SEC Proposes to Rescind the Trade-Through Rule: What Market Participants Should Know

On June 11, 2026, the U.S. Securities and Exchange Commission (the “SEC”) proposed amendments to Regulation NMS that would rescind Rule 611, commonly known as the “trade-through rule” or “Order Protection Rule,” and Rule 610(e), which restricts locked and crossed markets.

If adopted, the proposal would represent one of the most significant changes to U.S. equity market structure since Regulation NMS was adopted in 2005. The proposal would not eliminate broker-dealers’ best execution obligations, but it could change how market participants evaluate order routing, execution quality, connectivity, and trading venue competition.

This blog summarizes the key aspects of the proposal and its potential implications for exchanges, broker-dealers, alternative trading systems, wholesalers, institutional investors, and other market participants.

Background: What Is the Trade-Through Rule?

Regulation NMS was adopted in 2005 to modernize the national market system for equity securities. One of its central provisions is Rule 611, the trade-through rule.

In general, Rule 611 requires trading centers to maintain policies and procedures reasonably designed to prevent “trade-throughs.” A trade-through occurs when an order is executed at a price inferior to a protected quotation displayed by another trading center.

For example, if one exchange displays a protected offer to sell a stock at $10.00, another trading center generally may not execute a buy order at $10.01 without first attempting to access the better-priced protected quote, unless an exception applies.

Rule 611 was intended to protect displayed quotations, encourage market participants to post limit orders, and promote price priority across trading venues. However, the rule has been debated since its adoption. Critics have argued that the rule increased market complexity, encouraged routing based on protected quotations rather than overall execution quality, and contributed to fragmentation across trading venues.

Rule 610(e), which the SEC also proposes to rescind, requires exchanges and national securities associations to adopt rules reasonably designed to prevent their members from displaying quotations that lock or cross protected quotations. A locked market occurs when the best bid equals the best offer. A crossed market occurs when the best bid is higher than the best offer.

What the SEC Is Proposing

The SEC’s proposal would make several related changes to Regulation NMS.

First, the proposal would rescind Rule 611 in its entirety. This means trading centers would no longer be subject to the current federal rule requiring policies and procedures designed to prevent executions at prices inferior to protected quotations displayed by other venues.

Second, the proposal would rescind Rule 610(e), removing the federal requirement that exchanges and national securities associations maintain rules restricting locked and crossed quotations.

Third, the proposal would rescind related definitions in Rule 600 of Regulation NMS, including definitions tied to protected quotations and trade-through concepts, and would make conforming changes to related SEC rules.

The proposal would apply to national market system stocks. It would not, by itself, remove best execution obligations that apply to broker-dealers. Broker-dealers would still need to evaluate whether customer orders are handled and executed in a manner consistent with applicable best execution standards.

Why the SEC Is Reconsidering the Rule

The SEC’s proposal is based on the view that U.S. equity markets have changed significantly since 2005.

Today’s markets are highly automated, interconnected, and technologically sophisticated. Market participants have access to faster routing tools, more advanced execution systems, and more complex market data than when Regulation NMS was adopted.

The SEC also expressed concern that Rule 611 may have contributed to unintended consequences, including market fragmentation, increased connectivity and compliance costs, exchange proliferation, and the development of complex order types designed to comply with or navigate around the rule.

For institutional investors, one concern is that Rule 611 can require brokers to interact with small protected quotations across multiple venues before completing larger orders. This may create information leakage, increase execution costs, or reduce flexibility in handling large institutional trades.

The SEC also suggests that existing best execution obligations may provide an appropriate investor-protection framework without the need for a separate trade-through rule.

Potential Implications for Market Participants

Broker-Dealers and Wholesalers

If the proposal is adopted, broker-dealers and wholesalers may have more flexibility in designing order routing and execution strategies. However, that flexibility would come with increased importance on best execution analysis.

Firms may need to reassess how they document routing decisions, evaluate execution quality, monitor venue performance, and supervise order handling. Compliance programs may need to shift away from mechanical trade-through checks and toward a more principles-based review of execution outcomes.

Exchanges and Trading Venues

The rescission of Rule 611 could also affect exchange competition. Under the current framework, protected quotations displayed by exchanges receive regulatory protection. If that protection is removed, trading venues may need to compete more directly on execution quality, liquidity, technology, fees, rebates, market data, and overall service.

Smaller exchanges and venues with limited market share could face greater competitive pressure if broker-dealers are no longer required to access their protected quotations before executing elsewhere.

Institutional Investors

For institutional investors, the proposal could create both opportunities and risks.

On one hand, greater order-handling flexibility may allow brokers to reduce information leakage, avoid interacting with small displayed quotes, and pursue execution strategies better tailored to large orders. On the other hand, removing the trade-through rule may reduce the mechanical protection currently provided to displayed quotations.

Institutional investors may want to review broker routing disclosures, execution quality reports, and best execution policies to understand how execution strategies may change if the proposal is adopted.

Retail Investors

For retail investors, the practical impact is less clear.

The current trade-through rule was designed in part to protect investors from receiving executions at prices inferior to displayed protected quotations. If the rule is rescinded, retail investor protection may depend more heavily on broker-dealer best execution duties, competition among wholesalers and trading venues, and execution quality monitoring.

Market participants should expect continued debate over whether existing best execution obligations are sufficient to replace Rule 611’s more mechanical price-protection framework.

Locked and Crossed Markets

The proposed rescission of Rule 610(e) could allow exchanges and market participants more flexibility in displaying quotes that lock or cross other displayed quotations.

The SEC appears to view locked and crossed market restrictions as another source of complexity in the current market structure. If the federal restriction is removed, exchanges may still choose to maintain or modify their own rules governing locked and crossed quotations.

Market participants should monitor whether exchanges adopt different approaches, as inconsistent venue-level rules could create new operational and compliance considerations.

Related Market Structure Development

In a separate action issued around the same time, the SEC also delayed implementation of certain 2024 Regulation NMS amendments relating to minimum pricing increments and access fee caps.

This separate development is not the same as the Rule 611 proposal, but together the actions suggest that the SEC is reconsidering several major components of the current U.S. equity market structure framework.

Practical Considerations

The proposal is not yet final. Market participants do not need to change their practices immediately. However, firms that may be affected should consider beginning an internal review.

Important questions include:

• How would order routing logic change if Rule 611 were rescinded?
• Would current best execution policies and procedures be sufficient without the trade-through rule?
• How should firms document execution decisions when the best displayed quotation is not accessed?
• Would connectivity arrangements with exchanges and trading venues change?
• How would execution quality reports, customer disclosures, and supervision systems need to be updated?
• Would exchanges maintain their own restrictions on locked and crossed markets?
• How would the change affect institutional order handling and retail execution quality?

Because the proposal could affect routing, compliance, market data, technology, and supervision, market participants may want to involve legal, compliance, trading, technology, and operations teams in evaluating the potential impact.

Key Takeaway

The SEC’s proposal to rescind the trade-through rule could mark a major shift away from the centralized price-protection framework that has shaped U.S. equity markets since 2005.

If adopted, the proposal may give trading centers and broker-dealers greater flexibility in routing and executing orders. At the same time, it would place more weight on best execution obligations, execution quality analysis, and market-driven competition among trading venues.

Market participants should closely monitor the rulemaking process and consider whether to submit comments before the deadline. Even though the proposal is not yet final, it raises important questions about how U.S. equity trading should be structured in a faster, more automated, and more fragmented market environment.

If you would like to discuss Regulation NMS, broker-dealer best execution obligations, or the potential impact of the SEC’s proposal on trading and compliance practices, our team would be happy to assist.

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.