The Blockchain Association has thrown its weight behind the SEC’s proposal to repeal two long-standing market rules, arguing that removing the 2005-era restrictions could help pave the way for tokenized securities to trade natively on public blockchains. In an Aug. 17 comment letter filed on the final day of the SEC’s public comment period, the trade group urged regulators to rescind Rules 611 and 610(e) of Regulation NMS (and related definitions in Rule 600). The Association says those rules “have failed to achieve their stated purposes and have instead imposed substantial, unnecessary costs on market participants for the past two decades,” and that scrapping them would better reflect how modern markets — including blockchain-based markets — actually operate. What the rules do - Rule 611 (the “trade-through” rule) prevents an exchange from executing certain stock orders at an inferior price when a protected, better-priced quotation exists on another market. - Rule 610(e) bars exchanges from displaying quotations that lock or cross protected quotations elsewhere (locked = best bid equals best offer; crossed = best bid exceeds best offer). Why the SEC is reviewing them The SEC first proposed removing the two rules on June 11 (published in the Federal Register on June 17 under file S7-2026-20). Chair Paul Atkins said two decades of experience revealed unintended consequences from Rule 611, and the agency framed the proposal as a way to simplify U.S. equity market structure, lower costs, and let competition and technology play a larger role in order execution. The Blockchain Association’s case The Association’s filing argues markets have changed dramatically since 2005: trading is faster, automated and far more connected, and blockchain-based infrastructure now offers new methods to issue, transfer and settle securities. Tokenization — creating blockchain-based representations of traditional assets — was central to the group’s argument. It said Regulation NMS as written can hinder markets that execute and settle securities on public blockchains and that measuring execution quality by quoted price alone may be insufficient when on-chain markets can offer additional benefits. Key asks from the Blockchain Association - Repeal Rules 611 and 610(e) and related definitions. - Update best-execution standards so broker-dealers can weigh on-chain features (speed, settlement finality, transparency and composability) in addition to price. - Recognize on-chain execution as a compliant way to achieve fair and efficient execution where appropriate. Broader regulatory context The comment arrives amid multiple SEC moves and market tests related to tokenized securities: - Reports in May suggested the SEC was drafting a possible “innovation exemption” to allow blockchain platforms to offer tokenized versions of publicly traded shares — likely limited to tokens that represent securities investors can already buy in the secondary market (per Commissioner Hester Peirce). - Ondo Finance sought SEC staff comfort that its model — tokens on Ethereum representing interests in securities held in conventional broker-dealer custody — would not prompt enforcement action. In July, Ondo launched tokens claimed to be backed 1:1 by underlying U.S. securities (including BlackRock’s iShares Core S&P 500 ETF and Micron Technology shares), while keeping custody within regulated infrastructure. - Around the same time, Securitize (backed by BlackRock) minted blockchain-based tokens representing its common stock on Solana and Avalanche when the company listed on the NYSE; Securitize said the SECZ tokens represented the same shares rather than a new class of equity. Regulatory concerns and next steps When the proposal was introduced, SEC Commissioner Mark Uyeda warned repeal could raise questions about best execution, transparency, trading mechanics and investor confidence — areas the agency asked market participants to address during the comment period. Commissioner Peirce supported the review, saying advances in trading technology reduced the original connectivity concerns that prompted Rule 611. The SEC will now review public comments submitted through the Aug. 17 deadline and decide whether to move forward with rescission and related amendments to Regulation NMS. If finalized, the changes could create more regulatory flexibility for tokenized markets and trigger a broader rethinking of how execution quality and settlement are measured in a world where public blockchains play a central role. Read more AI-generated news on: undefined/news