SEC approves temporary framework for tokenized stock trading onchain

The US Securities and Exchange Commission has approved a temporary, conditional exemption designed to allow a limited number of onchain venues to trade tokenized shares of US stocks, Commissioner Mark Uyeda said in a Sept. 17 statement.

The venues, referred to as Tokenized Securities Venues or TSVs, will be able to operate under the Innovation Exemption while the Commission studies their operations and considers how securities regulation should apply to blockchain-based markets.

The SEC said tokenization could modernize issuance, trading, transfers, settlement and ownership records while potentially lowering costs, improving transparency and expanding liquidity. The exemption is aimed in part at addressing whether TSVs using onchain trading systems could fall under the Exchange Act’s definition of an exchange.

Qualifying venues can receive temporary relief when they provide permissioned trading in tokenized US stocks through innovative structures such as automated market makers and liquidity pools. The relief is conditional and requires TSVs to comply with requirements related to public notice, transaction transparency, trading stoppages, recordkeeping and technology safeguards.

The SEC has also built limits into the framework to keep the experiment controlled. Restrictions will apply to the number of symbols and trading volumes, with volume caps calibrated according to limit-up and limit-down tiers. Participating venues must regularly make US dollar-denominated transaction data available to the public, including prices, trade sizes, transaction times, pool addresses, end-of-day pool sizes and daily trading volumes.

The SEC is seeking detailed public feedback, including metrics, case studies and incident analyses, as it studies the operation of these venues and considers potential longer-term rules, Uyeda noted.

The Commission said public data will help reduce information asymmetries, facilitate monitoring and provide evidence for evaluating how securities trading operates onchain. The exemption also provides targeted regulatory relief for certain liquidity providers that contribute their own capital, as long as they satisfy conditions covering areas such as disclosure and recordkeeping.

The SEC said the move is part of the agency’s approach to financial innovation. The Commission stated that regulators should avoid forcing new technologies into outdated frameworks and instead pursue technology-neutral rules focused on investor protection, market integrity and market outcomes.