The source also said SEC staff have become increasingly focused on the agency’s legal authority to issue such broad relief, including whether it has completed sufficient economic analysis and followed the procedural steps required to justify an exemption. Industry insiders have been instructed that this effort may need to wait for the outcome of the Clarity Act.
Resistance came from traditional financial institutions as well.
SIFMA, the Wall Street trade group whose members include major broker-dealers and investment banks, has emerged as one of the main groups halting the SEC’s initiative, according to an industry source familiar with the discussions. SIFMA did not immediately respond to a request for comment.
The group’s concerns centered on how blockchain-based trading venues would fit within existing equity-market rules, particularly brokers’ obligations to seek the best execution for customers, the source said.
Under today’s market structure, Regulation NMS links prices across exchanges and generally requires brokers to execute trades at the best available protected quotation. That framework becomes less straightforward if tokenized securities trade through decentralized venues or automated market makers (AMM), where pricing and execution costs may differ from traditional exchanges.
In June, the SEC proposed eliminating Rule 611 of Regulation NMS — the so-called Order Protection Rule — a move widely viewed as removing one of the biggest regulatory obstacles to tokenized securities trading.