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Thank you, George [Georgiev]. Good morning and welcome to the Committee members and today’s panelists. Thank you for your participation in the meeting. Thank you also to Marc Sharma, Adam Moore, Charles Kwon, and Adam Anicich for their tireless work with the Committee. I expect that both of today’s topics—the use of AI in public company disclosure and Reg NMS—will inspire spirited, informative discussion. The last IAC meeting set a high bar, and I look forward to another meeting replete with lively engagement by Committee members. Such discussions, though I typically watch them only on rerun, are invaluable to me. I have some questions for your consideration. First, for the panel on artificial intelligence: * How extensively do issuers use AI to compare and make disclosures? Does AI improve disclosure or degrade it by making it less accurate or more useless boilerplate? * Are AI technologies likely to entrench current conventions regarding structured data and its use in disclosure? If so, how can the SEC ensure that our rules remain conducive to innovation? * Are AI-enabled technologies narrowing or widening the relative gap between large and small entities’ experiences and expenses associated with disclosure and structured data? If the divide is widening, how can we respond? * Dramatic predictions, some dire and some idealistic, about how AI is affecting our markets and society fill podcasts and newscasts. The unwavering confidence underlying some of these predictions is a bit alien for someone whose years in and around financial regulation counsel against such certainty. We must be careful in addressing issues or problems we do not fully understand. Regulating prematurely, which is often a response to fear of the unknown, can deprive Americans of the benefits of technological innovation, build regulatory barriers to entry, ensconce incumbents, and drive innovators to other industries and other countries. That said, are there any issues presented by AI-enabled technologies that are currently ripe for Commission review? Today’s second panel follows nicely on the two panels the Commission held last year on Reg NMS and the Trade-Through Prohibition. Continuing that discussion makes sense now that the Commission has proposed to rescind both Rule 611 and the prohibition on locked and crossed markets. I have several questions I hope you will consider: * Many commenters raised concerns that rescinding Rule 611 would reduce the NBBO’s integrity. What can we do to ensure that the post-611 NBBO continues to be a reliable benchmark? * How will the proposed amendments affect retail investors and institutional investors differently? * If other changes to Reg NMS are necessary, how should the Commission sequence them? Thank you again for your work, and enjoy the discussions. Today’s Investor Advisory Committee meeting likely is my last. I may be a lame duck, but I am looking forward to seeing how you help future Commissions keep their ducks in a row.

SIFMA today released the following statement from president and CEO Kenneth E. Bentsen, Jr. on the Securities and Exchange Commission’s (SEC) proposed amendments to rescind Rules 611 and 610(e) of Regulation NMS: “SIFMA appreciates the due diligence the SEC performed ahead of today’s proposed amendments to Regulation NMS, including rescinding Rule 611 on trade-through prohibitions, Rule 610(e) restricting locking and crossing quotations, and related defined terms in Rule 600. We look forward to commenting on the proposal and appreciate Chair Atkins’ intention to ‘simplify market structure and reduce costs for market participants while allowing competition, innovation, and other market forces to shape the continuing evolution of our equity markets’. “We are encouraged that the proposal includes making conforming changes to other related provisions. SIFMA has long stated that market structure involves many moving, interconnected pieces. Before making any changes, it is important to identify and analyze interconnected market structure elements and study what corresponding impacts could stem from any intentional change, as well as the cumulative net effect of changes. Our markets are the envy of the world. Investors – both retail and institutional – enjoy narrow spreads, low transaction costs, fast execution speeds, high levels of pre and post trade transparency, and strong investor protections. It is important to continue to analyze what changes could mean for all investors. This is particularly true today, as the landscape for modern securities markets is under consideration in conjunction with extending trading into overnight hours and the incorporation of tokenized securities.”

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.  --- [1] Commissioner Hester M. Peirce, Horses and Bourses: Remarks at the 12th Annual Conference on Financial Market Regulation (May 16, 2025), https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-financial-market-regulation-051625. [2] Dissent of Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption of Regulation NMS (June 9, 2005), https://www.sec.gov/files/rules/final/34-51808-dissent.pdf. [3] See Equity Market Structure Advisory Committee Meeting Transcript (May 13, 2015), https://www.sec.gov/spotlight/emsac/emsac-051315-transcript.txt; see also Equity Market Structure Advisory Committee Archives, https://www.sec.gov/spotlight/emsac/emsac-archives.htm   [4] The options market is fascinating and merits its own more comprehensive roundtable.

The Securities and Exchange Commission announced today that it will host a roundtable on September 18, 2025, to discuss trade-through prohibitions in the National Market System (NMS) stock and listed options markets.  “Reg NMS and its Rule 611 have not served investors or broker-dealers well, given the market distortion and resulting gamesmanship by those that seek to take advantage of the Reg NMS structure,” said Chairman Paul S. Atkins. “It is incumbent upon the Commission to give the public an opportunity to weigh in on items in our rulebook that deserve a refresh, and I look forward to the input we will receive on various aspects of the Rule 611 trade-through prohibition applicable to NMS stocks and the analogous NMS plan trade-through prohibition applicable to listed options.” The roundtable will be open to the public and held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C. The discussion will be streamed live on SEC.gov, and a recording will be posted at a later date. Information regarding the roundtable’s agenda and speakers will be posted before the event. Please note that the number of in-person participants may be limited and visitors will be subject to security checks. Members of the public who wish to provide their views on the current Rule 611 trade-through prohibition applicable to NMS stocks and the analogous NMS plan trade-through prohibition applicable to listed options may submit comments electronically or on paper. Please submit comments using one method only. Information that is submitted will become part of the public record of the roundtable and posted on the SEC’s website. All comments received will be posted without change. Persons submitting comments are cautioned that personal identifying information is not redacted or edited from comment submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number 4-862, and the file number should be included on the subject line if email is used. Electronic Comments: Use the SEC’s online submission form or send an email to rule-comments@sec.gov with “File Number 4-862” included in the subject line. Paper Comments: Send paper comments to Vanessa Countryman, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090.

Following the US SEC’s approval of the Consolidated Tape (CT) governance plan in late 2024, the ‘Market Data Infrastructure Rules’ (MDIR) and the ‘Minimum Pricing Increments (a.k.a. Tick Size), Access Fees, and Transparency of Better Priced Orders Rules’ (TBPO) are set to be implemented in November 2025. Odd Lot information is to be included by May 2026. The 897-page MDIR and 518-page TBPO introduced new frameworks, definitions, and updated various provisions of Reg. National Market System (NMS). Let’s dive into the approved changes and review how complicated they are:  * §242.600(b)(21) the expanded definition of ‘Core Data’ when implemented will include: (A) quotation sizes; (B) aggregate quotation sizes; (C) best bid and best offer; (D) national best bid and national best offer; (E) protected bid and protected offer; (F) transaction reports; (G) last sale data; (H) odd-lot; (I) depth of book data; and (J) auction information.  * Among which, most Investment Firms (IFs) are excited about getting “Five Levels of Depths” at the Securities Information Processors (SIPs)/ CCs for the first time. §242.600(b)(26) “the definition of depth of book data …  included price levels are the five prices below the national best bid and above the national best offer…” Complications are:  * MDIR added a new ‘40 shares’ tier, and §242.600(b)(82) when implemented, will have a four-tiered definition of ‘Round Lot’, i.e. “100 shares for stocks priced $250.00 or less per share, 40 shares for stocks priced $250.01 to $1,000.00 per share, 10 shares for stocks priced $1,000.01 to $10,000.00 per share, and 1 share for stocks priced $10,000.01 or more per share.” The SEC expects NMS stocks that have an average closing price over $250 per share will have a narrower spread.  * Investor education is needed given quotation sizes will no longer be represented by the number of round lots, but core data elements will be disseminated by SIPs/ CCs in share sizes, rounded down to the nearest round lot multiple. Also, “quotations for odd-lot orders priced better than the NBBO are required to be displayed as the number of shares available in an odd-lot size that are aggregated at the same price… odd-lots that aggregate into a round lot … could also establish a price level, as long as there is at least one round lot of interest—unitary or aggregated—on at least one SRO.” The SEC did acknowledge that both the round lot definition adopted in the MDIR and the amended tick size will impact the NBBO.   * Given new round lot NBBO will be protected, order protection requirements in Rule 611 and the prohibitions on locked and crossed markets in Rule 610(d) will be expanded: “(a) only [134] stocks priced over $250.00 will be assigned to a round lot size less than 100; and (b) increasing the notional size thresholds [to $10,000] of the new round lot sizes … [12 NMS stock that] currently have non-100 round lot sizes—would be assigned to round lot sizes based on their per share price… all round-lot orders in these stocks would be protected quotations...” Per MDIR footnote 399, “non-automated quotation (i.e. ‘manual quotation’ a.k.a. ‘slow quote’) are excluded in core data with respect to protected bid or offer.” Benchmark reference price arbitrage would persist due to multiple-NBBOs from different PPs/ SIPs/ CCs.  * TBPO further requires that odd-lot information to include a best odd-lot-orders to buy and sell (BOLO). TBPO footnotes 908, 965 and 968 stated, “initially market participants may need to explain to their customers … the technical and operational requirements … will necessitate distinct product changes … literally hundreds of exchanges, vendors, and subscribers, each with different development priorities and system capabilities… the compliance date [by May 2026] … testing… exchanges … to file … changes pursuant to … new round lot definition.”    * Per TBPO footnote 910, “BOLO may serve as the benchmark execution price for execution quality statistics in rule 605 reports” Interestingly, at footnote 917, “the Commission . . . is NOT setting forth minimum data elements needed to achieve best execution … will be a supplement to, rather than a replacement for, price improvement statistics [in order size categories based on notional order size and whether the order is for a fractional share, odd-lot, or round lot] relative to the NBBO… mitigate concerns about ‘gaming’ execution quality reports.”   * Regarding tick size, §242.612(b)(2) when implemented, will permit SRO, Alternative Trading System, vendor, or broker or dealer to display, rank, or accept from any person a bid or offer, an order, or an indication of interest in an increment no less than $0.005 if the NMS stocks have a narrow Time Weighted Average Quoted Spread (TWAQS =< $0.015) during the ‘Evaluation Period’. The SEC expects the spreads will be reduced for these NMS stocks (approx. 58% of daily trading volume or 43% in dollar volume).  If the TWAQS was greater than $0.015, the minimum tick size remains at $0.01.   * §242.600(b)(89)(i) requires “the primary listing exchange for each NMS stock to calculate and provide to CCs, SAs, and the exclusive SIPs (E) an indicator of the applicable round lot size …” Per §242.612(a)(2), “TWAQS means the average dollar value difference between the NBB and NBO during regular trading hours where each instance of a unique NBB and a unique NBO is weighted by the length of time that the quote prevailed as the NBB or NBO.” 3-month Evaluation Period (January-March / July-September) has a one-month lag for tick and round-lot tier assignment; thus the 6-month operative period are from May to October, and from November to April.  * In view of the Exchanges’ motion, the SEC has a partial stay of the amendments to rule 600(b)(89)(i)(F) that requires “the primary listing exchange to provide an indicator … of the applicable minimum pricing increment… under the definition of regulatory data” with respect to Order Protection Rule 612, and rule 610(c) regarding reduction in access fee cap.  * Retail Liquidity Programs (RLP) under SEC exemptions would not be affected, where sub-penny price improvement will continue to be permitted to allow Exchanges to compete with OTC markets. That being said, “quotes in RLP are not displayed…. market participants do not see the full liquidity available in RLP.”  * The high concentration of trading in closing auctions is a phenomenon related to the growth of passive, index-tracking investment strategies through mutual funds, ETFs, and similar products. The SEC believes that “order imbalances and indicative prices helps market participants determine whether to participate in auctions,” thus, action information will be included in core data per §242.600(b)(5), but IFs are not obligated to consume it, i.e. subscription is optional.  * The SEC did consider the outbound message traffic, and CCs will “only be required to generate and offer one or more consolidated market data products, which can contain some or all of the elements of consolidated market data” per §242.600(b)(16) framework. ‘Going fast by traveling light’ is how the SIPs can catch-up to the exchanges’ PPs.  * To curb Exchanges from optimally restricted access to price information, MDIR §242.603(b) “requires SRO to provide … to all CCs and SAs in the same manner and using the same methods … as such SRO makes available any information to any other person.” Amid we criticize the SEC for not going far enough to “deemphasize speed as a key to trading success,” it is light years ahead of the EU.   Overall, the changes are comprehensive around one single theme – increasing NBBO refresh rates with tighter spreads. Per TBPO page 181, “The round lot definition will narrow the spread for NMS stocks that have an average closing price over $250 per share by showing better prices for these stocks. The amended minimum pricing increments will reduce the spread for those NMS stocks that have a narrow TWAQS and will allow these stocks to be priced more competitively in smaller increments, which will more accurately reflect supply and demand.”   I have said this in the past, “queuing and wait time at the checkout counters if putting in layperson terms... artificially altering the queue (equal waiting line at all checkout counters) may affect the ‘apparent,’ not the real supply and demand for securities...” Hubert DeJesus at BlackRock shared this insight during a SIFMA roundtable in 2022, “When the number of price points is reduced, more liquidity gathering aggregate at those price points. But when the number of price points is increased, then it essentially fragmenting the quote and dispersing liquidity across multiple prices.”   TBPO footnote 1005 described the excessive intermediation phenomenon, “Because profiting off of the spread is easiest when the marketable orders filled are small, obtaining high priority in the queue at each tick is essential to such strategies. High-frequency, proprietary traders are generally better able to obtain such priority, and consequently investors may have less opportunity to profitably fill their trades using limit orders.”  Average investors lack sophistication to compete. Meanwhile, data centers rent seek 24x7, Exchanges maximize money making hours and strategic moves to locate away from Secaucus, Mahwah, Carteret present new opportunities andchallenges. Lastly, let’s wait and see if SIPs/ CCs are willing to “increase bandwidth to cater for the additional data,” likely at an additional cost to the subscribers. By Kelvin To, Founder and President of Data Boiler Technologies  Data Boiler is a Type C organization member of the European Commission’s Data Expert Group. Between my patented inventions in signal processing, analytics, machine learning, etc. and the wealth of experience of my partner, Peter Martyn, we are about Market Reform, Governance, Risk, Compliance, and FinTech Innovations to create viable paths toward sustainable economic growth. 

Over half a century has passed since Electronic Communication Networks (ECNs) disrupted the traditional floor-based model of stock exchanges. Ushering in the era of electronic trading. Since Regulation National Market System (Reg. NMS) was adopted almost…

Over half a century has passed since Electronic Communication Networks (ECNs) disrupted the traditional floor-based model of stock exchanges. Ushering in the era of electronic trading. Since Regulation National Market System (Reg. NMS) was adopted almost…

SEC has proposed rescinding Rule 611 of Reg NMS, which contains the trade-through prohibition.

Washington D.C., July 21, 2025 — The Securities and Exchange Commission announced today that it will host a roundtable on September 18, 2025, to discuss trade-through prohibitions in the National Market System (NMS) stock and listed options markets. “Reg NMS and its Rule 611 have not served investors or broker-dealers well, given the market distortion …

Applying Reg. NMS to crypto exchanges could enhance transparency through reforms including a consolidated market data feed and equal data access...

Washington, D.C.--(Newsfile Corp. - July 21, 2025) - The Securities and Exchange Commission announced today that it will host a roundtable on September 18, 2025, to discuss trade-through prohibitions in the National Market System (NMS) stock and listed options markets. “Reg NMS and its Rule 611 have not served investors or broker-dealers well, given the market distortion and resulting gamesmanship by those that seek to take advantage of the Reg NMS structure,” said Chairman Paul S. Atkins. “It...

Applying Reg. NMS to crypto exchanges could enhance transparency through reforms including a consolidated market data feed and equal data access...

Industry group is "encouraged that the proposal includes making conforming changes to other related provisions."

An SEC roundtable discussed how market structure has changed since the introduction of Reg NMS.