SEC Proposal to Repeal Trade Rules Could Open DeFi to Tokenized Stocks

For two decades, Rule 611 has prevented "trade-throughs" by requiring venues to execute orders at the best available price across the entire national market. While designed to protect investors, the rule has created a structural wall for DeFi protocols. Galaxy Digital’s Alex Thorn noted that automated market makers cannot comply with the regulation because they execute trades against bonding curves at block-time granularity, rather than routing orders across multiple exchanges to hunt for the national best bid and offer.

Beyond the technical friction of Rule 611, Rule 610(e) has historically prevented quotes from crossing or locking. Removing these constraints could allow tokenized stock pools to function without the constant threat of regulatory non-compliance. SEC Chairman Paul S. Atkins stated that the agency is seeking to reduce costs and foster innovation, suggesting that current rules have hindered market growth. Even if the repeal proceeds, however, significant hurdles remain. Tokenized assets must still navigate complex requirements for exchange registration, clearing, settlement, and investor rights. The SEC continues to explore an innovation exemption that would ensure blockchain-based shares mirror the dividends and voting rights of traditional equities, though Commissioner Hester Peirce has cautioned that any such relief would likely be narrow in scope.