The Ten Year Itch: Remarks at the Roundtable on Trade-Through Prohibitions

Good morning, and thank you all for being here. I will keep my statement short. I recently touched on the trade-through rule in a speech,[1] and I want to give as much time as possible to our impressive panelists. Today's agenda is packed with panelists and issues for discussion.

Today's focus is on Rule 611 of Reg NMS, also known as the trade-through rule, the order protection rule, or simply OPR. It is not only a rule of many names, but a rule that inspires many different opinions. The rule was controversial enough when it was adopted in 2005 to prompt a lengthy 44-page dissent from Commissioner Cynthia Glassman and then-Commissioner Paul Atkins.[2] Ten years later, in 2015, Rule 611 was the subject of the very first meeting of the Commission's Equity Market Structure Advisory Committee, which featured some of the same panelists and moderators that will speak later today.[3] Ten years later, here we are again. Rule 611 remains in our rulebook, remains controversial, and remains a hot topic in Commission corridors. By now, the top-line arguments are familiar. Critics of the rule blame it for increasing complexity, fragmentation, and costs, while defenders credit it for increasing competition and protecting investors. I am eager to hear more in-depth discussion from our panelists, many of whom have spent their careers working in a market shaped by Rule 611.

The insights gained from today's discussions should help the Commission determine whether to move forward with amendments to Rule 611, and if so, what form those amendments should take. Should Rule 611 be retained, repealed outright, or amended, so as to apply only to exchanges above a certain volume threshold? If a volume threshold is appropriate, what should that threshold be? And if Rule 611 is amended or repealed, should other NMS rules, such as the access fee cap in Rule 610 or the minimum tick size in Rule 612, also be changed? Should our thinking on the trade-through rule apply equally with respect to the joint industry plan equivalent in the options market? Does that market's experience with its trade-through rule mirrors the experience of the equity market?[4] On these matters we will benefit greatly from the wisdom of the panelists.

Even with the wisdom of our panelists, and the expertise and diligence of our staff, changing these rules will not be an easy task. Our markets are dynamic systems made up of, among others, investors, exchanges, ATSs, broker-dealers, proprietary trading firms, and technology providers, each of whom operates with different incentives, business models, technical and operational capabilities, and risk tolerances. This complexity is wonderful and keeps our markets vibrant and competitive. But it makes the task of writing, amending, or repealing rules that regulate this market structure challenging. Compounding this challenge is the rapid pace of technological innovation, which alters the markets in ways that we cannot foresee. Any amendments we undertake must try to account for technological changes we can anticipate, such as currently ongoing efforts regarding tokenization, as well as those we cannot. That the task is hard should not foreclose Commission action, but will require us to be careful, deliberate, and collaborative. Only then can we create durable and beneficial change to our markets.

Thank you again. I am looking to a fascinating, productive discussion-so productive that you do not find yourselves back here discussing this same topic in 2035.