SEC proposes removal of key market rules for US stocks! What are the game changing details for tokenize shares?

The US Securities and Exchange Commission (SEC) announced on June 11 a proposal to repeal Rules 611 and 610(e) under Regulation NMS, both of which have long served as foundational elements of the US equity market’s regulatory framework.

A 60 day public comment period begins

According to Jaret Seiberg, an executive at TD Cowen, a 60 day public comment period on the proposal is now underway, with the updated regulations expected to be finalized in the first quarter of 2027.

Rule 611, also known as the “Order Protection Rule,” prevents a lower quality order from being entered for a stock if a better price is available on another trading venue. Meanwhile, Rule 610(e) prohibits exchanges from posting prices that could create locked or crossed markets, thereby maintaining orderly price formation.

Why does the SEC want to repeal these rules?

These two rules were originally designed to prevent investors from receiving inferior prices in a fragmented marketplace. However, many market participants, including SEC Commissioner Paul Atkins, argue that instead of delivering the intended benefits, these rules have increased fragmentation among trading platforms and added connectivity costs that favor brokers.

Atkins has been a vocal opponent of Rule 611 since its inception. Alongside former Commissioner Cynthia Glassman, he argued in a dissent at the time that regulatory intervention was replacing, rather than encouraging, the more efficient outcomes created by natural competition and market dynamics.

It’s also stressed that the proposal has not emerged out of thin air. Last year, the SEC held two separate public consultations on the structure of equity markets, soliciting feedback from exchanges, broker dealers, and market makers. According to Atkins, the Commission kicked off this debate in a transparent way well before introducing the current proposal.

Potential implications for tokenize shares

Atkins unveiled a broader plan to reinvigorate public markets at the Rock Center for Corporate Governance at Stanford University on May 28. He pointed out that since the mid 1990s, the number of publicly listed US companies has fallen by around 40 percent, and he argued that the reduction of regulatory friction is necessary to halt this trend. The Regulation NMS proposal is seen as part of this larger effort.

The impact of these regulatory changes may not be limited to US markets. As US equities serve as a reference point for many regulatory frameworks worldwide, a more open environment for on chain stock transactions in the world’s largest capital market could accelerate efforts by global regulators to clarify their own approach to tokenize securities.

Mini glossary: Automated market makers, or AMMs, are decentralized systems that determine trading prices based on liquidity pools and mathematical price curves rather than traditional order books. A tokenized share refers to a digital representation of a stock issued and traded on a blockchain.

Alex Thorn, head of research at Galaxy Digital, described the SEC’s move as possibly the most significant development yet for the trading of tokenized shares on decentralized exchanges. He reasoned that AMM based platforms, which execute at the current pool price without pausing to check for better prices on Nasdaq or the New York Stock Exchange, can have trouble complying with Rule 611 in its current form.

Nevertheless, abolishing these two rules does not mean the market for tokenized shares will immediately become fully operational. Existing requirements for exchange or alternative trading system registration, clearing and settlement, and other securities regulations remain intact. Much of this infrastructure is still designed around a centralized, broker intermediary model.

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