The Securities and Exchange Commission proposed on June 11 to rescind Rule 611 and Rule 610(e) of Regulation NMS, two market structure rules that have governed US equity routing and execution since 2005. Benchmark Equity Research issued a note to investors on Monday calling the proposal the most consequential piece of regulation to impact the US crypto space this year, stating it would remove a key constraint on tokenized equities trading, lending and settlement on public blockchains. The SEC said the proposal is intended to simplify market structure and reduce costs while allowing competition and innovation to shape the evolution of US equity markets.
SEC Proposes to Rescind Rule 611 and Rule 610(e) of Regulation NMS
The SEC last week proposed scrapping Rule 611 and Rule 610(e) of Regulation NMS, the trade-through framework that has governed routing and execution for every US equity since 2005. According to Benchmark's note, Rule 611, known as the Order Protection Rule, requires trading centers to avoid executing trades at prices inferior to protected quotations displayed on other venues, effectively enforcing compliance with the national best bid and offer at the moment of execution. Rule 610(e) prohibits locked and crossed markets, requiring venues to prevent quotations that overlap in ways that violate the displayed price hierarchy.
Benchmark analyst Mark Palmer stated in the note to investors on Monday that the rescission would remove the primary legal obstacle that has kept tokenized stocks from trading on automated market makers. Palmer stated that those provisions have hindered decentralized finance-based trading models, particularly automated market makers, which execute trades against continuous pricing curves rather than routed order books and do not reference intermarket price protection systems such as the NBBO.
Benchmark Identifies Securitize, Coinbase Global and Galaxy Digital as Potential Beneficiaries
The analyst added that observers in the market have pointed to tokenized and crypto equity exchanges as the most immediate beneficiaries of a potential rescission of Rule 611, given that removal of trade-through constraints would allow such venues to align more directly with existing equity market infrastructure. Benchmark's note identified Securitize as the most direct potential beneficiary, citing its role as a regulated tokenization platform and issuer infrastructure provider for tokenized securities, including BlackRock's BUILD initiative.
Benchmark also pointed to Coinbase Global and Galaxy Digital as additional beneficiaries, citing their respective roles in trading infrastructure, brokerage services, and digital asset market-making activity.
Unanswered Questions on Exchange Registration and Settlement Frameworks
Benchmark noted that even with the rescission proposal, several harder questions remain unanswered. Those include exchange and alternative trading system registration, custody, clearance and settlement frameworks for peer-to-peer or DeFi-native trading. According to the note, the crypto industry is counting on a forthcoming innovation exemption to address them.
SEC Opens 60-Day Comment Period with Vote Expected in Early 2027
The SEC has opened a 60-day public comment period on the proposal. Benchmark expects a vote on the rescission to occur in early 2027.
FAQ
What did the SEC propose on June 11 regarding Regulation NMS?
The SEC proposed on June 11 to rescind Rule 611 and Rule 610(e) of Regulation NMS, two market structure rules that have governed US equity routing and execution since 2005. The SEC said the proposal is intended to simplify market structure and reduce costs while allowing competition and innovation to shape the evolution of US equity markets.
Why does Benchmark consider this proposal the most consequential US crypto regulation this year?
Benchmark Equity Research issued a note to investors on Monday stating the proposal would remove a key constraint on tokenized equities trading, lending and settlement on public blockchains. Benchmark analyst Mark Palmer stated that the rescission would remove the primary legal obstacle that has kept tokenized stocks from trading on automated market makers.
Which companies does Benchmark identify as potential beneficiaries of the rule rescission?
Benchmark's note identified Securitize as the most direct potential beneficiary, citing its role as a regulated tokenization platform and issuer infrastructure provider for tokenized securities, including BlackRock's BUILD initiative. Benchmark also pointed to Coinbase Global and Galaxy Digital as additional beneficiaries, citing their respective roles in trading infrastructure, brokerage services, and digital asset market-making activity.
