Hyperliquid Policy Center and Douro Labs Urge SEC to Repeal…

The Hyperliquid Policy Center and Douro Labs have asked the U.S. Securities and Exchange Commission to eliminate Rule 611 of Regulation National Market System, arguing that the rule's traditional definition of best execution does not fit blockchain-based trading venues.

The two organizations submitted a joint comment on August 17, backing the SEC's proposal to rescind the rule, commonly known as the trade-through or Order Protection Rule. Rule 611 generally bars trading venues from executing trades at prices worse than protected quotes displayed elsewhere. It was adopted in 2005 as part of Regulation NMS and helped make the National Best Bid and Offer (NBBO) a central reference for U.S. equity execution.

The SEC formally proposed removing Rule 611 on June 11, along with Rule 610(e), which restricts locked and crossed quotations. The public-comment period for the proposal, docket S7-2026-20, closed on August 17.

Why the NBBO Is a Poor Fit for On-Chain Markets

Hyperliquid Policy Center and Douro Labs contend that Rule 611 assumes market infrastructure that differs fundamentally from decentralized finance. Traditional exchanges continuously publish bids and offers that data processors aggregate into an NBBO. Automated market makers, by contrast, can derive prices algorithmically from liquidity pools at the moment a transaction occurs.

Blockchain markets also operate around the clock, including nights, weekends and holidays, when conventional U.S. markets and their consolidated feeds may be closed. Settlement timing is another mismatch: traditional market-data systems can update quotes in microseconds, while blockchain trades settle according to block production and network finality.

Douro Labs, a core contributor to the Pyth Network, has separately argued that execution quality should go beyond displayed price. Its proposed framework weighs execution certainty, privacy, atomicity, finality, slippage and total transaction costs. The company has also suggested that verifiable decentralized price feeds such as Pyth could serve as alternatives to centralized market-data infrastructure where appropriate.

The request comes close to the SEC's own stance. Chairman Paul Atkins has opposed Rule 611 since its adoption more than two decades ago. When unveiling the repeal proposal in June, Atkins said the rule contributed to fragmented liquidity and generated a complex, costly stock execution system. The SEC's proposal also argues that technological advances and stronger links among trading venues reduce the need for the rule, and that keeping it could hinder new technologies and services.

The outcome holds particular significance for tokenized equities. If securities increasingly trade on public blockchains, regulators will need to decide whether those markets should replicate conventional exchange infrastructure or meet investor-protection goals through different technical mechanisms. Hyperliquid Policy Center and Douro Labs favor the latter approach, backing principles-based best-execution requirements rather than prescriptive routing rules, while insisting that tokenized U.S. stocks remain subject to applicable investor protections.

Repealing Rule 611 would not itself authorize unrestricted blockchain trading of securities. Broker-dealers, exchanges and tokenized securities would still face other federal securities requirements. But removing the trade-through rule could clear a major structural hurdle for markets that operate continuously and settle directly on-chain. The SEC now must determine whether a rule designed for fragmented stock exchanges in 2005 still makes sense in a market increasingly experimenting with blockchains, automated liquidity and 24/7 trading.