SEC proposes eliminating Order Protection Rule for trading

Investing.com -- The Securities and Exchange Commission published a proposal on Thursday to eliminate the Order Protection Rule, which currently requires trades to be executed at the best available price regardless of trading venue.

The 267-page proposal would repeal Rule 611 and Rule 610(e), which restricts locking and crossing quotations in national market system stocks. Under the proposed changes, market participants would no longer be required to connect to every exchange, which the SEC said should reduce connectivity, market data, routing and compliance costs.

The proposal could reduce the number of existing exchanges as they would no longer be guaranteed to collect connectivity and market data fees. Broker-dealers would still be required to seek best execution, though that may include factors other than price such as order size, the difficulty of completing the trade, execution speed and clearing costs.

The proposal is open for 60 days of comment upon publication in the Federal Register.

TD Cowen said the agency will likely finalize the repeal in early 2027. The firm noted that repealing the Order Protection Rule has been a long-term priority for SEC Chair Paul Atkins. TD Cowen expects the rule to be finalized in the first quarter of 2027, stating that it is rare for the SEC to go from proposal to final rule in less than six months.

The SEC acknowledged in the proposal that Rule 611 may have benefited retail investors while hurting institutional investors. TD Cowen said this development should be positive for the tokenization of equity securities, though exemptive relief is still needed.

You May Also Be Interested In

• Muddy Waters Research is short The Ensign Group (ENSG)
• Vivos Therapeutics plans rights offering to raise capital
• 60 Degrees Pharmaceuticals licenses Australian chestnut patent