SEC Proposes Rescission of the Order Protection Rule

On June 11, 2026, the SEC proposed amendments to Regulation NMS that would rescind Rule 611 — the Order Protection Rule or “trade-through rule” — and Rule 610(e), the prohibition on locked and crossed markets (the Proposal). The Proposal, if adopted, would represent one of the most significant changes to U.S. equity market structure in two decades. Comments on the Proposal are due by Monday, August 17, 2026.

If adopted, the rescission of Rules 611 and 610(e) would remove two core elements of today’s equity market structure and could have significant downstream consequences for other rules, broker-dealer practices, trading venue incentives, and market data. Key takeaways and open questions are set forth below, followed by a summary of the relevant background and proposed rule changes.

I. Key Takeaways and Open Questions

1. Heightened Best Execution Pressure — If Rule 611 is rescinded, broker-dealers and trading venues will face increased pressure in their best execution analyses, particularly in instances where they trade through a better-priced displayed quotation. Without a regulatory floor provided by the trade-through prohibition, trades may lawfully occur at prices that would previously have constituted a trade-through. Brokers may face tough decisions in evaluating how accessible a better-priced quotation might be for a given trade and will likely need to carefully document their justification for effecting a trade at a trade-through price.
2. Locked/Crossed Markets and the Vendor Display Rule — With the proposed rescission of Rule 610(e), trading centers would no longer be required to prevent their members from displaying quotations that lock or cross the quotations of other trading centers. As a result, locked and crossed markets could be displayed to investors making routing decisions under the Vendor Display Rule (Rule 603 of Regulation NMS), potentially causing investor confusion, complicating order routing decisions, and undermining confidence in displayed market data. Other questions also arise, such as whether an exchange could maintain locking or crossing quotations on its own market (e.g., if both locking/crossing quotations are post-only).
3. Reduced Costs and Fragmentation — The Proposal suggests Rule 611 contributed to venue proliferation and routing complexity but also relies on today’s market connectivity as evidence that mandatory order protection is no longer needed. That connectivity, however, developed in part because Rules 611 and 610(e) required or incentivized access to protected quotations. To the extent broker-dealers begin to disconnect from certain lower-volume venues, they may need to rely on other routing broker-dealers to reach those venues to comply with their duty of best execution. It is therefore unclear whether rescission would reduce fragmentation or lower costs for many broker-dealers or investors.
4. Consolidated Market Data Revenue Allocation and Low-Volume Exchanges — On June 12, 2026, the SEC published notice of a proposed amendment to the CT Plan¹ that would modify the revenue allocation formula for consolidated market data by imposing a 5:1 cap on each member’s quote-to-trade revenue ratio.² Today, the formula allocates revenues based on both quotations and executions, with 50% attributable to quotes and 50% to trades. If approved, the amendment would limit the ability of exchanges to earn outsized market data revenue primarily by posting quotations with relatively little trading activity. In combination with the proposed rescission of Rules 611 and 610(e), the change could remove another incentive for displayed liquidity and may create additional economic pressure on low-volume exchanges, raising further questions about how the Proposal would affect venue competition, displayed liquidity, and market data quality.
5. Integration of Tokenized NMS Stocks — The Proposal cites the emergence of tokenized national market system (NMS) stocks and on-chain trading venues as a reason to reassess Rule 611 but does not explain how tokenized instruments would fit within the existing equity market structure. Market participants may face a fragmented environment in which traditional NMS shares trade alongside tokenized versions of the same securities, potentially on venues with different access, settlement, and data-reporting models. It remains unclear, for example, whether quotations and trades from tokenized venues would be reflected in consolidated market data, incorporated into the national best bid and offer, or considered in broker-dealers’ best execution analyses.

II. Background

Order Protection Rule (Rule 611). The Order Protection Rule requires each trading center — including national securities exchanges, alternative trading systems, and broker-dealers that execute orders internally — to establish, maintain, and enforce written policies and procedures reasonably designed to prevent “trade-throughs” of protected quotations in NMS stocks.³

The Order Protection Rule was designed, in part, to serve as a “backstop” to the duty of best execution. In adopting the rule, the SEC noted that a trade-through transaction can directly harm two parties (i.e., the party that received an inferior price and the party whose superior-priced limit order was traded through) and impose a more general harm to the market by undermining the incentive to display competitively priced limit orders. Specifically, if investors believe their displayed orders can be bypassed, they may be less willing to post aggressive quotes, which could impair the price discovery process. The rule contains several exceptions, including for intermarket sweep orders, flickering quotes, and benchmark and stopped orders.

Locked and Crossed Markets (Rule 610(e)). Rule 610(e) of Regulation NMS requires each national securities exchange and FINRA to establish, maintain, and enforce written rules that require their members reasonably to avoid displaying quotations⁴ that lock or cross any protected quotation in an NMS stock, to reconcile locked or crossed quotations that may occur, and to prohibit patterns or practices of avoidable locking or crossing quotations. Rule 610(e) is closely interrelated with Rule 611 because it relies on the concept of “protected quotations” defined in connection with Rule 611’s trade-through prohibition.

Rule 610(e) was designed to, among other things, promote fair and orderly markets and improve price transparency as locked and crossed markets can confuse investors about actual trading interest in a stock.

III. The Proposed Changes

The SEC proposes to rescind Rule 611 in its entirety, along with Rule 610(e) and related defined terms in Rule 600 of Regulation NMS, and to make conforming changes to other related provisions.

The SEC’s stated rationales for the proposed rescissions include the following:

• Changes in market structure since 2005 — Today’s markets are highly automated, interconnected, fast, and competitive, and routing technologies are more sophisticated, which the SEC believes obviates the need for linking markets through Rules 611 and 610(e).
• Increased costs and complexity — The SEC states that Rule 611 has increased costs and market complexity, including proliferation of order types and routing logic designed around Rule 611, exchange proliferation and fragmentation, and practical pressure for broker-dealers to connect to all protected markets. For example, any new exchange can effectively require market participants to connect to it simply by displaying a protected quotation even if it has minimal volume or is otherwise not an attractive routing destination.
• Best execution obligations as an alternative safeguard — The SEC states that Rule 611 may no longer be necessary as a backstop to best execution because broker-dealer best execution obligations and competitive incentives would continue to require reasonable diligence to obtain favorable terms for customer orders. According to the SEC, market participants can now identify and access the best available prices across venues without regulatory mandates given sophisticated order routing systems and real-time market data access.
• Facilitating competition and innovation — The SEC believes rescission may allow competition and innovation to develop more naturally, including potentially facilitating the development of tokenized securities trading and reducing incentives for exchanges to adopt price-time priority structures.

The Proposal would also amend several other rules that reference “protected quotations” including under Rule 15c3-5 (Market Access Rule), Rule 15b9-1 (Exemption for Certain Exchange Members), and Regulation NMS definitions in Rule 600.

IV. Chairman’s Statement on Rule 610/Rule 612 Amendments

Also on June 11, 2026, Chairman Paul Atkins issued a statement further extending temporary exemptive relief from the compliance dates for Rules 600(b)(89)(i)(F), 610(c) and 612 of Regulation NMS until the first business day of November 2027.⁵ Those amendments, adopted in 2024, modified Rule 612 to establish a minimum pricing increment of $0.005 (half-penny) for quotations in certain “tick-constrained” NMS stocks priced at or above $1.00 per share, and reduced the access fee caps under Rule 610(c) to $0.001 per share (10 mils) for protected quotations in NMS stocks priced at $1.00 or more.⁶

The Chairman stated that in light of the proposed rescission of Rule 611, as well as a pending request from the MEMX exchange seeking certain exemptive relief from the lower access fee cap requirement, he directed SEC staff to prioritize a review of Rules 610(c) and 612 by year-end, including whether potential changes to access fee caps and minimum pricing increments may be appropriate. This may signal a willingness to revisit the scope of “tick-constrained” stocks subject to the lower trading increment.

There is a substantive connection between the 2024 amendments and the Proposal as these rules operate together in the pricing and display ecosystem for NMS stocks. For example, one of the main purposes of access fee caps is to prevent an exchange from charging an exorbitant fee for accessing a protected quotation. If Rule 611 is rescinded and protected quotations cease to exist, access fee caps may no longer be necessary, although the SEC indicates in the Proposal that access fee caps may still be necessary to reduce instances of crossed markets. The delay provides the SEC additional time to consider whether implementing the 2024 amendments on their current path would be appropriate in a market structure that may no longer include mandatory order protection.

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1 The CT Plan is the NMS plan governing consolidated market data, including sharing revenue among all of the exchanges and FINRA in respect of quotation and execution market data.
2 Securities Exchange Act Release No. 34-105680, Joint Industry Plan; Notice of Filing of the Third Amendment to the Limited Liability Company Agreement of CT Plan LLC to Adopt Revenue Allocation Formula Revisions (June 12, 2026), https://www.sec.gov/files/rules/sro/nms/2026/34-105680.pdf.
3 A trade-through occurs when one trading center executes a trade at a price inferior to a “protected quotation” displayed by another trading center. A “protected quotation” is generally the best bid or best offer displayed on an exchange that is immediately accessible.
4 A locked market occurs when the bid price at one trading center equals the offer price at another (e.g., both the best bid and offer are displayed at $10); a crossed market occurs when a bid exceeds the offer at another venue (e.g., the best bid displayed on one market is at $10 and the best offer is displayed on another market at $9.99).
5 Statement of Paul S. Atkins, Chairman, SEC, Statement Regarding Minimum Pricing Increments and Access Fee Caps (June 11, 2026), https://www.sec.gov/newsroom/speeches-statements/atkins-statement-minimum-pricing-increments-access-fee-caps-061126.
6 For more information on the 2024 amendments to access fees and tick sizes (Rules 610 and 612), please see our Update here: https://www.sidley.com/en/insights/newsupdates/2024/10/sec-adopts-rules-modifying-minimum-pricing-increments-access-fee-caps-and-order-transparency.