Lockup Cliffs, a Reg NMS Rewrite, and a Korean Warning: Market Structure at a Crossroads

The plumbing of global equity markets is being stress-tested from three directions at once. In the United States, the SEC has proposed the most consequential change to Regulation NMS in two decades. In the world’s newest mega-cap listing, 911 million insider shares are about to unlock. And in South Korea, a leveraged-ETF frenzy has made a national index more volatile than Bitcoin — a real-time case study in how product design can overwhelm price discovery.

Each event is independently significant. Together, they frame the central question for the second half of 2026: whether the market’s infrastructure can absorb a wave of new supply and structural change without a break in liquidity.

The SEC’s Rule 611 Proposal: Rewiring Equity Trading

On June 11, 2026, the SEC proposed rescinding Rule 611 of Regulation NMS — the trade-through rule that has required trading centers to route orders to the best displayed price across all venues since 2005. The proposal also targets Rule 610(e), which prohibits locked and crossed quotations.^[1]

Chairman Paul Atkins, who dissented from Rule 611 when it was originally adopted as a commissioner in 2005, argued at the SEC’s open meeting that the rule has driven venue proliferation and fragmentation rather than improving displayed liquidity.^[2] The proposal’s rationale rests on three pillars: market forces should shape structure, Rule 611 has created harmful complexity, and the rule is no longer necessary in today’s highly automated and interconnected markets.^[3]

The implications cut differently depending on which side of the trade you sit. Institutional investors may benefit from greater flexibility to access liquidity, reduce information leakage, and minimize the costs of sourcing liquidity across fragmented venues. Trading centers and wholesalers could reduce connectivity and compliance costs. But smaller exchanges that currently benefit from protected-quote status may face increased competitive pressure, and retail investors who rely on obtaining the best displayed price could see a different execution landscape.^[3]

Skadden’s analysis notes that the proposal shifts regulatory scrutiny from trade-through compliance toward deeper assessments of routing practices and execution quality under best-execution frameworks — meaning broker-dealers will need to overhaul their compliance documentation regardless of the final rule’s shape.^[3]

The 60-day public comment period runs from the proposal’s Federal Register publication on June 17, putting the deadline in mid-August.^[3] Significant revisions remain possible given the breadth of affected market participants.

What would have to be true for each side: For repeal to succeed as intended, best-execution obligations and competition among venues would need to discipline pricing without the trade-through mandate — the European MiFID II experience suggests this is plausible but not guaranteed. For repeal to backfire, the loss of a unified price-protection standard would need to fragment fill quality across venues in ways that disproportionately harm retail investors — a risk that is real but difficult to quantify ex ante.

SpaceX: The Largest Lockup Unlock in History

SpaceX (SPCX) raised $85.7 billion in its June 12 IPO — the largest initial public offering ever — pricing 555.6 million shares at $135.^[4] But those public shares represent only about 4% of the company’s total stock. The rest sits behind a staggered lockup that begins expiring in August.^[5]

The company set August 4 as its first earnings report, which triggers the unlock schedule. Two days later, on August 6, up to 911.5 million shares — 20% of locked-up stock — enter the tradable float.^[4] An additional 10% tranche could unlock if the stock closes at least 30% above the IPO price for five of the ten trading days heading into the earnings report.^[4]

That performance condition now looks unlikely to be met. As of Monday’s close, SpaceX shares had shed roughly 43% from their all-time high closing price of $211.39 on June 16.^[4] The stock snapped a seven-day losing streak on Tuesday with a 3% gain, but short sellers have built positions amounting to about a third of the public float.^[4]

The staggered design is itself a market-structure experiment. Traditional 180-day lockups create single-day supply cliffs. SpaceX’s approach — releasing tranches at intervals tied to performance milestones — attempts to distribute selling pressure. But with only 4% of shares currently trading, even the first 20% tranche represents a roughly fivefold increase in the tradable float. How the order book absorbs that supply will be a close-to-textbook test of lockup mechanics at unprecedented scale.

The base rate from prior mega-IPOs is mixed. Some post-IPO drawdowns ahead of lockup expiry reflect anticipatory selling; once the unlock arrives and the expected flood of supply does not materialize in full, stocks sometimes stabilize. But the short-interest buildup and the sheer scale — 911 million shares on a float that started at 555 million — means the historical sample may not be informative.

KOSPI: When Leveraged Products Become the Market

South Korea’s KOSPI index has recorded volatility of 61% year-to-date, exceeding Bitcoin’s 50% and nearly double the Nikkei’s level, according to Bloomberg data cited on July 22.^[6] The Korea Exchange has triggered 40 sidecars and 7 circuit breakers this year alone.^[6]

The primary driver is single-stock leveraged ETFs. More than 10 new products tracking individual stocks like Samsung Electronics and SK Hynix were listed in 2026, with individual investors holding 90% of these products.^[6] Bloomberg found that leveraged ETFs combined with their two underlying semiconductor stocks account for over 70% of daily trading volume on the KOSPI.^[6] Samsung Electronics and SK Hynix now represent over 50% of the index’s market capitalization, effectively turning KOSPI-tracking funds into what Bloomberg described as “AI betting products.”^[6]

South Korean regulators announced a temporary suspension of new single-stock leveraged ETF listings on July 16 and tripled the minimum cash deposit requirement from 10 million won to 30 million won (approximately $20,300).^[6] President Lee Jae-myung ordered additional measures on July 21, criticizing the government’s slow response.^[6] On July 22, the KOSPI surged 5.59% to recover the 7,000 mark, triggering yet another buy sidecar.^[6]

The KOSPI episode is a structural warning, not just a volatility headline. When leveraged products and their underlying securities account for 70% of trading volume, the rebalancing mechanics of those products — concentrated in the closing auction — can create self-reinforcing momentum loops. South Korean authorities are now weighing spreading out rebalancing trades and exploring futures-based hedging as structural fixes.^[7] The question for US market participants is whether any domestic product structure carries analogous concentration risk, particularly as single-stock leveraged products and options-based ETFs proliferate.

The IPO Window: Selectively Open

While market structure debates play out at the regulatory level, the IPO calendar shows the issuance window is open — but only for companies that clear a high quality bar.

Biotech led the first half. BPIQ recorded 15 IPOs in H1 2026, up 114% from seven in H1 2025, the highest first-half total since 2021.^[8] Q1 2026 alone saw 10 biopharma IPOs raising $2.2 billion, up from 7 deals and $1 billion in Q4 2025.^[8] But the comparison to the 2020–2021 peak remains sobering: activity is far below that cycle, and deal quality scrutiny is higher.^[8]

This week’s calendar features Scribe Therapeutics (SCTX), a Phase 1 clinical-stage biotech developing CRISPR therapies for cardiovascular and metabolic disease. The company is offering 7.15 million shares at $13 to $15, targeting approximately $100 million at the midpoint, with underwriters Leerink Partners, Goldman Sachs, and Guggenheim Securities.^[9] Scribe is Eli Lilly-backed and based in Alameda, California; at the top of its range, it could gross $123.3 million.^[9] The deal is expected to price and begin trading on July 24.^[10]

Other recent listings include Csquare (CSQR), expected to raise $1.25 billion at $23–$27 per share, and Southern Cross Acquisition I Corp. (NCOU), a SPAC pricing at $10 per share for $100 million.^[10]

Lockup Expirations Adding to Supply Pressure

Beyond SpaceX, several lockup expirations are hitting the market this month:

BitGo Holdings (BTGO), the crypto custody firm that raised $212.8 million in January, saw its 180-day lockup expire on July 21.^[11][12] EquipmentShare.com (EQPT) follows on July 22, and Ethos (LIFE) on July 28.^[12]

Buybacks: The Counterweight

On the demand side, corporate buyback programs continue to absorb supply. Equinor (EQNR) announced on July 22 it will commence the third tranche of its 2026 share buyback program on July 23, covering up to $1.125 billion including shares redeemed from the Norwegian State.^[13] Alimentation Couche-Tard renewed its share repurchase program on July 16.^[13] Ericsson reported weekly buyback activity for the period July 13–17.^[13] Ahold Delhaize repurchased 250,000 shares at an average of EUR 35.89 for EUR 9 million in the week ending July 17.^[13] OceanaGold renewed its normal course issuer bid for up to 22 million shares.^[13] Tieto announced a new EUR 90 million buyback program.^[13]

The buyback calendar is concentrated in energy, European industrials, and mid-cap miners — a different universe from the biotech and tech names driving new issuance. This means the supply-demand balance is sector-specific: biotech issuance is meeting selective demand, while energy and European buybacks are removing float from a different set of holders entirely.

What to Watch Next

1. SpaceX earnings (Aug 4) and lockup unlock (Aug 6): The first tranche of up to 911.5 million shares enters the float. Watch volume, short interest, and whether the performance-based 10% tranche triggers. The stock’s distance from its $135 IPO price — and the 30% premium threshold — will determine the unlock scope.

2. SEC Rule 611 comment period (mid-August deadline): The breadth and tone of public comments will signal whether the proposal moves toward adoption with modifications or faces meaningful opposition. Watch for submissions from major exchanges, wholesaler-brokers, and institutional asset managers.

3. KOSPI structural reform timeline: South Korean regulators are weighing spreading out leveraged-ETF rebalancing trades and exploring futures-based hedging.^[7] Whether these structural fixes reduce the sidecar-trigger frequency — 40 and counting — will be a test case for whether product-design reform can tame mechanical volatility.

4. Scribe Therapeutics (SCTX) pricing and debut (July 24): As the first biotech IPO to price after the SpaceX selloff intensified, its reception will indicate whether the biotech IPO window remains genuinely open or is narrowing to only the strongest pipelines.

5. BitGo (BTGO) post-lockup trading: The crypto custody firm’s first full trading sessions post-unlock will test whether the January IPO class can absorb insider selling without significant price disruption.

6. Buyback cadence through August: Whether energy and European industrial buybacks maintain their pace will determine how much float they remove from the market during a period of elevated supply from lockup expirations.

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FN2 Research provides market commentary and education, not personalized investment advice. No trades are placed or managed here.

Sources

1. SEC.gov | SEC Proposes Rescission of Regulation NMS Rules 611 and 610(e)sec.gov
2. SEC considers rescinding Rule 611 to modernise US equity markets and fight fragmentation…noah-news.com
3. A New Era for Equity Market Structure: SEC Proposes Rescinding Regulation NMS's Trade-Thr…skadden.com
4. SpaceX sets earnings date, triggering first big share unlockcnbc.com
5. SpaceX sets earnings date, triggering first big share unlockcnbc.com
6. KOSPI Volatility Exceeds Bitcoin, Triggers 40th Sidecarchosun.com
7. SEC considers rescinding Rule 611 to modernise US equity markets and fight fragmentation…noah-news.com
8. Bio/Pharma: IPO Market Selectively Reopens in H1 2026doublehelixlaw.com
9. Scribe Therapeutics to Sell 7.15 Million Shares at $13-$15 Each in IPOmorningstar.com
10. IPO Calendar 2026 | Upcoming & Next IPOs (Live) | IPOTrackeripotracker.net
11. BTGO's (NYSE:BTGO) Lock-Up Period To Expire on July 21stmarketbeat.com
12. Upcoming IPO Lockup Period Expirationsmarketbeat.com
13. Equinor to commence third tranche of the 2026 shareglobenewswire.com