In a landmark decision for the intersection of traditional finance and blockchain, the US Securities and Exchange Commission (SEC) has authorized a rule change allowing Nasdaq to list certain securities as tokenized assets. Observers view this as a pivotal step toward integrating blockchain technology into mainstream stock exchange infrastructure, potentially reshaping the mechanics of asset trading.
New Era for Tokenized Securities
Under the new regulation, major securities such as shares from the Russell 1000 Index and exchange-traded funds (ETFs) tracking indices like the S&P 500 will now be eligible for trading on Nasdaq in tokenized form. These tokenized securities will be fully interchangeable with their original stocks, maintaining identical identifiers, ticker symbols, and shareholder rights. Investors holding these assets can expect all the standard protections—they remain entitled to vote in shareholder decisions, receive dividends, and share in any residual interests should the company cease operations.
Infrastructure and Control Mechanism
This initiative will be rolled out as a pilot program managed through the Depository Trust Company (DTC), which oversees the clearing and settlement of securities. Market participants can opt to clear trades using the tokenized process by specifying this preference when submitting orders. Transactions that do not meet the criteria for tokenization will continue to be settled using the traditional method. Nasdaq emphasizes that both tokenized and conventional securities will share a single order book, eliminating any distinction in pricing or order priority. Existing trading infrastructure, order types, session practices, and data streams will remain unchanged for the duration of the pilot.
Regulation, Oversight, and Notification Procedures
Both Nasdaq and the Financial Industry Regulatory Authority (FINRA) will supervise tokenized securities using the same datasets and surveillance as for traditional instruments. Nasdaq has committed to announcing which securities will be available as tokens in advance, with at least 30 days’ notice before introducing any new tokenized instrument. The settlement process will continue to adhere to the current T+1 standard, meaning trades are finalized one business day after execution.
In its approval, the SEC stated that the new regulatory framework aligns with legal principles designed to safeguard investors and ensure orderly markets. The commission underscored that both forms of securities—traditional and tokenized—must offer exactly the same rights and privileges to shareholders. This parity is intended to eliminate discrepancies in value or investor protections between the two formats.
Through the pilot, the DTC is able to test blockchain-based asset trading within a strictly controlled, regulated environment, minimizing market risk. The approach allows regulators and market operators to observe the system’s impact without exposing participants to significant disruption.
Additionally, Nasdaq has initiated a partnership with Payward, the parent company of digital asset exchange Kraken. Through this collaboration, tokenized shares representing conventional market assets are set to go live for trading on Payward’s xStocks platform, building a bridge between established securities and blockchain networks.
Nasdaq has indicated that additional tokenization models may be considered in the future, but clarified that any new approach would require separate submissions to the SEC for approval.
The SEC stated that the regulation fulfills all necessary conditions for investor protection and market fairness.
