Tokenized Securities Venue

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A Tokenized Securities Venue (TSV) is a trading venue defined by the U.S. Securities and Exchange Commission (SEC) that brings together buyers and sellers of tokenized National Market System (NMS) stock through permissioned automated market makers and liquidity pools, and which may operate without registering as an exchange under a temporary, conditional exemption issued on Sept. 17, 2026.

History

Early Tokenized Securities Trading

Secondary trading of blockchain-based securities in the United States began on alternative trading systems registered as broker-dealers. The PRO Securities ATS, operated by PRO Securities LLC, began trading tZERO's preferred equity security tokens among accredited investors in January 2019, and Overstock.com's digital preferred share became the second security token available on the system in June 2019. In August 2019, tZERO said non-accredited investors could buy and resell its tokens through brokerage accounts at Dinosaur Financial, with Electronic Transaction Clearing handling clearing and custody and Computershare acting as transfer agent.

Exchange operators outside the United States tested tokenized securities in regulated settings. In November 2021, SIX Group issued a CHF 150 million digital bond, with a CHF 100 million digital portion listed and traded on SDX Trading Ltd. of the SIX Digital Exchange (SDX) and a CHF 50 million conventional portion listed on the SIX Swiss Exchange. The two parts were exchangeable, and SIX said the transaction showed that distributed ledger technology could operate in a regulated capital market.

European and U.K. Frameworks

The European Union's DLT Pilot Regime, which took effect on March 23, 2023, created licensed categories for DLT multilateral trading facilities, DLT settlement systems and combined DLT trading and settlement systems. The regime limits eligible shares to issuers with market capitalization below EUR 500 million and caps eligible bond issuance at EUR 1 billion, with some exceptions. It runs for at least three years, subject to possible extension by the European Commission.

The European Securities and Markets Authority's register lists six authorized DLT market infrastructures. German regulator BaFin authorized 21X AG to operate a DLT trading and settlement system on Dec. 3, 2024, and authorized 360X AG as a DLT multilateral trading facility on April 29, 2025. Regulators in the Czech Republic, Lithuania, France and Spain authorized CSD Prague, Axiology, LISE and Securitize Europe between October 2024 and November 2025.

The Bank of England and the Financial Conduct Authority created the Digital Securities Sandbox as a regulated live environment for firms using developing technologies to issue, trade and settle securities. Trading venues can move through staged gates, beginning with testing and progressing to live activity within initial limits and then to scaled operations. Equities, bonds, commercial paper, fund units and emissions allowances fall within its scope, while derivatives and unbacked cryptocurrencies such as bitcoin do not. The sandbox is scheduled to run until Jan. 8, 2029, subject to extension by HM Treasury.

Offshore Stock Tokens

Retail brokers and crypto platforms began offering stock-linked tokens outside the United States in 2025. On June 30, 2025, Robinhood launched stock tokens for users in the European Union, including tokens linked to privately held OpenAI and SpaceX. OpenAI said the tokens were not OpenAI equity and that it had not approved any transfer of its shares. The Bank of Lithuania, Robinhood's lead EU regulator, sought clarification about the tokens' structure and related customer communications.

U.S. Regulatory Development

The SEC's Division of Trading and Markets granted no-action relief on Dec. 11, 2025, allowing the Depository Trust Company to operate a three-year tokenization service for DTC participants on pre-approved blockchains. The relief covered Russell 1000 securities, exchange-traded funds tracking major indexes and U.S. Treasury securities. DTC expected to begin operations in a controlled production environment during the second half of 2026.

On Jan. 28, 2026, the SEC's Division of Corporation Finance, Division of Investment Management and Division of Trading and Markets issued a staff statement on tokenized securities. The statement distinguished securities tokenized by issuers or their agents from securities tokenized by unaffiliated third parties. It further categorized third-party products as custodial security entitlements, linked securities or security-based swaps.

Registered exchanges also developed tokenized trading plans. On Jan. 19, 2026, the New York Stock Exchange (NYSE), part of Intercontinental Exchange (ICE), said it was developing a platform for trading and on-chain settlement of tokenized securities, subject to regulatory approval. The planned venue would support 24/7 trading, fractional shares, dollar-denominated orders, stablecoin funding and access for qualified broker-dealers.

On March 18, 2026, the SEC approved a Nasdaq proposal allowing certain stocks and exchange-traded products to trade on its main market in either conventional or tokenized form, with settlement through DTC. Eligibility initially covered stocks in the Russell 1000 Index and exchange-traded funds tracking benchmarks including the S&P 500 and Nasdaq-100. Unlike a Tokenized Securities Venue, the Nasdaq model operates within an existing registered exchange.

Innovation Exemption

The SEC delayed a planned exemption for tokenized stock trading in May 2026 after stock exchange officials and other market participants raised concerns. A central dispute involved whether third parties could create tokens representing company shares without the issuer's knowledge or approval. Former regulators and market specialists warned that such tokens could complicate dividend administration and shareholder vote counts.

The SEC delayed the exemption again in August 2026. Reports at the time cited questions about the agency's legal authority and economic analysis, differences between issuer-backed and synthetic products, and whether blockchain venues could meet existing equity-market requirements. White House officials were concerned that the exemption could complicate negotiations over the Digital Asset Market Clarity Act, while Wall Street firms sought notice-and-comment rulemaking.

The SEC issued the Innovation Exemption on Sept. 17, 2026, under Section 36(a)(1) of the Securities Exchange Act of 1934. The order exempts Tokenized Securities Venues from the Exchange Act definition of "exchange" and exempts certain liquidity providers, called covered firms, from the definition of "dealer." SEC Chairman Paul S. Atkins described the order as a bridge toward permanent rules and noted that Congress had not advanced the CLARITY Act earlier that week. The order expires five years after publication.

Operation and Market Structure

Under the Innovation Exemption, a Tokenized Securities Venue provides automated market maker pools for permissioned participants and sets standards for access. Eligible instruments include stock tokenized by the issuer or its agent and stock tokenized by an unaffiliated third party. Synthetic exposure products, rights, warrants and tokenized investment companies do not qualify. Each tokenized NMS stock must trade against another tokenized NMS stock, a non-security crypto asset such as a payment stablecoin, or a tokenized money market fund. A venue may not offer pools consisting only of crypto assets.

The exemption limits a venue to 75 Tier 1 symbols, each capped at 0.25% of the underlying stock's prior-month average daily share volume, and 250 Tier 2 symbols, each capped at 2.5%. A venue must be a U.S. person, use auditable smart contracts on a public, permissionless distributed ledger and provide public notice at least 30 days before beginning operations. Issuers receive at least 30 days to object to third-party tokenization, and a timely objection bars trading in that stock. Covered firms must trade only for their own accounts and may not hold customer assets.

A venue must publish U.S. dollar-denominated transaction data within 10 minutes of each trade and keep 30 days of machine-readable data publicly available. It must halt trading in a tokenized stock whenever its primary listing exchange halts the underlying security. Tokens must carry the economic and governance rights of the underlying shares, including dividend, voting, liquidation and proxy rights. Primary issuance is not permitted on the venue.

The exemption provides relief from the fair-access requirement of Regulation ATS and from Regulation NMS Rules 605, 610, 611, 612 and 613. Automated market maker pricing depends on pool ratios rather than consolidated quotations, and the exemption does not specify how broker-dealers or advisers should satisfy best-execution obligations under that pricing model. Participants may hold tokenized stock in blockchain wallets they control, although the exemption does not require self-custody.

Key Users

Potential participants in Tokenized Securities Venues include crypto trading platforms, retail investors, institutional investors and broker-dealers. Coinbase has said it plans to offer U.S. tokenized stocks when permitted. Robinhood, Kraken and other crypto exchanges already offered tokenized stocks outside the United States when the exemption was issued. Analysts and lawyers said the exemption could put crypto firms in competition with traditional brokerages such as E*Trade and Charles Schwab.

Issuers are users in two roles: they may tokenize their own shares or object to third-party tokenization. liquidity providers, including proprietary trading firms that supply tokenized NMS stock from their own capital, may qualify for the dealer exemption as covered firms. Robinhood Stock Tokens, Kraken xStocks and Ondo Global Markets' offshore notes provide price exposure without shareholder status and, as structured when the order was issued, do not qualify for trading on these venues.

Risk Management

The Innovation Exemption relies on disclosure and operating conditions rather than exchange registration for risk management. SEC Commissioner Mark T. Uyeda cited stoppage coordination, technology safeguards, books-and-records requirements, public notice and transaction transparency as core conditions. He described the order as "the latest instance of the Commission using scoped relief to experiment responsibly, learn, and translate old protections to new contexts."

Controversies

Public debate over Tokenized Securities Venues is recent and largely concerns the Innovation Exemption itself; coverage of the venues in operation remains limited. Before the order, the World Federation of Exchanges warned the SEC, IOSCO and ESMA in August 2025 that third-party stock tokens could fragment liquidity, weaken price discovery and leave holders without voting or dividend rights. WFE Chief Executive Officer Nandini Sukumar said the products "do not meet the high standards which investors are used to."

In a July 2025 submission to the SEC's Crypto Task Force, Citadel Securities argued that tokenized U.S. equities should be subject to the same best-execution, fair-access and transparency requirements as traditional equities. The letter warned that liquidity could move into pools inaccessible to many participants and that vertically integrated venues could control onboarding, pre-funding and settlement on non-interoperable blockchains. It urged the SEC to reject broad exemptions and pursue targeted rule changes.

After the order was issued, SIFMA President and Chief Executive Officer Kenneth E. Bentsen Jr. said it could allow multiple tokenized versions of U.S.-listed securities to trade in parallel, lightly regulated markets. He warned of potential investor confusion and price and liquidity fragmentation. SIFMA said it was unclear whether the order's guardrails were sufficient and urged the SEC to begin formal notice-and-comment rulemaking.

Better Markets, an investor-advocacy group, said the exemption created two regulatory regimes for stock trading and removed investor protections from tokenized stock trading. Benjamin Schiffrin, director of securities policy at Better Markets, also criticized the SEC for proceeding by exemptive order rather than rulemaking.

SEC Commissioner Hester M. Peirce characterized the order as limited in scope and said it was intended to let the Commission observe onchain trading of tokenized stocks before adopting permanent rules. She said the order does not address decentralized finance and that permissionless smart contracts facilitating peer-to-peer trading do not require an exemption.

See Also

• Nasdaq
• New York Stock Exchange
• SIX Digital Exchange
• electronic trading
• custody
• settlement