The U.S. Securities and Exchange Commission has proposed amendments to rescind Rules 611 and 610(e) of Regulation NMS, removing two market-structure rules that have shaped U.S. equity trading since 2005.
Rule 611, known as the order protection rule, blocks trading centers from executing stock trades at prices worse than protected quotes displayed on other exchanges. Rule 610(e) restricts locked and crossed quotations, where the best bid equals or exceeds the best offer.
The proposal would also remove related definitions in Rule 600 and make conforming changes across Regulation NMS. A 60-day public comment window will open after the proposal is published in the Federal Register.
Tokenized Stock Trading Gets A Cleaner Opening
The proposed rollback has immediate relevance for tokenized equities because DeFi trading systems do not work like traditional stock exchanges. Automated market makers use liquidity pools, smart contracts and slippage-based pricing. They do not route orders through the national market system in the same way as brokers, exchanges and alternative trading systems.
That creates a direct conflict with Rule 611. An AMM cannot easily pause each swap, compare quotes across protected equity exchanges, process intermarket sweep orders and guarantee routing against the national best bid and offer before settlement. Rule 610(e) creates a similar issue because onchain pool prices can naturally lock or cross displayed market quotes as liquidity changes.
Galaxy Digital research head Alex Thorn called the proposal a major unlock for tokenized stocks, with AMMs one of the clearest beneficiaries if the rule change moves forward. TD Cowen’s Washington Research team also views the proposal as positive for tokenized equities and expects finalization in the first quarter of 2027.
Broker Best Execution Moves To The Center
Removing Rule 611 would not remove investor-protection duties from tokenized stock trading. It would shift more weight toward broker best execution, venue controls, disclosure, surveillance and platform registration.
That structure is easier for tokenized equities than a trade-through rule built around traditional exchange routing. A regulated tokenized stock platform could design an AMM or hybrid liquidity model around clear execution policies, pricing disclosures, market access rules and custody controls instead of trying to make every onchain swap behave like a routed stock order.
The change could also help tokenized equity markets support 24/7 trading, smaller trade sizes and fractional access. Those features are difficult to fit into legacy equity plumbing when every execution must be compared against protected quotes from traditional trading hours and venue structures.
AMMs Need More Than Rule Relief
Tokenized stock AMMs would still need legal ownership structure, custody, transfer-agent support, corporate-action processing, dividend handling, shareholder rights, sanctions controls and market surveillance. A token that tracks a stock price is not enough if users cannot rely on enforceable ownership rights and clean settlement.
AMM design also carries its own trading risks. Thin pools can create heavy slippage. Stale liquidity can misprice assets after earnings, halts or major news. MEV, oracle delays and fragmented liquidity can weaken execution quality if protections are not built into the system.
The rule change would not solve those problems, but it would remove a structural mismatch between DeFi trading mechanics and a 20-year-old equity-market routing rule.
Tokenized Equities Move Closer To Market Structure Reform
The SEC proposal arrives as tokenized equity activity expands across exchanges, DeFi infrastructure and market-data providers. Binance’s stock-token push has already crossed $400 million in AUM, while Pyth has launched 24/7 indices for equities, metals and oil for crypto-native markets.
The proposal also follows the SEC’s earlier caution around broad tokenized-stock exemptions. Hester Peirce’s narrower stance on exemptive relief slowed expectations for a quick U.S. rollout, but the new NMS proposal attacks a different layer of the problem: stock-market plumbing rather than token issuance alone.
If the rollback is finalized, tokenized equity platforms would have more room to test regulated AMMs, hybrid order books and 24/7 settlement models without immediately colliding with Rule 611. For DeFi builders, the change could turn tokenized stocks from a compliance edge case into a more realistic regulated market design.
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