Allium Comments on the SEC's Proposal to Rescind Regulation NMS Rules 611 and 610(e)

Allium has submitted a comment letter to the U.S. Securities and Exchange Commission supporting its proposal to rescind Rules 611 and 610(e) of Regulation NMS.

Rule 611, the trade-through rule, was adopted in 2005 to protect displayed quotations across trading venues by preventing trades from executing at prices inferior to protected quotes available elsewhere. Rule 610(e) is the companion provision restricting locked and crossed markets.

The market those rules were designed for looks very different today. Trading is highly automated and interconnected, routing technology has improved, and participants have access to far more market and execution-quality information than they did in 2005.

We agree with the Commission that this creates room for competition and innovation to shape how markets develop, rather than a uniform prescriptive rule.

Rescission does not remove best execution

Rescinding Rule 611 would remove a uniform trade-through restriction. It would not remove broker-dealers' independent duty of best execution. That duty stands on its own: firms must exercise reasonable diligence to obtain the most favorable terms reasonably available under the circumstances.

What may change is the evidence behind it. Firms that have leaned on Rule 611 controls or protected-quote snapshots as a material part of their best-execution reviews would likely need to reassess those processes. That is a practical consequence of removing the trade-through prohibition, not a new legal obligation.

Any additional guidance the Commission offers for that transition should stay principles-based. Best execution depends on the customer, the order, market conditions, and the alternatives reasonably available. Prescriptive requirements would date quickly and recreate some of the rigidity the proposal is trying to remove.

When execution evidence changes

A protected quote is a clean object. It is one number, published by a registered venue, in a format everyone already agrees on. Best-execution evidence built on it is comparable by construction.

It is no longer the only kind of evidence in the room. Execution venues already produce different records of what happened, and that variation will widen as distributed-ledger and smart-contract applications enter securities markets. The same trade in the same security can arrive as an order-management log from one venue and as a settled transaction on a public ledger from another. Both can be accurate. Neither is automatically comparable to the other, because they carry different timestamps, different notions of when execution is final, and different assumptions about what counts as the price.

Different evidence should not produce incomparable standards. The regulatory question stays the same in either case, which is whether the intermediary exercised reasonable diligence and can support its judgment with reliable evidence.

A common vocabulary for measuring execution quality

This is the core recommendation in our letter. We suggest that the Commission and self-regulatory organizations encourage the development of a common, technology-neutral measurement vocabulary for execution quality.

The objective is not a single benchmark, process or market architecture, and we are not proposing a new reporting mandate. Shared definitions would make execution-quality evidence more comparable across market structures while leaving firms free to decide how orders are routed and executed.

Standardize evidence, not outcomes.

There is precedent for this. Rule 605 standardizes the disclosure of execution-quality information without establishing that any single statistic determines whether best execution was achieved. A measurement vocabulary can serve the same limited function: consistent definitions that stay technology-neutral, reproducible, and clear about their assumptions and limitations. It should be developed incrementally, and in coordination with the reporting, recordkeeping and audit-trail regimes already in place.

Where Allium fits

Much of our work at Allium is about this exact problem: turning records produced by different systems into data that can be compared, reproduced and audited.

As new execution models emerge, that problem becomes more important. Regulation should leave room for market structures to evolve while preserving the evidence that accountability and investor protection depend on.

The Commission’s proposal moves in that direction, and we support it. Read Allium's full comment letter to the SEC