Notice2026-06569
Order Granting Limited Exemptions Pursuant to Rule 605(b) of Regulation NMS Under the Securities Exchange Act of 1934 From Rule 605 and Modifying and Rescinding Certain Exemptions Granted Pursuant to Rule 605 of Regulation NMS
Primary source
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Published
April 6, 2026
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 91 Issue 65 (Monday, April 6, 2026)</title>
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[Federal Register Volume 91, Number 65 (Monday, April 6, 2026)]
[Notices]
[Pages 17313-17318]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-06569]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105136]
Order Granting Limited Exemptions Pursuant to Rule 605(b) of
Regulation NMS Under the Securities Exchange Act of 1934 From Rule 605
and Modifying and Rescinding Certain Exemptions Granted Pursuant to
Rule 605 of Regulation NMS
April 1, 2026.
I. Introduction
Rule 605 of Regulation NMS \1\ under the Securities Exchange Act of
1934
[[Page 17314]]
(``Exchange Act'') \2\ requires certain market participants to make
available to the public monthly electronic reports on order executions
in national market system stocks (``NMS stocks'') \3\ that include
uniform statistical measures of execution quality.\4\ In 2024, the
Commission adopted amendments that updated the disclosures required
under Rule 605.\5\ The amendments expanded the scope of entities
subject to Rule 605 (including larger broker-dealers, in addition to
market centers),\6\ modified the categorization and content of order
information required to be disclosed in the detailed execution quality
reports published under Rule 605 (including by modifying the scope of
covered orders subject to disclosures), and required reporting entities
to produce a summary report of execution quality in addition to the
existing detailed disclosures regarding execution quality for covered
orders in NMS stocks.\7\
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\1\ 17 CFR 242.605 (formerly known as Rule 11Ac1-5).
\2\ 15 U.S.C. 78a et seq.
\3\ See 17 CFR 242.600(b)(65) (defining ``NMS stock'').
\4\ See Securities Exchange Act Release No. 43590 (Nov. 17,
2000), 65 FR 75414 (Dec. 1, 2000) (Disclosure of Order Execution and
Routing Practices).
\5\ See Securities Exchange Act Release No. 99679 (Mar. 6,
2024), 89 FR 26428 (Apr. 15, 2024) (Disclosure of Order Execution
Information) (``Rule 605 Amendments Release''). In the Rule 605
Amendments Release, the Commission stated that the compliance date
for the Rule 605 amendments would be 18 months after the effective
date. Thus the compliance date was initially set as December 14,
2025. On September 30, 2025, the Commission extended the compliance
date to August 1, 2026. See Securities Exchange Act Release No.
104147, 90 FR 47552 (Oct. 2, 2025).
\6\ The amendments to Rule 605 expanded the scope of entities
that must produce monthly execution quality reports to include
broker-dealers with a larger number of customer accounts and single
dealer platforms. See 17 CFR 242.605(a)(1).
\7\ 17 CFR 242.605(a)(2).
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The Commission, by the Division of Trading and Markets pursuant to
delegated authority, previously granted several exemptive requests from
Rule 605 to market participants.\8\ By letter dated June 24, 2024,\9\
the Financial Information Forum (``FIF''), among other things, requests
that the Commission provide an exception from Rule 605's reporting
requirement for broker-dealers that execute fractional share orders in
certain limited circumstances and raises interpretive issues that will
require modification to exemptive relief from Rule 605 that the
Commission granted previously.\10\ As discussed below, the Commission
is granting an exemption to broker-dealers subject to Rule 605 from
compliance with Rule 605 for certain OTC market making activities,
rescinding and replacing an exemption previously granted relating to
certain orders received during a trading halt, modifying an exemption
previously granted relating to inactively traded securities, rescinding
and replacing an exemption previously granted relating to certain
orders received during crossed markets, and rescinding an exemption
previously granted relating to the exclusion of manually-received
orders from reporting pursuant to Rule 605(a)(1).
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\8\ See, e.g., letters from Annette L. Nazareth, Director,
Division of Market Regulation, Commission, to Stuart J. Kaswell,
Senior Vice President and General Counsel, Securities Industry
Association (``SIA''), dated March 12, 2001, available at <a href="https://www.sec.gov/divisions/marketreg/mr-noaction/siaexemp.htm">https://www.sec.gov/divisions/marketreg/mr-noaction/siaexemp.htm</a> (``SIA
Exemptive Letter'') and Richard Romano, Chair, Carl P. Sherr, Co-
Chair, NASD Small Firms Advisory Board, dated June 22, 2001,
available at <a href="https://www.sec.gov/divisions/marketreg/mr-noaction/smfirm062201.htm">https://www.sec.gov/divisions/marketreg/mr-noaction/smfirm062201.htm</a> (``Inactively Traded Securities Exemptive
Letter''). The SIA Exemptive Letter and the Inactively Traded
Securities Exemptive Letter granted exemptions from Rule 11Ac1-5. As
part of the adoption of Regulation NMS in 2005, Rule 11Ac1-5 was
redesignated as Rule 605. See Securities Exchange Act Release No.
51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (Regulation NMS)
(``Regulation NMS Adopting Release'').
\9\ See letter from Howard Meyerson, Managing Director,
Financial Information Forum, dated June 24, 2024, to Kathleen Gross,
Senior Special Counsel, and Lauren Yates, Senior Special Counsel,
Division of Trading and Markets, Commission (``FIF Letter''). The
Commission's Division of Trading and Markets previously published
Staff Legal Bulletin No. 12R and Responses to Frequently Asked
Questions Concerning Rule 605 of Regulation NMS (together, ``Rule
605 FAQs'') to address frequently asked questions about then Rule
11Ac1-5 and Rule 605. See Division of Market Regulation: Staff Legal
Bulletin No. 12R (Revised), Frequently Asked Questions About Rule
11Ac1-5 (revised) (June 22, 2001) (``SLB No. 12R''), available at
<a href="https://www.sec.gov/interps/legal/slbim12a.htm">https://www.sec.gov/interps/legal/slbim12a.htm</a>; Responses to
Frequently Asked Questions Concerning Rule 605 of Regulation NMS
(Feb. 22, 2013), available at <a href="https://www.sec.gov/divisions/marketreg/nmsfaq605.htm">https://www.sec.gov/divisions/marketreg/nmsfaq605.htm</a>. In the FIF Letter, FIF requested that staff
of the Division of Trading and Markets update certain of the Rule
605 FAQs and posed additional questions regarding the application of
Rule 605, as amended. See generally FIF Letter.
\10\ See FIF Letter, supra note 9, at 4.
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II. Discussion and Exemptions From Rule 605, as Amended
Rule 605(b) provides that the Commission may, by order upon
application, conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of persons,
securities, or transactions, from any provision or provisions of this
section, if the Commission determines that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.\11\
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\11\ 17 CFR 242.605(b).
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A. Limited Exemption From Rule 605
As amended, Rule 605 provides that market centers, brokers, and
dealers must make publicly available detailed and summary execution
quality reports pertaining to covered orders in NMS stocks that they
receive for execution on a monthly basis.\12\ The requirement that
brokers or dealers prepare Rule 605 reports is limited to larger
brokers or dealers that meet or exceed a specified customer account
threshold,\13\ but brokers and dealers may also be subject to Rule 605
reporting requirements if they meet the definition of a market
center.\14\ To the extent that any broker or dealer meets or exceeds
the customer account threshold and is also a market center, that broker
or dealer must produce separate Rule 605 reports pertaining to each
function.\15\ In response to a request for clarification, in the Rule
605 Amendments Release, the Commission stated that a broker-dealer that
meets the customer account threshold for larger broker-dealers and is
an OTC market maker generally should include in its Rule 605 reporting
pertaining to its market center function all covered orders in NMS
stock that the firm received for execution that are the type of order
for which the firm serves as an OTC market maker.\16\
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\12\ See 17 CFR 242.605(a). See also 17 CFR 242.600(b)(27)
(defining ``covered order'').
\13\ 17 CFR 242.605(a)(7). A broker or dealer meets the
``customer account threshold'' if it introduces or carries 100,000
or more customer accounts through which transactions are effected
for the purchase or sale of NMS stocks. See id.
\14\ Under Regulation NMS, ``market center'' means any exchange
market maker, OTC market maker, alternative trading system, national
securities exchange, or national securities association. See 17 CFR
242.600(b)(55). ``OTC market maker'' means any dealer that holds
itself out as being willing to buy from and sell to its customers,
or others, in the United States, an NMS stock for its own account on
a regular or continuous basis otherwise than on a national
securities exchange in amounts of less than block size. See 17 CFR
242.600(b)(75). See also 17 CFR 242.600(b)(4), (37), (62), and (63)
(defining ``alternative trading system,'' ``exchange market maker,''
``national securities association,'' and ``national securities
exchange,'' respectively).
\15\ 17 CFR 242.605(a)(7).
\16\ Rule 605 Amendments Release, supra note 5, at 26441.
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In addition, in the Rule 605 Amendment Release, in response to a
commenter's request for clarification about whether a broker-dealer
that principally facilitates the trading of fractional shares must
publish a separate Rule 605 report as a market center,\17\ the
Commission stated that ``a reporting entity must produce a separate
Rule 605 report as a market center if it meets the definition of an
`OTC market maker' and receives `covered orders' for
[[Page 17315]]
execution in such capacity.'' \18\ The Commission recognized that ``a
firm may act as an OTC market maker for certain types of orders only''
and that, as an example, a firm may act as an OTC market maker for
fractional shares only.\19\
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\17\ Rule 605 Amendments Release, supra note 5, at 26442.
\18\ Rule 605 Amendments Release, supra note 5, at 26442.
\19\ See Rule 605 Amendments Release, supra note 5, at 26442,
n.170.
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In the FIF Letter, FIF requests that the Commission provide an
exception from Rule 605's reporting requirement for broker-dealers that
execute fractional share orders only in certain circumstances.\20\
Specifically, FIF states that the Commission should provide ``an
exception [from Rule 605 reporting requirements] if the customer-facing
broker-dealer only executes fractional share orders in the following
limited circumstances: [(1)] A customer has a fractional share position
resulting from the customer's participation in a dividend reinvestment
program[; or (2)] A customer has a fractional share position resulting
from a stock dividend with a fractional component received after the
customer has sold the position or transferred its account to another
broker-dealer.'' \21\ FIF also asked for clarification regarding
broker-dealer reporting of fractional share positions in a separate
market center report.\22\
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\20\ See FIF Letter, supra note 9, at 4.
\21\ See FIF Letter, supra note 9, at 4.
\22\ See FIF Letter, supra note 9, at 3-4.
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Pursuant to its authority under Rule 605(b) of Regulation NMS,\23\
for the reasons discussed below, the Commission has determined to
exempt from the requirement to produce separate Rule 605 reports
pertaining to its market center function \24\ any customer-facing
broker-dealer that executes customers' fractional share orders only in
circumstances in which the customer has a fractional share position
resulting from (1) the customer's participation in a dividend
reinvestment program; or (2) a stock dividend with a fractional
component. In such circumstances, a customer-facing broker-dealer may
facilitate its customer's ability to exit out of such fractional share
positions by executing an order to sell the customer's fractional
shares. The customer-facing broker-dealer would not be required to
produce Rule 605 reports as a market center on the basis of this
activity.
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\23\ 17 CFR 242.605(b).
\24\ A customer-facing broker-dealer that meets the customer
account threshold would need to produce Rule 605 reports pertaining
to its broker-dealer function.
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The Commission has determined that such exemption is necessary or
appropriate in the public interest, and is consistent with the
protection of investors. In general, a broker-dealer that facilitates
the trading of fractional share orders by executing those orders as
principal would be acting as an OTC market maker with respect to
fractional share orders and be required to prepare Rule 605 reports as
a market center. This OTC market making activity in the context of a
customer seeking to exit fractional share positions that the customer
obtained due to the customer's participation in a dividend reinvestment
program or a stock dividend with a fractional component occurs
infrequently. Thus, the execution quality statistics prepared by the
broker-dealer would provide a smaller amount of benefits relative to
broker-dealers that execute fractional share orders as principal in a
wider range of circumstances.
Given this smaller amount of benefits, the cost of compliance for
these broker-dealers to produce Rule 605 reports as a market center, as
well as the potential costs if these broker-dealers were not willing to
help their customers exit fractional share positions acquired under
these limited circumstances, are not sufficient to justify the benefits
of their monthly Rule 605 reports. The Commission has therefore
determined to grant an exemption from the requirement to produce
separate Rule 605 reports pertaining to its market center function for
any customer-facing broker-dealer that executes customers' fractional
share orders only in circumstances in which the customer has a
fractional share position resulting from the limited circumstances
discussed above. However, to the extent that a broker-dealer that helps
its customers exit fractional share positions acquired as a result of
their participation in a dividend reinvestment program or their receipt
of a stock dividend also engages in additional OTC market making
activity, the broker-dealer would not be able to rely on the exemption
described herein and would still be subject to Rule 605 reporting
requirements as a market center with respect to the orders related to
helping its customers exit fractional share positions acquired through
a dividend reinvestment program or receipt of a stock dividend with a
fractional component, along with the other order types for which it
acts as an OTC market maker.
This exemption is consistent with the Commission's determination to
adopt a customer account threshold for broker-dealers' Rule 605
reporting requirements. In the Rule 605 Amendments Release, the
Commission stated that ``by limiting Rule 605 reporting requirements to
larger-broker-dealers that meet the customer account threshold only,
Rule 605 will balance the benefits of broker-dealer reporting with the
costs.'' \25\ Specifically, the Commission determined not to subject
all broker-dealers to Rule 605 reporting requirements because of the
lower benefits relative to costs for broker-dealers with a smaller
number of customer accounts.
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\25\ See Rule 605 Amendments Release, supra note 5, at 26438.
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B. Modifications to Existing Exemptions
1. Orders Received During a Trading Halt
In the SIA Exemptive Letter, the Commission exempted from the
definition of ``covered order'' (now found in Rule 600(b)): (1) all
orders that are received during the period of an ``announced'' trading
halt, as described below; and (2) all orders that are received less
than five minutes prior to an announced trading halt and that remain
outstanding (in whole or in part) at the time of the trading halt.\26\
In the SIA Exemptive Letter, SIA requested an exemption from the
definition of covered order under the rule ``for orders whose
executions are significantly affected by trading that is halted during
regular trading hours, either because they were received during the
trading halt itself or had not been executed at the time of the trading
halt.'' \27\ SIA ``state[d] that including these types of orders in
monthly reports could result in statistics that are skewed and
unrepresentative of a market center's normal trading.'' \28\
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\26\ See SIA Exemptive Letter, supra note 8, at 4.
\27\ SIA Exemptive Letter, supra note 8, at 4.
\28\ SIA Exemptive Letter, supra note 8 at 4.
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The FIF Letter requests that the Commission provide additional
clarity related to trading halts for ``orders that are not executable
at the time of order receipt but subsequently become executable.'' \29\
FIF requests that ``the determinations [of whether to exclude a non-
marketable order due to a trading halt] should be made as of the time
that the order becomes executable.'' \30\ FIF provides the following
example: ``an order is received and is not executable at the time of
order receipt; a trading halt occurs one minute after receipt of the
order; the trading halt ends; the order subsequently becomes
executable. In this scenario, the trading halt should
[[Page 17316]]
not impact whether the order is reportable.'' \31\
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\29\ FIF Letter, supra note 9, at 6.
\30\ FIF Letter, supra note 9, at 6.
\31\ FIF Letter, supra note 9, at 6.
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The Commission is rescinding the exemption from the definition of
``covered order'' for all orders that are received during the period of
an ``announced'' trading halt and all orders that are received less
than five minutes prior to an announced trading halt and that remain
outstanding at the time of the trading halt, as set forth in SIA
Exemptive Letter, and is replacing this exemption with the exemption
described herein. The replacement exemption accounts for non-marketable
order types (defined below), which may be received when a national best
bid or offer (``NBBO'') is not being disseminated, and do not fall
within the scope of the rule unless they become executable. The
Commission replacement exemption does not change the scope of the prior
exemption with respect to marketable order types (defined below). In
general, where Rule 605 requires calculation of execution quality
statistics for marketable order types based on the time of order
receipt, Rule 605 requires calculation of these statistics for non-
marketable order types based on the time that the order becomes
executable.\32\ Consistent with this approach, the replacement
exemption will treat non-marketable order types based on the time of
executability in a manner similar to the treatment of marketable order
types based on the time of order receipt. The replacement exemption
will continue to exclude orders whose inclusion in monthly reports
could result in statistics that may be skewed and unrepresentative of a
reporting entity's normal trading, while helping to ensure that the
group of excluded orders is not overly broad. As FIF states, for non-
marketable order types that have not yet become executable at the time
of the trading halt, a trading halt should not impact the treatment of
the order.\33\
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\32\ See, e.g., Rule 605(a)(1)(i)(G)-(N) (requiring time-to-
execution statistics as measured from time of order receipt or, for
non-marketable limit orders or orders submitted with stop prices,
from the time the order becomes executable).
\33\ FIF Letter, supra note 9, at 6.
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Therefore, for the reasons discussed above, the Commission has
determined that it is necessary or appropriate in the public interest,
and is consistent with the protection of investors to exempt from Rule
605:
(1) all market orders, marketable limit orders (excluding
immediate-or-cancel orders), and marketable immediate-or-cancel orders
(collectively, ``marketable order types'') received during the period
of an ``announced'' trading halt, as described below; and
(2) (a) all marketable order types that are received less than five
minutes prior to an announced trading halt and that remain outstanding
(in whole or in part) at the time of the trading halt; and (b) all
midpoint-or-better limit orders (excluding immediate-or-cancel orders),
midpoint-or-better limit orders that are immediate-or-cancel, non-
marketable limit orders (excluding orders submitted with stop prices,
midpoint-or-better limit orders, and immediate-or-cancel orders), non-
marketable orders that are immediate-or-cancel, market orders submitted
with stop prices, stop marketable limit orders, and stop non-marketable
limit orders (collectively, ``non-marketable order types'') that become
executable less than five minutes prior to an announced trading halt
and that remain outstanding (in whole or in part) at the time of the
trading halt.
Consistent with the SIA Exemptive Letter, under the exemption
provided herein, to qualify as an ``announced'' trading halt, the halt
must be either a general regulatory halt or a trading halt that is
announced by a market center in accordance with all applicable
regulatory rules. Under the exemption provided herein, orders that are
received prior to and during the time of an announced trading halt
would be handled as follows:
First, all marketable order types received during the period that
trading is halted must be entirely excluded from the Rule 605 monthly
report.
Second, all non-marketable order types received during the period
that trading is halted may be included in the Rule 605 report if they
become executable after trading resumes. In addition, regardless of
when a non-marketable order type is received, a non-marketable order
type should not be considered to have first become executable while
trading is halted.
Third, if an order that is a non-marketable order type becomes
executable less than five minutes prior to the announced trading halt
and remains outstanding (in whole or in part) at the time of the
trading halt, the entire order is exempted from Rule 605 and must be
excluded from the reporting entity's monthly report. If an order is a
marketable order type, and is received less than five minutes prior to
the announced trading halt and remains outstanding (in whole or in
part) at the time of the trading halt, the entire order is exempted
from Rule 605 and must be excluded from the reporting entity's monthly
report.
Fourth, for orders that are executed less than five minutes prior
to the announced trading halt, the calculation of average realized
spread should use the last NBBO disseminated prior to the time of the
trading halt (analogous to the treatment of orders executed less than
five minutes prior to the close of regular trading hours that is set
forth in the definition of ``average realized spread'' in Rule 600(b)
of Regulation NMS), to the extent that the realized spread time horizon
specified in Rule 605(a)(1)(i) would otherwise fall within the time
period during which trading was halted.
Fifth, if a marketable order type was received or a non-marketable
order type became executable five minutes or more prior to the
announced trading halt and remains outstanding (in whole or in part)
the order continues to be covered by Rule 605; provided, however, that
for executions that occur after the end of the trading halt, a
reporting entity may deduct the time period during which trading was
halted from the calculations using the time of execution of the order.
2. Inactively Traded Securities
In the Inactively Traded Securities Exemptive Letter, the
Commission granted an exemption from Rule 605 for very inactively
traded securities.\34\ The Commission is supplementing this existing
exemption solely to explicitly cover broker-dealers in addition to
market centers. The exemption, as supplemented, covers any NMS stock
that did not average more than five reported transactions per trading
day, as disseminated pursuant to an effective transaction reporting
plan, for each of the preceding six months (or such shorter time that
the security has been designated a NMS stock).\35\ An inactive security
will lose its exemption only after its average daily reported
transactions have exceeded five for each of the preceding six months.
Orders in exempted securities need not be included in the reporting
entity's monthly Rule 605 report, but a market center, broker, or
dealer is free to include them if it chooses to do so.
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\34\ See Inactively Traded Securities Exemptive Letter, supra
note 8, at 2.
\35\ While the Inactively Traded Securities Exemptive Letter
refers to a ``national market system security,'' when Regulation NMS
was adopted, the references to ``national market system security''
in Rule 605 were replaced with ``NMS stock'' to indicate that Rule
605 would continue to be inapplicable to listed options. See
Regulation NMS Adopting Release, supra note 8, at 37571.
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The Commission has determined that such action is necessary or
appropriate in the public interest, and is consistent with the
protection of investors, because it will supplement the exemption to
include all reporting entities subject to
[[Page 17317]]
Rule 605, as amended by the Rule 605 Amendments Release, within its
scope. Broker-dealers were not covered within the exemption when it was
originally issued in 2001, because Rule 605 at that time only applied
to market centers.\36\
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\36\ The supplemented exemption for inactively traded securities
supersedes a staff FAQ. See Rule 605 FAQs, supra note 8, Question
25.
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3. Orders Affected by Crossed Markets
In the SIA Exemptive Letter, the Commission exempted from the
definition of ``covered order'' (now found in Rule 600(b)) all orders
that would require reference to a consolidated best bid and offer
(``Consolidated BBO'') disseminated by an effective national market
system plan that has been crossed for 30 seconds or more.\37\ SIA
stated ``that when [the best bid and offer] have been crossed for a
significant period of time, it raises a serious concern that the quotes
may not represent a fair and reliable benchmark for a market center's
statistics.'' \38\
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\37\ See SIA Exemptive Letter, supra note 8, at 2. With the
adoption of Regulation NMS, the Commission replaced the term
``consolidated best bid or offer'' in Rule 11Ac1-5 with the term
``national best bid and national best offer.'' See Regulation NMS
Adopting Release, supra note 8, at 37574.
\38\ SIA Exemptive Letter, supra note 8, at 2.
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The FIF Letter requests that the Commission provide additional
clarity regarding how market centers, brokers, and dealers should
report on orders whose Rule 605 statistics would be affected by an NBBO
that is locked or crossed. In particular, FIF requests clarity
regarding reliance by reporting entities on locked and crossed quotes
as applied to ``new order types and the new concept of `executability'
introduced in the amended Rule 605.'' \39\
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\39\ FIF Letter, supra note 9, at 5.
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When the NBBO is crossed for a significant period of time, it
raises serious questions regarding whether the quotes continue to
provide a reliable benchmark for the statistical measures included in
Rule 605. However, the current exemption for certain orders affected by
crossed markets does not clearly account for the new order types in
Rule 605, as amended by the Rule 605 Amendments Release. In order to
provide additional clarity, the Commission is rescinding the exemption
from the definition of ``covered order'' for all orders that would
require reference to a Consolidated BBO disseminated by an effective
national market system plan that has been crossed for 30 seconds or
more, as set forth in the SIA Exemptive Letter, and is replacing this
exemption with the exemption described herein. For non-marketable limit
orders, the determination of whether the order has become
``executable'' (as defined in Rule 600(b)) requires reference to the
NBBO and many of the Rule 605 statistics pertaining to non-marketable
limit orders are based on the NBBO at the time that the order becomes
executable. Under the replacement exemption, in the context of non-
marketable limit orders, the determination of whether the order has
become executable should not occur when the NBBO is crossed because the
NBBO may not represent a fair and reliable benchmark at such time. The
replacement exemption also applies to broker-dealers, consistent with
the scope of Rule 605, as amended by the Rule 605 Amendments Release.
Therefore, for the reasons discussed above, the Commission has
determined that it is necessary or appropriate in the public interest,
and is consistent with the protection of investors to exempt from Rule
605 all orders that would require reference to an NBBO that has been
crossed for 30 seconds or more.
In light of this exemption, market centers, brokers, or dealers
should follow the following procedure whenever a reference to the NBBO
is necessary in connection with market or marketable limit orders,
whether at the time of order receipt or the time of order execution:
First, use the NBBO if the quotes are not crossed, or are locked.
Second, if the NBBO is crossed, reject the crossed quotes and use
the next-in-time uncrossed NBBO if there has been less than 30 seconds
between the last-in-time uncrossed NBBO and the next-in-time uncrossed
NBBO.
Third, if there has been 30 seconds or more between the last-in-
time uncrossed NBBO and the next-in-time uncrossed NBBO, the affected
order is exempted from Rule 605 and must be excluded entirely from a
market center, broker, or dealer's report (even if the crossed NBBO
only affects a partial execution of the order).
In addition, the determination of when a non-marketable limit order
(including an order submitted with a stop price) becomes
``executable,'' as defined in Rule 600(b), relies on a comparison to
the NBBO. A non-marketable limit order will fall within the scope of
Rule 605 reporting only if it becomes executable. To avoid skewing
execution quality statistics, the determination of whether a non-
marketable limit order has become executable should not occur when the
NBBO is crossed. Therefore, if the NBBO becomes crossed before a non-
marketable limit order has become executable, a determination that such
order has become executable should not be made during any period of
time in which the NBBO is crossed. If the NBBO subsequently becomes
uncrossed, a determination of whether the order has become executable
should resume. If, instead, the NBBO becomes crossed after a non-
marketable limit order has become executable, but before the order is
executed, then the procedure set forth above should also apply.
C. Rescission of Exemption for Manually-Received Orders
In the SIA Exemptive Letter, the Commission exempted temporarily
all market centers from the requirement to report under Rule 605 on
orders that are received by the market center otherwise than through
automated systems.\40\ The SIA Exemptive Letter stated that this
temporary exemption would be withdrawn, after a reasonable period of
advance notice to market centers, when the Commission determines that
market centers have the ability to capture all orders
electronically.\41\
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\40\ See SIA Exemptive Letter, supra note 8, at 1.
\41\ See SIA Exemptive Letter, supra note 8, at 1.
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The Commission is rescinding the temporary exemption from Rule 605,
as amended by the Rule 605 Amendments Release, for manually-received
orders. The Commission has determined that such action is necessary or
appropriate in the public interest, and is consistent with the
protection of investors. In granting the temporary exemption, the
Commission had stated that the exemption of manually-received orders
from the Rule ``is intended to facilitate timely compliance with the
Rule until market centers are able to develop automated systems that
will capture all orders.'' \42\ Over the last two decades, market
centers and broker-dealers have developed automated systems that
capture nearly all orders, including manual orders.\43\ Therefore, the
exemption is no longer necessary to facilitate timely compliance with
Rule 605.
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\42\ See SIA Exemptive Letter, supra note 10, at 2.
\43\ See also Rule 605 Amendments Release, supra note 5, at
26430 (discussing the evolution of the equities markets from manual
to highly automated trading).
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III. Conclusion
Accordingly, it is hereby ordered, pursuant to Rule 605(b) of
Regulation NMS, that the above-described exemptive relief be granted,
modified, or rescinded, as described above.
[[Page 17318]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(68).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-06569 Filed 4-3-26; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on April 6, 2026.
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