On June 11, the United States Securities and Exchange Commission (SEC) took a significant step by suggesting the repeal of Rules 611 and 610(e) under Regulation NMS. These rules have been integral to the regulation of the US equity market.
Key Proposal for Public Feedback
A 60-day period has begun for public commentary on this proposal. Jaret Seiberg from TD Cowen indicated that any new regulations stemming from this process might be formalized by early 2027.
Rule 611, known as the “Order Protection Rule”, is designed to prevent trading of stocks at suboptimal prices when better quotes are accessible on other platforms. Conversely, Rule 610(e) restricts exchanges from posting prices that potentially disrupt smooth market operations via locked or crossed situations.
Are These Rules Outdated?
Many in the financial sector, including SEC Commissioner Paul Atkins, argue that these rules, instead of improving market efficiency, have led to increased platform fragmentation and additional costs that appear to favor brokerage firms.
“These changes represent a necessary correction to outdated regulatory approaches that have not supported market growth effectively,” Atkins mentioned following a recent SEC vote.
Atkins has long criticized Rule 611 since its implementation, stating alongside former Commissioner Cynthia Glassman that natural market competition should dictate outcomes, not regulatory overreach.
This proposal comes after extensive consultations conducted last year, signaling transparency in approach and engaging various equity market stakeholders including exchanges and brokers, said Atkins.
What Could These Changes Mean for Tokenized Securities?
At an event at Stanford University’s Rock Center for Corporate Governance, Atkins highlighted a concerning decrease in publicly listed US companies since the 1990s—a 40% drop. He emphasized that trimming regulatory barriers could reverse this trend, marking the proposal as part of a wider mission.
This regulatory shift could potentially influence global market frameworks too. The US acts as a benchmark; thus, easing rules may propel international regulations toward supporting tokenized assets.
– The SEC’s move may accelerate international legislative reconsideration regarding tokenized securities.
– As tokenized shares progress, the reconsideration of traditional structures could bring new dynamics to global financial markets.
Alex Thorn from Galaxy Digital notes the SEC’s initiative as a watershed moment for trading digital securities on decentralized platforms. The current rule’s requirements impeded compliance for automated platforms that don’t cross-check with larger exchanges like Nasdaq.
However, entirely replacing existing constructs with a decentralized approach will take more than removing these two regulations. Structures supporting trade systems, clearing processes, and security compliance are still largely set up for centralized operations.
