SEC Proposes Repeal of Equities Trade-Through Rule

SEC Proposes Eliminating Rule to Ensure Fair Treatment for Investors

The Securities and Exchange Commission (SEC) has proposed eliminating a rule that aims to ensure investors receive better prices for their transactions. The current version of the so-called trade-through rule has been in place since 2005. It prohibits exchanges, alternative trading systems, and wholesalers like Citadel Securities and Virtu Financial Inc. from executing trades that "trade-through" or execute below the national best bid or offer price. This has helped ensure individual investors receive fair treatment.

SEC Chairman has been a critic of the rule since its inception, dissenting against it when he was a Republican commissioner. He has argued that the measure forces brokers to focus solely on the price a trade executes at rather than other factors such as speed or preferred trading venue. The proposal aims to eliminate the trade-through rule and another rule that prevents trading venues from "crossing" or going above a protected quote.