Full Breakdown
SEC Proposes Rescinding Two Regulation NMS Rules, Opening Path for Tokenized Stock Trading
6/13/2026, 9:12:28 AM
The Proposal: Dropping Rule 611 and Rule 610(e)
On June 11, 2026 the U.S. Securities and Exchange Commission (SEC) announced a draft rule change to eliminate Rule 611, the “trade-through” provision, and Rule 610(e), which bars locked or crossed quotations. The agency argues that removing the rules would simplify market structure, lower compliance costs, and give brokers greater flexibility in routing orders. A 60-day public comment period begins immediately, after which the SEC will incorporate feedback before a final vote.
Historical Context of the Trade-Through and Quotation Rules
Regulation NMS introduced Rule 611 and Rule 610(e) in 2005 to protect investors by requiring trades to execute at the National Best Bid and Offer (NBBO) and by preventing venues from displaying quotes that lock or cross the market. At that time the U.S. equity market comprised four national exchanges; today there are 17, with off-exchange volume exceeding 50 % in the first half of 2025. Critics say the rules now contribute to fragmented liquidity and a costly “latency arms race.”
Key Stakeholders
- Paul Atkins, SEC Chairman – long-time opponent of the trade-through rule.
- Alex Thorn, Head of Research, Galaxy Digital – market-structure analyst focused on tokenized equities.
- Citadel Securities, Virtu Financial – major wholesale liquidity providers subject to the rules.
- FINRA – self-regulatory organization expected to shift toward a best-execution framework under Rule 5310.
Quantitative Overview
- Wholesalers trade through unprotected odd-lot quotes 15-18 % of the time (SEC staff).
- The SEC estimates annual cost savings of $54.2 million to $77 million if the rules are repealed.
- Pre-NMS there were four exchanges; now there are 17.
- Off-exchange trading accounted for >50 % of equity volume in early 2025.
Expected Market Impact
Eliminating the rules could reduce data-feed and connectivity fees for trading centers, ATSs, and brokers. Proponents say it would remove a structural barrier for decentralized-finance (DeFi) platforms that use automated market makers (AMMs) to trade tokenized stocks, allowing on-chain price discovery without automatic trade-through violations. Opponents warn that large retail orders might receive worse prices and that locked or crossed quotes could persist longer on less liquid stocks, potentially confusing investors.
Official SEC Position
The SEC frames the change as a modernization effort: simplifying market structure, cutting compliance costs, and encouraging competition and innovation. Staff note that most retail orders are unlikely to see significant price degradation, while the agency plans to retain access-fee caps to prevent hidden cost inflation. The commission will evaluate public comments before finalizing the rule change.
Criticisms and Concerns
Industry observers highlight the risk that rescinding the protections could widen bid-ask spreads for certain securities and increase execution-quality variance. Traditional exchanges have voiced execution-related worries, prompting a postponed tokenized-stock trading plan last month. Retail-focused groups caution that locked or crossed quotations may appear on investor screens, creating confusion.
Conflicting Views and Uncertainties
SEC staff suggest limited impact on most retail trades, yet an unnamed official warned that “large retail orders could see worse prices.” The magnitude of any adverse effect remains unquantified, and the timeline for adopting a best-execution standard is still speculative.
Verbatim Quotes
- “I’m concerned that the rule incentivized a proliferation of trading venues,” — Paul Atkins, SEC Chairman
- “This proposal is intended to simplify market structure and reduce costs for market participants,” — Paul Atkins, SEC Chairman
- “one of the biggest unlocks yet for tokenized stocks.” — Alex Thorn, Head of Research, Galaxy Digital
- “Any pool in a tokenized NMS stock would commit trade-throughs constantly and arguably be an illegal trading center,” — Alex Thorn, Galaxy Digital
- “AMMs can’t comply with trade-through rules as they are designed today; they ‘trade against whatever the pool price is,’” — Alex Thorn, Galaxy Digital
Next Steps
The comment window closes in August 2026. The SEC may revise the proposal, possibly codifying a best-execution framework that accommodates AMMs. Stakeholders will watch for any exemptions granted to pilot tokenized-stock projects and for the final rule’s impact on both traditional equity markets and emerging DeFi platforms.
