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. Trade Or Fade Rule

    An options exchange rule that requires the market maker to either ...
  2. Exchange

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

    The price a seller is willing to accept for a security, also ...
  4. Regulation NMS

    National Market System (NMS) is a set of rules passed by the ...
  5. Bid

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

    A broker-dealer firm that accepts the risk of holding a certain ...
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. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  4. Investing Basics

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  5. Economics

    What is the Breakeven Point?

    In general, when gains or revenue earned equals the money spent to earn the gains or revenue, you’ve hit the breakeven point.
  6. Stock Analysis

    What is the Price-to-Sales Ratio?

    The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues.
  7. Investing Basics

    What is Treasury Stock?

    Treasury stock is a company’s own stock that it holds in its treasury for later use.
  8. Investing Basics

    What is a Mid-Cap?

    Mid-cap companies are those with a market capitalization between two and $10 billion.
  9. Fundamental Analysis

    What's a Drawdown?

    A drawdown is usually expressed as a percentage change between the peak price and the low price (trough) of an investment.
  10. Investing Basics

    What is Securitization?

    Securitization is the process of converting an asset, or group of assets, into a marketable security. Often times, the securitized assets are divided into different layers, or tranches, tailored ...

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center