The U.S. Securities and Exchange Commission (SEC) has approved a significant move by Nasdaq, allowing for the listing and trading of tokenized securities. This new regulation marks a crucial step for digital assets in mainstream financial markets, opening up opportunities for mainstream securities such as Russell 1000 index constituents and exchange-traded funds (ETFs) tracking indices like the S&P 500 to be traded in tokenized form on Nasdaq in the future.
The equivalence between tokenized securities and traditional securities is at the core of this reform. The new rule explicitly states that these tokenized securities will be fully interchangeable with their corresponding traditional stocks, possessing the same identifiers, trading symbols, and shareholder rights. This means investors holding tokenized securities will enjoy the same rights as those holding traditional stocks, including the right to participate in shareholder voting, receive dividends, and even share in residual assets during company liquidation, ensuring that investor rights are unaffected.
The launch of these tokenized securities will be conducted as a pilot program and managed by the Depository Trust Company (DTC), responsible for securities clearing and settlement. Market participants will have the option to clear trades through the tokenization process when submitting orders. Trades that do not meet the tokenization criteria will continue to use traditional settlement methods. Nasdaq emphasizes that tokenized securities and traditional securities will share the same order book, with no differences in price or order priority. During the pilot period, existing trading infrastructure, order types, trading hours, and data feeds will remain unchanged.
On the regulatory front, both Nasdaq and the Financial Industry Regulatory Authority (FINRA) will employ the same surveillance datasets and regulatory tools used for traditional securities to oversee tokenized securities. Nasdaq commits to announcing which securities will be tokenized at least 30 days in advance, providing ample preparation time for market participants. Trade settlement will continue to adhere to the current T+1 standard, meaning settlement will be completed on the next business day following trade execution.
In approving this initiative, the SEC stated that the new regulatory framework aligns with legal principles designed to protect investors and maintain market order. The commission specifically emphasized that both traditional and tokenized securities must offer shareholders the exact same rights and privileges, thereby eliminating any disparities in value or investor protection between the two.
Through this pilot program, DTC can test blockchain-based asset trading in a strictly controlled and regulated environment, minimizing market risks. This approach allows regulators and market operators to observe the system's actual performance without causing significant disruption to participants.
Furthermore, Nasdaq has established a partnership with Payward, the parent company of digital asset exchange Kraken. Through this collaboration, tokenized stocks representing traditional market assets will be traded on Payward's xStocks platform, building a bridge between established securities markets and blockchain networks.