SEC Proposes Repeal of Two Core Stock Market Rules, Comment Period Ends August 17
The U.S. Securities and Exchange Commission is considering repealing Rule 611 and Rule 610(e) in Regulation NMS. This is not a routine cleanup of tex…
On August 17, the U.S. Securities and Exchange Commission (SEC) will close a rulemaking comment period that could rewrite the underlying logic of U.S. stock trading. What market participants face is not a fee change at a single exchange, but whether two market-structure rules that have been in place for more than twenty years will continue to exist.(sec.gov)
What happened
On June 11, the SEC proposed rescinding Rule 611 and Rule 610(e) in Regulation NMS, while also deleting from Rule 600 the definitions related to the two rules and revising other cross-references. Rule 611 is commonly known as the “trade-through rule” or “order protection rule”; it requires trading venues, when executing orders, not to ignore a better protected quote already displayed on another venue. Rule 610(e) restricts locked and crossed markets, meaning the state in which the same bid and ask appear across different venues, or the bid is higher than the ask.(sec.gov)
The SEC’s stated direction is to simplify market structure, reduce participant costs, and let competition, innovation, and market forces play a larger role in determining how trading occurs. The regulator did not immediately change the trading rules, but instead put the matter through the public comment process, with a deadline of August 17, 2026.(sec.gov)
Why it matters
Rule 611 may look like only an order-routing rule, but in practice it connects an entire infrastructure: how exchanges publish and protect quotes, how broker-dealers use smart order routing, how market makers assess execution quality, and how market data systems stitch together quotes from different venues. If the rule is ultimately rescinded, market participants may need to redefine how a “better quote” is identified, when orders may be rerouted to other venues, and how the best execution obligation is implemented in a new trading environment.
SEC Commissioner Mark Uyeda supports the proposal, but also noted that rescinding Rule 611 would shake long-standing assumptions in the market and raise questions about best execution, transparency, trading mechanisms, and investor confidence. Commissioner Hester Peirce, meanwhile, argued that technological progress may already have reduced the original necessity of these rules, and that the current regime may instead encourage venue proliferation and more complex order types.(sec.gov)
For trading infrastructure companies, the most immediate impact may not be a price change on the day the rule takes effect, but whether systems will need to be rebuilt again. The industry had already been preparing adjustments to fees, minimum pricing increments, and trading workflows related to Rule 610 and Rule 612; if rescinding Rule 611 brings associated changes, exchanges, broker-dealers, market data vendors, and order management systems may face two rounds of build and compliance costs. Industry comments have already warned that the components of Regulation NMS are interconnected.(sec.gov)
What to watch next
First, whether the SEC ultimately retains some form of cross-market price protection, rather than simply switching from mandatory protection to a fully broker-dealer-driven best execution regime. Second, how exchanges, broker-dealers, market makers, institutional investors, and retail investors divide the benefits and risks during the comment period. Third, whether the SEC will simultaneously address adjacent regimes such as Rule 610, Rule 612, market data, and execution quality disclosure.
At present, this is still a proposal and does not mean the rules have already changed. What is truly worth watching is whether the SEC can relax constraints on trading venues while still providing sufficiently clear standards for price transparency and execution-quality measurement. If the answer is not clear, market-structure reform may first bring system migrations, and then bring new regulatory disputes.
Sources
Information only. Not investment, legal, tax, or financial advice.