SEC Finally Tells Rule 611 to Touch Grass: AMMs Cheer 📜

The U.S. Securities and Exchange Commission on June 11 proposed rescinding Rules 611 and 610(e) of Regulation NMS, the trade-through and locked/crossed-quote rules that have governed U.S. equity market structure since 2005. The proposal, which opens a 60-day public comment period upon publication in the Federal Register, is the latest step under the SEC's Project Crypto initiative launched in August 2025 to modernize digital-asset and blockchain oversight in U.S. markets. SEC Chairman Paul Atkins framed the move as a long-overdue review, stating, "After 2 decades of Rule 611, it is high time that the SEC review its unintended consequences that have hindered the long-term growth of our markets. I look forward to reviewing public input as we take a careful approach to avoid repeating the same mistakes that brought us here." Atkins added that 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."

Rule 611, the Order Protection Rule, requires trading venues to prevent trade-throughs by routing orders to the national best bid and offer (NBBO) displayed on any protected exchange. Rule 610(e) separately prohibits exchanges from displaying bids at the same or higher price than quotes available elsewhere. Galaxy Digital Head of Firmwide Research Alex Thorn called the combined repeal "one of the biggest unlocks yet for tokenized stocks" and described Rule 611 as "one of the biggest structural barriers to tokenized US equities trading in DeFi today."

Thorn explained that automated market makers (AMMs) cannot satisfy the existing rules by design, noting that "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. any pool in a tokenized NMS stock would commit trade-throughs constantly and arguably be an illegal trading center." Under Thorn's analysis, AMM prices drift continuously with flow and would routinely lock or cross the displayed NBBO, putting 610(e) in the same category. He argued that without Rule 611, broker-level best execution obligations under FINRA Rule 5310 would govern order handling through a principles-based standard rather than trade-by-trade enforcement, a framework he said "can accommodate an AMM. The old one never could."

Thorn cautioned that the proposal addresses only one part of a broader stack, pointing to clearing, settlement, and exchange registration for venues handling tokenized stocks as remaining issues he expects to be addressed under the SEC's forthcoming "innovation exemption" framework. That exemption plan was reportedly delayed last month after pushback from traditional exchange operators. Thorn's figures place the current tokenized-stocks segment at $3.5B in market size, roughly $5B in monthly transfer volume, a 44% increase over the prior month, and 357K holders, with no other named tickers cited for the segment.