The U.S. Securities and Exchange Commission proposed removing two key rules from Regulation National Market System on June 11, potentially reshaping how tokenized stocks could trade in decentralized finance.
The SEC said it plans to rescind Rules 611 and 610(e) of Regulation NMS, which have governed U.S. equity markets since 2005. Rule 611 prevents trade-throughs—meaning a trading venue cannot execute a trade at a worse price when a better one is available elsewhere. Rule 610(e) addresses locked and crossed quotations, requiring trading centers to avoid prices that equal or cross the national best bid and offer.
SEC chair says change could cut costs
SEC Chairman Paul Atkins said the proposal aims to simplify market structure and reduce costs. He noted that after 20 years, Rule 611 may have created unintended consequences that hindered market growth. Atkins added that the change would allow competition and innovation to shape the evolution of U.S. equity markets.
The proposal opens a 60-day public comment period after publication in the Federal Register. It does not directly approve tokenized stock trading but starts a rulemaking process that could lead to final changes.
Analysts see barrier removal for tokenized stocks
Galaxy Digital’s Alex Thorn argued that the rule change could remove a major barrier for tokenized U.S. equities in DeFi. He explained that automated market makers cannot easily comply with Rule 611 because they execute trades through liquidity pools and bonding curves at block-time granularity. AMMs cannot check every stock exchange quote in real time before each swap, nor can they route orders like traditional systems.
Thorn also said Rule 610(e) creates similar problems. AMM prices move with trading flow, so tokenized equity pools could often lock or cross displayed quotes in traditional markets. Removing these rules might make it easier for DeFi platforms to offer tokenized stock trading.
Other rules still apply
Even if the SEC removes Rules 611 and 610(e), other regulations remain. Broker-level best execution duties under FINRA Rule 5310 may become more relevant. That rule requires brokers to seek the best available terms for customer orders, which could fit tokenized markets better than trade-by-trade price protections.
Tokenized stocks still face hurdles like exchange registration, alternative trading system rules, clearing, settlement, and investor rights. The SEC has been studying an innovation exemption that could allow tokenized public stocks on blockchain platforms. Such shares would need to carry the same rights as normal shares, including dividends and voting rights.
Commissioner Hester Peirce has said any exemption would likely stay limited in scope, applying to digital versions of existing public equities—not synthetic tokens without shareholder rights.
The new proposal adds another layer to that policy shift. It could reduce one market structure barrier, but the final outcome depends on comments and further agency action.
