The U.S. Securities and Exchange Commission (SEC) has proposed eliminating two cornerstone provisions of the Regulation National Market System (Regulation NMS). This shift marks one of the most radical overhauls of the U.S. equity market structure in nearly two decades.
According to the official announcement, the 267-page proposal would rescind Rule 611, commonly known as the order protection or trade-through rule, alongside Rule 610(e), which restricts locking and crossing quotations across national stock exchanges.
According to the SEC, the changes are intended to simplify market operations, reduce compliance costs, and allow competition and innovation to play a greater role in shaping modern financial markets.
Why SEC is dismantling two decades of market rules
Regulation NMS was originally enacted in 2005 to modernize fragmented U.S. equity structures and protect retail execution quality. However, SEC Chairman Paul Atkins, a longtime opponent of the framework since his days as an SEC Commissioner in the mid-2000s, argued that some of the rigid provisions have generated unintended consequences that may now outweigh their original benefits.
“After two decades of Rule 611, it is high time that the Commission review its unintended consequences that have hindered — rather than enhanced — the long-term growth of our markets,” Atkins said.
Instead of encouraging visible, displayed liquidity on public exchanges, the SEC notes that the trade-through rule did the exact opposite over the last twenty years: it triggered a massive explosion of siloed trading venues, increased compliance data costs, and drove high-volume trading into hidden “dark pools.”
Clearing the obstacle for tokenized equities
While traditional broker-dealers assess how the rules will lower connectivity and market routing costs, Web3 researchers view the proposal as a structural green light for bringing legacy assets onto public blockchains.
Under the old Rule 611 framework, on-chain Automated Market Makers (AMMs) were effectively locked out of trading tokenized U.S. equities. Because an AMM executes trades deterministically against an algorithmic bonding curve at block-time granularity, it cannot natively comply with Rule 611. It cannot ingest external SIP market data feeds with sub-millisecond guarantees, nor can it halt an active on-chain swap because a slightly better price momentarily exists on Nasdaq.
By eliminating the strict trade-through requirement, the SEC will shift oversight toward FINRA Rule 5310’s “Best Execution” duty—a flexible, principles-based framework that evaluates overall execution execution, speed, and size, rather than checking individual executions trade-by-trade.
Regulatory pivot across financial agencies
The SEC’s proposal comes amid a broader regulatory shift across U.S. financial agencies.
Earlier this month, the Commodity Futures Trading Commission (CFTC) voted to eliminate its long-standing 1998 “no-deny” settlement policy, which prevented defendants from publicly disputing allegations after settling enforcement actions.
The CFTC said removing the restriction could accelerate case resolutions, reduce litigation costs, and return funds to harmed investors more efficiently.
The change mirrors the SEC’s recent efforts to reassess long-standing regulatory frameworks and follows the agency’s withdrawal of several proposed rules introduced during former Chairman Gary Gensler’s tenure.
The proposal has now entered the mandatory 60-day public comment period following its entry into the Federal Register. Institutional researchers expect the repeal to be finalized and implemented by early 2027, with the SEC potentially granting tailored exemptive relief for tokenized stock pilots ahead of schedule.
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