Regulation NMS
The SEC's framework governing US equity market structure, requiring best-price execution across all national exchanges.
What is Reg NMS?
Regulation National Market System (Reg NMS), adopted by the SEC in 2005 and effective in 2007, is the comprehensive set of rules governing the structure and operation of US equity markets. Its core rules include the Order Protection Rule (preventing trade-throughs by requiring brokers to route orders to the venue displaying the best price), the Access Rule (requiring fair and non-discriminatory access to the best quotes at all venues), the Sub-Penny Rule (prohibiting price increments smaller than $0.01 for most stocks to prevent quote stuffing), and the Market Data Rules (governing the consolidation and distribution of market data). Reg NMS created the current 'national market system' where quotes across all US exchanges are consolidated into the National Best Bid and Offer (NBBO), which brokers must respect when executing retail orders.
Example
Under Reg NMS, if the NYSE displays the best offer for Apple at $185.00 and a retail investor submits a buy order through a broker whose default route is Nasdaq, the broker cannot execute that order on Nasdaq at $185.05 — it must route to NYSE (or a venue matching that price) to comply with the Order Protection Rule. This rule fundamentally changed US market structure, creating a fragmented but interconnected system of 16+ equity exchanges all competing on speed and price.
Source: SEC — Regulation NMS