finance
SEC proposes ending 20-year-old order protection rule for equities
The agency has proposed eliminating a rule adopted two decades ago that requires brokers to seek the best available price across exchanges. The change would remove a regulatory requirement that currently prevents automated market makers from executing tokenized U.S. stock trades on blockchain platforms.
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The proposal would eliminate this routing requirement for trades involving tokenized versions of U.S. equities executed on automated market maker platforms. Officials said the change addresses a structural barrier that has kept such on-chain trading from occurring under current rules.
Background on the rule The order protection rule was adopted as part of Regulation NMS to promote best execution across multiple trading venues. It requires brokers to check prices on all exchanges before completing a trade. Automated market makers operating on blockchain networks have been unable to comply with the rule when handling tokenized equity transactions because their systems do not connect to traditional exchange order books.
Potential effects If finalized, the change would allow automated market makers to execute tokenized U.S. equity trades without routing orders to conventional exchanges. The proposal does not alter requirements for non-tokenized equity trading. The agency has not set a timeline for public comment or final action on the measure.
