SEC's Reg NMS Repeal Gives Tokenized Stocks a Path Forward

On June 11, the Securities and Exchange Commission proposed repealing Rules 611 and 610(e) of Regulation NMS. Chairman Paul Atkins said the move was "high time" and that the rules had "hindered, rather than enhanced, the long-term growth of our markets." A 60-day public comment period is now open. TD Cowen managing director Jaret Seiberg expects final adoption in the first quarter of 2027.

The two rules have governed U.S. equity-market structure since 2005. Rule 611, the trade-through or order protection rule, prohibits executing a stock trade at a price worse than the best quote available on any other exchange. Rule 610(e) bars trading venues from displaying quotes that lock or cross quotes elsewhere. Atkins dissented from the original adoption along with then-Commissioner Cynthia Glassman. Both argued the SEC was substituting its own assumptions for outcomes that competition and market forces would produce more efficiently.

For tokenized stocks, the repeal removes a specific technical barrier. Automated market makers on decentralized exchanges execute trades along a bonding curve at the current pool price. They cannot check whether a better quote exists on Nasdaq or the New York Stock Exchange before completing a transaction, making compliance with Rule 611 structurally impossible. Galaxy Digital's Alex Thorn called the proposal "one of the biggest unlocks yet for tokenized stock trading on decentralized exchanges."

Platforms that already issue tokenized shares face the clearest structural benefit. Services such as the bStocks program on Trust Wallet, which offers tokenized Tesla and Nvidia shares, currently operate through centralized issuance mechanisms that can comply with existing rules. A repeal of the trade-through rule would allow those platforms to explore genuinely decentralized trading venues without running afoul of the order protection rule. (Tokenized Tesla, Nvidia Now on Trust Wallet via Binance bStocks)

The proposal does not stand alone. Atkins outlined a broader deregulation campaign in a May 28 talk at Stanford's Rock Center for Corporate Governance. He noted a 40% decline in the number of U.S.-listed companies since the mid-1990s and called for eliminating "regulatory frictions" that drive companies away from public exchanges. The Reg NMS proposal fits into that push, which also includes reducing disclosure obligations and modernizing exchange registration rules.

The repeal does not create a fully operational market for tokenized equities. Registration requirements and Alternative Trading System rules, both designed for centralized markets, remain in place. Settlement procedures still apply. Seiberg noted that the SEC may grant exemptive relief to tokenization pilot programs before the full rulemaking finishes, giving early movers a clearer regulatory path.

The SEC held two public consultations on equity-market structure last year, gathering input from exchanges, broker-dealers, and market makers. Atkins referred to those sessions in his open-meeting statement, saying the agency began the discussion transparently before proposing formal revisions.

The effect is not contained to the United States. The U.S. equity markets set the standard on which other capital markets base their structure. A go-ahead for on-chain stock trading on the world's largest capital market would create pressure on securities authorities worldwide to define their positions on tokenized equities.

Thorn's take suggests the biggest near-term impact may come from removing what he called a structural obstacle that had no obvious workaround. The comment period closes in August. If the SEC signals exemptive relief for pilot programs before then, tokenized stock issuance gains a practical runway. If the proposal draws pushback from exchanges and broker-dealers who benefit from the existing fragmented structure, the timeline slips.