CryptoSlate
The Securities and Exchange Commission has proposed rescinding Rule 611 of Regulation NMS — the trade-through rule in place since 2005 — along with Rule 610(e), in a move that would remove one of the most significant structural barriers to blockchain-based equity trading. The June 11 proposal signals a deliberate sequencing by SEC Chairman Paul Atkins: clear the hardest market-structure obstacle first, then address venue-registration issues through a separate innovation exemption.
Why it matters
Rule 611 required trading centers to prevent executions at prices worse than protected quotes displayed elsewhere, tying all stock trading to the National Best Bid and Offer. That framework is fundamentally incompatible with automated market makers. As Galaxy Digital's head of research Alex Thorn put it bluntly: "An AMM cannot comply with 611 by construction." On-chain pools price trades through bonding curves, slippage, and block-time execution — they cannot route intermarket sweep orders or halt a swap because a better quote briefly appears on Nasdaq. Rule 610(e) compounds the problem: AMM prices can drift and lock or cross the NBBO, which current rules prohibit. Together, the two rules made tokenized NMS stock trading legally untenable. Christopher Perkins, CEO of 250 Digital Asset Management, called rescission "a whole new ballgame" and a "major unlock for DeFi."
Market impact
The proposal's reach extends beyond crypto. Max Resnick of Anza, a Solana-focused development firm, noted that Rule 611 also constrained asymmetric speed bump models at traditional venues, shaping how all exchanges compete for displayed liquidity. Removing it rewrites those incentives across the entire equity market.
Frequently asked questions
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Why was Rule 611 specifically incompatible with AMM-based blockchain trading?
Rule 611 required trading centers to match or beat the best displayed quote across all protected venues, but AMMs price trades through bonding curves and block-time execution and cannot route intermarket sweep orders or pause a swap mid-execution — making structural compliance impossible.
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Does rescinding Rule 611 mean tokenized stocks are now legal to trade on-chain in the US?
No. The proposal removes one major structural barrier, but firms still face unresolved requirements around exchange and ATS registration, clearance and settlement, shareholder rights, and corporate action handling before tokenized NMS stocks can legally trade on public blockchains.
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How does this SEC proposal affect traditional equity markets beyond crypto?
Rule 611 also constrained asymmetric speed bump models at conventional venues, shaping how exchanges compete for displayed liquidity. Removing it would alter routing incentives and competitive dynamics across the entire US equity market, not just blockchain-based trading.
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