The SEC on 17 September exempted a new class of Tokenized Securities Venues from the definition of an exchange for five years, clearing a path to trade tokenized US stocks through permissioned liquidity pools on public blockchains. No venue can start before mid-October, and the order is open for public comment.
What the SEC Innovation Exemption Allows
The SEC innovation exemption removes Tokenized Securities Venues, or TSVs, from the definition of an exchange under the Securities Exchange Act of 1934 for five years. TSVs can trade tokenized National Market System stock through permissioned automated market makers and liquidity pools, and liquidity providers in those pools gain a matching exemption from the definition of a dealer.
SEC Chairman Paul Atkins described the order as a step toward bringing US capital markets into the digital age and a bridge toward durable rulemaking. It rests on the SEC’s existing authority, not new legislation, and the order itself invites comment on possible modifications.
The Limits on SEC Tokenized Stock Trading
SEC tokenized stock trading under the order is capped by the number of symbols and the volume a venue can handle, and trading must stop whenever the underlying stock halts on its primary listing exchange. Smart contracts must be auditable, public and deployed on a public, permissionless blockchain.
The order excludes synthetic products: a token must give holders the same rights and privileges as the underlying stock, so linked securities and tokenized swaps that only track a price do not qualify. Before listing a stock tokenized by an unaffiliated third party, a venue must notify the issuing company and give it the chance to object.
Trading Cannot Start Before Mid-October
The earliest any venue could begin trading is around 17 October, because a TSV must publish a notice on its website at least 30 calendar days before operating and the order was issued on 17 September. It must also inform the SEC in writing within one business day of publishing that notice.
Liquidity providers acting under the dealer exemption must also notify the SEC in writing. The five-year term runs from the order’s publication in the Federal Register, and the public comment period will shape any changes before durable rules follow.
The Order Is Written Around Liquidity Pools
Goldman Sachs analysts noted that venues built on central limit order books would need new infrastructure to operate under the order, because the framework is designed around automated market makers. Issuers already running tokenized stocks through liquidity pools start closer to its structure.
Citi projects tokenized assets reaching $5.5 trillion by 2030 in its base case, up from roughly $17 billion today, with US equities and Treasuries leading early adoption.
Backpack’s Token Rose 38% After the SEC Tokenized Stocks Order
The Backpack token price rose 37.76% to $0.8647 after the order, with volume up 508.6% to $23.55 million. Backpack Securities, an SEC-registered broker-dealer, has tokenized 17 US stocks and ETFs on Solana since 12 June, each backed 1:1 by shares in custody, including Take-Two Interactive on 6 August and GoPro on 1 September.
US users are currently excluded from trading those tokens, and the order is the first framework under which a permissioned US venue for them could run. The token carries its own risk: only 249.99 million of 1 billion BP circulate, and market liquidity equals about 2.01% of capitalization.
FAQs
1. Who can operate under the SEC innovation exemption?
An organization, association or group can operate under the SEC innovation exemption as a Tokenized Securities Venue if it provides permissioned automated market maker pools for tokenized US stocks and sets standards for who may trade in them. It must meet the order’s conditions and publish notice at least 30 days before starting.
2. When can SEC tokenized stock trading begin?
SEC tokenized stock trading can begin no earlier than mid-October. A venue must publish notice on its website at least 30 calendar days before operating and inform the SEC in writing within one business day, and the order was issued on 17 September.
3. What counts as a tokenized stock under the exemption?
A tokenized stock counts under the exemption only if it gives holders the same rights and privileges as the underlying share, whether the issuer or an unaffiliated third party tokenized it. Synthetic products such as linked securities and tokenized swaps that only track a price are excluded.
4. Why did the Backpack token price rise?
The Backpack token price rose 37.76% to $0.8647 after the SEC’s 17 September order, as traders priced in Backpack Securities’ position as an existing issuer of 1:1 backed tokenized US stocks on Solana. Volume rose 508.6% to $23.55 million.
