CryptoSlate
The Securities and Exchange Commission on June 11 submitted a proposal to rescind Rule 611 of Regulation NMS — the 2005 trade-through rule that requires trading centers to prevent stock orders from executing at prices worse than protected quotes displayed elsewhere — along with Rule 610(e), which restricts locked and crossed quotations. The agency framed the move as an overdue review of rules it says produced unintended consequences, but the crypto industry is reading it as something narrower and more consequential: the dismantling of a structural barrier that made on-chain, AMM-based trading of tokenized equities difficult to reconcile with the national market system.
Why it matters
Rule 611 was designed for a routed market built around the National Best Bid and Offer. Automated market makers do not work that way. They price trades against liquidity pools and bonding curves, with slippage and block-time execution — they cannot route intermarket sweep orders, ingest consolidated tape at the latency the rule assumes, or halt a swap because a better quote briefly appears on Nasdaq. Galaxy Digital head of research Alex Thorn put it bluntly: "An AMM cannot comply with 611 by construction." Christopher Perkins, CEO of 250 Digital Asset Management, called rescinding the rule "a whole new ballgame" and "major unlock for DeFi," adding that "incumbents won't be happy." For tokenization advocates, the rule has been less about needing a technological breakthrough than about clearing a regulatory pathway.
Market impact
If 611 falls, the regulatory gravity shifts from per-trade NBBO protection toward the broker-dealer's best-execution obligation — a standard Thorn argues is more compatible with on-chain trading because a broker can review execution quality across venues over time rather than match prices quote-by-quote. The proposal also reaches beyond tokenization: Anza lead economist Max Resnick noted it could unlock exchange-design experiments like asymmetric speed bumps, since tighter quotes from slowed venues could no longer force rivals into uneconomic matches through the consolidated tape. The caveats remain large. Tokenized stocks still face exchange and ATS registration questions, clearance and settlement design, and definitional questions — direct share versus depositary receipt versus synthetic.
Frequently asked questions
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What is Rule 611 of Regulation NMS?
Rule 611 is the trade-through rule adopted in 2005 as part of Reg NMS. It requires trading centers to prevent stock orders from executing at prices worse than protected quotes displayed on other venues, tying equity trading to the National Best Bid and Offer.
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Why does Rule 611 block AMM-based tokenized stock trading?
AMMs price trades against liquidity pools and bonding curves with slippage and block-time execution. Galaxy Digital's Alex Thorn said an AMM cannot comply with Rule 611 by construction, because on-chain pools cannot route intermarket sweep orders or match consolidated-tape quotes at the latency the rule assumes.
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What does the SEC's June 11 proposal actually do?
The SEC submitted a proposal to rescind Rule 611 of Reg NMS along with Rule 610(e), which restricts locked and crossed quotations, and related definitions. Chair Paul Atkins framed it as an overdue review of a rule he said created unintended consequences for market structure and competition.
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How would rescinding Rule 611 help DeFi and tokenized stocks?
Removing the rule would shift the regulatory standard from per-trade NBBO protection toward the broker-dealer's best-execution obligation — a framework Thorn and other crypto advocates argue is more compatible with on-chain liquidity pools, where execution quality can be assessed across venues over time.
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Does rescinding Rule 611 automatically legalize tokenized equities?
No. Thorn and Coinbase Asset Management's Anthony Bassilli both noted that tokenized stocks would still face exchange and ATS registration questions, clearance and settlement design, and unresolved questions about what a token represents — direct share, depositary receipt, or synthetic instrument.
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