Hyperliquid and Douro Labs support repeal of SEC trading rule

The Hyperliquid Policy Center (HPC) and Douro Labs, a core contributor to the Pyth Network, are calling on the US securities regulator SEC to scrap the so-called trade-through rule. In their view, that rule, part of Regulation NMS, was designed for the stock market of 2005 and is a poor fit for modern trading via blockchains, automated market makers and 24-hour trading in tokenised securities.

In brief:

• HPC and Douro Labs jointly submit a comment letter to the SEC in support of scrapping Rule 611 under Regulation NMS.
• They advocate a “best execution” system as an alternative, requiring brokers to seek the best price regardless of the trading platform.
• For situations where the NBBO framework does not apply, they propose transparent onchain price feeds, such as those from Pyth.

Rule dates from the era of centralised trading

Rule 611, also known as the trade-through rule, requires securities dealers to route orders to the market with the best available price at that moment, based on the National Best Bid and Offer (NBBO) system. That system is built around centralised price quotations and does not work well with decentralised trading platforms, onchain order books or markets that operate continuously and outside office hours.

HPC argues that the SEC should use the abolition of Rule 611 to provide clarity on how brokers can fulfil their best execution obligations when orders are routed to onchain markets.

Onchain price feeds as an alternative to NBBO

Where the NBBO framework does not apply, HPC and Douro Labs propose allowing transparent and manipulation-resistant reference prices. In doing so, they expressly mention onchain price feeds such as those from the Pyth Network, the protocol to which Douro Labs contributes.

At the same time, they explicitly argue that tokenised US equities should remain subject to Regulation NMS and the existing best execution obligations. They therefore do not see the scrapping of the trade-through rule as a licence to abandon existing investor protections, but as an opportunity to better align those protections with the reality of onchain markets.

The Hyperliquid Policy Center published the joint response letter to the SEC in an article on X, which also links Douro Labs.

HYPE, the token of the Hyperliquid network, is trading at $58.67 at the time of writing, up 1.6% in the past 24 hours.