SEC Issues “Innovation Exemption” to Facilitate the Trading of Tokenized NMS Stock and Request for Comment

The U.S. Securities and Exchange Commission issued an order granting temporary, conditional exemptive relief to entities known as Tokenized Securities Venues (TSVs), removing them from the definition of “exchange” under the Securities Exchange Act of 1934 so they can trade tokenized National Market System (NMS) stocks using permissioned automated market makers and liquidity pools (AMM Liquidity Pools). SEC Chairman Paul S. Atkins highlighted the move as a significant step toward modernizing America’s capital markets by enabling on‑chain trading of certain tokenized stocks, while the agency invites public comment to shape future regulatory actions. The exemption also extends conditionally to liquidity providers within these AMM pools, shielding them from the “dealer” definition for up to five years after publication.

The relief is designed to foster innovation while protecting investors, imposing conditions that require TSVs to set standards for participant access and to operate in a permissioned environment that aligns with public‑interest goals. By allowing TSVs to function outside traditional exchange and dealer classifications, the SEC aims to test a framework for on‑chain secondary trading while it evaluates whether additional regulatory measures are needed. The order explicitly solicits feedback on possible modifications to the exemption and on next steps, signaling that the agency views this as an experimental phase rather than a permanent regulatory shift.

The SEC will publish the order on its website and in the Federal Register, and it will remain in effect for five years unless altered by further rulemaking. Market participants, investors, and interested parties are encouraged to submit comments, which will inform the Commission’s ongoing assessment of how best to integrate tokenized securities into the broader market infrastructure. The agency’s Division of Trading and Markets, led by Jamie Selway, stands ready to engage with entities seeking to operate TSVs and to address questions from investors, indicating a proactive approach to overseeing this emerging trading model.

⚡ Effects Interpreter