Specifically, the SEC will assess whether an intentional delay is "so short as to not frustrate the purposes of the Order Protection Rule
by impairing fair and efficient access to an exchange's quotations.
shtml) national securities exchange and revise the interpretation of the so-called order protection rule under its Regulation NMS could create a market structure benefiting some participants and costing other participants more than $400 million a year, according to one analysis of the potential effects of the SEC's two related moves.
A key differentiator between the newly approved IEX and other national securities exchanges such as the New York Stock Exchange, Nasdaq Stock Market and Bats BZX Exchange was blessed by the SEC in its revised interpretation of the order protection rule.
The Order Protection Rule
generally requires that trading centers trade at the best-quoted prices or route orders to the trading centers quoting the best prices.
Specifically, we use data from US equity markets in 2008 to investigate the US Securities and Exchange Commission's (SEC) "Flickering Quote Exception" to the Regulation National Market System (Reg NMS) Order Protection Rule that defines the benchmark price for evaluation of trade throughs and provides a one second look back exception.
Section I provides an overview of the SEC Reg NMS Order Protection Rule and the Benchmark Quote Exception and describes the quote-arbitrage trading strategy.
The Commissions interpretation applies to the Order Protection Rule under Regulation NMS, which protects the best priced automated quotations of certain trading centers by generally obligating other trading centers to honor those protected quotations and not execute trades at inferior prices.
The Commissions updated interpretation determined that a small delay will not prevent investors from accessing stock prices in a fair and efficient manner consistent with the goals of the Order Protection Rule.