The U.S. Securities and Exchange Commission has proposed rescinding two Regulation NMS rules that govern U.S. equity market structure, a move drawing attention from tokenized stock advocates despite not being framed as a blockchain measure. The proposal targets Rule 611, known as the Order Protection or Trade-Through Rule, and Rule 610(e), which restricts locked and crossed quotations. SEC Chairman Paul S. Atkins said the rules have introduced unintended complexity after two decades of market evolution, and the agency estimated the change could save market participants between $54.2 million and $77 million annually in compliance costs. Industry analysts say the proposal could matter for tokenized equities because current routing and quote rules are difficult to reconcile with on-chain trading models, though the SEC's press release does not describe the measure as designed for blockchain markets. The proposal is open for a 60-day public comment period after publication in the Federal Register and still faces a long rulemaking process before any final change.
SEC Proposes Rescinding Regulation NMS Rules 611 and 610(e)
Rule 611 was adopted in 2005 and generally prevents trading centers from executing trades at prices inferior to protected quotes displayed on other venues. Rule 610(e) deals with locked or crossed quotations, where bids and offers across venues create market structure conflicts. The SEC said the proposal is intended to simplify traditional equity market structure, reduce trading complexity, and lower costs for market participants. The agency estimated that removing the rules could save exchanges, alternative trading systems, broker-dealers, and OTC market makers between $54.2 million and $77 million annually in compliance, monitoring, and routing infrastructure costs. The proposal will be open for a 60-day public comment period after publication in the Federal Register.
Industry Analysts Highlight Tokenized Stock Trading Implications
The tokenization angle is not part of the SEC's stated rationale. The possible relevance comes from how on-chain trading systems work compared with traditional equity venues. Automated market makers, or AMMs, execute trades against liquidity pools using pricing formulas rather than routing each order across conventional venues to check the national best bid and offer. Under a strict trade-through framework, that model can be difficult to reconcile with tokenized versions of U.S. equities. If a tokenized-stock AMM executes a trade at a price that does not match protected quotes elsewhere, it could create compliance problems under existing market-structure rules. A shift away from rigid per-trade routing requirements could, in theory, make it easier to design compliant blockchain-based equity trading systems. Exchanges, broker-dealers, alternative trading systems, custody providers, and tokenized-asset platforms would still need to satisfy a long list of securities-law requirements.
Proposal Enters 60-Day Comment Period With Uncertain Outcome
The SEC proposal is still a proposal. It must go through the comment process, and the agency could revise, narrow, or abandon parts of it before any final rule is adopted. There are also remaining exchange-level and FINRA rules that may require separate updates. A Regulation NMS change would not automatically remove every barrier facing tokenized equities or real-world-asset markets. Traditional market-structure rules help determine what kinds of trading systems can legally operate in U.S. securities markets.
FAQ
What did the SEC propose regarding Regulation NMS rules?
The SEC proposed rescinding Regulation NMS Rules 611 and 610(e), which govern order routing and quote display in U.S. equity markets. Rule 611 prevents trading centers from executing trades at prices inferior to protected quotes on other venues, and Rule 610(e) restricts locked and crossed quotations.
Why do industry analysts say this proposal could affect tokenized stocks?
Industry analysts say the change could matter for tokenized equities because automated market makers execute trades against liquidity pools using pricing formulas, which can be difficult to reconcile with current trade-through rules that require checking the national best bid and offer across conventional venues.
What is the timeline for the SEC proposal to become final?
The proposal is open for a 60-day public comment period after publication in the Federal Register. The SEC could revise, narrow, or abandon parts of the proposal before any final rule is adopted.
