Blockchain Association Backs SEC Plan to Remove Two Market Rules for Tokenized Securities

The Blockchain Association is supporting a Securities and Exchange Commission proposal that could significantly change how U.S. markets handle certain trading requirements, arguing that the reforms could give developers more room to build blockchain-based securities infrastructure.

The industry group has backed the SEC’s plan to eliminate Rule 611 and Rule 610(e) under the agency’s Regulation National Market System framework. According to the association, removing the two requirements could reduce unnecessary costs and create greater flexibility for companies developing systems for tokenized securities.

The proposal comes as financial institutions and technology companies continue exploring tokenization, a process that places traditional financial assets on blockchain networks.

Blockchain Association Supports Regulation NMS Changes

The Blockchain Association outlined its position in a letter supporting the SEC’s proposed overhaul of Regulation NMS.

The two rules at the center of the debate date back to 2005, when the SEC introduced them as part of a broader effort to improve how securities markets operate across multiple trading venues.

Rule 611, commonly associated with the SEC’s order protection rule, requires trading venues to protect certain better-priced quotations displayed on other eligible markets. The objective is to reduce trade-throughs, where an investor’s order could potentially execute at a price inferior to a better displayed quotation elsewhere.

Rule 610(e) addresses locked and crossed quotations, restricting certain market conditions in which displayed bids and offers can create conflicts across trading venues.

The Blockchain Association argues that the rules can create significant operational costs while no longer fully reflecting the structure of modern financial markets.

The SEC proposed rescinding both requirements in June, saying the changes could simplify elements of market structure and reduce costs for market participants.

Why Tokenization Is Changing the Debate

The Blockchain Association believes the financial system has changed considerably since Regulation NMS was introduced.

Trading has become increasingly automated, faster and more interconnected. At the same time, blockchain technology has introduced a different model for representing, trading and settling financial assets.

Tokenization allows traditional assets, including securities and other financial instruments, to be represented digitally on blockchain networks. Depending on the structure, blockchain infrastructure can combine trading and settlement functions in ways that differ from conventional market systems.

The association argues that existing market rules should take these technological developments into account.

In its view, applying traditional requirements designed around conventional trading infrastructure could create barriers for companies attempting to build blockchain-based systems for securities markets.

The group therefore wants regulators to consider a broader range of factors when evaluating securities execution, rather than focusing primarily on displayed prices across traditional venues.

Blockchain Group Seeks Greater On-Chain Execution Recognition

The Blockchain Association is also calling for changes to the SEC’s approach to best-execution guidance.

The organization wants regulators to recognize on-chain execution as a potentially compliant method for conducting securities transactions fairly and efficiently.

Such recognition could become increasingly important if tokenized securities gain broader adoption.

Source: Official X

Under a blockchain-based model, transactions can potentially be executed and recorded directly through public blockchain infrastructure. This could allow market participants to use different mechanisms for trading and settlement compared with traditional securities markets.

The association argues that blockchain-based execution can still operate within regulatory principles designed to promote fair markets and efficient transactions.

For companies developing tokenized securities platforms, clearer guidance could reduce uncertainty about whether blockchain-native execution systems can satisfy existing securities requirements.

What the SEC Proposal Could Mean for Tokenized Assets

The debate over Rules 611 and 610(e) extends beyond technical market structure requirements.

At a broader level, the proposal could influence how regulators approach the development of blockchain-based financial infrastructure in the United States.

Removing the two requirements could give market participants more flexibility when designing systems for tokenized traditional assets.

The potential changes could also encourage financial technology companies and market operators to explore alternative approaches to trading, execution and settlement.

However, eliminating specific market rules would not automatically remove other securities regulations. Platforms dealing with tokenized securities would still need to comply with applicable federal securities laws and other regulatory requirements.

That distinction is important as policymakers consider how existing financial rules should apply to blockchain-based markets.

The Broader Push Toward Tokenized Securities

Tokenization has become an increasingly important area of discussion across the financial industry.

Supporters argue that blockchain infrastructure could improve the efficiency of asset issuance, settlement and ownership records. Critics and regulators, meanwhile, continue examining questions involving investor protection, market integrity, liquidity and compliance.

The Blockchain Association’s position reflects a broader industry effort to ensure that emerging blockchain infrastructure can develop without being constrained by rules designed for a different technological environment.

Its support for the SEC proposal does not necessarily mean that all tokenized securities platforms would operate outside existing market safeguards. Instead, the group is arguing for rules that recognize the technical differences between traditional exchanges and blockchain-based systems.

A Potential Turning Point for U.S. Market Structure

The SEC’s Regulation NMS proposal could become an important test of how U.S. financial regulators respond to the growth of tokenized assets.

For the Blockchain Association, removing Rules 611 and 610(e) would be a step toward a more flexible market structure that can accommodate blockchain technology.

The organization is also pushing regulators to acknowledge on-chain execution as part of the modern securities landscape.

Whether the SEC ultimately adopts the proposed changes will determine how much additional flexibility market participants receive.

For the growing tokenization industry, the outcome could influence how developers design blockchain-based securities infrastructure and how traditional financial assets are traded in the years ahead.

Conclusion

The Blockchain Association has backed the SEC’s proposal to remove Rules 611 and 610(e) from Regulation NMS, arguing that the requirements can impose unnecessary costs and restrict innovation in tokenized securities infrastructure.

With both rules dating to 2005, the association believes modern trading technology and blockchain-based markets require a more flexible regulatory approach.

The group is also urging the SEC to recognize on-chain execution as a potential method for achieving fair and efficient securities transactions.

As tokenization continues to develop, the debate could play an important role in determining how blockchain technology becomes integrated into the U.S. financial market structure.

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