Order Protection Rule


DEFINITION of 'Order Protection Rule'

One of the provisions of Regulation NMS that ensures that investors receive an execution price that is equivalent to what is being quoted on any other exchanges where the security is being traded. The order protection rule requires that each exchange establish and enforce policies to ensure consistent price quotation for all NMS stocks, which include those on the major stock exchanges as well as many over-the-counter (OTC) stocks.

The order protection rule is also known as "Rule 611", or the "trade-through rule".

BREAKING DOWN 'Order Protection Rule'

The order protection rule - and Regulation NMS as a whole - was instituted to make today's financial markets more liquid and transparent. Before the regulation was passed, existing "trade-through" rules did not protect investors at all times, especially on limit trades, where investors would sometimes get inferior prices to those being quoted on a different exchange.

The rule aims to protect quotations for a given security across the board, so that all market participants can receive the best possible execution price for orders that can be executed immediately.

Regulation NMS was passed in 2005 by the Securities and Exchange Commission (SEC).

  1. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. Trade Through

    A stock market order that is not executed at the best possible ...
  3. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  4. Ask

    The price a seller is willing to accept for a security, also ...
  5. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  6. Novation

    1.The act of replacing one participating member of a contract ...
Related Articles
  1. Options & Futures

    What Can Traders Learn From Investors?

    Discover tips from a long-term strategy that can help you make better short-term trades.
  2. Forex Education

    Anticipate Trends To Find Profits

    Monitoring your trades in real-time can help you anticipate their outcomes.
  3. Active Trading

    Eight Items That Impact Daily Trades

    Find out which factors can help you squeeze more profit out of each position.
  4. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  5. Bonds & Fixed Income

    Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  6. Investing News

    What Affirmative Action Means for Businesses

    A look at what Affirmative Action means for your business.
  7. Investing

    Protect Your Creations--Register Your Trademark

    Federally registering your brand name or logo offers the broadest protection against potential trademark infringement.
  8. Entrepreneurship

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  9. Economics

    China's Former One-Child Policy Explained

    A look at China's former plan to control population growth.
  10. Mutual Funds & ETFs

    What This Market Timing Ruling Means for Investors

    What the Janus Supreme Court ruling on market timing means for investors and advisors.
  1. What are the regulations surrounding limit order protection?

    A limit order is a common alternative to a market order that is used in technical trading and basic investing strategies ... Read Full Answer >>
  2. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  3. Can the IRS audit you after a refund?

    The U.S. Internal Revenue Service (IRS) can audit tax returns even after it has issued a tax refund to a taxpayer. According ... Read Full Answer >>
  4. Do penny stocks trade after hours?

    Penny stocks are common shares of public companies that trade at a low price per share. These companies are normally small, ... Read Full Answer >>
  5. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  6. What happens if property is wrongfully escheated?

    If your financial accounts, such as bank, investment or savings accounts, are declared dormant and the managing financial ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center