SEC Opens Path for On-Chain Markets With Landmark NMS Reform Proposal
The U.S. Securities and Exchange Commission has opened a new chapter in market structure reform after proposing the removal of Regulation NMS Rules 611 and 610(e), a move that could significantly accelerate the adoption of tokenized assets and blockchain-native trading infrastructure across U.S. financial markets.
Summary:
- SEC proposes scrapping two cornerstone U.S. market structure rules.
- Tokenized securities could benefit from a more flexible regulatory framework.
- Broker-dealers would assume greater responsibility for execution quality.
Announced on June 11, the proposal targets two rules that have shaped equity trading since the mid-2000s. Rule 611, commonly known as the Trade-Through Rule, requires trading venues to prevent executions at prices inferior to the best available quote displayed elsewhere. Rule 610(e) restricts exchanges from displaying quotations that lock or cross other market prices.
While originally designed to protect investors and improve market transparency, critics have increasingly argued that the rules have become incompatible with emerging technologies, particularly decentralized trading systems and tokenized securities markets.
From Prescriptive Rules to Principles-Based Oversight
The proposal marks a significant philosophical shift in how regulators approach trade execution.
Under the current framework, trading venues must continuously monitor protected quotations across multiple exchanges and route orders accordingly. This structure helped create the fragmented, highly interconnected equity market that exists today.
The SEC’s proposal would replace that prescriptive model with a more flexible best-execution framework that places greater responsibility on broker-dealers rather than trading venues themselves.
| Feature | Current Rule 611 | Proposed Best Execution Framework |
|---|---|---|
| Operational Logic | Requires “routing out” to match the best quote. | Allows brokers to consider multiple factors (price, speed, fill probability). |
| Tech Compatibility | Incompatible with on-chain AMMs. | Compatible with automated/on-chain protocols. |
| Compliance Focus | Mechanical/Technical check of all venues. | Holistic proof of reasonable effort and outcome. |
| Venue Flexibility | Rigid, fragmented by “protected quotes.” | Allows for innovation in trading protocols and execution models. |
This distinction is particularly important for tokenized markets and decentralized trading protocols.
Automated market makers (AMMs) and blockchain-based liquidity pools determine prices algorithmically through smart contracts rather than centralized order books. Because these systems execute trades directly against on-chain liquidity, they cannot easily comply with traditional routing requirements embedded within Rule 611.
By eliminating the rule, the SEC would move toward a broker-dealer “best execution” standard. Instead of forcing venues to route orders mechanically to the best displayed quote, brokers would bear responsibility for demonstrating that they achieved the most favorable outcome reasonably available for clients.
SEC Chairman Paul Atkins has argued that the existing framework creates unintended market distortions and may no longer reflect how modern markets function.
Why Tokenization Advocates Are Paying Attention
The proposal arrives as Wall Street accelerates efforts to bring financial assets onto blockchain infrastructure.
Industry analysts view Rule 611 as one of the most significant regulatory barriers preventing tokenized securities from achieving broader adoption. The rule effectively assumes a centralized market structure, whereas tokenized markets often rely on decentralized liquidity mechanisms that continuously update prices without routing orders across competing venues.
Removing that requirement could create a more accommodating regulatory environment for blockchain-based exchanges, tokenized equities and decentralized settlement networks.
The timing is notable.
Earlier the same day, Citigroup unveiled its Digital Depositary Receipts platform, allowing qualified investors to gain exposure to private-company shares through blockchain-based infrastructure. The launch reflects a broader trend among major financial institutions seeking to modernize issuance, trading and settlement processes through tokenization.
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Meanwhile, tokenized real-world assets continue to expand across multiple sectors, including private credit, Treasury products, real estate and insurance-linked securities.
Supporters argue that blockchain infrastructure can reduce settlement times, improve transparency and lower operational costs.
They believe regulatory modernization is necessary if those benefits are to scale within regulated markets.
Market Structure Debate Far From Settled
Despite enthusiasm from digital asset advocates, the proposal remains controversial.
Investor protection groups and some market participants caution that Rule 611 was introduced to prevent investors from receiving inferior prices when better quotes exist elsewhere. Removing the rule could create new execution risks if brokers fail to maintain robust best-execution policies.
The SEC has emphasized that brokers would still face stringent obligations to act in clients’ best interests. Price would remain a critical factor, but firms could also consider execution speed, market impact, fill probability and other relevant considerations.
In practice, the change would shift compliance responsibilities away from trading venues and toward broker-dealers, requiring firms to document and justify their routing decisions more extensively.
The proposal now enters a 60-day public comment period, during which exchanges, broker-dealers, institutional investors and digital asset firms are expected to weigh in heavily.
Part of a Broader Modernization Push
The SEC’s latest initiative underscores a growing recognition that market infrastructure is evolving faster than the rules governing it.
Tokenization has moved beyond theoretical discussions and increasingly represents a strategic priority for major financial institutions. Banks, asset managers and market operators are investing heavily in blockchain-based systems designed to support issuance, trading and settlement of financial assets.
Whether the proposal ultimately becomes law remains uncertain. However, market participants broadly agree that the SEC has opened one of the most consequential debates in U.S. market structure since Regulation NMS first reshaped equity trading nearly twenty years ago.
For tokenized securities, decentralized trading protocols and blockchain-based exchanges, the outcome could help determine how quickly digital asset infrastructure becomes integrated into mainstream capital markets.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Zdravkov
Reporter at CoinsPress
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 10,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
