The Blockchain Association submitted a letter to the SEC supporting the repeal of Rule 611 and Rule 610(e) of Regulation NMS, arguing that the structure of the U.S. securities market should adapt to tokenized securities and on-chain trading.

Rule 611, known as the "Order Protection Rule," requires trading centers to avoid executing orders at prices inferior to protected quotes from other trading centers; Rule 610(e) prohibits exchanges from displaying locked or crossed quotes. Both rules have been significant constraints on order routing in the U.S. stock market since 2005.

The SEC proposed to repeal the two rules on June 11, citing the rapid evolution of market structure and the different trading methods introduced by distributed ledgers, automated market makers, and tokenized securities compared to traditional exchange quoting mechanisms; the deadline for comments is August 17.

The core argument of the Blockchain Association is that on-chain trading venues typically do not produce continuously, fixed, publicly comparable quotes in the traditional sense, making the cross-market best quote protection of Rule 611 difficult to apply directly. After repeal, investor protection will rely more on brokers' best execution obligations rather than mandatory routing to the national best bid and offer.

A joint opinion submitted by Douro Labs and the Hyperliquid Policy Center on the same day suggested that the SEC should recognize "qualified reference prices" as a measure of execution quality for on-chain securities trading; this price should be contributed by independent participants, possess anti-manipulation mechanisms, have publicly available data sources and calculation logic, and be regularly verified against SIP data and external sources.

The letter also suggested allowing investors to preset maximum slippage parameters in smart contracts: when the execution price deviates from the specified threshold, the transaction is automatically canceled. This mechanism transforms the traditional external routing constraint of "orders must not cross the best quote" into execution protection conditions directly set by users at the contract level.

From a market mechanism perspective, repealing Rule 611 and 610(e) would reduce the rigid interconnection requirements of traditional stock order routing, providing greater design space for 24/7, instant settlement, AMM, and tokenized equity trading; however, it would also weaken the mechanical protection under a unified quote. Beneficiaries would be on-chain trading venues, tokenized securities issuers, DEX infrastructure, and service providers offering on-chain price oracles; those under pressure would be brokers, exchanges, and retail investors relying on NBBO, SIP, and traditional exchange quote protections. The ultimate strength of protection will depend on whether the best execution rules, reference price standards, and smart contract slippage parameters are verifiable.

Source: Public Information