SEC proposes scrapping Rule 611 to unlock tokenized stocks on DeFi
In brief
- SEC proposed rescinding Rule 611 and 610(e) governing stock order pricing and display.
- Galaxy's Alex Thorn called the proposal a major unlock for tokenized stocks in DeFi.
- Automated market makers cannot comply with current trade-through rules due to pool-based execution.
- SEC likely to replace rules with best execution framework permitting AMMs.
- Public comment period runs 60 days before SEC finalizes the proposal.
The barrier to tokenized stocks
Rule 611 bans trade-throughs, where a stock order on one exchange cannot be for a worse price than on another. Rule 610(e) bans exchanges from displaying a bid at the same or higher price than what is available elsewhere. Both rules exist to protect retail investors from poor execution.
The problem: automated market makers in crypto can't comply. They execute orders against whatever the pool price is, without checking if a better quote exists elsewhere. An AMM also can't stop a trade if a better price is available on another platform. That means any tokenized stock pool governed by current rules would commit trade-throughs constantly, and arguably operate as an illegal trading center under the rules.
What Galaxy sees
Thorn called the proposal "one of the biggest unlocks yet for tokenized stocks" as it would remove "one of the biggest structural barriers to tokenized US equities trading in DeFi." The SEC is likely to replace the rules with a best execution framework, which could permit AMMs to operate legally under the new regime.
The move fits within the SEC's broader Project Crypto initiative, which the agency launched in August 2025 with the goal of making rules for the use of digital assets and blockchain in US markets. The SEC put its proposal up for feedback for 60 days, where it will then review responses and may change its proposal before finalizing.
The timing matters. The SEC was reportedly set to release a plan allowing tokenized stock trading last month, but postponed it after stock exchange officials raised concerns. This rescission proposal signals the agency is still moving forward on the issue, albeit with a narrower initial focus on the specific rules that block AMM-style trading.
