The Securities and Exchange Commission (SEC) is scheduled to consider a proposal related to the Order Protection Rule (Rule 611 of Regulation NMS) at its open meeting on Thursday, June 11.
The rule, designed to prevent trade-throughs by requiring executions to avoid inferior displayed prices across trading venues, has long been central to Regulation NMS.
The SEC’s consideration of potential reforms has drawn different interpretations from market participants, ranging from investor-protection concerns to expectations of incremental structural adjustment.
Tyler Gellasch, President and Chief Executive Officer of Healthy Markets Association, said the rule has been central to linking fragmented trading venues and protecting investors.
“For decades, the Order Protection Rule has stitched our many stock trading venues together, driving competition, efficiency, and investor protection,” Gellasch said.
“But rather than looking to build upon that success and improve the rule, the agency seems eager rebuke it, driving up costs and inefficiencies for investors,” he said.
He described the rule as “an imperfect backstop to best execution,” adding that it “should be improved, not demolished.”
Gellasch warned that removing or significantly weakening the rule would shift market dynamics in ways that could disadvantage retail and smaller institutional investors.
“The SEC is proposing to remove some of the most critical guardrails and investor protections that have made the U.S. stock market the most interconnected, efficient, robust, and resilient equity markets in the world,” he told Traders Magazine.
“The rule will expose all investors to much greater risks and higher costs,” he added.
“While some of the largest institutions may have the resources and market power to protect themselves, millions of retail investors, and thousands of RIAs and smaller institutional investors would be effectively compelled to suffer the higher costs arising from a new lack of enforceable standards.”
He also rejected the argument that repealing the rule would materially reduce the need for market data.
“If brokers want to fulfill their best execution obligations, they will still need the market data,” Gellasch said.
“Repealing the Order Protection Rule won’t relieve brokers or data providers of their needs for market data from exchanges, but it would allow brokers, market makers, and other intermediaries to rip off investors,” he said.
While investor advocates focus on potential risks to execution quality and transparency, some market participants expect any reforms to the Order Protection Rule to to come through adjustments to the existing framework, particularly around exchange access fees.
Khody Azmoon, CEO and co-founder, BLOX Markets, said access fees are likely to remain part of any eventual reform package, even if the broader framework changes.
“We anticipate access fees will likely remain part of any eventual Order Protection Rule reforms, although the framework itself may evolve,” Azmoon said.
He pointed to prior discussions during the SEC’s 2025 Order Protection Rule roundtables, as well as the regulator’s consideration of public comment on an exchange request tied to implementation of a 10-mil access fee cap, including potential alternative caps for certain tick-size categories.
Taken together, he said these developments suggest reforms are more likely to adjust the existing access-fee structure, potentially including lower caps, rather than eliminate access fees entirely, although he cautioned that outcomes remain uncertain.
The SEC has not yet taken action on the proposal. Market participants are expected to closely watch Thursday’s meeting for further detail on how commissioners will approach Rule 611 and its role in the U.S. equity market structure.
