hurting execution quality).

37

commenter, the Commission agrees that, as a result of different business models, a particular
broker-dealer’s order flow may be made up of a different mixture of securities, order types, and
order sizes, which may impact or constrain that broker-dealer’s overall execution quality level.131
However, under these amendments, larger broker-dealers will be required to categorize the
execution quality information required by Rule 605 by individual security, different types of
orders, and different order sizes. Giving market participants access to this information in Rule
605 reports will help ensure that they are able to control for these differences in order flow
characteristics and make apples-to-apples comparisons when assessing and comparing execution
quality information across broker-dealers.132
An industry group suggested that the Commission allow firms an opportunity to provide
a statement in their Rule 605 reports explaining how to contextualize the report based on the
nature of the firm’s order flow.133 In addition, a broker-dealer suggested that the Commission
permit retail brokers to provide background and contextual information to explain how their
obligations are different from those of wholesalers or other market centers that currently report
under Rule 605.134 The Commission is not adopting the suggestion to include a descriptive
statement within the Rule 605 reports because it would be inconsistent with the structure of these
reports, which are designed to be structured, standardized, machine-readable, quantitative

131

See Proposing Release, 88 FR 3786 at 3831 (Jan. 20, 2023). See also infra note 984 for an example of how
differences in order flow characteristics may impact inferences about execution quality. For further
discussion, see infra section IX.C.1.a).

132

That some of the information contained in the summary execution quality report will be useful for
controlling for differences across differences in order flow characteristics of broker-dealer was supported
by comment. See, e.g., comments in support of including average notional order size and average realized
spreads in the summary reports, discussed in infra section IV.B.1.b).

133

See SIFMA Letter II at 31.

134

See Virtu Letter II at 3-4.

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disclosures.135 As the Commission stated in the original adopting release for Rule 605, Rule 605
is intended to establish a baseline level of disclosure and facilitate cross-market comparisons of
execution quality.136 Similarly, the adopted amendments to Rule 605 provide a baseline level of
disclosure that all market centers and larger broker-dealers must meet. Rule 605 does not
preclude larger broker-dealers from disclosing additional information concerning their order
execution practices that they believe would provide useful context concerning the quality of their
services on their websites or through other means of communication.137
A broker-dealer recommended that rather than expanding Rule 605 to include larger
broker-dealers, the Commission should update Rule 606, which already applies to nonmarket
center broker-dealers, to require additional information regarding execution quality.138 In
response to the commenter’s suggestion, the Commission considers the inclusion of larger
broker-dealers in Rule 605 as adopted to be the preferable option. Although providing Rule 605
data within an expanded version of the existing Rule 606 reports could result in lower
compliance costs as a result of broker-dealers’ existing experience with preparing and filing Rule
606 reports, many of the costs associated with the initial reporting of execution quality statistics
would still be incurred by broker-dealers and therefore broker-dealers would not benefit from a
significant reduction in compliance costs overall. Moreover, the format and frequency of the

135

See Rule 605 NMS Plan at 2 (providing that the detailed report must be in standard, pipe-delimited ASCII
format); final 17 CFR 242.605(a)(2) (providing that the summary report must be made available using the
most recent version of the schema for CSV format and the associated PDF renderer).

136

See Rule 11Ac1-5 Adopting Release, 65 FR 75414 at 75419 (Dec. 1, 2000).

137

Any such statements will be subject to applicable securities laws and regulations.

138

See Robinhood Letter at 42 (“Instead of unnecessarily imposing additional costs on the industry to create
new Rule 605 reports that may not have the desired result of empowering investors to analyze brokerdealers’ execution quality, the SEC should require broker-dealers that already publish Rule 606 reports …
to add execution quality statistics to their Rule 606 reports.”).

39

Rule 606 reports differs because the data are more aggregated and the reports are issued
quarterly.139 In contrast, Rule 605 reports are monthly and provide detailed, symbol-by-symbol
data that will allow market participants and other users of the report to analyze the data and
consider the execution quality that a broker-dealer provides for orders with specific
characteristics. Further, while Rule 606 covers all brokers or dealers, subject to a de minimis
exception, as described below, the customer account threshold will focus the Rule 605 reporting
requirement on those larger broker-dealers for which the provision of Rule 605 data will include
data for most of the customer accounts handled by broker-dealers and, therefore, will balance the
benefits of broker-dealer reporting with the costs of reporting.140
a)

Customer Account Threshold

An investor advocacy group and a national securities exchange specifically supported the
proposed customer account threshold that would include in scope a broker or dealer that
introduces or carries 100,000 or more customer accounts.141 An academic and an individual

139

See supra notes 45-51 and accompanying text (discussing Rule 606(a)(1) reports that provide quarterly
information about order routing and payment arrangements).

140

See infra section II.A.2.a) (discussing the Commission’s analysis to support the adoption of the customer
account threshold, which indicates that approximately 85 broker-dealers introduce or carry more than
100,000 customer accounts and these broker-dealers together handle over 98% of customer accounts). See
also infra section IX.E.5.b) (discussing a reasonable alternative to expand Rule 606 reporting
requirements).

141

See Healthy Markets Letter at 16, n.38; Nasdaq Letter at 43 (stating that the proposed customer account
threshold “appears to balance the associated implementation costs on those broker-dealers that may provide
the execution quality statistics with the greatest benefit”).

40

investor suggested that all broker-dealers should be required to submit Rule 605 reports.142 In
contrast, a broker-dealer stated that it is not clear why it is necessary to include such a broad
scope of larger broker-dealers.143 According to this commenter, the proposal would require larger
retail broker-dealers to produce execution quality reporting and metrics that are identical to those
required of securities exchanges and market makers, even if those broker-dealers do not direct
client orders.144
After considering the comments, the Commission is adopting the 100,000 customer
account threshold, as proposed. The Commission’s analysis of available data on the number of
broker-dealers that will meet the minimum reporting threshold of 100,000 customers confirmed
that such threshold will balance the benefits of having broker-dealers produce execution quality
statistics with the costs of implementation and continued reporting,145 given the smaller amount
of benefits relative to costs that there would be if the Rule 605 reporting requirements extended
to broker-dealers that introduce or carry a smaller number of customer accounts. Specifically,

142

See Joy Letter; Angel Letter at 2-3 (stating that all broker-dealers should be required to show execution
quality information, and that CAT could easily produce Rule 605 reports at low incremental cost). See also
Robinhood Letter at 44-45 (recommending that, if the Commission decides to proceed with the proposed
rule, it should require all broker-dealers to report under Rule 605, because the number of large brokerdealers is relatively small (6.7% of all broker-dealers); the limited application of the rule would create an
information gap about execution quality for investors that use smaller broker-dealers and new retail broker
entrants). With respect to the commenter’s suggestion that CAT data could be used to produce Rule 605
reports, see infra section V.B.2.b) for a discussion of the potential alternative to generate order execution
quality reports using CAT data.

143

See Cambridge Letter at 7 (“such breadth cannot be justified in light of the likely significant costs to be
imposed on certain participants”).

144

See id.

145

See infra section IX.D.2.a)(1) for a discussion of the costs related to expanding the scope of Rule 605
reporting entities. As discussed further below, broker-dealers that were not previously required to publish
Rule 605 reports will incur initial costs to prepare and post Rule 605 reports for the first time, which may
include developing any policies and procedures that may be needed to do so, and all broker-dealers will
face ongoing costs to continue to prepare the reports each month. See also infra section IX.E.1.a) for a
discussion about the estimated costs of utilizing a different number of customer accounts as the minimum
reporting threshold.

41

this analysis indicates that approximately 85 broker-dealers introduce or carry more than 100,000
customer accounts and these broker-dealers together handle over 98% of customer accounts.146
The Commission is not subjecting all broker-dealers to Rule 605 reporting requirements, as
suggested by certain commenters, because of the lower benefits relative to costs for brokerdealers with a smaller number of customer accounts.147 Conversely, the Commission disagrees
with the commenter that states that the scope of larger broker-dealers that will be required to
provide Rule 605 reports is overbroad.148 The relative market-wide benefit of having a brokerdealer prepare Rule 605 reports increases when the broker-dealer has more customers.149 The
Commission’s updated analysis indicates that utilizing a lower customer account threshold, such
as 10,000 customer accounts, would nearly triple both initial and ongoing costs for non-market

146

Analysis from the Proposing Release was repeated regarding the estimated number of broker-dealers that
will be subject to Rule 605 reporting requirements according to different definitions of the customer
account threshold. See Proposing Release, 88 FR 3786 at 3886-87 (Jan. 20, 2023). For a description of how
this analysis differs from the analysis in the Proposing Release, see infra note 1747. This updated analysis
indicates that approximately 85 broker-dealers (or approximately 6.7% of customer-carrying brokerdealers) introduce or carry more than 100,000 customer accounts and these broker-dealers together handle
over 98% of customer accounts. See infra Table 13 for a cost-benefit analysis of different customer account
thresholds that could be used to define “larger broker-dealer” and accompanying text for methodology. For
example, approximately 244 broker-dealers introduce or carry more than 10,000 customer accounts and
these broker-dealers together handle over 99% of customer accounts. Further, approximately 1,245 brokerdealers introduce or carry at least 1 customer account.

147

See infra section IX.E.1.a) (reducing the customer account threshold from 100,000 to 10,000 would almost
triple both initial and ongoing costs); see also infra section IX.E.1.b) (discussing the alternative of requiring
all broker-dealers to prepare Rule 605 reports).

148

See supra notes 143-144 and accompanying text. It is unclear, and the commenter does not explain, why
any of the required execution quality metrics will not be appropriate for reporting by a larger broker-dealer
and the commenter does not suggest any alternative metrics. It is also unclear, and the commenter does not
explain, how a Rule 605 report prepared by a retail broker will be less useful if the retail broker did not
direct client orders. Even though the same underlying order may be reflected on multiple Rule 605 reports,
the aggregated statistics within each report will provide different views of execution quality specific to the
group of orders received by each reporting entity. Thus, a Rule 605 report prepared by a retail broker will
allow that retail broker’s customers, as well as other market participants, to view the execution quality
specific to those orders received by the specific retail broker.

149

See Proposing Release, 88 FR 3786 at 3797, n.167 (Jan. 20, 2023) and accompanying text (discussing
potential initial and ongoing costs that broker-dealers would incur as a result of the proposed amendments
to Rule 605).

42

center broker-dealers (which are not otherwise subject to Rule 605’s reporting requirements) and
yet would result in capturing only modestly more customer accounts than the 100,000 customer
account threshold.150 The Commission’s updated analysis also indicates that utilizing a higher
customer account threshold, such as 250,000 customer accounts, would lower costs but also
decrease coverage of customer accounts and customer order originations.151 Thus, utilizing
100,000 customer accounts as the adopted minimum reporting threshold will better balance the
benefits of having broker-dealers produce execution quality statistics with the costs of
implementation and reporting.
The customer account threshold will require brokers-dealers to include in their
calculations the customer accounts that they introduce, as well as the customer accounts that they
carry. Rule 605 reports that reflect orders received from customer accounts that a broker-dealer
introduces or carries will provide useful information to market participants because both
introducing and carrying broker-dealers make decisions about where to route those orders and it
will be helpful for customers to be able to evaluate the execution quality received as a result of
those decisions.
One industry group requested an exception from the Rule 605 reporting requirement for
an introducing firm that routes all of its customer orders to its clearing firm, on a non-directed
basis, where the clearing firm makes all routing decisions and the introducing firm does not

150

See infra section IX.E.1.a) and Table 13 (demonstrating that, for example, reducing the customer account
threshold from 100,000 to 10,000 would increase estimated initial and ongoing compliance costs from
about $3.4 million and $4.4 million, respectively, to about $9.8 million and $12.6 million, respectively,
while increasing the coverage of customer accounts by 1.4% and the coverage of customer order
originations by 21%). See also infra notes 1749-1751 (discussing why lowering the customer account
thr

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Acf3103c071784953. Public record. Not legal advice.