SEC Greenlights Temporary Tokenized Securities Trading
The US Securities and Exchange Commission (SEC) has adopted an exemptive order to facilitate trading in certain tokenized securities. The 'Innovation Exemption' is a temporary measure, set to expire in five years, aimed at promoting experimentation with securities tokenization that could lead to future SEC rulemaking.
The exemption allows for the trading of tokenized national market system (NMS) stocks through automated market makers and liquidity pools on public blockchains. This facilitates potential benefits such as self-custody, around-the-clock trading, fractional ownership, and faster settlement while preserving investor protections and fair, orderly markets.
The order excludes qualifying tokenized securities venues (TSVs) from the Securities Exchange Act definition of an 'exchange' and provides conditional relief from the definition of 'dealer' for certain liquidity providers, known as Covered Firms. Eligible tokenized NMS stocks include shares tokenized by or on behalf of the issuer, as well as shares tokenized by an unaffiliated third party; tokens that provide only synthetic exposure to a stock are not covered.