Best execution if the Order Protection Rule goes

What the change implies

On June 11, 2026, the Securities and Exchange Commission (SEC) proposed to rescind Rule 611, the Order Protection Rule, and Rule 610(e), the locked and crossed markets provision, of Regulation NMS.¹ Rule 611 is the trade-through prohibition: a trading center generally cannot execute an order at a price inferior to a protected quotation displayed elsewhere, subject to narrow exceptions such as the intermarket sweep order (ISO).² For two decades that prohibition has made the national best bid and offer (NBBO) a regulatory anchor. It is the reference price against which routing is measured. The NBBO protection ensured that an execution at a price other than the best displayed price is a rarity.³ The proposal does not reach listed options, which keep their own trade-through and locked and crossed protections under the Options Order Protection and Locked/Crossed Market Plan.¹⁶

The proposal to remove the rule removes that guarantee, but the obligation of best execution still stays. The Commission's position is that best execution, which implies the broker's obligation to seek the most favorable terms reasonably available, stays and that it can reasonably protect investors even without the rule.⁴ Commissioner Mark Uyeda, supporting the proposal, framed it as a beginning rather than an endpoint, one that unsettles long-standing assumptions and raises open questions about best execution, transparency, trading mechanics, and investor confidence.⁵ The comment period closed on August 17, 2026, and the Commission has not yet adopted a final rule.⁶

The trade-through restriction offered a measurable metric: an execution either printed through a protected quote or it did not, and a machine could test it. Best execution however is a judgment call about whether the route sought the best terms, weighed across price, size, speed, and cost. With the measurable metric gone, what benchmark would a judgement on best execution be measured against?

However, it is pertinent to note that the case for treating the rule as redundant is not yet settled. The Commission runs its own before-and-after tests. For example, when the tiered round-lot definition extended protection to 40-share quotations in certain higher-priced stocks in November 2025, the off-exchange trade-through rate for those trades fell from 12.6 percent to 0.2 percent, and the on-exchange rate fell from 1.6 percent to 0.5 percent, with no comparable decline in the stocks the change did not touch.¹⁷

What a benchmark is and its importance

A benchmark is a reference price a firm measures an execution against. There are two points against which this is anchored. The arrival price is the market price at the instant an order reaches the desk; measured against it, a buyer wants to pay as little more as the market allows, and the gap records how much the order moved the price by being worked. The interval volume-weighted average price (VWAP) is the average price of every trade in the security while the order is worked, each weighted by its size; measured against it, a buyer wants to have paid less than the market's own average over the same window.

Alongside the benchmarks sit the execution-quality measures the SEC's own reporting rules define. These are the effective spread, realized spread, price improvement relative to the quote, and time to execution.⁷ Together they answer the question the trade-through rule used to answer mechanically: did the customer get a good result, and can the firm show it?

With the rescission of the rule, the benchmark now becomes crucial. Today the trade-through rule keeps venues interconnected and quotes competitive, which is part of what makes the NBBO a reliable yardstick in the first place. Some commenters have questioned whether quoting activity and along with it the integrity of the NBBO would weaken and which would have an effect on the very basis on which best-execution analysis leans on.⁸ Commenters have since taken the point further. The Committee on Capital Markets Regulation argues that rescission also deletes the distinction between automated and manual quotations, so quotations that are not immediately executable, or that carry deliberate access delays, would still enter the NBBO.¹⁸ The Securities Industry and Financial Markets Association makes the same argument from the other side: Rule 611 held a floor under the quality of the NBBO, because a quotation that set the NBBO was generally one a firm could reach, and rescission takes the floor away while leaving the NBBO in place.¹⁹ If we were to rely on this reading, then the yardstick does not merely loosen; what it is made of changes. The obligation to measure grows heavier with the rescission. A firm's answer is to make its benchmarks deliberate: chosen in advance, applied consistently, and never swapped after the fact to flatter a result.

What would compliance look like now

Under Financial Industry Regulatory Authority (FINRA) Rule 5310, a firm must use reasonable diligence to find the best market and obtain a price as favorable as possible under prevailing conditions. While the rule does not ask for a review order by order, the obligation to conduct a regular and rigorous review of execution quality, at least quarterly, security by security and order type by order type remains.⁹ Three key features of the obligation are what would become key once the trade through rule is gone. First is that the obligation cannot be transferred: when a firm routes customer flow to another for handling, both the routing firm and the receiving firm hold it.¹⁰ Second, payment for order flow (PFOF), rebates, and routing to affiliated venues cannot be allowed to interfere with the search for best terms.¹¹ And thirdly, the review must be evidenced with data, the routing decisions, and the rationale behind them, documented well enough to defend.¹²

On July 24, 2026, FINRA opened a consultation on modernizing that guidance in light of the proposal.²⁰ It does not propose to change the text of Rule 5310, which FINRA believes stays appropriately calibrated, and instead asks the industry to settle what rescission leaves open. FINRA asks whether the NBBO will remain an important reference for measuring price improvement once it is no longer protected, and what alternatives, such as time-weighted or volume-weighted average price, could take its place. It also asks in what circumstances a firm could route to displayed liquidity at a price inferior to the best displayed price and still meet its obligations. A third question asks whether safe harbors should be written into Rule 5310, so that activity within their scope, such as an execution carried out under a documented regular and rigorous methodology, counts as compliant. A safe harbor of that kind would put a testable line back where rescission removes one. Comments close on September 25, 2026.

Two parts of that compliance are significant and both are set out in the callouts below: the inventory a firm builds of everything its systems and policies still say about the old rule, and the record by which a single routing decision is defended once the rule is gone.

Rule 605 and 606: the disclosures become the proxy

The public disclosures of execution quality and routing become the most visible proxy for best execution when the rule is rescinded. Rule 605 requires standardized monthly reports of execution-quality statistics; the SEC's March 2024 amendments expanded the reporting entities to include broker-dealers that introduce or carry 100,000 or more customer accounts, modernized the order-size and order-type categories to capture odd lots and fractional and larger orders, and refined the time-to-execution and spread metrics. The amendments took effect on August 1, 2026, and the first reports under them, covering August trading, are due before the end of September 2026.¹³ Rule 606 requires firms to disclose how customer orders are routed, including the financial arrangements (PFOF among them) that may bear on routing.¹⁴

Commissioner Uyeda invited comment specifically on how execution quality and best-execution practices might evolve without the rule, and market participants have argued that any weakening of the trade-through prohibition should be preceded by stronger execution-quality and routing disclosure norms.¹⁵ For reporting and record-keeping teams, the practical point is that after rescission, the Rule 605 and 606 reports become much more important. The numbers in them, and the routing behind them, have to be defensible.