The U.S. Securities and Exchange Commission has approved Nasdaq’s pilot program to permit trading of tokenized versions of stocks and certain securities.
Nasdaq first submitted the proposal in September to allow high-volume stocks to trade either in traditional form or as tokenized securities on the same exchange, working with the Depository Trust Company. Under the pilot, tokenized shares will trade on the same order book as their conventional counterparts, at the same price, using the same ticker and identifying number, and carrying identical shareholder rights.
Tokenization—representing assets on a blockchain—has attracted interest from financial firms testing the technology to speed settlement and extend trading hours.
Participation in the pilot is limited to “eligible participants,” who may choose whether to trade the traditional or tokenized version of a security. Eligible tokenized securities are confined to stocks in the Russell 1000 Index and exchange-traded funds that track the S&P 500 and Nasdaq-100 indices.
The SEC said initial public comments raised concerns about market surveillance and the risk of divergent prices between tokenized and traditional securities. Nasdaq amended its proposal to add detail addressing those issues, which the SEC cited in granting approval.
The approval follows Nasdaq’s announcement that it will work with crypto exchange Kraken to enable clients to move securities into tokenized forms usable on blockchains and to permit companies to issue tokenized shares. Intercontinental Exchange, owner of the New York Stock Exchange, has also pursued tokenization efforts, including an investment in crypto exchange OKX to support tokenized stocks.
SEC Chair Paul Atkins indicated the agency will soon seek public comment on several crypto-related exemptions, including a proposed “fundraising exemption” that would allow certain crypto-linked securities to raise a capped amount within 12 months without full registration.
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