Key Highlights
- a16z crypto submitted a letter supporting the SEC’s proposal to rescind Rule 611 of Regulation NMS.
- Miles Jennings said the proposal could help move securities markets onchain.
- a16z argues Rule 611 was designed for a market structure that has changed significantly since 2005.
Andreessen Horowitz’s crypto arm, a16z crypto, has backed the U.S. Securities and Exchange Commission’s proposal to rescind Rule 611 of Regulation NMS, arguing that the change could make it easier to develop blockchain-based securities markets.
In a comment letter submitted on August 17, a16z said the Trade-Through Rule was created for a market structure that looked very different from today’s automated and interconnected equity markets.
The firm also argued that applying the rule to certain blockchain-based trading systems could force onchain venues to accommodate legacy offchain market-routing requirements.
The comments come as the SEC considers how existing market-structure rules should apply as stocks and other securities increasingly move onto blockchain networks.
Miles Jennings calls proposal a “Big Deal”
a16z crypto Head of Policy and General Counsel Miles Jennings highlighted the firm’s filing in a post on X on August 18.
“The SEC proposal to rescind Rule 611 is a big deal.”
Jennings said the proposal could do more than update the existing U.S. market structure, adding in the same post that a16z crypto had filed a letter supporting it the previous day.
He added that a16z crypto had filed a letter supporting the proposal the previous day.
The comments provide a clearer indication of why the crypto industry is paying attention to what could otherwise appear to be a technical change to U.S. equity-market rules.
Why Rule 611 matters for tokenized stocks
Rule 611, adopted as part of Regulation NMS in 2005, was designed to prevent trades from being executed at prices worse than protected quotations available at other trading centers.
a16z said the Trade-Through Rule — which requires trades to be executed at the best available price across markets — was created for a market structure that looked very different from today’s automated and interconnected equity markets.
The firm says the issue becomes more complicated when securities are traded through blockchain-based infrastructure.
Under the existing framework, certain onchain systems that could qualify as trading centers may have to monitor protected quotations on traditional exchanges and potentially route orders to offchain venues before executing transactions onchain.
a16z argues that such requirements could limit how tokenized securities markets are designed.
The firm said developers could effectively face a choice between integrating with traditional market infrastructure or structuring their systems to avoid falling within the definition of a trading center.
Ondo Also pushes SEC to recognize onchain structure
The a16z filing follows a similar push from Ondo Finance, which submitted comments to the SEC earlier this month regarding the proposed changes to Regulation NMS.
In its August 12 response, Ondo supported rescinding key provisions of the existing framework but urged the SEC to explicitly account for the way tokenized securities can trade and settle on blockchain networks.
Ondo highlighted areas including request-for-quote (RFQ) trading — where buyers and sellers negotiate a price directly rather than trading on a public order book — blockchain-based settlement and non-custodial infrastructure.
The company’s position adds another perspective to the debate: tokenized securities may not simply be traditional stocks placed on a blockchain, but could use different trading, settlement and liquidity mechanisms.
That means market rules written around centralized exchanges and conventional order-routing systems may need to account for infrastructure that operates differently.
a16z Says rule could give onchain venues more flexibility
a16z argues that removing Rule 611 would give eligible onchain venues greater flexibility to compete on execution quality, transparency and settlement.
The firm also said rescinding the rule would remove uncertainty over how trade-through requirements apply to certain blockchain-based systems.
However, a16z acknowledged that many decentralized finance systems, including automated market makers, would not ordinarily qualify as trading centers.
The firm’s argument is therefore focused on the subset of onchain market infrastructure that could fall within the existing regulatory definitions.
The proposal does not remove securities rules
The proposed rescission would not make tokenized stocks exempt from U.S. securities regulation.
Tokenized equities would still be subject to applicable securities laws, while platforms involved in issuance, custody or trading could remain subject to broker-dealer, exchange, investor-protection and other regulatory requirements where applicable.
The debate is instead about whether legacy market-structure requirements should be applied in the same way to blockchain-based markets.
That distinction is becoming more relevant as financial firms develop tokenized stocks, funds and other securities on public blockchains.
SEC’s Broader Onchain Market Push
a16z said its support for rescinding Rule 611 aligns with the SEC’s broader efforts to establish a framework for blockchain-based securities markets. The firm pointed to the SEC’s April guidance on certain non-custodial interfaces and the expected Innovation Exemption as steps that could support onchain trading infrastructure.
a16z also urged the SEC to formalize relevant guidance through rulemaking, arguing that clearer regulations would provide greater certainty for companies building in the sector.
The proposal remains subject to the SEC’s rulemaking and public-comment process. Along with Ondo’s separate comments, a16z’s position highlights a growing industry focus on how tokenized securities will trade, settle and access liquidity onchain, rather than simply how they are issued.
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