NBIM warns on OPR reforms

For Norges Bank Investment Management, the $2 trillion Norwegian sovereign wealth fund, the US order protection rule is a source of information leakage when it conducts block trades. Despite this, the fund’s traders are worried about the consequences if the rule is abolished.

For once, the loudest sceptics of the order protection rule (OPR) are not the usual suspects. Institutions with a lot to win in the short term can still take a longer-term view. Norges Bank Investment Management (NBIM), the world’s largest sovereign wealth fund, says it could live without Rule 611, the trade-through prohibition at the centre of Regulation NMS. But it warned Global Trading that a straight repeal by the SEC could damage one thing most US market participants still treat as a sacrosanct “north star”: a credible national best bid and offer (NBBO).

With more than 51% of its portfolio invested in the US — NOK 10.49 trillion (about US$1.03 trillion) as of 30 June 2025, according to its disclosures — NBIM is a major stakeholder in any US market structure debate, and wants its voice heard in the OPR discussion.

Read more: Norway’s sovereign wealth fund paid US$2 billion in transaction costs in 2024

Simon Emrich, NBIM’s head of market structure strategy, is clear about the large buy-side’s short-term incentive. “From a selfish perspective, we would be fine if the order protection rule did not exist,” he says. “We try to source liquidity through block trades, and having to sweep the top of book as a first step can be a signalling issue.”

That point sits at the heart of the modern critique of Rule 611: exemptions — including orders marked as intermarket sweep orders (ISOs) — can expose intent in the most visible place, the lit top of book, before investors can attempt to access larger blocks of liquidity.

NBIM’s warning is that the discussion should not end at a simplistic transaction cost analysis for a single institution. Emrich says there are longer-term, more fundamental issues: what happens to investor confidence, particularly retail confidence, if the NBBO becomes a weaker, less universal reference price?

“However, we are concerned about the long-term health of equity markets if the OPR is completely eliminated, particularly if it leads to a reduction in quality of the NBBO,” he says. “This might reduce the confidence investors have in equity markets — imagine if different brokers quote different prices for the same security.”

His cautionary stance comes as the SEC accelerates its rethink of the trade-through regime, and Regulation NMS more widely. At the Commission’s 16 December roundtable on Rule 611, SEC chair Paul Atkins told participants: “We must summon the courage to acknowledge when well-intended policies have produced unintended consequences,” adding: “The verdict is clear that core aspects of Regulation NMS, including Rule 611, command a fresh look.”

The data behind the debate is, by now, familiar. SEC staff analysis of second-quarter 2025 consolidated data shows measured “trade-through” rates are extremely low and become lower still once a short look-back accounts for fleeting quote changes. In round lots during regular hours, the rates are in the single basis points. That is one reason the conversation has shifted away from “how often do trade-throughs happen?” and towards “what is Rule 611 really doing now, and what else has grown up around it?”

NBIM’s view is that the SEC can target low-hanging fruit and real pain points by tweaking rules rather than repealing them: venue proliferation, SIP-related rent extraction, the connectivity burden, and how to allow more meaningful innovation in public markets — without betting the integrity of the national reference quote on a full repeal.

Emrich argues that exchange entry has become easier, while the obligation for brokers to connect broadly can turn protection into leverage. “The barriers to entry as an exchange have come down,” he says. “Since brokers are forced to connect to every exchange, this can lead to a form of rent extraction.”

In NBIM’s view, the Commission should start with eligibility and incentives. “The proliferation of exchanges… is arguably driven even more by the economics of the SIP,” Emrich says, adding that the SEC could “look at [the] SIP revenue sharing formula” to address proliferation “without taking out the cornerstone of Reg NMS.”

The fund also wants the reform agenda to make space for more meaningful experimentation in market design — but not necessarily by applying the same “fair access” constraints to every possible model. “While fair access to displayed quotes is important… we would encourage allowing exchanges to operate different books… like not having fair access,” Emrich says. “Exchanges could get into the block trading business, for example — that would be intriguing.”

Peder Viervoll, NBIM’s head of quantitative trading, makes a similar point in practical terms: reforms should preserve the ability to test market models for liquidity and execution quality, rather than forcing everything through a single price-protection logic.

“If you don’t have order protection for smaller exchanges that do have a potential innovative approach… you can actually force flow there to test… because market participants like ourselves can effectively do A/B experiments properly,” he says.

Plainly, NBIM is not defending Rule 611 because it makes execution easier. It is warning that, if the SEC dismantles the OPR, it should do so in a way that does not quietly degrade the NBBO into a “good enough national quote” concept. For the world’s largest sovereign wealth fund, the near-term benefits of less signalling and simpler routing may be real — but NBIM argues that targeted tweaks, including to SIP payment mechanisms, minimum market shares for protected quotes, and aspects of fair access, could deliver better outcomes than a clean repeal.