Equity market structure has always been built on the technology of its era. In the late 1960s, America's stock markets nearly buckled under their own success: trading volumes grew so fast that Wall Street’s back offices drowned in paper, and the New York Stock Exchange closed on Wednesdays just to catch up. The deeper problem was fragmentation: the same stock traded on different exchanges at different prices, and an investor had no easy way to know which price was best. Congress responded in 1975 by directing the SEC to create a “national market system” for securities, built on the technology of the day, in which computers and communications networks would link the nation’s exchanges together. That way, every trader could see the whole market and get the same best price, wherever it sat.

Three decades of rulemaking culminated in the 2005 adoption of Regulation National Market System (“Reg NMS”). At its center was Rule 611, known as the trade-through rule. The rule’s premise was straightforward: if one exchange shows a stock for sale at $10.00 and another shows it at $10.01, a buy order cannot “trade through” $10.00 and execute at the worse price of $10.01. The rule reaches every broker handling a customer order, effectively requiring them to route each order to the market displaying the best price. Delivering on that promise required wiring the entire market together: every exchange feeds its quotes into centralized securities information processors (“SIPs”), which combine them into a single national best bid and offer (“NBBO”), the common reference price against which every execution is measured. 

The costs showed up everywhere. Trading in a single stock scattered across an ever-growing list of venues. Every broker had to build and pay for connections to all of them, and new exchanges launched for that very reason, since the rule guaranteed that the rest of the market would pay for their price feeds. The result was a market shaped from the top down by regulatory design rather than from the bottom up by competition for investors’ business. Commissioner Hester Peirce argued in 2018 that markets could have built the connected system Congress envisioned on their own, and likely would have built it better.

Rule 611 now stands between onchain markets and their full potential. The rule assumes that every venue advertises its prices in advance, showing what buyers and sellers are ready to pay at any given moment, and that a central data feed gathers those prices from every venue so the best ones can be identified and protected. Some onchain venues, like AMMs, have no advance price to advertise, because the price is determined at the instant of the trade based on the funds available in the venue. Others, like onchain CLOBs, do display prices but operate entirely outside the central reporting feed. There is no clear way to plug these systems into the one the rule assumes, leaving brokers and venues in the dark about how to meet Rule 611’s mandate. Without that clarity, market participants miss out on what onchain markets have to offer: transparency with every trade publicly recorded for anyone to verify, settlement in seconds instead of days, a market that never closes, and securities that investors can hold directly in their own wallets. 

In June, the SEC proposed to rescind Rule 611, along with a related prohibition on locked and crossed quotations, concluding that competition and brokers’ duty of best execution should govern how customer orders are handled. The proposal also asks whether best execution guidance for brokers should be updated in turn. 

Today we filed a joint comment letter with Douro Labs, the core contributor to the Pyth Network, supporting the proposal and urging the Commission to provide such guidance. Pyth is a network through which exchanges and trading firms involved in price formation publish their real-time prices directly onchain, and its price oracles power many perpetual futures markets on Hyperliquid.

With Rule 611 gone, investor protection rests on the duty of best execution, a longstanding obligation that requires brokers to seek the most favorable terms reasonably available for their customers' orders. Our comment makes three points:

•  The SEC should adopt the proposed rescission. The trade-through framework presupposes quotes with particular characteristics that do not map neatly onto onchain execution venues, all collected through SIPs that were never designed to capture how trading interest is expressed through onchain venues. The framework is inconsistent with how trades actually occur onchain.

• Brokers need clear guidance on how to meet their best execution obligations onchain. Onchain environments raise questions existing guidance does not answer. Some venues display no quotations to compare. Onchain markets keep trading on nights, weekends, and holidays when the NBBO switches off. Even when the NBBO is on, it may not reflect the prices at which tokenized securities actually change hands. Onchain trades also carry costs and risks with no traditional analog, from network fees to the value sophisticated actors can extract by reordering transactions. Brokers that want to keep performing their regulated function onchain, on their customers’ behalf, need clear rules for doing it.

• That guidance should be principles-based and recognize independent reference prices. Onchain technology evolves too quickly for prescriptive technical standards to stay accurate. Where the NBBO is unavailable or does not reflect onchain conditions, the SEC should recognize qualifying independent reference prices, built on transparent and manipulation-resistant methodologies, as alternatives. Price feeds like those on Pyth, which aggregate real-time contributions from firms directly involved in price formation, show what that model looks like. 

Our comment also asks the Commission to confirm that tokenized versions of NMS stocks remain inside the investor-protection perimeter of Regulation NMS and the best execution framework, so that investor protections do not turn on the ledger where a trade settles.

The goals Congress set in 1975 remain sound: efficient execution, fair competition, and transparent prices. Markets built on public blockchains advance all three, and rescinding Rule 611 lets market structure evolve through competition rather than regulatory design. We are focused on ensuring that Americans can access onchain markets under U.S. rules, and we will continue engaging with the Commission and the self-regulatory organizations as the best execution framework is modernized.

Read our full comment letter here.