The Securities and Exchange Commission (SEC) is proposing to rescind Rules 611 and 610(e) of Regulation NMS, or Regulation of the National Market System.
Rule 611 of Regulation NMS, adopted in 2005 and established intermarket protection against trade-throughs for all national market system (NMS) stocks. A trade-through occurs when one trading center executes an order at a price that is inferior to the price of a protected quotation displayed by another trading center.
Rule 610(e) was also adopted in 2005 under Regulation NMS and contains restrictions on locking and crossing quotations in NMS stocks. A locked market occurs when the best bid price equals the best offer price, and a crossed market occurs when the best bid price is higher than the best offer price.
The SEC’s proposed amendments would:
- Rescind Rule 611 of Regulation NMS, which contains the trade-through prohibition for national market system stocks.
- Rescind Rule 610(e) of Regulation NMS, which contains restrictions on locking and crossing quotations in national market system stocks.
- Rescind related defined terms in Rule 600 of Regulation NMS.
- Make conforming changes to other related provisions.
“After two decades of Rule 611, it is high time that the Commission review its unintended consequences that have hindered — rather than enhanced — the long-term growth of our markets,” SEC Chairman Paul Atkins said. “This proposal is intended to simplify market structure and reduce costs for market participants while allowing competition, innovation, and other market forces to shape the continuing evolution of our equity markets. I look forward to reviewing public comments as we take a careful, deliberative approach to avoid repeating the same mistakes that brought us here.”
The public comment period will remain open for 60 days following the publication of the proposal in the Federal Register.