The SEC paves the way for stock tokenization: repeal of key Reg NMS rules
The U.S. Securities and Exchange Commission (SEC) has taken a historic step by proposing to repeal two pillars of Regulation NMS—Rules 611 and 610(e). In my opinion, this decision could become one of the most significant regulatory shifts for DeFi and the market for tokenized assets in recent years.
The Essence of the Changes: From Rigid Frameworks to Flexibility
Rule 611, known as the "trade-through rule," prohibits executing trades at prices worse than the best quotes available on other trading venues. Rule 610(e) restricts the display of quotes that could lock or cross prices on alternative exchanges. According to SEC Chairman Paul Atkins, both mechanisms have been in place for two decades but have gradually turned into a drag on innovation, creating "unintended consequences."
Personally, I see a direct link here to the technological limitations of DeFi. Automated market makers (AMMs) operate based on mathematical formulas and cannot account for the liquidity of centralized exchanges like Nasdaq in real time. Repealing these rules removes a key barrier that made trading tokenized stocks in decentralized pools practically impossible from a legal standpoint.
Expert Opinion: What This Means for the Market
Alex Thorn, head of research at Galaxy Digital, called this initiative "one of the biggest breakthroughs for tokenized stocks." According to him, an AMM cannot halt a trade just because the price is better on a traditional exchange—after the rules are repealed, tokenized assets will be able to legally circulate in DeFi pools. This opens the door to genuine, rather than simulated, tokenization of real-world assets (RWA).
Instead of rigid restrictions, the SEC plans to implement a flexible approach based on the principle of "best execution" of trades. This means that brokers and platforms will be required to achieve the optimal outcome for the client, but without being tied to specific technical standards that have hindered development.
Timeline and Prospects
The public comment period for the proposal will last 60 days after publication in the Federal Register. The SEC is expected to make a final decision in the first quarter of 2027. Until then, pilot projects for tokenization with temporary exemptions from existing rules may be launched. However, as SEC Commissioner Hester Peirce previously warned, one should not expect permission to issue synthetic assets—the regulator remains conservative on this issue.
My Analysis: The repeal of Rules 611 and 610(e) is not just a technical adjustment but a fundamental shift in regulatory philosophy. The SEC is effectively acknowledging that the market architecture of 2005 is incompatible with decentralized finance. If the changes are adopted, we will see explosive growth in tokenized stocks within DeFi, potentially leading to a flow of liquidity from traditional exchanges to AMM pools. However, investors should keep in mind the risks: the lack of centralized control over trade execution could increase volatility and create new vulnerabilities for manipulation. This is the price of freedom, and the market must be prepared for it.