The Hyperliquid Policy Center and Douro Labs have urged the U.S. Securities and Exchange Commission to move ahead with its proposal to repeal Regulation NMS Rule 611, the order protection rule that has shaped U.S. equity market routing for two decades. In a joint comment letter submitted on Aug. 17, the groups said the repeal should be adopted “without qualification.”

Their filing also asked the SEC and the Financial Industry Regulatory Authority to provide clearer best-execution guidance for onchain markets. The groups argued that current rules do not fully account for how automated market makers, onchain order books, network fees, atomic settlement and transaction-ordering risks affect execution quality.

What the SEC has proposed

The SEC proposed on June 11 to rescind Rule 611 and Rule 610(e), along with related definitions in Rule 600 and other linked provisions in Regulation NMS. Rule 610(e) addresses locked and crossed quotations, where bids equal or exceed available offers.

Rule 611 was adopted in 2005 as part of Regulation NMS. It requires trading centers to maintain policies designed to avoid executing orders at prices worse than protected quotations displayed on other connected venues. The SEC has not adopted the new proposal, so the current rules remain in effect.

When the proposal was released, SEC Chairman Paul Atkins said the agency was seeking to simplify market structure and reduce costs, while taking a careful and deliberative approach to the public feedback process.

Why the groups say the current framework does not fit onchain trading

In their letter, Hyperliquid Policy Center and Douro said the existing regime is built around the assumption that executable trading interest appears as firm quotations collected by securities information processors. They argued that this model does not map neatly onto onchain venues.

Automated market makers, for example, derive execution prices from the state of a liquidity pool at the moment an order is submitted. Some onchain central limit order books do show bids and offers, but those quotes are not currently included in the consolidated market data feeds used to calculate the national best bid and offer, or NBBO.

The groups said that mismatch makes Rule 611 a poor fit for certain blockchain-based markets and supports the SEC’s effort to remove the rule.

Best execution would remain, but guidance may need to change

The letter stresses that repealing Rule 611 would not eliminate brokers’ duty to seek favorable execution terms for customers. Hyperliquid Policy Center and Douro said that best execution should remain the core investor-protection standard.

They asked the SEC to work with FINRA on principles-based guidance tailored to onchain execution. According to the filing, existing guidance does not fully address protocol charges, network fees, transaction-ordering risks, atomic settlement or periods when the NBBO is unavailable or does not reflect onchain conditions.

The groups proposed that execution quality should be evaluated using the effective price after fees and order-related market movement are taken into account. They also said settlement speed and lower counterparty settlement risk could be relevant factors. Where no reliable NBBO exists, they asked regulators to recognize independent reference prices that use transparent, manipulation-resistant methods. The filing cited Pyth as one possible model, but did not ask the SEC to designate it as a required provider.

Tokenized stocks and an alternative legal argument

The comment letter also asked the SEC to confirm that tokenized versions of NMS stocks remain subject to Regulation NMS and the broader best-execution framework. In the groups’ view, investor protections should not depend on whether ownership records are maintained through blockchain infrastructure.

The filing noted that tokenized equity products are spreading across crypto networks. It also emphasized that these products can use different legal structures, including claims on an issuer or special purpose entity rather than direct ownership of the underlying shares, meaning the legal form must be assessed separately from the settlement technology.

If the SEC does not repeal Rule 611, or delays doing so, Hyperliquid Policy Center and Douro argued that some onchain transactions may already fit within the rule’s existing exception for trades that do not use regular-way settlement. The article makes clear that this is the groups’ legal view, not an SEC determination.

What happens next

The public comment period for file S7-2026-20 closed on Aug. 17, the same day the joint submission was filed. The SEC will now review comments from exchanges, investment firms, trade associations and other market participants before deciding whether to adopt, revise or withdraw the proposal.

Opposition has also been submitted. Some commenters said removing Rule 611 could weaken an objective price-protection standard and shift more responsibility onto brokers’ own routing systems. SEC Commissioner Mark Uyeda similarly said in June that repeal could raise questions around best execution, transparency, trading mechanics and investor confidence.

Any repeal would still require a final Commission vote and an adopting release setting out the final text and effective date. As of Aug. 18, no final vote or implementation timetable had been announced.

Source: crypto.news