SEC Rule Rollback Could Unlock Tokenized US Stock Trading

The U.S. Securities and Exchange Commission (SEC) has proposed removing two key rules that govern trade protections for U.S. equities markets, potentially paving the way for tokenized U.S. stock trading in decentralized finance (DeFi).

Rules 611 and 610(e) of Regulation National Market System, introduced in 2005, block trade-throughs and deal with locked and crossed quotations. The SEC's proposal would eliminate these rules, allowing DeFi market makers to support tokenized U.S. stock trading.

Analysts believe the move could simplify equity market structure and reduce costs for market participants. However, tokenized equities still face other hurdles, including registration, settlement, clearing, and investor rights under U.S. securities rules.

The SEC's proposal is part of a wider policy shift to allow tokenized public stocks to trade on blockchain platforms. The agency has been studying an innovation exemption that could enable digital versions of existing public equities to be traded on decentralized exchanges.