Odaily reported that Alex Thorn, head of research at Galaxy, said the U.S. Securities and Exchange Commission is seeking to repeal Rule 611, known as the “Order Protection Rule,” and Rule 610(e) under Regulation National Market System, or Reg NMS. Thorn described the move as an important turning point for the development of tokenized stocks because these market-structure rules have long affected how on-chain trading mechanisms can interact with regulated securities markets.
Why the Order Protection Rule matters for AMMs
According to Thorn, Rule 611 requires trades to follow the National Best Bid and Offer, or NBBO. This requirement creates a direct conflict with automated market makers. AMMs cannot route orders in real time in the same way as traditional venues, cannot access low-latency market data in the required form, and may need to halt trading when another exchange displays a better quote. Thorn said these constraints have made it difficult for AMMs to satisfy regulatory requirements and have become one of the main structural barriers preventing tokenized U.S. equities from being deployed in DeFi settings.
A shift toward broker best execution obligations
Thorn said that if future regulation replaces trade-by-trade requirements with a broker’s “best execution obligation,” on-chain liquidity pools and AMM mechanisms would be easier to bring into a compliance framework. Under that approach, the regulatory focus would move away from whether each individual trade strictly meets the order protection rule and toward whether the broker has fulfilled its best execution responsibility. In Thorn’s view, that would create a more workable path for designing compliant on-chain securities trading systems.
He also noted that tokenized securities still face other unresolved issues, including trading venue registration and clearing and settlement. However, the SEC’s planned “innovation exemption” mechanism is expected to further support related development. Thorn said the repeal of these key market-structure barriers is an important step in the SEC’s implementation of the “Project Crypto” roadmap, and would help pave the way for tokenized stocks, AMMs and innovation in on-chain securities trading.