Nasdaq, the world’s second-largest stock exchange by market capitalization, is seeking regulatory approval from the US securities regulator to list tokenized stocks.
Nasdaq filed a request Monday with the US Securities and Exchange Commission (SEC) asking for a rule change that would allow the company to list tokenized stocks.
The exchange operator specifically asked to amend certain rules, including the definition of a security, to trade tokenized stocks under the same execution and documentation rules as traditional securities, provided the tokenized versions are deemed equivalent.
According to a report by Bloomberg, Nasdaq’s request with the SEC would go beyond a technical rule change as it relates to the foundations of how stocks are issued and settled.
Tokenized assets should be clearly labeled
One of the changes sought by Nasdaq is that tokenized assets should be clearly labeled to ensure that all participants, including those responsible for clearing and settlement, like the Depository Trust Company, properly process these trades.
“A security may be traded in the Nasdaq Market Center in either traditional form (a digital representation of ownership and rights, but without utilizing distributed ledger (‘blockchain’ technology)) or tokenized form (a digital representation of ownership and rights which utilizes blockchain technology,” the company stated in the filing.
Additionally, Nasdaq also said that tokenized assets would have the same priority in which the exchange executes that order as it does with traditional stocks.
If approved, US-regulated exchanges, including Nasdaq, would be authorized to list tokenized shares on their platforms, which could boost liquidity for blockchain-based versions of traditional securities.
Nasdaq steps up against “siloed trading venues”
In the filing, Nasdaq emphasized the importance of putting tokenized securities under the purview of established securities markets players, opposing it to listings on “siloed trading venues,” where investors would have “no consolidated sense of best market-wide prices.”
“Although tokenization technology presents novel capabilities by which to record evidence of securities ownership and transactions, the trading of tokenized securities can, and it must occur largely as Congress prescribed when it enacted and subsequently amended the Act,” the company said, adding:
“Such trading must occur in regulated markets, namely national securities exchanges, alternative trading systems, and at FINRA [Financial Industry Regulatory Authority] regulated broker-dealers.”
Nasdaq also advocated for tokenized securities to be traded “within the context of an interconnected national market system.”
Concerns about Europe
In addition to pushing regulators to bring tokenization under the purview of established market players, Nasdaq expressed concerns about the growing number of offerings providing exposure to US tokenized stocks in Europe.
“A few trading platforms are purporting to offer investors access to tokenized US ‘equities,’ but they are not providing investors with actual shares in US companies,” Nasdaq wrote, adding:
“Instead they are providing investors with digitally tradable rights to traditional digital shares that the platforms themselves purchase and hold in their own accounts. These digital rights do not comprise the full extent of the rights to which owners of traditional digital shares are entitled, including voting rights […]”
Nasdaq’s proposal came amid a growing trend for real-world assets (RWAs) globally, with many platforms choosing to list tokenized versions of US investment products like Tesla shares or exchange-traded funds (ETFs) for users in jurisdictions like Europe.
Related: Boerse Stuttgart unveils pan-European platform for tokenized assets
“The reality is that users in the US already have relatively seamless access to traditional equities like stocks and ETFs through well-established brokerage platforms,” Alchemy Pay’s Ailona Tsik told Cointelegraph in June while commenting on the platform’s partnership with Backed’s equity tokenization platform xStocks.
“Our mission with this product is to bridge the gap for users outside of the US, especially in regions where direct access to such assets has traditionally been limited or unavailable,” the exec said.
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