The U.S. Securities and Exchange Commission (SEC) is considering changing the order protection rule (OPR, Rule 611). Trades that print to the Securities Information Processor (SIP) at a price that looks like a trade-through are rare, possibly due to the time it takes to route trades to the SIP. While trades can arrive at the tape at old prices after the National Best Bid and Offer (NBBO) has changed, only a fraction of midpoints print after the NBBO has changed. In the U.S., almost none of the off-exchange trades reported outside the NBBO are at “stale” midpoints, which occur rarely.

A study in Europe found that trades occurring after the NBBO has changed are mostly latency arbitrage opportunities or due to the physics of routing orders. Elevated activity after a quote changes confirms that dark pool midpoints are probed for liquidity simultaneously with lit quote removal. Some “stale prints” may have traded before the dark pool knew the NBBO had changed. Stale trade-prints occur even with the order protection rule (OPR) in place, but determining if there is latency arbitrage is challenging.

Read more at Nasdaq: How Stale Are Dark Midpoint Prints?