The SEC has proposed rescinding Regulation NMS Rules 611 and 610(e), the long-standing trade-through and locked/crossed-market provisions for U.S. stocks, saying the market has changed and the rules now add cost and complexity. The proposal opens a 60-day comment period after Federal Register publication.

The Securities and Exchange Commission on Thursday proposed rescinding two core Regulation NMS provisions that have shaped U.S. equity trading for two decades: Rule 611, the trade-through rule, and Rule 610(e), which restricts locked and crossed quotations.

The agency said the 2005 rules were written for a very different market and now contribute to higher costs, added complexity and less flexibility in how orders are handled and executed. SEC Chairman Paul S. Atkins said the proposal is meant to simplify market structure and let competition and innovation play a larger role in how equity markets evolve.

What the proposal would change

Rule 611 generally prohibits trading through the best displayed price in national market system stocks. Rule 610(e) bars locked and crossed quotes, where one market posts the same price as, or a worse price than, another market.

The SEC said it is proposing to rescind both rules, along with related defined terms in Rule 600 and conforming changes to other provisions tied to them.

Why the SEC is acting now

The rules were adopted in 2005, when U.S. equity markets were far less automated and interconnected than they are today. The SEC said the market has since become highly competitive and fragmented, and that the old framework can limit routing and execution choices.

In a statement at the open meeting, Atkins said the Commission should examine the unintended consequences of Rule 611. He also said the agency held two roundtables on the topic last year and wants market data through the comment process.

What happens next

The proposal is not final. It will be published in the Federal Register, after which the SEC will accept public comment for 60 days.

Market participants including exchanges, broker-dealers and other trading venues are likely to weigh in on whether rescinding the rules would reduce compliance burdens and costs, or weaken protections against trade-throughs and locked or crossed markets.

The SEC said it will review the comments before deciding whether to finalize, revise or abandon the proposal.

Revision note

Initial automated publication.