SEC Moves to Scrap Trade-Through Rule in Sweeping Regulation NMS Overhaul (NDAQ, ICE, CBOE, VIRT)

The Securities and Exchange Commission on June 11 proposed amendments to Regulation NMS that would rescind Rule 611, the 'order protection rule' (OPR) that has governed U.S. equity trading since 2005, along with Rule 610(e)'s restrictions on locking and crossing quotations. Rule 611 currently bars trading venues from executing orders at prices inferior to the best displayed quote available elsewhere — the 'trade-through' prohibition. Its stated purpose was to stitch together fragmented markets and protect displayed limit orders, reinforcing best execution for retail investors. Chairman Paul Atkins, who dissented from the rule's original 2005 adoption, framed the proposal as overdue. 'After two decades of Rule 611, it is high time that the Commission review its unintended consequences that have hindered — rather than enhanced — the long-term growth of our markets,' he said, adding that the change would 'simplify market structure and reduce costs for market participants while allowing competition, innovation, and other market forces to shape the continuing evolution of our equity markets.' Critics of the existing rule argue it forced venue proliferation, fragmented liquidity, and saddled brokers with high connectivity costs by requiring connections to every exchange — even those holding only one or two percent market share. Robinhood backed rescission, saying 'there should be competition driving the marketplace and not regulatory restrictions.' The proposal has produced unusual alliances. A joint letter from NYSE (owned by Intercontinental Exchange), Citadel Securities and Charles Schwab urged the SEC to withdraw it entirely, as did a separate letter from Cboe, State Street Global Advisors, T. Rowe Price, UBS and Virtu Financial. Supporters of the status quo, including the Healthy Markets Association, warn that OPR is a critical backstop for best execution. 'For decades, the Order Protection Rule has stitched our many stock trading venues together, driving competition, efficiency, and investor protection,' said CEO Tyler Gellasch. For exchange operators — Nasdaq, ICE and Cboe — the stakes are significant. The trade-through rule effectively guarantees that displayed quotes on lit exchanges must be honored, supporting the value of exchange data and connectivity products. Rescission could shift volume and pricing power toward off-exchange wholesalers and broker internalization, pressuring exchange market-data and access-fee revenue, though the long-run effects remain hotly contested. The vote launches a public comment period; no final rule takes effect until the Commission reviews feedback and votes again. Given the depth of industry opposition and the technical complexity of best-execution standards in a post-611 world, the proposal faces a prolonged and litigation-prone path. For now, the action signals the Atkins-led SEC's deregulatory tilt toward letting 'market forces' reshape equity structure — a philosophical reversal from the prior administration's incremental tightening of Reg NMS.