The Blockchain Association has thrown its weight behind a U.S. Securities and Exchange Commission proposal to repeal two long-standing market rules — a move it says could clear regulatory friction for tokenized securities trading on public blockchains. What’s happening - On Aug. 17, the Blockchain Association filed a comment urging the SEC to rescind Rules 611 and 610(e) of Regulation NMS (Regulation National Market System). The filing arrived on the final day of the SEC’s public comment window for the proposal that was issued June 11 and published in the Federal Register on June 17 (file number S7-2026-20). - The SEC is considering dropping those two rules, removing related definitions in Rule 600, and updating other Reg NMS provisions that rely on them. Why these rules matter - Rule 611 (adopted in 2005) bars a trading venue from executing certain orders at an inferior price when a protected, better-priced quotation exists on another market — the so-called “trade-through” prohibition. - Rule 610(e) restricts exchanges and other covered markets from displaying quotations that lock (best bid equals best offer) or cross (best bid exceeds best offer) protected quotations elsewhere. - The SEC says two decades of experience with Rule 611 revealed unintended consequences; the proposal aims to simplify equity market structure, lower costs, and let competition and technology play a larger role in execution. Blockchain Association’s argument - The group told the SEC the rules “have failed to achieve their stated purposes and have instead imposed substantial, unnecessary costs on market participants for the past two decades.” - It argued trading technology, market connectivity, and automation have evolved dramatically since 2005 — and a “revolutionary shift” is now underway as traditional assets are represented on public blockchains. - The Association said Reg NMS requirements can interfere with markets that execute and settle securities on blockchains and urged the SEC to allow execution quality to be judged on more than just quoted price — including benefits unique to blockchain-based markets. - It also asked the SEC to update best-execution guidance so that on-chain execution mechanisms are explicitly recognized as a compliant way to achieve fair and efficient execution. How this ties into tokenization efforts - The comment comes amid separate SEC work and industry requests around tokenized versions of conventional securities: - In May, reports said the SEC was developing a possible innovation exemption that could let blockchain platforms offer tokenized shares representing existing public equities under specific conditions. Commissioner Hester Peirce later said any exemption she envisions would be limited to digital representations of securities already trading in public secondary markets. - In June, Ondo Finance sought staff confirmation it wouldn’t face enforcement over a model that records securities interests as tokens on Ethereum while keeping the underlying assets in existing broker-dealer custody. Ondo’s approach keeps assets in regulated custody and issues blockchain representations tied 1:1 to those assets. - In July, Ondo launched an initial on-chain deployment that included BlackRock’s iShares Core S&P 500 ETF and Micron shares on Ethereum using a registered transfer agent, while Securitize issued blockchain representations of its common stock on Solana and Avalanche when it listed on the NYSE. Both projects emphasized the tokens represent the same underlying shares rather than creating a new class of equity. Regulatory balance and next steps - When the proposal was introduced, SEC Chair Paul Atkins cited the need to examine Rule 611’s unintended consequences. Commissioner Mark Uyeda warned repealing Rule 611 raises questions about best execution, transparency, trading mechanics, and investor confidence — topics the SEC asked commenters to address. - Commissioner Peirce supported the review, saying modern trading technology has reduced the market-connectivity concerns that motivated Rule 611 in 2005. - The Blockchain Association wants the SEC to consider these execution and investor-protection questions in parallel with developments in blockchain-based markets and to view public blockchains as permissible venues for compliant securities execution. Why crypto markets care - Repealing the trade-through and locked/crossed quotation rules could give tokenized securities platforms more flexibility in execution mechanics and settlement flows, potentially lowering friction for on-chain trading models that keep legal ownership and custody within existing frameworks. - If the SEC updates best-execution and other standards to explicitly accommodate on-chain mechanisms, it would clear a significant regulatory hurdle for broader institutional adoption of tokenized securities. Bottom line: The Blockchain Association sees the Reg NMS repeal as an important, timely step to align U.S. market structure with modern trading technology and to enable tokenized securities to compete and operate on public blockchains — but the change will require careful answers on execution quality, transparency, and investor protection. Read more AI-generated news on: undefined/news