The Trade-Through Rule and Locked and Crossed Markets Provisions of Regulation NMS
Key claim: The SEC is proposing to rescind the trade-through rule and locked/crossed markets provisions of Regulation NMS for NMS stocks, removing key order-protection requirements from U.S. equity market structure.
Abstract
(Proposed Rule · Securities and Exchange Commission) The Securities and Exchange Commission (“Commission” or “SEC”) is proposing amendments to Regulation NMS (“Regulation NMS”) under the Securities Exchange Act of 1934 (“Exchange Act”). The proposed amendments would rescind the trade-through rule for NMS stocks, the provision regarding locking and crossing quotations for NMS stocks, and certain defined terms. The proposed amendments would also make conforming changes to other related provisions.
Why this matters
The trade-through rule has been a cornerstone of U.S. equity market structure since 2005, forcing venues to route around inferior-priced executions and shaping how exchanges, ATSs, and wholesalers compete for order flow. Rescinding it — along with the locked/crossed markets provisions — would reallocate execution-quality responsibilities toward broker best-execution obligations and could reshape venue economics, retail price improvement, and the role of protected quotations. The proposal is a significant regulatory shift for investors, market makers, and exchanges, but remains at the proposed-rule stage.