The U.S. Securities and Exchange Commission has adopted Regulation NMS, which broadens trade-through protection, among other things.

The rule amendments were approved in a contentious split decision by the SEC, in early April. The most controversial part of Reg NMS is the so-called trade-through protection, which requires trading centers to obtain the best price for investors when that price is represented by automated quotations.

Previously, that requirement has only applied to the NYSE, but the new rule would extend it to the Nasdaq and other electronic markets. And, this decision was cited as one reason for the NYSE’s bid for Archipelago, and Nasdaq’s subsequent decision to buy Instinet.

The two Republican commissioners argued that the rule is anti-competitive. But, Republican appointee, SEC chair Bill Donaldson, sided with the Democrats, who argued that the rule protects small investors by ensuring they get the best price for their trades.

Today, commissioners Cynthia Glassman and Paul Atkins published a 44-page dissent along with the final rule. In that dissent they reiterate the arguments they made at the SEC meeting to debate the rule, concluding that Reg NMS is not the appropriate policy choice.

“Instead of facilitating a national market system in which technology, competition and innovation will produce benefits for all investors, Regulation NMS saddles the marketplace with anachronistic regulation that reduces investor choice and raises investor costs,” they say. “In the name of investor protection and uniformity, the majority has opted for greater regulation rather than competition to facilitate what it perceives to be fair treatment of customer orders and deep and liquid markets.” They add the proposed merger deals between the various markets exacerbates their concerns.

Now, Donaldson is to be replaced by Republican congressman, Chris Cox, there have been some speculation as to whether Reg NMS could be overhauled. It is scheduled to take effect in 60 days.

In addition to the trade-through rule, Reg NMS also promotes non-discriminatory access to quotations through a private linkage approach; establishes a limit on access fees; establishes a uniform pricing increment of no less than one penny for orders of more than $1.00 per share; and, updates the requirements for consolidating, distributing, and displaying market information.