Benchmark says SEC's NMS proposal is the 'most consequential' US crypto rule this year

Benchmark Equity Research said the Securities and Exchange Commission’s June 11 proposal to rescind two decades-old market structure rules is "the most consequential piece of regulation to impact the U.S. crypto space" this year, arguing it would remove a key constraint on tokenized equities trading, lending and settlement on public blockchains.

The agency last week proposed scrapping Rule 611 and Rule 610(e) of Regulation NMS, the trade-through framework that has governed routing and execution for every U.S. equity since 2005. The SEC said the proposal is intended to simplify market structure and reduce costs while allowing competition and innovation to shape the evolution of U.S. equity markets.

In a note to investors on Monday, Benchmark analyst Mark Palmer said the rescission would remove the primary legal obstacle that has kept tokenized stocks from trading on automated market makers.

According to the note, Rule 611, known as the Order Protection Rule, requires trading centers to avoid executing trades at prices inferior to protected quotations displayed on other venues, effectively enforcing compliance with the national best bid and offer at the moment of execution. Rule 610(e) prohibits locked and crossed markets, requiring venues to prevent quotations that overlap in ways that violate the displayed price hierarchy.

Palmer stated that those provisions have hindered decentralized finance-based trading models, particularly automated market makers, which execute trades against continuous pricing curves rather than routed order books and do not reference intermarket price protection systems such as the NBBO.

The analyst added that observers in the market have pointed to tokenized and crypto equity exchanges as the most immediate beneficiaries of a potential rescission of Rule 611, given that removal of trade-through constraints would allow such venues to align more directly with existing equity market infrastructure.

Within that group, Benchmark’s note identified Securitize as the most direct potential beneficiary, citing its role as a regulated tokenization platform and issuer infrastructure provider for tokenized securities, including BlackRock’s BUILD initiative. 

Benchmark also pointed to Coinbase Global and Galaxy Digital as additional beneficiaries, citing their respective roles in trading infrastructure, brokerage services, and digital asset market-making activity.

But even with the rescission proposal, several harder questions remain unanswered, Benchmark noted. Those include exchange and alternative trading system registration, custody, clearance and settlement frameworks for peer-to-peer or DeFi-native trading. 

The crypto industry is counting on a forthcoming innovation exemption to address them, according to the note.

The SEC has opened a 60-day public comment period on the proposal. Benchmark expects a vote on the rescission to occur in early 2027.