The US Securities and Exchange Commission has proposed rescinding Rule 611 and Rule 610(e) under Regulation NMS, a change Galaxy Digital says could remove one of the biggest structural barriers to trading tokenized stocks onchain. The Commission voted on June 11 to issue the proposal and opened a 60-day public comment period that begins once it appears in the Federal Register.
Why Rule 611 has been a major obstacle
Rule 611, known as the order protection rule, prevents trading centers from executing orders at prices worse than protected quotes displayed on other venues. Rule 610(e) restricts locking and crossing quotations in national market system stocks. The SEC proposal also removes related defined terms in Rule 600 and makes matching changes elsewhere in the framework.
SEC Chairman Paul S. Atkins said the agency should revisit the unintended effects of a market structure framework that has been in place for roughly two decades. He said those effects have hindered long-term market growth rather than improved it. In his view, rescinding the rules would simplify market structure, lower costs for market participants, and leave competition and innovation to shape how equity markets develop.
Galaxy argues AMMs cannot satisfy the rule by design
Galaxy Digital head of firmwide research Alex Thorn described the proposal as one of the biggest unlocks yet for tokenized stocks. His argument is direct: the order protection rule made compliant onchain equity trading effectively impossible. An automated market maker, or AMM, executes against a pool and bonding curve, with slippage and block-time execution. That structure does not allow it to reference and honor the national best bid and offer at the exact moment of execution in the way Rule 611 requires.
Because of that, an AMM also cannot route intermarket sweep orders or stop a swap simply because a better quote exists on another exchange. If a pool were to hold a tokenized NMS stock, it could be exposed to constant trade-throughs and the risk of being treated as an illegal trading center.
Broker best-execution duties may become the main standard
Thorn said that if Rule 611 is removed, order-handling obligations would shift toward the broker-level best execution duty under FINRA Rule 5310. That is a principles-based standard, and a broker can meet it through regular review rather than trade-by-trade enforcement. He argues this framework can accommodate AMM-based trading models, while the existing structure cannot.
Open questions still remain for tokenized securities. Exchange and ATS registration, clearing and settlement, and other rules not designed for DeFi or peer-to-peer trading are still unresolved. Thorn pointed to the SEC’s planned innovation exemption as a possible tool for dealing with venue registration issues, while the current proposal addresses the deeper market structure problem.
Proposal arrives as institutions expand tokenization efforts
The timing stands out because large financial institutions are moving deeper into tokenized assets. Citigroup has launched a blockchain-based platform that lets wealthy and institutional clients trade tokenized shares of private companies. The platform uses infrastructure from SIX Digital Exchange, with Citi acting as custodian and tokenization agent, and the product is initially open to foreign investors.
Citi has also projected that the tokenized real-world asset market could grow from $17 billion to $5.5 trillion by 2030. It said that expansion could be driven by operators such as DTCC, Nasdaq, and Intercontinental Exchange as tokenized securities move from pilot programs into production. For tokenized stock platforms, the SEC proposal has become a key policy development to watch.