The Market Access Rule

Before 2010, some brokers offered "naked" or "unfiltered" sponsored access, letting a trading firm send orders straight to an exchange under the broker's market participant ID, with no pre-trade checks by the broker in between. That meant a bug in a firm's algorithm, or a fat-finger error, could hit the market with no filter at all standing between a runaway program and the exchange's matching engine. SEC Rule 15c3-5, commonly called the Market Access Rule, closed this off: any broker-dealer providing market access — its own trading or a client's — must have risk management controls and supervisory procedures reasonably designed to systematically limit financial and regulatory exposure, and those controls must be under the broker's own direct and exclusive control, not outsourced to the client sending the orders.

In practice this means every order flowing through a broker's market access must pass automated pre-trade checks: maximum order size and notional limits, price collars that reject orders too far from the current market, credit and capital thresholds per client, and duplicate-order or message-rate throttles to catch a malfunctioning algorithm before it floods the market. The rule applies whether the broker is trading for itself or providing access to a client, and it explicitly bans unfiltered access — every single order must pass through the broker's own controls, even if that adds a few microseconds of latency the client would rather not pay.