SIFMA, MFA, Better Markets Differ on SEC Plan to Scrap Equity Market Protections
Commentary by Steven Lofchie
SIFMA endorsed the SEC's plan to scrap the equity trade-through rule so long as the agency builds replacement safeguards first, while the Managed Funds Association ("MFA") said the proposal needs more study and Better Markets called for it to be withdrawn altogether.
The comment letters responded to the SEC's proposal to rescind Rule 611 ("Order protection rule") and the locked-and-crossed-markets provisions in Rule 610(e) ("Access to quotations") under Regulation NMS. According to the proposal, rescission would reduce market complexity and trading-venue proliferation.
SIFMA asked that the SEC and FINRA build a post-rescission best-execution framework before the changes take effect and that the SEC set a minimum volume threshold a venue must meet for its quotations to count toward the National Best Bid and Offer ("NBBO"). SIFMA also warned that numerous SEC and self-regulatory-organization rules rely on protected quotations and the NBBO as an objective benchmark, citing Regulation SHO ("Short Sales") and FINRA Rule 5310 ("Best Execution and Interpositioning"), and urged the SEC to address the proposal's broader regulatory implications.
The MFA requested more rigorous analysis, evaluation of targeted alternatives short of full rescission, and consideration of a pilot program.
Better Markets opposed the proposal outright, calling Rule 611 a fundamental investor defense against trade-throughs of protected quotations. It argued that the SEC was dismantling the rule to benefit the crypto industry, contending that decentralized trading venues cannot ensure investors get the best prices on tokenized stock trades.
Comments on the June 17 proposal closed August 17, 2026. Rules 611 and 610(e) remain in effect unless and until the SEC adopts a final rule.
Commentary
SIFMA members are reasonably concerned that the elimination of the trade-through rule, and some of the related mechanics as to market access, would leave them vulnerable to enforcement actions or private claims with respect to best execution in the absence of any clear standard that must be met in order to satisfy their duty of best execution. While it would appear that the individual exchanges are preparing themselves for the elimination of the trade-through rule, as a number of exchanges have recently adopted their own best execution rules (see, e.g., NYSE Adopts New Rule Establishing Best Execution Standards), the individual exchanges cannot adopt rules that govern the market as a whole. Any such rulemaking or guidance can only come from either the SEC or FINRA.
Better Markets' claim that the elimination of the trade-through rule is simply to boost the crypto industry wholly ignores the long and quite detailed history of SEC Chair Paul Atkins' opposition to the rule. When the rule was adopted, Mr. Atkins was a Commissioner, and he not only voted against the rule but also joined fellow Commissioner Cynthia Glassman in authoring a very detailed denunciation of it, which looks prescient in retrospect. (See Dissent of Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption of Regulation NMS; see also Mr. Atkins' speech of February 2004 and his speech of December 2004.) If Better Markets wants to support the continuation of the rule, it would do better to dispute the predictions Mr. Atkins made when the rule was adopted rather than crying crypto.