Woofun AI reports that the U.S. Securities and Exchange Commission has proposed abolishing Rule 611 of Reg NMS, known as the Order Protection Rule, alongside Rule 610(e). Alex Thorn, Head of Research at Galaxy Digital, identified Rule 611 as a primary obstacle for trading tokenized stocks in decentralized finance, noting that automated market makers cannot comply with its requirement to prevent trades at prices inferior to protected quotes. This incompatibility effectively renders liquidity pools for tokenized stocks illegal trading centers under current regulations.

The proposed abolition would replace Rule 611 with the 'best execution' principle, which operates at the broker level through a rules-based framework rather than trade-by-trade review.

This shift aligns regulatory requirements with automated market maker mechanics. Thorn indicated this move is part of a broader SEC strategy to remove critical market structure barriers before addressing venue registration issues through innovation waivers.