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Traders Magazine, December 2004

Editorial Staff

Reg NMS *Industry pros spent the holidays studying the Securities and Exchange Commission's proposed new version of its controversial trade-through rule. The revision, one part of a revamped Reg NMS, both narrows and broadens the scope of the original trade-through proposal. The new version extends trade-through protection only to those quotes - of both Nasdaq and listed securities - that are "immediately accessible." Those that can't be executed automatically receive no protection. The original proposal provided for a blanket trade-through rule covering all quotes. The revision has resulted in the elimination of the first version's "opt-out" provision. The SEC now says opt-out is unnecessary. Under the new version, the SEC has also proposed broadening trade-through protection to include all posted quotes. The original idea was to offer protection only to a market's best bids and offers. This new "voluntary depth alternative" has been criticized by the New York Stock Exchange.

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