The U.S. Securities and Exchange Commission SEC proposed repealing rules 611 and 610(e) under Reg NMS on June 11. These two regulations are among the rules that have long formed the basic framework for the functioning of the US stock market.
60-day comment period has started
According to TD Cowen executive Jaret Seiberg, a 60-day public comment period has been opened for the proposal. The revised regulation is expected to be completed in the first quarter of 2027.
Rule 611 prevents entering an order of lower quality for the relevant stock if a better price in the market is available on another trading platform. The 610(e) rule does not allow an exchange to display prices in a way that would result in locked or cross-price formation with quotes on competing markets.
Why does the SEC want to repeal these rules?
The first purpose of these two rules was to prevent investors from trading at bad prices in a fragmented stock market structure. However, many market participants, including SEC Chairman Paul Atkins, express the opinion that the rules do not provide the expected benefits and instead further fragment the trading platforms and create connection costs in favor of brokers.
In his statement released along with Wednesday’s vote, Paul Atkins stated that the proposed changes were a step long overdue and argued that these rules hindered the long-term growth of markets rather than supporting them.
Atkins had opposed Rule 611 since it was first adopted. In a dissenting opinion filed at the time with former Commissioner Cynthia Glassman, he argued that the regulator was substituting its own assumptions for outcomes that competition and market dynamics could more efficiently produce.
It is also emphasized that the proposal did not come to the agenda suddenly. The SEC held two separate public consultations on equity market structure last year; Gathered opinions from exchanges, brokerage firms and market makers. Atkins said the agency initiated this discussion transparently before the proposal.
Possible implications for tokenized shares
Atkins announced a broader simplification plan to revitalize public markets at the Rock Center for Corporate Governance event at Stanford University on May 28. The number of companies traded on U.S. exchanges has fallen nearly 40% since the mid-1990s, arguing that the regulatory frictions that drive companies away from public markets need to be reduced. The Reg NMS proposal is also seen as part of this approach.
The impact of this change may not be limited to the USA only. US stock markets are considered the reference for many regulatory structures on a global scale. A more open platform for on-chain share transactions in the world’s largest capital market could accelerate regulators in other countries clarifying their stance on tokenized securities.
Mini-dictionary: Automated market makers, or AMMs, are decentralized systems that determine trading prices through liquidity pools and mathematical price curves rather than the classic order book. Tokenized stock means creating a digital representation of a stock on the blockchain.
Galaxy Digital Research manager Alex Thorn said that this step could be one of the most important expansions ever in terms of tokenized share transactions on decentralized exchanges. The reason for this was that AMM-based systems have difficulty technically complying with rule 611 because they operate at the current pool price without stopping the transaction and checking the better price on Nasdaq or the New York Stock Exchange.
However, the removal of the two rules does not mean that the tokenized share market will become fully functional. Exchange or alternative trading system registration, clearing, settlement infrastructure and other securities regulations remain in existence. Most of these areas are still designed according to the centralized and brokerage-based market structure.
