SEC Proposes Repeal of Rule 611, Opening Door for Tokenized Stocks

The U.S. Securities and Exchange Commission proposed rescinding two core equity market rules on June 11, a move that could remove a structural barrier to tokenized U.S. stocks trading on blockchain-based venues.

The proposal targets Rules 611 and 610(e) of Regulation National Market System. Rule 611 has governed trade-through protection since 2005. It requires trading venues to execute stock trades at prices that match or beat the best available quote on any other venue. Rule 610(e) restricts locked and crossed quotations in national market system stocks.

SEC Chairman Paul Atkins said the rules may have created problems that limited market growth. “After two decades of Rule 611, it is high time that the Commission review its unintended consequences that have hindered – rather than enhanced – the long-term growth of our markets,” Atkins said in a statement.

The proposal does not itself approve tokenized stock trading. It opens a 60-day public comment period after publication in the Federal Register. Market participants can weigh in before the SEC decides whether to finalize the rescission.

Galaxy Digital’s Alex Thorn said the rule change could remove a major barrier for tokenized equities in decentralized finance. He argued that automated market makers cannot comply with Rule 611 by design. “An AMM cannot comply with 611 by construction. It executes against a bonding curve at whatever the pool price is, with slippage, at block-time granularity,” Thorn wrote.

DeFi pools cannot check every stock exchange quote in real time before each swap. They also cannot route orders across venues the way traditional brokers do. Rule 610(e) creates similar problems. AMM prices move with trading flow, which means tokenized equity pools could often lock or cross displayed quotes in the traditional market.

If the SEC removes the rules, broker-level best execution duties under FINRA Rule 5310 may become the main framework. That rule requires brokers to seek the best available terms for customer orders. Some analysts say that framework may fit tokenized markets better than trade-by-trade price protection.

Tokenized stocks still face other hurdles. They require exchange registration, ATS compliance, clearing, settlement, and investor rights. As previously reported, the SEC has studied an innovation exemption for tokenized public stocks. Commissioner Hester Peirce has said any exemption would likely stay limited to digital versions of existing equities, not synthetic tokens without shareholder rights.

The proposal is a step in a wider policy shift but remains subject to the comment process and further agency action. The public comment period opens 60 days after the proposal appears in the Federal Register.