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

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

7 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-remarks-roundtable-trade-through-prohibitions (“Chairman Remarks at First TTR Roundtable”).

8 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).

9 Id. at 37497.

10 Id. at 37496.

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

11 Id. at 37498-501.

12 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)

Rule 611, the Commission emphasized that intermarket price protection was designed to promote national market system objectives by promoting the use of 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

16 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).

17 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.

18 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

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.

23 See supra note 16.

24 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”).

25 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”).

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

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)

rs 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

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

31 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.

32 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.

33 NMS Adopting Release at 37584.

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

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

33 NMS Adopting Release at 37584.

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”) 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.

34 See supra notes 5-7 and accompanying text.

35 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).

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)

refers to an OTC market maker that seeks to attract orders from broker-dealers that service the accounts of retail investors.

40 For example, from February 2005 to February 2014, the total percentage of volume executed by non-displayed 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/.

41 See, e.g., Summary Metrics by Exchange, available at https://www.sec.gov/data-research/sec-markets-data/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

markets-data/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-darkest-middle-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

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

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

43 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.

44 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-012826-statement-tokenized-securities

on 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 current form, 50 many commenters criticized Rule 611 51 and its effect on equity market structure. 52

46 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 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”).

47 The first Roundtable on Trade-Through Prohibitions (“First TTR Roundtable”) was held at the Commission's Washington DC headquarters on September 18, 2025

arket 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”).

47 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-trade-through-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-611-regulation-nms (“Second TTR Roundtable Transcript”). A broad overview from the roundtables is summarized below.

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

49 The term “commenters” throughout this document refers to both the panelists at the TTR Roundtables and those who submitted written comments.

50 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

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.

51 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).

52 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.

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

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

53 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).

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

55 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

, 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

56 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.

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

58 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).

59 See, e.g., letter from Christopher Nagy, Research Director, Healthy Markets Association (Sept. 16, 2025) (“Healthy Markets Letter I”) at 8.

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

Based on these critiques, some commenters recommended rescinding Rule 611 in its entirety. 61 Other commenters offered alternatives to rescission of Rule 611, including modifications to Rule 611 62 or modifications to other aspects of Regulation NMS instead

rom 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.

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

66 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 34-35 (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)).

67 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).

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.

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

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/.

75 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 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

ain 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_LLC-as-of-01.13.26.pdf (referencing “protected best bid and offer”).

76 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).

II. Rule 611

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

ber 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).

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 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

77 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.

78 NMS Adopting Release at 37498.

79 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).

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

s 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).

80 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”).

A. Description of Rule 611

1. Intermarket Price Protection

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 trade-throughs on that trading center of “protected quotations,” 82 unless one of the exceptions to the 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

81 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)

a protected offer. 85

81 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.

82 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 a national securities exchange, or the best bid or best offer of a national securities association.” 17 CFR 242.600(b)(81).

83 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)

otection 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).

84 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).

85 17 CFR 242.600(b)(105) (definition of “trade-through”).

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 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

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.

86 See supra note 82.

87 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-or-cancel 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).

88 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 quotati

or 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).

89 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).

90 See https://www.finra.org/filing-reporting/alternative-display-facililty-adf (stating “[c]urrently, there are no active quoting ADF participants.”).

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 non-displayed trading center that never displays quotations

s under Rule 611(b)

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 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

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.

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

97 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.”).

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 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

le 611 106 and has taken into consideration the comments and input received. Based on its assessment, rescinding Rule 611 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.

106 See infra section VI.

107 See infra section II.B.3.a.

108 See infra section II.B.3.b.

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

inded, 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 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

109 See infra section VI.C.1.

110 See Order Execution Obligations Adopting Release at 48323-24.

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

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).

1. Allowing Market Forces To Shape Equity Market Structure

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

sing section 11A).

1. Allowing Market Forces To Shape Equity Market Structure

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 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

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)

thout 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-roundtable-supporting-data.pdf.

122 See Jane Street Letter at 2. See also infra section VI.

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 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 sophisticated market participants, such as high-tech algorithmic traders with expansive data and processing capacities who are more capable of managing increased complexity. 129

123 See Robinhood Letter at 4 (citing “Complaints Rise Over Complex U.S. Stock Orders,” by Herbert Lash, Reuters (Oct. 19, 2012))

eover, this complexity and the costs associated therewith may provide an advantage to more sophisticated market participants, such as high-tech algorithmic traders with expansive data and processing capacities who are more capable of managing increased complexity. 129

123 See Robinhood Letter at 4 (citing “Complaints Rise Over Complex U.S. Stock Orders,” by Herbert Lash, Reuters (Oct. 19, 2012)).

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

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”).

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.

b. Exchange Proliferation and Fragmentation

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

er 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.

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 Grou

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”).

This proliferation of exchanges has increased fragmentation of trading on equity exchanges, spreading market share across the increasing number of exchanges, resulting in a 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

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

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.

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 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

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

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 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)

ns, 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).

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 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

quid 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.

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).

143 See infra section VI.C.1.

3. Rule 611 Is Unnecessary

a

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 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.

144 See NMS Adopting Release at 37499 (quoting H.R. Rep. 94-123, 94th Cong., 1st Sess. 50 (1975)).

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

ability of execution quality benchmarks and data, 152 which will continue even if Rule 611 were to be rescinded.

144 See NMS Adopting Release at 37499 (quoting H.R. Rep. 94-123, 94th Cong., 1st Sess. 50 (1975)).

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).

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).

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

gulation NMS, 17 CFR 242.605 (requiring certain reporting entities to publicly disclose order execution quality statistics).

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 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

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)

ant 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

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 broker-dealers' 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 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

161 See, e.g., Newton v

ll 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.”).

168 See Order Execution and Routing Practice Release at 75418.

169 See supra note 73.

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

170 See id.; FINRA Rule 5310

ent 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

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

177 See supra section I.

178 NMS Adopting Release at 37497.

179 Id. at 37539

ed 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 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.”

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)

ound 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.

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.

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 quotations that lock or cross previously displayed quotations was inconsistent with fair and orderly markets and detracted from market efficiency

bate 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 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

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 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

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 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.

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

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 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

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).

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

Sophistication

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 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

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 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.

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.

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-its-muscle-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

mitigated by today's routing technology, speed of execution, and the resulting rate at which crossed markets are resolved. 205

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 145-147 (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).

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

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.

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.”).

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

ed, 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.

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).

214 See NMS Proposing Release at 11159.

215 Id.

216 Id.

217 Id.

218 Id.

Locked markets may occur naturally when quoting is competitive, and may represent greater price transparency, fairer competition, and more efficient markets that provide optimal pricing for investors

onds 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.

3. Reduction in Complexity and Compliance Costs

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

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 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

ld 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 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

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 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).

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 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

227 SROs would be required to file any proposed changes to their rules with the Commission pursuant to 15 U.S.C

pon defined terms that the Commission is proposing to rescind from Regulation NMS ( e.g., “protected 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

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.

228 See, e.g., Nasdaq Rulebook, Equity 2, section 5(e)(2)(A) (defining “protected quotation” as having the meaning set forth in Rule 600(b) of Regulation NMS); Cboe BYX Rulebook, Chapter 1, Rule 1.5(t) (defining “protected bid,” “protected offer,” and “protected quotation” to mirror the definitions in Rule 600(b)(81) of Regulation NMS); see also infra note 258.

229 See infra section IV.C.

Additionally, the Commission believes that rescission of Rule 610(e) should eliminate certain compliance costs associated with monitoring and preventing locked and crossed markets. 230 Depending on whether SROs modify their own rules to eliminate prohibitions on locked and crossed markets, market participants may also be able to reduce their costs associated with maintaining routing logic designed to avoid locking and crossing. Consistent with section 11A of the Exchange Act, removing unnecessary complexity and compliance costs could help to remove impediments to competition and foster efficiency. The level of any reduction in complexity or compliance costs would, however, be impacted by whether and how SROs determine to modify their own rules.

230 See sections VI.B. and VI.C.2.a

designed to avoid locking and crossing. Consistent with section 11A of the Exchange Act, removing unnecessary complexity and compliance costs could help to remove impediments to competition and foster efficiency. The level of any reduction in complexity or compliance costs would, however, be impacted by whether and how SROs determine to modify their own rules.

230 See sections VI.B. and VI.C.2.a. (discussing, respectively, the costs of, and potential benefits of rescinding, Rule 610(e), including the potential to reduce operating costs to exchanges related to compliance). See also FIA PTG Paper at 6 (stating that rescinding Rule 610(e) would eliminate elaborate systems designed to capture quote snapshots and satisfying intermarket sweep orders solely to demonstrate that a quote was not locked, crossed or traded through ); First TTR Roundtable Transcript at 171-173 (Adam Nunes, Hudson River Trading) (discussing systems necessary to demonstrate compliance).

4. Crossed Markets

The Commission recognizes that elimination of the crossed markets prohibition could raise concerns over intentional crossing and market distortion in the absence of access fee caps 231 or net pricing, concerns that more illiquid symbols could remain crossed for significant periods of time, and concerns regarding the calculation of execution quality and price improvement in a crossed market. 232 However, arbitrage opportunities associated with crossed markets would likely cause them to be cleared quickly by market participants. 233 Additionally, the Commission believes access fee caps are significant in helping to maintain the economic incentive for such arbitrage opportunities. 234

231 Rule 610(c) provides an access fee cap that applies to protected quotations for NMS stocks and also applies to any other quotation of a trading center that is the best bid or offer of a national securities exchange or national securities association. Rule 610(c); 17 CFR 242.610(c)

ess fee caps are significant in helping to maintain the economic incentive for such arbitrage opportunities. 234

231 Rule 610(c) provides an access fee cap that applies to protected quotations for NMS stocks and also applies to any other quotation of a trading center that is the best bid or offer of a national securities exchange or national securities association. Rule 610(c); 17 CFR 242.610(c). As discussed above, the rule 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 supra note 76 (citing 2024 Regulation NMS Amendments at 81643-44). Specifically, Rule 610(c) was designed to address the potential distortions caused by substantial, disparate fees, and was not intended to reduce access fees; rather, the fee limitation was designed to preclude individual trading centers from raising their fees substantially in an attempt to take improper advantage of strengthened protection against trade-throughs and the adoption of a private linkage regime. In particular, a purpose of the fee limitation was to address “outlier” trading centers that otherwise might charge high fees and pass most of the fees through as rebates to attract liquidity providers. It also was designed to preclude a trading center from charging high fees selectively to competitors. NMS Adopting Release at 37544-45; see also supra notes 31 and 76 (discussing amendments to Rule 610(c) adopted by the Commission in 2024, as well as the status of such amendments)

nity for the liquidity taker, in that a liquidity taker could buy (sell) at the lower offer (higher bid) and sell (buy) at the higher bid (lower offer), locking in a risk-free profit. Without such caps, fees and rebates could become so large as to negate the arbitrage opportunity, which would disincentivize market participants from clearing a crossed market. 238

235 NMS Adopting Release at 37547. The Commission has also stated that “[w]hen the NBBO is crossed for a significant period of time, it raises serious questions regarding whether the quotes continue to provide a reliable benchmark for the statistical measures included in Rule 605.” Securities Exchange Act Release No. 105136 (Apr. 1, 2026), 91 FR 17313, at 17317 (Apr. 6, 2026) (Order Granting Limited Exemption Pursuant to Rule 605(b) of Regulation NMS Under the Securities Exchange Act of 1934 from Rule 605 and Modifying and Rescinding Certain Exemptions Granted Pursuant to Rule 605 of Regulation NMS) (“2026 Rule 605(b) Exemption”). The Commission has also outlined procedures for reporting entities to follow during locked and crossed markets, including when orders should be excluded entirely in the event of a persistent crossed market. See 2026 Rule 605(b) Exemption at 17317. See also Frequently Asked Questions: Rule 605 of Regulation NMS (Apr. 1, 2026) available at https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/frequently-asked-questions-rule-605-regulation-nms (“Rule 605 FAQs”). The new Rule 605 FAQs will become effective on August 1, 2026, and the responses therein will supersede and replace the previous staff guidance regarding then Rule 11Ac1-5 and Rule 605. See id

ion of access fees in the context of crossed markets).

The Commission believes that the access fee caps should serve to mitigate the risk that fees and rebates could become so large as to negate the arbitrage opportunity, and that the potential overall reductions in costs and complexity in the marketplace from rescinding Rule 610(e) would mitigate any negative impacts of allowing crossed markets. Specifically, the access fee caps should create an opportunity for arbitrage in a crossed market. Given the minimum pricing increments for NMS stocks 239 and the caps on the level of access fees, 240 there would be potential net profit from rapidly resolving the cross ( i.e., the fees could never exceed the difference between the crossed bid and ask prices); and the Commission believes that the speed of trading technology in today's equity markets and the economic incentives for arbitrage when a market is crossed will help to ensure that crossed markets will continue to be infrequent and quickly resolved.

239 See Rule 612 (establishing the minimum pricing increment for NMS stocks); supra note 31.

240 See Rule 610(c) (providing limitations on the fees to access certain quotations); supra note 31. See also infra section IV.B.2. (discussing proposed conforming amendments to Rule 610(c)).

The Commission also believes that to the extent crossed markets do occur and resolve quickly due to market forces, the potential for investor confusion is minimal and would be mitigated by the changes in technology, access to market data and investor sophistication discussed above in section III.B.1., and that the potential for investor confusion among less sophisticated investors would likely diminish over time as market participants adjust to the new trading environment and adapt their behaviors accordingly. 241 Additionally, SROs would have the flexibility to determine whether to retain their own rules originally designed to comply with the requirements of Rule 610(e) relating to the avoidance of crossed markets

l for investor confusion among less sophisticated investors would likely diminish over time as market participants adjust to the new trading environment and adapt their behaviors accordingly. 241 Additionally, SROs would have the flexibility to determine whether to retain their own rules originally designed to comply with the requirements of Rule 610(e) relating to the avoidance of crossed markets.

241 See infra section VI.C.2.b. (discussing investor confusion as a potential cost associated with rescission of Rule 610(e)).

C. Request for Comment

The Commission generally requests comment from the public on the proposed rescission of Rule 610(e), including its relation to the proposed rescission of Rule 611. More specific requests for comment are set forth below. Responses supported by empirical data are particularly helpful.

14. Is Rule 610(e) necessary in today's equity markets? Are any of the concerns the Commission identified when adopting Rule 610(e) still relevant? Should the Commission maintain any of the requirements of Rule 610(e) rather than rescind the entire rule? For example, should prohibitions on the display of crossed markets be maintained? Why or why not? Are there different concerns for liquid and illiquid securities that the Commission should

consider? Should SROs continue to be required to have rules designed to assure the reconciliation of locked or crossed quotations in an NMS stock? Why or why not?

15. Would the availability of liquidity and the quality of the NBBO be impacted by the rescission of Rule 610(e)? If so, how, and how might any such impact be mitigated?

16

iquid and illiquid securities that the Commission should

consider? Should SROs continue to be required to have rules designed to assure the reconciliation of locked or crossed quotations in an NMS stock? Why or why not?

15. Would the availability of liquidity and the quality of the NBBO be impacted by the rescission of Rule 610(e)? If so, how, and how might any such impact be mitigated?

16. Would the rescission of Rule 610(e) lead to investor confusion regarding the status of displayed quotations or whether displayed quotations accurately represent available trading interest? Why or why not? Would the possibility of crossed markets result in the potential for investor confusion? Why or why not, and if yes, how could the potential for such confusion be mitigated? Do investors have access to the tools and market information necessary to understand and navigate equity markets when they are locked or crossed? Why or why not?

17. If Rule 610(e) is rescinded, would there be an increase in frequency or duration of locked or crossed markets? Would locked or crossed markets, when they do occur, resolve quickly? Why or why not? Are there particular concerns associated with crossed markets for symbols that have certain characteristics, such as more illiquid symbols? Why or why not, and if yes, how could such concerns be mitigated?

18. How would the rescission of Rule 610(e) impact execution quality metrics? For example, do commenters have particular concerns regarding the potential impact on their average execution performance statistics, or concerns regarding how to calculate certain metrics for purposes of Rule 605 Reports that are not addressed by Commission staff responses to Frequently Asked Questions or related exemption? 242 If so, what are the concerns and why? How could these concerns be addressed?

242 See infra note 235.

19

22. If trading centers were to eliminate order types and modifiers that are currently designed to facilitate compliance with Rule 610(e), would other complexities emerge? If so, what kinds of complexities and why? How would they impact market structure and investors?

23. Would rescission of Rule 610(e) reduce costs for market participants? If so, what costs would be reduced and by how much?

24. Would rescission of Rule 610(e), when taken together with the rescission of Rule 611, result in more displayed liquidity, or instead more non-displayed liquidity? Why or why not?

25. Because SROs would not be required to rescind rules relating to locked and crossed market prohibitions, would SROs continue to provide existing orders and modifiers, as well as other rules to prevent the locking and crossing of quotations internally or more broadly? Why or why not? Are there certain related rules that SROs would retain? If so, which ones and why?

26. Are there any implementation concerns if the Commission were to rescind Rule 610(e)? For example, if Rule 610(e) is rescinded how far out from the date of rescission should the implementation date 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 611, if applicable? If so, in what way?

27. Are there any NMS Plan amendments that would be needed if Rule 610(e) is rescinded? If so, which ones, why, and in what way?

28. Would rescission of Rule 610(e)'s prohibitions result in improved price transparency and/or tighter spreads? Why or why not? Would market participants' ability to pursue their unique trading interests and strategies be improved? Why or why not? If so, how? Would rescission of Rule 610(e)'s prohibitions permit greater competition among orders and/or trading venues? Why or why not? If so, how?

IV. Conforming Amendments to Regulation NMS Definitions and Related Rules

A

omated quotation,” “manual quotation,” and “intermarket sweep order,” are used in exchange and FINRA rules that were adopted pursuant to the requirements of Rules 611 and 610(e). 258 The Commission believes that, if Rules 611 and 610(e) are rescinded, most, if not all, SROs would seek to amend their rules originally designed for compliance with Rules 611 and 610(e), including related defined terms. However, the Commission is requesting comment on whether there is a reason that such defined terms should be retained or modified, even if Rules 611 and 610(e) are rescinded, as proposed. 259

258 See, e.g., NYSE Rule 1.1(v) (defining “protected bid,” “protected offer”, and protected quotation”); NYSE Rule 7.37(a) (Order Execution and Routing); NYSE Rule 7.31(e)(3) (Orders and Modifiers); Nasdaq Rule Equity 1, section 1(a)(12) (defining “protected bid”, “protected offer”, “protected quotation”, and “intermarket sweep order”); Nasdaq Rule Equity 2, section 5(e) (Locked and Crossed Markets). These terms are also used in certain FINRA Rules. See, e.g., FINRA Rules 6282 (Transactions Reported by Members to ADF); 6380A (Transaction Reporting). See also supra note 228.

259 See infra section IV.C.

2. Proposed Conforming Amendments to Other Rules in Regulation NMS

In conjunction with the proposed rescission of Rules 611 and 610(e) and related defined terms in Rule 600(b), the Commission proposes to amend certain other rules in Regulation NMS that reference the defined terms being proposed to be rescinded. First, Rule 610(c) of Regulation NMS, which sets forth a cap on the highest permitted level of fees a trading center may charge for access to the best quotations of a trading center, currently provides that such access fee cap is applicable to the execution of orders against a “protected quotation” and against any other quotation of a trading center that is the best bid or offer of a national securities exchange or national securities association

orth a cap on the highest permitted level of fees a trading center may charge for access to the best quotations of a trading center, currently provides that such access fee cap is applicable to the execution of orders against a “protected quotation” and against any other quotation of a trading center that is the best bid or offer of a national securities exchange or national securities association. 260 The Commission proposes to amend Rule 610(c) to eliminate the reference to “protected quotation.” As a result, Rule 610(c), as proposed to be amended, would apply to fees for the execution of an order against any quotation of the trading center that is the best bid or best offer of an exchange or association in an NMS stock.

260 See supra note 76 and accompanying text for a description of Rule 610(c).

Next, Regulation NMS includes provisions relating to the collection and dissemination of consolidated market data. 261 The definition of “consolidated market data” 262 includes, among other things, “core data” 263 and “regulatory data.” 264 The term “core data” is defined to include, among other things, “protected bids and protected offers,” 265 and the term “regulatory data” is defined to include, among other things, “regulatory messages including. . .trade-through exempt indicators.” 266 The Commission proposes to amend the definition of “core data” in Rule 600(b)(26) to eliminate the reference to “protected bid and protected offer” and to amend the definition of “regulatory data” in Rule 600(b)(89) to eliminate the reference to “trade-through exempt indicators.”

261 See Rule 603(b); 17 CFR 242.603(b). See also Rule 614; 17 CFR 242.614.

262 See Rule 600(b)(24); 17 CFR 242.600(b)(24).

263 See Rule 600(b)(26); 17 CFR 242.600(b)(26).

264 See Rule 600(b)(89); 17 CFR 242.600(b)(89).

265 See Rule 600(b)(26)(i)(E); 17 CFR 242.600(b)(26)(i)(E).

266 See Rule 600(b)(89)(ii)(B); 17 CFR 242.600(b)(89)(ii)(B)

ction with the proposed rescission of Rules 611 and 610(e) and related definitions in Rule 600(b), the Commission proposes to amend certain Commission rules outside of Regulation NMS that reference the Regulation NMS rules and related definitions being proposed to be rescinded.

First, Rule 15c3-5 under the Exchange Act sets forth risk management controls for brokers or dealers with market access. 272 The rule sets forth an exception from most of its requirements where a broker-dealer “routes orders on behalf of an exchange or [ATS] for the purpose of accessing other trading centers with protected quotations in compliance with Rule 611 of Regulation NMS for NMS stocks, or in compliance with a national market system plan for listed options.” 273 The Commission proposes to amend this rule to remove the language excepting a broker-dealer routing orders for the purpose of accessing other trading centers with protected quotations in compliance with Rule 611 from the requirements of the rule. As a result, the exception set forth in Rule 15c3-5(b) would apply only to broker-dealers routing orders on behalf of an exchange or ATS for the purpose of accessing other trading centers in compliance with an NMS Plan for listed options ( i.e. , the Options Order Protection and Locked/Crossed Markets Plan). 274

272 17 CFR 240.15c3-5. Specifically, the rule requires brokers or dealers with access to trading securities directly on an exchange or ATS, including those providing sponsored or direct market access to customers or other persons, and broker-dealer operators of an ATS that provide access to trading securities directly on their ATS to a person other than a broker or dealer, to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity. See Rule 15c3-5(b) under the Exchange Act.

273 See id. See also Securities Exchange Act Release No. 63241 (Nov. 3, 2010), 75 FR 69792, 69800 (Nov

heir ATS to a person other than a broker or dealer, to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity. See Rule 15c3-5(b) under the Exchange Act.

273 See id. See also Securities Exchange Act Release No. 63241 (Nov. 3, 2010), 75 FR 69792, 69800 (Nov. 15, 2010) (File No. S7-03-10) (Final Rule adopting Risk Management Controls for Brokers or Dealers with Market Access).

274 The Options Order Protection and Locked/Crossed Markets Plan is a Commission-approved NMS Plan that contains trade-through provisions for listed options. See Securities Exchange Act Release No. 60405 (July 30, 2009), 74 FR 39362 (Aug. 6, 2009) (Order Approving the National Market System Plan Relating to Options Order Protection and Locked/Crossed Markets Submitted by the Chicago Board Options Exchange, Incorporated, International Securities Exchange, LLC, The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Inc., NYSE Amex LLC, and NYSE Arca, Inc.) (“Options Order Protection and Locked/Crossed Markets Plan”). See also supra note 83.

Next, Rule 15b9-1 under the Exchange Act sets forth a limited exemption for certain exchange members from the requirements of section 15(b)(8) of the Exchange Act 275 to become a member of a registered national securities association. 276 The rule provides an exemption from the requirements of section 15(b)(8) for Commission-registered broker-dealers that effect off-member-exchange securities transactions where the broker or dealer does not carry customer accounts, is a member of at least one exchange, and effects off-member-exchange securities transactions that: (1) result solely from orders that are routed by an exchange of which the broker or dealer is a member in order to comply with Rule 611 of Regulation NMS or the Options Order Protection and Locked/Crossed Market Plan; 277 or (2) are solely for the purpose of executing the stock leg of a stock

C. Request for Comment

The Commission generally requests comment from the public on the proposed rescission of certain defined terms in Rule 600(b) and the proposed modification of other Commission rules in connection with the proposed rescission of Rules 611 and 610(e). More specific requests for comment are set forth below. Responses supported by empirical data are particularly helpful.

29. Are the proposed rescissions of the defined terms in Rule 600(b) appropriate? Why or why not? Are there other defined terms set forth in Rule 600(b) that should be rescinded or modified? Are there any terms the Commission proposes to rescind that should be retained or modified? If so, why? For example, should the Commission retain or modify defined terms that are currently used in SRO rules?

30. Are the proposed amendments to other provisions of Regulation NMS to remove references to the rescinded defined terms appropriate? Why or why not? Are there any other amendments to Regulation NMS that are necessary or appropriate if the proposed rescissions of the defined terms in Rule 600(b) are adopted?

31. Are the proposed amendments described above to Commission rules outside of Regulation NMS that reference Rule 611, Rule 610(e), and related definitions appropriate? Why or why not? Are there any other Commission rules outside of Regulation NMS that the Commission should modify if Rule 611, Rule 610(e), and related defined terms are rescinded?

32. If the proposed amendments to Regulation NMS are adopted, should the Commission allow the SROs to determine whether any NMS Plans should be changed to reflect such amendments? Alternatively, should the Commission itself change any NMS Plans pursuant to Rule 608 of Regulation NMS to reflect the proposed amendments to Regulation NMS, should they be adopted? Why or why not?

V. Paperwork Reduction Act

A. Rescission of Rule 611

Rule 611 currently contains one collection of information

SROs to determine whether any NMS Plans should be changed to reflect such amendments? Alternatively, should the Commission itself change any NMS Plans pursuant to Rule 608 of Regulation NMS to reflect the proposed amendments to Regulation NMS, should they be adopted? Why or why not?

V. Paperwork Reduction Act

A. Rescission of Rule 611

Rule 611 currently contains one collection of information. The title for this existing collection of information is Order Protection Rule—Rule 611 of Regulation NMS. OMB approved this collection of information and assigned it OMB Control No. 3235-0600. Specifically, Rule 611 requires a trading center 279 to establish, maintain, and enforce written policies and procedures reasonably designed to prevent trade-throughs on that trading center of protected quotations in NMS stocks, unless a valid exception applies, and, if relying on such an exception, that are reasonably designed to assure compliance with the terms of the exception. The nature and extent of the policies and procedures that a trading center is required to establish to comply with this requirement depends upon the type, size, and nature of the trading center. The purpose of the collection of information has been to help ensure that “trading centers” and their customers, subscribers, members, and employees, as applicable, generally avoid trade-throughs, unless a valid exception is applicable.

279 See supra note 81.

Rescission of Rule 611 would eliminate this collection of information and, therefore, would eliminate the associated compliance burdens for trading centers.

If the rescission of Rule 611 is approved, upon publication of the final rule in the Federal Register , the Commission will submit a request to OMB to discontinue OMB Control Number 3235-0600. 280

280 The Commission estimates that there are currently 305 trading centers subject to Rule 611

ion of information and, therefore, would eliminate the associated compliance burdens for trading centers.

If the rescission of Rule 611 is approved, upon publication of the final rule in the Federal Register , the Commission will submit a request to OMB to discontinue OMB Control Number 3235-0600. 280

280 The Commission estimates that there are currently 305 trading centers subject to Rule 611. This estimate includes 20 exchanges (17 exchanges that trade NMS stocks + three exchanges that are approved but not yet operating) and 33 ATSs that trade NMS stocks. Based on data from CAT for January 2026, the estimate also includes 96 exchange market makers and 225 broker-dealers acting as OTC market maker or executing orders internally by trading as principal or crossing orders as agent. 69 broker-dealers are both exchange market makers and an OTC market maker or broker-dealer internalizing orders. 20 + 33 + 96 + 225 − 69 = 305 trading centers.

B. Request for Comment

33. The Commission believes that this proposal would not impose any new collection of information requirement as defined by the Paperwork Reduction Act of 1995, as amended (“PRA”). The Commission requests comment on (a) whether the proposed rescission of Rules 611 and 610(e), and the related amendments to Regulation NMS definitions and related rules, would create any new, or revise any existing, collection of information pursuant to the PRA and (b) to evaluate the accuracy of the Commission's assessment that the proposed rescission of Rule 611 would eliminate the collection of information and its associated compliance burdens for respondents.

Persons submitting comments on the collection of information requirements should direct them to the OMB Desk Officer for the Securities and Exchange Commission, MBX.OMB.OIRA.SEC_desk_officer@omb.eop.gov, and should also send a copy of their comments to Secretary, Securities and Exchange Commission, using any of the methods in the ADDRESSES section, with reference to File Number S7-2026-20

tations on order handling and execution choices, exchange proliferation, and fragmentation of liquidity on equity exchanges. Furthermore, the Commission expects that in today's markets the negative impact on investor execution quality from removing these rules would be minimal. 282 For these reasons, which are discussed further below, 283 the Commission is proposing to rescind Rules 611 and 610(e).

282 See infra section VI.C.1.b, discussing these minimal impacts.

283 See infra sections VI.B.2., VI.B.3., and VI.B.4., discussing current costs of these rules, and section VI.C.1.b., discussing the impact of rescinding Rule 611 on execution quality.

B. Economic Baseline

The baseline against which the costs, benefits, and the effects on efficiency, competition, and capital formation of the proposed amendments are measured consists of the current state of the market; the current practices of national securities exchanges, other trading centers, and registered broker-dealers; and the current regulatory framework. 284

284 See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111-14 (D.C. Cir. 2022). This baseline approach also follows Commission staff guidance on economic analysis for rulemaking. See SEC, Current Guidance on Economic Analysis in SEC Rulemaking 6 (Mar. 16, 2012), available at https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf (“The economic consequences of proposed rules (potential costs and benefits including effects on efficiency, competition, and capital formation) should be measured against a baseline, which is the best assessment of how the world would look in the absence of the proposed action.”); id. at 7 (“The baseline includes both the economic attributes of the relevant market and the existing regulatory structure.”).

1. Regulatory Baseline

a

d rules (potential costs and benefits including effects on efficiency, competition, and capital formation) should be measured against a baseline, which is the best assessment of how the world would look in the absence of the proposed action.”); id. at 7 (“The baseline includes both the economic attributes of the relevant market and the existing regulatory structure.”).

1. Regulatory Baseline

a. Trading Center and Broker-Dealer Practices for Complying With Rule 611

In the years since the adoption of Rule 611, market participants have developed various practices to comply with its requirements, including practices for determining the best bid and offer on a given exchange, methods for ensuring execution systems comply with Rule 611's prohibitions, and practices for surveillance in accordance with Rule 611(a)(2). 285

285 The requirements of Rule 611 of Regulation NMS, which generally prohibit trading centers from executing orders that trade-through protected quotations, are described above ( see supra section II.A.). In addition to these restrictions on execution, Rule 611(a)(2) requires a trading center to regularly surveil to ascertain the effectiveness of the policies and procedures to prevent trade-throughs and take prompt action to remedy any deficiencies.

Exchanges have promulgated their own rules to comply with Rule 611, and put in place compliance processes. 286 Each exchange has a methodology for determining its best bid and offer in each NMS stock that takes into account the availability of odd-lot quotes on their exchanges. 287 Specifically, each exchange aggregates all displayed odd-lot quotes, starting with the best priced odd-lot, across multiple prices, until their combined size is equal to or greater than a round lot. Then the exchange disseminates the least aggressive price ( i.e., lowest priced bid and highest priced offer) of the aggregated odd-lot quotes, with their aggregated size (rounded down to the nearest round lot) to the SIPs

change aggregates all displayed odd-lot quotes, starting with the best priced odd-lot, across multiple prices, until their combined size is equal to or greater than a round lot. Then the exchange disseminates the least aggressive price ( i.e., lowest priced bid and highest priced offer) of the aggregated odd-lot quotes, with their aggregated size (rounded down to the nearest round lot) to the SIPs. The SIPs use this information to determine the National Best Bid (“NBB”) and National Best Offer (“NBO”) for each NMS stock by selecting the highest priced bid and lowest priced offer from among the best bid and offer quotes across all exchanges. 288 The SIPs then disseminate information on the NBB and NBO and each exchange's best bid and offer, including whether the best bid and offer qualify as a protected quote under Rule 611.

286 See, e.g., Nasdaq Rule 4702(a) (“All Order Types and Order Attributes operate in a manner that is reasonably designed to comply with the requirements of Rules 610 and 611 under Regulation NMS”), Nasdaq Rule 4758(a)(1) (“All routing of orders shall comply with Rule 611 of Regulation NMS under the Exchange Act”), available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Equity%204.

287 Because only round-lot-sized quotes have the potential to be protected, Rule 611 does not cover odd-lot-sized quotes on the automated trading center that might nevertheless be displayed at better prices ( i.e., a higher bid price or lower ask price) than the best bid and offer.

288 If multiple exchanges have the same best bid or offer price, then the SIPs select the exchange with the largest size at that price as the NBB or NBO. If multiple exchanges also tie for the largest size, then the SIPs select the quote they received from these exchanges first as the NBB or NBO. See Rule 600(b)(60)

rs may also use this real-time monitoring process to detect problems with their matching engine or market data feeds.

296 See infra section VI.B.1.c.

297 These trading centers may compare their trades to market data quotes up to one second before the trade occurred in order to check if a trade-through occurred. See supra section II.A.2., discussing the “one second window” exception to Rule 611.

Smaller trading centers or smaller broker-dealers routing orders may be more likely to use a third-party service to surveil for their compliance with Commission rules, including Rule 611, and related FINRA rules, including Rule 5310. These firms usually send their order and trade records to a third-party that specializes in compliance monitoring or transaction cost analysis (“TCA”) and may offer the examination of trade-through compliance as part of a package of services. The third party then matches the trade and order records with historical market data and examines for compliance with and violations of trading rules, including trade-throughs.

The smallest trading centers and broker-dealers routing orders may manually monitor for compliance with Rule 611 for a small sample of their orders. The Commission understands that these firms do not usually compare their order and trade records to historical market data. Instead, these firms tend to take manual snapshots of what the market looks like for a few of their orders and then review these snapshots for compliance with Rule 611 and other trading rules.

b. Trading Center and Broker-Dealer Practices for Complying With Rule 610(e)

FINRA 298 and the exchanges 299 have promulgated rules for complying with Rule 610(e)

of Regulation NMS, which generally prohibit market centers from posting a displayed round-lot order that would lock or cross a protected quote, are described above ( see supra section III.A.). The SRO rules which implement these prohibitions include exceptions pursuant to current staff guidance. ( see https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm#sec5 at section 5: SRO Lock/Cross Rules. ) The ISO exception permits market participants to “ship-and-post” via ISO orders. They can post an order on one side of the market that would lock or cross the market, so long as they execute the quotes on the other side of the market that they are locking/crossing via an intermarket sweep order. For example, if a trader wants to post a bid at $10.00, but there are offers at $9.99 and $10.00, normally the trader would be prohibited from posting the bid at $10.00 because it would cross the $9.99 offer quote and lock the $10.00 offer quote. However, using this exception, the trader could post the bid at $10.00 while using an ISO order to execute against the offers at $9.99 and $10.00, which effectively unlocks/uncrosses the market. The self-help exception applies to 610(e) in the same manner as the self-help exception of Rule 611.

The Commission understands that, in practice, exchanges will display odd-lot and round- lot orders that lock or cross a resting odd-lot quote on another exchange, but will not display an odd-lot order that locks or crosses a resting round-lot quote on another exchange, even though such display would not violate the requirements of Rule 610(e), because Rule 610(e) only applies to the display of quotations of round-lot size. 301 Exchanges and national securities associations are allowed to display odd-lot-sized orders that lock or cross another odd-lot or round-lot-sized quotation. In effect, the practice of not displaying an odd-lot quote that locks or crosses a round-lot quote reflects an industry convention to preserve the prominence of resting round-lot quotations

ok/nasdaq/rules/Nasdaq%20Equity%204; NYSE ARCA Rule 7.31-E (Orders and Modifiers) https://nysearcaguide.srorules.com/rules/b44a1e347ccd1000af3290b11c2ac4f10258.

Rule 605 requires trading centers and broker-dealers to classify orders and compute statistics based on the NBB and NBO. However, a crossed NBB and NBO may interfere with order classifications and with the computing of certain statistics. When the NBBO is crossed for a significant period of time, it raises serious questions whether the quotes continue to provide a reliable benchmark for the statistical measures included in the Rule. Therefore, the Commission has exempted all orders from being included in Rule 605 reports if they reference a NBBO that has been crossed for 30 seconds or more. 309 For NBBOs that are crossed for less than 30 seconds, staff guidance recommends that the next-in-time uncrossed NBBO be used in place of the crossed NBBO for computing Rule 605 reports. 310

309 See Letter from Annette L. Nazareth, Director, Division, SEC, to Stuart J. Kaswell, Senior Vice President and General Counsel, Securities Industry Association, dated March 12, 2001 (“SIA Exemption Letter”); see also 2026 Rule 605(b) Exemption, supra note 235.

310 See Sec. & Exch. Comm'n, Div. of Mkt. Regul., Staff Legal Bull. No. 12R (Revised), Frequently Asked Questions About Rule 11Ac1-5, Q. 7 (2001), available at: https://www.sec.gov/rules-regulations/staff-guidance/staff-legal-bulletins/slb-12r. The guidance document's reference to the “Consolidated BBO” applies to the NBBO. This guidance will be superseded on August 1, 2026. See Rule 605 FAQs, supra note 235.

c. Best Execution

Broker-dealers are subject to a duty of best execution, which requires them to execute customers' trades at the most favorable terms reasonably available under the circumstances. The best execution obligation is independent from the requirements under Rule 611

ated BBO” applies to the NBBO. This guidance will be superseded on August 1, 2026. See Rule 605 FAQs, supra note 235.

c. Best Execution

Broker-dealers are subject to a duty of best execution, which requires them to execute customers' trades at the most favorable terms reasonably available under the circumstances. The best execution obligation is independent from the requirements under Rule 611. 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. 311 The duty of best execution requires a broker-dealer to execute customers' (either retail or institutional investors) trades at the best reasonably available price, considering a non-exhaustive list of factors that may be relevant to broker-dealers' best execution analysis. 312 These factors may include execution price, the size of the order, speed of execution, the trading characteristics of the security involved, the availability of 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 operational costs and difficulty associated with achieving an execution in a particular market center. 313 The importance of each factor may differ depending on whether the order is retail or institutional and also due to market conditions and order characteristics.

311 See Order Execution Obligations Adopting release at 48322. The Commission has not adopted its own rule governing a broker-dealer's legal duty of best execution.

312 See Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 F.3d 266, 270 (3d Cir. 1998); see also Kurz v. Fidelity Mgmt. & Rsch. Co., 556 F.3d 639, 640 (7th Cir. 2009).

313 See Order Execution and Routing Practice Release at 75418; NMS Adopting Release at 37538 & n. 341

the security ( e.g., price, volatility, relative liquidity, and pressure on available communications); (ii) the size and type of transaction; (iii) the number of markets checked; (iv) accessibility of the quotation; and (v) the terms and conditions of the order which result in the transaction, as communicated to the member and persons associated with the member. 316

314 See FINRA Rule 5310(a)(1).

315 See FINRA Rule 5310(e). FINRA Rule 5310 also addresses two situations where a member's best execution obligation is modified or no longer applicable: (i) if a broker-dealer “receives an unsolicited instruction from a customer to route that customer's order to a particular market for execution, the member is not required to make a best execution determination beyond the customer's specific instruction” and (ii) “when another broker-dealer is simply executing a customer order against the member's quote.” FINRA Rules 5310.08, 5310.04.

316 See FINRA Rule 5310(a)(1).

FINRA's best execution rule and guidance addresses issues associated with payment for order flow. Some retail brokers maintain arrangements involving payment for order flow from wholesalers. Wholesalers internalize a significant portion of retail orders purchased via payment for order flow. FINRA's best execution guidance states that firms that provide payment for order flow for the opportunity to internalize customer orders cannot allow such payments to interfere with their best execution obligations. 317 For example, inducements such as payment for order flow and internalization may not be taken into account in analyzing market quality or determining where to route a customer order. 318

317 See FINRA Regul. Notice No. 21-23, Best Execution & Payment for Order Flow 4 (2023), https://www.finra.org/rules-guidance/notices/21-23.

318 Id. FINRA's guidance stated that “the possibility of obtaining price improvement is a heightened consideration when a broker-dealer receives payment for order flow.” Id. at 3-4

in odd-lot information; 331 (2) information about certain orders that are outside of an exchange's best bid and best offer ( i.e., certain depth of book data); 332 and (3) information about orders that are participating in opening, closing, and other auctions. 333

330 The exclusive SIPs currently disseminate information on the best odd-lot order to buy and the best odd-lot order to sell (“BOLO”). The best odd-lot order to buy means the highest priced odd-lot order to buy that is priced higher than the national best bid, and the best odd-lot order to sell means the lowest priced odd-lot order to sell that is priced lower than the national best offer. The 2024 Regulation NMS Amendments adopted a requirement for the exclusive SIPs to disseminate information on the BOLO starting in May 2026. See 2024 Regulation NMS Amendments at 81676-81. The exclusive SIPs began disseminating BOLO information on April 27, 2026. See UTP Vendor Alert #2026—5: UTP Data Service (UQDF) Updated Specs Related to Dissemination of Odd-Lot data, NasdaqTrader (Feb. 2, 2026), https://www.nasdaqtrader.com/TraderNews.aspx?id=UTP2026-05. The 2024 Regulation NMS Amendments also adopted a requirement for the exclusive SIPs to disseminate odd-lot information as defined under the MDI Rules starting in May 2026. See 2024 Regulation NMS Amendments at 81674-76, 81681. However, on Jan. 15, 2026, the Commission granted an exemptive relief request delaying the requirement for the exclusive SIPs to begin disseminating odd-lot information until May 2028. See Securities Exchange Act Release No. 104612 (Jan. 15, 2026), 91 FR 12577 (Jan. 21, 2026).

331 See 17 CFR 242.600(b)(69); Market Data Infrastructure Adopting Release at 18613.

332 See Market Data Infrastructure Adopting Release at 18602.

333 See id. at 18630.

The MDI Rules also introduce a decentralized consolidation model under which competing consolidators, rather than the existing exclusive SIPs, will collect, consolidate, and disseminate certain NMS information

n. 21, 2026).

331 See 17 CFR 242.600(b)(69); Market Data Infrastructure Adopting Release at 18613.

332 See Market Data Infrastructure Adopting Release at 18602.

333 See id. at 18630.

The MDI Rules also introduce a decentralized consolidation model under which competing consolidators, rather than the existing exclusive SIPs, will collect, consolidate, and disseminate certain NMS information. 334 These competing consolidators are not required to offer a product containing all elements of consolidated market data, but are able to develop the consolidated market data products that their subscribers demand. 335 This model is intended to promote competition in how consolidated market data products are created and delivered.

334 See id. at 18637.

335 See id. at 18603-4, 18671-72.

The MDI Rules also introduced a four-tiered definition of round lot that is tied to a stock's average closing price during the Evaluation Period. 336 For stocks

with prices greater than $250, a round lot is defined as consisting of between 1 and 40 shares, depending on the specific price tier. 337 The MDI round-lot rules were implemented on November 3, 2025. 338 The compliance date for the SIPs to collect, consolidate, and disseminate the odd-lot information required by the MDI Rules is May 1, 2028. 339

336 Round lots will be updated every six months, with the round lot determined by the stock's average price with a one-month lag— i.e., a stock's round lot is updated in May of every year using its

average stock price in March, and the round lot is updated again in November using its average stock price in September. See 2024 Regulation NMS Amendments at 81699-700; 17 CFR 242.600(b)(93)(iv).

337 See Market Data Infrastructure Adopting Release at 18602

at some provisions of the MDI Rules have not yet been implemented, they have not affected market practice and therefore data that would be required for a quantitative analysis of a baseline that includes the effects of the MDI Rules are not available. It is possible that the baseline (and therefore the economic effects relative to the baseline) could be different once the MDI Rules are implemented. The following discussion reflects the Commission's assessment of the anticipated economic effects of the unimplemented MDI Rules described in the Market Data Infrastructure Adopting Release as they relate to the baseline for the adoption of these amendments. 346

346 See Market Data Infrastructure Adopting Release at 18741-18799.

The MDI Rules may result in a higher number of odd-lot trades, as the inclusion of odd-lot quotes that may be priced better than the current NBBO in consolidated market data may attract more trading interest from market participants that did not have access to this information prior to the MDI Rules. 347 However, the magnitude of this effect depends on the extent to which market participants who rely solely on SIP data and lack information on odd-lot quotes choose to receive the odd-lot information and trade based on it. The Commission states in the Market Data Infrastructure Adopting Release that it believes it is not possible to observe this willingness to trade with existing market data. 348

347 See id. at 18754.

348 See id.

The MDI Rules may have implications for broker-dealers' order routing practices. For those market participants that rely solely on SIP data for their routing decisions and that choose to receive the expanded set of consolidated market data, the Commission anticipated that the additional information contained in consolidated market data would allow them to make more informed order routing decisions. 349 This in turn would help facilitate best execution, which would increase execution quality

et participants that rely solely on SIP data for their routing decisions and that choose to receive the expanded set of consolidated market data, the Commission anticipated that the additional information contained in consolidated market data would allow them to make more informed order routing decisions. 349 This in turn would help facilitate best execution, which would increase execution quality. 350 Broker-dealers may choose to receive market data from competing consolidators, who may offer different consolidated market data products at different prices or at different latencies, or with different amounts of data content. 351 Competing consolidators will be required to disclose information about their consolidated market data products, including the services they will offer, the prices for such services, and performance metrics, which will assist broker-dealers in selecting an appropriate competing consolidator. 352

349 The Commission states in the Market Data Infrastructure Adopting Release that it believes that competition among consolidators will support high quality consolidated market data ( see id. at 18661). Furthermore, while competing consolidators are not required to offer a product containing all elements of consolidated market data, the Commission states that it believes that one or more competing consolidators will be incentivized to offer a consolidated market product containing all data elements ( see id. at 18752).

350 See id. at 18725.

351 See id. at 18606.

352 See id.

The option to receive consolidated market data from a competing consolidator, or produce consolidated market data as a self-aggregator, 353 is expected to form a reasonable alternative to the use of exchange proprietary data feeds, with potentially lower costs. 354 When this happens, the Commission believes that exchanges may respond by lowering their fees for connectivity and proprietary data feeds

re implementation of the above-described MDI Rules may affect certain baseline figures, the description of the baseline below notes those effects.

ii. Amendments to Rule 605

The Commission amended Rule 605 on March 6, 2024, and the requirements of that rule are part of the baseline considered here. 358 With certain exceptions, the amendments to Rule 605 have a compliance date of August 1, 2026. 359 The following discussion reflects the Commission's assessment of the anticipated economic effects of the amendments to Rule 605 described in the Rule 605 Amendments, as they relate to the baseline for these proposed amendments. Specific interactions between the expected economic effects of the amendments to Rule 605 and those of rules proposed herein will be discussed in detail in a later section. 360

358 See Rule 605 Amendments A

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