Take a look at the SECs response to question 13 at https://www.sec.gov/divisions/marketreg/subpenny612faq.htm#q13
That refers to “Market Center” providing improvement instead of routing orders away to comply with NBBO protection. The answer actually explicitly states that no sub-penning orders of any kind are allowed: Answer: Yes, provided that the execution does not result from an order, quotation, or indication of interest that was itself priced in an impermissible sub-penny increment.
Right, which means that you suffer adverse selection because they can "improve" your offer by a fraction of a cent and take it if they want to, while you and I can't do the same to a limit order on the book.
So become a MM and rip the rewards. You are not you saying that allowing avg joe to quote in sub-pennies will solve the adverse selection, right? If you want to quote/fill in sub-pennies (effectively), send your order to inverse fee markets.
The capitalization and technology required to be a MM by definition make it unobtainable for a retail trader. Therefore suggesting that a retail trader become a MM to avoid adverse selection is idiotic. Right up there with "Let them eat cake". I think the point you're missing is the the sub-penny price improvement allows MMs to take orders in a way retail traders can't. Placing an order at an exchange that provides rebates in no way allows me to take an order that's resting on another exchange, and doesn't solve the adverse selection issue if you're putting in limit orders. The difference is between taking and making.
It’s pointless to discuss which professional institutions have what advantages over non-professionals. The real question is - how can retail trader avoid adverse selection? And the answer is - don’t place resting orders unless you are ok being filled at that price. If you have any practical suggestions, I am all ears.
That's exactly what @777 said, you disagreed with, and I just wasted multiple points trying to demonstrate. Glad we're all in violent agreement now!