Galaxy Research Director: SEC Plans to Repeal Core Reg NMS Rules, Potentially Clearing the Path for Tokenized Stocks and On-Chain AMM

Odaily Planet Daily News: Galaxy Research Director Alex Thorn stated that the U.S. Securities and Exchange Commission (SEC) plans to repeal Rule 611 (the "Order Protection Rule") and Rule 610(e) of Regulation National Market System (Reg NMS), a move that could mark a significant turning point for the development of tokenized stocks.

Thorn noted that Rule 611 requires trades to follow the National Best Bid and Offer (NBBO). As AMMs cannot route orders in real-time, access low-latency market data, or pause trades due to better quotes on other exchanges, they have long struggled to meet regulatory requirements. This has been one of the main structural obstacles to integrating tokenized US stocks with DeFi.

He stated that if the SEC shifts from real-time trade-by-trade oversight to a broker's "best execution obligation," on-chain liquidity pools and AMM mechanisms could more easily fit within a compliance framework. Although tokenized securities still face issues such as trading venue registration and clearing/settlement, the "Innovation Exemption" mechanism that the SEC plans to introduce could further advance related developments.

Thorn believes this is an important step in implementing the SEC's "Project Crypto" roadmap, removing key market structure barriers to pave the way for tokenized stocks, AMMs, and on-chain securities trading innovation.