Order protection rule

(redirected from Rule 611)

Order protection rule

A provision of the National Market System that forces trading centers to quote equivalent and consistent execution prices for a security on all exchanges that allow trading of that security. Also known as Rule 611 after its designation in the Federal Register, the Order Protection Rule is designed to prevent trade-throughs, or trades executed at prices other than the best-quoted price for that security. Rule 611 applies to all stocks on major indices and most over-the-counter stocks.

Order Protection Rule

A rule requiring investors to receive a price for a security that is at least equivalent to the price for the same security on another exchange. That is, the order protection rule forbids an order from being executed at a price below the price on another exchange. There are various exceptions; notably limit orders and IOC orders do not necessarily abide by the order protection rule. The rule is a provision of Regulation NMS and is designed to help integrate American exchanges and to protect investors from bad deals. It is also called Rule 611.

Order protection rule.

The order protection rule, part of Regulation NMS -- for National Market System -- adopted by the Securities and Exchange Commission (SEC) in 2005, requires that every stock trading center establish and enforce a policy that ensures no transaction will be traded-through, or executed at a price that's lower than a protected quotation in that security displayed by another trading center.

A protected quotation is one that's immediately and automatically accessible. The order protection rule, also called Rule 611, does allow certain exceptions, which apply to limit orders, immediate-or-cancel (IOC) orders, and intermarket sweep orders (ISOs).

References in periodicals archive ?
Under the Securities and Exchange Commission (SEC) Rule 611 exchanges that have not matched a new National Best Bid and Offer (NBBO) can trade at the old NBBO for one second.
Any trades that execute at Benchmark Compliant Prices are not trade throughs under Rule 611.
Consequently, the SEC adopted the Benchmark Quote Exception, set forth in paragraph (b)(8) of Rule 611.
These orders may be executed at Benchmark Compliant Prices under SEC Rule 611.
NEW YORK -- TABB Group in a new report released today, "The Reg NMS Order Protection Rule: Preparing for the Impact," says implementing the Securities and Exchange Commission's Regulation NMS Order Protection Rule 611 will have an unprecedented and drastic impact on the equities markets.
Adds Tabb, "With the new regulations such as the intermarket sweep in Rule 611 acting as an enabler for improved routing, firms removing liquidity a fraction of a second faster will win.
The TABB report, in summarizing the National Market Structure (NMS) Rule 611 and its impact, explains the need for private linkages, how participants are repositioning themselves, the importance of being an exchange under the Order Protection Rule and the effect of the rule on best execution, intermarket routing and the various exemptions to the rule, including an intermarket sweep order.