The Blockchain Association says the Order Protection Rule and locked-quote limits don't fit onchain trading. FINRA's comment window closes Sept. 25.
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The Blockchain Association asked the U.S. Securities and Exchange Commission to scrap two Regulation NMS trading rules, arguing that price-protection standards written for conventional stock exchanges don't fit tokenized markets.
On Aug. 18, the Washington-based group filed a comment letter backing the SEC's proposal to strike Rules 611 and 610(e), first issued June 11 under file number S7-2026-20. The rules remain in force, and the Commission has not scheduled a vote on a final version.
Rule 611, the Order Protection Rule, generally stops trading venues from executing at prices worse than protected quotations displayed elsewhere. Adopted in 2005 to tie together fragmented U.S. equity markets, it requires trading centers to maintain policies designed to prevent prohibited trade-throughs. Rule 610(e) covers locked and crossed quotations, situations where the best bid equals the best offer or a bid exceeds an available offer. The provision requires national securities exchanges and associations to maintain rules reasonably designed to prevent members from displaying quotations that lock or cross protected quotes.
Both provisions assume an order-book market, the letter argues, where the displayed price is the main measure of execution quality. Trading systems have become faster and more automated since the rules were adopted, the group said. Tokenized venues can operate differently from that model. A blockchain system combines execution and settlement in one step, rather than separating the trade from a settlement process that occurs later. The letter points to 24/7 trading as another feature that doesn't fit a framework built around continuous exchange sessions.
A displayed price may not always produce the best overall result for an investor, the group said. Other factors include transaction fees, settlement speed, liquidity and counterparty exposure.
"Public blockchains can enable 24/7 trading, faster settlement, greater transparency, interoperability, and new models for executing trades," the Association said.
Blockchain settlement still faces liquidity constraints, smart contract risks, network congestion and different investor protection requirements. The potential benefits the Association cites are not guaranteed outcomes.
An exemption from federal securities laws is not what the group is seeking. The letter argues that compliant onchain systems can satisfy regulatory duties through methods suited to their technology; the exact obligations depend on the asset and venue involved.
SEC Commissioner Mark Uyeda said removing the rules would raise questions about best execution, transparency, trading mechanics and investor confidence. He described the proposal as the beginning of a wider market structure review, not its endpoint.
Chairman Paul Atkins said the proposal is "intended to simplify market structure and reduce costs." The proposing release weighs potential benefits against risks. Losing Rule 611 gives venues more latitude in routing and execution. Investors could receive trades at prices inferior to protected quotations displayed elsewhere.
Some commenters oppose the repeal for exactly that reason. They view Rule 611 as objective price protection for retail investors and warn that leaning on brokers' best execution assessments could deepen conflicts around order routing.
The Association argues the opposite case. A rigid focus on displayed price, it says, can block investors from choosing venues that settle faster or cost less overall. Its letter asks the SEC to pair any rescission with updated best execution guidance, the long-standing standard that requires brokers to seek the most favorable terms reasonably available for customer orders. Removing Rule 611 does not eliminate that duty, the group said.
National market system stocks generally, not only blockchain products, fall inside the proposal's scope. A final rescission would affect conventional exchanges, alternative trading systems, brokers and market makers. SEC officials have maintained that tokenized securities remain subject to existing securities laws; recording a stock on a blockchain does not change its legal status.
U.S. tokenization projects keep expanding inside regulated structures. Ondo Finance placed a BlackRock ETF and Micron shares on Ethereum while retaining the underlying securities through traditional custody arrangements. Kraken-backed xStocks runs an onchain engine for more than 70 tokenized equities across Ethereum and Solana; availability and investor rights vary by jurisdiction.
The products show why the intersection of blockchain execution and existing market rules is a live regulatory issue. They do not establish that removing Rules 611 and 610(e) would automatically permit every tokenized trading model in the United States.
The formal comment deadline was Aug. 17. The Federal Register published the proposal on June 17, and the Association announced its letter a day after the deadline. Its statement says the letter was submitted to the Commission.
SEC staff will review the comments before deciding whether to recommend a final rule, modify the proposal, leave the existing provisions in place or request further information. Any final rescission requires another Commission vote and publication in the Federal Register, with an effective date and transition requirements to be specified.
FINRA is separately taking comments through Sept. 25 on possible changes to its best execution guidance.
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