Douro Labs, the core contributor to the Pyth Network, asked the Securities and Exchange Commission (SEC) on August 17 to let brokers measure the quality of blockchain-based stock trades against independent price feeds rather than the official national benchmark, which does not operate on weekends.
The letter sets out four criteria a qualifying reference price would have to meet and discloses that Douro Labs has built a service meeting them. It filed jointly with the Hyperliquid Policy Center, a research and advocacy group led by Jake Chervinsky.
The Rule Being Scrapped
The letter responds to an SEC proposal published on June 11 to scrap two long-standing stock market rules.
The first, Rule 611, is known as the trade-through rule. Since 2005 it has required that an order be sent to whichever exchange is displaying the best publicly quoted price, rather than executed somewhere worse. The second, Rule 610(e), bars exchanges from displaying quotes that lock or cross each other.
If Rule 611 disappears, the protection that replaces it is a broker’s duty of best execution—a general obligation to get customers the most favorable terms reasonably available. That duty is administered mainly through rules written by FINRA, the industry self-regulator.
Douro Labs and the Hyperliquid Policy Center said they support scrapping both rules without qualification. Their argument is that the trade-through rule cannot describe blockchain venues at all, because those venues do not produce the kind of firm public quote the rule is built around.
Why the Official Benchmark Does Not Work Onchain
Most brokers check execution quality against the national best bid and offer, or NBBO—the best publicly quoted buy and sell price across US exchanges, compiled and published by systems called securities information processors, or SIPs.
The letter argues that benchmark fails for blockchain trades for three reasons. It often does not exist when the trade happens. Blockchain venues run continuously, including nights, weekends, and holidays, while the SIPs do not. The Commission has approved extended SIP hours starting December 6, 2026, running from 9:00 p.m. Eastern on Sunday to 8:00 p.m. Eastern on Friday, but those hours still exclude weekends and holidays and include a nightly pause.
It does not reflect blockchain conditions even when it exists. Automated market makers, the most common blockchain trading venues, hold assets in a pool and set prices by formula rather than posting bids and offers, so they have no quote to submit. Blockchain order books that do display resting orders are not connected to the national reporting system.
And the timing does not line up. A benchmark refreshing in microseconds is not a meaningful reference for an order that will settle at a block boundary, the letter argues, citing block times of roughly 200 milliseconds on Hyperliquid, 400 milliseconds on Solana, 12 seconds on Ethereum, and about 10 minutes on Bitcoin.
Four Criteria and a Disclosure
The letter asks the Commission to state that a “qualifying reference price” can be used instead of, or alongside, the official benchmark when judging blockchain executions.
It proposes four criteria. Such a price should aggregate contributions from independent market participants directly involved in setting prices; use manipulation-resistant methods with published information on data recency, update frequency, and validation; make publisher identities, data sources, and calculation logic public and open to audit; and be periodically checked against SIP data and outside sources.
The letter states that services meeting these criteria, which market participants, including Douro Labs, have developed for this purpose, are appropriate tools for supporting compliance. It asks that any recognition be framed by the criteria rather than by the identity of a provider.
Pyth is a decentralized oracle that publishes real-time price data on-chain, drawing contributions from exchanges and trading firms. Douro Labs is its core contributor and the developer of the Pyth Pro reference price service, according to the letter. The Hyperliquid Policy Center describes itself as an independent research and advocacy organization working on regulated access to on-chain markets, including Hyperliquid. Nasdaq joined the Pyth Data Marketplace as a publisher in June 2026, making its TotalView depth-of-book feed available through Pyth’s distribution layer.
Letter Says Exchange-Written Rules Carry a Conflict
The filing also asks the Commission to keep the best-execution policy anchored in FINRA rather than at individual exchanges.
It notes that NYSE American, NYSE Arca, NYSE National, and NYSE Texas each adopted their own immediately effective best-execution rules on June 9, modeled on FINRA’s, following a similar rule at NYSE in January.
Exchanges are themselves trading venues competing for order flow, the letter states, and a system in which each venue writes, interprets, and enforces the standard governing where its members send orders carries an inherent conflict of interest and the potential for anti-competitive effects. It says such rules could be applied in ways that impede routing to venues other than the adopting exchange, including alternative trading systems and blockchain venues, and asks the Commission to watch for that.
Costs With No Traditional Equivalent
The letter sets out blockchain trading costs; it says existing guidance does not address network fees paid to block producers, which spike during congestion and must be estimated before submission; protocol fees charged by the venue; slippage caused by an order moving the price along a pool’s pricing curve; the cost of pre-funding a wallet before trading; bridge fees when a token moves between blockchains; and the opportunity cost of capital tied up during confirmation.
It also asks the Commission to recognize maximal extractable value, or MEV—value captured by block producers who reorder, insert, or exclude transactions—as a best-execution consideration. The letter argues MEV can both harm and help a customer, citing front-running and sandwich attacks on one side and inclusion certainty and rebates on the other, and asks for a safe harbor for firms that document reasonable practices rather than a requirement to eliminate MEV exposure.
Proposal for an Investor-Set Price Limit
As a replacement for the price protection the rescission removes, the letter proposes what it calls an investor-directed slippage parameter—a maximum price deviation the investor sets when placing an order, enforced by the smart contract itself, so that a trade outside the tolerance reverts unfilled.
It argues this is the blockchain equivalent of a limit order, with a difference: a limit price constrains the match price only, while a slippage tolerance constrains the effective price across the whole fill. The letter opposes any fixed numerical cap, arguing a mandated ceiling would cause orders to fail precisely when customers most need to trade.
Letter Questions Whether Tokenized Stocks Are Covered at All
The filing closes on a definitional problem. An “NMS security” is defined by reference to transaction reporting through the SIPs. Read strictly, the letter argues, a tokenized instrument may not technically qualify as an NMS stock unless blockchain venues report trades to those systems—even where it represents ownership of a security that plainly is one.
That would mean a security’s regulatory status could turn on which ledger a given trade settles on. The letter calls that untenable and asks the Commission, rather than the self-regulators, to confirm that instruments held on distributed ledgers fall inside Regulation NMS.
Separately, it argues blockchain trades already fall outside Rule 611 under an existing exception for transactions not executed on “regular way” terms, because they settle instantly on a ledger rather than through the standard next-day process run by the central clearing infrastructure.
Second Crypto Filing on the Same Proposal
The letter was signed by Brandon H. Ferrick, general counsel of Douro Labs, and Brad Bourque, senior counsel at the Hyperliquid Policy Center. It was copied to Chairman Paul Atkins, Trading and Markets director Jamie Selway, FINRA chief legal officer Robert Colby, Douro Labs chief executive Michael Cahill, and Hyperliquid Policy Center chief executive Jake Chervinsky.
Douro Labs and Securitize Markets chief executive Joe Nikolson separately wrote to FINRA on August 11 requesting updated interpretive guidance on the same subject, according to the letter.
Ondo Finance filed its own comment on the same rulemaking, asking the SEC to address tokenized stocks and request-for-quote execution. The Hyperliquid Policy Center, established this year and led by Chervinsky, filed with the CFTC on August 7 on perpetual futures. Hyperliquid representatives met the SEC’s crypto task force in July.
The Crypto Times contacted Douro Labs and the Hyperliquid Policy Center for comment at 1:00 pm UTC on August 17.
