Trade Through

AAA

DEFINITION of 'Trade Through'

A stock market order that is not executed at the best possible price according to quoted prices at other exchanges. Regulations to protect against trade-throughs were first passed in the 1970s and were later upgraded via Rule 611 of Regulation NMS, which passed in 2007.

Rule 611, otherwise known as the Order Protection Rule, aims to ensure that both institutional and retail investors get the best possible price for a given trade by comparing quotes on multiple exchanges. If a better price is quoted elsewhere, the trade must be routed there for execution, and not "traded through" at its current exchange.

INVESTOPEDIA EXPLAINS 'Trade Through'

Regulation NMS extends the old trade-through provisions past the NYSE and now covers all Nasdaq and AMEX-listed stocks, as well as many smaller bourses. The current Order Protection Rule also protects share blocks of less than 100 shares, which in the past could be traded through by brokerages without penalty.

Manual quotes are not considered protected by Reg NMS; only electronically delivered price quotes, the best of which (also called the top-of-book orders) must now be posted across any other exchanges under the NMS umbrella.

RELATED TERMS
  1. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  2. Ask

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

    1. An offer made by an investor, a trader or a dealer to buy ...
  4. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  5. Trade Or Fade Rule

    An options exchange rule that requires the market maker to either ...
  6. Regulation NMS

    National Market System (NMS) is a set of rules passed by the ...
Related Articles
  1. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  2. Active Trading Fundamentals

    Limiting Losses

    It is impossible to avoid them completely, but there is a systematic method you can use to control them.
  3. What's a Marketable Security?
    Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  4. Stock Analysis

    Buyinb Facebook Stock, A Beginner's Guide

    This straightforward guide helps the novice investor feel more adept at buying a stock, such as Facebook (FB).
  5. Trading Strategies

    How do technical analysts interpret the Average Directional Index (ADI)?

    Learn what the average directional index is and why technical analysts look towards ADX indicators to measure the strength of price trends.
  6. Brokers

    How long does it take a broker to confirm a trade after it is placed?

    Learn about placing trades with a broker and the amount of time required to received confirmation of different types of orders, such as limit and stop-loss.
  7. Trading Systems & Software

    How do you know if a trade placed to a broker is confirmed?

    Learn how to check if trades placed with brokers online or over the telephone have been filled and confirmed. Explore different types of orders.
  8. Investing News

    Alibaba's Top Competitors

    A look at Alibaba’s top competitors to understand perceived and real competitive threats to the Chinese ecommerce giant.
  9. Investing Basics

    Analysis of Companies with high goodwill

    High goodwill as a percentage of market cap can actually be a big red flag--it potentially means the company botched a major acquisition.
  10. Investing Basics

    What Does The Dow Jones Industrial Average (DJIA) Quote Represent?

    “The Dow” is regarded as the “pulse of the stock market,” as it is one of the most quoted and followed stock market indices by investors, market professionals and media.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center