Benchmark Equity Research has identified a recent proposal by the U.S. Securities and Exchange Commission (SEC) to rescind two key market structure rules as the most significant regulatory development for the U.S. cryptocurrency sector this year. The proposal, concerning Regulation NMS Rules 611 and 610(e), is viewed as a potential enabler for the trading of tokenized equities on automated market makers (AMMs) and decentralized finance (DeFi) platforms.
Key Takeaways
- Benchmark Equity Research deems the SEC’s proposal to rescind Regulation NMS Rules 611 and 610(e) the year’s “most consequential” U.S. crypto regulation.
- The rescission could remove a significant legal barrier to trading tokenized equities on automated market makers.
- Securitize is highlighted as a primary beneficiary, with Coinbase and Galaxy Digital also noted as potential gainers.
- Outstanding questions remain regarding registration, custody, clearance, and settlement for DeFi-native trading of tokenized assets.
- The SEC’s proposal is open for a 60-day public comment period, with a potential vote expected in early 2027.
The SEC’s proposal, introduced on June 11, aims to remove Rules 611 (the Order Protection Rule) and 610(e) of Regulation NMS, which have dictated equity trade routing and execution practices across U.S. markets since 2005. The stated intention behind this move is to streamline market structure, reduce operational costs, and foster innovation by allowing market forces to shape the future of U.S. equity markets.
According to Benchmark analyst Mark Palmer, the removal of these rules would eliminate a primary legal impediment to the trading of tokenized stocks on platforms like AMMs. Currently, Rule 611 mandates that trading venues must avoid executing trades at prices inferior to protected quotations on other markets, thereby enforcing compliance with the National Best Bid and Offer (NBBO) at the time of execution. Rule 610(e) further prevents “locked and crossed markets,” ensuring a clear price hierarchy among trading venues.
Palmer’s analysis suggests that these existing provisions have restricted the development of DeFi-based trading models. AMMs, which rely on continuous pricing curves rather than traditional order books and do not inherently adhere to intermarket price protection systems like NBBO, have been particularly affected. The proposed rescission could therefore pave the way for greater integration of tokenized securities within the DeFi ecosystem.
Industry observers and Benchmark point to tokenized equity exchanges as the most immediate beneficiaries of this regulatory shift. By removing trade-through constraints, such platforms could align more seamlessly with existing equity market infrastructure, facilitating broader adoption and liquidity.
Among the entities specifically identified by Benchmark, Securitize stands out as a direct potential beneficiary. As a regulated platform involved in tokenization and providing issuer infrastructure for tokenized securities, including initiatives like BlackRock’s BUILD, Securitize is well-positioned to capitalize on the proposed changes. Coinbase Global and Galaxy Digital are also recognized as potential beneficiaries due to their significant roles in trading infrastructure, brokerage services, and digital asset market-making.
However, Benchmark also acknowledges that several complex issues remain unresolved even with the potential rescission of these rules. These include the regulatory frameworks for exchange and alternative trading system (ATS) registration, custody solutions, and clearance and settlement mechanisms for peer-to-peer or DeFi-native trading of tokenized assets. The firm notes that the crypto industry is anticipating a forthcoming “innovation exemption” to address these remaining challenges.
The SEC has initiated a 60-day public comment period for the proposal. Benchmark forecasts that a vote on the rescission of these rules could take place in early 2027.
Potential Regulatory Precedent
The SEC’s proposal to rescind Rules 611 and 610(e) of Regulation NMS carries significant implications beyond just the tokenized equity market. If enacted, this move could signal a broader regulatory willingness to re-evaluate and modernize established market structure rules in response to technological advancements and evolving market practices. For the global digital asset industry, this represents a potential shift away from rigid, legacy frameworks and towards a more adaptive regulatory environment. It could set a precedent for how U.S. regulators approach the integration of blockchain-based assets with traditional financial markets, potentially influencing regulatory approaches in other jurisdictions that are also grappling with the classification and trading of digital securities. The outcome of this proposal will be closely watched as an indicator of the SEC’s stance on facilitating innovation in areas like tokenized assets and decentralized finance, balanced against investor protection and market integrity concerns.
Based on materials from : www.theblock.co