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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 242

[Release No. 34-105655; File No. S7-2026-20]

RIN 3235-AN50

The Trade-Through Rule and Locked and Crossed Markets Provisions of Regulation NMS

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

SUMMARY: The Securities and Exchange Commission (“Commission” or “SEC”) is proposing

amendments to Regulation NMS (“Regulation NMS”) under the Securities Exchange Act of

1934 (“Exchange Act”). The proposed amendments would rescind the trade-through rule for

NMS stocks, the provision regarding locking and crossing quotations for NMS stocks, and

certain defined terms. The proposed amendments would also make conforming changes to other

related provisions.

DATES: Comments should be received on or before August 17, 2026.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic comments:

•

Use the Commission’s internet comment form (https://www.sec.gov/comments/s72026-20/amendments-regulation-nms); or

•

Send an email to rule-comments@sec.gov. Please include File Number S7-2026-20

on the subject line.

Paper comments:

•

Send paper comments to Secretary, Securities and Exchange Commission, 100 F

Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-20. This file number should be

included on the subject line if email is used. To help the Commission process and review your

comments more efficiently, please use only one method of submission. The Commission will

post all comments on the Commission’s website (https://www.sec.gov/rules-regulations/publiccomments/s7-2026-20). Do not include personal identifiable information in submissions; you

should submit only information that you wish to make available publicly. We may redact in part

or withhold entirely from publication submitted material that is obscene or subject to copyright

protection.

Studies, memoranda, or other substantive items may be added by the Commission or staff

to the comment file during this rulemaking. A notification of the inclusion in the comment file of

any materials will be made available on our website. To ensure direct electronic receipt of such

notifications, sign up through the “Stay Connected” option at www.sec.gov to receive

notifications by email.

A summary of the proposal of not more than 100 words is posted on the Commission’s

website (https://www.sec.gov/rules-regulations/2026/06/s7-2026-20).

FOR FURTHER INFORMATION CONTACT: Theodore S. Venuti, Assistant Director;

Kevin Brennan, Special Counsel; Sarah Counts, Special Counsel; Jennifer Dodd, Special

Counsel; David Liu, Special Counsel; Gita Subramaniam, Special Counsel, at (202) 551-5500,

Office of Market Supervision, Division of Trading and Markets, U.S. Securities and Exchange

Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments for public

comment to the following rules.

Commission Reference

Exchange Act

Rule 15c3-5

Rule 15b9-1

Rule 600

Rule 610

Rule 611

Regulation NMS

CFR Citation

(17 CFR)

§ 240.15c3-5

§ 240.15b9-1

§ 242.600

§ 242.610

§ 242.611

Table of Contents

Introduction ......................................................................................................................... 4

A. Overview of Proposal ......................................................................................................... 4

B. Background ......................................................................................................................... 5

II.

Rule 611 ............................................................................................................................ 21

A. Description of Rule 611 .................................................................................................... 22

1. Intermarket Price Protection ............................................................................................. 22

2. Exceptions under Rule 611(b) .......................................................................................... 25

B. Proposed Rescission of Rule 611...................................................................................... 27

1. Allowing Market Forces to Shape Equity Market Structure ............................................ 29

2. Addressing the Adverse Consequences of Rule 611 ........................................................ 31

3. Rule 611 is Unnecessary ................................................................................................... 37

C. Request for Comment ....................................................................................................... 44

III.

Rule 610(e)........................................................................................................................ 46

A. Description of Rule 610(e)................................................................................................ 47

B. Proposed Rescission of Rule 610(e) ................................................................................. 49

1. Evolution of Market Structure and Investor Sophistication ............................................. 50

2. Potential for Improved Price Discovery and Competition................................................ 53

3. Reduction in Complexity and Compliance Costs ............................................................. 56

4. Crossed Markets................................................................................................................ 59

C. Request for Comment ....................................................................................................... 63

IV.

Conforming Amendments to Regulation NMS Definitions and Related Rules ............... 66

A. Description ........................................................................................................................ 66

B. Proposed Rescissions and Amendments to Related Rules ............................................... 66

1. Proposed Rescission of Related Defined Terms in Rule 600(b) of Regulation NMS ...... 66

2. Proposed Conforming Amendments to Other Rules in Regulation NMS ........................ 69

3. Proposed Conforming Amendments to Rules Outside of Regulation NMS..................... 71

C. Request for Comment ....................................................................................................... 73

Paperwork Reduction Act ................................................................................................. 74

A. Rescission of Rule 611...................................................................................................... 74

B. Request for Comment ....................................................................................................... 75

VI.

Economic Analysis............................................................................................................ 76

A. Introduction ....................................................................................................................... 76

B. Economic Baseline............................................................................................................ 78

1. Regulatory Baseline .......................................................................................................... 78

2. Economic Effects of Current Rule 611 ........................................................................... 102

3. Economic Effects of Current Rule 610(e) ...................................................................... 116

4. Current Exchange Competition, Revenue, Market Data, and Connectivity Services .... 120

5. Competition in the Market for Trading Services and Broker Execution Services ......... 150

C. Benefits and Costs........................................................................................................... 158

1. Rescinding Rule 611 ....................................................................................................... 158

2. Rescinding Rule 610(e)................................................................................................... 203

3. Combined Economic Effects .......................................................................................... 217

4. Monetized Benefits and Costs ........................................................................................ 232

D. Effect on Efficiency, Competition, and Capital Formation ............................................ 240

1. Efficiency ........................................................................................................................ 240

2. Competition..................................................................................................................... 241

3. Capital Formation ........................................................................................................... 245

E. Reasonable Alternatives.................................................................................................. 246

1. Venue Trading Volume Threshold for Protected Quotes ............................................... 246

2. Large Trade Exception from Rule 611 ........................................................................... 249

3. Only Rescind Locked Market Prohibition, Keep Prohibition on Crossed Markets........ 249

F. Request for Comment ..................................................................................................... 250

VII. Regulatory Flexibility Act Certification ......................................................................... 257

VIII. Congressional Review Act .............................................................................................. 263

IX.

Other Matters .................................................................................................................. 263

Statutory Authority...................................................................................................................... 264

Introduction

A. Overview of Proposal

Rule 611 of Regulation NMS was adopted in 2005 and established intermarket protection

against trade-throughs for all national market system stocks. A trade-through occurs when one

trading center executes an order at a price that is inferior to the price of a protected quotation

displayed by another trading center. Rule 610(e) was also adopted in 2005 under Regulation

NMS and contains restrictions on locking and crossing quotations in national market system

stocks. A locked market occurs when the best bid price equals the best offer price, and a crossed

market occurs when the best bid price is higher than the best offer price.

Since the adoption of these rules, the structure of the U.S. equity markets has evolved

dramatically, and today’s markets are highly automated, interconnected, fast, and competitive.

While a goal of Rule 611 was to incentivize displayed liquidity, since its adoption the percentage

of orders interacting with non-displayed liquidity on- and off-exchange has consistently

increased. In addition, since the adoption of Rules 611 and 610(e), U.S. equity markets have

become increasingly fragmented and complex.

The Commission is proposing to rescind Rules 611 and 610(e) under Regulation NMS.

Rules 611 and 610(e) have led to a myriad of consequences in today’s trading environment,

including increased costs and market structure complexity, limiting order handling and execution

choice, and contributing to exchange proliferation and fragmentation of trading on equity

exchanges. Moreover, technologies, particularly with respect to access and order handling and

routing, have advanced significantly and obviate any continued need for Rule 611, which was

adopted at a time when exchanges and market participants were not as well connected and many

linkages that did exist were relatively slow. Also, given this highly automated and interconnected

nature of our equity markets today, Rule 611 is not needed to backstop a broker’s duty of best

execution to seek the most favorable terms for customer orders reasonably available under the

circumstances. Similarly, such increases in automation and interconnectivity, as well as increases

in market participant access to market data, obviate the need for Rule 610(e). Rescinding Rules

611 and 610(e) would reduce compliance costs and benefit U.S. equity markets by eliminating

regulations to allow competition, innovation, and other market forces to shape the U.S. equity

market’s continued evolution.

B. Background

Congress, through section 11A of the Exchange Act (“section 11A”), 1 charged the

Commission in 1975 with facilitating the establishment of a national market system, and

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

identified five key components for such a system to function properly: (1) economically efficient

execution of securities transactions; (2) fair competition among broker-dealers, among exchange

markets, and between exchange markets and non-exchange markets; (3) price transparency;

(4) best execution of investor orders; and (5) an opportunity, consistent with economic efficiency

and best execution, for investor orders to meet without the participation of a dealer. 2 Following

the adoption of section 11A, over the next three decades the Commission sought to facilitate the

development of the national market system for NMS securities 3 by adopting rules, and working

with various self-regulatory organizations (“SROs”) to adopt rules and establish national market

system plans (“NMS Plans”), relating to, among other things, linkages between markets; the

collection, consolidation, and dissemination of quotation and transaction information; the display

of quotations; and intermarket price protection. 4

The years leading up to 2005 were a time of considerable transformation for the

secondary markets for U.S. listed equities. In particular, “the equity markets [had] experienced

sweeping changes, ranging from new technologies to new types of markets to the initiation of

trading in penny increments” 5 and a majority of the Commission at that time believed there was

an “inescapable” and “pressing” need to modernize the national market system. 6 Significant

Exchange Act section 11A(a)(1)(C)(i) through (v); 15 U.S.C. 78k-1(a)(1)(C)(i) through (v).

Rule 600(b)(64) of Regulation NMS defines “NMS security” to include “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 17 CFR 242.600(b)(64). In other words, NMS securities include NMS stocks and listed

options.

See Securities Exchange Act Release No. 49325 (Feb. 26, 2004), 69 FR 11126 (Mar. 9, 2004) (“NMS

Proposing Release”) at 11130-31. See also infra note 13.

See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (“NMS

Adopting Release”) at 37497.

Id. at 37497. But see Dissent of Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption of

Regulation NMS, id. at 37639-43 (“Joint NMS Dissent”).

increases in the usage of electronic trading systems resulted in more transparent order handling

and routing practices; at the same time, intensifying competition drove commissions lower and

penny pricing reshaped the mechanics of trading. 7 After the “culmination of a long and

comprehensive rulemaking process,” 8 and while acknowledging the wide range of different

opinions on many contentious issues, 9 the Commission adopted Regulation NMS in 2005, which

it described as “a series of initiatives designed to modernize and strengthen the national market

system” for NMS securities. 10

In adopting Regulation NMS, the Commission stated that it sought to promote certain

principles and objectives for the national market system, namely: (1) competition among markets

and competition among orders; and (2) serving the interests of long-term investors and listed

companies. 11 At the same time, the Commission acknowledged that its primary challenge in

facilitating the establishment of a national market system was to maintain an appropriate

competitive balance, stating that it particularly sought to avoid the two extremes of “[i]solated

markets that trade an NMS stock without regard to trading in other markets and thereby fragment

the competition among buyers and sellers in that stock” and “a totally centralized system that

loses the benefits of vigorous competition and innovation among individual markets.” 12

See Remarks at the Roundtable on Trade-Through Prohibitions by Paul S. Atkins, Chairman, Commission

(Sept. 18, 2025), available at https://www.sec.gov/newsroom/speeches-statements/atkins-091825-remarksroundtable-trade-through-prohibitions (“Chairman Remarks at First TTR Roundtable”).

NMS Adopting Release at 37498; see also id. at 37497-98 (describing in detail the process the Commission

engaged in prior to adopting Regulation NMS in 2005).

Id. at 37497.

Id. at 37496.

Id. at 37498-501.

Id. at 37499.

Under Regulation NMS, the Commission consolidated the then-existing national market

system rules previously adopted under section 11A 13 and adopted several significant new rules,

including Rule 611 (relating to restrictions on trade-throughs), Rule 610 (relating to access to

quotations and restrictions on locking and crossing quotations), Rule 612 (relating to minimum

increments for orders and quotations), and Rule 603 (relating to the distribution, consolidation,

and display of market data). 14 Thus, as originally adopted in 2005, Regulation NMS consisted of

twelve rules, along with a definitional rule (Rule 600). 15

Rule 611 (referred to in the NMS Adopting Release as the “order protection rule,” and

referred to herein as the “trade-through rule”) was the core of the rules adopted by the

Commission in Regulation NMS and established intermarket protection against trade-throughs 16

for all NMS stocks. In adopting Rule 611, the Commission emphasized that intermarket price

protection was designed to promote national market system objectives by promoting the use of

The national market system rules predating Regulation NMS are the requirements relating to: NMS defined

terms (Rule 600, previously Exchange Act Rule 11Aa2-1); public dissemination of trade reports (Rule 601,

previously Exchange Act Rule 11Aa3-1) and quotations (Rule 602, previously Exchange Act Rule 11Ac1-1

and commonly referred to as the “Quote Rule”); distribution, consolidation and display of quotes and

transactions in NMS stocks (Rule 603, previously Exchange Act Rule 11Ac1-2 and commonly referred to

as the “Vendor Display Rule”); public display of customer limit orders (Rule 604, previously Exchange Act

Rule 11Ac1-4 and commonly referred to as the “Limit Order Display Rule”); public disclosure of order

execution and routing information (Rules 605, previously Exchange Act Rule 11Ac1-5, and 606, previously

Exchange Act Rule 11Ac1-6); customer account statements (Rule 607, previously Exchange Act Rule

11Ac1-3); national market system plans (Rule 608, previously Exchange Act Rule 11Aa3-2); and

registration of securities information processors (“SIPs”) (Rule 609, previously Exchange Act Rule 11Ab21).

See 17 CFR 242.611, 17 CFR 242.610, 17 CFR 242.612, and 17 CFR 242.603, respectively.

17 CFR 242.600-612. Subsequent to the adoption of Regulation NMS in 2005, the Commission adopted:

Rule 613 of Regulation NMS, which required national securities exchanges and national securities

associations to submit a national market system plan to create, implement, and maintain a consolidated

audit trail with respect to the trading of NMS securities (“CAT”) (Securities Exchange Act Release No.

67457 (July 18, 2012), 77 FR 45722 (Aug. 1, 2012) (“CAT Adopting Release”)); and Rule 614, relating to

the registration and responsibilities of competing consolidators (Securities Exchange Act Release No.

90610 (Dec. 9, 2020), 86 FR 18596 (Apr. 9, 2021) (“Market Data Infrastructure Adopting Release”)).

Currently, Regulation NMS consists of fourteen substantive rules. 17 CFR 242.600-614.

A “trade-through” means “the purchase or sale of an NMS stock during regular trading hours, either as

principal or agent, at a price that is lower than a protected bid or higher than a protected offer.” 17 CFR

242.600(b)(105).

displayed “non-marketable” limit orders (orders with limit prices that are not immediately

executable at current quoted prices) 17 and minimizing the extent to which investor market orders

and marketable limit orders are executed at inferior prices. 18

Broadly speaking, 19 Rule 611 requires “trading centers” 20 (which encompass national

securities exchanges (“exchanges”), 21 alternative trading systems (“ATSs”), 22 over-the-counter

(“OTC”) market makers, and any other broker-dealer that executes orders internally) to establish,

maintain, and enforce written policies and procedures reasonably designed to prevent tradethroughs, 23 i.e., the execution of an order at a price that is inferior to the price of a “protected

Trade-through protection for displayed non-marketable limit orders was designed to encourage the use of

such orders by increasing the likelihood of their receiving an execution in a timely manner, as greater use of

displayed limit orders was believed to improve the price discovery process and contribute to increased

liquidity and depth. NMS Adopting Release at 37505-07.

Trade-through protection for market and marketable limit orders was designed both to prevent unfairness to

investors and to facilitate broker-dealers’ ability to achieve best execution of their customer orders. If a

broker-dealer routes an order to a trading venue that cannot execute the order at the best price, the venue

cannot simply execute the order at an inferior price. It can either cancel the order back to the broker-dealer

or route the order to another venue that will execute the order at the best price or better. See NMS Adopting

Release at 37505-07.

See infra section II.A. for a more detailed discussion of Rule 611’s requirements and exceptions.

17 CFR 242.600(b)(106) (definition of “trading center”).

See infra note 22.

Section 3(a)(1) of the Exchange Act defines an “exchange” as “any organization, association, or group of

persons…which 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 as that term is generally understood…” 15 U.S.C. 78c(a)(1).

Exchange Act Rule 3b-16(a) provides a functional test to assess whether a trading system meets the

definition of “exchange” under section 3(a)(1) of the Exchange Act. Under Rule 3b-16(a), an organization,

association, or group of persons “constitutes, maintains, or provides a market place or facilities for bringing

together purchasers and sellers of securities” if it (1) brings together the orders for securities of multiple

buyers and sellers; and (2) uses established, non-discretionary methods (whether by providing a trading

facility or by setting rules) under which such orders interact with each other, and the buyers and sellers

entering such orders agree to the terms of a trade. See 17 CFR 240.3b-16(a). A national securities exchange

and ATS each meet the definition of exchange under section 3(a)(1) of the Act and Rule 3b-16(a)

thereunder but are subject to different registration requirements. When used herein, “exchange” is used to

mean “national securities exchange” unless the context specifies otherwise.

See supra note 16.

quotation.” 24 To be “protected,” a quotation must be immediately and automatically accessible

up to its full displayed size and must be the best-priced quotation (highest bid to buy and lowest

offer to sell) in round-lot sizes 25 of an exchange or a national securities association (currently the

Financial Industry Regulatory Authority, Inc. (“FINRA”) is the only registered national

securities association and it operates the Alternative Display Facility (“ADF”)). 26

Accordingly, Rule 611 provides for intermarket price priority of an exchange’s or the

ADF’s best bid and offer (“BBO”); 27 it does not establish time priority among quotations at

different trading centers, nor does it protect “depth-of-book” quotations (quotations with prices

outside an exchange’s BBO). Rule 611 also provides certain exceptions to its requirements,

including an “intermarket sweep order” (“ISO”) 28 exception that allows, among other things, a

trader simultaneously to sweep multiple price levels outside of a protected quotation, as long as

one or more ISOs, as necessary, are routed at the same time to execute against the full displayed

size of any protected quotations with better prices. 29

17 CFR 242.600(b)(82) (definition of “protected quotation”); see also 17 CFR 242.600(b)(81) (definition

of “protected bid or protected offer”).

By its terms, Rule 611 only applies to round lots, as “quotation” is defined in Rule 600(b)(86) as “a bid or

offer,” which, in turn, is defined in Rule 600(b)(16) to be the bid price or the offer price communicated by a

member of a national securities exchange or member of a national securities association to any broker or

dealer, or to any customer, at which it is willing to buy or sell one or more “round lots” of an NMS security,

as either principal or agent, but shall not include indications of interest. In 2024, the Commission amended

the definition of “round lot” to implement a tiered approach based on an NMS stock’s average closing price

on its primary listing exchange. The change to the definition of “round lot” went into effect in November

2025. See Securities Exchange Act Release No. 101070 (Sept. 18, 2024), 89 FR 81620 (Oct. 8, 2024)

(“2024 Regulation NMS Amendments”).

See also infra note 90 and accompanying text (discussing the ADF, which currently has no active quoting

participants).

17 CFR 242.600(b)(15) (definition of “best bid and best offer”); see also 17 CFR 242.600(b)(16)

(definition of “bid or offer”).

17 CFR 242.600(b)(47) (definition of “intermarket sweep order”).

This allows, for example, a block trader to access large-sized quotations at prices outside protected

quotations.

Another significant new rule adopted by the Commission under Regulation NMS was

Rule 610 of Regulation NMS. 30 Rule 610 contains provisions relating to fair access to

quotations, and includes, among other things, a cap on the fees a trading center may impose for

access to quotations and restrictions on locked and crossed markets. 31 In particular and relevant

to this release, Rule 610(e) requires each exchange and national securities association to

implement rules requiring members reasonably to avoid displaying quotations that lock or cross

protected quotations. 32 The Commission stated that “[t]he restrictions on locking or crossing

quotations, in conjunction with [Rule 611], should encourage trading against displayed

quotations and enhance the depth and liquidity of the markets.” 33

As discussed above, the Commission approved Regulation NMS at a time of considerable

transformation in the U.S. equity markets. 34 Since the adoption of Regulation NMS in 2005, U.S.

securities markets have evolved further and continue to evolve and innovate. Trading has moved

from two traditional models of equity market structure that had dominated trading prior to 2005–

namely, floor-based auctions for stocks listed on the New York Stock Exchange LLC (“NYSE”)

See infra section III.A. for a more detailed discussion of Rule 610’s requirements.

See Rule 610(a) through (f). With respect to access fee caps under paragraph (c) of Rule 610, when first

adopted in 2005 the Commission limited exchange fees for accessing protected quotations with prices of $1

or greater to 0.3 cents per share (or 30 cents per 100 shares). Subsequently, in 2024, the Commission

amended Rule 610(c) to reduce the access fee caps to $0.001 (or 10 mils) per share for NMS stocks with

prices of $1 or greater. At the same time, the Commission established a second minimum pricing increment

of $0.005 under Rule 612 for quoting certain “tick constrained” NMS stocks and adopted new definitions

of “round lot” and “odd-lot information.” See 2024 Regulation NMS Amendments. The changes to the

access fee cap in Rule 610(c) and the minimum pricing increment in Rule 612 have yet to be implemented.

See infra note 76.

17 CFR 242.610(e). A locking quotation is when a bid is displayed with a price equal to the price of a

previously displayed offer, or when an offer is displayed with a price equal to the price of a previously

displayed bid. A crossing quotation is when a bid is displayed with a price higher than the price of a

previously displayed offer, or when an offer is displayed with a price lower than the price of a previously

displayed bid.

NMS Adopting Release at 37584.

See supra notes 5-7 and accompanying text.

and dealer-based competition for stocks listed on the Nasdaq Stock Market LLC (“Nasdaq”)– to

evolve into today’s highly automated, electronic market structure model where exchange-listed

stocks trade on a wide range of different types of electronic trading centers, connected by private

linkages, including exchanges, ATSs, single-dealer trading platforms (“SDPs”), 35 and other

broker-dealer trading systems. Rapid changes in technology led to the rise of sophisticated

algorithmic trading strategies and high-volume proprietary trading firms.

Moreover, since the adoption of Regulation NMS in 2005, the number of national

securities exchanges for NMS stocks has proliferated, further fragmenting the trading landscape.

Currently, there are 17 operating national securities exchanges that trade NMS stocks and three

exchanges approved to trade NMS stocks but not yet operating, 36 as compared to eight national

securities exchanges that traded NMS stocks in 2005 (plus Nasdaq, which did not become an

exchange until 2006). 37

There has also been a significant increase in the volume and proportion of trading

executing against non-displayed liquidity. 38 Since the adoption of Rule 611, fragmentation

An SDP is a type of business operated by some OTC market makers which primarily seeks to attract the

orders of institutional investors for internal execution. See Where Do Stocks Trade?, FINRA (Sept. 28,

2023) available at https://www.finra.org/investors/insights/where-do-stocks-trade (for further discussion

about SDPs).

The 17 operating national securities exchanges are: Cboe BYX Exchange, Inc. (“Cboe BYX”); Cboe BZX

Exchange, Inc. (“Cboe BZX”); Cboe EDGA Exchange, Inc. (“Cboe EDGA”); Cboe EDGX Exchange, Inc.

(“Cboe EDGX”); Investors Exchange LLC (“IEX”); Long-Term Stock Exchange, Inc. (“LTSE”); MEMX

LLC (“MEMX”); MIAX Pearl, LLC (“MIAX PEARL”); Nasdaq Texas, LLC. (“Nasdaq TX”); Nasdaq

PHLX LLC (“Nasdaq Phlx”); The Nasdaq Stock Market LLC (“Nasdaq”); NYSE; NYSE American LLC

(“NYSE American”); NYSE Arca, Inc. (“NYSE Arca”); NYSE Texas, Inc. (“NYSE Texas”); NYSE

National, Inc. (“NYSE National”); and 24X National Exchange LLC (“24X”). The three national securities

exchanges approved to trade NMS stocks, but not yet operating, are: Green Impact Exchange, LLC

(“GIX”); MX2 LLC (“MX2”) and Texas Stock Exchange LLC (“TXSE”).

See NMS Adopting Release at 37576, n.730 (listing the eight national securities exchanges that traded

NMS stocks in 2005).

See, e.g., Staff of the Division of Trading and Markets, Trade Through Roundtable Supporting Data, pp.

10-15 (Sept.12, 2025), available at: https://www.sec.gov/files/trade-through-roundtable-supportingdata.pdf (providing measures of the number of round lots at the best bid and number best bids from 2015-

among non-displayed venues has occurred as trading volumes in U.S. equities have increased on

off-exchange venues, such as ATSs, SDPs, and wholesalers, 39 with the market share of offexchange trading steadily increasing in the last decade, and, since the end of 2024, now regularly

exceeding 50% of overall volume. 40 Even on exchanges, the percentage of volume executed

against liquidity that is not displayed (i.e., is “hidden” or “dark”) has steadily increased. 41

2025); see also Memorandum re: Rule 611 of Regulation NMS from SEC Division of Trading and Markets

to SEC Market Structure Advisory Committee, dated Apr. 30, 2015 at 21, available at

https://www.sec.gov/spotlight/emsac/memo-rule-611-regulation-nms.pdf (“EMSAC Market Structure

Memo”).

Wholesalers fall within the definition of an OTC market maker in Rule 600(b)(75) of Regulation NMS —

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 block size. The term “wholesaler” is not defined in

Regulation NMS but commonly refers to an OTC market maker that seeks to attract orders from brokerdealers that service the accounts of retail investors.

For example, from February 2005 to February 2014, the total percentage of volume executed by nondisplayed ATSs and broker-dealers rose from 29.4% to 38.6% for Nasdaq-listed stocks and from 13.0% to

34.6% for NYSE-listed stocks. See EMSAC Market Structure Memo at 9-12. From February 2014 to

January 2026, these off-exchange volumes have risen even further, with total percentage of volume

executed off-exchange for Nasdaq-listed stocks climbing to 51.9% and NYSE-listed stocks climbing to

47%. See 2026 Data Update of the 2015 EMSAC Market Structure Memo, by Staff of the Office of

Analytics and Research, Division of Trading and Markets (June 11, 2026), available at

https://www.sec.gov/rules-regulations/public-comments/s7-2026-20. See The Volume Explosion No One

Saw Coming, by Jeff O’Oconnor, Liquidnet (Oct. 20, 2025) (noting that off-exchange volumes first began

to consistently clear 50% of total market volumes in Q4 of 2024). See also Rosenblatt Trading Talk –

Market Structure Analysis (Feb 6, 2026). For daily and monthly summaries of NMS stock volumes

executed on each exchange or reported to each trade reporting facility, see

https://www.cboe.com/us/equities/market_statistics/historical_market_volume/.

See, e.g., Summary Metrics by Exchange, available at https://www.sec.gov/data-research/sec-marketsdata/marketstructuredata-exchange. Analysis of this data indicates, for example, that in the first quarter of

2015, the median proportion of equity exchange volume executed against non-displayed orders for stocks

was 16.0%, but in the second quarter of 2025, it was 30.7%, and that comparable numbers for ETPs were

12% and 16.6%. This change was an increase of 92% for stocks and 38% for ETPs. Similarly, in the first

quarter of 2015, the exchange with the smallest proportion of volume executed against hidden orders for

stocks had 3.7% and the largest 28.4%, but in the second quarter of 2025, the smallest had 13.7% and the

largest had 54.6%. In the first quarter of 2015, the exchange with the smallest proportion of volume

executed against hidden orders for ETPs had 1.5% and the largest 17.1%, but in the second quarter of 2025,

the smallest had 5.6% and the largest had 43.1%. This analysis is based on quarterly averages of the

“etp_hidden_volume” and “stock_hidden_volume” data for each exchange, and excluded one exchange

that consistently executed nearly all trades against non-displayed liquidity. See also It’s Darkest in the

Middle of the Day, by Phil Mackintosh, Nasdaq, available at https://www.nasdaq.com/articles/its-darkestmiddle-day (discussing off-exchange market share rising above 50% for the first time in 2025 and lit price

discovery (exchange trades at the NBBO) at around 30% during portions of the trading day).

The U.S. equities markets are continuing to evolve rapidly. Advances in technology and

increased automation and efficiencies have recently enabled settlement times to shrink 42 and

have made near 24 hour equity trading a reality. 43 In addition, innovative technology such as

distributed ledger technology (“DLT”) allows issuers to tokenize a security by issuing it in the

format of a crypto asset and facilitate trading among market participants. 44 The use of DLT,

including smart contract applications undergirding automated market makers, has introduced

new methods of trading securities and opened access to such trading to various types of market

participants. Such innovative technology also raises challenges and questions relating to current

equities market structure and the application of current regulatory requirements. 45

Given the importance of the U.S. national market system, the Commission and its staff

have periodically engaged in assessments of equity market structure over the two decades since

the adoption of Regulation NMS, 46 most recently examining the impact of Rule 611 and related

See Securities Exchange Act Release No. 96930 (Feb. 15, 2023), 88 FR 13872 (Mar. 6, 2023) (Shortening

the Securities Transaction Settlement Cycle).

National securities exchanges have recently been approved to trade NMS stocks on an almost 24/5 basis.

See Securities Exchange Act Release Nos. 102400 (Feb. 11, 2025), 90 FR 9794 (Feb. 18, 2025) (order

approving NYSE Arca Inc. proposal to lengthen its trading session to 22 hours per day, 5 days per week);

101777 (Nov. 27, 2024); 89 FR 97092 (order approving application of 24X National Exchange, LLC for

registration as a national securities exchange and to trade 23 hours per day, 5 days per week, once the SIPs

are able to concurrently collect, consolidate, process and disseminate consolidated data at all times during

that time). In addition, certain ATSs make NMS stocks available for trading during the overnight session.

See Statement on Tokenized Securities; Division of Corporation Finance, Division of Investment

Management, Division of Trading and Markets; Commission, Jan. 28, 2026, available at

https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826statement-tokenized-securities.

See, e.g., Beyond Reg NMS: A Market Structure Framework for the Modern Era, Michael Cahill, CEO, and

Brandon Ferrick, General Counsel, Duoro Labs LLC (“Duoro Labs Paper”), at 18-19.

For example, in 2010 the Commission conducted a broad review of equity market structure and invited

public comment on a wide range of market structure issues, including high frequency trading, order

routing, market data linkages, and liquidity. See Securities Exchange Act Release No. 61358 (Jan. 14,

2010), 75 FR 3594 (Jan. 21, 2010) (“Concept Release on Equity Market Structure”). In 2015 the

Commission established an Equity Market Structure Advisory Committee (“EMSAC”) to provide the

Commission with “diverse perspectives on the structure and operations of the U.S. equities markets, as well

as advice and recommendations on matters related to equity market structure.” See Securities Exchange Act

Release No. 74092 (Jan. 20, 2015), 80 FR 3673 (Jan. 23, 2015). The EMSAC used its inaugural meeting in

rules on equity market structure. To this end, the Commission held two public roundtables in late

2025 and engaged a range of panelists, including representatives from exchanges, ATSs, retail

and institutional broker-dealers, investor advocacy groups, academics, and regulators. 47 In

conjunction with the TTR Roundtables, the Commission also welcomed public comments

regarding issues relating to Rule 611 and related rules. 48 Through the TTR Roundtables and the

public comment process, the Commission received a wide range of input on Regulation NMS

broadly, and the current Rule 611 trade-through prohibition specifically, from a variety of market

participants, including industry groups, exchanges, broker-dealers, financial services firms, and

individual investors. While some commenters 49 indicated support for the trade-through rule in its

May 2015 to focus on Rule 611. See https://www.sec.gov/newsroom/press-releases/2015-70 and EMSAC

Market Structure Memo at 18. See also supra note 15 (discussing amendments to Regulation NMS

following its 2005 adoption). Even preceding the adoption of Regulation NMS, the Commission and its

staff have undertaken periodic reevaluations of market structure. See, e.g., Concept Release on Market

Fragmentation, 65 FR 10577 (Feb. 28, 2000); Market 2000: An Examination of Current Equity Market

Developments, Division of Market Regulation, Commission (Jan. 1994) (‘‘Market 2000 Study’’).

The first Roundtable on Trade-Through Prohibitions (“First TTR Roundtable”) was held at the

Commission’s Washington DC headquarters on September 18, 2025. A transcript and webcast of the First

TTR Roundtable can be found at: https://www.sec.gov/newsroom/meetings-events/roundtable-tradethrough-prohibitions (“First TTR Roundtable Transcript”). Data analysis supporting this roundtable can be

found at: https://www.sec.gov/files/trade-through-roundtable-supporting-data.pdf. The second Roundtable

on Rule 611 (“Second TTR Roundtable” and, together with the First TTR Roundtable, the “TTR

Roundtables”) was held in Austin, TX on December 16, 2025. A transcript and webcast of the Second TTR

Roundtable can be found at: https://www.sec.gov/newsroom/meetings-events/roundtable-rule-611regulation-nms (“Second TTR Roundtable Transcript”). A broad overview from the roundtables is

summarized below.

See https://www.sec.gov/comments/4-862/4-862.htm.

The term “commenters” throughout this document refers to both the panelists at the TTR Roundtables and

those who submitted written comments.

current form, 50 many commenters criticized Rule 611 51 and its effect on equity market

structure. 52

In particular, some commenters questioned whether the trade-through rule is at least

partly to blame for the substantial increase in the number of exchanges and excessive

fragmentation of liquidity among trading venues. 53 Some commenters contended that, by

requiring market participants to consider the protected quotations of all exchanges and to route

orders to execute against those quotations in certain contexts, Rule 611 enables more exchanges

to stay in business than may have otherwise been the case. 54 Similarly, some commenters argued

that the proliferation of exchanges increases costs and complexity for market participants by, for

example, requiring them to connect to each exchange, directly or indirectly, and to pay for and

monitor market data from each exchange, regardless of such venue’s utility. 55

See, e.g., letter from Allen Spence (Aug. 13, 2025) at 1-2; letter from R. T. Leuchtkafer (Aug. 25, 2025)

(“Leuchtkafer Letter”) at 4; letter from Haoxiang Zhu, Associate Professor of Finance, MIT Sloan School

of Management (Dec. 15, 2025) (“Zhu Letter”) at 1; First TTR Roundtable Transcript at 36 (Julie Andress,

Securities Traders Association and KeyBanc Capital Markets). Some of these commenters also expressed

support for maintaining other aspects of Regulation NMS, such as Rule 610(e)’s prohibition on locked and

crossed markets. See, e.g., Leuchtkafer Letter at 5-6; letter from Christopher Nagy, Research Director,

Healthy Markets Association (Dec. 12, 2025) (“Healthy Markets Letter II”) at 2 n.7.

See, e.g., letter from James J. Angel, Associate Professor, Georgetown University, McDonough School of

Business (Sept. 1, 2025) (“J. Angel Letter”) at 1, 16; letter from Matt Billings, President, Robinhood

Financial, LLC and Robinhood Securities, LLC (Sept. 16, 2025 (“Robinhood Letter”) at 2-5; letter from

Raz Tirosh and Calvin Hayes, Jane Street (Sept. 23, 2025) (“Jane Street Letter”) at 2 (stating the

continuation of Rule 611 “imposes negative externalities”); letter from Joseph Saluzzi, Partner, Themis

Trading LLC (Dec. 17, 2025) at 3 (calling Rule 611 flawed and offering reforms).

See, e.g., letter from Ari Burstein, General Counsel, Imperative Execution, IntelligentCross (Sept. 17, 2025)

(“IntelligentCross Letter”) at 3-4; Kelvin To, Founder and President, Data Boiler Technologies, Can Order

Protection be replaced by Competing Market Forces? (Sept. 8, 2025) (“Data Boiler Comment”) at 1, 4;

letter from John A. Zecca, Executive Vice President, Global Chief Legal, Risk & Regulatory Officer,

Nasdaq (Sept. 24, 2025) (“Nasdaq Letter I”) at 1-2.

See, e.g., Robinhood Letter at 3-5; letter from William O’Brien, Former CEO, Direct Edge (Sept. 16, 2025)

(“O’Brien Letter”) at 5; First TTR Roundtable Transcript at 57 (Pankil Patel, Bank of America), at 277

(Daniel Gerhardstein, FIA Principal Traders Group and Jump Trading Group).

See, e.g., Jane Street Letter at 2; First TTR Roundtable Transcript at 235 (Mehmet Kinak, T. Rowe Price).

See, e.g., Robinhood Letter at 2, 5; First TTR Roundtable Transcript at 68-69 (Pankil Patel, Bank of

America).

Some commenters also attributed other market structure concerns to Rule 611. For

example, some stated that the trade-through rule has indirectly led to more non-displayed trading

by constraining the nature of competition on displayed venues to factors such as speed and

fees. 56 In addition, some commenters stated that Rule 611 has led to unnecessary costs and

complexity for market participants 57 and to the proliferation of complex order types. 58 Others

have stated that the trade-through rule has harmed institutional investors that seek to trade in

large size by forcing them to access small-sized quotations that may signal their trading

intentions to short-term proprietary traders. 59 Commenters critical of Rule 611 generally

contended that it has not succeeded in achieving the Commission’s stated objective of enhancing

the reward for the display of limit orders and has produced negative unintended consequences for

market participants. 60

Based on these critiques, some commenters recommended rescinding Rule 611 in its

entirety. 61 Other commenters offered alternatives to rescission of Rule 611, including

See, e.g., Nasdaq Letter I at 1-2. Non-displayed trading is sometimes referred to as “dark” liquidity and can

include off-exchange trading as well as non-displayed (or “hidden”) liquidity on exchanges. Displayed

trading is sometimes referred to as “lit” trading.

See, e.g., Robinhood Letter at 5; O’Brien Letter at 6.

See, e.g., Robinhood Letter at 4; FIA PTG Position Paper – Regulation NMS: A Renewed Call for Reform,

FIA PTG Principal Traders Group, Sept. 2025 (“FIA PTG Paper”) at 4; First TTR Roundtable Transcript at

78-80 (Maureen O’Hara, Cornell University, SC Johnson Graduate School of Management), at 169

(Armando Diaz, PureStream).

See, e.g., letter from Christopher Nagy, Research Director, Healthy Markets Association (Sept. 16, 2025)

(“Healthy Markets Letter I”) at 8.

See, e.g., First TTR Roundtable Transcript at 57 (Pankil Patel, Bank of America), 144-45 (Adam Nunes,

Hudson River Trading).

See, e.g., Second TTR Roundtable Transcript at 51-52 (Mehmet Kinak, T. Rowe Price), at 52-53 (Dmitry

Bulkin, Bernstein), at 53 (Brett Redfearn, Panorama Financial Markets Advisory); Robinhood Letter at 2;

O’Brien Letter at 7.

modifications to Rule 611 62 or modifications to other aspects of Regulation NMS instead. 63

Several commenters described the interconnectedness of the trade-through rule with best

execution obligations 64 and some commenters recommended, in light of possible changes to

Rule 611, consideration of ways to support best execution compliance. 65 Some commenters

suggested that if the Commission rescinds Rule 611, it would need to change other parts of

Regulation NMS, including eliminating or modifying the access fee caps set forth in Rule

610(c) 66 or the prohibition on locked and crossed markets in Rule 610(e). 67

The Commission is cognizant of the complex and interconnected nature of our equity

market structure and believes that proceeding with any changes requires taking a holistic view to

help ensure that changes result in improvements in, and not a deterioration of, our national

market system. Changes to a single rule could have profound effects, both expected and

unexpected, on a multitude of other rules and aspects of market structure. Thus, changes to, and

modernizations of, the U.S. regulatory structure for our equity markets should be done through a

deliberative and calibrated process that is designed to result in improved market efficiency and

reduced costs and complexity for investors.

See, e.g., Healthy Markets Letter I at 8-10; Zhu Letter at 1-2; letter from Timothy J. Boyle, Chief Operating

Officer, McKay Brothers, LLC (Sept. 5, 2025) (“McKay Letter”).

See, e.g., letter from Patrick Sexton, EVP, General Counsel, and Corporate Secretary, Cboe Global Markets,

Inc. (Dec. 15, 2025) (“Cboe Letter II”) at 3-6.

See, e.g., letter from Adrian Griffiths, Head of Market Structure, MEMX LLC (Sept. 18, 2025) (“MEMX

Letter”) at 9-10 n.9; Healthy Markets Letter I at 5; FIA FTG Paper at 2-3; Jane Street Letter at 1-2.

See, e.g., Nasdaq Letter I at 3-7; McKay Letter at 2-3; Healthy Markets Letter II at 6-7.

See, e.g., letter from Patrick Sexton, EVP, General Counsel, and Corporate Secretary, Cboe Global Markets,

Inc. (Sept. 15, 2025) (“Cboe Letter I”) at 4; Nasdaq Letter I at 4; Second TTR Roundtable Transcript at 3435 (Kevin Tyrell, New York Stock Exchange). See also O’Brien Letter at 7 (recommending the

Commission rescind Rule 611 and modify Rules 605 (disclosure of order execution information) and 612

(minimum pricing increment)).

See, e.g., MEMX Letter at 17-18; FIA PTG Paper at 6; Cboe Letter I at 4-5; First TTR Roundtable

Transcript at 129-130 (Jonathan Kellner, MEMX); Second TTR Roundtable Transcript at 55 (Brett

Redfearn, Panorama Financial Markets Advisory).

Based on the experience of the Commission and its staff overseeing the equity markets

and taking into consideration the input from panelists at the TTR Roundtables and other

comments received, the Commission is proposing certain targeted changes to Regulation NMS.

Specifically, as described below in greater detail, the Commission proposes to:

•

Rescind Rule 611 of Regulation NMS in its entirety; 68

•

Rescind Rule 610(e) of Regulation NMS in its entirety; 69 and

•

Make conforming revisions to Regulation NMS and other Commission rules to reflect

the rescission of Rules 611 and 610(e), including amending the definitional rule of

Rule 600 to rescind terms that would no longer be necessary to retain in Regulation

NMS given the proposed rescissions of Rules 611 and 610(e). 70

The Commission understands these proposed changes could impact related aspects of

equity market structure. To the extent other changes may be warranted to Commission rules,

SRO rules, and NMS Plans 71 in light of this proposal, the Commission requests market

participants to submit comments explaining these market structure impacts and other needed

changes. 72 Such areas for comment may include, but are not limited to: (i) whether, and to what

See infra section II.

See infra section III.

See infra section IV. Specifically, the provisions of Regulation NMS that are proposed to be rescinded are

Rules 600(b)(6), (7), (47), (54), (81), (82) and (105); the provisions of Regulation NMS that are proposed

to be revised are Rules 600(b)(26), (72), and (89), and Rule 610(c); and the other Commission rules that are

proposed to be revised are Rules 15c3-5 and 15b9-1 under the Exchange Act.

See Rule 608 (Filing and amendment of national market system plans), 17 CFR 242.608, which allows two

or more SROs, acting jointly, or the Commission itself to propose amendments to effective NMS Plans.

Listed options have their own rules prohibiting trade-throughs and locked and crossed markets, which is set

forth in the Options Order Protection and Locked/Crossed Market Plan, a Commission approved NMS

Plan. See infra note 83. The options markets are materially different than the equities markets in a number

of ways. For example, as highlighted by commenters, there is no off-exchange trading in listed options,

options are more commonly quote-driven versus order-driven, and there are a great deal more listed options

than listed equities. See, e.g., First TTR Roundtable Transcript at 94-98 (Chris Isaacson, Cboe Global

Markets, Inc.; Chris Solgan, MIAX Exchange Group). These differences between the equities and options

extent, best execution requirements and guidance should be updated if the proposed amendments

to Regulation NMS are adopted; 73 (ii) whether, and to what extent, revisions should be made to

market data revenue allocation formulas; 74 (iii) whether, and to what extent, conforming changes

would be required to SRO rules and NMS Plan provisions if the proposed amendments to

Regulation NMS are adopted; 75 and (iv) whether, and to what extent, the access fee caps under

markets necessitate a separate review of the options markets to determine if any structural changes are

warranted. To that end, the Commission hosted a roundtable on April 16, 2026, to discuss listed options

market structure, including facilitating competition in a quote driven market, evaluating the customer

experience, and identifying opportunities and challenges for continued growth. See

https://www.sec.gov/newsroom/press-releases/2026-24-sec-announces-roundtable-options-marketstructure-reform.

A broker’s duty of best execution derives from common law agency principles and fiduciary obligations,

and is incorporated implicitly, through judicial and Commission decisions, in the antifraud provisions of the

Federal securities laws. Securities Exchange Act Release No. 37619A, 61 FR 48290, 48322 (Sept. 12,

1996) (“Order Execution Obligations Adopting Release”), citing Market 2000 Study at V-1, 2 and sources

cited therein. The Commission has stated that the duty of best execution requires broker-dealers to execute

customers’ trades at the most favorable terms reasonably available under the circumstances. Id. FINRA’s

best execution rule (FINRA Rule 5310) requires FINRA member firms to “use reasonable diligence to

ascertain the best market” for a customer order for a securities transaction and to execute in such market to

provide the customer with a price that is “as favorable as possible under prevailing market conditions.”

FINRA Rule 5310(a)(1).

The Commission recognizes that the quality of consolidated data, including the national best bid and

national best offer (“NBBO”), is critical to the health of our markets. When the Commission adopted

Regulation NMS, it also implemented a new market data formula for revenue allocation among the relevant

SROs, essentially allocating half of market data revenues to trading and half to quoting. See NMS Adopting

Release at 37557-70. Some have criticized the formula’s quoting component, which they argued has

contributed to the creation of new exchanges and subsidizes exchanges that quote but rarely trade, thus

providing minimal value to market participants. See, e.g., Jane Street Letter; FIA PTG Paper; McKay

Letter. On June 2, 2026, the members of the CT Plan LLC (“CT Plan”) filed Amendment No. 3 to the CT

Plan pursuant to Rule 608 of Regulation NMS (proposing certain revisions to the provisions of the plan that

govern the allocation of net revenues received under the CT Plan among its members to impose a limit on

the ratio of revenue distributed to each individual member that is attributable to its quoting activity

compared to revenue such member receives for trading activity under the revenue formula). The CT Plan

was approved in November 2024 to become the successor to and replacement for the Nasdaq UTP Plan and

the CTA/CQ Plans. See Securities Exchange Act Release No. 101672 (Nov. 20, 2024), 89 FR 94924 (Nov.

29, 2024) (“CT Plan Approval Order”). The CT Plan is expected to begin disseminating quote and trade

data in the second quarter of 2027. See CT Plan FAQs, available at https://thectplanllc.com/faqs/.

For example, if the proposed amendments to Regulation NMS are adopted, SROs would no longer be

required to have rules restricting trade-throughs and locking or crossing quotations. In such a case, the

Commission believes, that most, if not all, SROs would seek to amend rules originally designed for

compliance with Rules 611 and 610(e). Similarly, if the proposed amendments to Regulation NMS are

adopted, key terms such as “protected quote,” “trade-through,” and “intermarket sweep orders” would no

longer be defined in Regulation NMS and SRO rulebooks would need to redefine or eliminate such terms.

In addition, the text of certain NMS Plans may reference Regulation NMS requirements or defined terms

that are being proposed to be rescinded and plan participants may choose to amend such plans. For

Rule 610(c) under Regulation NMS should be revised. 76

II.

Rule 611

Rule 611 was adopted as the most significant and controversial piece of Regulation

NMS. 77 At the time, the Commission believed that, in adopting Rule 611: (1) investors,

particularly retail investors, would be assured that orders would be filled at the best prices,

thereby giving them greater confidence that they would be treated fairly when they participated

example, the NMS Plans relating to the collection, consolidation, processing and dissemination of

consolidated equity market data by the SIPs, including the CT Plan, the Nasdaq UTP Plan and the CTA/CQ

Plan, currently determine “quote credits” based on certain automated quotations that do not lock or cross a

previously displayed automated quotation. See CT Plan Approval Order; Securities Exchange Release Nos.

104670 (Jan. 22, 2026), 91 FR 3609 (Jan. 27, 2026) (Notice of Filing of the Fifty-Fifth Amendment to the

Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of

Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted

Trading Privileges Basis); and 104665 (Jan. 22, 2026), 91 FR 3602 (Jan. 27, 2026) (Notice of Filing of

Fortieth Substantive Amendment to the Second Restatement of the CTA Plan and Thirty-First Substantive

Amendment to the Restated CQ Plan). As discussed further below, the Commission is proposing to rescind

the defined term “automated quotation” and to eliminate the prohibitions on locking and crossing markets.

As a result, plan participants may determine to amend such plans to revise how “quote credits” are

determined under the plans. But see, e.g., Second TTR Roundtable Transcript at 56 (Brett Redfearn,

Panorama Financial Markets Advisory) (stating that even if the Commission rescinds the prohibition on

locked and crossed markets, the SIP revenue allocation formula should not reward participants for actively

locking or crossing a market). See also, e.g., section VI.A.1. of the NMS Plan to Address Extraordinary

Market Volatility (“Limit Up/Limit Down Plan”), available at https://www.luldplan.com/plans (which

excludes from certain requirements of the plan “transactions excepted or exempt from Rule 611 under

Regulation NMS”); section 8.1.2. of Appendix D of the Limited Liability Company Agreement of

Consolidated Audit Trail, LLC, dated Aug. 29, 2019, available at

https://catnmsplan.com/sites/default/files/2026-01/LLC_Agreement_of_Consolidated_Audit_Trail_LLCas-of-01.13.26.pdf (referencing “protected best bid and offer”).

Rule 610(c) was adopted at the same time as Rule 611 and Rule 610(e), and was designed to promote fair

and non-discriminatory access to quotations displayed in the national market system, ensure the fairness

and accuracy of displayed quotations by establishing an outer limit on the cost of accessing such

quotations, and preclude trading centers that posted protected quotations from raising their fees in an

attempt to take improper advantage of the trade-through protections. See 2024 Regulation NMS

Amendments at 81643-44. In 2024, the Commission adopted amendments to the Rule 610(c) access fee

caps in conjunction with changes to Rule 612 of Regulation NMS (Minimum Pricing Increment). See 2024

Regulation NMS Amendments. These amendments to Rules 610(c) and 612 are scheduled to be

implemented in November 2026. See Securities Exchange Act Release No. 104172 (Oct. 31, 2025), 90 FR

51418 (Nov. 17, 2025) (“2025 Temporary Exemptive Relief”). However, on Feb. 26, 2026, the Commission

received a request for exemptive relief from the November 2026 implementation deadline, which request

was published for comment on Mar. 20, 2026. See Securities Exchange Act Release No. 105058 (Mar. 20,

2026), 91 FR 14602 (Mar. 25, 2026). See also infra notes 231-238 and accompanying text (discussing

access fee caps and locked and crossed markets).

See, e.g., NMS Adopting Release at 37498 (“Clearly, the Order Protection Rule was most controversial and

attracted the most public comment and attention.”); see also Joint NMS Dissent at 37633-35.

in the equity markets; and (2) the promotion of the best displayed and accessible prices would

promote deep and stable markets that minimized investor transaction costs. 78 Rule 611 was the

centerpiece of Regulation NMS and has been likened to the “head of an octopus” because of its

ability to impact many different areas of equity market structure. 79 Rule 611 has recently been

analogized to the scaffolding of the national market system, akin to a temporary structure that

can now be taken down because it is no longer necessary. 80

A. Description of Rule 611

The core of Rule 611 is paragraph (a)(1), which promotes intermarket price protection of

orders by restricting the execution of trades on one venue at prices that are inferior to displayed

quotations at another venue. Specifically, it requires a “trading center” 81 to establish, maintain,

and enforce written policies and procedures that are reasonably designed to prevent tradethroughs on that trading center of “protected quotations,” 82 unless one of the exceptions to the

NMS Adopting Release at 37498.

See First TTR Roundtable Transcript at 45-46 (Katie Kolchin, SIFMA) (“Like the octopus, market structure

involves many moving, interconnected pieces, and Rule 611 represents the head of this octopus. If you

move or change one piece, other parts could move as well.”). See also supra notes 66-67 and

accompanying text (relating to other areas of Regulation NMS commenters believed to be closely

connected to Rule 611).

See First TTR Roundtable Transcript at 123 (Jim Angel, Georgetown University). See also J. Angel Letter;

Jane Street Letter at 2 (stating that modern automated electronic markets have now evolved beyond the

baseline requirements of Rule 611 and that “[w]hile arguably Rule 611 served a historical function, its

continuation imposes negative externalities on market participants”).

Rule 600(b)(106) defines “trading center” to mean “a national securities exchange or national securities

association that operates an SRO trading facility, an alternative trading system, an exchange market maker,

an OTC market maker, or any other broker or dealer that executes orders internally by trading as principal

or crossing orders as agent.” 17 CFR 242.600(b)(106). Trading center is defined broadly to include venues

that execute trades in today’s equity market structure, including registered exchanges, ATSs, OTC market

makers, and any other broker-dealers that execute orders internally, whether as principal or agent.

Rule 600(b)(82) provides that “protected quotation” means “a protected bid or a protected offer.” 17 CFR

242.600(b)(82). Rule 600(b)(81) provides that a “protected bid or protected offer” means “a quotation in

an NMS stock that: (i) is displayed by an automated trading center; (ii) is disseminated pursuant to an

effective national market system plan; and (iii) is an automated quotation that is the best bid or best offer of

trade-through restrictions set forth in paragraph (b) of the rule applies. A “trade-through” is

defined as the purchase or sale of an “NMS stock” 83 during “regular trading hours” 84 either as

agent or principal, at a price that is lower than a protected bid or higher than a protected offer. 85

The definition of “protected bid or protected offer” 86 (collectively, “protected

quotations”) includes several key elements. First, they must be “automated quotations” 87

displayed by an “automated trading center.” 88 The definitions of automated trading center and

automated quotation generally require that quotations must be immediately and automatically

a national securities exchange, or the best bid or best offer of a national securities association.” 17 CFR

242.600(b)(81).

An NMS stock generally means any exchange-listed security (other than listed options) for which

consolidated market data is disseminated. Rule 600(b)(65) defines an “NMS stock” to mean “any NMS

security other than an option.” 17 CFR 242.600(b)(65). See supra note 3 (defining NMS security). Listed

options have their own trade-through rule, which is set forth in the Options Order Protection and

Locked/Crossed Market Plan. That NMS Plan introduced features to the listed options markets analogous

to Rule 611 for the equity markets, including requiring its participants to establish, maintain and enforce

written policies and procedures that are reasonably designed to prevent trade-throughs, and provided for a

number of exceptions to the trade-through requirement (including ISOs). In addition, the plan requires

participants to have rules to reasonably avoid displaying locked and crossed markets. See Securities

Exchange Act Release No. 60405 (July 30, 2009), 74 FR 39362 (Aug. 6, 2009).

Rule 600(b)(88) defines “regular trading hours” to mean “the time between 9:30 a.m. and 4:00 p.m. Eastern

Time, or such other time as is set forth in the procedures established pursuant to 17 CFR 242.605(a)(2).” 17

CFR 242.600(b)(88).

17 CFR 242.600(b)(105) (definition of “trade-through”).

See supra note 82.

Rule 600(b)(6) defines the term “automated quotation” as “a quotation displayed by a trading center that:

(i) permits an incoming order to be marked as immediate-or-cancel; (ii) immediately and automatically

executes an order marked as immediate-or-cancel against the displayed quotation up to its full size;

(iii) immediately and automatically cancels any unexecuted portion of an order marked as immediate-orcancel without routing the order elsewhere; (iv) immediately and automatically transmits a response to the

sender of an order marked as immediate-or-cancel indicating the action taken with respect to such order;

and (v) immediately and automatically displays information that updates the displayed quotation to reflect

any change to its material terms.” 17 CFR 242.600(b)(6).

Rule 600(b)(7) defines the term “automated trading center” as “a trading center that: (i) has implemented

such systems, procedures, and rules as are necessary to render it capable of displaying quotations that meet

the requirements for an automated quotation set forth in [Rule 600(b)(6)]; (ii) identifies all quotations other

than automated quotations as manual quotations; (iii) immediately identifies its quotations as manual

quotations whenever it has reason to believe that it is not capable of displaying automated quotations; and

(iv) has adopted reasonable standards limiting when its quotations change from automated quotations to

manual quotations, and vice versa, to specifically defined circumstances that promote fair and efficient

access to its automated quotations and are consistent with the maintenance of fair and orderly markets.” 17

CFR 242.600(b)(7).

executable, without any programmed delay. 89 Second, to be protected, a quotation must be

disseminated in the consolidated market data feeds. Consequently, Rule 611 does not apply when

the consolidated market data feeds are not operating. Third, to be protected, a quotation must be

the “best bid” (highest-priced bid) or “best offer” (lowest-priced offer) of an exchange or a

national securities association (currently FINRA through its ADF). Currently, 17 exchanges

quote and trade NMS stocks but there are no active quoting participants in the ADF, 90 which

means that, practically, Rule 611 only applies to the best round-lot prices on an exchange. Rule

611 does not cover any additional depth-of-book prices (lower prices for bids and higher prices

for offers) that are outside the best prices displayed by an automated trading center.

Rule 611 restricts trades at prices worse than a protected quotation, though it does not

affirmatively require the routing of orders to trading centers that are displaying the best prices.

Any trading center is free to execute trades at prices that are equal to or better than a protected

quotation, regardless of whether such trading center is currently quoting at that price or is a nondisplayed trading center that never displays quotations. 91 Thus, for example, Rule 611 does not

prohibit the execution of trades on non-displayed trading centers (non-displayed ATSs which are

sometimes referred to as “dark pools,” off-exchange market makers, and other broker-dealers

that execute orders internally) at prices that match displayed prices at displayed trading centers.

See NMS Adopting Release at 37534 (“The term “immediate” precludes any coding of automated systems

or other type of intentional device that would delay the action taken with respect to a quotation.”). In 2016,

the Commission updated its interpretation of the term “immediate” given technological and market

developments since the adoption of Regulation NMS and stated that “immediate” in the context of

Regulation NMS does not preclude a de minimis intentional delay – i.e., a delay so short as to not frustrate

the purposes of Rule 611 by impairing fair and efficient access to an exchange’s quotations. See Securities

Exchange Act Release No. 78102 (June 17, 2016), 81 FR 40785 (June 23, 2016).

See https://www.finra.org/filing-reporting/alternative-display-facililty-adf (stating “[c]urrently, there are no

active quoting ADF participants.”).

Stated another way, Rule 611 does not require orders to be routed to execute against displayed quotations

before trades could be executed at matching prices (sometimes referred to as a “trade-at” restriction).

Moreover, Rule 611 does not mandate transparency or force investors to display their trading

interest when they wish not to do so. 92 Any investor can choose not to display an order, whether

on an exchange or a non-displayed trading center, and such orders can be executed as long as

they are executed at NBBO prices or better.

Paragraph (b) of Rule 611 sets forth nine exceptions to the trade-through restrictions of

paragraph (a). Two of the most significant of these involve the use of intermarket sweep

orders. 93 ISOs are defined as limit orders that are routed, as necessary, to execute against the full

displayed size of all protected quotations with prices that are better than the price of the ISO.

Thus, while ISOs are exceptions to Rule 611, they remain consistent with the trade-through

rule’s objective of promoting intermarket price priority. One ISO exception allows a trading

center to execute a trade immediately at any size and price as long as it simultaneously routes

ISOs to execute against any better-priced protected quotations. 94 The other ISO exception allows

a trading center to execute an order it receives immediately at any size and price when the order

is identified as an ISO. 95 This exception enables order routers to control the execution of their

own orders, while effectively relieving trading centers of the necessity of checking protected

For example, Rule 604 of Regulation NMS provides an exception from display for all block-sized limit

orders (unless the customer requests display), as well as an exception for limit orders of any size for which

the customer expressly requests non-display. Rule 604 of Regulation NMS (Display of Customer Limit

Orders). 17 CFR 242.604.

Rule 600(b)(47) defines an “intermarket sweep order” to mean “a limit order for an NMS stock that meets

the following requirements: (i) when routed to a trading center, the limit order is identified as an

intermarket sweep order; and (ii) simultaneously with the routing of the limit order identified as an

intermarket sweep order, one or more additional limit orders, as necessary, are routed to execute against the

full displayed size of any protected bid, in the case of a limit order to sell, or the full displayed size of any

protected offer, in the case of a limit order to buy, for the NMS stock with a price that is superior to the

limit price of the limit order identified as an intermarket sweep order. These additional routed orders also

must be marked as intermarket sweep orders.” 17 CFR 242.600(b)(47).

Rule 611(b)(6); 17 CFR 242.611(b)(6).

Rule 611(b)(5); 17 CFR 242.611(b)(5).

quotations at other trading centers. For example, if an order router wishes to immediately access

a large-sized quotation with a price inferior to protected quotations at other trading centers, it can

route an ISO to execute against the large-sized quotation, while simultaneously routing

additional ISOs to execute against all of the better-priced protected quotations.

Another significant exception to Rule 611 is the “one-second window.” 96 This exception

was primarily designed to deal with the practical difficulties that existed when Regulation NMS

was adopted of preventing intermarket trade-throughs during a fast-moving market when

quotations can change rapidly (sometimes referred to as “flickering quotes”). 97 This exception

provides that if a trade is executed at a price that would not have been a trade-through of

protected quotations as they stood at any point within the previous one second (the one-second

window), then the trade is excepted from Rule 611.

Other exceptions to Rule 611 include: (1) the “self-help” remedy that allows market

participants to disregard the protected quotations of trading centers that are experiencing systems

problems; 98 (2) transactions that are not “regular way contracts”; 99 (3) single-priced opening,

reopening, and closing transactions; 100 (4) trades during a crossed market when a protected bid is

Rule 611(b)(8); 17 CFR 242.611(b)(8).

In adopting the exception in 2005, the Commission stated that it “generally does not believe that the

benefits would justify the costs imposed on trading centers of attempting to implement an intermarket price

priority rule at the level of sub-second time increments.” NMS Adopting Release at 37523. The

Commission emphasized, however, that the exception is not an exception to the duty of best execution. For

example, a broker-dealer that owes a duty of best execution to its customers cannot disregard a quotation

for purposes of best execution if experience shows that it is likely to be accessible. Id. at n. 213 (“In making

a best execution determination, for example, a broker-dealer cannot rely on the Rule’s exception for

flickering quotations to justify ignoring a recently displayed, better-priced quotation when experience

shows that the quotation is likely to be accessible.”).

Rule 611(b)(1); 17 CFR 242.611(b)(1).

Rule 611(b)(2); 17 CFR 242.611(b)(2).

100

Rule 611(b)(3); 17 CFR 242.611(b)(3).

higher than a protected offer; 101 (5) trades executed at benchmark prices rather than current

quoted prices (such as volume-weighted average price (“VWAP”) transactions and other types of

average price transactions); 102 and (6) transactions in “stopped orders.” 103 The Commission has

also issued several exemptions from Rule 611. 104

B. Proposed Rescission of Rule 611

The Commission proposes to rescind Rule 611 in its entirety. The Commission

recognizes that our national market system is complex and interconnected, and that any changes

could impact other parts of the national market system and result in unintended consequences. It

is precisely for these reasons that the Commission has sought the input of market participants in

assessing Regulation NMS and Rule 611 in advance of formulating this proposal. 105

The Commission has engaged in a broad assessment of the regulatory environment since

the adoption of Rule 611 and the economic effects of Rule 611 106 and has taken into

consideration the comments and input received. Based on its assessment, rescinding Rule 611

101

Rule 611(b)(4); 17 CFR 242.611(b)(4).

102

Rule 611(b)(7); 17 CFR 242.611(b)(7).

103

Rule 611(b)(9); 17 CFR 242.611(b)(9). In particular, Rule 611(b)(9) provides an exception for the

execution by a trading center of an order for which, at the time of receipt of the order, the trading center had

guaranteed an execution at no worse than a specified price (a “stopped order”), where: (i) the stopped order

was for the account of a customer; (ii) the customer agreed to the specified price on an order-by-order

basis; and (iii) the price of the trade-through transaction was, for a stopped buy order, lower than the

national best bid in the NMS stock at the time of execution or, for a stopped sell order, higher than the

national best offer in the NMS stock at the time of execution. Id.

104

See Securities Exchange Act Release No. 54389 (Aug. 31, 2006), 71 FR 52829 (Sept. 7, 2006), as modified

by Securities Exchange Act Release No. 57620 (Apr. 4, 2008), 73 FR 19271 (Apr. 9, 2008) (exemptive

order for “qualified contingent trades”); Securities Exchange Act Release No. 54678 (Oct. 31, 2006), 71 FR

65018 (Nov. 6, 2006) (exemptive order for certain sub-penny trade-throughs); Securities Exchange Act

Release No. 55884 (June 8, 2007), 72 FR 32926 (June 14, 2007) (exemptive order for certain error

correction transactions); Securities Exchange Act Release No. 55883 (June 8, 2007), 72 FR 32927 (June 14,

2007) (exemptive order for certain print protection transactions); Securities Exchange Act Release No.

57621 (Apr. 4, 2008), 73 FR 19270 (Apr. 9, 2008) (exemptive order for non-convertible preferred

securities).

105

See, e.g., supra notes 47-67 and accompanying text (discussing TTR Roundtables).

106

See infra section VI.

and its trade-through restrictions may be appropriate and beneficial for the national market

system and, in particular, our equity markets. As discussed in more detail below, Rule 611 has

contributed to a myriad of consequences that have resulted in costs to market participants. In

addition, equity markets have significantly evolved since 2005 such that the trade-through

prohibition in Rule 611 may no longer be needed in our current equity markets because of

advancements in technologies, particularly with respect to access and order handling and

routing. 107 Also, best execution obligations should continue to ensure brokers use reasonable

diligence to secure the most favorable terms for customer orders. 108 Moreover, removing the

trade-through prohibition of Rule 611 would allow market participants greater freedom in order

handling execution and routing decisions, which could promote competition and foster

innovation among trading centers and executing brokers.

In general, our equity markets are well served by allowing competition, innovation, and

other market forces, rather than prescriptive requirements on market participants, to shape their

continued evolution to the greatest extent possible. If Rule 611 were to be rescinded, U.S. equity

markets may benefit from reduced costs associated with the reduction in market structure

complexity and fragmentation, and competition, innovation, and other market forces would no

longer be constrained by the restrictions of Rule 611. 109 Today’s trading environment is highly

competitive, interconnected, and automated, which was not the case when the Commission

adopted Rule 611. Rule 611 therefore is unnecessary given that the Commission’s concern

expressed at the time of adoption of Rule 611 regarding the lack of mechanisms to connect

markets is no longer relevant. Rule 611 also is not needed as a backstop to best execution given

107

See infra section II.B.3.a.

108

See infra section II.B.3.b.

109

See infra section VI.C.1.

today’s highly automated, interconnected and competitive equity markets, where retail investors

have widely available access to market data and execution quality information, and a broker’s

duty to provide best execution would apply regardless. 110

Accordingly, the Commission believes that rescission of Rule 611 would be in the public

interest and appropriate for the protection of investors and the maintenance of fair and orderly

markets in that removing Rule 611 may, in furtherance of the goals of section 11A of the

Exchange Act, 111 allow for more economically efficient executions of securities transactions, the

execution of investor orders in the best market, and remove impediments to competition. 112

The goal of the changes proposed in this rulemaking is to strengthen our national market

system and, in furtherance of section 11A of the Exchange Act, 113 to allow for more

economically efficient executions of securities transactions, and to remove impediments to

competition, 114 in order to help ensure that the U.S. remains the preeminent securities market in

the world, where issuers, investors, and other market participants look to entrust their companies,

savings, and capital. When the Commission adopted Regulation NMS in 2005, the U.S. equity

markets were undergoing significant changes with respect to technology, trading, and

competition. At this time of still-emerging and still-evolving technologies, the Commission

adopted Regulation NMS, which set forth a uniform trade-through rule, in order to address

inefficiencies in the equity market structure that existed at the time. Rule 611 resulted in market

110

See Order Execution Obligations Adopting Release at 48323-24.

111

Exchange Act section 11A(a)(1)(C); 15 U.S.C. 78k-1(a)(1)(C).

112

See id. See also supra notes 1-2 and accompanying text (discussing section 11A).

113

Exchange Act section 11A(a)(1)(C); 15 U.S.C. 78k-1(a)(1)(C).

114

See supra notes 1-2 (discussing section 11A). See also section VI.D.1.a. (discussing the Commission’s

Economic Analysis regarding the benefits of rescinding Rule 611).

participants needing, as a practical matter, to connect, directly or indirectly, to all markets with

protected quotations. 115 Moreover, Rule 611 led to market participants focusing particularly on

price and speed with respect to executing trades, as described further in sections II.B.2. and

II.B.3 below. While this may be beneficial to the execution quality of retail orders, the overall

execution quality for large institutional orders may be negatively affected. 116 Moreover, Rule

611’s restriction on trading through protected quotations may have had the effect of incentivizing

exchanges to adopt a particular trading protocol (i.e., price-time matching), thereby reducing

innovation in exchange trading models and limiting competition among exchanges. 117

Markets are now once again undergoing a period of significant technological change. 118

U.S. equity markets are highly competitive and resilient, and they should, whenever possible, be

allowed to develop on their own. The Commission’s involvement should be focused on those

areas where its regulatory reach can improve their functioning. 119 Thus, core to the

Commission’s proposal to rescind Rule 611 is that, where appropriate, market forces should

shape U.S. equity market structure. By proposing to remove the regulatory restrictions contained

in Rule 611, the Commission seeks to simplify the regulation and structure of our equity markets

rather than continue to impose requirements and costs that are no longer necessary, and thus

empower market participants to compete on merit and innovation—whether through service,

price, technology, costs, or a combination thereof. The Commission believes that removing such

115

See infra note 121 and accompanying text (discussing the practical need for market participants to connect

to all markets).

116

See infra section VI.B.2.a. (discussing economic effects on large institutional orders).

117

See infra section VI.B.4.

118

See, e.g., supra notes 42-45 and accompanying text (discussing the rapidly changing technology in today’s

markets).

119

See Horses and Bourses: Remarks at the 12th Annual Conference on Financial Market Regulation, by

Commissioner Hester M. Peirce (May 16, 2025), available at https://www.sec.gov/newsroom/speechesstatements/peirce-remarks-financial-market-regulation-051625.

restrictions could foster innovation in trading protocols and venue design and increase

competition among trading centers and executing brokers. 120

Rule 611 and its numerous exceptions and exemptions have been at the core of the

complexity in our equity market structure since the adoption of Regulation NMS in 2005. The

prohibition against trade-throughs effectively requires market participants to connect or have

routing capability to all exchanges and to monitor quotes and route orders to exchanges that they

otherwise might choose not to do business with. 121 This complexity may be particularly

impactful for institutional and larger-sized orders where requirements may result in executions

across multiple venues with varying fee structures and latencies, potentially leading to worse

overall execution quality than alternative approaches. 122

In addition, since the adoption of Rule 611, there has been a proliferation of order types

offered by exchanges. 123 Many of these order types were developed in response to Rule 611 and

other Regulation NMS-related requirements and are now commonplace among equity

120

See infra section VI.D.1.

121

Rule 611 does not mandate that trading centers connect to all trading centers with protected quotes, or even

that they have routing capabilities to reach such trading centers. Trading centers can operate without any

routing capabilities so long as they abide by the trade-through restrictions of Rule 611 (i.e., that, absent an

exception under Rule 611(b), they not trade-through protected quotes at away markets); however, the

practical effect of the rule for many market participants has been that they have routing capabilities to reach

all trading centers with protected quotes, directly or indirectly. Trade-Through Roundtable Supporting

Data, by Staff of the Office of Analytics and Research, Division of Trading and Markets (Sept. 9, 2025,

revised Sept. 12, 2025) (“121 Analysis”), available at https://www.sec.gov/files/trade-through-roundtablesupporting-data.pdf.

122

See Jane Street Letter at 2. See also infra section VI.

123

See Robinhood Letter at 4 (citing “Complaints Rise Over Complex U.S. Stock Orders,” by Herbert Lash,

Reuters (Oct. 19, 2012)).

exchanges. 124 These order types include but are not limited to ISOs and “price to comply” orders

and variations thereof. 125 When such order types are combined or interact with other similarly

complex order types offered by trading venues, the resulting mix of combinations and

permutations that need to be considered increases the complexity faced by market participants. 126

In addition, many order types themselves have one or more modifiers, which can add even more

market structure complexity, 127 which may increase costs to market participants. 128 Moreover,

this complexity and the costs associated therewith may provide an advantage to more

124

Some commenters have stated that this increase in order types stems directly from Rule 611 and related

Regulation NMS market structure requirements (such as Rule 610(e)’s prohibition on locking and crossing

markets), and that such order types have been developed to enable market participants to take advantage of

the complexities. See Nasdaq Letter I at 1-2 (citing EMSAC Market Structure Memo, supra note 46). See

also First TTR Roundtable Transcript at 230 (Matt Billings, Robinhood), at 78-80 (Maureen O’Hara,

Cornell University, SC Johnson Graduate School of Management), at 168 (Matt Mackenzie, Optiver), at

169 (Armando Diaz, PureStream); Robinhood Letter at 4; Healthy Markets Letter I at 9. One commenter

stated that certain order types are “not designed to enhance execution quality but to comply with display

rules while maintaining [SIP] visibility…” See FIA PTG Paper at 4. See also First TTR Roundtable

Transcript at 165-66 (Hubert De Jesus, BlackRock). See also First TTR Roundtable Transcript at 169

(Armando Diaz, PureStream) (noting that “the overwhelming majority of volume” on an exchange was

using order types “that are meant to suppress or sidestep 611”), at 168 (Matt Mackenzie, Optiver).

125

ISO order types are designed to allow market participants to avail themselves of the ISO exceptions under

Rules 611(b)(5) through (6); 17 CFR 242.611(b)(5) through (6). “Price to comply” orders and variations

thereof seek to automatically adjust an order’s price to avoid locking or crossing markets. See, e.g., Nasdaq

Rule 4702(b)(1). See also supra note 29 and accompanying text and section II.A.2. (discussing the ISO

exceptions and order types) and infra section III.B.3. (discussing complexities associated with Rule

610(e)).

126

See, e.g., First TTR Roundtable Transcript at 167 (Adam Nunes, Hudson River) (“[O]ne of the things that

adds a great deal of complexity is that you have features to do one thing sitting on top of features to do

another thing, and the combinations of those can get quite extreme.”); O’Brien Letter at 6-7 (discussing

complexity attributable to Rule 611); Robinhood Letter at 4 (stating that “[t]here has also been an

exponential increase in the number and complexity of order types offered by exchanges, with one source

estimating that exchanges offer 2,000 variations of order types”).

127

See, e.g., Trading Talk – An In-Depth Look at Exchange Order Types, Rosenblatt Securities Inc. (June 26,

2013) (“Rosenblatt Order Type Report”); No Order Type Conspiracy, Rosenblatt Study Says, by Editorial

Staff, Traders Magazine (July 5, 2013) (discussing findings of Rosenblatt Order Type Report, including that

“the proliferation of order types had indeed added to the complexities of the marketplace and that

‘undoubtedly creates opportunities for the savviest market participants.’”).

128

See infra section VI.C.1. (discussing estimated cost savings due to reduced complexity if Rule 611 is

rescinded). Some commenters stated that this complexity also increases risks to market IT infrastructure

and systems. See, e.g., O’Brien Letter at 7. See also Robinhood Letter at 5; FIA PTG Paper at 4. One

commenter stated that Rule 611’s rigid requirements make the equity markets more “brittle” because of all

the complexity they add. First TTR Roundtable Transcript at 291 (Cameron Smith, Texas Stock Exchange).

sophisticated market participants, such as high-tech algorithmic traders with expansive data and

processing capacities who are more capable of managing increased complexity. 129

In addition to this equity market structure complexity, Rule 611’s trade-through

prohibition has contributed to an environment where speed has become the primary competitive

advantage, allowing fast algorithms to capture price discrepancies. 130 As discussed below, Rule

611 has contributed to the fragmentation of displayed liquidity across numerous order books. 131

This in turn creates latency arbitrage opportunities and has incentivized massive investment in

low-latency infrastructure to gain a speed advantage over competitors, resulting in the rise of

high-frequency traders (“HFTs”). 132 In today’s equity markets, participants are locked in a

technology and latency arms race for speed, 133 and the Commission believes that Rule 611 has

contributed to this.

The Commission believes that rescinding Rule 611 would reduce the complexity in our

equity market structure that has occurred since its adoption in 2005, which would in turn reduce

costs for market participants and foster innovation and competition.

129

See infra section VI.B.3.

130

See First TTR Roundtable Transcript at 72-73 (Dave Lauer, Urvin Finance and We the Investors) (citing

Rule 611 as a factor driving the “speed race”), at 218 (Vlad Khandros, One Chronos) (stating Rule 611 is

exacerbating the “latency arms race”). See also Data Boiler Comment at 2 (stating that the trading

community is in a “low-latency arms race”).

131

See infra section II.B.2.b.

132

See letter from Benjamin L. Schiffrin, Director of Securities Policy, Better Markets, Inc. (Sept. 18, 2025)

(“Better Markets Letter”). This commenter states that HFTs pay the exchanges fees for high-speed

proprietary data feeds, fees for market data, and fees for having their computers “co-located” in the

exchanges’ data centers. Id. at 3.

133

See, e.g., First TTR Roundtable Transcript at 56-57 (Pankil Patel, Bank of America) (discussing a “more

sophisticated technology arms race”), 218 (Vlad Khandros, OneChronos) (stating that there is a “latency

arms race”), 219 (Jon Herrick, New York Stock Exchange) (discussing “the technological arms race that

we’re faced with”).

Rule 611’s trade-through restrictions have contributed to greater fragmentation in the

U.S. equity markets. Rule 611 effectively lowered barriers to entry for exchanges by giving all

exchanges, no matter their trading volume or other competitive distinctions, an opportunity to

display a protected quotation, and thus avail themselves of guaranteed market data and

connectivity revenue as market participants are effectively required to connect, directly or

indirectly, to their markets. As a result, Rule 611 and Regulation NMS have contributed to the

proliferation of exchanges in our equity markets. 134 To be clear, the Commission welcomes

competition and believes that exchanges that introduce innovations to our markets, such as

providing new ways to trade, can benefit the national market system overall. However, the

Commission believes that Rule 611 has distorted incentives in the U.S. equity markets by

providing new exchanges with protected quotation status at their inception, essentially

guaranteeing that market participants must connect to them and subscribe to their market data

feeds, 135 and this has led to a proliferation of exchanges.

This proliferation of exchanges has increased fragmentation of trading on equity

exchanges, spreading market share across the increasing number of exchanges, resulting in a

134

See, e.g., O’Brien Letter at 5; Robinhood Letter at 3-4; FIA PTG Paper at 3-4; First TTR Roundtable

Transcript at 181-82 (Hubert De Jesus, BlackRock). See also infra section II.B.2.b. (discussing exchange

proliferation).

135

As one commenter stated, “[a]ll a new venue needs to do is post a quotation and the entire market must

connect to its infrastructure, code to its systems and re-shape its trading algorithms to accommodate it.” See

O’Brien at 5. See also FIA PTG Letter at 4; Robinhood Letter at 4 (stating that six exchanges account for

approximately 80% of the volume traded on all exchanges while 10 exchanges individually account for less

than a 2% market share); First TTR Roundtable Transcript at 49, 72-73 (Dave Lauer, Urvin Finance and We

the Investors) (stating that most of the additional exchanges have been “copycat” exchanges), at 288-89

(Mehmet Kinak, T.Rowe Price) (stating that the additional exchanges have not offered anything to

differentiate themselves from existing exchanges), at 277 (Daniel Gerhardstein, FIA Principal Traders

Group and Jump Trading Group) (stating that “Rule 611 creates artificial incentives for the establishment of

new exchanges” and that “[a]chieving the protected quote status provides exchanges with guaranteed

revenue through the forced connectivity, market data, and access fees, without regard to new value

delivered to market participants”).

dispersal of liquidity. 136 This dispersal of displayed liquidity across numerous exchange order

books increases routing complexity and potentially thins size at each exchange’s best

quotations. 137 This fragmentation is particularly impactful for large and institutional orders

because, as the fragmentation of displayed liquidity increases, institutional child orders face

more venues with small top-of-book sizes, which raises the complexity and cost of routing to

meet the requirements of Rule 611. This greater dispersion across exchanges can make

institutional trading intentions easier to detect, which can increase slippage and hurt the overall

execution quality of the parent order. 138

Moreover, with the increase in the number of U.S. equity exchanges, costs for market

participants have increased due to the need to connect to trading centers with protected quotes,

maintain such connections and routing capabilities thereto, and subscribe to their market data

feeds. 139 These costs include incurring connection, routing, and market data fees to certain

136

See, e.g., Better Markets Letter at 1-2; FIA PTG Paper at 2 (stating that during the first half of 2025, no

exchange had more than 20% market share based on notional volume and 9 exchanges had market share of

less than 1%, and that the primary listing exchanges had a combined market share of less than 30% over the

first half of 2025 (citing Cboe Exchange Inc, Historical Market Data Volume, available at

https://www.cboe.com/us/equities/market_statistics/historical_market_volume/)). See also infra section

II.B.2.b. (discussing exchange proliferation and fragmentation of displayed liquidity).

137

See infra section VI.B.2.c.

138

See infra section VI.B.2.

139

See, e.g., O’Brien Letter at 6-7; Robinhood Letter at 3-5; FIA PTG Paper at 1 (stating that major firms

spend millions annually on market data and connectivity fees to all U.S. exchanges), 3. See also Jane Street

at 2 (stating that these types of costs were a “regulated subsidy for venue proliferation, as new exchanges

can effectively mandate that certain market participants purchase their connectivity and market data

services”); First TTR Roundtable Transcript at 51, 70-71 (Joe Mecane, Citadel), at 56-58 (Pankil Patel,

Bank of America) (discussing increased costs for infrastructure, colocation/connectivity, and market data),

at 48, 72-73 (Dave Lauer, Urvin Finance and We the Investors), at 232-233, 277 (Daniel Gerhardstein, FIA

Principal Traders Group and Jump Trading Group) (stating that “[a]chieving the protected quote status

provides exchanges with guaranteed revenue through forced connectivity, market data, and access fees,

without regard to new value delivered to market participants”), at 246 (Vlad Khandros, OneChronos).

Certain commenters have stated that some of the costs that emanate from Regulation NMS have come

down due to advances in technology and competition, particularly in areas relating to routing. See, e.g.,

First TTR Roundtable Transcript at 158 (Allison Bishop, Proof Trading), at 160 (Jeff Starr, Schwab). See

also First TTR Roundtable Transcript at 19-26 (Dan Mathisson, Commission, Division of Trading and

Markets, Office of Analytics and Research). The Commission acknowledges that certain costs may have

exchanges that some participants feel may provide limited value, but that such participants must

nevertheless incur due to the requirements of Rule 611. 140 In addition, market participants incur

costs to monitor for pre-trade and post-trade compliance with Rule 611, which costs increase

with the number of venues providing protected quotes. 141

Without the requirements of Rule 611, market participants will no longer effectively be

required to connect, directly or indirectly, to every exchange, which should reduce the

connectivity, market data, routing, and compliance costs associated with such connections. 142 In

turn, this may result in fewer new exchanges and potentially fewer existing exchanges, as the

exchange revenue streams currently associated with market data and connectivity fees would no

longer be guaranteed as they currently are. In addition, without the requirements of Rule 611,

market participants will have greater choice in determining which trading center provides the

come down, however, costs resulting from the trade-through prohibition in Rule 611 still remain high

because, in practice, Rule 611 results in market participants connecting to all protected markets, even if

indirectly through connectivity providers, and rescission of Rule 611 should result in reduced costs for

market participants.

140

One commenter stated that, according to its calculations, the increased costs to the industry as a whole for

connectivity, market data and options regulatory fees associated with small venues (i.e., for equities venues

with less than 2% market share and options venues with less than 4% market share) is approximately $375

million a year, which is about two thirds of the total revenue for those 21 venues. See First TTR Roundtable

Transcript at 51, 70-71 (Joe Mecane, Citadel Securities). This commenter, however, also stated that it did

not believe that eliminating the trade-through rule would impact that cost significantly for a variety of

reasons, including because firms are already connected to such venues and because firms’ best execution

obligations would make it difficult to simply disconnect from a venue to save costs. See id.

141

See, e.g., Robinhood Letter at 5; J. Angel Letter; First TTR Roundtable Transcript at 90 (Julie Andress,

Securities Traders Association and KeyBanc Capital Markets) (discussing trade-through compliance).

142

See infra section VI.C.1. One commenter estimated that the fixed costs of connecting to U.S. equity

exchanges are 350 percent greater than the average connection costs of the top ten markets that its firm

trades in globally. First TTR Roundtable Transcript at 232-33 (Daniel Gerhardstein, FIA Principal Traders

Group and Jump Trading Group). Another commenter estimated its costs associated with onboarding new

exchanges and connectivity maintenance costs to be $1.5 million for onboarding and $200,000 annually for

maintenance. First TTR Roundtable Transcript at 68-69 (Pankil Patel, Bank of America) (stating that, with

respect to onboarding a new exchange, the costs for his firm were estimated to be approximately $1.5

million and included not just connectivity and market data, but costs associated with integration into the

firm’s ecosystem, such as “third party sourcing, procurement, technology, testing, hardware, CAD

integration, [and] billing” and that ongoing maintenance costs were estimated at approximately $200,000

per year, and included continued connectivity costs, maintaining upgrades, and ensuring surveillance

systems were up-to-date, among other things).

best market for execution of their orders given their investment objectives. Among other things,

if the Commission were to rescind Rule 611, market participants would have more flexibility to

send their orders to trading centers that have a consistently higher volume of order flow, more

reliable speed of execution, or lower adverse selection costs, if they are not constrained by

requirements to first route to execute against any protected quotation. Fragmentation may be

reduced as broker-dealers concentrate their orders on more liquid trading centers with better

execution quality. In turn, trading centers would have more flexibility to innovate and compete

for order flow on factors other than price and speed. And rescinding Rule 611 would allow

institutional investors more flexibility to route child orders, thereby allowing them to avoid

trading at exchanges that may increase their information leakage and reducing slippage. 143

Accordingly, rescinding Rule 611 could lead to reduced exchange fragmentation, enable

competition and innovation among trading venues, reduce costs, and remove unnecessary

regulatory requirements that may advantage some market participants over others in today’s

equity markets.

When the Commission adopted Rule 611 and Regulation NMS, one of its goals was to

seek the proper balance between competition among markets and competition among orders, and

the Commission stated that investors “must be assured that they are participants in a system

which maximizes the opportunities for the most willing seller to meet the most willing buyer.” 144

The Commission expressed concern regarding market fragmentation and the absence of

143

See infra section VI.C.1.

144

See NMS Adopting Release at 37499 (quoting H.R. Rep. 94–123, 94th Cong., 1st Sess. 50 (1975)).

mechanisms and linkages “designed to assure that public investors are able to obtain the best

price for securities regardless of the type or physical location of the market upon which his

transaction may be executed.” 145 Following the adoption of Regulation NMS in 2005, including

Rule 611 and its trade-through protections, market participants moved quickly towards

electronification of trading and invested in intermarket linkages and routing technologies for the

equity markets. 146 One commenter stated that Rule 611 “helped spur investment in interlinkages

between venues as routing technology was developing, and best execution practices were less

sophisticated” and “served almost as ‘training wheels’ for the national market system, providing

clear, objective standards for order routing processes.” 147 While it is possible that such changes

would have occurred in our equity markets without the intervention of Regulation NMS and

some have argued that it would have been preferable to allow the markets to evolve and develop

such technology and processes more naturally through competitive forces, 148 the adoption of

Rule 611’s requirements and Regulation NMS generally did push the U.S. equity markets toward

automation and away from the inefficiencies that existed previously. 149 Currently, the U.S.

equity markets are highly automated and interconnected and the Commission’s concern

expressed at the time of Regulation NMS’s adoption in 2005 regarding the lack of mechanisms

to connect markets is no longer an issue. Today’s market participants have quick, electronic

access to the markets and state-of-the-art routing technology is widely available for those

145

See id. at 37499, n.13.

146

See J. Angel Letter at 11-13.

147

Jane Street Letter at 2.

148

See, e.g., Robinhood Letter at 2. See also Chairman Remarks at First TTR Roundtable.

149

See, e.g., First TTR Roundtable Transcript at 62 (Katie Kolchin, SIFMA) (referring to the Intermarket

Trading System that previously linked various stock exchanges); O’Brien Letter at 3 and Robinhood Letter

at 3 (linking NYSE’s adoption of electronic quoting and trading to the status automated quotations under

Rule 611).

seeking it. 150 Liquidity providers now routinely provide enhanced execution results that surpass

any minimum benefits of Rule 611, such as through price improvement relative to the national

best bid and offer and the execution of orders at midpoint prices. 151 The Commission believes

that these execution quality benefits are not dependent on Rule 611, but instead are due to the

intense competition among liquidity providers and the availability of execution quality

benchmarks and data, 152 which will continue even if Rule 611 were to be rescinded.

The widely-available and fast routing capabilities and linkages in today’s equity markets

contrast with the period before the adoption of Regulation NMS, when exchanges and market

participants were not as well connected and many linkages that did exist were relatively slow. 153

Because of the advances in these technologies and the competition among liquidity providers

since Regulation NMS’s adoption in 2005, 154 Rule 611 is no longer necessary to address the

Commission’s concerns in 2005. As discussed above, while Rule 611 may have served a

historical function, it also has resulted in adverse consequences in the equity markets. 155 As

technological advancements have changed how the U.S. securities markets operate since the

150

See First TTR Roundtable Transcript at 21-23 (Dan Mathisson, Commission, Division of Trading and

Markets, Office of Analytics and Research) (discussing the Division of Trading and Market’s analysis that

showed that an overwhelming majority of firms outsource some or all of their routing and fewer than 20

firms directly connect to/trade on every exchange). While fewer than 20 firms have such direct

connections, the practical effect of Rule 611 for nearly all trading centers has been that they incur costs for

routing capabilities to reach all trading centers with protected quotes, whether directly or indirectly through

a connectivity provider. See also supra notes 121 and 139-140 and accompanying text (costs of connecting

to trading centers with protected quotes).

151

See Jane Street Letter at 2.

152

See, e.g., Rule 605 of Regulation NMS, 17 CFR 242.605 (requiring certain reporting entities to publicly

disclose order execution quality statistics).

153

See NMS Adopting Release at 37538-59 (describing linkages in 2005 for exchange-listed stocks through

the Intermarket Trading System, or “ITS”, Plan, with “receiving markets generally having up to 30 seconds

to respond”).

154

See, e.g., J. Angel Letter at 12-13; O’Brien Letter at 5; Jane Street Letter at 2; First TTR Roundtable

Transcript at 62-64 (Katie Kolchin, SIFMA), at 216, 234 (Mehmet Kinak, T. Rowe Price).

155

See supra section II.B.2. (discussing market structure complexity, exchange proliferation and

fragmentation, and costs to market participants).

adoption of Regulation NMS, to remain effective, the Commission must continuously monitor

the market environment and, as appropriate, adjust and modernize our rules, regulations, and

oversight tools and activities. At this point, Rule 611 is unnecessary to the functioning of our

equity markets, and the continued maintenance of the rule may inhibit innovation and the

development of new technologies, products, and services that could enhance competition in the

U.S. equity markets to the benefit of investors. 156

When adopted, Rule 611 was “designed to assure that public investors are able to obtain

the best price for securities” given the absence of robust intermarket linkages at the time. 157 The

Commission was concerned that investors “often may have difficulty monitoring whether their

orders receive the best available prices.” 158 The Commission stated that “furthering the interests

of these investors in obtaining best execution on an order-by-order basis is a vitally important

objective that warrants adoption of [Rule 611.]” 159 The Commission further stated, in adopting

Rule 611, that Rule 611 “will backstop a broker’s duty of best execution on an order-by-order

basis by prohibiting the practice of executing orders at inferior prices, absent an applicable

exception.” 160

156

See also IntelligentCross Letter at 3 (“The elimination of the trade-through prohibitions would . . . foster a

more competitive playing field among lit venues, and more easily facilitate the introduction of innovation

to the displayed markets.”); Duoro Labs Paper (describing generally how the crypto market has evolved

and innovated in the absence of prescriptive regulatory requirements and stating that, because of

prescriptive rules like the trade-through rule, the equity markets “have not embraced mechanisms such as

intents-based trading, automated market makers, decentralized price oracles, or atomic cross-domain

settlement, which all emerged naturally in crypto”).

157

See NMS Adopting Release at 37499, n.13.

158

Id. at 37511.

159

Id.

160

Id. at 37516.

A broker-dealer has a legal duty to seek best execution of customer orders. 161 The duty of

best execution predates the Federal securities laws and is derived from an implied representation

that a broker-dealer makes to its customers. 162 The duty of best execution is incorporated into

SRO rules and, through judicial and Commission decisions, the antifraud provisions of the

Federal securities laws. 163 This obligation requires that a “broker-dealer seek to obtain for its

customer orders the most favorable terms reasonably available under the circumstances.” 164 In

other words, broker-dealers should execute trades “at the best reasonably available price.” 165

And, as the Commission has recognized, price is a critical concern for investors. 166 In addition,

the Commission has described a non-exhaustive list of factors that may be relevant to brokerdealers’ best execution analysis. These factors include the size of the order, 167 speed of

execution, clearing costs, the trading characteristics of the security involved, the availability of

161

See, e.g., Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 269-70, 274 (3d Cir.), cert.

denied, 525 U.S. 811 (1998).

162

See id. 135 F.3d at 270.

163

See supra note 73.

164

See id. (noting that a broker-dealer’s duty of best execution requires the execution of customer trades at the

best reasonably available price, recognizing several terms in addition to price as relevant to best execution,

and stating that a broker-dealer must also take into account 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 also id. (citing Order Execution Obligations Adopting Release).

165

Reg NMS Adopting Release at 37538.

166

See Securities Exchange Act Release No. 43590 (Nov. 17, 2000), 65 FR 75414, 75418 (Dec. 1, 2000)

(“Order Execution and Routing Practice Release”) (“The Commission strongly believes, however, that

most investors care a great deal about the quality of prices at which their orders are executed, and that an

opportunity for more vigorous competition among market participants to provide the best quality of

execution will enhance the efficiency of the national market system.”).

167

It is the Commission’s understanding that when an institutional customer gives a large order to be executed

on behalf of one account (e.g., a single mutual fund or pension fund), it expects the broker-dealer that

handles and executes such large order to do so in a manner that ensures best execution is provided to the

“parent” order. In other words, to the extent that a parent order is split into smaller “child” orders, the

institutional customer expects the best execution analysis to evaluate whether the parent order was executed

at the most favorable price possible under prevailing market conditions according to customer instructions.

See, e.g., Concept Release on Equity Market Structure at 3604-3605 (measuring the transaction costs of

institutional investors “can be extremely complex” because their “large orders often are broken up into

smaller child orders and executed in a series of transactions” and “[m]etrics that apply to small order

executions may miss how well or poorly the large order traded overall.”).

accurate information affecting choices as to the most favorable market center for execution and

the availability of technological aids to process such information, and the cost and difficulty

associated with achieving an execution in a particular market center. 168 FINRA Rule 5310

requires broker-dealers to use reasonable diligence to ascertain the best market for a security

such that the price the customer receives is as favorable as possible under the prevailing market

conditions. 169

As noted above, to comply with their best execution obligations, firms must consider a

number of factors when handling and executing a customer’s order, which should include the

best price. 170 When adopting Rule 611, the Commission made clear the duty of best execution

requires broker-dealers to “periodically assess the quality of competing markets to assure that

order flow is directed to the markets providing the most beneficial terms for their customer

orders.” 171 And, broker-dealers “must examine their procedures for seeking to obtain best

execution in light of market and technology changes and modify those practices if necessary to

enable their customers to obtain the best reasonably available prices.” 172

Rule 611 is no longer needed to backstop a broker’s duty of best execution given the

evolution of U.S. equity markets since 2005. Since the adoption of Rule 611, U.S. equity markets

have become highly automated and interconnected, and routing technologies have become

increasingly sophisticated, resulting in increasingly accessible prices for investors. In addition,

168

See Order Execution and Routing Practice Release at 75418.

169

See supra note 73.

170

See id.; FINRA Rule 5310. Some have been critical of Rule 611 with respect to best execution, because its

focus on displayed price did not take into account other factors that may be important to clients. See, e.g.,

FIA PTG Paper at 2-3. See also Prepared Remarks of Paul S. Atkins at the SEC Investor Advisory

Committee, by Paul Atkins (June 10, 2021), available at https://patomak.com/2021/06/10/preparedremarks-of-paul-s-atkins-at-the-sec-investor-advisory-committee-june-10-2021/.

171

Regulation NMS Adopting Release at 37538.

172

Id.; see also Order Execution Obligations Adopting Release at 48322-23.

since 2005, retail investor participation in the equity markets has significantly increased, 173 as

has investor access to market data and execution quality information. 174 Given the evolution of

the U.S. equity markets since 2005 and the widely available access to liquidity, market data, and

execution quality information, the concern the Commission had in 2005, that Rule 611 was

beneficial as a backstop to best execution because of investors’ difficulty monitoring whether

their orders receive the best available prices and the absence of robust intermarket linkages, is no

longer applicable. 175 Moreover, a broker’s duty to seek to obtain for its customer orders the most

favorable terms reasonably available under the circumstances will continue to apply regardless of

whether Rule 611 is rescinded. And a firm’s commercial and competitive incentives should

result in the firm routing orders to execute against the best price at an away market when

consistent with the duty of best execution (rather than being required to do so by Rule 611). 176

173

See, e.g., Caitlin McCabe, “New Army of Individual Investors Flexes Its Muscle,” The Wall Street Journal

(Dec. 30, 2020), available at https://www.wsj.com/articles/new-army-of-individual-investors-flexes-itsmuscle-11609329600.

174

See, e.g., Rule 605 Amendments Adopting Release at section IX.C. (discussing the availability of certain

information to, and how that information is used by, various types of market participants); Charles M.

Jones, Understanding the Market for U.S. Equity Market Data (Aug.31, 2018), available at

https://www.sec.gov/comments/4-729/4729-4545881-176154.pdf at 3-8 (discussing available equity market

data products and their uses). See also Robinhood Letter at 7 (stating that “[u]nlike any other moment in

history, retail investors today have easy access to tools and platforms, educational resources, real-time

market data and investment analytics”).

175

As further discussed in section VI.C.2. infra, retail brokers route most of their customers’ marketable

orders to off-exchange wholesalers, who usually internalize the order (i.e., execute the order in a principal

capacity). As a consequence, most marketable retail orders do not directly interact with protected quotes.

The majority of marketable retail orders are instead internalized off-exchange.

176

See First TTR Roundtable Transcript at 26-29 (Arun Manoharan, Commission, Division of Trading and

Markets, Office of Analytics and Research) (discussing analysis of trade-through rates during the second

quarter of 2025, including that trade-through rates during periods when Rule 611’s requirements did not

apply (such as for odd-lot trades and pre- and after-market trading sessions) remained relatively low, at

2.4% or less); OAR Roundtable Analysis. See also infra section VI.C.1.c. (discussing analysis of tradethroughs of odd-lot quotes inside the NBBO for high-priced stocks, showing trade-through rates of 1-5%

for trades that occur on exchange and trade-through rates of 11-19% for trades that occur off-exchange and

are larger than one share).

For the reasons discussed above, the Commission proposes to rescind Rule 611 in its

entirety.

C. Request for Comment

The Commission generally requests comment from the public on the proposed rescission

of Rule 611. More specific requests for comment are set forth below. Responses supported by

empirical data are particularly helpful.

1. Do commenters agree with the Commission’s proposed rescission of Rule 611? Why

or why not? Are there benefits to maintaining Rule 611?

2. If Rule 611 is rescinded, should any other rules (of Regulation NMS or otherwise) be

modified or rescinded in addition to what the Commission is proposing herein?

3. Rather than rescinding Rule 611, should the Commission instead modify Rule 611? If

so, please be specific and describe how Rule 611 should be modified. What

advantages or disadvantages are there to such a modification in comparison to the

proposed rescission? Please also describe how such a modification would address the

adverse consequences the Commission has identified in section II.B.2.

4. Would the rescission of Rule 611 affect investor confidence? Why or why not? If it

were to decrease investor confidence, how could that effect be mitigated?

5. Given best execution obligations and the current level of automation and

interconnectedness of the U.S. equity markets, is Rule 611 still needed? Will a

broker-dealer’s processes to fulfill its best execution obligations be affected by

rescission of Rule 611? What steps should be taken by the Commission and/or SROs

with respect to best execution if the Commission were to rescind Rule 611? Is there a

need for additional best execution guidance concerning retail order handling?

Institutional order handling? If so, what should that guidance include and should that

guidance be principles-based or more prescriptive?

6. What impact has Rule 611 had on complexity in the equity markets, including but not

limited to order types, exchange proliferation, and fragmentation? Will rescinding

Rule 611 reduce the complexity in our equity market structure that has occurred since

its adoption in 2005? Will rescinding Rule 611 reduce fragmentation of liquidity in

the equity markets? Will rescinding Rule 611 reduce costs on market participants? If

so, which costs and by how much?

7. What impacts have market technologies, including those relating to routing and

connectivity, had on Rule 611? Have market technologies advanced to such a degree

that Rule 611 is no longer needed? Why or why not?

8. Are the concerns regarding equity market structure that the Commission expressed

when it adopted Rule 611 still relevant? Is Rule 611 necessary to the current

functioning of our equity markets? Would the continued maintenance of Rule 611

inhibit innovation and the development of new technologies?

9. What is the impact of Rule 611 on the number of equity exchanges? What would be

the impact of the rescission of Rule 611 on the number of equity exchanges? Would

rescission of Rule 611 result in fewer or more equity exchanges? Why or why not?

10. What is the impact of Rule 611 on displayed liquidity? Would the rescission of Rule

611 result in more displayed liquidity, or instead more non-displayed liquidity? Why

or why not? What steps, if any, should be taken to bolster displayed liquidity if Rule

611 were to be rescinded? How would the availability of displayed liquidity and the

quality of the NBBO be impacted by the rescission of Rule 611?

11. What steps (if any) would broker dealers, exchanges, and other market participants

need to take to implement a rescission of Rule 611? Are there any implementation

concerns if the Commission were to rescind Rule 611? For example, if Rule 611 is

rescinded how long should the implementation period be? Should implementation be

done in phases or tranches (and if yes, please be specific to describe what should be

phased and when)? Should the timing for implementation be tied to the timing for

implementation rescission of Rule 610(e), if applicable? If so, in what way?

12. Are there any NMS Plan amendments that would be necessary or desirable if Rule

611 is rescinded? If so, which ones, why, and in what way?

13. Are there any amendments to SRO rules that would be necessary or desirable if Rule

611 is rescinded? If so, which ones, why, and in what way?

III.

Rule 610(e)

As discussed above, 177 the adoption of Regulation NMS included the adoption of Rule

610, often referred to as the “Access Rule.” Broadly, Rule 610 was designed to promote fair and

non-discriminatory access to quotations displayed by NMS trading centers through a private

linkage approach for all NMS stocks. 178 As originally adopted, Rule 610 primarily addressed:

(1) the means of access to quotations; (2) the fees for accessing protected quotations and any

other quotations that are the best bid or offer of a national securities exchange or national

securities association; and (3) locking and crossing quotations. 179

In conjunction with the proposed rescission of Rule 611, the Commission is also

proposing to rescind paragraph (e) of Rule 610, which sets forth restrictions on locking and

177

See supra section I.

178

NMS Adopting Release at 37497.

179

Id. at 37539.

crossing quotations. Advancements in the marketplace, including increased automation and

interconnectivity, that have occurred since the time the rule was adopted may have rendered the

rule no longer necessary. In addition, rescinding Rule 610(e) could reduce unnecessary

complexity in the U.S. equity markets stemming from the rule’s requirements. Recission of Rule

610(e) would also facilitate the benefits of the rescission of the trade-through prohibition in Rule

611. The Commission is also proposing conforming changes to Rule 610(c) to reflect the

proposed rescission of Rule 611 and the elimination of the concept of “protected quotations,” as

discussed in section IV.B. below.

A. Description of Rule 610(e)

Rule 610(e) of Regulation NMS addresses the locking and crossing of quotations. 180

Specifically, Rule 610(e) requires each national securities exchange and national securities

association to establish, maintain, and enforce written rules that: (1) require their members to

reasonably avoid displaying quotations 181 that lock or cross any protected quotation in an NMS

stock, and displaying manual quotations 182 that lock or cross any quotation in an NMS stock

disseminated pursuant to an effective NMS Plan; 183 (2) are reasonably designed to assure the

reconciliation of locked and crossed quotations in an NMS stock; 184 and (3) prohibit their

members from engaging in a pattern or practice of displaying quotations that lock or cross any

180

See supra note 32 (explaining locking and crossing quotations). The other paragraphs of Rule 610, broadly

relating to access, are described generally in section I. supra note 31 and accompanying text.

181

As with respect to Rule 611, by its terms, Rule 610(e) only applies to round lots, as a result of the definition

of “quotation.” See supra note 25.

182

Rule 600(b)(54) provides that a “manual quotation” means “any quotation other than an automated

quotation.” 17 CFR 242.600(b)(54).

183

Rule 610(e)(1); 17 CFR 242.610(e)(1). In this regard, the rule distinguishes between protected automated

quotations and manual quotations.

184

Rule 610(e)(2); 17 CFR 242.610(e)(2). For example, the Commission stated that an SRO’s rules must

require the market participant responsible for displaying the locking or crossing quotation to take

reasonable action to resolve the locked or crossed market. NMS Adopting Release at 37550.

protected quotation in an NMS stock, or from displaying manual quotations that lock or cross

any quotation in an NMS stock disseminated pursuant to an effective NMS Plan, other than

displaying quotations that lock or cross any protected or other quotation as permitted by an

exception contained in its rules established pursuant to Rule 610(e)(1). 185 The rule does not

prohibit trading centers from displaying automated quotations that lock or cross the manual

quotations of other trading centers. 186 Of note, Rule 610(e) also does not itself impose

prohibitions on the locking and crossing of markets, but rather requires SROs to establish,

maintain, and enforce rules that comply with the rule’s requirements. Throughout this discussion,

we refer to Rule 610(e)’s requirements generally as “locked and crossed market prohibitions.”

Adoption of Rule 610(e) was driven by concerns over the rise in the incidence of locked

and crossed markets at the time due to market fragmentation coupled with limitations on the

level of interconnectivity among markets. 187 In addition, the economic incentives created by

access fee and liquidity rebate strategies at the time, as well as differences in the speed or

certainty of access among market centers, were believed to be contributing to the increase in the

frequency of locked markets. 188 The Commission believed that the practice of displaying

185

Rule 610(e)(3); 17 CFR 242.610(e)(3). Rule 610(e)(3), together with the reasonable avoidance directive of

Rule 610(e)(1), was designed to recognize that locked and crossed markets may occur accidentally (such as

during updating of quoting), and that SRO rules could include “ship and post” procedures that would

require a member to first attempt to execute against a relevant displayed quotation while posting a

quotation that could lock or cross such a quotation. NMS Adopting Release at 37550.

186

NMS Adopting Release at 37503.

187

See NMS Proposing Release at 11154-56. In establishing the NMS, Congress stated that “market

fragmentation becomes of increasing concern in the absence of mechanisms designed to assure that public

investors are able to obtain the best price for securities regardless of the type or physical locations of the

market upon which his transaction may be executed.” NMS Adopting Release at 37499, n.13 and

accompanying text (citing H.R. Rep. 94–123, 94th Cong., 1st Sess. 50 (1975).

188

NMS Proposing Release at 11154-56. It was thought, for example, that market participants’ unwillingness

to pay the fee on the locked market, and preference to instead wait to receive the maker rebate, was a

contributor to locked markets. See id. at 11156-57. Additionally, some believed that electronic

communications network (“ECN”) access fees exacerbated locked markets and that certain ECNs

programmed their systems to lock the quote of other market participants automatically instead of routing to

quotations that lock or cross previously displayed quotations was inconsistent with fair and

orderly markets and detracted from market efficiency. 189 Moreover, the Commission believed

that reducing the instance of locked and crossed quotations would promote capital formation by

providing market participants a clear picture of the true trading interest in a stock. 190

B. Proposed Rescission of Rule 610(e)

The Commission proposes to rescind Rule 610(e) in its entirety. Based on its assessment

of the national market system, 191 the Commission believes that the rescission of Rule 610(e)

could benefit market participants by allowing for narrower spreads and improving price

discovery. 192 Furthermore, rescinding Rule 610(e) should reduce the prevalence of certain order

types designed to automatically avoid displaying orders that lock or cross quotations thereby

reducing market complexity, as well as burdensome compliance costs. Additionally, the concerns

the Commission sought to address in 2005 with the adoption of Rule 610(e), namely concerns

about the level of automation and interconnectivity in the marketplace at that time, as well as the

potential for investor confusion when markets become locked or crossed, are no longer prevalent

in today’s trading environment. As such, rescission of Rule 610(e) would appear to be in the

public interest and appropriate for the protection of investors and the maintenance of fair and

the other quote to force the contra-party to be a liquidity taker and thereby collect the associated access fee

rebate for themselves. See id. at 11158.

189

NMS Adopting Release at 37547. In particular, the Commission stated that “an automated quotation is

entitled to protection from locking or crossing quotations” and that “[w]hen two market participants are

willing to trade at the same quoted price, giving priority to the first-displayed automated quotation will

encourage posting of quotations and contribute to fair and orderly markets.” Id.

190

NMS Adopting Release at 37596. For example, prior to the prohibition there could be an offer to sell at a

certain price displayed on one market at the same price as an offer to buy on another market, but the orders

could not meet because the two markets were not linked. As a result, some market centers at the time would

perceive the quotes to be stale. See NMS Proposing Release at 11155.

191

See supra note 46 and accompanying text.

192

See infra section VI.C.2.a. (discussing the potential for narrower spreads for some stocks, including the

possibility of a quoted spread of zero, which may, for some stocks, be closer to economic fundamentals).

orderly markets in that removing the prohibitions on locked and crossed markets may allow for

more economically efficient executions of securities transactions, remove impediments to

competition, and improve the quality and availability of information with respect to trading

interest. 193 Rescission of Rule 610(e) would also facilitate the benefits of rescinding Rule 611,

due to the connection between the two and the concept of “protected quotations.” 194

Since the adoption of Regulation NMS, equity market structure has changed due, in part,

to the many technological advancements that have altered the speed and nature of trading. 195

Computer-assisted trading tools are common and include smart order routing systems that are

designed to deal with the large number of trading centers in the fragmented U.S. equity market

structure. These tools also include trading systems with automated functionalities that enable

orders to be submitted to the marketplace in ways that are far beyond the manual capacities of a

human trader. 196 As the Commission has previously recognized, the U.S. securities markets have

193

See supra note 2 (discussing section 11A); infra sections III.B.1., B.2. and B.3. (discussing, among other

things, the potential for more efficient price discovery and opportunities for competition if Rule 610(e) is

rescinded).

194

Some market participants expressed a similar view about the interconnectedness of the rules. See, e.g.,

MEMX Letter at 17 (stating that the prohibition on locked and crossed markets is directly tied to tradethrough protections); Nasdaq Letter I at 2-3 (stating that the prohibition against locked and crossed markets

would be impacted by rescinding Rule 611); First TTR Roundtable Transcript at 43-44 (Chris Isaacson,

Cboe Global Markets, Inc.), at 129-130 (Jonathan Kellner, MEMX), at 144 (Chris Nagy, Healthy Markets

Association). See also First TTR Roundtable Transcript at 166 (Adam Nunes, Hudson River) (stating that

Rule 611 and 610(e) are effectively the same rule “from an implementation and compliance standpoint”).

Others stated that removing the prohibitions on locked and crossed markets was necessary to get the full

benefit of rescinding the trade-through rule. See, e.g., Second TTR Roundtable Transcript, at 55-56 (Brett

Redfearn, Panorama Financial Markets Advisory) (stating, that if eliminating Rule 611, it does make sense

to eliminate the locked and crossed market provisions), at 58-59 (Oliver Sung, Cboe Global Markets)

(stating that it seems logical to remove the locked and crossed prohibition to get the full benefit of 611

removal).

195

Securities Exchange Act Release No. 99679 (Mar. 6, 2024), 89 FR 26428, 26429 (Apr. 15, 2024) (“Rule

605 Amendments Adopting Release”) (citing Securities Exchange Act Release No. 96493 (Dec. 14, 2022),

88 FR 3786 (Jan. 20, 2023) (Rule 605 Amendments Proposing Release) at 3787-88 (Jan. 20, 2023)).

196

“Equity Market Structure Literature Review Part II: High Frequency Trading Staff of the SEC Division of

Trading and Markets,” SEC, Mar. 14, 2014, available at

https://www.sec.gov/marketstructure/research/hft_lit_review_march_2014.pdf.

become almost entirely electronic and highly dependent on sophisticated trading and other

technology, including complex and interconnected routing, market data, regulatory, surveillance

and other systems. 197 At the same time, retail investor participation in the equity markets has

significantly increased, 198 as has investor access to market data and execution quality

information. 199 When the Commission proposed Rule 610(e), it recognized that, as automated

executions become more prevalent, there may be less reason to lock a displayed quote. 200 Given

the evolution of the U.S. equity markets since 2005, Rule 610(e) may be no longer necessary and

the concerns it sought to address in 2005 may be no longer relevant. For example, increases in

market fragmentation at that time, and a lack of interconnectivity, resulted in a reduction in the

interaction between orders displayed in competing market centers; and there were greater

differences in speed among market centers than exist currently (i.e., there were more markets

that relied heavily on human traders to quote and trade, and which may not have adjusted their

quotations as quickly as automated markets). 201 These kinds of inefficiencies are no longer

prevalent. 202 While the equity markets continue to be highly fragmented, with the greater

197

Securities Exchange Act Release No. 73639 (Nov. 19, 2024), 79 FR 72252 (Dec. 5, 2014) (“Regulation SCI

Adopting Release”) at 72254. See also supra notes 146 and 150 and accompanying text (discussing

technological developments since the adoption of Regulation NMS).

198

See, e.g., Caitlin McCabe, “New Army of Individual Investors Flexes Its Muscle,” The Wall Street Journal

(Dec. 30, 2020), available at https://www.wsj.com/articles/new-army-of-individual-investors-flexes-itsmuscle-11609329600.

199

See, e.g., Rule 605 Amendments Adopting Release at section IX.C. (discussing the availability of certain

information to, and how that information is used by, various types of market participants); Charles M.

Jones, Understanding the Market for U.S. Equity Market Data (Aug. 31, 2018), available at

https://www.sec.gov/comments/4-729/4729-4545881-176154.pdf at 3-8 (discussing available equity market

data products and their uses). See also Robinhood Letter at 7 (stating that “[u]nlike any other moment in

history, retail investors today have easy access to tools and platforms, educational resources, real-time

market data and investment analytics”).

200

NMS Proposing Release at 11159.

201

See, e.g., id. at 11159.

202

See, e.g., infra section VI.B.4.b. (discussing, among other things, the speed at which market participants are

able to react in today’s equity markets).

automation and interconnectivity in today’s equity market structure, and increased access to

market data and execution quality information, market participants now have the tools necessary

to better navigate them.

In addition, the potential for investor confusion that could result from removing the

locked and crossed market prohibitions would be limited and, to the extent that it does occur

initially, would diminish over time as market participants adjust their behavior in response to the

new trading environment. 203 Today’s investors have significantly greater access to market data,

execution quality information, and trading technologies, 204 giving them the tools and market

information necessary to navigate the equity markets even when they are locked. Also, any

confusion from crossed markets should be mitigated by today’s routing technology, speed of

execution, and the resulting rate at which crossed markets are resolved. 205

Additionally, eliminating restrictions on trading through protected quotations and

displaying orders that lock or cross quotations would provide broker-dealers greater freedom

when determining how to handle their customers’ orders, including where to route those orders

to achieve best execution. 206 Among other things, if the Commission were to rescind the locked

203

See infra note 241 and accompanying text; section VI.C.2.b. (discussing investor confusion as a potential

cost associated with rescission of Rule 610(e)). Some commenters also stated that rescission of the crossed

markets prohibition could lead to investor confusion. See, e.g., Second TTR Roundtable Transcript at 64-65

(Dmitry Bulkin, Bernstein) (stating that retail brokers may need to take some time to educate their clients),

at 65 (Mehmet Kinak, T. Rowe Price) (stating that self-directed or retail investors may not be confused by a

locked market, but that crossed markets could lead to some investor confusion). Other commenters did not

think that rescission would lead to investor confusion. See, e.g., First TTR Roundtable Transcript at 145147 (Adam Nunes, Hudson River).

204

See supra note 199 and accompanying text.

205

See, e.g., Phil Mackintosh and Eugenio Piazza, Locked, Crossed and Barrel (Dec. 11, 2025) (analyzing the

significance of locked and crossed markets to investors), available at

https://www.nasdaq.com/articles/locked-crossed-and-barrel; Second TTR Roundtable at 57 (Mehmet

Kinak, T. Rowe Price), at 59 (Oliver Sung, Cboe Global Markets) (stating that in a crossed market arbitrage

opportunities would clear out crosses quickly).

206

See supra section II.B.3.b.

and crossed market prohibitions, and to the extent permitted by SRO rules, 207 market participants

would have more flexibility to post their trading interest on trading centers that have a

consistently higher volume of order flow, more reliable speed of execution, or lower adverse

selection costs, if they are not constrained by requirements to first route to execute against any

locking contra-side interest. In turn, trading centers would have more flexibility to compete for

order flow.

Rescission of Rule 610(e) could also lead to improved price discovery and tighter spreads

and foster competition among trading venues, which could benefit investors. Specifically,

allowing locked markets could strengthen public price formation to the extent that locked

markets are a natural consequence of competitive quoting, and that disallowing locked markets

(as is the case currently) may arbitrarily widen spreads. 208 Locked markets may be indicative of

fair and efficient markets, and allowing them could lead to more advantageous pricing and cost

savings for some investors. 209 Additionally, a quotation that would qualify as a locking quotation

for purposes of the prohibition may in fact not be a locking quotation if one were to consider the

207

Under Rule 610(e), the Commission requires exchanges to have rules that prohibit locked and crossed

markets. As a result, if the Commission rescinds Rule 610(e), the exchanges would still have those rules

and would need to decide whether to eliminate them. See also infra note 224

208

See, e.g., Cboe Letter I at 4-5. (stating that locked markets are a natural consequence of competitive

quoting, provide optimal pricing for investors, and contribute to fair markets and that allowing locked

markets would narrow or, in some cases, eliminate spreads to the benefit of investors); Second TTR

Roundtable Transcript at 56-57 (Mehmet Kinak, T. Rowe Price) (stating that trading at the market is true

price discovery and has benefits: there is no spread, no adverse selection, no information leakage).

209

See infra section VI.C.2.a. (discussing the potential benefits of rescinding Rule 610(e), including the

potential for more advantageous pricing and a reduction in transaction costs for some stocks). See also

Cboe Letter II at 6. This commenter stated that that locked markets occur naturally when quoting is

competitive, are indicative of fair and efficient markets, and allowing them would lead to optimal pricing

and cost savings to investors. This commenter also stated that the artificially wide spreads resulting from

the prohibition on locked markets creates an opportunity for off-exchange venues to execute orders at better

prices between such spreads that would not otherwise exist. Id.

price with fees. 210 In this regard, the prohibition on display of locked quotations may be

preventing the display of trading interest that would not be considered locking interest based on

the net price (e.g., if the exchange fees associated with taking the locking offer would cause the

order’s effective price to be higher than its displayed price).

Moreover, allowing locked markets could foster competition between exchanges and

other trading centers. 211 A significant portion of trading in NMS stocks has migrated off

exchange in recent years. 212 The structure of the OTC market that permits the execution of orders

more readily in finer increments has been a factor that contributes to this result. 213 Allowing

locked markets means that the NBBO spread may, in some cases, be tightened to zero.

Competition may drive OTC market makers to provide even better prices in the event of locked

markets than they otherwise would currently. Allowing locked markets could also remove an

impediment to competition in that market participants would have fewer restrictions on their

210

See NMS Proposing Release at 11159 (stating, at the time Rule 610(e) was proposed, that in addition to

accidental locks, which are often resolved quickly, quotes also may lock because one or both quotes have

an access fee attached, which increases the net price of trading with that quote, and creates an undisclosed

spread). Some market participants make a similar observation. See, e.g., Second TTR Roundtable

Transcript at 56-57 (Oliver Sung, Cboe Global Markets). See also FIA PTG Paper at 6 (stating that “[w]hile

we are likely to see more locked markets in the absence of a prohibition, these prices represent the true

state of supply and demand, accounting for the cost of access and other potential market frictions.”).

211

See infra sections VI.D.2.c. (discussing that rescission of Rule 610(e) may improve liquidity on exchanges

for some stocks) and VI.D.2.e. (discussing that improved efficiency and liquidity on exchanges could, in

turn, allow exchanges to better compete with off-exchange market makers for order flow).

212

See supra notes 39-41 and accompanying text.

213

See 2024 Regulation NMS Amendments at 81643. See also Securities Exchange Act Release No. 96494

(Dec. 14, 2022), 87 FR 80266 (Dec. 29, 2022) (proposing release for the 2024 Regulation NMS

Amendments) at 80273-74 (describing how the combination of the requirements of Rule 612 and

differences in the underlying regulatory framework for exchanges, ATSs, and OTC market makers gives

OTC market makers the ability to more readily trade in finer increments than exchanges and ATSs). In the

2024 Regulation NMS Amendments, the Commission stated that under Rule 612 as amended, the OTC

Markets would continue to be able to trade more readily in comparatively smaller increments than

exchanges and ATSs. As stated by one commenter, “the current prohibition on locked markets artificially

widens spreads, creating an opportunity for off-exchange venues to execute orders at better prices between

an artificially wide spread that would otherwise not exist.” Cboe Letter II at 6.

selection of trading centers that best meet their trading objectives and trading centers could better

compete for order flow based more fully on the merits of their system.

In fact, when the Commission originally proposed Rule 610(e), the Commission

requested comment on the extent of the concerns arising from locked markets in particular,

recognizing that some market participants stated that locked quotes convey useful price

information, and that the ability to lock quotes enables markets to efficiently communicate their

trading interest. 214 In addition, the Commission stated that the problem of apparent locked

markets resulting from quotes with access fees attached may be reduced by the adoption of other

access provisions of Regulation NMS. 215 For example, the Commission stated that if quoting

market centers and quoting market participants have fair access to each other’s quotations, and

access fees are limited to de minimis levels, the economic incentives that currently encourage

locked markets may diminish. 216 The Commission also recognized that as automated executions

become more prevalent, there may be less reason to lock a displayed quote, 217 and specifically

requested comment on the necessity of adopting restrictions on locked markets in the light of its

proposed provisions governing intermarket access and access fees. 218 As discussed, the equity

markets have become more automated and interconnected, diminishing the need for Rule 610(e).

Locked markets may occur naturally when quoting is competitive, and may represent

greater price transparency, fairer competition, and more efficient markets that provide optimal

214

See NMS Proposing Release at 11159.

215

Id.

216

Id.

217

Id.

218

Id.

pricing for investors. 219 Currently, even with the requirements of Rule 610(e), the NBBO may

appear locked or crossed for part of each trading day; however, such occurrences are rare. 220 If

locked markets were allowed, the Commission believes that spreads could narrow to zero for

some securities, which could result in cost savings to investors. 221

Rescinding Rule 610(e) could reduce both unnecessary complexity in the marketplace

and compliance costs. Notably, Rule 610(e) does not itself prohibit locked and crossed markets.

Rather, the rule requires SROs to establish, maintain, and enforce rules for their members that

require the avoidance of such behavior and the reconciliation of locked and crossed quotations,

and all 20 of the exchanges approved to trade NMS stocks and FINRA have adopted such

rules. 222 These rules generally require members to avoid entering orders that would create a

locked or crossed market and, in some cases, mandate specific handling procedures for such

orders, as discussed further below. 223

219

See infra section VI.C.2.a. (discussing that locked markets can be a natural consequence of competitive

quoting and that in certain circumstances the potential reduction in transaction costs from allowing locked

markets could be significant).

220

See infra section VI.B.3. See also Mackintosh and Piazza, supra note 205 (reporting that while the NBBO

may appear locked or crossed for part of each trading day, such occurrences are rare and more commonly

involve the appearance of a locked market, and providing data that shows the appearance of locked and

crossed markets happens much more frequently in lower-priced, tick-constrained stocks, and that locks and

crosses resolve quickly). Id. This data includes an analysis of S&P 500 stocks and shows that on average,

each stock is locked for around 2.5 seconds each day, and that markets are crossed far less – with an

average of just 4.2 milliseconds each day. According to this market participant, the current rules mostly

make the NBBO unlock “much faster than a human can blink” and they have evidence that market makers

and arbitrageurs act very quickly to uncross markets. Their data also shows that latency in both time to

report and dissemination of SIP data appearing to be major contributing factors. Id.

221

See infra section VI.C.2.a. See also supra note 209 and accompanying text.

222

See supra note 207.

223

See, e.g., NYSE Rule 7.37 (requiring, with certain exceptions, the exchange and its members to reasonably

avoid displaying, and prohibiting the exchange and its members from engaging in a pattern or practice of

displaying, any quotations that lock or cross the protected best bid or protected best offer); Nasdaq Rules

4702 and 4703 (providing order types and order attributes designed to prevent the locking or crossing of

protected quotations, as well as orders on the Nasdaq book); FINRA Rule 6240 (requiring FINRA

The Commission believes that the requirements of Rule 610(e) have contributed to the

proliferation of order types and attributes that cause the orders to be repriced, displayed at a price

that does not represent the market participants’ true trading interest, or that otherwise prohibit the

acceptance of such orders, and which introduce complexity in the equity markets. 224 Some of

these order types and attributes include re-pricing features that automatically adjust the order’s

displayed price to avoid locking or crossing quotations, such as “price-to-comply” and other repricing order types, and provide market participants with the ability to execute only on that

market, and in some instances only against later arriving interest in order to ensure that the

market participant entering such order will be the provider of liquidity. 225 These repricing

members, with certain exceptions, to reasonably avoid displaying, and not engage in a pattern or practice of

displaying, any quotations that lock or cross a protected quotation, and any manual quotations that lock or

cross a quotation previously disseminated pursuant to an effective NMS Plan); Cboe BYX Rule 11.20(b)

(the BYX system shall not make available for dissemination, and BYX users shall reasonably avoid

displaying, and shall not engage in a pattern or practice of displaying, any quotations that lock or cross a

protected quotation, and any manual quotations that lock or cross a quotation previously disseminated

pursuant to an effective national market system plan).

224

Some market participants expressed a similar view. See, e.g., FIA PTG Paper at 4, 6 (citing the prohibition

on locked and crossed markets as a factor in the proliferation of complex order types, such as price-tocomply orders); First TTR Roundtable at 166-69 (Adam Nunes, Hudson River Trading; Matt Mackenzie,

Optiver) (discussing that a lot of the order types designed for compliance are related to the lock-cross

prohibitions), at 168-69 (Matt Mackenzie, Optiver) (stating that their firm uses approximately 50 complex

order types and that the firm has to develop strategies to use such orders); Second TTR Roundtable at 59-60

(Oliver Sung, Cboe Global Markets) (stating that currently it is necessary to have order types to hide and

price slide orders that would otherwise lock the market and discussing, as an exchange operator, the

number of order types and mechanisms created to, for example, prevent locking the market), at 60 (Kevin

Tyrrell, New York Stock Exchange) (stating that it, an exchange operator, would be able to get rid of a lot

of the order types that lead to investor confusion if Rule 610(e) were eliminated). See also infra sections

VI.B.3. (discussing the development of specialized order types to comply with the prohibition on locked

and crossed markets) and VI.C.2.a. (discussing potential benefits that could flow from elimination of such

order types).

225

See, e.g., Cboe BYX Rule 11.9(g)(1) Display-Price Sliding (allowing an order that, at the time of entry,

would create a violation of Rule 610 by locking or crossing a protected quotation of an external market, to

be ranked at the locking price in the BYX book and displayed at one minimum price variation below the

current NBB (for bids) or to one minimum price variation above the current NBO (for offers)); Nasdaq

Texas Rules 4702 (b)(1)(A), (2)(B), and (4)(A) (describing the characteristics of the exchange’s Price to

Comply Order, Price to Display Order, and Post-Only Order types, respectively, and their design for

compliance with Rule 610’s locked and crossed market prohibitions). See also Rosenblatt Order Type

Report at 10-36 (discussing various pricing mechanisms, including those that re-price to prevent locking or

crossing the market and to keep interest on an exchange’s order book). This report also states that the

behavior of order types like the Post Only order type creates actionable information that “isn’t inherently

features may mask a market participant’s true trading interests by, among other things, resulting

in the display of the market participant’s order at a price lower (for a buy order) or higher (for a

sell order) than the price at which the market participant is willing to trade, primarily to avoid

locking or crossing the market. For these reasons, the Commission believes that rescission of

Rule 610(e) could allow more unconstrained competition among trading centers and among

orders, could provide greater price transparency, and would provide more freedom to market

participants to make trading and order handling decisions based on the unique characteristics of

their order flow. 226

Importantly, rescission of Rule 610(e) would not create a requirement that SROs rescind

their rules designed to comply with Rule 610(e)’s current prohibitions. Rather, market forces and

consistency with the Exchange Act would dictate which rules and practices, if any, SROs and, as

applicable, other trading centers, would seek to rescind or modify. 227 The Commission

anticipates, however, that most, if not all, SROs would seek to amend rules originally designed

for compliance with Rule 610(e). Recognizing that some of these rules are reliant upon defined

terms that the Commission is proposing to rescind from Regulation NMS (e.g., “protected

nefarious, but [that] a sophisticated trader can use to make a meal out of an investor who doesn’t have the

time, money or inclination to achieve an equal level of sophistication”). Id.

226

As discussed above in the context of the proposed rescission of Rule 611, market participants should be

more free to compete on merit, and not based on their ability to maneuver around regulatory strictures. See

supra section II.B.1. See also infra section VI.B.4.f. (discussing potential impact on market participants’

routing strategies and interference costs resulting from Rule 610(e)) and section VI.C.2.a (discussing how

reduced complexity could reduce costs to broker-dealers associated with their order routing logic).

227

SROs would be required to file any proposed changes to their rules with the Commission pursuant to 15

U.S.C. 78s(b) (section 19(b) of the Exchange Act) and the rules and regulations thereunder, and such

changes would be subject to public notice and comment, and, if applicable, Commission approval. NMS

Stock ATSs would be required to comply with the requirements of 17 CFR 242.304 (Rule 304 of

Regulation ATS) for any changes to their practices and amend their publicly available disclosures on Form

ATS-N, as applicable.

quotation”), 228 however, the Commission is requesting comment on whether such defined terms

should be retained or modified, even if Rules 611 and 610(e) are rescinded, as proposed. 229

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