SEC Proposes to Repeal Reg NMS Rule 611 and 610(e), Clearing Path for Tokenized Stock Trading

According to Galaxy Digital research lead Alex Thorn, the SEC has proposed to repeal Rule 611 (order protection rule) and Rule 610(e) of Reg NMS on June 12. Rule 611, a cornerstone of U.S. stock market structure since 2005, requires each trading venue to prevent executing trades at prices worse than protected quotes displayed on other exchanges. Thorn noted that Rule 611 has been a major obstacle for tokenized stocks trading in DeFi, as automated market makers cannot comply with the requirement; any liquidity pool for tokenized stocks would constitute an illegal trading venue. The SEC proposes replacing the rule with a best execution principle applied at the broker level, which is rules-based rather than trade-by-trade review, making it compatible with automated market makers.
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