As self-regulatory organizations, exchanges are subject to unique principles and processes
The SEC proposed Rule 6b-1 to prohibit exchanges from offering volume-based transaction pricing for agency-related orders in NMS stocks, eliminating economic incentives that cause brokers to misroute customer trades for personal gain, while requiring transparency through public disclosure of pricing tiers for proprietary orders.
The U.S. Securities and Exchange Commission proposed Rule 6b-1 to ban national securities exchanges from providing volume-based rebates or fee discounts for agency or riskless principal orders in NMS stocks, as these structures create conflicts of interest by rewarding brokers for routing customer orders to maximize their own profits. Exchanges that continue offering such pricing for proprietary orders must implement anti-evasion policies and submit monthly, machine-readable data to the SEC disclosing how many members qualify for each pricing tier, with all information made publicly accessible via EDGAR. The rule aims to enhance market fairness and transparency without imposing unnecessary competitive burdens, and no fraud charges or penalties are involved—it is a preventive regulatory measure.
The U.S. Securities and Exchange Commission proposed Rule 6b-1 to address systemic conflicts of interest caused by volume-based transaction pricing on national securities exchanges, where brokers receive financial incentives based on the volume of trades executed. Such pricing structures, which offer tiered rebates or fee discounts, incentivize broker-dealers to route customer orders not in the customers’ best interests but to qualify for favorable pricing, undermining market integrity. The rule would prohibit exchanges from offering these volume-based incentives for agency or riskless principal orders, which involve customer trades executed on behalf of clients. For proprietary orders—those executed for the exchange member’s own account—the rule requires exchanges to implement robust anti-evasion measures, including written policies to detect and deter misuse, and to submit monthly, structured data tables to the SEC detailing the number of members qualifying for each pricing tier. This data must be filed in an Interactive Data File compliant with Rule 405 of Regulation S-T and made publicly available through the SEC’s EDGAR system to ensure transparency. The proposal does not allege any fraud, enforcement action, or financial penalties, but is designed as a preventive regulatory reform to promote fair competition and protect investors. The public comment period for the proposal remained open for 60 days after its publication in the Federal Register.
Extracted insights
- organization Securities and Exchange Commission
- Exchanges Prohibit National Securities Exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal orders in NMS stocks
- Exchanges Require Exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to electronically submit to the Commission, on a monthly basis, tables in structured data format that disclose certain information, including the number of members that qualify for each volume-based transaction pricing tier
- Exchanges Have Anti-evasion measures, including rules requiring members to engage in practices that facilitate the exchange’s ability to comply with the prohibition
- Exchanges Require Exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to submit electronic, machine-readable structured data tables of certain information about their volume-based transaction pricing tiers and the number of members that qualify for each tier in an Interactive Data File in accordance with Rule 405
Warning: TT: undefined function: 32 FACT SHEET Volume-Based Exchange Transaction Pricing for NMS Stocks U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2 Why This Matters As self-regulatory organizations, exchanges are subject to unique principles and processes that do not apply to other businesses. Among other things, exchange rules, including transaction pricing schedules, may not be designed to permit unfair discrimination between brokers and may not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Through increasingly complex transaction pricing schedules, many exchanges offer their broker-dealer members lower fees or higher rebates as the number of shares the member executes on the exchange reaches successively higher predefined volume-based tiers. The large number of available pricing tiers, and the possible combinations of some tiers, make exchange transaction pricing schedules difficult to understand. Volume-based exchange transaction pricing raises competitive concerns among exchange members and among exchanges. Further, the desire to qualify for volume-based transaction pricing tiers exacerbates a conflict of interest between members and their customers when members route customers’ orders for execution because the member can economically benefit from its routing decision. The Securities and Exchange Commission proposed Rule 6b-1 under the Securities Exchange Act of 1934 to: ● Prohibit national securities exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal (“agency-related”) orders in NMS stocks; and ● Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to: o Electronically submit to the Commission, on a monthly basis, tables in structured data format that disclose certain information, including the number of members that qualify for each volume-based transaction pricing tier; and o Have anti-evasion measures, including rules requiring members to engage in practices that facilitate the exchange’s ability to comply with the proposed rule and written policies and procedures reasonably designed to detect and deter members from receiving volume-based transaction pricing in connection with the execution of agency-related orders in NMS stocks. FACT SHEET | Volume-Based Exchange Transaction Pricing for NMS Stocks U.S. SECURITIES AND EXCHANGE COMMISSION Page 2 of 2 How The Rule Would Apply Proposed Rule 6b-1 would: • Prohibit exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal orders in NMS stocks; • Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to have anti-evasion measures, including rules requiring members to engage in practices that facilitate the exchange’s ability to comply with the prohibition, and written policies and procedures reasonably designed to detect and deter members from receiving volume-based pricing in connection with the execution of agency- related orders in NMS stocks; and • Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to submit electronic, machine-readable structured data tables of certain information about their volume-based transaction pricing tiers and the number of members that qualify for each tier in an Interactive Data File in accordance with Rule 405 of Regulation S-T, which the public would be able to access through the Commission’s EDGAR system. Additional Information: The public comment period will remain open 60 days after the date of publication of the proposing release in the Federal Register.
FACT SHEET Volume-Based Exchange Transaction Pricing for NMS Stocks U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2 Why This Matters As self-regulatory organizations, exchanges are subject to unique principles and processes that do not apply to other businesses. Among other things, exchange rules, including transaction pricing schedules, may not be designed to permit unfair discrimination between brokers and may not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Through increasingly complex transaction pricing schedules, many exchanges offer their broker-dealer members lower fees or higher rebates as the number of shares the member executes on the exchange reaches successively higher predefined volume-based tiers. The large number of available pricing tiers, and the possible combinations of some tiers, make exchange transaction pricing schedules difficult to understand. Volume-based exchange transaction pricing raises competitive concerns among exchange members and among exchanges. Further, the desire to qualify for volume-based transaction pricing tiers exacerbates a conflict of interest between members and their customers when members route customers’ orders for execution because the member can economically benefit from its routing decision. The Securities and Exchange Commission proposed Rule 6b-1 under the Securities Exchange Act of 1934 to: ● Prohibit national securities exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal (“agency-related”) orders in NMS stocks; and ● Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to: o Electronically submit to the Commission, on a monthly basis, tables in structured data format that disclose certain information, including the number of members that qualify for each volume-based transaction pricing tier; and o Have anti-evasion measures, including rules requiring members to engage in practices that facilitate the exchange’s ability to comply with the proposed rule and written policies and procedures reasonably designed to detect and deter members from receiving volume-based transaction pricing in connection with the execution of agency-related orders in NMS stocks. FACT SHEET | Volume-Based Exchange Transaction Pricing for NMS Stocks U.S. SECURITIES AND EXCHANGE COMMISSION Page 2 of 2 How The Rule Would Apply Proposed Rule 6b-1 would: • Prohibit exchanges from offering volume-based transaction pricing in connection with the execution of agency or riskless principal orders in NMS stocks; • Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to have anti-evasion measures, including rules requiring members to engage in practices that facilitate the exchange’s ability to comply with the prohibition, and written policies and procedures reasonably designed to detect and deter members from receiving volume-based pricing in connection with the execution of agency- related orders in NMS stocks; and • Require exchanges that offer volume-based transaction pricing in connection with the execution of proprietary orders in NMS stocks for the account of a member to submit electronic, machine-readable structured data tables of certain information about their volume-based transaction pricing tiers and the number of members that qualify for each tier in an Interactive Data File in accordance with Rule 405 of Regulation S-T, which the public would be able to access through the Commission’s EDGAR system. Additional Information: The public comment period will remain open 60 days after the date of publication of the proposing release in the Federal Register. Why This Matters How The Rule Would Apply Additional Information: The public comment period will remain open 60 days after the date of publication of the proposing release in the Federal Register.