SEC Moves to Repeal NMS Rules 611 and 610(e), Potentially Opening the Door for Tokenized Stock Trading Models

The U.S. Securities and Exchange Commission has proposed eliminating two long-standing National Market System (NMS) rules that shape how U.S. equity venues protect displayed prices and prevent "trade-throughs." If adopted, the rollback could significantly change the regulatory baseline for tokenized stock platforms, especially those using automated market makers (AMMs) or other decentralized execution designs. In a notice of proposed rulemaking released Thursday, the SEC said it would rescind Rule 611, which generally blocks an execution on one venue at an inferior price when a better-priced quotation is available on another venue. The agency also proposed removing Rule 610(e), which limits exchanges from displaying certain bids that are not aligned with better-priced quotations elsewhere. The proposal is open for 60 days of public comment. Key points - The SEC is proposing to repeal NMS Rule 611 (trade-through protections) and Rule 610(e) (limits on certain displayed bids), potentially resetting cross-venue price-protection expectations. - AMMs and other pooled-liquidity execution models could face fewer built-in structural conflicts if the trade-through framework is removed. - The SEC has indicated it could replace these provisions with a broader "best execution" approach, shifting compliance from rigid price-protection mechanics to execution-quality standards. - Firms exploring tokenized equities may need to reassess regulatory alignment where execution logic cannot reliably replicate centralized quote-by-quote comparisons. What the SEC is proposing to change Rules 611 and 610(e) were designed to reinforce price competition across U.S. equity markets by linking execution quality to displayed quotations across venues. Rule 611 targets trade-throughs—executions at prices worse than better-priced quotes available elsewhere. Rule 610(e) addresses quoting behavior, restricting the display of certain bids when superior quotations exist on other venues. By proposing to repeal both rules, the SEC is effectively challenging whether these specific mechanisms remain the right fit as market infrastructure evolves, including the growing interest in using digital-asset technology for securities trading and settlement. The compliance impact is immediate because these rules influence what routing, quoting, and execution behavior is permitted for exchanges, ATS operators, broker-dealers, and any tokenized-stock venue design. Why tokenized equities run into structural friction Industry commentary has highlighted a core mismatch between today's NMS structure and AMM-based execution. Galaxy head of research Alex Thorn has argued that AMMs trade against a pool price at the moment of execution, which can conflict with trade-through protections that hinge on whether a better quote exists on another venue. In Thorn's framing, an AMM may not be able to "stop a trade" simply because another market is displaying a superior price. That can create situations where a pool executes at a price worse than the best displayed quotation elsewhere, raising trade-through concerns under the current regime. Rapidly changing AMM pricing can also make compliance difficult within a framework built around continuous cross-venue quote comparisons. The institutional issue is less about whether engineering can satisfy every technical requirement and more about whether the rules' assumptions match how the execution model functions. Trade-through standards depend on comparing quotes across venues; AMMs depend on internal liquidity mechanics. That disconnect can translate into recurring legal and operational risk. From trade-through rules to a "best execution" framework The SEC has not finalized any replacement structure. Thorn suggested the agency may shift toward a broader best-execution model. Best execution focuses on whether a broker or venue handles an order in a way reasonably designed to obtain the most favorable terms for the customer under the circumstances, typically supported by policies, routing logic, monitoring, and controls. For tokenized equities, that approach could be more adaptable than strict trade-through prohibitions. It would still require robust documentation, governance, and evidence that execution-quality objectives are being met. The compliance lens would move away from a binary quote-vs-execution comparison toward a reasonableness standard supported by surveillance, metrics, and audit trails. Even if Rules 611 and 610(e) are removed, broader obligations for exchanges and broker-dealers—covering order handling, market integrity, and customer protection—may still constrain how tokenized equities are offered and executed within the U.S. market structure. Regulatory context and next steps The proposal is subject to a 60-day comment period. After reviewing submissions, the SEC may revise the proposal based on feedback from market participants, investors, and market-structure stakeholders. The timing aligns with broader SEC efforts to clarify how digital-asset technologies could fit within existing rules. The agency has described parts of this work under "Project Crypto," launched in August 2025. Separately, Cointelegraph has reported that the SEC was preparing a plan to allow an innovation exemption for tokenized stock trading, but that the plan was postponed after exchange officials raised execution-related concerns. While repealing trade-through rules differs from creating an innovation-exemption pathway, both developments point to the same direction: the SEC is rethinking market-structure scaffolding as newer execution models emerge. For regulated institutions, tokenized-equity initiatives can also trigger additional compliance considerations beyond NMS, including licensing and supervisory duties, disclosure, AML/KYC where applicable to intermediaries and counterparties, and cross-border issues when infrastructure or participants involve non-U.S. elements. Bottom line Whether or not the SEC ultimately rescinds Rules 611 and 610(e), the proposal signals a willingness to revisit how price-protection requirements should operate as trading infrastructure evolves. Market participants will be watching the comment record for details on any best-execution replacement and for how tokenized-stock models would be expected to demonstrate compliance in practice. This piece was originally published as "SEC Plan to Replace Tokenized US Stock Rule 611, Galaxy Says" on Crypto Breaking News.