SEC Proposes to Rescind Regulation NMS Rules 611 and 610(e)
The SEC has proposed rescinding two central provisions of Regulation NMS: Rule 611, the trade-through rule, and Rule 610(e), the locked and crossed markets provision. If adopted, the proposal would mark one of the most significant equity market structure reforms since Regulation NMS was adopted in 2005.
The proposal reflects the Commission’s view that modern equity markets are now sufficiently automated, interconnected, competitive, and technologically advanced to function without the prescriptive intermarket price protection framework created two decades ago. For broker-dealers, exchanges, ATSs, wholesalers, institutional investors, retail brokerages, market makers, and compliance personnel, the proposal raises major questions regarding best execution, order routing, market data, exchange connectivity, displayed liquidity, exchange competition, and implementation planning.
The Proposal
On June 11, 2026, the Securities and Exchange Commission proposed amendments to Regulation NMS that would rescind Rules 611 and 610(e), remove several related defined terms from Rule 600, and make conforming changes to other Commission rules.
Rule 611, often referred to as the order protection rule or trade-through rule, was adopted in 2005 as the centerpiece of Regulation NMS. It generally requires trading centers to establish, maintain, and enforce policies and procedures reasonably designed to prevent executions at prices inferior to protected quotations displayed by other trading centers.
Rule 610(e) requires exchanges and national securities associations to maintain rules requiring their members to reasonably avoid 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 exceeds the best offer.
The SEC’s proposal would remove those requirements from Regulation NMS and allow market participants, trading centers, and competitive forces to play a greater role in determining how orders are routed and displayed.
Why This Matters
This proposal is important because Rule 611 has shaped the architecture of U.S. equity trading for two decades. It influences order routing systems, exchange connectivity, market data consumption, compliance surveillance, smart order router design, trading venue economics, and the practical meaning of intermarket price priority.
The current framework effectively makes the national best bid and offer a regulatory anchor for much of equity order routing. A trading center generally cannot execute at an inferior price when a protected quotation exists elsewhere, subject to exceptions such as intermarket sweep orders.
The SEC is now asking whether that framework has become outdated. The Commission’s theory is straightforward: the U.S. equity markets of 2026 are fundamentally different from the markets of 2005. Trading is electronic. Routing is automated. Market data is more widely available. Exchanges, ATSs, single-dealer platforms, wholesalers, and other execution venues are connected through sophisticated technology. The SEC’s proposal suggests that a rule originally designed to address slow, fragmented, and insufficiently connected markets may now be contributing to the very complexity it once sought to solve.
The SEC’s Core Rationale
The proposal rests on several related premises.
First, the Commission believes that Rule 611 and Rule 610(e) have contributed to market complexity. Compliance with the trade-through rule requires trading centers and broker-dealers to maintain systems, policies, routing logic, exception management, and surveillance designed around protected quotations and trade-through prevention.
Second, the Commission believes the rules have contributed to exchange proliferation and market fragmentation. Because protected quotation status gives exchange quotes regulatory significance, the SEC is concerned that Rule 611 may have created incentives for additional exchanges to enter and remain in the market even where their independent contribution to liquidity or execution quality may be limited.
Third, the Commission believes that Rule 611 may constrain order handling and execution choice. Market participants seeking to execute large institutional orders may be forced to access small displayed quotations across multiple venues, increasing signaling risk, information leakage, and execution costs.
Fourth, the Commission believes that modern best execution obligations can continue to protect investors without Rule 611 serving as a regulatory backstop. Broker-dealers remain subject to duties to seek the most favorable terms reasonably available under the circumstances, including under FINRA Rule 5310 and broader principles of best execution.
Fifth, the SEC believes rescission may allow competition and innovation to develop more naturally. Without the current trade-through and locked/crossed market structure, exchanges and ATSs may have more flexibility to experiment with trading protocols, auction models, priority rules, and execution designs.
What Would Change if Rule 611 Is Rescinded?
If Rule 611 is rescinded, Regulation NMS would no longer impose the current trade-through prohibition for NMS stocks. Trading centers would no longer be required by Rule 611 to maintain policies and procedures reasonably designed to prevent executions at prices inferior to protected quotations. That does not mean broker-dealers could ignore execution quality. Best execution obligations would remain central. The practical shift would be from a prescriptive intermarket price protection rule toward a more principles-based, facts-and-circumstances execution quality framework.
For retail orders, the SEC appears to believe the immediate effect may be limited because many marketable retail orders are already routed to wholesalers and executed off-exchange at or inside the NBBO. For institutional orders, the proposal may be more consequential. Asset managers, institutional brokers, and algorithmic execution providers may gain more flexibility to determine when routing to every displayed quotation is helpful and when it may impair execution of the parent order.
What Would Change if Rule 610(e) Is Rescinded?
If Rule 610(e) is rescinded, Regulation NMS would no longer require exchanges and national securities associations to maintain rules requiring members to reasonably avoid locking or crossing protected quotations. This could permit, subject to SRO rule changes and implementation decisions, displayed locked markets and potentially crossed markets. The SEC suggests that allowing locked markets may improve price discovery and permit narrower effective spreads, including zero-spread markets in certain circumstances. The more difficult question concerns crossed markets. Crossed markets may create confusion, particularly for less sophisticated investors, and may complicate execution quality measurement, order routing logic, and market data interpretation. The SEC appears to recognize these issues and specifically requests comment on whether some prohibition or reconciliation requirement should remain for crossed markets.
Best Execution Becomes Even More Important
The proposal places best execution at the center of the post-Rule 611 market structure. If the trade-through rule is rescinded, broker-dealers will need to revisit how they document, test, and supervise order routing decisions. The absence of Rule 611 would not relieve firms from the obligation to seek favorable execution terms. It would likely increase the importance of demonstrating why routing decisions were reasonable under the circumstances.
Firms should expect renewed scrutiny of routing logic, venue selection, payment for order flow arrangements, execution quality reviews, Rule 605 and Rule 606 disclosures, order-by-order versus regular and rigorous review practices, and institutional execution algorithms. The best execution question will likely become more nuanced. A broker-dealer may need to consider price, speed, fill probability, adverse selection, market impact, order size, information leakage, venue reliability, and client instructions with greater specificity. This is especially true for institutional orders, where rigid pursuit of displayed top-of-book quotations may not always produce the best overall result for the parent order.
Implications for Market Participants
Broker-Dealers
Broker-dealers should begin assessing how the proposal would affect smart order routing, best execution committees, written supervisory procedures, compliance testing, surveillance alerts, exception reports, and client disclosures. Firms that currently rely on Rule 611-based routing infrastructure should consider whether systems would need to be redesigned if protected quotations, intermarket sweep orders, and trade-through exceptions are eliminated or redefined.
Exchanges
Exchanges may face a more competitive environment if protected quotation status no longer carries the same regulatory force. Market data revenue, connectivity fees, routing relationships, quote behavior, order types, and exchange rulebooks may all be affected. Exchanges may also need to determine whether to retain, modify, or eliminate their own trade-through, locking, crossing, ISO, and order modifier rules.
ATSs and Alternative Trading Models
ATSs may benefit from greater flexibility to design matching protocols and trading mechanisms that are less constrained by intermarket price protection rules. The proposal may create room for new auction models, midpoint mechanisms, conditional order protocols, block trading tools, and other market structure innovations.
Institutional Investors
Institutional investors may have more flexibility to manage market impact and information leakage. If the proposal is adopted, institutional trading strategies may become less dependent on mandatory routing to small displayed quotations across fragmented markets.
That said, institutions will need to evaluate whether a less prescriptive market structure improves execution quality in practice. The answer may vary by asset class, liquidity profile, order size, volatility, and trading objective.
Retail Investors
For retail investors, the key question is whether rescission would affect execution quality, price improvement, and confidence in the fairness of the markets. The SEC appears to believe that best execution duties, execution quality data, competitive wholesaler practices, and modern routing technology may mitigate these concerns. Still, retail brokerages should expect heightened attention to disclosures, routing practices, price improvement statistics, and customer communications if the proposal moves forward.
The Conforming Amendments
The SEC is also proposing to remove or revise related Regulation NMS definitions that would no longer be necessary if Rules 611 and 610(e) are rescinded. These include terms such as “trade-through,” “protected bid or protected offer,” “protected quotation,” “manual quotation,” “automated quotation,” “automated trading center,” and “intermarket sweep order.” The proposal would also make conforming amendments to Rule 610(c), Rule 605-related definitions, Rule 15c3-5, and other provisions that currently reference Rule 611 or related defined terms. These conforming amendments are technical, but they matter. Regulation NMS is an interconnected framework. Removing Rule 611 and Rule 610(e) requires careful attention to the many rules, SRO provisions, NMS Plans, order types, surveillance systems, and disclosure regimes built around those concepts.
Issues for Comment
The SEC’s proposal raises several issues that market participants should consider addressing in comment letters.
First, whether Rule 611 remains necessary in modern equity markets.
Second, whether best execution obligations are sufficient to protect investors without a trade-through rule.
Third, whether rescinding Rule 611 would reduce market complexity, exchange proliferation, and fragmentation.
Fourth, whether the proposal would improve or impair displayed liquidity.
Fifth, whether Rule 610(e) should be rescinded in full or whether the SEC should preserve protections against crossed markets.
Sixth, whether the SEC, FINRA, and exchanges should issue updated best execution guidance if Rule 611 is removed.
Seventh, what implementation period would be necessary for broker-dealers, exchanges, ATSs, market makers, and vendors to revise systems, procedures, surveillance, order types, and disclosures.
Eighth, whether related NMS Plans, SRO rules, market data revenue formulas, and access fee rules should be amended in parallel.
Practical Steps for Firms
Market participants should treat this proposal as more than a technical rule change. It is a potential redesign of the regulatory assumptions underlying U.S. equity routing and execution.
Broker-dealers should inventory systems, policies, and controls that reference protected quotations, trade-throughs, ISOs, locked markets, crossed markets, and Rule 611 exceptions.
Compliance and legal teams should review best execution governance frameworks and determine whether existing documentation would support routing decisions in a market without mandatory trade-through protection.
Trading and technology teams should assess whether smart order routers, execution algorithms, venue scoring models, and surveillance systems would require material changes.
Exchanges and ATSs should evaluate whether their current order types and trading protocols remain commercially useful if Rule 611 and Rule 610(e) are eliminated.
Institutional investors should consider whether to submit comments regarding parent order execution, information leakage, venue fragmentation, and the treatment of large orders.
Retail brokerages should consider whether customer-facing disclosures, execution quality reviews, and wholesaler evaluations would need to be updated.
The Broader Significance
The proposal reflects a larger policy shift in the SEC’s approach to market structure. The Commission is questioning whether prescriptive rules adopted in response to the market conditions of 2005 remain appropriate in a market defined by automation, low-latency routing, off-exchange liquidity, exchange proliferation, tokenization, extended trading hours, and algorithmic execution.
Rule 611 was designed to protect displayed quotations and promote investor confidence in a fragmented market. Two decades later, the SEC is asking whether that rule now entrenches fragmentation, increases costs, and limits innovation. That question will likely define the comment process. If adopted, the rescission of Rules 611 and 610(e) would represent a major shift away from regulatory intermarket price protection and toward a market structure framework more dependent on best execution, competition, transparency, and technological capability.
Frequently Asked Questions
What is Rule 611 of Regulation NMS?
Rule 611 is the Regulation NMS trade-through rule. It generally requires trading centers to maintain policies and procedures reasonably designed to prevent executions in NMS stocks at prices inferior to protected quotations displayed by other trading centers.
What is Rule 610(e) of Regulation NMS?
Rule 610(e) requires exchanges and national securities associations to maintain rules requiring members to reasonably avoid displaying quotations that lock or cross protected quotations in NMS stocks.
What is a trade-through?
A trade-through generally occurs when an order is executed at a price worse than a protected quotation displayed by another trading center.
What is a locked market?
A locked market occurs when the best bid equals the best offer.
What is a crossed market?
A crossed market occurs when the best bid is higher than the best offer.
Would rescinding Rule 611 eliminate best execution obligations?
No. Broker-dealers would remain subject to best execution obligations. The proposal would remove the Regulation NMS trade-through rule, but firms would still need to seek the most favorable terms reasonably available under the circumstances for customer orders.
Why is the SEC proposing this change now?
The SEC believes U.S. equity markets have changed substantially since 2005. The proposal points to automation, interconnectivity, sophisticated routing technology, market data availability, off-exchange trading growth, and market complexity as reasons to reconsider the current framework.
Who should consider submitting comments?
Broker-dealers, exchanges, ATSs, wholesalers, market makers, institutional investors, retail brokerages, asset managers, vendors, compliance professionals, and investor advocates should consider whether the proposal affects their operations, obligations, or market structure views.
Conclusion
The SEC’s proposal to rescind Regulation NMS Rules 611 and 610(e) is a significant market structure development. It challenges two core assumptions of the post-2005 equity market: that intermarket trade-through protection is necessary to protect investors, and that locked and crossed market restrictions are necessary to preserve fair and orderly markets.
For market participants, the immediate task is to assess how deeply Rule 611 and Rule 610(e) are embedded in their systems, procedures, routing logic, order types, disclosures, and supervisory controls. The longer-term question is whether a less prescriptive framework will produce a simpler, more competitive, and more innovative equity market.
The answer will depend heavily on the comment process, the implementation details, and the willingness of regulators and market participants to address the many parts of equity market structure that were built around Rule 611.
