[The Significance of Order Protection for Market Efficiency] < p>The U.S. Securities and Exchange Commission (SEC) has proposed eliminating the Order Protection Rule (OPR).
Feedback on the proposed revision has gathered quickly, and robust consensus among stakeholders has not emerged.
This analysis explores the potential consequences of OPR and considers what its removal would imply for trading spreads and National Best Bid and Ask (NBBO) benchmarks.
Our key finding indicates that order protection delivers a measurable reduction in spread width. In essence, OPR appears to hold considerable relevance for investors.
We employ updated round‑lot methodologies to gauge how strongly the NBBO influences setting price targets
A fundamental challenge in assessing OPR’s impact lies in locating empirical data comparing markets when OPR was active against those where it was inactive while holding all other conditions constant.
Fortunately, the SEC’s latest revisions to round‑lot specifications generate precisely the kind of comparative dataset needed for this inquiry.
Unlike earlier approaches that relied on divergent analytical frameworks, this study capitalizes on the enduring presence of odd lots on the trade tape—as illustrated in the following figure.
Chart 1: New dynamic round lots alter the threshold used to set the NBBO, yet off‑exchange odd lots persist within the spread
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