On June 11, the U.S. Securities and Exchange Commission (SEC) proposed amendments to certain rules under Regulation NMS, aiming to eliminate specific structural restrictions on stock trading. Market participants believe that while this change targets traditional stock markets, it may also help alleviate compliance barriers faced by tokenized stocks trading on-chain.
Two key restrictions are to be removed.
SEC Chairman Paul Atkins stated that the current rules have not consistently improved market efficiency over the past two decades; instead, they have somewhat increased trading costs and restricted the evolution of market structure. This proposal involves rescinding Rule 611 and Rule 610(e).
Among these, Rule 610(e) primarily restricts cross-market quoting; Rule 611 requires trading venues to avoid executing trades at prices lower than other protected quotes. The SEC believes that adjusting these rules will help simplify market structure and allow competition and innovation to play a greater role in the stock market.
Galaxy says compliance barriers for AMMs are expected to decline
Alex Thorn, Research Head at Galaxy Digital, stated that Rule 611 has been one of the key barriers preventing tokenized U.S. equities from entering DeFi trading. This is because automated market makers (AMMs) match trades based on pool prices and slippage mechanisms, making it difficult to naturally meet the traditional stock market’s requirements for best execution.
He believes that if the SEC ultimately approves this proposal, the potential for trading tokenized stocks on DeFi frontends and on-chain liquidity pools could significantly expand. According to this assessment, the new framework is more likely to accommodate on-chain trading models such as AMMs, which the old rules struggled to accommodate.
Settlement and registration issues still remain to be resolved.
However, Galaxy also noted that this proposal cannot solve all issues at once. Even if Rule 611 is repealed, tokenized stocks would still need to overcome practical hurdles such as clearing, settlement, and registration with relevant trading venues.
Alex Thorn believes these issues may eventually be addressed under the SEC’s so-called “innovation exemption” framework. However, the plan was delayed last month due to opposition from traditional financial institutions, and its future progress remains worth watching.
The scale of tokenized stocks continues to grow.
- The current market size is approximately $3.5 billion.
- Monthly transaction volume approaches $5 billion
- The number of holding addresses is approximately 357,000.
According to reported data, this sector has grown approximately 44% over the past month. This suggests that if regulatory constraints continue to ease, the expansion of tokenized stocks on-chain for trading and distribution may accelerate further.