The Hyperliquid Policy Center and Douro Labs submitted a joint remark letter to the U.S. Securities and Alternate Fee on Aug. 17 supporting the proposed repeal of Regulation NMS Rule 611.
Abstract
- August 17 submitting collectively backed the SEC proposal to repeal Regulation NMS Rule 611 completely.
- Rule 611 prevents executions via protected quotations displaying higher costs throughout related U.S. buying and selling venues.
- HPC and Douro requested regulators to acknowledge qualifying impartial reference costs when NBBO is unavailable.
- Tokenized U.S. equities would stay topic to securities guidelines and dealer greatest execution duties unchanged.
- The SEC remark interval closed August 17, with no closing repeal choice introduced but publicly.
Rule 611, generally referred to as the commerce via rule, typically prevents buying and selling facilities from executing orders at costs worse than protected quotations displayed elsewhere. The framework makes use of consolidated market information to determine the Nationwide Greatest Bid and Supply, or NBBO.
HPC and Douro argued of their 22 web page letter that this citation system doesn’t map cleanly onto automated market makers, onchain order books and markets working repeatedly exterior conventional trade hours.
Douro Labs is a core contributor to Pyth Community. HPC is an impartial advocacy group targeted on making a regulated path for U.S. customers to entry onchain markets, together with markets out there via Hyperliquid.
SEC Rule 611 repeal would change order safety
The SEC proposed rescinding Rule 611 and Rule 610(e) on June 11. Rule 610(e) restricts locked and crossed quotations, the place bids equal or exceed out there presents.
The company’s proposal would additionally take away associated definitions from Rule 600 and make corresponding adjustments elsewhere in Regulation NMS. The SEC has not adopted the proposal, which means the present guidelines stay in power.
Rule 611 was adopted as a part of Regulation NMS in 2005. It requires buying and selling facilities to determine procedures designed to stop executions at costs inferior to protected quotations out there via different related venues.
SEC Chairman Paul Atkins stated in June that the proposal was meant to simplify market construction and cut back prices. He additionally stated the company would take a “cautious, deliberative strategy” whereas reviewing public suggestions.
HPC and Douro supported the repeal “with out qualification.” They argued that the present framework assumes executable curiosity seems as agency quotations collected by securities data processors.
Automated market makers work otherwise. They calculate an execution worth from a liquidity pool when an order is positioned. Some onchain central restrict order books show bids and presents, however these costs will not be presently included into the consolidated feeds used to calculate the NBBO.
Onchain markets require up to date greatest execution steering
Repealing Rule 611 wouldn’t take away brokers’ obligation to hunt favorable execution phrases for patrons. HPC and Douro stated that obligation ought to stay the central investor safety normal.
Their letter requested the SEC to coordinate with the Monetary Business Regulatory Authority on rules primarily based steering for onchain execution. The teams stated present steering doesn’t absolutely deal with community charges, atomic settlement, transaction ordering dangers or markets working when the NBBO is unavailable.
An onchain venue might also calculate costs primarily based on the scale of an order and the liquidity out there when it executes. In consequence, one displayed reference worth might not seize the ultimate price {that a} buyer receives.
The teams proposed evaluating the efficient execution worth after accounting for protocol prices, community charges and market motion brought on by the order. Settlement velocity and diminished counterparty settlement threat may additionally type a part of that evaluation, based on the letter.
HPC and Douro additional requested regulators to acknowledge qualifying impartial reference costs when an NBBO doesn’t exist or doesn’t mirror onchain situations. They stated such benchmarks ought to use clear methodologies and resist manipulation.
The submitting cited Pyth as one attainable mannequin. Pyth receives pricing data from exchanges and buying and selling companies concerned in worth formation, then publishes aggregated information onchain. The proposal didn’t request that the SEC endorse Pyth because the obligatory supplier.
Tokenized shares would keep inside securities guidelines
HPC and Douro requested the SEC to verify that tokenized variations of NMS shares stay inside Regulation NMS and the broader greatest execution framework. Underneath that strategy, investor protections wouldn’t rely upon whether or not possession information use a blockchain.
The request comes as tokenized inventory merchandise broaden throughout crypto networks. As beforehand reported, Ondo brought 35 tokenized stocks and ETFs onto HyperEVM in June.
Such merchandise can use totally different authorized constructions. Some characterize claims towards an issuer or particular goal entity relatively than direct authorized possession of the underlying firm shares. The construction should subsequently be assessed individually from the blockchain used for buying and selling or settlement.
In associated protection, an onchain platform launched trading for more than 70 tokenized equities throughout Ethereum and Solana. That system makes use of public market data to assist preserve token costs aligned with the underlying shares.
HPC and Douro additionally argued that onchain transactions might qualify for Rule 611’s present exception for trades that don’t use “common method” settlement phrases. They requested the SEC to verify that interpretation if the repeal is delayed or rejected. This stays the teams’ authorized place, not an SEC willpower.
The SEC should determine whether or not to undertake the repeal
The general public remark interval for file S7-2026-20 closed on Aug. 17, based on the SEC docket. The joint submission arrived on the deadline alongside feedback from exchanges, funding companies, commerce teams and different market individuals.
The SEC will now assessment the responses earlier than deciding whether or not to undertake, revise or withdraw the proposal. A repeal would require a closing Fee vote and an adopting launch establishing the ultimate textual content and efficient date.
Not all commenters help eradicating the rule. Some responses warned that repeal may weaken an goal worth safety normal and place larger reliance on particular person brokers’ routing programs.
SEC Commissioner Mark Uyeda additionally acknowledged these questions in a June statement. He stated eradicating Rule 611 may elevate points involving greatest execution, transparency, buying and selling mechanics and investor confidence.
The following choice rests with the SEC. No closing vote, adoption date or implementation timetable had been introduced as of Aug. 18.
