The Blockchain Association has backed a U.S. Securities and Exchange Commission proposal to repeal two market rules adopted in 2005, arguing that their removal could make it easier for tokenized securities to trade on public blockchains.
Summary
- The Blockchain Association backed the SEC’s proposal to repeal Rules 611 and 610(e) of Regulation NMS.
- The group said the two rules impose unnecessary costs and can restrict the development of tokenized securities markets.
- The association urged the SEC to recognize onchain execution as a compliant way to achieve fair and efficient securities trading.
- The SEC’s public comment period on the proposal ended on Aug. 17.
The Blockchain Association said in an Aug. 17 comment letter that the SEC should move ahead with plans to rescind Rules 611 and 610(e) of Regulation National Market System, or Regulation NMS, as the existing requirements no longer fit the way modern securities markets operate.
The filing arrived on the final day of the SEC’s public comment period for the proposal, which was first issued on June 11. The agency is considering removing the two rules along with related definitions in Rule 600 and making corresponding changes to other provisions of Regulation NMS.
“Rules 611 and 610(e) have failed to achieve their stated purposes and have instead imposed substantial, unnecessary costs on market participants for the past two decades,” the association said.
SEC proposal would remove two Regulation NMS rules
Adopted as part of Regulation NMS in 2005, Rule 611 prevents a trading venue from executing certain stock orders at an inferior price when a protected, better-priced quotation is available on another market.
Rule 610(e), meanwhile, restricts national securities exchanges and other covered markets from displaying quotations that lock or cross protected quotations elsewhere. A locked market occurs when the best bid and offer are equal, while a crossed market occurs when the best bid exceeds the best offer.
When the SEC proposed removing both requirements in June, Chair Paul Atkins said two decades of experience with Rule 611 had given the regulator reason to examine its unintended consequences. The proposal is designed to simplify U.S. equity market structure and lower costs while allowing competition and technology to play a larger role in how orders are executed, according to the agency.
The Blockchain Association made a similar argument in its filing, saying trading technology has changed substantially since the rules were introduced.
Markets have become faster, more automated and more connected, the group said in a series of posts accompanying the filing, while blockchain-based financial infrastructure has introduced another way to issue, transfer and settle securities.
“Today’s markets have evolved dramatically since 2005, and a revolutionary shift is now underway: the representation of traditional assets on public blockchains,” the association said.
Tokenized securities could benefit from the SEC rule changes
Tokenization formed a key part of the group’s case for repealing the two rules, with the association arguing that existing Regulation NMS requirements can interfere with the development of markets that execute and settle securities on public blockchain networks.
According to the filing, the reasoning behind removing the rules also supports giving market participants more flexibility when assessing tokenized securities transactions. The group said execution quality should account for more than the quoted price when blockchain-based markets can provide other features.
“[The] logic underlying the rules’ rescission points to the benefits of enabling tokenized securities markets generally,” the association said. “Specifically, that logic favors weighing multiple factors when evaluating securities transactions, including the benefits of tokenized securities.”
The comments come as the SEC has been considering separate ways to bring blockchain-based versions of conventional securities within U.S. market rules.
In May, an SEC proposal was reported to be under development that could allow blockchain platforms to offer tokenized versions of publicly traded shares through an innovation exemption. The framework was expected to cover tokens representing existing public equities while setting conditions for how the products could be issued and traded.
SEC Commissioner Hester Peirce later narrowed expectations around the plan, saying any exemption she envisioned would be limited to digital representations of equity securities that investors can already purchase in public secondary markets.
By June, Ondo Finance had also sought SEC clearance for a model that records securities interests as tokens on Ethereum while keeping the underlying assets within existing broker-dealer custody arrangements.
Ondo’s request asked SEC staff to confirm that they would not recommend enforcement action over the structure used by Ondo Global Markets. Under the model, blockchain tokens represent interests connected to securities held through regulated U.S. financial infrastructure instead of replacing the underlying custody arrangement.
Blockchain Association wants onchain execution recognized
Alongside its support for repealing Rules 611 and 610(e), the Blockchain Association asked the SEC to update its approach to best execution, an obligation that requires broker-dealers to seek favorable terms for customer orders.
The group argued that execution standards should account for the features available through blockchain infrastructure and asked the regulator to acknowledge that transactions completed through public networks can comply with securities requirements.
“The SEC should recognize employing an onchain execution mechanism as a compliant means of achieving fair and efficient execution,” the filing said.
The request puts execution rules alongside a separate regulatory question facing tokenized markets: whether blockchain records can operate inside the existing securities system without changing the legal rights attached to the underlying asset.
Several projects have begun testing that model. In July, Ondo put U.S. securities onchain through a structure that kept the underlying assets in regulated custody while issuing blockchain-based representations through a registered transfer agent.
The initial deployment included BlackRock’s iShares Core S&P 500 ETF and Micron Technology shares on Ethereum. Ondo said the tokens were backed 1:1 while the underlying securities remained within conventional U.S. custody infrastructure.
Around the same time, BlackRock-backed Securitize tokenized its common stock on Solana and Avalanche when the company began trading on the New York Stock Exchange. Securitize said the blockchain-based SECZ tokens represented the same common shares instead of creating a separate class of equity.
SEC comment period has now closed
The SEC’s Regulation NMS proposal was published in the Federal Register on June 17 under file number S7-2026-20, with Aug. 17 set as the deadline for public comments.
Besides repealing Rule 611’s trade-through prohibition and Rule 610(e)’s restrictions on locked and crossed quotations, the proposal would remove definitions in Rule 600 that would no longer be needed and amend provisions that currently refer to the two rules.
SEC Commissioner Mark Uyeda said when the proposal was introduced that removing Rule 611 could raise questions involving best execution, transparency, trading mechanics and investor confidence, areas the agency asked market participants to address during the comment process.
Peirce also supported putting the rules under review, arguing in June that changes in trading technology had reduced the market-connectivity concerns that led regulators to adopt Rule 611 more than two decades ago.
The Blockchain Association’s Aug. 17 filing asked the SEC to consider those execution questions alongside the development of blockchain-based markets and to recognize public blockchains as a possible compliant venue for fair and efficient securities execution.
