medium · Market Microstructure lob
Under Reg NMS Rule 611 (Order Protection Rule), what is a broker required to do if the best offer is $50.01 on Exchange A, but they receive a buy order to execute at $50.05 on Exchange B?
- Execute at $50.05 on Exchange B if Exchange B offers higher PFOF.
- Internalize the order at $50.03 to provide price improvement over the $50.05 request.
- Route the order to Exchange A to avoid a 'trade-through' of the protected quote.
- Execute at Exchange B and pay a 'fine' of the $0.04 difference to Exchange A.
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