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Hyperplastic, Douro Labs Push SEC to Drop Equity Trade-Through Rule

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Hyperplastic, Douro Labs Push SEC to Drop Equity Trade-Through Rule

2026-08-18 05:44 UTCBy AlphaScala Research DeskSource reporting: financefeeds.comEditorial standards

Hyperplastic, Douro Labs Push SEC to Drop Equity Trade-Through Rule

Two crypto organizations told the SEC to scrap Rule 611, arguing the 'best' price definition does not fit blockchain-based markets. Chairman Atkins has opposed the rule since 2005.

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Two crypto-sector organizations told the Securities and Exchange Commission to scrap one of the core rules governing how U.S. stocks are executed, arguing that the definition of the "best" available price does not fit blockchain-based markets.

The Hyperliquid Policy Center and Douro Labs submitted a joint comment on August 17 supporting the SEC's proposal to repeal Rule 611 of Regulation National Market System. That rule, also called the trade-through or Order Protection Rule, generally prevents trading venues from filling orders at prices worse than protected quotes shown elsewhere.

The SEC adopted Rule 611 in 2005 to create the National Best Bid and Offer as a single reference point for stock execution. The commission itself proposed eliminating the rule on June 11, alongside Rule 610(e), which restricts locked and crossed quotations. The public-comment period for docket S7-2026-20 closed August 17.

Hyperliquid Policy Center and Douro Labs argue that Rule 611 assumes a market structure fundamentally different from decentralized finance. Traditional exchanges publish bids and offers continuously, aggregated through securities information processors to determine the NBBO. Automated market makers do not necessarily work that way. Prices can emerge algorithmically from liquidity pools at the moment a transaction executes. Blockchain markets also operate around the clock, including overnight and weekends when conventional U.S. securities markets and their consolidated feeds may not be functioning.

Settlement creates another mismatch. Traditional market-data systems can update quotations in microseconds. Blockchain transactions settle according to block production and network finality, which is slower. Douro Labs has argued separately that execution quality should account for more than displayed price. Its proposed framework includes execution certainty, privacy, atomicity, finality, slippage and total transaction costs. The company, a core contributor to Pyth Network, has also advocated allowing verifiable decentralized price feeds to serve as alternatives to centralized market-data infrastructure where appropriate.

The industry's request arrives unusually close to the SEC's own position. Chairman Paul Atkins has opposed Rule 611 since its adoption more than two decades ago. When announcing the repeal proposal in June, Atkins argued that the rule contributed to fragmented liquidity and produced an increasingly complex and costly system for executing stock trades. The SEC's proposal says technological improvements and stronger connections among trading venues have reduced the need for Rule 611. Maintaining it could inhibit new technologies, products and services, the agency said.

That makes the debate particularly consequential for tokenized equities. If securities increasingly trade on public blockchains, regulators must determine whether those markets should reproduce the infrastructure of conventional exchanges or satisfy investor-protection requirements through different technological mechanisms. Hyperliquid Policy Center and Douro Labs favor the latter approach. They support principles-based best-execution requirements rather than prescriptive routing rules. They maintain that tokenized U.S. stocks should remain subject to applicable investor protections.

Repealing Rule 611 would not itself authorize unrestricted blockchain trading of securities. Broker-dealers, exchanges and tokenized securities would remain subject to other federal securities requirements. Eliminating the trade-through rule could remove a major structural obstacle to markets that operate continuously and settle directly onchain. The SEC must now decide whether a rule designed to connect fragmented stock exchanges in 2005 still improves execution in a market increasingly experimenting with blockchains, automated liquidity and 24/7 trading.