SEC Approves Five-Year Exemption for Tokenized NMS Stock Trading

TLDR:

• The SEC’s five-year exemption lets TSVs trade tokenized NMS stock via permissioned AMM pools.
• Tokenized shares traded on a TSV must carry the same rights as traditional NMS stock does.
• Liquidity providers in AMM pools also get temporary relief from dealer registration rules.
• The exemption expires in five years, and the SEC is now seeking public comment on the order.

The five-year exemption granted by the U.S. Securities and Exchange Commission lets select venues trade tokenized NMS stock.

The order, issued September 17, 2026, exempts these venues from the Exchange Act’s exchange definition. It allows trading through permissioned automated market makers and liquidity pools.

The relief expires five years after publication, and the SEC is inviting public comment during that window. Chairman Paul Atkins said the Commission is “taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age.”

Five-Year Window Comes With Trading Conditions

The exemption applies to entities the SEC calls Tokenized Securities Venues, or TSVs. A TSV connects buyers and sellers of tokenized NMS stock through AMM Liquidity Pools.

Permissioned participants use these pools to agree on trade terms directly. The venue also sets its own standards for who may access trading.

Several conditions apply throughout the five-year exemption period to protect investors. Tokenized NMS stocks traded on a TSV face limits on symbols and volume.

A TSV must confirm that tokenized shares carry the same rights as traditional stock. These rights include voting privileges tied to the underlying security.

Before listing a token created by an unaffiliated issuer, a TSV must send written notice. The issuer then receives an opportunity to object to the proposed listing.

Smart contracts used by the venue must remain auditable, public, and permissionless. They must run on a distributed ledger that stays open to outside review.

A TSV must halt trading whenever the underlying stock stops on its primary exchange. This keeps tokenized markets aligned with pauses in traditional trading venues.

Each venue must publish notices covering its operations and trading activity. Affiliate trading activity conducted on the platform must also be disclosed.

Dealer Relief Runs Alongside the Exemption

The order also grants temporary relief from the Exchange Act’s definition of a dealer. This relief applies to liquidity providers supplying tokenized NMS stock within an AMM Liquidity Pool. These providers may use proprietary capital to support ongoing trading activity.

Liquidity providers under this relief may quote pricing directly to customers. They may also enter agreements to supply committed capital to a pool.

Such activities would otherwise trigger dealer registration requirements under existing securities law. The temporary exemption removes that registration burden for the duration of the order.

SEC Division of Trading and Markets Director Jamie Selway called the order “an important milestone for the Commission’s work to open our capital markets for tokenized securities.”

He added that “the division stands ready to work with interested parties seeking to operate a TSV and field questions from investors and market participants.”

SEC confirmed the order took effect immediately, noting the relief covers trading “using innovative permissioned automated market makers and liquidity pools.”

A follow-up post reiterated that “the exemptions are set to expire five years after publication” and that the order “solicits public comment about possible modifications.” The Commission said the order will appear on SEC.gov and in the Federal Register.

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