Citadel Securities asks SEC to rethink plan to scrap order protection rule

Citadel Securities, the market-making firm led by billionaire Ken Griffin, has formally asked the U.S. Securities and Exchange Commission (SEC) to revisit its proposal to eliminate a long-standing rule that requires stock trades to be executed at the best available price.

The rule, known as the order protection rule, was adopted in 2005 to prevent trade-throughs — instances where a trade is executed at a worse price than what is quoted on another trading venue. The SEC, under Chairman Paul Atkins, proposed scrapping the regulation in June, arguing that it adds cost and complexity without providing meaningful benefits.

In a letter to the SEC, Citadel Securities said the proposal represents a major overhaul of U.S. equity market structure and described the commission's economic analysis as "fatally flawed." The firm argued that the projected compliance savings of roughly $250,000 per trading day are negligible compared with the overall size of the U.S. stock market.

Citadel Securities warned that removing the rule could make it easier for brokers to bypass the best displayed exchange prices, potentially pushing more customer orders toward internalization or alternative trading venues instead of public exchanges. This, the firm said, could weaken incentives for market participants to display competitive quotes and may undermine price discovery.

The firm also raised concerns about platforms offering tokenized equities, suggesting that such venues could execute trades without matching better prices available elsewhere, potentially exposing investors to weaker protections.

Citadel Securities has urged the SEC to consider a less drastic alternative — such as imposing a minimum volume threshold for exchanges to receive protected quote status — instead of eliminating the rule entirely.