Blockchain Association backs SEC's proposal to scrap outdated NMS rules, citing tokenization benefits

The Blockchain Association has filed a letter in support of the Securities and Exchange Commission's proposal to scrap outdated Regulation National Market System (NMS) rules, citing potential benefits for tokenization.

In a Monday letter to the SEC, the industry group urged the agency to move forward with its proposal to rescind Rules 611 and 610(e), which were established in 2005 as part of Regulation NMS.

Specifically, Rule 611 establishes intermarket protection against trade-throughs for NMS stocks — meaning trading platforms should honor better-priced quotes available elsewhere. Rule 610(e) restricts the display of locked and crossed quotations.

"Rules 611 and 610(e) have failed to achieve their stated purposes and have instead imposed substantial, unnecessary costs on market participants for the past two decades," the association said.

The SEC proposed scrapping the two rules in June, saying the move could simplify market structure and reduce costs for market participants. The public comment period for the proposal ended on Monday.

Potential tokenization boost

"Today's markets have evolved dramatically since 2005, and a revolutionary shift is now underway: the representation of traditional assets on public blockchains," the group said in the Monday letter.

The association also said that the current rules "inhibit" the development of tokenized market infrastructure.

"[The] logic underlying the rules' rescission points to the benefits of enabling tokenized securities markets generally," the group added. "Specifically, that logic favors weighing multiple factors when evaluating securities transactions, including the benefits of tokenized securities."

The industry group further urged the SEC to modernize best-execution guidance, and requested the agency to recognize that tokenized securities trading on public blockchains can satisfy regulatory requirements. 

"The SEC should recognize employing an onchain execution mechanism as a compliant means of achieving fair and efficient execution," the letter said.