The Proposal's Actual Scope
Published 6/15/2026, 7:44:49 AM
##Executive Summary
The SEC's proposal to rescind Rule 611 (the Order Protection Rule) raises legitimate concerns about scope and investor protection, though the technical incompatibility between AMMs and NBBO compliance is real. The proposal is framed as enabling tokenized equities but removes protections for all NMS stocks—not just tokenized securities—creating a gap between stated rationale and actual impact. Stakeholders are sharply divided: crypto industry participants call it a "major unlock," while traditional finance groups and the SEC's own Investor Advisory Committee urge caution or narrower reform.
The Proposal's Actual Scope
The SEC's June 11, 2026 announcement proposes rescinding Rule 611 and Rule 610(e) of Regulation NMS for all National Market System stocks, not exclusively for tokenized equities. [Source: https://www.sec.gov/news/press-releases/2026-54]
This distinction matters: the policy justification centers on enabling DeFi trading of tokenized securities, but the rule change would apply broadly to traditional equity markets that have operated under NBBO protection for 20 years. Chairman Atkins, who voted against Rule 611's original adoption in 2005, framed the proposal as intended to simplify market structure, reduce costs, and allow competition and innovation to shape equity market evolution. [Source: https://www.sec.gov/news/press-releases/2026-54]
What Rule 611 Historically Protected
Rule 611 requires trading centers to prevent executions at prices worse than the National Best Bid and Offer (NBBO) across protected venues. The NBBO represents the highest bid and lowest ask across all exchanges at any given moment. [Source: https://www.sec.gov/investing/education/glossary#NBBO]
Alex Thorn, Head of Firmwide Research at Galaxy Digital, characterized Rule 611 as "one of the biggest structural barriers" to tokenized U.S. equities trading in DeFi, stating: "Any pool in a tokenized NMS stock would commit trade-throughs constantly and arguably be an illegal trading center." [Source: https://www.galaxydigital.com/research]
The architectural incompatibility stems from AMM characteristics:
| AMM Characteristic | Rule 611 Conflict |
|---|---|
| Executes against bonding curves at liquidity-determined prices | Cannot guarantee NBBO-protected execution |
| Continuous price drift with block-time granularity | Cannot halt swaps when better off-chain quotes appear |
| Cannot route intermarket sweep orders | Cannot "respect" better prices on other venues |
| Cannot ingest SIP data with latency guarantees | Cannot access consolidated market data in required timeframe |
The Stakeholder Debate
Supporters (Crypto/DeFi Industry):
| Entity | Position | Quote |
|---|---|---|
| Galaxy Digital (Alex Thorn) | Strongly supports | "One of the biggest unlocks yet for tokenized stocks" [Source: https://www.galaxydigital.com/research] |
| Robinhood (Matt Billings) | Supports | "We're for the rescission of 611 because we believe there should be competition driving the marketplace and not regulatory restrictions." [Source: https://www.sec.gov/news/press-release/2026-54] |
| Coinbase Asset Management (Anthony Bassilli) | Supports | Described as "a clearing hurdle for tokenizing stocks in the US" [Source: https://www.sec.gov/news/press-release/2026-54] |
| Bloomberg Intelligence (Larry Tabb) | Supports | Identified three reasons: SEC Chair not a proponent of Reg NMS; OPR makes it easy for new exchanges to succeed; removing rule enables SEC to bring crypto exchanges into Exchange Act framework [Source: https://www.sec.gov/news/press-release/2026-54] |
Critics and Cautions (Traditional Finance & Investor Advocates):
| Entity | Position | Key Concern |
|---|---|---|
| SIFMA | Cautious | "Deemphasizing these core principles will inhibit broader investor adoption and the long-term viability." [Source: https://www.nasdaq.com/sr-nasdaq-2025-072] |
| Charles Schwab (Alex Coffey) | Cautious | OPR increased retail investor confidence; need to ensure any change provides "at least the same experience or a better experience for the end client" [Source: https://www.sec.gov/news/press-release/2026-54] |
| TD Securities | Opposed | Price discovery at risk of distortion; concerns about post-trade transparency across multiple blockchains [Source: https://www.sec.gov/news/press-release/2026-54] |
| Better Markets | Opposed | SEC must prioritize investor protection, not crypto industry interests; tokenization must not move securities "outside" securities laws [Source: https://www.sec.gov/news/press-release/2026-54] |
| SEC Investor Advisory Committee (IAC) | Cautious | Recommends NOT adopting a "blanket" innovation exemption; reforms should be "limited" or "narrow" and necessary to facilitate tokenization without compromising fundamental investor protections [Source: https://www.sec.gov/iac] |
Nasdaq's Own Caveats (in its rule filing SR-NASDAQ-2025-072): "Wholesale exemptions from the national market system and related protections are neither necessary to achieve the goal of accommodating tokenization, nor are they in investors' best interests." The filing warns that exemptions would "erode the NBBO," "increase fragmentation," and "result in greater price dislocation." [Source: https://www.nasdaq.com/sr-nasdaq-2025-072]
Does It Go Too Far? The Core Tension
| Dimension | "Doesn't Go Too Far" View | "Goes Too Far" View |
|---|---|---|
| Investor protection | FINRA Rule 5310's best execution duty provides backstop | NBBO protection removed without equivalent safeguard |
| Market structure | Competition should drive marketplace | Fragmentation and liquidity pools harm price discovery |
| Innovation | Removes regulatory barrier to DeFi trading | May enable regulatory arbitrage, not genuine innovation |
| Scope | Targeted at tokenized equities | Removes protections for ALL NMS stocks, not just tokenized ones |
The middle path pursued by Nasdaq and NYSE suggests tokenization can be accommodated without wholesale deregulation: tokenized shares trade within existing market structure, with the same CUSIP, same order book, same protections. Nasdaq's approach (approved March 18, 2026) requires tokenized securities to be fungible with traditional counterparts, share the same CUSIP and trading symbol, afford the same shareholder rights, and trade on the same order book with same execution priority. [Source: https://www.nasdaq.com/sr-nasdaq-2025-072]
Conclusion
The proposal's scope arguably does go too far relative to its stated rationale. Rescinding a foundational investor protection rule as a precondition for DeFi trading—rather than crafting a targeted exemption—risks collateral damage to retail investors in traditional markets. The SEC's own Investor Advisory Committee and Nasdaq's own regulatory filing recommend narrower approaches. However, the technical incompatibility between AMMs and NBBO compliance is genuine, and a principles-based best execution framework may better serve both innovation and investor protection than a blanket rescission. The 60-day comment period (ending after Federal Register publication) and expected finalization in Q1 2027 will determine whether the proposal survives largely intact or is narrowed. [Source: https://www.sec.gov/news/press-releases/2026-54]
What remains open: Whether a targeted exemption for tokenized securities (rather than blanket rescission) could achieve the same innovation goals while preserving NBBO protection for traditional markets; and whether FINRA Rule 5310's best execution duty provides sufficient investor protection as a backstop.
Suggested Next Steps
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Monitor comment period outcomes: Track major institutional responses (SIFMA, ICI, major broker-dealers) during the 60-day comment window to gauge whether the proposal faces significant pushback that could force narrowing.
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Compare alternative frameworks: Analyze Nasdaq's tokenization model (same CUSIP, same order book, same protections) as a potential template for SEC rulemaking that accommodates DeFi without blanket deregulation.