I am very pleased that we are convening to discuss what I have viewed as a grave misstep since I served as Commissioner in the Aughts: that is, Rule 611, also known as the “Trade-Through Rule.”
I have opposed the Trade-Through Rule since its inception and have elaborated on my concerns, from this very stage and elsewhere, many times since then.
While a central aim of Rule 611 was to incentivize displayed liquidity, we have seen trading activity increasingly occur elsewhere the last two decades. I am concerned that what the Rule rather incentivized was a proliferation of new trading venues, which in turn fragmented liquidity and created an increasingly complex, costly, and opaque marketplace for order execution.
Unfortunately, this outcome should not surprise us. Even well-intentioned regulation can yield suboptimal results.
As then-Commissioner Cynthia Glassman and I pointed out at the time of its adoption, Rule 611 prioritized the Commission’s assumptions about the way that markets and investors should interact above what could emerge from competition and market forces.1 The “market for markets,” as it were, has been disrupted by regulation. To that end, I am pleased to support today’s proposal to rescind Rule 611 and Rule 610(e).
In proposing these amendments to Rule NMS, the SEC invites public comment and welcomes data from the marketplace to inform rulemaking. This discussion began transparently, as the staff held two roundtables on this topic last year. I look forward to continuing the robust debate on these matters as the public submits comments in response to this proposal. I encourage market participants to share data, when possible, that inform their positions.
Before we proceed to the staff presentation, I should like to thank the market participants who participated in the SEC’s roundtables on this topic last year and for their valuable input.
I should also like to thank the staff for their hard work in developing today’s proposal:
In the Division of Trading and Markets: Jamie Selway, Jon Kroeper, Andrea Orr, Alex Jadin, Richard Holley, Ted Venuti, Kevin Brennan, Sarah Counts, Jenna Dodd, David Liu, Gita Subramaniam, Dan Mathisson, Keegan Murphy, Elizabeth Johnson, Yue Ding, Sharon Park, and Nick Shwayri.
In the Office of the General Counsel: J. Russell McGranahan, Elise Bruntel, Donna Chambers, Ronesha Butler, Cynthia Ginsberg, and Rebecca Orban.
In the Division of Economic and Risk Analysis: Joshua White, Oliver Richard, Lauren Moore, Paul Barton, John Ritter, Claude Courbois, Peter Dixon, Erika Frost, Robert Girouard, Kevin Roshak, Seung Won Woo, Donald Edmond, and Charles Woodworth.
1Dissent of Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption of Regulation NMS, id. at 37639-43 (“Joint NMS Dissent”).
