US Reg NMS Order Protection Rule Compliance

When to Use

Use this skill when an execution in an NMS stock must be reviewed against the protected quotations that were displayed when it printed, under SEC Regulation NMS Rule 611 (17 CFR 242.611). That is the surveillance obligation in Rule 611(a)(2): a trading centre must "regularly surveil to ascertain the effectiveness" of its trade-through policies and procedures and "take prompt action to remedy deficiencies".

Use it as well when reviewing existing Rule 611 code, because three readings are widely copied and each is wrong in a direction that hides violations:

• "A buy trades through the offer, a sell trades through the bid." Rule 600(b)(105) defines a trade-through as "the purchase or sale of an NMS stock during regular trading hours ... at a price that is lower than a protected bid or higher than a protected offer". It is a price test. A purchase printed below the protected bid trades through that bid — which is exactly why Rule 611(b)(9) exists to except a stopped buy order printed below the national best bid. Testing by side passes half the universe silently.
• "A quote changed within the last second, so Rule 611(b)(8) applies." The exception is about the venue whose protected quotation was traded through and about a price equal or inferior to the print. Read loosely, it excepts essentially every trade-through in a liquid name, and the engine reports nothing, ever.
• "Compare the print against the current NBBO." FAQ 3.02 requires trade prices to be compared with protected quotations at the time of execution; FAQ 6.01 assesses a firm on the quotation data it held then. An unordered quote list fed to max/min lets a quotation that did not yet exist decide the outcome.

Jurisdiction: United States only. Rule 611 is an SEC rule for NMS stocks. Nothing here transfers to EU/UK best execution (MiFID II RTS 27/28, which is an execution-quality obligation, not a price-priority prohibition), to Canadian UMIR order protection, or to any Asian market.

Rule status, 2 September 2026. Rule 611 is in effect. On 11 June 2026 the Commission proposed to rescind it in its entirety, along with Rule 610(e) and the definitions at Rule 600(b)(6), (7), (47), (54), (81), (82) and (105) — Release No. 34-105655, File No. S7-2026-20, 91 FR 36656 (17 June 2026), comments closed 17 August 2026. No final rule has been adopted, so the obligation stands unchanged. Track the file rather than pre-emptively removing controls.

When NOT to Use

• As a pre-trade router control. This is post-trade surveillance. What Rule 611(a)(1) requires is written policies and procedures reasonably designed to prevent trade-throughs; a detector that runs after the print demonstrates the surveillance limb of Rule 611(a)(2), not the prevention limb.
• As the firm's Rule 611 policies and procedures. Rule 611 compliance is a policies-and-procedures standard, not a per-trade pass/fail. An engine output is evidence for that standard, never a substitute for it.
• For listed options, or for any non-NMS-stock instrument. Rule 611 reaches NMS stocks. Options, futures, fixed income and FX are outside it entirely.
• Outside regular trading hours. Rule 600(b)(105) confines trade-throughs to 09:30–16:00 ET, and FAQ 7.01 states that policies and procedures "are not required to address trades that occur outside of regular trading hours, and the exceptions in Rule 611(b), including the ISO exception, are not needed" there. The engine returns NOT_SUBJECT_RULE_611; do not read that as "compliant by exception".
• As a depth-of-book model. Rule 600(b)(81) protects only a quotation that is the best bid or offer of a national securities exchange or national securities association, displayed by an automated trading centre and disseminated under an effective NMS plan. Depth behind the BBO is never protected. One top-of-book record per venue is the correct granularity; feeding L2 levels in manufactures protected quotations that do not exist.
• To decide the Rule 611(b)(2), (b)(3) or (b)(7) exceptions. Whether a contract was "regular way", whether a print was a single-priced auction, and whether a benchmark price was "not based, directly or indirectly, on the quoted price ... and for which the material terms were not reasonably determinable at the time the commitment to execute the order was made" are facts about the transaction. The engine records the claim and marks it as asserted; it cannot verify it from quote data, and neither can you.

Prerequisites

• Python 3.10+. No third-party dependencies. zoneinfo needs a system tz database — on Windows and slim containers, pip install tzdata, or the regular-trading-hours test raises rather than guessing at Eastern time.
• Firm-specific quotation data, timestamped as the firm received it. Per FAQ 6.01 a firm's Rule 611 compliance "will be assessed based on the time that orders and quotations are received, and trades are executed, at that trading center", not on Network (SIP) timestamps. SIP data is the common reference regulators screen with (FAQ 6.04) — expect it to produce false positives against your own book, and be able to explain them.
• Automated/manual quote status per venue. Rule 611 protects automated quotations only (Rule 600(b)(6), (54), (81)). A trading centre that cannot display automated quotations must identify its quotations as manual, at which point they may be traded through freely.
• Clocks synchronised to CAT tolerance. The CAT NMS Plan requires Industry Members to hold Business Clocks within 50 ms of NIST (Participants within 100 µs; clocks used solely for Manual Order Events within one second), and timestamps reported in milliseconds or finer, using the finest increment the firm's own order-handling systems capture, truncated — never rounded — at nanoseconds.
• Time of execution as defined for Rule 611. FAQ 3.02: the time "when final agreement is reached on the stock, price, and size of the trade", documented simultaneously and not subject to retrospective alteration. Not the time the trade was reported.

Workflow

1. Gate on the session first. Convert the execution timestamp to Eastern time and test it against 09:30–16:00. Outside that window Rule 611 does not reach the print at all and no exception is needed — evaluating it produces fictitious violations out of pre- and post-market prints, which is where wide spreads live.
2. Take the book as of the execution, per venue. Discard quotes stamped after the execution; for each venue keep only its most recent quote at or before it. Filter to the execution's own symbol — a mixed feed produces a numerically valid, entirely meaningless NBBO, and does it silently.
3. Drop what is not protected. Manual quotations, and venues under an open Self-Help declaration as of the execution time. Self-Help must be stored as an interval, not a boolean: replaying yesterday's tape must not depend on which venues are broken today.
4. Classify by price, not by side. price > protected offer trades through the offer; price < protected bid trades through the bid. Apply both tests to buys and to sells. Record which protected quotation was hit and which venue displayed it — the exception analysis that follows is per-venue.
5. Separate a Self-Help exemption from a clean fill. Compute the outcome against the full protected market and against the market with Self-Help venues removed. A print that is clean only after the removal is EXEMPT_SELF_HELP under Rule 611(b)(1), not COMPLIANT. That distinction is the whole audit value: it is the count an examiner will ask about.
6. Apply the exceptions only to a transaction that was a trade-through. Rule 611(b) excepts "the transaction that constituted the trade-through". An ISO-marked execution that never traded through the market is compliant, not exempt; classifying it as exempt inflates your reliance on the ISO exception in your own records.
7. Take crossed markets out first. When a protected bid is priced above a protected offer, every price is through one side or the other. Rule 611(b)(4) excepts the condition rather than asking the trading centre to resolve it. A locked market (NBB == NBO) is not crossed and gets no exception.
8. Test the ISO sweep, do not trust the marking. The receiving trading centre may rely on the marking (Rule 611(b)(5)). The router may not: Rule 611(c) requires it to take reasonable steps to establish that the order met Rule 600(b)(47), which obliges simultaneous ISOs against the full displayed size of every protected quotation priced superior to the ISO's limit price — protected offers for a buy, protected bids for a sell. Feed the limit price and the routed venues in and the obligation is checkable. Venues under Self-Help may be left out of the sweep (FAQ 4.09).
9. Run the flickering-quote test per venue and strictly backwards. Only the venue whose protected quotation was traded through counts, only quotes in the one second before the execution count, and the quote must be equal or inferior to the print — a higher offer where the offer was traded through, a lower bid where the bid was. The quote in force at the execution is the one that was traded through and can never support the exception.
10. Check the stopped-order condition you can check. Rule 611(b)(9)(iii) requires the print to be "underwater": for a stopped buy order, lower than the national best bid; for a stopped sell order, higher than the national best offer. Customer account and order-by-order agreement are assertions; the price test is not.
11. Record the snapshot on every outcome, exceptions included. An audit record for an exempt execution that zeroes the NBBO cannot be reconciled against CAT and cannot be defended. Retain the protected NBB/NBO, the as-of instant, the contributing venues, the Self-Help venues, and whether Self-Help notice was recorded.

Full procedure: see references/workflows.md. Standards reference: see references/standards.md. Printable pre-flight checklist: see assets/checklist.md.

Common Pitfalls

• Testing buys against the offer and sells against the bid. Rule 600(b)(105) is a price test. A purchase below the protected bid is a trade-through of that bid. The side-based test reports it clean, and the existence of the Rule 611(b)(9) stopped-order exception — which excepts exactly that print — is the proof that it is not clean.
• Reading Rule 611(b)(8) as "any quote updated within one second". In a liquid NMS stock every protected venue re-quotes many times per second, so the loose test excepts a 100 bps trade-through as readily as a one-tick one. The exception is per-venue, strictly prior, and requires an equal or inferior price from the venue that was traded through.
• Evaluating against the current NBBO, or against an unordered quote list. Both leak quotations that did not exist at execution. In an audit tool that is look-ahead bias with an examiner attached: the same execution replayed twice gives different answers.
• Treating Self-Help as a boolean on the engine. A live flag makes a historical evaluation depend on today's operational state. Store declarations as (declared_at, revoked_at) intervals and evaluate at the execution time.
• Declaring Self-Help without sending notice. FAQ 4.07 sets three mandatory elements — notice, systems assessment and response, objective parameters — and notice to the bypassed trading centre "must be sent immediately upon use of the exception". A declaration with no notice record is a deficiency in the policies and procedures, whatever the trade evaluation says. The FAQ also names the objective parameter the Commission had in mind: repeated failure of the destination to turn an IOC around within one second, after adjusting for order transmission time.
• Bypassing a venue before declaring. Executing through a lagging venue's quote and back-dating the Self-Help declaration produces exactly the record an examiner is looking for. FAQ 4.07 is also explicit that a router is not entitled to elect Self-Help when it has reason to believe the problem is its own systems or connections.
• Trusting an ISO marking end to end. Rule 611(b)(5) relieves the receiving trading centre. It does not relieve the router, whose Rule 611(c) obligation runs to Rule 600(b)(47)(ii): simultaneous ISOs against the full displayed size of every superior-priced protected quotation. Note the direction — superior to the ISO's limit price, not to its execution price — and note that an ISO is by definition a limit order.
• Treating a VWAP tag as the Rule 611(b)(7) exception. FAQ 3.16 makes the benchmark exception facts-and-circumstances: whether the price was not based on the quoted price and whether the material terms were reasonably determinable at commitment. A boolean flag records a claim. FAQ 3.08 requires the firm to retain documentation of the externally observable circumstances behind any adjustment factor.
• Flagging a crossed market as a violation. NBB above NBO makes every price a trade-through. Rule 611(b)(4) excepts it. Without that branch, every crossed instant floods the surveillance queue with noise.
• Flagging auction prints. Rule 611(b)(3) excepts single-priced opening, reopening and closing transactions — which are a large share of daily volume and routinely print away from the contemporaneous NBBO.
• Letting a NaN price through. Every < and > comparison against NaN returns False, so a bad tick is reported as a clean compliant execution. A data-quality failure must raise, never resolve to "no violation".
• Mixing naive and timezone-aware timestamps. Subtracting them raises TypeError, and it will be the one record whose feed carried a zone that crashes the overnight batch.
• Asserting a six-year retention period. Information required to be reported to CAT is maintained under SEA Rule 17a-4(b) — three years, the first two in an accessible place. Business Clock synchronisation logs run five years. The six-year figure belongs to Rule 17a-4(a) blotters and ledgers, not to Rule 611 surveillance records.

Verification

• Confirm the price test is side-independent: a BUY at $99.50 against NBB $100.00 / NBO $100.05 must return TRADE_THROUGH_VIOLATION with trade_through_kind == THROUGH_PROTECTED_BID, and a SELL at $100.60 must return THROUGH_PROTECTED_OFFER.
• Confirm the session gate: an execution at 08:00 ET, five dollars through the market, returns NOT_SUBJECT_RULE_611 with is_regular_trading_hours False — and does so with no quotes supplied at all.
• Confirm the flickering-quote exception does not swallow surveillance: with every venue quoting as of the execution instant, a $101.00 print against a $100.05 protected offer must still be TRADE_THROUGH_VIOLATION. Then confirm it fires correctly when the traded-through venue itself showed $100.09 half a second earlier, and does not fire when the inferior quote came from a different venue.
• Confirm as-of selection: a quote stamped one second after the execution must not enter the protected NBBO, and a superseded quote from the same venue must not survive its replacement.
• Confirm Self-Help is time-scoped: declare at T−10m, revoke at T−5m, then evaluate the same execution at T−9m (EXEMPT_SELF_HELP) and at T (TRADE_THROUGH_VIOLATION).
• Confirm the ISO sweep check: a buy ISO with limit $100.30 against protected offers of $100.05 (NYSE) and $100.10 (NASDAQ) must return EXEMPT_ISO when both are routed and ISO_SWEEP_NOT_SUBSTANTIATED, naming NASDAQ, when only NYSE is.
• Confirm the stopped-order test: a stopped buy below the protected bid is EXEMPT_STOPPED_ORDER; the same order above the protected offer is not.
• Confirm the input guards: a NaN price, an infinite price, a negative price, a zero quantity, a string side, and quotes for a different symbol must each raise RegNMSError rather than return an audit result.
• Run the test suite:

python -m unittest discover -s skills/us-reg-nms-order-protection-rule-compliance/scripts

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