The Hyperliquid Policy Center and Douro Labs submitted a joint comment letter to the U.S. Securities and Exchange Commission on Aug. 17 supporting the proposed repeal of Regulation NMS Rule 611.
Summary
- August 17 filing jointly backed the SEC proposal to repeal Regulation NMS Rule 611 entirely.
- Rule 611 prevents executions through protected quotations displaying better prices across connected U.S. trading venues.
- HPC and Douro asked regulators to recognize qualifying independent reference prices when NBBO is unavailable.
- Tokenized U.S. equities would remain subject to securities rules and broker best execution duties unchanged.
- The SEC comment period closed August 17, with no final repeal decision announced yet publicly.
Rule 611, commonly called the trade through rule, generally prevents trading centers from executing orders at prices worse than protected quotations displayed elsewhere. The framework uses consolidated market data to establish the National Best Bid and Offer, or NBBO.
HPC and Douro argued in their 22 page letter that this quotation system does not map cleanly onto automated market makers, onchain order books and markets operating continuously outside traditional exchange hours.
Douro Labs is a core contributor to Pyth Network. HPC is an independent advocacy organization focused on creating a regulated path for U.S. users to access onchain markets, including markets available through Hyperliquid.
SEC Rule 611 repeal would change order protection
The SEC proposed rescinding Rule 611 and Rule 610(e) on June 11. Rule 610(e) restricts locked and crossed quotations, where bids equal or exceed available offers.
The agency’s proposal would also remove related definitions from Rule 600 and make corresponding changes elsewhere in Regulation NMS. The SEC has not adopted the proposal, meaning the existing rules remain in force.
Rule 611 was adopted as part of Regulation NMS in 2005. It requires trading centers to establish procedures designed to prevent executions at prices inferior to protected quotations available through other connected venues.
SEC Chairman Paul Atkins said in June that the proposal was intended to simplify market structure and reduce costs. He also said the agency would take a “careful, deliberative approach” while reviewing public feedback.
HPC and Douro supported the repeal “without qualification.” They argued that the current framework assumes executable interest appears as firm quotations collected by securities information processors.
Automated market makers work differently. They calculate an execution price from a liquidity pool when an order is placed. Some onchain central limit order books display bids and offers, but those prices are not currently incorporated into the consolidated feeds used to calculate the NBBO.
Onchain markets require updated best execution guidance
Repealing Rule 611 would not remove brokers’ duty to seek favorable execution terms for customers. HPC and Douro said that obligation should remain the central investor protection standard.
Their letter asked the SEC to coordinate with the Financial Industry Regulatory Authority on principles based guidance for onchain execution. The groups said existing guidance does not fully address network fees, atomic settlement, transaction ordering risks or markets operating when the NBBO is unavailable.
An onchain venue may also calculate prices based on the size of an order and the liquidity available when it executes. As a result, one displayed reference price may not capture the final cost that a customer receives.
The groups proposed evaluating the effective execution price after accounting for protocol charges, network fees and market movement caused by the order. Settlement speed and reduced counterparty settlement risk could also form part of that assessment, according to the letter.
HPC and Douro further asked regulators to recognize qualifying independent reference prices when an NBBO does not exist or does not reflect onchain conditions. They said such benchmarks should use transparent methodologies and resist manipulation.
The filing cited Pyth as one possible model. Pyth receives pricing information from exchanges and trading firms involved in price formation, then publishes aggregated data onchain. The proposal did not request that the SEC endorse Pyth as the mandatory provider.
Tokenized stocks would stay within securities rules
HPC and Douro asked the SEC to confirm that tokenized versions of NMS stocks remain inside Regulation NMS and the wider best execution framework. Under that approach, investor protections would not depend on whether ownership records use a blockchain.
The request comes as tokenized stock products expand across crypto networks. As previously reported, Ondo brought 35 tokenized stocks and ETFs onto HyperEVM in June.
Such products can use different legal structures. Some represent claims against an issuer or special purpose entity rather than direct legal ownership of the underlying company shares. The structure must therefore be assessed separately from the blockchain used for trading or settlement.
In related coverage, an onchain platform launched trading for more than 70 tokenized equities across Ethereum and Solana. That system uses public market information to help keep token prices aligned with the underlying shares.
HPC and Douro also argued that onchain transactions may qualify for Rule 611’s existing exception for trades that do not use “regular way” settlement terms. They asked the SEC to confirm that interpretation if the repeal is delayed or rejected. This remains the groups’ legal position, not an SEC determination.
The SEC must decide whether to adopt the repeal
The public comment period for file S7-2026-20 closed on Aug. 17, according to the SEC docket. The joint submission arrived on the deadline alongside comments from exchanges, investment firms, trade groups and other market participants.
The SEC will now review the responses before deciding whether to adopt, revise or withdraw the proposal. A repeal would require a final Commission vote and an adopting release establishing the final text and effective date.
Not all commenters support removing the rule. Some responses warned that repeal could weaken an objective price protection standard and place greater reliance on individual brokers’ routing systems.
SEC Commissioner Mark Uyeda also acknowledged those questions in a June statement. He said removing Rule 611 could raise issues involving best execution, transparency, trading mechanics and investor confidence.
The next decision rests with the SEC. No final vote, adoption date or implementation timetable had been announced as of Aug. 18.
