Blood, sweat, and tiers: how the SEC’s exchange rebates proposal could reshape US equities markets

The proposal to overhaul volume-based rebates for agency brokers may create significant shifts in liquidity, order routing, and competition. And industry practitioners are split on whether it’s for better or for worse.

To the impartial observer, the US Securities and Exchange Commission’s proposed rule 6b-1 may seem like an innocuous technical market reform. But the proposal to change the way exchanges compete for order flow from brokers has proved controversial, unleashing a heated debate about equity market structure.

At the heart of the proposal lies the system of tiered transaction pricing, where an exchange pays brokers rebates in proportion to the volume of orders they route to the venue.

But how exactly

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