SEC plan to scrap ‘Rule 611’ a boon for tokenized US stocks: Galaxy
Galaxy says the SEC’s plan to drop key stock quoting and trade-protection rules could make tokenized US stocks easier to trade on DeFi platforms.
Intelligence analysis by GPT-5.4 Mini
The SEC has proposed rescinding two National Market System rules, including Rule 611, and Galaxy’s Alex Thorn says that would remove a major barrier for tokenized US equities trading on decentralized platforms. The agency is considering a shift toward a best-execution framework instead.
The SEC is thinking about removing an old rule that helps pick the best stock price across markets. Galaxy says that could make tokenized stocks work more easily on crypto-style trading systems, like changing a road rule so a new kind of car can drive on it.
Analysis
What the SEC proposed
The SEC proposed rescinding two market-structure rules: Rule 611, which limits trade-throughs, and Rule 610(e), which bars exchanges from showing bids at or above better available prices elsewhere. The proposal is part of a broader push to revise rules that interact with crypto and blockchain use in US markets.
Why Galaxy sees this as important
Galaxy research head Alex Thorn said the move would be one of the biggest unlocks for tokenized stocks. His argument is that decentralized trading systems, especially automated market makers, do not operate like traditional exchanges and would struggle to comply with a rule that assumes price comparison across venues.
Thorn said AMMs execute against the pool price rather than routing orders to the best outside quote. In his view, that means a tokenized stock pool under the current rules could end up violating trade-through protections constantly and might be treated as an illegal trading venue.
What could replace it
Thorn said the SEC may move toward a best-execution framework instead. That would be a better fit for AMM-style trading, because it focuses on whether investors receive a good outcome rather than enforcing the current exchange-by-exchange quote structure.
The proposal is now open for public feedback for 60 days, after which the SEC can revise it based on comments. The article also notes that the agency had reportedly planned a tokenized stock trading framework last month, but that plan was delayed after stock exchange officials raised concerns about how it would work.
Key points
- The SEC proposed rescinding Rule 611 and Rule 610(e) in its national market system rules.
- Galaxy’s Alex Thorn called the change a major unlock for tokenized US stocks trading in DeFi.
- Thorn argued AMMs cannot easily comply with trade-through and best-quote requirements.
- The SEC may replace the rules with a best-execution framework.
- The proposal is open for public feedback for 60 days.
If the SEC replaces the current rule set with a best-execution approach, tokenized US stocks could fit more naturally into DeFi trading systems. That would lower a legal barrier Galaxy says has kept AMM-style tokenized equity markets from working cleanly in the US.
The proposal is still only open for comment, so the rules may change or be narrowed after review. Stock exchange objections could also slow or reshape any framework for tokenized stocks, especially if regulators decide the old protections still need a close substitute.
