In 2005, an SEC commissioner named Paul Atkins voted against a new rule designed to protect ordinary stock investors.
He lost.
21 years later he now runs the agency…
And on the June 11th proposed repealing that same rule…
The rule is SEC Rule 611 aka the trade-through rule.
So if your broker is buying Coca-Cola for you, and one exchange is showing the stock at $88.80 while another is showing $88.79… then your order has to be routed through the cheaper one.
Meaning your broker is not allowed to knowingly fill you at a worse price.
Now Paul Atkins is not stupid, and his complaint has some merit.
When the rule came in there were 8 stock exchanges in America. Today there are 18, and most of them handle < 1% of trading volume.
Every brokerage has to pay for price data from all 18, including the ones nobody uses, because the rule says they have to check.
So companies like Robinhood support the repeal, saying the costs "now outweigh its benefits"
Atkins himself says scrapping it will "simplify market structure and reduce costs for market participants"
Now let’s look at who is on each side of this argument…
Citadel Securities, the firm that handles the lion’s share of American retail orders, wants it kept...
Pension funds also want it kept…
But Robinhood wants the rule gone…
And some of the loudest support for killing it came from cryptocurrency lobbying groups… who want tokenised stocks trading 24/7 on blockchains and have said openly that the rule is incompatible with how their markets work.
So you’ve got a retail brokerage and the crypto lobby on one side… with a market-making giant and the pension funds on the other.
Notice that this is not Wall Street versus investors like you and me…
It is Wall Street versus Wall Street, and us regular folk have been handed a costume and told which side to cheer for.
More than 900 comment letters filed appeared to follow a template circulated by an advocacy group. One of them, from a man identifying himself as a concerned and appalled investor, read…
"This proposal sends a clear message that the SEC is actually AGAINST investors."
He’s right… and I hope the SEC doesn’t repeal rule 611
Remember, the SEC was created with the aim of protecting investors from bad actors and actions that helped cause the 1929 crash and subsequent depression…
And even though it won’t really won’t affect overall performance… it’s the principle of it all.
Oliver