Source: U.S. SEC official website; Compiled by: Shaw, Golden Finance
On September 17, the U.S. Securities and Exchange Commission (SEC) issued an order granting a conditional temporary exemption to Tokenized Securities Venues (TSVs). Under this exemption, TSVs may operate outside the definition of "exchange" under the Securities Exchange Act of 1934, conducting tokenized National Market System (NMS) equity trading through licensed automated market makers and liquidity pools—collectively referred to as "AMM liquidity pools."
SEC Chairman Paul S. Atkins stated in a release: "Today, the U.S. Securities and Exchange Commission has taken an important step within its statutory authority. By establishing an 'Innovation Waiver' mechanism to support on‑chain trading of certain tokenized securities, we are advancing U.S. capital markets into the digital age. Although the Innovation Waiver is a temporary measure, it permits TSV to conduct tokenized NMS stock trading in a controlled environment, while the Commission evaluates whether additional complementary rules are needed to support on‑chain trading. As we take this critical first step, we are seeking public input on all aspects of the Innovation Waiver to inform the Commission's future rulemaking."
Jamie Selway, Director of the SEC's Division of Trading and Markets, stated: "This approval of an exemption allowing TSV to conduct on‑chain secondary market trading—the 'Innovation Exemption'—represents a significant milestone in the Commission's efforts to open capital markets to tokenized securities. The Division of Trading and Markets stands ready to engage with entities seeking to operate TSV and to respond to inquiries from investors and market participants."
TSV facilitates the buying and selling of tokenized NMS shares by: (1) establishing one or more AMM liquidity pools where authorized participants can interact and finalize transaction terms; and (2) setting准入 criteria to govern the entities eligible to participate in trading within the AMM liquidity pools.
The TSV has been granted an exemption from the "exchange" definition, subject to a number of conditions designed to ensure that the exempted arrangement serves the public interest and safeguards investors. The key requirements include:
Tokenized NMS shares traded on the TSV platform are subject to caps on both the number of underlying stock symbols and the trading volume.
TSV must verify that the tokenized NMS shares listed on the platform confer rights and entitlements that are fully identical to those of conventional NMS shares of the same class.
If it is proposed to list tokenized NMS shares issued by an unrelated third party, the TSV must first issue a written notice to the issuer of the underlying NMS shares and afford the issuer an opportunity to raise any objections;
The smart contracts used by TSV must be auditable, with open-source code, and deployed on a public, permissionless distributed ledger.
Once the underlying NMS shares are suspended from trading on their primary listing exchange, TSV must simultaneously suspend trading of the tokenized NMS shares.
The TSV must publicly disclose its platform operations, transaction data, and the trading activities of its affiliated entities on the TSV platform.
In addition, the order grants a conditional temporary exemption to liquidity providers in TSV‑used AMM liquidity pools, exempting them from the definition of "broker" under Section 3(a)(5) of the Securities Exchange Act. Such liquidity providers furnish liquidity using their own capital in the form of tokenized NMS shares and may also engage in other activities that exhibit broker‑like characteristics, such as quoting prices to clients and entering into committed funding agreements.
This exemption shall be effective for a period of five years from the date of its publication. The SEC is seeking public comment on the proposed revisions to the exemption framework and on the subsequent regulatory roadmap.