Regulation NMS and Rule 611

Information to help you understand new regulations.

At Schwab, we understand that the quality of your trade execution is critical to your success as an investor. You can rest assured that we will provide quality executions and remain at the forefront of industry and regulatory changes.

One such change is Regulation NMS—for National Market System (Reg NMS). Reg NMS is a series of initiatives designed to modernize and strengthen the national market system for equity securities.

How this affects you.

Rule 611 (also known as the Order Protection Rule) of Reg NMS has the most impact from a Schwab client perspective. The Order Protection Rule requires trading centers to establish and enforce procedures designed to prevent "trade-throughs"—trade executions at prices inferior to the best-priced quotes displayed by automated trading centers.

The Order Protection Rule is not an outright prohibition on trade-throughs. There are many exceptions to the rule (listed in the SEC Frequently Asked Questions). When monitoring potential trade-through issues, it is important to distinguish between problematic patterns of trade-throughs versus trade-throughs that qualify as exceptions.

Schwab's role.

Schwab is not considered a trading center under Reg NMS, but we will continue to work with our trading partners to comply with the requirements of Reg NMS. We will also continue to regularly and rigorously examine our execution quality as our clients have come to expect from us. Please contact us if you have any additional questions.

For more information on the Order Protection Rule and Reg NMS, please visit the SEC Frequently Asked Questions.