The Blockchain Association is calling on the U.S. Securities and Exchange Commission (SEC) to repeal two long-standing market structure rules, arguing that removing them could make it easier for tokenized securities to trade and settle on public blockchains.
In an Aug. 17 comment letter, the industry group backed the SEC’s proposal to eliminate Rules 611 and 610(e) of Regulation National Market System (Regulation NMS). The proposal’s public comment period closed the same day.
The association argued that the rules, introduced in 2005, have become increasingly difficult to justify as trading markets have become faster, more automated and more technologically advanced.
SEC Proposes Repeal of Two Market Rules
Rule 611 generally prevents trading venues from executing certain orders at prices worse than protected quotations available elsewhere. Rule 610(e) addresses locked and crossed markets, restricting exchanges and other covered venues from displaying quotations that match or exceed protected quotes on another market.
The SEC proposed repealing both provisions in June, along with related definitions and references elsewhere in Regulation NMS.
The agency has said that two decades of experience with the rules warrant a review of their unintended consequences. Removing them could simplify market structure, reduce costs and give market participants greater flexibility as trading technology evolves.
The Blockchain Association echoed that position, arguing that the rules have imposed unnecessary costs without delivering their intended benefits.
Tokenized Securities at the Center of the Debate
The association’s strongest argument focuses on the growth of tokenized securities.
Traditional assets are increasingly being represented on public blockchains, creating markets where issuance, trading and settlement can occur through blockchain infrastructure. The association said existing Regulation NMS requirements may not fully account for these new market structures.
The group urged the SEC to consider factors beyond quoted price when assessing execution quality for tokenized assets, including the potential benefits of blockchain-based settlement and infrastructure.
The comments arrive as the SEC considers broader ways to integrate tokenized versions of traditional securities into U.S. markets.
Projects such as Ondo Finance and Securitize have already explored models in which blockchain tokens represent conventional securities while the underlying assets remain within regulated custody and financial infrastructure.
These developments have increased pressure on regulators to determine how existing securities rules should apply when trading and settlement move onto public blockchains.
Group Seeks Recognition of Onchain Execution
The Blockchain Association also asked the SEC to recognize onchain execution as a potentially compliant method for achieving fair and efficient securities transactions.
The request would give broker-dealers and other market participants greater flexibility to use public blockchain networks while meeting their obligations around execution quality.
The association argued that regulators should evaluate blockchain-based execution according to the same core objectives applied to conventional markets rather than treating the underlying technology as inherently incompatible with existing securities requirements.
The issue is becoming increasingly relevant as financial firms experiment with tokenized equities, exchange-traded funds and other securities on networks such as Ethereum, Solana and Avalanche.
SEC Must Now Consider Public Feedback
The SEC’s Regulation NMS proposal was published in the Federal Register in June, with Aug. 17 marking the deadline for public comments.
Alongside repealing Rules 611 and 610(e), the proposal would remove related definitions in Rule 600 and make corresponding changes to other provisions that reference the two rules.
SEC officials have acknowledged that eliminating Rule 611 could raise questions surrounding best execution, market transparency, trading mechanics and investor confidence.
The Blockchain Association is urging the regulator to consider those issues alongside the rapid development of blockchain-based financial markets.
If adopted, the changes could give tokenized securities platforms greater flexibility and reduce regulatory barriers to onchain trading. More broadly, the debate signals a growing effort to adapt traditional U.S. market structure rules to financial markets increasingly built on public blockchain infrastructure.
