The Nasdaq exchange submitted a formal proposal to the U.S. Securities and Exchange Commission (SEC) on Monday, requesting a rule change that would allow for the listing and trading of tokenized stocks. The filing seeks to amend the definition of a security to include a "tokenized form," subjecting these blockchain-based assets to the same regulatory framework and trading rules as traditional shares within the national market system.

• One of the world's largest stock exchanges is making a landmark move to merge blockchain technology with traditional markets.
• Discover the crucial rule change proposal that could redefine what a "security" is in the digital age.
• Nasdaq's warning shot to unregulated European platforms offering synthetic versions of U.S. stocks.

The timing of this proposal is no coincidence. It arrives amid a groundswell of interest in the tokenization of real-world assets (RWAs), a sector that financial leaders believe could grow into a multi-trillion dollar industry. Tokenization is the process of creating a digital representation, or "token," of an asset on a blockchain, which can then be traded, settled, and recorded with greater efficiency. While the concept has gained significant traction in the crypto space, Nasdaq's move is a clear attempt to bring this innovation under the umbrella of regulated finance. The core of the Nasdaq SEC filing argues for evolution, not revolution; it posits that a token is simply a new technological "wrapper" for an old concept, and as such, should be governed by the same time-tested rules that ensure market fairness and integrity.

At the heart of the proposal is the desire to maintain the existing U.S. market structure, which is designed to consolidate trading and provide investors with transparent, market-wide pricing. In its filing, Nasdaq voiced strong opposition to the emergence of "siloed trading venues" for tokenized stocks. The exchange warned that allowing these assets to trade on dozens of isolated, unregulated platforms would lead to a fragmented market, where investors would have "no consolidated sense of best market-wide prices." This would result in poor liquidity, wider price spreads, and ultimately, a worse outcome for the public. Nasdaq is positioning its established, regulated platform as the logical and necessary home for this new asset class, ensuring that innovation does not come at the cost of transparency.

The Nasdaq SEC filing also draws a sharp distinction between the type of direct ownership it proposes and the synthetic products currently being offered on some overseas platforms. The exchange expressed pointed concerns about a growing number of trading venues, particularly in Europe, that claim to offer access to tokenized U.S. equities. Nasdaq clarified that these platforms often are not providing investors with actual shares in U.S. companies. Instead, they sell digitally tradable rights to shares that the platforms themselves hold. This derivative model can strip investors of crucial rights, such as the ability to vote in corporate elections, and introduces significant counterparty risk. This part of the filing serves as a warning shot, signaling Nasdaq's intent to protect the integrity of U.S. securities and assert the primacy of regulated, direct ownership.

This focus on the risks from foreign jurisdictions mirrors the SEC's own heightened vigilance in this area. The regulatory body recently took decisive action by announcing the formation of its own Cross-Border Task Force, a unit dedicated to combating international fraud schemes and enhancing investor protection against threats originating overseas. This parallel focus from both the market operator and the regulator underscores the growing importance of securing U.S. capital markets from a new generation of global threats.

If the SEC approves the rule change, the implications would be profound. It would authorize all U.S.-regulated exchanges, not just Nasdaq, to list tokenized stocks, potentially unlocking a new wave of liquidity and innovation. This could pave the way for future advancements like 24/7 stock trading and more efficient fractional ownership, all while remaining within the SEC's regulatory perimeter. The proposal specifically calls for clear labeling of tokenized assets to ensure all market participants, including clearing and settlement bodies like the Depository Trust Company (DTC), can process them correctly. Furthermore, it guarantees that orders for tokenized stocks would have the same execution priority as traditional shares, ensuring a level playing field. This comprehensive Nasdaq SEC filing is more than a technical request; it's a strategic blueprint for the future of capital markets.

Expert Opinion and Quotes

Nasdaq statement: “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, such trading must occur in regulated markets, namely national securities exchanges, alternative trading systems, and at FINRA [Financial Industry Regulatory Authority] regulated broker-dealers." - Source

FAQs

What did Nasdaq propose to the SEC?
In its Nasdaq SEC filing, the exchange requested a rule change that would allow it to list and trade tokenized stocks—digital representations of securities on a blockchain—under the same rules as traditional stocks.

How would tokenized stocks be different from traditional stocks on Nasdaq?
Functionally, they would trade with the same priority and rules. The key difference is the underlying technology used for record-keeping, with tokenized stocks utilizing a blockchain as a "wrapper" to represent ownership, while traditional stocks use a standard digital representation.

Why is Nasdaq concerned about "siloed trading venues"?
Nasdaq argues that allowing tokenized assets to trade on many small, isolated platforms would fragment the market, making it difficult for investors to find the best price. They advocate for integrating these assets into the existing national market structure to ensure transparency and consolidated liquidity.

What does this mean for the trend of tokenizing real-world assets?
Nasdaq's proposal is a major step toward legitimizing the market for real-world assets (RWAs). If approved, it would create a regulated, high-liquidity venue for trading tokenized securities in the U.S., potentially accelerating the adoption of this technology across the financial industry.