The Securities and Exchange Commission next Tuesday will propose to extend trade-through requirements to all markets, including Nasdaq, as part of a package of reforms to modernize U.S. securities trading.

The reforms, under the umbrella of Section 11A of the Securities Exchange Act of 1934, will include a new Rule 611 that would require all "market centers to establish, maintain and enforce policies and procedures to prevent the execution of trade-throughs in their markets," according to an SEC advisory statement.

The reforms will involve a new definition of "national market system security," which will cover Nasdaq stocks and security options.

The SEC will present the reform proposals at its Feb. 24 open meeting and decide then whether to publish them for comments.

Securities Industry News reported in its Feb. 9 issue that the SEC is mulling extending trade-through rule provisions to the Nasdaq marketplace, at a time when many industry participants are clamoring for the rule's repeal.

The trade-through or "best-price" rule bars brokers from executing orders at a price inferior to the best quote displayed on another market. But the rule has come under fire over the past year, as critics say it only serves to protect the floor-based specialist system and slows down lightning-fast electronic venues, causing brokers to violate their best-execution obligations.

According to sources, Rule 611 will resolve this issue by making a distinction between the two models and allowing electronic markets to trade through exchanges whose quotes are not directly accessible and firm. However, electronic markets could not trade through each other’s quotes, including in the Nasdaq market.

Other topics for reforms, which Securities Industry News has covered in recent issues, include prohibiting "market participants from accepting, ranking or displaying orders, quotes or indications of interest in a pricing finer than a penny in any NMS stock," according to the SEC.

The proposed reforms will also cover access to quotes and a plan to "modify the formulas for allocating plan net income" for market data, the SEC said.