SEC Proposes Scraping Two Rules That Prevent Bad Stock Trades

The Securities and Exchange Commission has proposed removing two rules from Regulation NMS that were designed to protect investors from getting worse prices than what is publicly displayed. Rule 611, known as the trade-through rule, currently prevents traders from executing orders at a price inferior to a protected quote on another exchange. Rule 610(e) stops markets from locking or crossing, which happens when bid and offer prices overlap in ways that create confusion.

Why it matters: This matters because it changes the baseline for how stocks are traded in the United States. If adopted, brokers would no longer be legally required to check every other exchange for a better price before filling an order. While the SEC claims this will reduce costs and complexity, critics might argue it could lead to less price transparency or worse execution quality for retail investors who rely on these protections.

Who it affects

• Broker-dealers and trading firms that must currently build systems to prevent trade-throughs

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This is a proposed rule from the Securities and Exchange Commission, meaning it is open for public comment and not yet law; check the original Federal Register document for full details before relying on it.

Agency: Securities and Exchange Commission
Source: Federal Register — read the official document