Svmuu News: Galaxy Research Director Alex Thorn stated that the U.S. Securities and Exchange Commission (SEC) plans to abolish Rule 611 (the "Order Protection Rule") and Rule 610(e) under Regulation National Market System (Reg NMS). This move could mark a significant turning point for the development of tokenized stocks.
Thorn pointed out that Rule 611 requires trades to follow the National Best Bid and Offer (NBBO). However, Automated Market Makers (AMMs) have long struggled to meet regulatory requirements because they cannot route orders in real-time, access low-latency market data, or pause transactions due to better quotes available on other exchanges. This has made the rule one of the main structural barriers to the adoption of tokenized US stocks in DeFi scenarios.
He stated that if the SEC replaces trade-by-trade regulatory supervision with a broker's "best execution obligation," on-chain liquidity pools and AMM mechanisms would be more easily integrated into a compliant framework. Although tokenized securities still face issues such as trading venue registration and clearing/settlement, the "innovation exemption" mechanism the SEC plans to introduce later could further promote related developments.
Thorn believes this is an important step in the SEC's implementation of the "Project Crypto" roadmap. By removing key structural market barriers, it paves the way for innovations in tokenized stocks, AMMs, and on-chain securities trading.