The U.S. Securities and Exchange Commission (SEC) has proposed rescinding Rules 611 and 610(e) of Regulation NMS, which have governed equity market structure since 2005. Rule 611, the Order Protection Rule, requires trading venues to prevent trade-throughs by respecting the national best bid and offer (NBBO). Galaxy Digital's Alex Thorn called the rule "one of the biggest structural barriers" to tokenized equities trading in decentralized finance (DeFi). Automated market makers (AMMs) cannot comply because they execute trades based on bonding curves and slippage, unable to route intermarket sweep orders or halt swaps for better quotes. The repeal would allow broker-level best execution duties under FINRA Rule 5310 to govern, which is principles-based and can accommodate AMMs. The SEC also proposed scrapping Rule 610(e) on locking and crossing quotations. A 60-day comment period follows Federal Register publication. Thorn sees this as a breakthrough, but notes open questions on exchange registration and clearance. The SEC's move aligns with its Project Crypto approach, addressing market structure first then venue registration.

Key facts

• SEC proposes repealing Rule 611 (Order Protection Rule) and Rule 610(e) of Regulation NMS.
• Rule 611 prevents trade-throughs by enforcing NBBO across venues.
• AMMs cannot comply with Rule 611 due to bonding curve execution and lack of routing capabilities.
• Alex Thorn calls repeal a breakthrough for tokenized stocks, enabling AMM trading.
• After repeal, FINRA Rule 5310's principles-based duty would govern best execution.
• 60-day public comment period begins after Federal Register publication.

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