Citadel Securities, the market-making firm founded by billionaire Ken Griffin, has urged the U.S. Securities and Exchange Commission to reconsider its proposal to eliminate a longstanding regulation requiring stock trades to be executed at the best available price, according to a report by Reuters.
The firm warned that scrapping the so-called order protection rule could divert trading away from public exchanges, weaken market liquidity and potentially hurt retail investors. The proposal has emerged as one of the most significant U.S. market-structure debates in years because the rule is central to how equity orders are routed and executed.
The SEC unanimously proposed in June to eliminate the regulation, arguing that it had increased trading costs and complexity and was no longer necessary. If adopted, the move would form part of Chairman Paul Atkins' efforts to overhaul the structure of U.S. securities markets under the Trump administration.
In a letter to the SEC, Citadel Securities Managing Director and Global Head of Government and Regulatory Policy Stephen John Berger said the proposal represented a major overhaul of U.S. equity-market structure and challenged the SEC's economic analysis, as per the report.
Citadel Securities said the SEC had not demonstrated that the expected benefits of removing the rule would outweigh the potential risks. The firm noted that projected compliance savings of about $250,000 per trading day were relatively small compared with the scale of the U.S. stock market.
The order protection rule, adopted in 2005, was designed to prevent so-called trade-throughs, in which an order is executed at a price inferior to a better bid or offer displayed on another trading venue.
According to Reuters, Citadel Securities argued that eliminating the rule could make it easier for brokers to bypass better prices displayed on public exchanges. This could encourage more customer orders to be internalized or routed to alternative trading venues, potentially reducing incentives for market participants to display competitive quotes.
The firm also warned that weaker protections for displayed prices could undermine price discovery and market liquidity.
Citadel Securities raised concerns about the potential impact on emerging platforms offering tokenized equities. It said removing the requirement could allow such venues to execute trades without matching better prices displayed elsewhere, potentially leaving investors with weaker protections.
The firm urged the SEC to reconsider the proposal and instead consider a less disruptive alternative, including imposing a minimum trading-volume threshold for exchanges to qualify for protected quote status, the report stated.
