The US Securities and Exchange Commission (SEC) will allow qualifying tokenised securities venues to trade real US stocks on public blockchains for five years without registering as national securities exchanges.
The framework would permit shares to be represented and traded through smart contracts and liquidity pools, creating a regulated route for blockchain-based trading while placing strict limits on how the system operates.
Only tokenised securities that retain the rights attached to conventional shares will qualify. That includes voting rights, dividend entitlements and other rights held by traditional stock investors.
Products that only mirror the price of a company’s shares, without representing the underlying stock and its associated rights, will not be covered by the arrangement. Those synthetic products are excluded from the SEC’s proposed pathway.
The initiative will also restrict the amount of trading that can take place and limit the number of securities that may be listed. Access to the venues must be permissioned, meaning participation will not be open without authorisation.
The software supporting the system must be made public and capable of being audited. That requirement is intended to allow the technology behind tokenised trading to be examined openly.
Companies will retain control over whether their shares can be tokenised by outside parties. Issuers will be able to veto third parties seeking to create tokenised versions of their stock.
The SEC’s approach therefore combines blockchain-based trading with controls over market access, volume, listings and the rights of companies whose shares are represented. While the venues would not need to register as national securities exchanges during the five-year period, their operations would remain subject to the conditions set out in the framework.
