Executive Summary
- What’s new: On June 11, 2026, the SEC proposed amendments to Regulation NMS that would rescind Rule 611 (the trade-through rule) and Rule 610(e) (the prohibition on locking and crossing quotations), along with related defined terms and conforming changes to other SEC rules.
- Why it matters: The SEC’s proposal would represent one of the most significant changes to U.S. equity market structure since the adoption of Regulation NMS. Trading centers and wholesalers may gain greater flexibility in designing routing and execution strategies, while smaller exchanges could face increased competitive pressure.
- What to do next: Market participants — including exchanges, broker-dealers, ATSs and institutional investors — should evaluate the impact of these proposed changes on their order routing practices, connectivity arrangements, compliance infrastructure and best execution policies and procedures. Comments are due 60 days after the proposal is published in the Federal Register.
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Introduction
On June 11, 2026, the Securities and Exchange Commission (SEC) proposed amendments to Regulation NMS that would rescind Rule 611 (the trade-through rule) and Rule 610(e) (the prohibition on locking and crossing quotations), along with related defined terms and conforming changes to other Commission rules.
The SEC’s proposal would represent one of the most significant changes to U.S. equity market structure since the adoption of Regulation NMS by eliminating Rule 611’s trade-through protections and rescinding Rule 610(e)’s restrictions on locked and crossed quotations.
If the amendments are adopted as proposed, trading centers would no longer be required to attempt to access all better-priced, protected quotations up to their displayed size and would be allowed to execute trades at prices that are inferior to publicly available quotations displayed at other trading centers. Exchanges would also be permitted to display a quote that locks or crosses displayed quote in an NMS stock.
Trading centers and wholesalers thus may gain greater flexibility in designing routing and execution strategies, while smaller exchanges could face increased competitive pressure.
The proposal could shift regulatory scrutiny away from compliance with the trade-through rule and toward more in-depth assessments of routing practices and execution quality under the broker-dealer’s best execution framework.
Although the proposal does not focus on tokenized securities, the rescission of Rule 611 may reduce certain market structure challenges associated with applying trade-through requirements in emerging trading environments that are not interconnected in the same manner as traditional equities markets.
Background
Rule 611 was adopted in 2005 as the core provision of Regulation NMS (which stands for National Market System). It requires “trading centers” — which include exchanges, self-regulatory organization (SRO) trading facilities, alternative trading systems (ATSs), over-the-counter (OTC) market makers and broker-dealers that execute orders internally — to establish, maintain and enforce policies and procedures reasonably designed to prevent executions at prices worse than “protected quotations” displayed at other venues.
For example, if an exchange displays a protected bid quote of $5.00 and an offer quote of $5.01, a broker-dealer generally is prohibited from internally executing a buy order at $5.02 without first attempting to route the order to the exchange displaying the better price. In practice, this means trading centers must access all better-priced protected quotations up to their displayed size before executing a trade at an inferior price, unless an exception applies.
From the outset, Rule 611 was the most contentious element of Regulation NMS. While the Commission majority at the time believed the rule would incentivize the display of limit orders and ensure retail investors received best prices, the dissenting commissioners, which included then-Commissioner Paul Atkins, argued that Rule 611 would constrain competition, stifle innovation and fail to achieve its objectives.
The SEC’s Rationale for Rescission
The Commission offers three principal rationales for rescinding Rule 611:
- Allowing market forces to shape equity market structure. The Commission believes that removing Rule 611’s restrictions will “empower market participants to compete on merit and innovation — whether through service, price, technology, costs, or a combination thereof.”
- Addressing Rule 611’s adverse consequences. The proposal identifies several harmful effects of Rule 611, including: market complexity and exchange proliferation; fragmentation of displayed liquidity; increased costs; proliferation of complex order types; and harm to institutional investors.
- Rule 611 is no longer necessary. The Commission finds that the concerns motivating Rule 611’s adoption have been resolved. Today’s markets are highly automated and interconnected and routing technology is widely available. The SEC also emphasized that a broker’s duty of best execution would continue to apply regardless of Rule 611’s presence.
Rescission of Rule 610(e)
In tandem with the proposed rescission of Rule 611, the Commission proposes to rescind Rule 610(e), which requires exchanges and national securities associations to adopt rules requiring their members to reasonably avoid displaying quotations that lock or cross protected quotations. A locked quote occurs when the bid and ask quotes are priced the same. A crossed market occurs when a bid quote is higher than the offer, or the offer is lower than the bid.
The SEC found that the same technological advances that obviate Rule 611 also render Rule 610(e) unnecessary, and that allowing locked and crossed markets could reduce complexity by eliminating specialized order types and increase competition.
Observations
Impact on Investors
The proposal could have different implications for retail and institutional investors. The proposed rescission of Rule 611 may benefit institutional investors by providing greater flexibility to access liquidity, reduce information leakage and minimize the costs associated with sourcing liquidity across multiple trading venues.
Although the best displayed quotation may not always represent the most favorable execution opportunity when factors such as execution certainty, market impact and access to liquidity are considered, one of the principal objectives of Rule 611 was to prevent investors from receiving executions at prices inferior to accessible displayed quotations. The removal of these trade-through protections could therefore have a greater impact on retail investors, who generally place greater value on obtaining executions at the best displayed prices than on accessing block liquidity or minimizing market impact.
The proposed rescission may also result in increased complaints from customers dissatisfied with the prices at which their orders were executed. While broker-dealers would remain subject to their duty of best execution, the effect of removing this longstanding trade-through protection on execution quality, execution prices and retail order fill rates remains uncertain.
Impact on Intermediaries
The proposal is likely to be well received by market participants that have long criticized Rule 611. Trading centers could realize cost savings from reduced connectivity, routing, surveillance and compliance obligations associated with maintaining connectivity to multiple trading venues displaying protected quotations.
Large broker-dealers and wholesalers may also gain greater flexibility to internalize order flow and design routing strategies that place greater emphasis on execution quality factors in addition to displayed price. The proposal, however, may have disparate effects across market participants. Smaller exchanges that currently benefit from the protections afforded to displayed quotations could experience reduced order flow if trading centers are no longer required to access those quotations before executing elsewhere.
Perhaps more significantly, the proposal could shift regulatory scrutiny away from compliance with the trade-through rule and toward more in-depth assessments of routing practices and execution quality under the broker-dealer’s best execution framework. Rule 611’s trade-through protection for market and marketable limit orders was designed both to prevent unfairness to investors and to facilitate broker-dealers’ ability to achieve best execution of customer orders. While price is not the only component of the best execution analysis, and compliance with Rule 611 has never, by itself, satisfied a broker-dealer’s duty of best execution, firms often point to compliance with Rule 611 as evidence that customer orders received access to the best displayed prices.
As a result, broker-dealers likely will need to reassess their best execution policies and procedures and place greater emphasis on documenting and reviewing routing decisions, execution quality metrics and the factors supporting their determination that customer orders received best execution.
Impact on the Tokenized Securities Market
Although the release does not address the application of Rule 611 to crypto assets in detail, the proposed rescission may have implications for firms seeking to facilitate transactions in tokenized NMS securities. The release’s discussion the about the evolution of U.S. equities markets briefly references crypto assets and notes that that emerging technologies such as distributed ledger technology enable issuers to tokenize securities and may raise “challenges and questions relating to current equities market structure and the application of current regulatory requirements.” While the release does not expressly state that these “challenges and questions” contributed to the Commission’s decision to propose rescinding Rule 611, rescission would eliminate a market structure requirement that may be particularly difficult to apply in nascent markets that are not interconnected in the same manner as traditional equities markets.
Broker-dealers facilitating transactions in tokenized securities would remain subject to their duty of best execution. As these markets develop, firms will need to evaluate available liquidity, compare execution opportunities across venues and identify the most favorable terms reasonably available for customer transactions.
Impact on Quoting Practices
Rule 610(e) requires exchanges and national securities associations to adopt rules designed to prevent members from displaying quotations that lock or cross protected quotations. Although the proposal would eliminate this requirement, exchanges would remain free to maintain existing restrictions or adopt alternative approaches.
The proposal may therefore result in greater variation among exchanges regarding how locked and crossed quotations are managed. Some venues may conclude that existing restrictions continue to promote orderly markets, while others may view the rescission as an opportunity to experiment with different quoting practices or order types. As a result, competition among exchanges may increasingly focus on how liquidity is displayed and accessed rather than on compliance with a uniform regulatory framework.
Market participants may also need to revisit their quoting, routing and surveillance procedures if exchanges adopt divergent approaches to locked and crossed quotations. While the proposal could provide exchanges with greater flexibility, it may also increase compliance and operational complexity for firms that interact with multiple trading venues.
What’s Next
The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. The Commission has requested comments on a broad range of issues, including:
- Whether best execution requirements should be updated.
- Whether access fee caps should be revised.
- What amendments to the NMS Plans may be necessary.
- How any transition away from the current trade-through framework should be implemented.
Given the significance of the proposal and the wide range of market participants that could be affected, the Commission is likely to receive substantial industry feedback. As a result, significant revisions to the proposal remain possible before a final rule is adopted.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.