To prevent Crypto Assets from "Long Wick Candle," the market may need this "magic weapon."

There is no shortage of smart code in the crypto market, what is missing is a bottom line that everyone must adhere to. This article will explore how the no-trade penetration rule protects traders? This article is from an article written by Daii and compiled and contributed by Foresight News. (Synopsis: Full record for the largest liquidation day in the history of cryptocurrencies!) Some altcoins went to zero at one point, who is sniping Binance and market makers? (Background added: Under the extreme market of the crypto market, why is your position suddenly forced to close?) I've always said that the crypto market today is more like a “Wild West.” The most glaring evidence is the “pin”. It is not metaphysics, but the result of the superposition of deep thinning + leverage chain liquidation + on-market matching preference: the price is slammed to your stop loss level in the key milliseconds, and the position is swept away, leaving only the long and thin “wick” in the K line - like a cold needle pricked. In this environment, what is lacking is not luck, but the bottom line. Traditional finance has long written this bottom line into the system - Trade-Through Rule. Its logic is simple and powerful: when there is a better open price in the market, no broker or exchange should turn a deaf ear, let alone fill your order at a worse price. This is not moral persuasion, but a hard constraint that can be held accountable. In 2005, the U.S. Securities and Exchange Commission (SEC) explicitly enshrined this bottom line in Reg NMS Rule 611: All market participants (where dealing centers must not penetrate protected quotes and brokers have a FINRA 5310 best execution obligation) must fulfill “order protection”, prioritize the best available price, and leave traces, verifiability, and accountability for routing and execution. It does not promise that “the market is not volatile”, but it ensures that your transaction is not “deteriorated” for no reason during fluctuations - better prices are available elsewhere, and you cannot be arbitrarily “matched in place” in this place. Many people will ask, “Can this rule prevent pins?” To put it bluntly: it can't destroy the long needle, but it can cut the chain of damage of the “long deal against you”. Imagine a scene that can be understood at a glance: at the same moment, Exchange A appears a down pin, instantly smashing BTC to $59,500; Exchange B still has a valid buy order of $60,050 pending. If your stop-loss market order is executed “in place” at A, you are out at the tip of the needle; With order protection, routing must send your order to B's better bid price or refuse to close at A's inferior price. Result: The needle is still on the chart, but it is no longer your deal price. That's the value of this rule – not to kill the needle, but to keep the needle from you. Of course, the contract liquidation trigger itself also needs to mark the price / index, volatility band, auction restart, anti-MEV and other supporting facilities to manage the “generation of needles”. However, in the area of fair transactions, the bottom line of “prohibiting transaction penetration” is almost the only grasp that can immediately improve the experience, can be implemented, and can be audited. Unfortunately, the crypto market has not yet had such a bottom line. A table is worth a thousand words: Through the above perpetual contract quotation table for BTC, you will find that none of the quotes of the top ten exchanges with the largest trading volume are the same. The current crypto market landscape is highly fragmented: hundreds of centralized exchanges, thousands of decentralized protocols, prices are fragmented from each other, coupled with the decentralization of the cross-chain ecology and the dominance of leveraged derivatives, investors want a transparent and fair transaction environment, which is more difficult than ascending to the sky. You may be wondering, why am I asking this question now? Because on September 18, the U.S. Securities and Exchange Commission (SEC) will convene a roundtable on the prohibition of trading penetration rules to discuss its gains and losses in the National Market System (NMS). This matter seems to be related only to traditional securities, but in my opinion, it also serves as a wake-up call to the crypto market: if in the highly concentrated and mature US stock system, the transaction protection mechanism needs to be rethought and upgraded, then in the more fragmented and complex crypto market, ordinary users need the most basic protection line: Crypto market providers (including CEX and DEX) cannot ignore better public prices at any time, and cannot allow investors to be traded at inferior prices when they could have avoided. Only in this way can the crypto market move from the “Wild West” to true maturity and trustworthiness. This thing now seems like a fantasy, and it is not an exaggeration to say that it is a fool's dream. However, when you understand the benefits of the establishment of the no-trade penetration rule for the US stock market, you will understand that even if it is difficult, it is worth a try. 1. How is the Trade-Through Rule established? Looking back, the establishment of this rule went through a complete chain: from the legislative mandate in 1975, to the interconnection experiment of the interexchange trading system (ITS), to the full electronic transition in 2005, and finally to the phased implementation in 2007. It's not about eliminating volatility, it's about ensuring that investors still get the better prices they deserve. 1.1 From fragmentation to a unified market In the sixties and seventies, the biggest problem facing the US stock market was fragmentation. Different exchanges and market-making networks are fragmented, and investors simply cannot be sure where to get the “best price at the moment” in the whole market. In 1975, the U.S. Congress passed the Amendment to the Securities Act, which for the first time explicitly proposed the establishment of a “national market system (NMS)” and asked the SEC to lead the construction of a unified framework that can open up all trading venues, with the goal of improving fairness and efficiency [Congressional Network, sechistorical.org]. With legal mandates, regulators and exchanges have launched a transitional “interconnection cable” – the Inter-Exchange Trading System (ITS). It is like a dedicated network cable that strings the exchange together, allowing quotations and routes to be shared between different venues, avoiding the better price next door being ignored when the market is traded at a bad price [SEC, Investopedia]. Although ITS has gradually faded with the rise of electronic transactions, the concept of “no disregard for better prices” has been deeply rooted. 1.2 Regulation NMS and Order Protection In the 90s, the web and decimalization made transactions faster and more fragmented, and the old semi-artificial system simply couldn't keep up. In 2004–2005, the SEC introduced a historic new regulation, the Regulation NMS. It contains four core provisions: fair access (Rule 610), no transaction penetration (Rule 611), minimum quote unit (Rule 612), and market data rule (Rule 603) [SEC]. Among them, Rule 611 is also known as the “order protection rule”, which is explained in the vernacular: when other places have put out a better protected offer, you can't match the list with a worse price here. The so-called “protected quote” must be a quote that can be executed automatically in real time, not a slow order [SEC Final Rule] processed manually. In order to make this rule truly feasible, the US market has also established two key “foundations”: NBBO (National Best Bid and Offer): combines the best bid and best bid prices of all exchanges to become a unified yardstick to measure whether it “penetrates”. For example, Figure E…