SEC Yanks Rule 611, Galaxy Calls It the "Biggest Unlock" for Tokenized Stocks 🗝️

The US Securities and Exchange Commission on June 11 proposed rescinding Rules 611 and 610(e) of Regulation NMS, the trade-through and locking/crossing provisions that have governed US equity market structure since 2005. SEC Chairman Paul Atkins said the proposal is "intended to simplify market structure and reduce costs for market participants while allowing competition, innovation, and other market forces to shape the continuing evolution of our equity markets." A 60-day public comment period begins upon publication in the Federal Register.

Rule 611, the Order Protection Rule, requires trading venues to prevent "trade-throughs," or executions at worse prices when better prices are available on other exchanges, with every trade in a national market system stock required to respect the national best bid and offer (NBBO). Rule 610(e) concerns restrictions on locking and crossing quotations in US equity markets.

Alex Thorn, head of firmwide research at Galaxy Digital, called the rule "one of the biggest structural barriers to tokenized US equities trading in DeFi today" and described its potential rescission as "one of the biggest unlocks yet for tokenized stocks." Thorn argued that automated market makers (AMMs) cannot comply with these rules by design, as pools execute against bonding curves at whatever price liquidity dictates, with slippage, at block-time granularity. "An AMM can't route intermarket sweep orders, can't ingest SIP data with latency guarantees, can't halt a swap because a better quote exists on Nasdaq," Thorn said, adding that any pool in a tokenized NMS stock "would commit trade-throughs constantly and arguably be an illegal trading center." He said AMM prices, which drift continuously with flow, would routinely lock or cross the displayed NBBO, which venues are currently required to prevent.

Thorn noted that without Rule 611, broker-level best execution duties under FINRA Rule 5310 would govern order handling. He characterized that standard as principles-based rather than enforced trade-by-trade, writing that "the proposed framework can accommodate an AMM. The old one never could." Thorn cautioned that the proposal addresses only one obstacle, and that clearance, settlement, and exchange registration for venues handling tokenized stocks remain to be resolved, likely in an upcoming "innovation exemption" framework that was delayed last month amid pushback from traditional market participants.

The SEC launched "Project Crypto" in August 2025 with the goal of establishing rules for digital assets and blockchain in US markets. According to figures cited by Galaxy, the tokenized stocks segment has reached $3.5B in market capitalization with nearly $5B in monthly transfer volume, a 44% increase over the past month, and 357K holders.