Key Takeaways:
The Hyperliquid Policy Center and Douro Labs submitted a joint comment letter on Aug. 17 backing the SEC's proposal to repeal Rule 611, the 20-year-old trade-through rule, while urging new best-execution guidance tailored to onchain markets.
The letter supports the SEC's June 11 proposal to rescind Rule 611 of Regulation NMS, which requires trading venues to route orders to whichever exchange displays the best price under the National Best Bid and Offer. The SEC itself acknowledged in its June proposal that the trade-through rule "complicates execution and increases costs." The groups argue the rule, adopted in 2005, is a relic of centralized exchange architecture that does not translate to decentralized trading, where prices are determined by liquidity pools at execution time rather than through consolidated quote systems.
Onchain markets operate 24/7 across permissionless protocols with no closing bell, no registered venue hierarchy, and liquidity that can appear and vanish within a single block. Network fees (gas costs) erode execution quality, while maximal extractable value (MEV) allows validators and sophisticated actors to reorder transactions for profit. Because many decentralized venues don't display conventional quotes, there's no obvious benchmark to measure "best" against.
Repealing Rule 611 is only half of what HPC and Douro Labs are asking for. The other half is principles-based best-execution guidance designed specifically for onchain trading. Douro Labs, the core contributor to the Pyth Network oracle, previously submitted comments to the SEC on Feb. 20 proposing that execution certainty, privacy, and total costs factor into best-execution assessments. The joint letter extends that framework, suggesting independent, transparent pricing feeds could replace conventional market quotes as the relevant benchmark for onchain venues.
HPC launched on Feb. 18 in Washington, D.C., funded by a $28 million donation in HYPE tokens. Its stated mission is to influence regulatory frameworks for decentralized markets, with a focus on onchain perpetual derivatives. Douro Labs brings a complementary interest: if the SEC requires best-execution reporting for decentralized venues, the infrastructure providing reference prices becomes critical plumbing, similar to how Securities Information Processor feeds function in traditional equities.
Despite the push for regulatory flexibility, the letter emphasizes that tokenized U.S. stocks should remain subject to existing investor protection rules. The settlement model — whether onchain or traditional — should not exempt these assets from safeguards that apply to their conventional counterparts.
The SEC's decision on Rule 611 will be closely watched by traders and platforms operating in the onchain space. A repeal could remove a significant compliance burden and allow more efficient execution, while new guidance would provide the regulatory clarity the industry has sought for years. The outcome could set a precedent for how U.S. regulators approach decentralized finance more broadly, potentially reshaping how execution quality is measured across crypto trading venues.
This article is for informational purposes only and does not constitute investment advice.
