High-Frequency Trading Price Improvement Disruption Analysis - November 2025 Market Structure Changes

This analysis is based on a Reddit user report [Event source] published on November 14, 2025, detailing how their high-frequency trading strategy experienced a dramatic loss of price improvement starting November 3, 2025. The strategy, which previously achieved a 75% win rate, suddenly began receiving fills at quoted prices without any better execution. The timing directly coincides with the original compliance date for major SEC market structure reforms under Regulation NMS, even though the SEC issued an exemptive order on October 31, 2025, delaying implementation until 2026 [3]. Market data shows modest declines on November 3, 2025, with the S&P 500 falling 0.44%, NASDAQ declining 0.49%, and Dow Jones dropping 0.76% [0] - insufficient to explain such a dramatic change in execution quality.

The reported disruption on November 3, 2025, aligns precisely with the original implementation date for comprehensive SEC market structure reforms including:

• Minimum pricing increment rules
  (Rule 612) implementing half-penny quoting
• Access fee cap amendments
  (Rule 610) setting uniform $0.001 per share caps
• New round-lot definition
  allowing flexible share lots [2][5]

Despite the SEC’s October 31, 2025, exemptive order delaying these rules, market participants likely made preemptive adjustments to their trading algorithms and routing strategies in anticipation of the changes. This preparatory behavior could explain the sudden reduction in price improvement availability.

Payment for order flow (PFOF) remains central to retail execution quality, with market makers paying fractions of a penny per share for order flow. However, the practice faces ongoing regulatory scrutiny. The SEC previously found that brokers like Robinhood “explicitly offered to accept less price improvement for its customers than what the principal trading firms were offering, in exchange for receiving a higher rate of payment for order flow for itself” [1]. The regulatory uncertainty surrounding PFOF practices may be prompting market makers to reduce price improvement offerings as a risk mitigation strategy.

The market environment on November 3, 2025, showed relatively normal volatility patterns:

• S&P 500 (^GSPC)
  : 6882.32 → 6851.98 (-0.44%) [0]
• NASDAQ Composite (^IXIC)
  : 23951.91 → 23834.72 (-0.49%) [0]
• Dow Jones (^DJI)
  : 47697.33 → 47336.69 (-0.76%) [0]
• Russell 2000 (^RUT)
  : 2481.05 → 2471.24 (-0.40%) [0]

These modest declines cannot account for a complete cessation of price improvement, suggesting structural rather than market-driven factors.

The most significant insight is that market participants appear to have adjusted their behavior in advance of regulatory changes, despite the implementation delay. This suggests that:

1. Algorithm Preparation Costs
   : Market makers invested significantly in updating algorithms for the new rules and may be running modified versions even during the delay period.

2. Risk Management
   : Faced with regulatory uncertainty, market makers may be adopting more conservative pricing strategies to avoid potential compliance issues.

3. Economic Realignment
   : The pending changes to access fee structures and pricing models may have already altered the economics of providing price improvement.

Critical missing information includes:

• Brokerage Specificity
  : The Reddit post doesn’t specify which broker or execution venues were used, preventing identification of whether this is broker-specific or market-wide.

• Strategy Details
  : Without knowing the specific trading strategy, order types, and targeted securities, it’s impossible to determine if the issue is strategy-specific or structural.

• Market Maker Communications
  : No public statements from major market makers regarding pricing policy changes have been identified.

The ongoing SEC review creates significant uncertainty affecting:

• Broker Routing Decisions
  : Execution quality may vary significantly as brokers adjust to regulatory uncertainty.
• Market Maker Profitability
  : Reduced price improvement may reflect changed economics in the PFOF market.
• Market Liquidity
  : Systemic reductions in price improvement could impact overall market efficiency.

High-frequency strategies face elevated risks from:

• Algorithm Changes
  : Market maker updates may permanently alter execution quality dynamics.
• System Modifications
  : Broker routing technology updates could impact fill quality.
• Exchange Adjustments
  : Venue-specific changes may affect order execution differently across markets.

Decision-makers should track:

1. SEC Regulatory Developments
   : Final implementation dates and additional guidance on market structure rules.
2. Broker Execution Quality Reports
   : Rule 605/606 disclosures for changes in price improvement metrics.
3. Market Maker Announcements
   : Communications from major market makers regarding pricing policies.
4. Industry Discussion
   : Trading forums and professional networks for similar reports from other traders.

The analysis indicates that the reported loss of price improvement starting November 3, 2025, likely stems from preemptive market adjustments to anticipated SEC regulatory reforms, rather than normal market volatility. The regulatory uncertainty surrounding payment for order flow practices and market structure rules appears to be driving more conservative market-making behavior. Users should monitor their execution quality closely and consider diversifying across multiple brokers or execution venues to mitigate potential disruptions from ongoing regulatory transitions.

: Users should be aware that the regulatory uncertainty surrounding market structure reforms may significantly impact execution quality and price improvement availability. The combination of delayed rule implementation and ongoing judicial review creates a complex environment where market participants may adjust their behavior in ways that affect trading costs and execution quality [3].