TD Securities warns that Nasdaq’s push into tokenized securities could lead to a two-tier market in which traditional U.S. exchanges coexist with blockchain-based trading venues, fragmenting trading activity and producing price inconsistencies.
In a research note, Reid Noch, vice president of U.S. equity market structure at TD Securities, highlights plans by Nasdaq and the New York Stock Exchange to incorporate tokenized shares into alternative trading systems (ATS) that match buyers and sellers outside standard exchange infrastructure. Noch outlines three parallel efforts by Nasdaq: modernizing post-trade settlement, enabling companies to issue tokenized equity, and supporting trading on offshore blockchain platforms such as Kraken. Together, these moves could create a distinct onshore regulated market and an offshore, blockchain-driven market.
TD Securities cautions that offshore tokenized platforms may trade tokenized versions of the same underlying stocks. Although these tokens would be backed by real shares, they could sit outside U.S. regulatory oversight and differ in contractual terms, custody arrangements, and legal protections. That may mean a single issuer’s equity could trade simultaneously in multiple venues at divergent prices, complicating transparency, price discovery, and the routing of orders away from traditional exchanges.
Cointelegraph requested comment from TD Securities but did not receive a response before publication.
Tokenized equities are gaining traction. Kraken’s xStocks, which lists tokenized versions of publicly traded shares on blockchain venues, has recorded over $25 billion in cumulative trading volume — roughly a 150% increase since last November — signaling demand for round-the-clock trading beyond conventional market hours. Crypto platforms such as Coinbase are also expanding into tokenized stocks, while the NYSE is exploring tokenization through a partnership with Securitize to enable extended or 24/7 trading.
However, the industry’s growth raises concerns: fragmenting liquidity across multiple venues can weaken depth, create price dispersion between platforms, and complicate oversight and the public’s ability to determine a single, reliable market price. Regulators and market participants will need to address custody, contractual clarity, and investor protections as tokenized trading scales.
Cointelegraph is committed to independent, transparent journalism. Readers are encouraged to verify information; see Cointelegraph’s Editorial Policy at https://cointelegraph.com/editorial-policy.