Summary
- Blockchain Association supports removing two Regulation NMS rules, arguing their elimination could reduce restrictions affecting tokenized securities market infrastructure development.
- Rules 611 and 610(e) govern trade-through protections and quotations, while the SEC believes removing them could simplify existing market structures.
- The association wants regulators to recognize on-chain execution and modernize best-execution guidance for securities transactions conducted through public blockchain networks.
The Blockchain Association has backed the SEC’s plan to remove two market rules that it believes restrict tokenized securities development. According to the industry group, eliminating Rules 611 and 610(e) could provide greater flexibility for blockchain-based securities trading infrastructure.
The association presented its position in a letter supporting the Securities and Exchange Commission’s proposed Regulation National Market System overhaul. Introduced in 2005, both requirements govern how trading venues handle quotations and transactions involving National Market System securities.
Rule 611 protects against trade-throughs by requiring trading platforms to recognize better-priced quotations available across other eligible trading venues. Meanwhile, Rule 610(e) restricts the display of locked and crossed quotations within markets operating under Regulation NMS requirements.
However, the Blockchain Association argues that both rules impose unnecessary costs while failing to fully achieve their original regulatory objectives. The SEC proposed rescinding the requirements in June, citing opportunities to simplify market structure and reduce costs for participating firms.
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Blockchain Association Connects NMS Reform With Tokenization
According to the Blockchain Association’s X posts, modern financial markets operate differently from the environment that existed when Regulation NMS emerged. Trading systems have become faster, more automated, and increasingly interconnected, while blockchain technology has introduced another form of securities infrastructure.
Significantly, tokenization allows traditional assets to exist on public blockchains while supporting alternative approaches to trading, execution, and settlement. The association believes existing NMS requirements can restrict the development of infrastructure specifically designed for securities represented through blockchain networks.
Consequently, the group wants regulators to consider multiple factors when assessing securities execution rather than relying primarily on displayed market prices. Those factors could include potential benefits offered by tokenized securities and the different execution structures available through public blockchain networks.
Moreover, removing the two rules could give market participants greater flexibility when developing systems for trading tokenized traditional financial assets.
Group Pushes for Recognition of On-chain Execution
The Blockchain Association also urged the SEC to modernize its best-execution guidance alongside the proposed changes to Regulation NMS. Specifically, the organization wants regulators to recognize on-chain execution as a compliant method for achieving fair and efficient securities transactions.
Such recognition could provide greater regulatory clarity for platforms seeking to execute tokenized securities directly through public blockchain infrastructure. Additionally, the association believes blockchain-based execution can operate within existing regulatory standards covering market fairness and efficient transaction execution.
Its recommendations therefore connect the proposed NMS overhaul with broader questions surrounding how tokenized securities should operate under federal securities rules.
Conclusion
The Blockchain Association views the SEC proposal as an opportunity to modernize market rules while providing greater flexibility for tokenized securities infrastructure. Removing Rules 611 and 610(e) could also influence how regulators approach blockchain-based execution within the broader securities market framework.
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