One market, many venues
Because the same US stock trades on more than a dozen venues at once, the rules have to stop each venue from acting as an island. Regulation NMS (National Market System), adopted by the SEC in 2005, ties the venues together so that an investor's order gets the best displayed price, wherever it is posted.
The key number is the NBBO, the National Best Bid and Offer: the highest bid and the lowest offer among all protected venues. It is computed and published by the securities information processors (SIPs) and is the benchmark for best execution. Four rules matter most: the Order Protection Rule (611) forbids trading through a better-priced protected quote on another venue; the Access Rule (610) guarantees fair access to quotes and caps the fee to access them; the Sub-Penny Rule (612) bans quotes in fractions of a cent for stocks at or above 1 USD; and the market data rules govern the consolidated feeds.
The SIP is accurate but slower than the exchanges' own direct feeds, so fast firms see price changes a little before the consolidated NBBO updates. The SEC adopted further changes in 2024 (lower access fee caps and half-penny ticks for some stocks) and has since postponed their compliance dates, so always check the current rules.
- NBBO: the highest bid and lowest offer across all protected venues.
- Trade-through: executing at a worse price than a protected quote elsewhere.
- SIP: the consolidated feed that computes and publishes the NBBO.
- Access fee cap: the maximum fee a venue may charge to take its displayed quote.
Lab · what's graded
- The national spread15 pts
- The NBBO bid15 pts
- A trade-through10 pts
- The rules and their purpose20 pts
- About the SIP20 pts
- Why the rules exist20 pts