The Blockchain Association has told the U.S. Securities and Exchange Commission to repeal two long-standing trading rules it says were written for a pre-blockchain market and could hamper tokenized securities. What happened - On Aug. 18 the Washington-based trade group filed a comment letter backing the SEC’s June 11 proposal (file S7-2026-20) to rescind two provisions of Regulation NMS: Rule 611 and Rule 610(e). The proposal is still under review; no final vote date has been set and neither rule has been repealed. What the rules do - Rule 611 (the Order Protection Rule) was adopted in 2005 to prevent trading venues from executing transactions at prices worse than protected quotations displayed elsewhere, limiting so-called “trade-throughs.” - Rule 610(e) requires exchanges and associations to prevent members from displaying locked (best bid = best offer) or crossed (bid > offer) quotations against protected quotes. Why the Blockchain Association wants them gone - The group says both rules reflect 2005 market structures — slower, order-book centric and fragmented — and don’t fit modern, automated, interconnected trading or tokenized markets that combine execution, ownership records and settlement onchain. - It argues that the “best displayed price” is not always the best outcome for investors once you factor in fees, execution certainty, settlement speed, liquidity and counterparty exposure. Onchain venues can execute and settle together, offer 24/7 trading, faster settlement, greater transparency and new execution models that rigid price-protection rules could block. - The Association asked the SEC to update best execution guidance alongside any repeal. It stressed that removing Rule 611 would not eliminate brokers’ broader duty to seek favorable terms for customer orders. Caveats and dissent - The letter acknowledges blockchain benefits are potential and that onchain settlement still faces real risks: liquidity constraints, smart contract vulnerabilities, network congestion and differing investor protections. - SEC Commissioner Mark Uyeda warned that rescinding the rules raises questions about best execution, transparency, trading mechanics and investor confidence, calling the proposal the start of a broader market structure review. - Some public commenters opposed repeal, arguing Rule 611 provides objective price protection for retail investors and that relying more on brokers’ best-execution judgments could heighten routing conflicts. The Association counters that an exclusive focus on displayed price can prevent investors from accessing faster settlement or lower total costs. How this fits into the broader tokenization picture - The Association’s letter does not seek exemptions from federal securities laws; it urges that compliant onchain trading systems be allowed to meet regulatory duties through technology-appropriate methods. The SEC has repeatedly said tokenized securities remain subject to existing securities laws. - Tokenization activity in the U.S. has continued within regulated frameworks: examples include Ondo Finance placing a BlackRock ETF and Micron shares on Ethereum while retaining traditional custody of the underlying assets, and Kraken-backed xStocks launching an onchain engine for over 70 tokenized equities across Ethereum and Solana (with availability and investor rights varying by jurisdiction). These projects highlight why the interaction between blockchain execution and legacy market rules is now a live regulatory issue — but they don’t prove that removing Rules 611 and 610(e) would automatically permit any tokenized trading model. Next steps and process - The formal SEC comment period closed (the Federal Register posting listed Aug. 17), and the Blockchain Association announced its submission one day after that date though it states the letter was submitted on time. SEC staff will review comments and may recommend modifying or finalizing the proposal, or leaving the rules intact. Any repeal would require a Commission vote, a Federal Register notice, and specified effective and transition dates. - The Association is also pressing for updated best-execution guidance that covers tokenization and extended trading hours. Separately, FINRA is taking comments through Sept. 25 on possible updates to its best-execution guidance in light of the SEC proposal. Why it matters - The debate isn’t just academic: a final decision would reshape routing and execution practices for national market system stocks — affecting conventional exchanges, alternative trading systems, brokers and market makers — and determine how readily blockchain-native trading models can operate within U.S. markets. Read more AI-generated news on: undefined/news