SEC Advisers Mull Study on Axing ‘Order Protection Rule’

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By Andrew Ramonas

An SEC rule that helps investors get the best price for their stock orders may disappear under a market-wide pilot program a commission advisory panel is considering.

A Securities and Exchange Commission Equity Market Structure Advisory Committee panel is deciding whether to call for an agency study on eliminating Regulation National Market System Rule 611, known as the “order protection” or “trade-through” rule. The panel is struggling to reach a consensus on whether the SEC should do anything with the provision, Regulation NMS subcommittee chairman Kevin Cronin said at an April 5 EMSAC meeting.

Adopted in 2005, the rule generally requires exchanges to send trade orders to venues with the best execution prices. Exemptions include intermarket sweep orders and some displayed quotes that were changed within a second before the execution of an order.

“What we concluded is that there are a lot of varied opinions, and as usual, those opinions are firmly entrenched,” said Cronin, global head of trading for Invesco Ltd. “We want to have recommendations that are made on data and science, not on emotions.”


Jeffrey Brown, senior vice president of legislative and regulatory affairs at Charles Schwab Corp., expressed concern at the meeting about removing the order protection rule, saying the regulation helps assuage his firm’s clients’ concerns about fairness.

“I would be very concerned about undermining [investor] confidence,” he said.

The Securities Industry and Financial Markets Association is open to a review on a Rule 611 repeal, however.

Although the regulation has helped narrow spreads and keep transaction costs low, the rule has increased market complexity, according to a letter SIFMA sent to the SEC in advance of the meeting.

No Timeline

Through its work on Rule 611, the EMSAC Regulation NMS subcommittee is hoping to reduce complexity and increase competition and innovation in the markets, according to a panel memo released in conjunction with the meeting.

“We’re not going to put forth anything that we think is incongruent with the principle of doing something that would be beneficial to the overall industry,” Cronin said. “But at this point, this, as you can probably see and sense, is somewhat elusive.”

Cronin told Bloomberg BNA he didn’t have a timeline for making a recommendation.

“Rather than get it done quickly, I’d rather get it done right,” he said.

To contact the reporter on this story: Andrew Ramonas in Washington at

To contact the editors responsible for this story: Phyllis Diamond at

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