Why We Told the SEC to Keep the Trade-Through Rule
By R Tamara de Silva
On August 16, De Silva Law Offices filed a comment letter with the Securities and Exchange Commission opposing the proposed rescission of Rule 611 of Regulation NMS, commonly called the trade-through rule, and Rule 610(e), the prohibition on locked and crossed markets. The comment period closed the following day. Our letter is now part of the public record in File No. S7-2026-20 and can be read here.
What the Commission Has Proposed
On June 11, 2026, the Commission proposed to rescind both rules outright, along with the related definitions in Rule 600 and a set of conforming changes. Rule 611 has been the backbone of intermarket price protection since 2005. It prohibits a trading center from executing an order at a price inferior to a protected quotation displayed on another exchange. In plain terms, your broker cannot fill your market order at $20.05 when $20.00 is displayed and available on a competing lit exchange. Rule 610(e) keeps the displayed market coherent by prohibiting quotations that lock or cross the quotations of other venues.
The Commission's rationale is that markets have changed since 2005, that the rule generates complexity and cost, and that broker-dealer best execution obligations will protect investors once the rule is gone. The proposal has been well received by the industry's largest participants. SIFMA supports it. The client alerts from the major firms treat it as overdue modernization.
We read it differently.
Who We Filed For
This firm represents individual traders, proprietary trading entities, commodity pool operators, introducing brokers, and broker-dealers. Those clients make up a large segment of the American equity markets and a very small segment of this comment file. They are not wholesalers who internalize retail order flow. They are not exchange groups. They are the people Rule 611 was written for, and they are the people with the most to lose if it disappears without a substitute.
The comment file in a market structure proceeding tends to be written by the participants with the most money riding on the outcome the Commission is proposing. Somebody should speak for the other side of those trades. That is why we filed.
The Problem With the Commission's Substitute
The proposal rests on a single load-bearing premise: that best execution obligations will fill the void left by Rule 611. Our letter explains why that premise fails.
Best execution and the trade-through rule are different tools doing different jobs. Rule 611 is structural. It constrains what trading centers may do, regardless of any individual broker's routing decisions, and it operates before the trade. Best execution is a firm-level duty. It is self-assessed, it is evaluated on a policies-and-procedures basis rather than order by order, and it is enforced after the fact through FINRA examinations and SEC oversight. A retail investor who receives an inferior fill has no private right of action under FINRA Rule 5310. Rule 611 stops the bad fill before it happens. Best execution, at best, produces a compliance memo after it does.
The Commission knew all of this in 2005. Data presented during the original Regulation NMS rulemaking showed a 3.2 percent trade-through rate for internalizing dealers in 2003. Roughly one in thirty retail orders was executed at a price worse than what was displayed on a lit exchange, and the Commission observed at the time that most of those customers never knew it. Rule 611 was the answer to that documented harm. The current proposal does not explain why the problem has gone away. Payment for order flow and off-exchange internalization are larger features of the market today than they were then.
The Quiet Part: Locked and Crossed Markets
The proposal to rescind Rule 610(e) has drawn less attention than the trade-through rule, and it deserves more. A crossed market, where the bid on one exchange exceeds the offer on another, tells a professional that a quote is stale or a feed is slow. To a retail customer looking at consolidated data, it looks like free money. The current rule keeps that confusion out of the displayed market. The Commission suggests that exchanges will police locking and crossing voluntarily. That asks competing venues to protect market-wide price integrity at their own expense, which is not how venues behave.
What We Asked For
We asked the Commission to decline to adopt the rescission. The legitimate costs of Rule 611, including the roughly $5.7 million per year the Commission estimates a broker-dealer spends connecting to all protected exchanges, can be addressed with targeted reform: adjust the definition of a protected quotation, set volume thresholds for protection, distinguish professional from retail order flow.
If the Commission proceeds anyway, our letter proposes four compensating measures: strengthened best execution standards with per-order monitoring and meaningful disclosure to customers, targeted reform in place of full rescission, mandatory disclosure when orders are routed under locked or crossed conditions, and an independent baseline study of retail execution quality before any final rule takes effect.
What Happens Next
The comment period closed on August 17. The Commission will review the file and decide whether to adopt the rescission as proposed, modify it, or withdraw it. There is no deadline for that decision. We will be watching, and we will write about the adopting release when it comes.
I spent years on the floor of the Chicago Board of Trade before founding this firm. Market structure has changed beyond recognition since then. The incentive to shave a customer's fill has not. Rules like 611 exist because that incentive is permanent, and the discipline of a structural prohibition is worth more to an ordinary trader than a promise that someone will check the paperwork later.
De Silva Law Offices advises traders, trading entities, funds, and brokers on securities and derivatives regulatory matters. Questions about the proposal and what rescission would mean in practice can be directed to R Tamara de Silva at 312-500-8424 or info@desilvalawoffices.com.