- The Blockchain Association supports the SEC's plan to remove two Regulation NMS rules introduced in 2005.
- The group says the rules have become outdated and create unnecessary costs.
- It argues that removing them could help the growth of tokenized securities and onchain markets.
- The association also wants the SEC to recognize blockchain-based trading as a compliant way to achieve fair execution.
The Blockchain Association is backing the SEC's proposal to remove two outdated market structure rules, arguing that doing so could also help accelerate the growth of tokenized securities.
The rules, Rule 611 and Rule 610(e), were introduced in 2005 as part of Regulation National Market System, or Regulation NMS.
Rule 611 requires trading platforms to protect investors from trades being executed at worse prices than those available elsewhere. Rule 610(e) deals with so-called locked and crossed quotes, where buy and sell orders can create conflicting prices across markets.
The Blockchain Association argues that both rules have become outdated as financial markets have become faster, more automated and more interconnected.
The group said the rules have failed to achieve their original goals and have instead created unnecessary costs for market participants over the past two decades.
The SEC proposed removing the rules in June as part of an effort to simplify market structure and reduce costs.
Tokenization could benefit
The Blockchain Association believes removing the rules could also make it easier to build onchain financial markets.
Traditional assets such as stocks and bonds are increasingly being represented on blockchains, allowing them to be traded and settled using blockchain infrastructure.
The association argues that the existing market structure rules can make it harder to develop this type of infrastructure.
It is also asking the SEC to modernize its best-execution guidance and explicitly recognize that onchain trading can meet regulatory requirements for fair and efficient execution.
In other words, the group wants regulators to treat blockchain-based markets as a legitimate part of the financial system rather than forcing them to fit into rules designed for a market structure from 2005.
The SEC's public comment period for the proposal ended on Monday, so the agency will now consider the feedback before deciding whether to move forward.
