SEC proposes scrapping Rule 611 for tokenization

TLDR

The SEC has proposed rescinding Rule 611 of Regulation NMS, which could remove a key legal barrier to tokenized US stocks trading on DeFi-style platforms.

1. The proposal would scrap Rule 611 and related Rule 610(e), replacing rigid best price routing with a simpler equity market structure focused on broker best execution.
2. Analysts see this as a major unlock for tokenized US equities, since automated market makers (AMMs) cannot comply with Rule 611s trade-through requirements today.
3. Nothing changes immediately: there is a 60?day comment period, implementation is likely around 2027, and big hurdles like registration, settlement, and investor rights still remain.

Deep Dive

1. What The SEC Is Proposing

The SEC has put forward a rulemaking to rescind Regulation NMS Rules 611 and 610(e), core components of US equity market structure since 2005 and 2007 respectively. Rule 611, the Order Protection Rule, forces trading centers to avoid executing trades at worse prices than the national best bid or offer, while Rule 610(e) restricts locked or crossed quotes across venues.

According to the SEC and summarized in coverage such as this overview of the proposal, the goal is to simplify market structure, reduce connectivity costs, and let competition and best execution standards do more of the work. The proposal opens a 60?day public comment period and could, if adopted, be finalized around early 2027.

2. Why This Matters For Tokenization And DeFi

Rule 611 has been a structural blocker for tokenized US stocks on AMM-based DeFi venues. AMMs quote prices from liquidity pools, do not route orders across exchanges, and cannot pause trades whenever a better NBBO quote appears elsewhere.

Analysts like Galaxy Digitals Alex Thorn argue that any AMM pool in a tokenized NMS stock would be committing constant trade-throughs under Rule 611, effectively making it an illegal trading center, and that rescinding the rule would remove one of the biggest structural barriers to tokenized US equities in DeFi as discussed here. If 611 is dropped, broker-level best execution standards (for example FINRA Rule 5310) would likely take over, which are more compatible with on-chain liquidity models.

3. Timeline, Remaining Hurdles, And Risks

The proposal is at an early stage. It must go through the comment period, potential revisions, and a final vote before any rules actually disappear, and the SEC can still scale back or abandon the idea.

Even if 611 and 610(e) are rescinded, tokenized equities will still need to navigate exchange or ATS registration, clearing and settlement rules, and ensuring digital tokens carry proper shareholder rights, as highlighted in broader analyses of the move toward tokenized equities in DeFi like this one. There is also talk of a limited innovation exemption to let pilots run under volume caps and strict whitelisting.

For traditional markets, critics worry that removing order protection could increase fragmentation and harm execution quality, which could slow or reshape the final rule.

Conclusion

The SECs plan to scrap Rule 611 is not a crypto rule on its face, but it directly tackles the market-structure conflict that has kept tokenized US stocks out of AMM-based DeFi. If the rulemaking survives the comment process and is finalized around 2027, it could be a major enabler for regulated tokenized equity venues, while shifting the regulatory focus toward best execution, registration, and investor protection rather than strict trade-through mechanics.