The U.S. Securities and Exchange Commission is advancing adjustments to securities market rules. Market participants believe this could create greater opportunities for tokenized U.S. stocks to enter on-chain trading, particularly benefiting automated market makers (AMMs) and decentralized exchanges in supporting these products.
Two long-standing rules are to be canceled.
This proposal has entered a 60-day public comment period as part of the SEC’s efforts to modernize financial market regulations. The focus of the discussion is whether the current U.S. stock trading system remains suitable for blockchain-based trading models.
The SEC's current proposal seeks to eliminate two rules within the National Market System framework. Rule 611 requires that stock orders be executed at the best available price across the entire market, prohibiting "trade-throughs"; Rule 610(e) restricts exchanges from displaying quotes that are the same as or worse than those in other markets.
AMMs are difficult to align with existing regulations.
Analysts believe that these two rules have long been more suited to traditional order book markets but are not well-aligned with on-chain trading systems. Tokenized stocks traded in a decentralized environment often struggle to meet real-time price comparison and routing requirements across platforms.
Alex Thorn, Head of Research at Galaxy Digital, said this could be one of the most significant regulatory developments to date in the tokenized stocks space. He noted that AMMs price assets based on liquidity pools rather than order books used by traditional exchanges, and therefore do not automatically seek the best available price across all trading venues.
Under the current regulatory framework, this means AMM platforms supporting tokenized U.S. stocks may continuously face questions regarding compliance with best execution requirements. Due to their inability to route orders to the best available price across the entire market, as traditional brokers or trading systems do, these platforms operate within a narrow compliance space under securities regulations.
Or switch to the best execution standard
Alex Thorn believes that the SEC may, in the future, replace parts of the existing framework with a broader "best execution" standard. If regulatory focus shifts from mechanical requirements for optimal cross-market quotes to more principle-based execution obligations, decentralized trading models could gain greater regulatory alignment.
The report states that the SEC launched "Project Crypto" in 2025, with one of its goals being to establish clearer regulatory pathways for digital assets and blockchain-based financial infrastructure. Whether this proposal will be finalized awaits the official decision following the public comment period.