SEC to Hold Roundtable on the Order Protection Rule: Implications for Market Structure and Best Execution

On July 21, 2025, the Securities and Exchange Commission (SEC) announced that it will hold roundtable discussions to evaluate Rule 611 of Regulation NMS (the Order Protection Rule), which prohibits “trade-throughs” — executing trades at prices worse than protected quotes on other venues.¹ 

According to SEC Chairman Paul Atkins, the impetus for the roundtables is that the Order Protection Rule and Reg NMS “have not served investors or broker-dealers well, given the market distortion and resulting gamesmanship by those that seek to take advantage of the Reg NMS structure.” Notably, Chairman Atkins voted against the initial adoption of Reg NMS in 2005.²  

Background on the Order Protection Rule

Adopted in 2005, the Order Protection Rule aimed to prevent trade-throughs, which can harm (i) investors who miss the best price, (ii) market participants whose quotes are bypassed (i.e., traded through), and (iii) overall market efficiency by discouraging aggressive quoting.³ By ensuring investors receive the best displayed price, the rule also serves as a backstop to broker-dealers’ duty of best execution.

However, markets have evolved significantly since the rule’s adoption. With the proliferation of trading venues and advanced order types, some observers question whether the rule still promotes its original goals or instead leads to adverse outcomes such as increased complexity and potential gaming of the rule’s mechanics.

Key Considerations for Market Participants

As the SEC reopens a public forum on the Order Protection Rule, market participants might consider several important implications:

• Impact on Incentives to Display Aggressively Priced Orders. Eliminating the Order Protection Rule could reduce incentives for market participants to display aggressively priced orders, potentially reducing market transparency and price discovery.
• Potential for Gamesmanship via Specialized Orders. Some critics have argued that the use of intermarket sweep orders, which are exempt from the rule, and other specialized order types may advantage sophisticated market participants over others. 
• Tokenized Equities and Regulatory Parity. As discussions around tokenized versions of NMS stocks advance, the elimination or modification of the Order Protection Rule may better facilitate regulatory parity between and among NMS stocks and any corresponding tokenized equity securities. 
• Best Execution Complexity. Firms may face increased difficulty ensuring and documenting best execution without the backstop of the Order Protection Rule if their executions result in trade-throughs.
• Reduced Market Fragmentation. Narrowing the Order Protection Rule could reduce incentives to operate new exchanges, possibly decreasing market fragmentation.
• Broader Market Structure Reforms. The roundtable could serve as a catalyst to broader market structure reforms such as facilitating decentralized finance models or exclusive venues for thinly traded stocks.

Next Steps

Market participants should closely follow the SEC’s roundtable schedule and consider submitting comments. The discussions may shape future reforms with wide-reaching implications for trading practices and regulatory compliance.

For guidance or to discuss potential effects on your firm, please contact the Sidley team.

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¹ SEC Announces Roundtable on Trade-Through Prohibitions (July 21, 2025), https://www.sec.gov/newsroom/press-releases/2025-99-sec-announces-roundtable-trade-through-prohibitions.

² Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37637-68 (June 29, 2005) (Reg NMS Adopting Release), https://www.govinfo.gov/content/pkg/FR-2005-06-29/pdf/05-11802.pdf.  

³ Id. at 37532.