SEC Tokenized Stock Exemption Targets AMMs, Not Traditional Exchanges

The US Securities and Exchange Commission (SEC) granted tokenized securities venues a five-year exemption from registering as exchanges on September 17, according to Goldman Sachs analysts. This exemption is specifically targeted at Automated Market Makers (AMMs), which use formulas to price trades against pooled liquidity, and excludes Central Limit Order Books (CLOBs). CLOBs are used by traditional exchanges and most large centralized crypto venues.

The exemption applies only to natively tokenized stocks, which carry the same dividend and voting rights as the underlying share. This means that derivative-style wrappers sold offshore today are excluded from the exemption. Venues must notify an issuer before listing a tokenized version of its stock and give it a chance to object.

Goldman Sachs analysts expect this order to have minimal impact on volumes at traditional exchanges, as volume caps and corporate issuers' ability to opt out limit the scope of the exemption. The venue exemptions will lapse after five years.