The Securities
SEC would allow locked stock quotes and tighter spreads
The proposal would scrap the ban on locked and crossed quotes for NMS stocks. The agency says that could sharpen price discovery even if the best bid and offer sometimes meet.
The Securities and Exchange Commission is proposing a big change to stock-market quoting rules. It says locked markets can reflect healthy competition, not a broken market, and that the best bid and offer could even narrow to zero in some cases.
- The SEC wants to scrap Rule 610(e), which bans locked and crossed stock quotes.
- The agency says tighter spreads could improve price discovery.
- In some cases, the NBBO could narrow to zero.
- Brokers, market makers and exchanges would have to adapt to the new rules.
- In Washington, the Securities and Exchange Commission is proposing to rescind Rule 610(e), the provision that bars locked and crossed quotations for National Market System, or NMS, stocks
In Washington, the Securities and Exchange Commission is proposing to rescind Rule 610(e), the provision that bars locked and crossed quotations for National Market System, or NMS, stocks. For investors, the change is not about a legal footnote. It is about whether the market can quote a better price when the best bid and the best offer meet or overlap.
The SEC says that removing the ban could benefit market participants by allowing narrower spreads and improving price discovery. In its view, a locked market is not automatically a sign that something is wrong. It can be the result of competitive quoting, with trading venues pressing closer together as they compete to set prices.
A market quirk the SEC wants to keep
That argument turns an old assumption on its head. Under the proposal, locked markets could be a sign that public price formation is working more aggressively, not breaking down. The commission says more competition in quoting can sharpen the signals that help determine stock prices, which is why it sees the tighter spread as a possible benefit rather than a defect.
The practical promise is simple: if the distance between the best bid and the best offer shrinks, investors may see a cleaner price signal. That is the core logic behind the proposal's claim that rescinding Rule 610(e) could improve price discovery.
When the spread reaches zero
The agency says the national best bid and offer, or NBBO, could tighten all the way to zero in some cases. That would mean the best displayed buy and sell prices are the same, a result the SEC is willing to accept if it comes from competitive quoting rather than a frozen market.
The proposal would also rescind the trade-through rule for NMS stocks and certain defined terms tied to the current framework. For brokers, market makers and exchanges, the shift would require adapting to a market structure that gives more weight to competition at the quote level and less to the old ban on lock-and-cross pricing.