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The Trump-era Securities & Exchange Commission (SEC), led by Chairman Paul Atkins, has officially withdrawn fourteen proposed rules initiated under former Chairman Gary Gensler’s leadership during the Biden administration. This move is seen as a significant step to unwind the previous administration’s expansive regulatory agenda and align the SEC’s framework with the current administration’s objectives to reduce regulatory burdens.
Nine of the fourteen abandoned proposals were related to trading, order flows, and trading venues. These can be broadly categorized into those concerning exchanges and venues regulation and those related to order handling.
Key Withdrawn Rules and Their Implications:
* Disclosure of Large Equity Swap Positions: A proposal to require public disclosure of large swap positions has been abandoned.
* Regulation of Volume-Based Exchange Transaction Pricing: This rule would have banned volume-based exchange transaction pricing for agency or riskless-principal orders, citing competitive concerns. Its withdrawal means these pricing models can continue without the proposed restrictions.
* Further Best Execution Regulation: The Gensler-era SEC had proposed a new “Regulation Best Execution” that would have created a standalone best execution regime for broker-dealers, with specific heightened obligations for retail transactions, particularly those involving conflicted principal or payment for order flow (PFOF) trades. This proposal would have required detailed policies and procedures, quarterly execution-quality reviews, and annual board reports. Its withdrawal leaves the existing best execution standards, primarily enforced by FINRA Rule 5310, as the primary regulatory framework. While industry experts note that FINRA’s rule already mandates best execution, the SEC’s proposed rule would have added more stringent requirements and oversight.
* Order Competition Rule: This rule was specifically designed to address retail payment for order flow (PFOF) practices. It would have mandated that most small-investor marketable orders (“segmented orders”) be exposed in 100 to 300 millisecond auctions on open venues before any wholesaler or internalizer could execute them. The SEC’s stated economic basis for this rule was an estimated $1.5 billion annual competitive shortfall, believing auctions would benefit individual investors through increased competition and transparency, leading to more favorable prices. The withdrawal of this rule means that the current practice of PFOF can continue without the introduction of mandatory auctions, maintaining the current market structure for retail order execution. Critics of the withdrawn rule had argued it might impose significant costs on retail investors and disrupt the existing, often efficient, wholesale market.
* Further Regulation of Exchange Self-Regulation Processes: Details on the specific aspects of this withdrawn rule are less prominent, but it generally aimed to enhance oversight of how exchanges regulate themselves.
* Amendments to Improve the Consolidated Audit Trail (CAT): This withdrawal indicates a halt to proposed changes intended to enhance the CAT, a system designed to track all trading activity in U.S. equity and options markets.
Impact on Market Participants:
The withdrawal of rules related to best execution and retail order flow is particularly relevant for:
* Market Makers (Wholesalers): They will not face the direct impact of the Order Competition Rule, which would have fundamentally altered how they interact with retail order flow through mandated auctions. This means they can continue current PFOF arrangements and internalize orders without prior auction exposure.
* Broker-Dealers and Retail Brokers: These entities will not be subject to the more stringent “Regulation Best Execution” and its enhanced disclosure and oversight requirements. While still bound by FINRA’s best execution rule, the absence of the SEC’s proposed rule means less regulatory burden and no immediate changes to their order routing practices, including those involving PFOF.
The SEC’s decision to withdraw these proposals aligns with a broader push from the current administration and some members of Congress to reduce perceived regulatory burdens on financial institutions and foster innovation, rather than stifle it with extensive new rules. The SEC has indicated that any future regulatory action in these areas would likely involve issuing new proposals.

Video courtesy of ABN-AMRO

Video courtesy of ABN-AMRO