SEC Plans to Repeal 20-Year Trade-Through Rule, Vote Scheduled Next Week
N.R. Finch
The SEC will vote on June 11 to propose abolishing the two-decade-old trade-through rule — the regulation that forces brokers to honor the national best bid and offer for retail investors. If it goes, the plumbing of US equity trading gets rewritten.
What does this rule actually protect?
The trade-through rule bars exchanges, alternative trading systems, and wholesalers like Citadel Securities and Virtu Financial from executing trades that ignore the national best bid and offer (NBBO — the best available price across all US venues at any given moment).
In plain terms = if Exchange A is showing the best price for your order, no other venue can pretend it doesn't exist and fill you at something worse.
This means → the rule is essentially a retail price-protection backstop. Without it, whether your order gets the best price depends on your broker's and market maker's goodwill.
Why is the SEC moving against it now?
SEC Chair Paul Atkins opposed the rule as a commissioner when it was finalized in 2005, citing concerns about long-term unintended consequences.
Critics make three arguments: the rule fragments trading across too many venues, raises transaction costs, slows execution — and strips investors of the right to choose where they trade.
This means → this is not a sudden policy pivot. It is a 20-year-old objection finally getting its shot. SEC Trading and Markets Director Jamie Selway confirmed that full repeal is "on the table."
What happens after the vote?
The White House Office of Management and Budget (OMB) completed its review on Wednesday, clearing the administrative path for the June 11 commission vote.
But the vote is only the starting gun: if approved, the proposal enters a public-comment period and a full notice-and-comment rulemaking process before any final rule takes effect.
This reflects the SEC's playbook — lock in the policy direction with a vote, then absorb market pushback through the rulemaking timeline. The real fight is just beginning.
What should retail investors watch for?
The central question is straightforward: will scrapping the rule materially weaken the price-protection mechanism for retail orders?
Supporters say removing fragmentation lowers overall trading costs, so retail benefits. Opponents say without a mandatory best-price guarantee, market makers have no incentive to give you the best fill.
In plain terms = the debate boils down to one thing: can market competition replace regulatory mandate? The answer won't come until the rule is finalized and the data rolls in.
Content is for reference only, not financial advice.