SEC Opens On-Chain Trading Route for US Stocks
The US Securities and Exchange Commission (SEC) has introduced a five-year exemption allowing certain venues to trade tokenized US stocks on-chain. The Innovation Exemption, issued on September 17, enables qualifying Tokenized Securities Venues (TSVs) to operate automated market makers and liquidity pools for these tokens.
The SEC emphasizes that companies behind the shares still have control over which tokens are listed. If a token is created by an unaffiliated third party, the venue must notify the issuer of the underlying stock and wait at least 30 calendar days after receipt. The issuer can then object to the listing in writing within this period.
The exemption combines public infrastructure with permissioned trading. Smart contracts are required to be public and auditable, operating on a public, permissionless distributed ledger. However, venues still set entry standards for participants using their pools and must stop trading a tokenized stock when its underlying stock is halted or suspended on the primary listing exchange.