SEC Proposes Rescinding Reg NMS Trade-Through and Locked-Market Rules

The Securities and Exchange Commission voted on June 11 to propose rescinding Rules 611 and 610(e) of Regulation NMS, which would remove the current trade-through rule for protected quotations and the ban on displaying locked or crossed protected quotations. The proposal would also remove related defined terms in Rule 600 and make conforming changes elsewhere in Regulation NMS.

Rule 611 has shaped U.S. equity routing for two decades by requiring trading centers to avoid executing at prices inferior to protected quotations displayed on other venues. Rule 610(e), in turn, bars trading centers from displaying a protected quote that locks or crosses another protected quote. In announcing the proposal, the SEC said the changes are intended to reflect how markets have evolved since Regulation NMS was adopted in 2005.

For traders, the proposal is not a small technical rewrite. It goes to the heart of how smart order routers, exchange books, wholesalers and other venues interact when liquidity is fragmented across the market. If finalized, it could alter execution logic, quoting behavior and the economics around routing to the displayed NBBO.

Why it matters

Active stock and options traders should read this as an early signal that U.S. equity market-structure rules may be entering another major rewrite cycle. Any eventual rollback of trade-through protection could change where orders rest, how price improvement is measured and how brokers justify execution quality.

What to watch next

Watch the public-comment process, the final text around conforming amendments and any broker or exchange comment letters focused on routing, access fees and displayed-liquidity incentives.