Nasdaq’s push to introduce tokenization into capital markets could create a dual-market structure where traditional U.S. exchanges operate alongside blockchain-based trading venues, potentially splitting trading activity and producing price divergences, TD Securities warns.
In a note, Reid Noch, vice president of U.S. equity market structure at TD Securities, cites plans by Nasdaq and the New York Stock Exchange to add tokenization to alternative trading systems (ATS), which match buyers and sellers outside conventional exchanges. Noch says Nasdaq is pursuing three parallel initiatives: upgrading post-trade settlement processes, enabling companies to issue tokenized shares, and supporting trading on offshore platforms such as Kraken. Together, these efforts could produce two distinct systems — one within the regulated U.S. market and another running through offshore, blockchain-based venues.
TD Securities cautions that offshore tokenized platforms could create separate venues for trading the same underlying assets. Tokenized shares would be backed by real stocks but operate outside the U.S. regulatory framework and could differ from traditional holdings in contract terms, custody arrangements, or legal protections. For investors, the same stock might trade in multiple places at different prices, complicating market transparency and potentially diverting order flow from traditional exchanges.
Cointelegraph sought comment from TD Securities but did not receive a response before publication.
Tokenized trading is moving into the mainstream. The market for tokenized assets has expanded rapidly, with equities becoming a primary focus. Kraken’s xStocks platform, which offers tokenized versions of publicly traded shares on blockchain-based venues, has surpassed $25 billion in cumulative trading volume, reflecting roughly 150% growth since November. That growth points toward a shift to round-the-clock trading, allowing equities to trade outside regular market hours.
However, the expansion brings risks: weaker liquidity in fragmented venues, price differences across platforms, and challenges for price discovery and regulatory oversight. Crypto firms are increasing competition with traditional exchanges — Coinbase has also expanded into tokenized stocks — while the NYSE is exploring tokenization via a partnership with Securitize to develop a platform that could support extended or 24/7 trading.
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