Opting out of the “opt‐out” provision: The new order protection rule from the SEC

The Trade‐through rule (TTR) was established in 1975; it was designed to ensure that investors got the best price available for a stock trade. Under the Trade‐through rule, a customer’s order must be routed to the exchange or order market system where the best current price exists at any given moment. For example, if the best price quote for an order is listed by a specialist market maker at the NYSE, a customer order must be routed to the NYSE floor; it may not “trade through” to another exchange. The TTR is really an anti‐trade‐through rule; i.e. it prevents the trading through of orders. In fact, to reflect this reality, the SEC has given the TTR a new name: The Order Protection Rule. In concept, the TTR is a good idea to ensure that investors get the best price possible when trading stocks. At the time the TTR was adopted, it was designed to address a fragmented marketplace for stock trading. However, the financial markets have changed radically since the rule was first adopted. The dramatic increase in the use of personal computers in the early 1980s as well as the advent of electronic communication networks (ECNs) in the 1990s changed the trading landscape.