Hyperliquid Supports SEC's Proposal to Abolish Trade-through Rule, Calls for On-chain Market Best Execution Guidelines

On August 17, the U.S. Securities and Exchange Commission proposed to abolish the core rule of Reg NMS, Rule 611 (the trade-through rule), along with the prohibition on locked or crossed quotes, arguing that order processing should be driven by market competition and brokers' best execution obligations. HPC (Hyperliquid Policy Center) and Douro Labs (core contributors to Pyth Network) jointly submitted a comment letter supporting this proposal and urged the SEC to provide principled best execution guidelines for on-chain markets. The comment letter pointed out that Rule 611 is predicated on all venues publicly displaying quotes in advance and aggregating them through a central information processing system to create the national best bid and offer, which fundamentally does not match the actual execution methods on-chain. AMM-type venues do not have pre-quoted prices; instead, prices are determined at the moment of trade based on the liquidity pool. Additionally, on-chain order books operate entirely outside of the central quoting system. Furthermore, the comment letter also requested that the SEC confirm that tokenized NMS stocks remain subject to the Reg NMS investor protection framework, emphasizing that protections should not change due to differences in settlement ledgers. Abolishing Rule 611 would allow market structure to evolve through competition rather than regulatory design, while also suggesting that in cases where the NBBO is absent or does not reflect on-chain conditions, independent reference prices based on transparent, anti-manipulation methodologies should be recognized.

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