SEC CRYPTO TASK FORCE – UPDATE THU, 17 SEP 2026
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Order Granting Temporary Conditional Exemptive Relief, Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934, from the Definition of "Exchange" in Section 3(a)(1) of the Exchange Act for the Use of Certain Distributed Ledger Trading Venues for Tokenized NMS Stocks and from the Definition of "Dealer" in Section 3(a)(5) of the Exchange Act for Certain Liquidity Providers for Tokenized NMS Stocks, and Request for Comment
Fact Sheet: Order Granting Temporary Conditional Exemptive Relief for Trading of Tokenized NMS Stock on Tokenized Securities Venues
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106402; File No. 4-927]
Order Granting Temporary Conditional Exemptive Relief, Pursuant to Section 36(a)(1) of
the Securities Exchange Act of 1934, from the Definition of Exchange in Section 3(a)(1)
of the Exchange Act for the Use of Certain Distributed Ledger Trading Venues for
Tokenized NMS Stocks and from the Definition of Dealer in Section 3(a)(5) of the
Exchange Act for Certain Liquidity Providers for Tokenized NMS Stocks, and Request for
Comment
I. Introduction
temporary, conditional exemptions to facilitate the permissioned trading of tokenized NMS stock
using innovative automated market makers (AMMs) and liquidity pools (together referred to
as AMM Liquidity Pools). Specifically, the Commission hereby issues to Tokenized
Securities Venues (TSVs) an exemption from the definition of exchange in section 3(a)(1)
of the Securities Exchange Act of 1934 (Exchange Act) (TSV Exemption). The
Commission also hereby issues an exemption from the definition of dealer in section 3(a)(5) of
the Exchange Act to certain liquidity providers in an
in the form of tokenized NMS stock (Covered Firm Exemption).
A TSV is an organization, association, or group of persons that brings together buyers
and sellers of Tokenized NMS Stock by: (1) providing one or more
permissioned participants to interact and agree to terms of a trade and (2) setting standards for
persons to access trading on such
2
Tokenized NMS Stock means an NMS stock1 that is (1) a security tokenized2 by, or on behalf
of, the issuer of the underlying NMS stock; or (2) a security tokenized by a third party that is
unaffiliated with the issuer of the underlying NMS stock.
3 Tokenized NMS Stock does not
include securities where a third party issues a crypto asset representing its own security that
provides synthetic exposure to an underlying security, such as a tokenized linked security or a
tokenized security-based swap.4
Over the past several years, advancements in distributed ledger5 technology have
facilitated innovations in trading across non-security crypto assets.
6
These innovations have
enhanced access and efficiencies for buyers and sellers to discover prices, interact, find
counterparties, and execute trades in these assets. Additionally, distributed ledger technology
1 NMS stock means any NMS security other than an option. 17 CFR 242.600(b)(65). NMS security
means any security or class of securities for which transaction reports are collected, processed, and made
available pursuant to an effective transaction reporting plan, or an effective national market system plan for
reporting transactions in listed options. 17 CFR 242.600(b)(64).
2 Tokenization is the process of creating a digital representation of a tangible or intangible asset using
distributed ledger technology. See Statement on
Division of
https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-
statement-tokenized-securities (Statement on
staff statement referenced in this release, is not a rule, regulation, guidance, or statement of the
Commission, and the Commission has neither approved nor disapproved its content. Staff statements have
no legal force or effect: they do not alter or amend applicable law, and they create no new or additional
obligations for any person. See id. at n. 2.
3 See generally id. (stating that tokenized securities generally fall in such categories). See also id. at nn. 5,
11, 13-15 and accompanying text.
4 See id. at n. 16 and accompanying text. In addition, Tokenized NMS Stock eligible for trading on a TSV
does not include rights and warrants.
5 A distributed ledger is technology in which data is shared across a network that creates a public digital
ledger of verified transactions or information among network participants and cryptography is used to link
the data to maintain the integrity of the public ledger and execute other functions. Section 2(8) of the
Guiding and Establishing National Innovation for
(2025) (GENIUS Act).
6 A crypto asset is any digital representation of value that is recorded on a cryptographically secured
distributed ledger. The foregoing definition of crypto asset is identical to the definition of digital asset
in section 2(6) of the GENIUS Act. A non-security crypto asset is a crypto asset that itself is not a
security. See Securities Exchange Act Release No. 11412 (
2026) (Crypto Asset Interpretative Statement).
3
and related applications have led to developments in the tokenization of securities.7
Increasingly, retail investors, institutional investors, and professional securities market
participants are seeking to buy and sell Tokenized NMS Stock on trading venues that use
distributed ledger applications.
8
Such distributed ledger applications include smart contracts9
that automate transactions in crypto assets, such as smart contracts within an AMM Liquidity
Pool. An AMM consists of a smart contract (or smart contracts) that enforces terms of trading,
including setting token prices based on the ratio of the quantities of the assets committed to a
liquidity pool. AMM smart contracts act in tandem with liquidity pool smart contracts. A
liquidity pool is a portfolio of crypto assets that is algorithmically bound and traded based on the
terms of the smart contracts that compose the
Distributed ledger technology and associated applications, including smart contracts, can
be employed in various other ways in connection with crypto assets. For example, smart
contracts can be programmed with permissioning criteria to allow certain participants to access
trading in certain crypto assets, AMM Liquidity Pools, or both. While AMM Liquidity Pools for
non-security crypto assets generally operate on a permissionless basis, certain market
participants have expressed the desire to provide access to trading of Tokenized NMS Stock on a
permissioned basis and using AMM Liquidity Pools selected by such market participants.
Section 36(a)(1) of the Exchange Act grants the Commission the authority to
conditionally or unconditionally exempt any person, security, or transaction . . . from any
7 See, e.g., Statement on
8 A distributed ledger application means any executable software that is deployed to and maintained on a
distributed ledger and composed of source code that is publicly available, including a smart contract or
network of smart contracts.
9 A smart contract is a self-executing contract or program that (A) is stored using distributed ledger
technology and (B) automatically executes or enforces digital asset transactions upon the occurrence of
explicit, pre-determined conditions encoded in the contract or program, without intervention, other than to
provide data, by any entity or natural persons.
4
provision or provisions of [the Exchange Act] or of any rule or regulation thereunder, to the
extent that such exemption is necessary or appropriate in the public interest, and is consistent
with the protection of investors.10
For the reasons discussed below, the Commission finds it appropriate in the public
interest and consistent with the protection of investors to issue a temporary exemption, under
section 36(a)(1) of the Exchange Act, from the definition of exchange to a TSV, subject to
conditions.
Additionally, the Commission finds it appropriate in the public interest and consistent
with the protection of investors to issue a temporary exemption from the definition of dealer
under section 3(a)(5) of the Exchange Act to any liquidity provider in an
that supplies liquidity in the form of Tokenized NMS Stock using proprietary capital and may
also be engaged in additional activities that are indicia of dealing activity, such as quoting
pricing to customers or entering into agreements to provide committed capital (Covered Firm),
subject to conditions.
On
Force to help provide greater clarity on the application of the Federal securities laws to the
crypto asset markets.11
Commissions efforts to draw clear regulatory lines; appropriately distinguish securities from
non-securities; craft tailored disclosure frameworks; provide realistic paths to registration for
10 See 15 U.S.C. 78mm(a)(1).
11
Force.
available at https://www.sec.gov/files/crypto-task-force-designation-letter.pdf. On
Chairman
5
crypto asset offerings and intermediaries subject to the Federal securities laws; and ensure that
investors have the information necessary to make informed investment decisions.12 To this end,
the
on secondary market trading,13 and requested and received written input from,14 and held
meetings with, members of the public.15
In addition, on
policy to support the responsible growth and use of digital assets, blockchain technology, and
related technologies, including by providing regulatory clarity and certainty built on
technology neutral regulations, frameworks that account for emerging technologies, transparent
decision making, and well-defined regulatory boundaries.16 Pursuant to the executive order, in
Strengthening American Leadership in Digital Financial Technology that, among other things,
provides a framework for regulatory reforms relating to crypto asset markets.17 In connection
with the release of the PWG Report, Chairman
Commission-wide initiative to modernize rules and regulations under the Federal securities laws
12
13
14
https://www.sec.gov/about/crypto-task-force/crypto-task-force-written-input.
15
https://www.sec.gov/about/crypto-task-force/crypto-task-force-meetings.
16 Exec. Order No. 14,178 (Strengthening American Leadership in Digital Financial Technology), 90 FR
8647 (
17 See
Digital Financial Technology, dated
6
in accordance with the Presidents Working Groups recommendations to enable
financial markets to move onchain.18
This Order is informed by the extensive feedback the Commission and its staff have
received from the public to date, including from the
input, and meetings.19 Some of the feedback addressed various risks and benefits associated
with the trading of tokenized securities using distributed ledger technology and the ability of the
Commissions current regulatory regime to address them.20 Based in part on this feedback, the
Commission has determined to issue temporary exemptions to allow permissioned trading of
Tokenized NMS Stock on a TSV, subject to conditions. Public feedback has informed the
formulation of the exemptions, including the scope, term, and breadth of the exemptions. As
described in detail below, the exemptions are carefully scoped to ensure that they further the
goals of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating
capital formation. The conditions applicable to TSVs, which are tailored to activities that are
akin to activities that currently occur on registered national securities exchanges and alternative
trading systems (ATSs) pursuant to
experience regulating securities trading and are designed to ensure the relief is in the public
interest and consistent with the protection of investors.
Set to expire five years after publication, this Order is intended as an interim, targeted
measure to facilitate the trading of Tokenized NMS Stock using distributed ledger technology,
18 See Chairman
available at https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125.
For purposes of this Order, onchain refers to transactions or data that are processed and recorded directly
on a crypto network, offchain refers to transactions or data that are processed and recorded outside of a
crypto network, and a crypto network is a blockchain or similar distributed ledger technology network.
19 See supra notes 13-15.
20 See id.
7
subject to the limitations and conditions specified herein, while the Commission considers the
need for future rulemaking or other related actions. Although the Commission may determine to
undertake rulemaking in the future, this Order is intended to address the immediate concerns of
market participants seeking to establish a TSV while maintaining appropriate investor
protections and allowing the Commission to proceed in a deliberate manner as it considers
potential regulatory changes or other actions. The Commission anticipates that experience with
the Order, both in the form of public input and the practical application of the exemptions, which
are time-limited and subject to enumerated conditions, will help inform any future Commission
actions in this area, including rulemaking. As an initial step in that process, the Commission
solicits public comment about possible modifications to the exemptive relief provided in this
Order and potential next steps.21 The Commission looks forward to continued public
engagement to help the Commission further assess the efficacy and sufficiency of the temporary
exemptions.
A. Definition of Tokenized Securities Venue
A TSV is defined as an organization, association, or group of persons that brings together
buyers and sellers of Tokenized NMS Stock by: (1) providing one or more AMM Liquidity
Pool(s) for permissioned participants to interact and agree to terms of a trade and (2) setting
standards for persons to access trading on such
First, a TSV can make available for trading only a Tokenized NMS Stock22 that is trading
21 See infra section VI.
22 The Order does not provide an exemption for purposes of the Investment Company Act of 1940
(Investment Company Act). Activities related to tokenized investment companies may raise issues under
the Investment Company Act, such as multi-class issues under section 18 of the Investment Company Act
and the application of section 22(d) and rule 22c-1.
8
in a pair23 with another Tokenized NMS Stock, a non-security crypto asset (e.g., a payment
stablecoin issued by a permitted payment stablecoin issuer),24 or a tokenized money market
fund.
25 Any non-security crypto asset or tokenized money market fund must be directly paired
and traded alongside a Tokenized NMS Stock to be eligible for trading on a TSV. The TSV
Exemption does not limit the type of non-security crypto asset a TSV can pair with a Tokenized
NMS Stock. A TSV will determine which Tokenized NMS Stock, non-security crypto assets,
and tokenized money market funds can trade on a TSV, subject to conditions as discussed herein.
Second, a TSV provides one or more
users and liquidity providers (TSV Participants) to interact and agree to terms of a trade. An
prices of assets offered to users based on the ratio of assets committed by liquidity providers in
the
receive liquidity pool tokens (LP tokens) that are proportionate to the percentage of assets they
have contributed to the liquidity pool.26 A user willing to buy and sell particular assets can
obtain prices and sizes either directly from the
23 A trading pair on a TSV can include two or more legs. Each such leg must be a Tokenized NMS Stock,
non-security crypto asset, or tokenized money market fund.
24 The terms payment stablecoin and permitted payment stablecoin issuer have the meanings set forth in
section 2 of the GENIUS Act. A payment stablecoin does not include a digital asset that is a security, as
defined in section 2 of the Securities Act of 1933 (Securities Act), section 3 of the Exchange Act, or
section 2 of the Investment Company Act. See section 2(22) of the GENIUS Act. Payment stablecoins
issued by a permitted payment stablecoin issuer categorically will not be securities by operation of statute
after the effective date of the GENIUS Act, which is the date that is the earlier of 18 months after its date of
enactment (
stablecoin regulators (as such term is defined in section 2(25) of the GENIUS Act) issue any final
regulations implementing the GENIUS Act. See sections 17 and 20 of the GENIUS Act. This Order does
not provide any interpretation as to whether TSVs are, or could be, digital asset service providers, as the
term is defined in the GENIUS Act. See section 2(7) of the GENIUS Act.
25 Money market funds are a type of fund registered under the Investment Company Act and regulated
pursuant to Rule 2a-7 under the Investment Company Act.
26 See PWG Report at 23, n. 61.
9
functionality.27 As users trade against offered prices derived from liquidity providers assets, or
as liquidity providers add or remove their assets from the
contract rebalances the price of the assets offered for trading in the
Generally, thereafter, asset allocation among liquidity providers is updated and the value that the
LP token represents will fluctuate based on the proportion of assets in the pool. Liquidity
providers normally earn a fee as an incentive for depositing assets in the liquidity pool, which is
paid by users who interact with the liquidity pool.
on the protocol from which they are derived. TSVs can also use distributed ledger applications
in conjunction with AMM Liquidity Pools to, for example, set fees or halt trading. AMM
Liquidity Pools consist of distributed ledger applications that are encoded with non-discretionary
rules under which TSV Participants interact and agree to the terms of a trade for a Tokenized
NMS Stock.
28 A TSV that designates or controls an
location for trading Tokenized NMS Stock provides the
the TSV definition. For example, a TSV provides an
designating the
29
A TSV may also provide an
an
trading a given pair of assets, setting or altering the rules or parameters of the pool, determining
27 The TSV Exemption is limited to activity performed through the functionalities and systems provided by a
TSV.
28 A TSV may consist of various functionalities that operate collectively to bring together buyers and sellers.
If a TSV provides the use of a functionality to enter, display, or agree to terms of a trade on an order (e.g., a
website, browser extension, or other software application), such functionality would be considered part of
the TSV for purposes of the TSV Exemption.
29 A person that solely performs the administrative act of encoding a smart contract to whitelist an AMM
10
the fees for the pool, and/or having the ability to pause trading in the pool.
Third, a TSV sets standards for persons to access trading on an
TSV dictates which person(s) can access trading on the
example, the ability of TSV Participants to enter, display, and receive displayed orders, interact
with counterparties, and agree to terms of a trade.30 A TSV sets standards to allow only
permissioned TSV Participants to access trading and to buy and sell Tokenized NMS Stock on
the TSV. Permissioning access to trading a Tokenized NMS Stock on the TSV can, for example,
help ensure that TSV Participants trading against each other are not subject to economic and
trade sanctions and do not present illicit finance risks. Applicable identification or eligibility
screening processes may be done through, for example, active, offchain management or onchain
protocols.
The permissioning criteria for trading set by a TSV to grant access or limit levels of
access may be enforced using a distributed ledger application in different ways. For example, an
that only certain white-listed or allow-listed crypto asset wallet participant addresses (i.e.,
wallet addresses that meet certain credentialing requirements) gain access to trading in the
TSV.31 Alternatively, a Tokenized NMS Stock could be encoded with criteria to only allow
transfers of the Tokenized NMS Stock to crypto wallet addresses of persons that meet the TSVs
30 Under the TSV Exemption, a TSV is not limited to using only orders and may offer TSV Participants the
use of other trading interest, such as indications of interest or requests for quotes, which are generally nonfirm trading interest. For purposes of the TSV Exemption only, trading interest collectively refers to
orders, quotes, indications of interest, and requests for quotes. For context, other Commission requirements
including Form ATS-N for ATSs that trade NMS stock (NMS Stock ATSs), which was adopted in 2018
apply to both orders and non-firm trading interest. See Form ATS-N, Part II, Item 1 (providing examples
of trading interest including quotes, conditional orders, or indications of interest). See also Securities
Exchange Act Release No. 83663 (
31 If a third-party service provider performs permissioning services, such as verification-related services, for
example, at the direction of or on behalf of the TSV, the TSV, not such third-party service provider, would
be responsible for ensuring that the TSV services comply with the conditions of the TSV Exemption.
11
credentialing requirements.
B. Exemption from the Definition of Exchange and Scope
Today, permissioned AMM Liquidity Pools are unavailable for trading Tokenized NMS
Stock, which may be a result of ambiguity surrounding the regulatory status of a TSV and how a
TSV trading Tokenized NMS Stock could comply with the Federal securities laws. Federal
securities laws and Commission rules today may not fully accommodate the use of a trading
venue that incorporates AMM Liquidity Pools for trading Tokenized NMS Stock without
requiring potentially burdensome changes to its business model. Given the nature of the TSV
business model and the unique characteristics of trading tokenized securities, a TSV may face
substantial challenges as a national securities exchange or ATS for Tokenized NMS Stock under
Regulation NMS.32 For example, as prices on AMM Liquidity Pools are generally set based on
the ratio of the quantities of the assets in a liquidity pool without directly considering external
pricing, a TSV using an
requirements of Rule 611 under Regulation NMS.
33 Additionally, there may be challenges for a
TSV to meet the requirements of Rule 602(a) under Regulation NMS, which requires a national
securities exchange to establish and maintain procedures and mechanisms for collecting and
processing quotation information, including best bids and offers, from its member broker-dealers
and making such information available to vendors; and to establish and maintain procedures for
ascertaining and disclosing to other members of the exchange the identity of the responsible
broker or dealer who made such bid or offer and the quotation size associated with it.34 For
32 17 CFR 242.600-614.
33 17 CFR 242.611(a). On
NMS stocks, the provision regarding locking and crossing quotations for NMS stocks, and certain defined
terms. See Securities Exchange Act Release No. 105655 (
34 17 CFR 242.602(a).
12
example, determining the best bids and offers of a TSV may be challenging where a TSV may be
composed of multiple distinct liquidity pools that contain different pair combinations for a
Tokenized NMS Stock and where a TSV disseminates prices that are based on a particular ratio
of such assets in each pool. Further, a TSV might be encumbered by being required to identify
best bids and offers of a particular broker or dealer given that AMM pricing and asset allocation
among liquidity providers is continually updated based on the proportion of assets in the pool. In
addition, pricing from an
finer increments than the minimum pricing increments required by Rule 612, and compliance
with such rule by, for example, rounding pricing, may have ramifications on AMM pricing and
affect arbitrage.35 In addition to such potential compliance challenges, certain features of
distributed ledger technology, such as the transaction, price movement, and participant
interaction transparency provided by AMMs, may potentially obviate the need for certain
regulations.
Considering questions surrounding the application of securities regulations to a TSV, the
Commission hereby issues, subject to the conditions set forth herein, a temporary exemption
from the definition of exchange to a TSV,
36 finding it necessary and appropriate in the public
35 Depending on the decimal conventions of the blockchain network used for tokenization, a Tokenized NMS
Stock (and its crypto asset pair) could be quoted at a price and volume using six to 18 decimal places. See,
e.g., Decimal Precision,
https://www.tokendecimals.com.
36 An exchange is any organization, association, or group of persons, whether incorporated or
unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together
purchasers and sellers of securities or for otherwise performing with respect to securities the functions
commonly performed by a stock exchange as that term is generally understood, and includes the market
place and the market facilities maintained by such exchange. 15 U.S.C. 78c(a)(1). Exchange Act Rule
3b-16(a) provides a functional test to assess whether a trading platform meets the definition of an exchange
and, if so, triggers the requirement to register as a national securities exchange pursuant to section 5 of the
Exchange Act and comply with the requirements applicable to exchanges. See 17 CFR 240.3b-16(a); 15
U.S.C. 78f. Under Rule 3b-16(a), an organization, association, or group of persons shall be considered to
constitute, maintain, or provide a market place or facilities for bringing together purchasers and sellers of
13
interest and consistent with the protection of investors.
37 TSVs and the use of distributed ledger
technology under this exemption can offer several benefits to various market participants. TSVs
provide another choice of venue for permissioned buyers and sellers to come together to trade
Tokenized NMS Stock. In addition, TSVs offer the potential to benefit investors by enabling
investor self-custody, around-the-clock trading, fractional ownership of shares, and near
instantaneous settlement. Further, TSVs use of distributed ledger technology to permission
access to trading could facilitate investor verification to, for example, help assure investors that
their counterparties are not subject to economic sanctions and may not present elevated moneylaundering risks. TSVs use of distributed ledger technology may also strengthen their controls
by improving auditability and recordkeeping, thereby advancing investor protection and market
integrity. The use of such technology may also lower operating, recordkeeping, and transaction
costs,38 and improve efficiencies.39 Additionally, distributed ledger technology may provide
greater transparency, potentially reducing information asymmetries in furtherance of investor
securities or for otherwise performing with respect to securities the functions commonly performed by a
stock exchange, if such organization, association, or group of persons: (1) brings together the orders for
securities of multiple buyers and sellers; and (2) uses established, non-discretionary methods (whether by
providing a trading facility or by setting rules) under which such orders interact with each other, and the
buyers and sellers entering such orders agree to the terms of a trade. 17 CFR 240.3b-16(a).
37 Because the evaluation of whether an organization, association, or group of persons is an exchange depends
on facts and circumstances, no presumption that a TSV is an exchange shall arise on the basis of reliance on
the TSV Exemption.
38 For example, a TSVs use of distributed ledger technology may enable proxy communications with
company shareholders at a lower cost than is otherwise available today.
39 See, e.g.,
Automated
https://ssrn.com/abstract=4247283 (Since traders in [centralized exchanges] must be matched with one
another to trade, an incomplete contract may occur, where one party decides to renege on the exchange at
the last minute. This is not possible with AMMs because they eliminate the matching of two parties.
Instead of an order book, AMMs are smart contracts, which are agreements built from code that
automatically run when certain conditions are met. They allow users to create, hold, and trade digital
assets, and can solve the incomplete contract problem with their automatic fulfillment. Once a trader
makes an acceptable buy or sell offer to an AMM it is immediately executed; therefore, there is no
opportunity for a party to leave the contract unfulfilled.).
14
protection.
Section 11A(a)(2) of the Exchange Act directs the Commission, having due regard for the
public interest, the protection of investors, and the maintenance of fair and orderly markets, to
facilitate the establishment of a national market system for securities (which may include
subsystems for particular types of securities with unique trading characteristics).
40 Pursuant to
the TSV Exemption, TSVs will make available Tokenized NMS Stock for trading using AMM
Liquidity Pools, which generally do not directly consider external pricing or executions. As
discussed above, a TSV could not comply with the requirements of Regulation NMS41 without
significant modifications to its trading model, which may adversely impact TSV Participants.
Given that we are exempting TSVs from the definition of exchange, a TSV that meets the
conditions of the TSV Exemption would not be considered an exchange for purposes of the
Exchange Act and would not be required to register as a national securities exchange nor operate
under the exemption from such registration available to an
not be considered a trading center or a market center under Regulation NMS,43 and thus the rules
under Regulation NMS applicable to exchanges, ATSs, trading centers, and market centers
would not apply to such TSV.
44 Trading activity conducted through TSVs pursuant to the
conditional and time-limited TSV Exemption will help the Commission evaluate the impact of
trading Tokenized NMS Stock using AMM Liquidity Pools and the TSV trading model on the
national market system and determine whether and how trading activity in Tokenized NMS
40 15 U.S.C. 78k-1(a)(2).
41 17 CFR 242.600-614.
42 See 15 U.S.C. 78e, 15 U.S.C. 78f, and 17 CFR 242.301-304.
43 17 CFR 242.600(b)(106), 17 CFR 242.600(b)(55).
44 See, e.g., 17 CFR 242.605, 17 CFR 242.610, 17 CFR 242.611, 17 CFR 242.612, and 17 CFR 242.613.
15
Stock on TSVs should be integrated into the national market system.
The TSV Exemption does not apply to securities activity conducted outside the TSV.
Such securities activity may be subject to Commission registration requirements, as applicable,
and rules and regulations under the Federal securities laws. An organization, association, or
group of persons that is registered with the Commission for securities activity unrelated to a TSV
could be eligible to operate under the TSV Exemption but must keep any registered activity
separate from the operation of the TSV. For example, a registered entity may operate an
affiliate45 in compliance with the conditions of the TSV Exemption, provided the operation of
the TSV affiliate is kept separate from any registered activity.
This Order does not provide an exemption from any other applicable laws, including but
not limited to the anti-fraud and anti-manipulation provisions of the Federal securities laws, such
as the obligations under section 10(b) of the Exchange Act46 and Rule 10b-5 thereunder.
47 As
set forth in statute and relevant rules, regulations, and judicial decisions thereunder, such Federal
securities law requirements will apply to securities activities performed on a TSV.
48 In addition,
as stated below, the TSV must be a
sanctions programs administered and enforced by the
(OFAC).
45 For purposes of this Order, affiliate shall mean, with respect to a specified person, any person that,
directly or indirectly, controls, is under common control with, or is controlled by, the specified person.
Control is defined for purposes of this Order to mean the power, directly or indirectly, to direct the
management or policies of a TSV, whether through ownership of securities, by contract, or otherwise. The
definitions of affiliate and control are aligned with definitions in rules under the Exchange Act. See 17
CFR 242.300(c) and (f).
46 See 15 U.S.C. 78j(b).
47 See 17 CFR 240.10b-5.
48 This Order also does not relieve a TSV or a TSV Participant from any applicable registration requirements
for securities transactions under the Securities Act.
16
The TSV Exemption cannot be relied upon if the organization, association, or person
within a group that comprises a TSV is subject to a statutory disqualification, as defined in
section 3(a)(39) of the Exchange Act,49 unless that organization, association, or person has been
permitted by the Commission or any relevant self-regulatory organization (SRO), by order,
rule, or otherwise, to continue its membership in or participation with such SRO or its
association with a member of an SRO or other Commission registrant notwithstanding that
organization, association, or persons statutory disqualification. Any such organization,
association, or person who has not received such permission from the Commission or the
relevant SRO cannot rely on the TSV Exemption as there is an increased potential for that person
to adversely affect the public interest by, for example, creating an unreasonable risk of harm to
investors or the markets without additional regulatory oversight of such person.
Finally, TSV Participants, which include users and liquidity providers, may consist of a
variety of market participants, such as retail investors (i.e., natural persons), institutional
investors, or registered entities such as broker-dealers. As a wide range of market participants
may desire increased investor choice, including the ability to trade Tokenized NMS Stock on a
TSV,50 it is in the public interest not to limit the types of participants that may trade on TSVs
under the TSV Exemption. The TSV Exemption does not apply to nor address the regulatory or
registration status of securities activities performed by TSV Participants. Depending on their
securities activities, TSV Participants may be subject to
as applicable, and rules and regulations under the Federal securities laws, including the rules of
49 See 15 U.S.C. 78c(a)(39).
50 See PWG Report at 18-19 (discussing the types of market participants that use digital assets).
17
any SRO of which they are a member and anti-money laundering/countering the financing of
terrorism (AML/CFT) compliance requirements.
A TSV must comply with all of the conditions set forth herein.51 The Commission
welcomes feedback regarding the application of the TSV Exemption and related conditions to
particular facts and circumstances. Staff will be available to answer questions and may publish
responses to frequently asked questions, as needed.
II. Conditions of the TSV Exemption
The exchange regulatory framework is designed to promote fairness, efficiency, and
transparency by applying requirements rooted in investor protections and fair and orderly market
principles. As discussed above, pursuant to section 36(a)(1) of the Exchange Act,52 the
Commission is granting a temporary exemption to TSVs from the definition of an exchange,
subject to the conditions set forth herein.
The conditions of the TSV Exemption are designed to mitigate risks and challenges that
might arise from a TSV performing exchange activities outside the protections offered by the
exchange regulatory framework and the national market system. A TSV that meets the
conditions of the TSV Exemption would not be subject to the exchange regulatory framework
and therefore would not be subject to the same books and records, examinations, and other
oversight requirements applicable to national securities exchanges and ATSs. Without
appropriate conditions, the TSV Exemption could introduce certain risks or challenges that may
otherwise be addressed by rules applicable to a national securities exchange or an ATS. For
instance, TSVs could provide TSV Participants differing levels of transparency regarding, for
51 See infra section II.
52 See 15 U.S.C. 78mm(a)(1).
18
example, permissioning, fees, and trading services, which could put some TSV Participants at an
informational disadvantage. More generally, the use of distributed ledger technology could
present cybersecurity and manipulation risks that, if not disclosed, could go unknown to TSV
Participants.
53 In addition, fair and orderly markets could be impeded if, in the absence of a
requirement to stop trading, a TSV continues to trade a Tokenized NMS Stock in the event of a
stoppage of trading in the underlying security on the primary listing exchange. The conditions
attendant to this Order are designed to address these types of risks and challenges, facilitate
transparency and fair and orderly markets, and ensure that the TSV Exemption is in the public
interest and consistent with the protection of investors.
A. TSV Distributed Ledger Applications
To ensure transparency, distributed ledger applications (i.e., smart contracts) used by a
TSV must be auditable, public, and deployed on a public, permissionless distributed ledger.54
Permissionless generally means that anyone can read or write to the distributed ledger without
authorization.55 Requiring distributed ledger applications to be deployed on a public,
permissionless distributed ledger will provide information that could help TSV Participants
understand how their trades are effected on a TSV.
In addition, requiring that the distributed ledger application be auditable, public, and
53 See PWG Report at 38 (stating that, similar to traditional markets, digital asset markets face risks from
fraud, manipulation, and illicit conduct, and that [s]mart contracts may introduce certain risks due to
potential coding errors, inadequate testing or auditing of code, or security vulnerabilities that can be
exploited, leading to unauthorized transfers or loss of funds). See also
Hasbrouck, and
Research Policy, Volume 55, Issue 3 (2026) (discussing types of front-running that can occur on AMMs).
54 TSVs are welcome to engage with Commission staff on questions regarding whether the distributed ledger
on which their distributed ledger applications are deployed satisfies the requirements of this condition. The
Commission encourages market participants, including TSVs that may not meet one or more of the
conditions of the TSV Exemption, to engage with the Commission staff on whether additional relief from
any requirement of the federal securities laws is necessary, or the conditions should be otherwise modified.
55 A permissioned
19
deployed on a public, permissionless distributed ledger will enhance TSV transparency, support
market integrity, and reduce systemic and operational risk by empowering participants and third
parties to audit and report vulnerabilities, as well as help TSV Participants better assess the risks
of trading on a particular TSV.
B.
To be eligible for the TSV Exemption, a TSV must be a
are required to comply with economic and trade sanctions programs administered and
enforced by the OFAC, including, but not limited to, the prohibition from engaging in
transactions with persons on the Specially Designated Nationals and Blocked Persons
(SDN) List and the requirement to block property of SDNs that are in the
possession or control.57 Requiring a TSV to be a
OFAC prohibitions and requirements as a
actors accessing the
security or foreign policy.
C. Public Notice
To qualify for the TSV Exemption, at least 30 calendar days before operating, a TSV
must publish a copy of a notice (Notice) prominently on its publicly available website that
56 A
of
in
(ITSR)); 31 CFR 598.318 (Foreign Narcotics Kingpin Sanctions Regulations); 31 CFR 591.312 (
Sanctions Regulations).
57 All
regardless of where they are located, all individuals and entities within
incorporated entities and their foreign branches. Basic Information on OFAC and Sanctions, available at
https://ofac.treasury.gov/faqs/11. See also 31 CFR 500-599.
20
includes the information described below.
58 Such Notice must be written in plain English and
presented in a clear, concise, and understandable manner. Within one business day of the
publication of the Notice, the TSV must provide the Commission written notice at
tradingandmarkets@sec.gov that it intends to operate pursuant to the TSV Exemption, including
the means for contacting the TSV (e.g., an email address and phone number) and the location of
the Notice (e.g., website URL). Such Notice will help inform market participants and the
Commission about when the TSV begins to operate.
59
A TSV must, in the same form and location as the initial Notice, publish a revised Notice:
(1) within five business days to disclose that it has commenced or ceased making any Tokenized
NMS Stock available for trading, paused or resumed trading in connection with the volume
thresholds under the TSV Exemption, or received a timely Notice of Issuer Objection;
60 (2) 20
calendar days in advance of any material change to the operations of the TSV or to the
disclosures in the Notice; (3) no later than 30 calendar days following the end of any calendar
quarter to describe any non-material change to the operations of the TSV or to the disclosures in
the Notice; and (4) within five business days of the discovery of any materially inaccurate or
incomplete information in the Notice, including in any previous revisions to the Notice.
61
Pursuant to the TSV Exemption, a TSV must provide the Commission written notice
within one business day of publishing any revised Notice on its website. The TSV must
58 See infra section III. With respect to all notices required by conditions of the TSV Exemption, if a TSV
comprises a group of persons, one person from that group can be designated to provide notice on behalf of
all such persons.
59 See infra section III.
60 See infra sections II.D, II.F.
61 Each revision to the Notice must indicate which of these categories the change that is being made falls
under, and if the change has not yet been made, the date such change will go into effect.
21
maintain all versions of its Notice on its website.62
Revised Notices will provide market participants and the Commission with current
information about whether the TSV has commenced, ceased, paused, or resumed trading in a
Tokenized NMS Stock; material changes to the TSV operations and Notice disclosures that are
forthcoming; and non-material changes that have been made to the operations of the TSV or its
Notice disclosures. By providing advance notice of material changes, the revised Notice will
allow market participants to protect their interests and consider whether the use of the TSV, as
modified, would be consistent with their trading objectives. Furthermore, requiring a revised
Notice to correct any materially inaccurate or incomplete information in the Notice will help
ensure the disclosure of accurate information to market participants that rely on the Notice
disclosures.
D. Issuer Notice and Notice of Issuer Objection
Before making available for trading a Tokenized NMS Stock that is tokenized by a
third party unaffiliated with the issuer of the underlying NMS stock, a TSV must provide
written notice to the issuer of the underlying NMS stock (Issuer Notice).
63 Trading of a
Tokenized NMS Stock on the TSV may not commence until at least 30 calendar days from the
date when the issuer receives the Issuer Notice.64
If the issuer provides, on or prior to the 30th calendar day following receipt of the
Issuer Notice, written notice to the TSV that it objects to a Tokenized NMS Stock that was
62 The TSV may identify the changes in a marked document or redline to help market participants and the
Commission easily review changes it is making in any revision.
63 Issuer Notice must be sent to the physical or email address for the issuers principal executive offices listed
on the cover page of the issuers Exchange Act reports. Issuer Notice must include the TSVs current and
accurate contact information for the issuer to provide any notice of its objection.
64 A TSV can obtain confirmation of whether and when an issuer received an Issuer Notice by, for example,
requesting a return receipt/proof of delivery or a receipt notification depending on whether the Issuer
Notice was sent to the issuers physical or email address.
22
tokenized by a third party unaffiliated with the issuer being made available for trading on the
TSV (Notice of Issuer Objection), the TSV cannot make such Tokenized NMS Stock
available for trading on the TSV. Within five business days, the TSV must amend the public
Notice65 to inform the public that it has received the Notice of Issuer Objection.
An issuers ability to object to the trading of a Tokenized NMS Stock that was
tokenized by a third party unaffiliated with the issuer on a TSV will enable the issuer of the
underlying NMS stock to consider the balance of potential benefits and risks accompanying
trading of its Tokenized NMS Stock on a TSV. For example, an issuer of the underlying
NMS stock may be concerned about the risk of maintaining its shareholder register related to
onchain transfers or the potential price dislocation or adverse effects on the price of the
underlying NMS stock, particularly given that prices disseminated by an
are most likely based only on the ratio of the quantities of assets in that liquidity pool.
A TSV operating under the TSV Exemption that fails to provide Issuer Notice, or makes
available for trading the Tokenized NMS Stock of an issuer that has delivered a Notice of Issuer
Objection to the TSV in the manner set forth above, would not meet the conditions of the TSV
Exemption with respect to trading such Tokenized NMS Stock.
E. No Primary Issuance and Rights of the Holders of the Tokenized NMS Stock
Traded
All offers and sales of Tokenized NMS Stock under the TSV Exemption must be
registered under the Securities Act or conducted pursuant to an exemption from the registration
requirements of the Securities Act. No primary issuance or initial offerings of securities are
permitted on a TSV under the TSV Exemption.
65 See infra section III.j.
23
A TSV must verify that the Tokenized NMS Stock made available for trading on the TSV
provides holders the same rights and privileges as does traditional NMS stock of an equivalent
class. A Tokenized NMS Stock would be deemed to provide the same rights and privileges as
does traditional NMS stock if, among other things, it conveys the same interest in the company
that holders of the underlying NMS stock have, a right to receive the same dividends that the
company issues to holders of the underlying NMS stock, a right to exercise the same voting
rights that holders of the underlying NMS stock may exercise, and a right to receive the same
share of the residual assets of the company upon liquidation as holders of the underlying NMS
stock receive. For example, regardless of the mechanism used to pass through any voting rights
of the underlying NMS stock, a TSV can only make available for trading an NMS stock
tokenized by a third party that is unaffiliated with the issuer of the underlying NMS stock if the
third party distributes or otherwise makes available to holders of the Tokenized NMS Stock any
related proxy materials or other issuer communications at no cost to the issuer or the
shareholders.
F. Limitations on Number of Symbols and Volume of Tokenized NMS Stock
Traded
Tokenized NMS Stock traded on a TSV under the TSV Exemption is subject to
limitations on the number of symbols and volume traded. Tokenized NMS Stock is divided into
two tiers: Tier 1 (Tier 1 Tokenized NMS Stock) and Tier 2 (Tier 2 Tokenized NMS Stock).
Tier 1 and Tier 2 Tokenized NMS Stock comprise the NMS stocks in Tier 1 and Tier 2,
respectively, of the National Market System Plan to Address Extraordinary Market Volatility
24
(Limit Up-Limit Down Plan or LULD Plan).66
Tier 1 Tokenized NMS Stock traded on a TSV under the TSV Exemption cannot exceed
75 symbols traded and 0.25 percent of the average daily share volume during the prior month in
the relevant NMS stock as reported by an effective transaction reporting plan.67 Tier 2
Tokenized NMS Stock traded on a TSV under the TSV Exemption cannot exceed 250 symbols
traded and 2.5 percent of the average daily share volume during the prior month in the relevant
NMS stock as reported by an effective transaction reporting plan. The percentage of the average
daily share volume during the prior month for a given security shall be calculated using the
average daily share volume of a given Tokenized NMS Stock traded on the TSV as the
numerator, and the average daily share volume of the NMS stock (as reported by an effective
transaction reporting plan) as the denominator.68 When calculating volume for purposes of
compliance with the TSV Exemption, a TSV must aggregate its trading volume with that of its
affiliated TSVs for a given Tokenized NMS Stock. Similarly, when calculating the number of
symbols traded for purposes of compliance with the TSV Exemption, the TSV must aggregate its
66 The Commission approved, on a pilot basis, the LULD Plan in 2012. See Securities Exchange Act Release
No. 67090 (
Rule Changes as Modified by Amendments No 1, Relating to Trading Halts Due to Extraordinary Market
Volatility). The Commission approved the LULD Plan on a permanent basis in 2019.
Exchange Act Release No. 85623 (
subsequent amendments to the LULD Plan. See, e.g., Securities Exchange Act Release No. 103845 (Sept.
3, 2025), 90 FR 43254 (
67 [A]s reported by an effective transaction reporting plan means as reported by the Consolidated Tape
Association Plan/Consolidated Quotation Plan (CTA/CQ Plans) and the
Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction
Information for
(UTP Plan) for inclusion in the securities information processor (SIP). These include data from various
market centers, including national securities exchanges, FINRA, and broker-dealers.
68 NMS stocks are, by definition, securities for which transaction reports are collected, processed, and made
available pursuant to an effective transaction reporting plan. See supra note 1.
25
number of symbols traded with the number of symbols traded by its affiliated TSVs.69 This is
intended to help avoid a situation in which businesses are structured into multiple TSVs to avoid
triggering the volume and symbol limitations.
As noted above, the Tokenized NMS Stock in Tier 1 and Tier 2 are the NMS stocks in
LULD Plan Tier 1 and Tier 2. The NMS stock in Tier 1 of the LULD Plan consists of all NMS
stocks included in the S&P 500 Index, the Russell 1000 Index, and certain exchange-traded
products (ETPs) that trade over
Tier 2 NMS stock under the LULD Plan is NMS stock that is not Tier 1 NMS stock and is not
rights and warrants.71 LULD Plan Tier 1 NMS stocks have the largest capitalization of all
equities and are generally more liquid and have higher average daily trading volume than those
in Tier 2.72 The LULD Plan has been in place since 2012, and market participants are familiar
with the categorization of LULD Plan Tier 1 and Tier 2 NMS stocks. Using Tier 1 and Tier 2 of
the LULD Plan in the TSV Exemption corresponds with an established standard used for NMS
stocks and provides a commonly understood and publicly available basis for categorizing the
Tokenized NMS Stock offered for trading by a TSV for purposes of applying the TSV
69 For purposes of determining the trade date for the calculation of daily share volume and the number of
symbols, the next trade date will start concurrently with when trades must be reported to the SIP. TSVs
should monitor for amendments to the UTP and CTA/CQ Plans for any changes in the SIPs operating
hours and the definition of a trading day.
70 The LULD Plan Appendix A, Schedule 1 lists the ETPs that are currently eligible for inclusion as a Tier 1
NMS Stock for purposes of the LULD Plan. See https://www.luldplan.com/plans. The LULD Plan
Appendix A, Schedule 1 is generally updated semi-annually. For purposes of the TSV Exemption, Tier 1
Tokenized NMS Stock includes all Tokenized NMS Stock included in the S&P 500 Index, the Russell 1000
Index, and eligible ETPs as provided by the LULD Plan. See id.
71 Tier 2 Tokenized NMS Stock includes all Tokenized NMS Stock other than those in Tier 1.
72 Based on staff analysis of equity consolidated market data feeds for 2025, the daily weighted average
trading volume for LULD Plan Tier 1 NMS stocks and Tier 2 NMS stocks was 3,022,668 shares and
1,207,978 shares, respectively, for the year ending 2025. To calculate the daily averages for the year, staff
first calculated monthly daily averages for each NMS stock in the tiers, and then calculated a daily
weighted average based on the number of trading days in each month. For avoidance of doubt, the TSV
Exemption is using the LULD Plan tiering methodology only to categorize Tokenized NMS Stock; the TSV
Exemption does not in any way alter or modify, or propose to alter or modify, the LULD Plan.
26
Exemptions volume limitations.
73
Different limits for Tier 1 and Tier 2 Tokenized NMS Stock are designed to better
calibrate the trading limits to the types of securities within each tier. As average daily trading
volume limits can more easily be exceeded for less liquid securities, Tier 2 Tokenized NMS
Stock is subject to higher volume limits under the TSV Exemption than is Tier 1 Tokenized
NMS Stock. Separate trading percentage limits for Tier 1 and Tier 2 Tokenized NMS Stock,
rather than a single threshold applicable to all Tokenized NMS Stock, are designed to better
calibrate the characteristics of stocks that trade in each tier. Because there are also more LULD
Plan Tier 2 securities than in LULD Plan Tier 1, it is appropriate to set a higher limit on the
number of symbols that can be Tier 2 Tokenized NMS Stock. Furthermore, separate limits on
the number of symbols traded for Tier 1 and Tier 2 Tokenized NMS Stock incentivize TSVs to
make available for trading Tokenized NMS Stocks that are not only the most liquid securities.
Exceeding the volume limit in any Tokenized NMS Stock will, depending on the
circumstances, cause a TSV to not meet the conditions of the TSV Exemption with respect to
trading such Tokenized NMS Stock and require the TSV to pause trading in the applicable
Tokenized NMS Stock for three months. The Commission recognizes that a TSV may
inadvertently exceed a volume threshold, for example, due to a miscalculation in either a
numerator or denominator. The first time a TSV exceeds a volume threshold in a Tokenized
NMS Stock, it will not be required to take any action, other than to ensure that it does not exceed
the volume thresholds going forward. As TSVs are likely new to trading Tokenized NMS Stock,
73 The NMS stock that comprises Tier 1 and Tier 2 of the LULD Plan are specified in Appendix A to the
LULD Plan, which is publicly available on the LULD Plan website. See https://www.luldplan.com/plans.
For purposes of designing the TSV Exemption, the Commission used the NMS stocks in Tier 1 and Tier 2
of the LULD Plan as the model for Tier 1 and Tier 2 Tokenized NMS Stock. Because the LULD Plan
excludes rights and warrants from LULD Tier 1 and Tier 2, Tokenized NMS Stock for purposes of the TSV
Exemption excludes rights and warrants.
27
a stepped compliance approach will allow TSVs to become acclimated with complying with the
trading limitations and will not be overly punitive if TSVs initially experience inadvertent errors
coming into compliance.
74
After the first time a TSV exceeds the volume threshold in a given Tokenized NMS
Stock, each time the TSV subsequently exceeds the volume threshold in the applicable
Tokenized NMS Stock, the TSV must immediately pause trading in such Tokenized NMS Stock
for three months.
75 The TSV may resume trading in the same Tokenized NMS Stock three
months from the date the TSV exceeded the volume threshold. During such pause, a TSV may
continue to trade Tokenized NMS Stocks that have not exceeded the thresholds. Upon
approaching a volume threshold but before triggering the threshold, a TSV may choose to pause
trading in a Tokenized NMS Stock to avoid triggering the volume threshold. Each time that it
has paused trading in a Tokenized NMS Stock in connection with the volume threshold, whether
it be TSV-initiated or pursuant to the condition to pause, the TSV must immediately notify its
TSV Participants of the pause in trading through any regular means of communication with its
TSV Participants (e.g., website, software application, or interface)76 and must accordingly amend
its public Notice77 within five business days.
The symbol number and trading volume limitations under the conditions of the TSV
Exemption are designed to mitigate potential risks to the broader markets as TSV Participants
experiment with trading Tokenized NMS Stock on TSVs and as the Commission considers
74 The stepped compliance approach only applies with respect to the volume limitations and not to the
limitations in the number of symbols. A TSV that exceeds the symbol number thresholds would not meet
the conditions of the TSV Exemption.
75 Affiliated TSVs must accordingly pause trading in the same Tokenized NMS Stock.
76 A TSV has flexibility to determine an efficient way to disseminate the information to TSV Participants
shortly after pausing trading in a Tokenized NMS Stock.
77 See infra section III.
28
rulemaking to address the trading of Tokenized NMS Stock. The thresholds of 0.25 percent for
Tier 1 Tokenized NMS Stocks and 2.5 percent of average daily share volume during the prior
month for Tier 2 Tokenized NMS Stocks are designed to mitigate potential disruptions in trading
in the overall market for the NMS stock (whether tokenized or in traditional format) for the
duration of the TSV Exemption. The Commission is mindful of the risk of potential adverse
impacts of trading Tokenized NMS Stocks on TSVs on the broader markets for NMS stocks that
are required to comply with Regulation NMS. In this regard, the prices of Tokenized NMS
Stock trading on a TSV could dislocate from the prices of the NMS stock in traditional format,
particularly given that AMM Liquidity Pools generally use the ratio of the quantities of assets in
the liquidity pool to determine pricing. The trading volume limitations are designed to help limit
the potential impact of any price dislocations between the Tokenized NMS Stock and the NMS
stock in traditional format and any adverse effects on market quality for NMS stocks. Finally,
the thresholds allow TSV Participants to engage in meaningful trading volume in a Tokenized
NMS Stock on a TSV. The conditions to immediately announce a pause on a TSVs website or
via any regular means of communication and to amend its public Notice allow TSV Participants
to adjust their trading strategies in a timely manner.
G. Transaction Transparency
A TSV must make
publicly available in a machine-readable format for all transactions within the past thirty (30)
days. The transaction data must be updated within ten (10) minutes of the occurrence of any
transaction78 and include, at minimum, the following: (i) the symbols for each Tokenized NMS
78 A TSV, for example, could provide a separate data feed of transaction reports (accessible, for example, via
API) or make such information available on a public website or software application. The TSV must
provide pricing and transaction data in
29
Stock and paired asset (non-security crypto asset, tokenized money market fund, or Tokenized
NMS Stock), (ii) the transaction price, (iii) the transaction size, (iv) the transaction time at the
79 and (v) the transaction direction.80 In addition, the TSV must provide
information pertaining to the
share volume,81 and end-of-day size of the
Registered national securities exchanges and ATSs are subject to certain transaction
reporting obligations to facilitate transparency and oversight. With distributed ledger
technology, TSVs may provide transparency that could mitigate some of the risks that national
securities exchange and ATS transaction reporting obligations are assigned to address. The
transaction transparency conditions under the TSV Exemption require that all TSVs provide
certain standard information to be eligible for the exemption. A TSV must make such
transaction data publicly available to market participants at the same time and on the same terms.
Conditioning the TSV Exemption on such transaction data from the TSV being denominated in
the same terms will help reduce information asymmetries and provide market participants with
equivalent data to evaluate the TSV and protect their interests. Further, the condition that
transaction data be denominated in
commonly applied by market participants for converting the value of an asset that is not quoted in
dollars.
79 The transaction time should be reported in UTC time (Coordinated Universal Time), the time standard used
for crypto asset transactions. See UTC Time Definition, Gate, https://www.gate.com/learn/glossary/utctime-definition.
80 For each transaction, the direction shall specify the asset within the pair that is being contributed to the
81 The daily asset pair trading volume is the volume calculated between the time of data publication as
determined by the TSV and the previous 24 hours.
82 The end-of-day size of the
publication as determined by the TSV.
30
Participants with other Commission rules and the Federal securities laws, as applicable.
83
H. Stoppage of Trading
A TSV must stop trading in a Tokenized NMS Stock concurrently with any stoppage of
trading in the underlying NMS stock on the primary listing exchange, which includes a halt or a
suspension. Stoppages in trading in a Tokenized NMS Stock occur for various reasons, such as,
among others, a trading halt in the underlying NMS stock in the event a market-wide circuit
breaker is triggered or pending dissemination of material news or a trading suspension of the
underlying NMS stock by the
Following any stoppage of trading in a Tokenized NMS Stock, a TSV must immediately
notify its TSV Participants of the stoppage through any regular means of communication with its
TSV Participants (e.g., website, software application, or interface).84
Given the speed of trading and interconnected nature of the markets for Tokenized NMS
Stock and the underlying NMS stock, a stoppage of trading at a single entity may quickly create
losses and liability for market participants, including TSV Participants and particularly liquidity
providers who commit assets to the liquidity pool. The condition to immediately publish
stoppages on a TSVs website or via any regular means of communication allows TSV
Participants to adjust their trading strategies in a timely manner. The condition to stop trading a
Tokenized NMS Stock concurrently with any stoppage of trading in the underlying NMS stock
83 For example, FINRA Rule 6110 requires FINRA members to report transactions in NMS stocks, as
defined in Rule 600(b) of SEC Regulation NMS, effected otherwise than on or through a national securities
exchange to FINRA.
84 A TSV has flexibility to determine an efficient way to disseminate the information to TSV Participants
about the stoppage shortly after the stoppage. In addition, the TSV must make and keep current as part of
its books and records, for any stoppage of trading by the TSV, the Tokenized NMS Stock that stopped
trading, reasons for the stoppage, the start time and end time of the stoppage, the reasons for resuming
trading, and the notice(s) it provided to TSV Participants and the public for the stoppage. See infra section
II.L. In the Notice (discussed below), the TSV must describe the circumstances under which it would stop
trading or displaying trading interest, any risk controls, and the circumstances and procedures for resuming
trading, accepting trading interest, or displaying trading interest after a stoppage. See infra section III.cc.
31
on the listing exchange will help prevent material price dislocations that could result from
continuous trading of a Tokenized NMS Stock while the underlying NMS stock is under a
stoppage of trading.
In addition, if the TSV determines on its own accord to stop making available a
Tokenized NMS Stock for trading, the TSV must immediately notify TSV Participants.85 This
will provide TSV Participants, including liquidity providers that have committed assets to the
liquidity pool, with information that will help them determine how and when to exit their
positions.
I. Significant Operational Event
TSVs are dependent on sophisticated technology, which could potentially bring risks of
exposure to cybersecurity events from threat actors intent on doing harm, and also operational
systems problems that can arise inadvertently. To mitigate adverse effects of any such events, a
TSV must immediately notify its TSV Participants,
86 and promptly notify the Commission,
87 of
an event that has a significant impact on the operation of the TSV or on its participants
(significant operational event).
88 One example of such significant operational event would be
85 If the TSV ceases making a Tokenized NMS Stock available for trading for any reason, it also must revise
its Notice within five business days. See supra section II.C.
86 In the context of a significant operational event, the TSV must notify the TSV Participants of the event
upon having a reasonable basis to conclude that the event has occurred. Notice to TSV Participants can be
accomplished various ways, including a TSV making information publicly available on its website or its
public communication channels (e.g., X.com). As part of the books and records conditions of the TSV
Exemption, a TSV must also keep a record of the notice(s) it provided to TSV Participants of the event.
See infra note 96 and accompanying text.
87 The requirement for prompt notification, as opposed to immediate notification, is designed to provide some
limited flexibility to the TSV to keep the Commission apprised of the significant operational event
simultaneously as, or shortly after, the TSV notifies the TSV Participants of the occurrence. The TSV must
provide notification of a significant operational event to the Commission in writing by email at
88 A significant operational event could take various forms. For example, an event is likely to be a
significant operational event if it impacts systems (including systems that support distributed ledger
applications or entering or disseminating trading interest) by limiting or precluding the TSV from
permissioning access or offering trading services to TSV Participants.
32
a known disruption to the systems that support the TSV, such as functionalities relating to
trading, the
would be a known intrusion,
89 such as a system intrusion, that impacts trading or the assets of
TSV Participants or the security of their information.
90
A TSV must remedy any known significant operational events as soon as reasonably
practicable and notify its TSV Participants of the remediation. Notification of potential systems
disruptions, for example, will allow TSV Participants to adjust their trading strategies and, in the
case of a system intrusion that might put TSV Participants assets at risk of loss, take
precautionary steps to limit any damages. If a system used by a TSV is adversely impacted by a
significant operational event, it may disrupt and impede orderly and efficient market operations
of Tokenized NMS Stock and the NMS markets more generally. Notifications will allow the
Commission to monitor the risks posed by systems that are used by the TSVs and facilitate the
Commissions mission of maintaining fair and orderly markets. In addition, such notifications
will inform the Commission as it considers establishing an appropriate regulatory framework to
help ensure the resiliency of Tokenized NMS Stock markets. Appropriate remedial action
following a significant operational event will mitigate potential harm to investors and enhance
market integrity.
J. No Leverage
A TSV cannot engage in financing activities, which are generally not exchange activities,
and are inappropriate for an entity that is not subject to requirements such as capital and margin
89 The term intrusion includes unauthorized external intrusions as well as unauthorized internal personnel
access to the systems and the information residing therein.
90 The notice should provide information about the event, including the nature and the time of the event, the
TSVs systems impacted by the event, and the events impact on TSV Participants and the TSVs market
for Tokenized NMS Stock.
33
rules to help ensure that such activities are conducted in a financially responsible manner. Thus,
a TSV cannot borrow, whether secured or unsecured, securities or non-security crypto assets on
the TSV, and cannot, directly or indirectly, hypothecate or arrange for or permit the
hypothecation of any securities or non-security crypto assets on the TSV. A TSV is not
permitted to extend credit to a TSV Participant for the purpose of purchasing a Tokenized NMS
Stock on the TSV.
K. No Misrepresentations and Public Disclaimer
A TSV cannot make any statementspublic or privateto the effect that it is
registered with the Commission or that the TSVs activities involving Tokenized NMS Stock
and non-security crypto assets or tokenized money market funds used to trade in pairs with
Tokenized NMS Stock have been approved or endorsed by the Commission, or any similar
formulation. The TSV must also affirmatively disclose in its public Notice (discussed below)
that it is not registered with the Commission. This condition will inform market participants that
the TSV is not subject to the investor protection requirements of Commission registration as an
exchange.
A TSV must make and keep current trading records as well as any information related to
compliance with the conditions of the TSV Exemption, including:
a. Information regarding trading interest in Tokenized NMS Stock, including date
and time of receipt, size, and price (denominated in
b. Information about transactions, including date and time of execution, size, nonsecurity crypto assets or tokenized money market funds traded in pairs with a
34
Tokenized NMS Stock, cancellations, modifications, and price (denominated in
c. Information regarding the methods used to verify or screen TSV Participants and
verify the wallet addresses associated with each TSV Participant used to access
the TSV;
d. Fees, rebates, and discounts, and any material sources of compensation to the
TSV related to activities on the TSV;
e. For any stoppage of trading by the TSV, the Tokenized NMS Stock that stopped
trading, reasons for the stoppage, the start time and end time of the stoppage, and
the reasons for resuming trading;
f. The average daily share trading volume of each Tokenized NMS Stock traded on
the TSV;
g. Events that impact the operation of the TSV or the TSV Participants, such as
system intrusions and system disruptions;91 and
h. All notices submitted to the public, Commission, issuers, and TSV Participants in
connection with the TSV Exemption (e.g., public Notice,92 Issuer Notice,
93 notice
of pausing trading in a Tokenized NMS Stock in connection with a volume
91 The TSV must provide immediately to the TSV Participants, and promptly to the Commission, notice of a
significant operational event. See supra section II.I. In its books and records, the TSV must make and
keep current such events it has reported to the Commission. The books and records must also include
details about events that impact the operation of the TSV or the TSV Participants that are not reportable as
significant operational events.
92 See infra section III.
93 See supra section II.D.
35
threshold,
94 notice of a stoppage of trading in a Tokenized NMS Stock,95 notice of
a significant operational event96).
A TSV must preserve all such books and records while the TSV Exemption is effective
and for a period of three years after the end of the TSV Exemption, maintain such books and
records in
the Commission staff in both a human-readable format and a reasonably usable electronic
format97 upon request. A TSV must consent to examinations of its books and records by the
Commission staff at any time, including for ongoing compliance with the conditions of the TSV
Exemption.
98 Under the TSV Exemption, records from a distributed ledger would satisfy such
books and records requirements if they can be readily accessed by the Commission in a humanreadable format and a reasonably usable electronic format.
The books and records requirements will facilitate the Commissions ability to determine
compliance with the conditions of the TSV Exemption. These books and records requirements
are similar to those required of registered national securities exchanges and ATSs and tailored to
the activities of a TSV. The books and records conditions are also intended to provide the
Commission with prompt access to information needed to help determine whether fraudulent or
manipulative activity has occurred and whether additional steps are necessary to halt such
activity.
94 See supra notes 75-77 and accompanying text.
95 See supra note 84 and accompanying text.
96 See supra notes 86-88 and accompanying text.
97 A human-readable format would be a format that can be naturally read by a human, and a reasonably usable
electronic format would be a format that is common and compatible with commonly used systems for
accessing and reading electronic records.
98 See generally section II.
36
III. Information Included in the Public Notice
To operate under the TSV Exemption, the TSV must publish and, as necessary, revise a
public Notice as set forth above.
99 As described herein, the Notice will include information
designed to help market participants understand how to access and trade on a TSV and protect
their interests. In addition, the information will help the Commission oversee securities activities
of the TSV and monitor developments in the trading of Tokenized NMS Stock. Accordingly, the
following information must be in the Notice:
a. Disclaimer: State that: (i) the TSV is not registered with the Commission in any
capacity for the activities performed under the TSV Exemption and the
Commission has not passed upon the merits or accuracy of the disclosures in the
Notice; (ii) the TSV is not subject to the fair access requirements applicable to
registered national securities exchanges and ATSs subject to Rule 301(b)(5) of
Regulation
limitations of access of TSV Participants by the TSV are not subject to
review; and (iii) the TSV is not subject to Regulation NMS.
b. Use of the Exemption: The TSV must acknowledge that its use of the TSV
Exemption is subject to Commission oversight and that operating a TSV in a
99 See supra section II.C.
100 National securities exchanges must maintain standards for access, and provide fair procedures for
disciplining members, denying membership, barring of any person from becoming associated with a
member, and prohibiting or limiting access to services. 15 U.S.C. 78f(b). ATSs that are subject to the fair
access requirements of Rule 301(b)(5) of Regulation ATS are required to establish reasonable written
standards for access to the ATS and apply those standards to all prospective and current subscribers in a fair
and non-discriminatory manner. 17 CFR 242.301(b)(5).
37
manner inconsistent with the TSV Exemption could result in a Commission
enforcement action.
c. Overview of the Tokenized Securities Venue: Describe generally the structure and
organization of the TSV and its products, services, and operations. Describe the
ownership and/or governance structure of the TSV, including both offchain and
onchain governance mechanisms, and provide the name of any affiliated TSV.
Include, as applicable, a description of any governance rights of LP tokens.
d. Non-Exempt Activities: Identify whether the organization, association, group of
persons, or any person within a group that comprises the TSV is registered in any
capacity with the Commission and, if so, provide a summary of the activities that
require such registration with the Commission.
e. TSV Participants: Describe the types of persons who are eligible to access and
participate on the TSV (e.g., retail investors, institutional investors, liquidity
providers, broker-dealers), including the types of persons that can access the TSV
by way of a broker-dealer.
f. Permission Trading Access Eligibility: Describe the criteria or standards used to
grant a person access to the services of the TSV. Describe the procedures for
approving access (e.g., white-listing or permissioning) of potential TSV
Participants or wallet addresses, including, among others, any procedures to
verify a persons identity, and the procedures for providing access based on such
approval. Describe any conditions or circumstances for denying or limiting a
person from accessing TSV services, including for purposes of compliance with
38
economic and trade sanctions programs administered by OFAC and applicable
AML/CFT requirements.
g. Securities, Non-Security Crypto Assets, and Tokenized Money Market Funds
Traded: Identify the Tokenized NMS Stocks and non-security crypto assets and
tokenized money market funds that the TSV makes available for trading in pairs
with Tokenized NMS Stock on the TSV.
101 If applicable, indicate whether the
TSV has paused trading in a Tokenized NMS Stock in connection with the
limitations on the volume traded.
102
h. Tokenization of Securities: Describe the Tokenized NMS Stock traded, including
whether they are tokenized by or on behalf of the issuers of the underlying NMS
stock, or are tokenized by third parties unaffiliated with the issuers of the
underlying NMS stock, and the processes used for tokenizing the Tokenized NMS
Stock. Describe any procedures the TSV uses to evaluate the legal status,
technical soundness, and operational integrity of each Tokenized NMS Stock it
makes available for trading, and the distributed ledger system on which that
security is issued and transferred.
101 By including in the Notice disclosure of Tokenized NMS Stock that is tokenized by a third party
unaffiliated with the issuer, the TSV is representing that it has provided Issuer Notice pursuant to section
II.D of this Order.
102 See supra notes 75-76 and accompanying text.
39
i. Tokenization: Describe the steps (e.g., audits, certifications, attestations) the TSV
has taken to verify that the Tokenized NMS Stock provides holders the same
rights and privileges as does traditional NMS stock of an equivalent class.103
j. Notice of Issuer Objection: Identify any issuer of an NMS stock underlying a
Tokenized NMS Stock that has provided a timely Notice of Issuer Objection to
trading the Tokenized NMS Stock.
104
k. Tokenization by the TSV or its Affiliates: State whether the organization,
association, group of persons, or any person within a group of persons that
comprises the TSV, the TSVs affiliates, or both, issued or tokenized any
Tokenized NMS Stock that is made available for trading on the TSV and identify
any such Tokenized NMS Stock. Describe any differences in treatment between
Tokenized NMS Stock that is issued or tokenized by any such person and any
other Tokenized NMS Stock made available for trading on the TSV.
l. Trading Activities of the TSV and Its Affiliates: State whether the organization,
association, group of persons, or any person within a group of persons that
comprises the TSV, the TSVs affiliates, or both, can directly or indirectly display
or enter trading interest on the TSV and, if so, state the capacity in which the
TSV, its affiliates, or both, display or enter trading interest into the TSV as a TSV
Participant (e.g., as a user or as a liquidity provider). For example, a TSV should
state whether any organization, association, group of persons, or person within a
103 See supra section II.E for criteria for when a Tokenized NMS Stock would be deemed to provide the same
rights and privileges as the underlying NMS stock.
104 See supra section II.D.
40
group of persons comprising the TSV that is an issuer of Tokenized NMS Stock
that is, or will be, available for trading on the TSV, can directly or indirectly
display or enter trading interest on the TSV and the capacity in which it will
engage in this activity.
m. Differences in Treatment of TSV Participants: Describe any standards, policies,
and procedures the TSV uses to differentiate among TSV Participants. Identify
and describe any differences in treatment between or among TSV Participants
(including any organization, association, group of persons, or any person within a
group of persons that comprises the TSV and/or the TSVs affiliates that display
or enter trading interest on the TSV). For example, identify and describe
differences with respect to access, entry or display of trading interest, onchain or
offchain trading procedures, market data, and fees.
n. Distributed Ledger Technology: Describe distributed ledger applications and
networks of distributed ledger applications used by the TSV including the
distributed ledger on which such applications are deployed and any cryptographic
protocols employed to verify transactions on the distributed ledger; the smart
contract addresses of distributed ledger applications; any use of protocols and
applications (e.g., user interfaces, wallets, aggregators, solvers, relayers); and
whether those protocols and applications are provided by the TSV, by related
parties, or third parties, or a combination thereof. Explain whether the distributed
ledger applications are interoperable with third-party service providers. Describe
whether and how TSV Participants can access the TSV via custom integrations or
direct interaction with smart contracts. Describe any circumstances under which
41
the distributed ledger applications used by the TSV can be upgraded, modified,
suspended, overridden, or ceased, the persons (whether unilaterally or in
combination) that can upgrade, modify, suspend, override, or cease the distributed
ledger applications used by the TSV, and the methods for upgrading, modifying,
suspending, overriding, or ceasing the distributed ledger application. Provide the
names of any entities and/or the roles of persons permitted to upgrade, modify,
suspend, override, or cease each distributed ledger application.
o. Entry of Trading Interest: Describe any procedures and functionality made
available by the TSV for entering and interacting with trading interest in
Tokenized NMS Stock and information solicited from TSV Participants (e.g.,
slippage tolerance, assets available to trade, price and quantity parameters).
Describe the methods by which transactions are approved, confirmed, or verified
on the relevant distributed ledger. In addition, describe procedures governing
price and size parameters, including, but not limited to, minimum or maximum
trade size, any daily trade limits, and any messages or flags provided to users.
p. AMM Liquidity Pool Trading Procedures: Describe any procedures for creating,
modifying, accessing, and funding liquidity pools provided by the TSV. Describe
procedures for purchasing and selling Tokenized NMS Stock using an AMM
among and between TSV Participants and trading in Tokenized NMS Stocks,
including pricing, such as pricing models or curves (e.g., x*y=k), priority,
42
ranking, order types, trading rules, allocation, and execution, as applicable.
105
Describe any procedures for using any features that the TSV offers to allow
liquidity pool customization; the applicability of the customization (e.g., the terms
available to customize, including fees, and where in a trades lifecycle it may be
implemented); any permissioning required to use such customization features or
customized liquidity pools; and procedures for addressing any requests made by
users to alter or permit additional customizable settings.
q. Offchain Trading Procedures: Describe any offchain functionality used by the
TSV to facilitate trading on the TSV, how and where in the lifecycle of a trade
such offchain functionality is used, and whether, and how, TSV Participants
access the offchain functionality to support their use of the TSV.
r. Hours of Operations: State the hours of operations of the TSV, including whether
the TSV offers trading on a 24/7 basis.
s. Use of Market Data: Describe whether, and if so, how, the TSV uses or integrates
external market data, such as with oracles.106
providers to the TSV for market data and describe the sources of any such market
data. Describe the purposes of the market data (e.g., providing safeguards during
periods of volatility or preventing manipulation) and how oracles are used by or
on the TSV.
105 To the extent that the TSV relies on a third-party protocol, in addition to a description of such protocol, the
TSV may also include a link to a website of the third party describing such protocol.
106 An oracle is a service that connect[s] external data sources to blockchain networks. This enables smart
contracts to execute onchain agreements based on real world prices and events. PWG Report at 12.
43
t. Display: Describe any display of trading interest, including what is displayed,
when it is displayed, whether it is displayed onchain or offchain, and how such
displayed trading interest can be accessed. Describe any dissemination of
information resulting from a transaction on the TSV, including what information
is disseminated by whom, to whom, when, and how.
u. Fees: Describe the fee structure of the TSV, including any charges, fees, rebates
and discounts and any other forms of compensation and the source of
compensation, including whether (and if so, how much of) fees are shared with
TSV Participants. Include or provide a link to any applicable fee or rebate
schedule. Any relevant formulas or protocols used to determine and/or allocate
fees are responsive. If fees or rebates are individually negotiated with TSV
Participants or imposed in any other non-standardized manner (e.g., applying
exceptions), describe the variables that impact the fees or rebates established.
v. Complaints and Disputes: Describe any procedures for resolving TSV Participant
complaints and execution errors and disputes. If the TSV does not have these
procedures, state so in the Notice.
w. Procedures to Protect TSV Participant Information: Describe any procedures and
safeguards to protect the confidentiality of TSV Participants information,
including information that the TSV considers confidential, which can include any
trading information on associated technology made available by the TSV (e.g.,
wallets). If the TSV does not have such procedures and safeguards, state so in the
Notice. State whether the TSV will share TSV Participant confidential
information and personally identifiable information (PII) with other parties.
44
Describe any policies and procedures designed to address Maximal Extractable
Value (MEV).107 If the TSV does not have such policies and procedures, state
so in the Notice.
x. Systems Safeguards: Describe any procedures related to the capacity, integrity,
resiliency, availability, and security of the TSV, including any offchain or onchain
systems, such as distributed ledger applications, used with the TSV. Such
procedures include, but are not limited to: code review; the types of audits used
(e.g., third-party audits, security audits, SOC 2 audits, code audits, incident audits,
audits of distributed ledger applications, public auditability of the distributed
ledger on which the distributed ledger applications are deployed); pre-trade risk
assessments; post-deployment monitoring; authorization controls; stress tests;
business continuity and disaster recovery plans testing; and any other contingency
or incident response planning. If the TSV does not have such procedures, state so
in the Notice. Identify the entity that performs each of the described functions, to
the extent this information is available.
y. Clearing procedures and arrangements: Describe any procedures or material
arrangements undertaken to facilitate clearance and settlement of transactions on
the TSV, including a description of any requirements applied to TSV Participants
related to such procedures or material arrangements.
107 Sequencing transactions on a blockchain involves multiple actors ultimately aimed at creating a block with
the highest fees to the validators or MEV. See PWG Report at 27. While this process typically leads to
both the most efficient use of block space and the highest fees to the validators, the sequencing of
transactions can be abused in attacks against users (such as front-running) or leveraged to protect users with
price-stabilizing actions (such as back-running). See id.
45
z. Risks: Describe any known material risks to TSV Participants or the integrity of
the TSVs market, such as artificial intelligence exploits or attacks, loss of private
keys, compromised wallets, smart contract coding errors or bugs, access control
failures, reentrancy attacks, denial-of-service attacks, congestion, impermanent
loss, any abusive activity involving MEV (e.g., front-running, back-running,
sandwich attacks), oracle manipulation, network cyber-attacks, or phishing
attacks. Explain any actions the TSV takes to mitigate the risks and compensate
for any losses.
aa. Service Providers: Identify any entities, other than the TSV, that support the
services or functionalities of the TSV and describe their roles and responsibilities
with respect to the TSV. These include, among others, service providers that
perform services related to permissioning subscribers, identifying and mitigating
cyber risk, monitoring trading activity, displaying trading interest, recordkeeping,
and clearance and settlement.
bb. Trading Oversight: Describe any monitoring by the TSV to detect fraudulent or
manipulative trading activity (e.g., spoofing, wash trading, front running, pumpand-dump schemes), illegal trading of Tokenized NMS Stock, and other market
abuses occurring on the TSV. If the TSV does not perform such monitoring, state
that in the Notice.
cc. Stoppage of Trading: Describe the circumstances under which the TSV would
stop trading or displaying trading interest (e.g., a trading halt in the underlying
NMS stock in the event a market-wide circuit breaker is triggered or pending
dissemination of material news, a trading suspension of the underlying NMS
46
stock associated with delisting proceedings or by the
stoppage upon approaching the volume threshold). Describe any risk controls,
including any circuit breakers or reference price bands, and any procedures to
address price volatility or trading involving, for example, corporate actions
occurring when markets for the underlying securities are closed. Describe the
circumstances and procedures for resuming trading, accepting trading interest, or
displaying trading interest after a stoppage.
dd. Exclusive or Predominant Venue for Trading of a Tokenized NMS Stock: Describe
whether the TSV may be the exclusive or predominant trading venue for a
Tokenized NMS Stock (e.g., a Tokenized NMS Stock is encoded to trade
exclusively on the TSV), and if so, describe any potential risks to TSV
Participants associated with the TSV being the exclusive or predominant trading
venue for a Tokenized NMS Stock. For example, such risks may include TSV
Participants being unable to trade the Tokenized NMS Stock on another trading
venue, which may subject TSV Participants to having no choice other than
accepting the terms and conditions, including fees, of the exclusive or
predominant TSV to trade that Tokenized NMS Stock. Describe any procedures
to address such risks, such as, for example, processes to burn or detokenize the
Tokenized NMS Stock.
Transparency has long been a hallmark of the
primary tools used by investors to protect their interests. One of the most important functions
the Commission can perform for investors is to ensure that they have access to the information
they need to protect and further their own interests. National securities exchanges and NMS
47
Stock ATSs make public disclosures about their trading operations and potential conflicts of
interest. These disclosures allow market participants to assess whether to participate on a trading
venue, and if they choose to do so, have the necessary information to carry out their trading
objectives and protect their interests. The disclosures in the Notice are designed for similar
purposes. The information provided by a TSV in its Notice can help TSV Participants, which
may include a wide variety of retail, institutional, and professional market participants, make
informed trading decisions and evaluate their participation in a TSV.
The disclaimer condition requiring that a TSV state in its Notice that it is not registered
with the Commission and that the Commission has not passed upon the merits or accuracy of the
Notice; that the TSV is not subject to any fair access requirements108 and that unfair and
unreasonably discriminatory denials or limitations of access of TSV Participants by the TSV are
not subject to
inform market participants that there are risks involved in participating in a TSV.
Disclosure of the structure and organization of a TSV, its products, services, operations,
affiliates, its governance structure, and whether the organization, association, group of persons,
or any person within a group that comprises the TSV is registered in any capacity with the
Commission, will inform potential TSV Participants in deciding whether to trade on a TSV.
Likewise, disclosing whether LP tokens provide governance rights will inform liquidity
providers in deciding whether to do business on a TSV.
Information in the Notice about permissioned trading access requirements for a TSV,
including the conditions or circumstances for denying or limiting a person from accessing a
service, and the categories of persons eligible to access and participate on the TSV will inform
108 See supra note 100.
48
potential TSV Participants of what they need to do to trade a Tokenized NMS Stock on the TSV,
either as a user or a liquidity provider. Further, it will help market participants better assess
potential counterparties permitted to access the TSV and the risks of trading with such
counterparties on the TSV. Disclosure of the conditions or circumstances for denying or limiting
a person from accessing TSV services, including for purposes of compliance with economic and
trade sanctions programs administered by OFAC and applicable AML/CFT requirements, will
assure market participants that their counterparties do not present elevated money-laundering
risks or are subject to economic sanctions.
Additionally, information in the Notice about the Tokenized NMS Stock and non-security
crypto assets and tokenized money market funds trading in pairs with Tokenized NMS Stock that
are made available for trading on a TSV, including whether the Tokenized NMS Stock is
tokenized by or on behalf of the issuers of the underlying NMS stock or by third parties
unaffiliated with the issuers of the underlying NMS stock, and the steps that the TSV has taken
to verify that the Tokenized NMS Stock provides holders with the same rights and privileges as
does traditional NMS stock of an equivalent class, is designed to help TSV Participants fully
understand the features of such assets. Disclosure of the procedures used by a TSV to evaluate
the legal status, technical soundness, and operational integrity of the Tokenized NMS Stock it
makes available for trading, and the distributed ledger system on which that security is issued
and transferred, should inform potential TSV Participants in deciding whether to trade in the
Tokenized NMS Stock on the TSV. Information regarding Notices of Issuer Objection will
provide TSV Participants with notice of Tokenized NMS Stock that the TSV may not make
available for trading.
49
Describing a TSVs fundamental operational information, such as the distributed ledger
technology used by a TSV, its use of offchain functionality and market data, AMM Liquidity
Pool trading procedures, its business hours, its procedures for entering trading interest and for
trading, procedures related to stoppages of trading, and any differences in treatment among TSV
Participants will allow market participants to understand how the TSV operates and how they
can effect their trading strategies on the TSV. Describing the TSVs procedures or material
arrangements to facilitate clearance and settlement and the requirements applied to its TSV
Participants related to such procedures or material arrangements should provide useful
information for market participants considering whether to trade on the TSV, such as when
trades will settle. Information in the Notice about how a TSV displays trading interest will allow
TSV Participants to readily decide to act on a price and size of trading interest disseminated from
an
Disclosure in the Notice of the distributed ledger technology used, including any
protocols and applications such as user interfaces, wallets, aggregators, solvers, or relayers, and
the providers of those protocols and applications, and the circumstances and the methods under
which the distributed ledger applications used by the TSV can be upgraded, modified,
suspended, overridden, or ceased, including the persons permitted to perform such actions, will
help provide market participants with reasonable expectations regarding how the distributed
ledger applications used by the TSV operate and if and how they can be changed.
Information in the Notice describing the handling of TSV Participant confidential
information and PII will allow market participants to weigh the potential risks of participating in
a TSV and protect their interests. For example, describing if or how a TSV protects TSV
Participant information from unauthorized access, theft, and other threats and intrusions should
50
inform a potential TSV Participants decision whether to use a TSV. Likewise, whether a TSV
shares TSV Participant confidential information with other parties is important to potential TSV
Participants. Additionally, disclosing how a TSV addresses MEV will inform TSV Participants
about how their transaction information may be used in a way that adversely impacts the price
they receive from trading on the TSV.
Disclosure in the Notice of material risks, including those related to the security of the
smart contracts, impermanent loss, abusive activity involving MEV, oracle manipulation, and
others, and how a TSV mitigates or addresses such risks, will help market participants determine
whether to trade on a TSV and what, if any, additional security or loss mitigation measures TSV
Participants should implement with respect to their use of the TSV. Disclosure of the TSVs
oversight of trading activity in Tokenized NMS Stock is also designed to help potential TSV
Participants decide whether to participate on a TSV. Additionally, disclosure of whether a TSV
may become the exclusive or predominant trading venue providing access to trade its Tokenized
NMS Stockand if so, the associated risks109 and any procedures used to address those risks
will inform potential TSV Participants of the risks of trading on such venue and whether those
risks are mitigated, helping them to decide whether to trade on a TSV.
Furthermore, the interests of a TSV and/or its affiliates may compete against the interests
of TSV Participants. These competing interests may give rise to conflicts of interest for the TSV
and its affiliates, or potential leakage of TSV Participants confidential trading information.
Information about trading participation by the TSV, its affiliates, or both on the TSV, the
services provided by the TSV, interoperability with third-party service providers, fees and
109 For example, if a TSV is the exclusive venue providing access to a particular Tokenized NMS Stock and
that TSV had to cease all trading in that Tokenized NMS Stock, then holders of the Tokenized NMS Stock
would have limited options to liquidate their holdings.
51
sources of compensation, tokenization by the TSV or its affiliates, and governance will help TSV
Participants understand potential conflicts of interest that may impact their trading on the TSV
and assess the potential for information leakage.
The Notice requirements regarding the disclosure of system safeguards used by a TSV
will aid potential TSV Participants in evaluating the integrity and security of a TSV. TSV
Participants will directly interact with their TSV so the use of such safeguards by a TSV can help
assure TSV Participants that they can trade safely and reliably on the TSV. For example, a
TSVs code review procedures can assure TSV Participants that the code is checked for errors
and security or design flaws. Disclosure of whether and how a TSV conducts post-deployment
monitoring of its smart contracts can inform potential TSV Participants if the TSV surveils
transactions and monitors for and responds to suspicious or abnormal activity and security
incidents (like hacking attempts). The presence of smart contract audits can provide assurances
that the
things, code errors, vulnerabilities, security risks, and compliance with evolving regulatory
requirements, and that problems identified by these audits are remedied.110 The regular testing
of a TSVs business continuity and disaster recovery plans can demonstrate to potential TSV
Participants that the TSV will be able to continue its operations after a significant system
disruption. Disclosures of safeguards such as these examples evidence whether a TSV employs
protections that may prevent or mitigate the severity of systems issues, which could reduce
trading outages or other problems that impact TSV Participants in other ways, such as
110 The PWG Report recommends the following measures to mitigate against smart contract vulnerabilities: (i)
adhere to secure development practices, conduct quality assurance and control of smart contracts prior to
deployment, and employ third-party auditing to reduce risk of software defects; (ii) leverage trusted code
libraries; (iii) monitor for new vulnerabilities; (iv) consider emergency stops and circuit breakers for
unexpected smart contract issues. See PWG Report at 122. To the extent a TSV has adopted these
recommendations, it should be discussed in its Notice.
52
compromising the confidentiality of their data or causing financial harm. Disclosure of the
system safeguards used by a TSV can help potential TSV Participants better evaluate a TSV
when deciding which TSV to use as a trading destination.
Information in the Notice regarding how a TSV handles TSV Participant complaints,
disputes, and execution errors are intended to protect investors by providing transparency into
whether and how a TSV offers any protections and recourse to TSV Participants in the event of
these commonplace incidents. Additionally, this information should inform potential TSV
Participants as they decide whether to participate on a TSV.
The Notice will also aid the Commission in its efforts to protect investors and maintain
fair, orderly, and efficient markets by enabling the Commission to review for compliance with
certain conditions of the TSV Exemption, such as whether the TSV falls under the scope of the
exemption and whether the requirements of the TSV distributed ledger applications are met.
Further, the Notice will provide the Commission with valuable information about developments
in TSVs and in the trading of Tokenized NMS Stock.
IV. Exemption for Covered Firms
Section 3(a)(5) of the Exchange Act defines the term dealer to mean any person
engaged in the business of buying and selling securities . . . for such persons own account
through a broker or otherwise, but excludes a person that buys or sells securities . . . for such
persons own account, either individually or in a fiduciary capacity, but not as a part of a regular
business. This statutory exclusion from the definition of dealer is often referred to as the
trader exception.111 Absent an exception or an exemption, section 15(a)(1) of the Exchange
111 The purpose of the trader exception is to exclude from the definition of dealer members of the public
who buy and sell securities for their own account as ordinary traders. See
Inc., Fed. Sec. L. Rep. (CCH) 95,388 (D.D.C. 1975) (citing Loss, Securities Regulation (2d ed. 1961)).
53
Act makes it unlawful for a dealer to effect any transactions in, or to induce or attempt to
induce the purchase or sale of, any security unless registered with the Commission in accordance
with section 15(b) of the Exchange Act.
Liquidity provision alone does not constitute engaging in dealer activity, and the
Commission anticipates that, absent other indicia of dealer activity, persons acting as liquidity
providers in an
activity. The Commission recognizes, however, that depending on the facts and
circumstances,112 certain liquidity provider activity may raise questions regarding whether it is
dealer activity, as opposed to trader activity, under section 3(a)(5) of the Exchange Act. As an
example, uncertainty may arise for liquidity providers if they were to provide pricing to
customers or assert control over pricing and inventory of committed liquidity to AMM Liquidity
Pools pursuant to agreements, arrangements, or other understandings.
The Commission recognizes that liquidity providers that supply Tokenized NMS Stock
and paired assets to smart contract-based AMM Liquidity Pools and may also engage in
See also 2002 Release ([A] person that is buying securities for its own account may still not be a dealer
because it is not engaged in the business of buying and selling securities for its own account as part of a
regular business); River North, 415 F. Supp. at 859 (traders purchase securities already in the marketplace
and turn a profit from selling them after they appreciate in value); Sodorff, 1992 WL 224082, at *5 (same);
(
that anyone who buys and sells securities not as a part of a regular business is a tradernot a dealer
under the Exchange Act.). See also Definition of Terms in and Specific Exemption for Banks, Savings
Associations, and Savings Banks Under sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of
1934, Exchange Act Release No. 46745 (
person that is buying securities for its own account may still not be a dealer because it is not engaged in
the business of buying and selling securities for its own account as part of a regular business, and that
[t]his exclusion is often referred to as the dealer/trader distinction).
112 See Definition of Terms in and Specific Exemption for Banks, Savings Associations, and Savings Banks
Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Securities Exchange Act
Release No. 47364 (
Specific Exemption for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and
3(a)(5) of the Securities Exchange Act of 1934, Securities Exchange Act Release No. 46745 (
2002), 67 FR 67496, 67499 (
a person meets the definition of a dealer depends upon all of the relevant facts and circumstances)).
54
additional activities carrying indicia of dealing activity, are necessary and integral to a TSVs
core functionality. Absent committed liquidity, the automated pricing and execution
mechanisms of AMMs related to AMM Liquidity Pools cannot operate as designed.
Accordingly, the Commission believes it is necessary or appropriate and consistent with
the public interest and the protection of investors to provide a temporary, conditional exemption
from the definition of dealer in section 3(a)(5) of the Exchange Act to Covered Firms solely
within the limited context of AMM Liquidity Pools operating pursuant to the TSV Exemption.113
The Commission believes that narrowly tailored, temporary exemptive relief is warranted to
facilitate responsible innovation in tokenized securities markets by providing greater legal
certainty while the Commission evaluates the scope of the term dealer more broadly,114 as well
as the application of existing broker-dealer regulatory frameworks to these novel market
structures more specifically.
This section 3(a)(5) exemption is limited in duration and scope and is conditioned on
operational, disclosure, and transparency requirements applicable to the TSV and Covered
Firms.115
The Covered Firm Exemption cannot be relied upon if the Covered Firm or any of its
affiliates are subject to statutory disqualification as defined in section 3(a)(39) of the Exchange
113 See 15 U.S.C. 78o(a)(2) and 15 U.S.C. 78mm.
114 As described in the SECs Spring 2025 Regulatory Flexibility Agenda, the
(Division) is considering recommending that the Commission propose amendments regarding the scope
of, and exceptions from, the term dealer. See Securities Exchange Act Release No. 103337 (
2025), 90 FR 45652 (
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST
¤tPub=true&agencyCode=&showStage=active&agencyCd=3235.
115 Because the evaluation of whether a person is a dealer depends on the facts and circumstances, no
presumption shall arise on the basis of a persons reliance on the Covered Firm Exemption that the person
is a dealer.
55
Act,116 unless the Covered Firm or any of its affiliates has been permitted by the Commission or
any relevant SRO, by rule, order or otherwise, to continue its membership in or participation
with such SRO or its association with a member of the SRO or other Commission registrant
notwithstanding that Covered Firm or affiliates statutory disqualification.117
A. Conditions for the Covered Firm Exemption
As detailed below, the Covered Firm Exemption is subject to conditions designed to
protect investors and maintain market integrity, including requirements relating to liquidity
provider operations, activities, disclosures, and notices. These conditions are designed to
facilitate the operation of the TSVs while preserving the Commissions ability to oversee and
assess the development of these markets. Additionally, the Covered Firm Exemption is
temporary, expiring at the end of five years, running in parallel with the TSV Exemption. TSV
Participants acting as a Covered Firm pursuant to the conditions herein remain subject to the
anti-fraud and anti-manipulation provisions of the federal securities laws.
Exemption, a Covered Firms securities activities must be limited to activities related to the
trading of Tokenized NMS Stock in an
Exemption.
118
Proprietary Accounts. A Covered Firm must provide liquidity through a TSV, engage in
116 15 U.S.C. 78c(a)(39).
117 Any such person who has not received such permission from the Commission or any SRO cannot rely on
the Covered Firm Exemption as there is an increased potential for that person to adversely affect the public
interest by, for example, creating an unreasonable risk of harm to investors or the markets without
additional regulatory oversight of such person as appropriate.
118 Provided that the conditions herein are met, a Covered Firm relying on this Covered Firm Exemption may
engage in the trading of Tokenized NMS Stock on more than one TSV operating pursuant to the TSV
Exemption. In addition, the Covered Firm Exemption does not limit a Covered Firms non-securities
activities, such as activity related to payment stablecoins.
56
such trading activity solely for its own account, and must not hold or custody customer assets.
Maintenance of Records. A Covered Firm must make and retain records relating to: its
ability to maintain sufficient liquid assets to cover potential losses associated with trading
activity (e.g., financial statements); any liquidity supplied in an
agreement, arrangement or understanding with a TSV to provide liquidity, including market
making, services to an
of compensation received for any liquidity provision, including for achieving certain volume
thresholds.
Disclosures. A Covered Firm must prominently disclose on any public-facing website, if
applicable: (1) that it is not registered as a broker-dealer with the Commission, (2) that it may
enter into liquidity provision, including market making, agreements or arrangements with a TSV
to provide liquidity to an
incentives for providing liquidity or achieving certain volume thresholds from a TSV-provided
Notification. A Covered Firm must notify the Commission in writing at
tradingandmarkets@sec.gov of its role as a Covered Firm including: the participants name; a
description of its business model and an overview of its risk controls, as applicable; its
designated regulatory contact; a description of any liquidity provision or market making
agreements, arrangements, or understandings it has entered into; a description of any fees,
tokens, or other incentives it receives for providing liquidity or achieving certain volume
thresholds from a
Covered Firm nor any of its affiliates is subject to statutory disqualification; its consent to
requests for information from Commission staff of the Covered Firms activities; and an
57
acknowledgement that use of the Covered Firm Exemption is subject to Commission oversight
and that operating a Covered Firm in a manner inconsistent with the Covered Firm Exemption
could result in a Commission enforcement action.
V. Duration for the Exemptions
The exemptions are effective from
Commission may modify the length or any other aspect of the exemptions pursuant to its
authority under section 36 of the Exchange Act if it determines that such modification is
necessary or appropriate in the public interest and consistent with the protection of investors.
VI. Solicitation of Comments
The Commission intends to monitor closely the use of the exemptions and whether any
modifications to the exemptions may be necessary. The Commission solicits public comment on
all aspects of the exemptions, including:
1. Should the Commission modify the TSV Exemption in any way? Why or why not?
If so, describe how the TSV Exemption should be modified.
2. Should the TSV Exemption be permanent? If so, what conditions of the TSV
Exemption should TSVs be subject to on a permanent basis? Is the length of the
temporary TSV Exemption appropriate? If not, what should the duration be?
3. How could trading of Tokenized NMS Stock on a TSV potentially impact the
liquidity, pricing, or trading of underlying NMS stock in the broader market and how,
if at all, should the TSV Exemption be potentially modified to account for any such
impact? What effects could transaction reporting within ten minutes of the
occurrence of a transaction and overnight trading have on market quality in
underlying NMS stock, including on the market opening, reopening and closing
58
processes of the exchanges? What, if any, modifications should be made to the TSV
Exemption to account for such potential impacts?
4. Should the TSV Exemption be modified to permit a TSV to trade securities other than
Tokenized NMS Stock? Which types of securities should TSVs be limited to trading
under the TSV Exemption? Should the non-security crypto assets or tokenized
money market funds that are permitted to trade in pairs with Tokenized NMS Stock
on a TSV be limited to certain types of non-security crypto assets or tokenized money
market funds?
5. Should the conditions of the TSV Exemption be modified in any way? Do any of the
conditions pose any challenges for market participants? Please explain.
6. Is the categorization into Tier 1 and Tier 2 Tokenized NMS Stock appropriate for the
limitations on volume and number of symbols for Tokenized NMS Stock? Are the
limitations to trading 75 symbols and 0.25 percent of the average daily share volume
during the prior month in the relevant NMS stock appropriate for Tier 1 Tokenized
NMS Stock? Are the limitations to trading 250 symbols and 2.5 percent of the
average daily share volume for Tier 2 Tokenized NMS Stock during the prior month
in the relevant NMS stock appropriate? Please explain and provide any potential
modifications to the limitations you believe may be appropriate.
7. Are there compliance or operational challenges impeding regulated entities from
being TSV Participants? Should the Commission provide any relief from the
requirements of Regulation NMS under the Exchange Act to TSV Participants that
are registered broker-dealers? Why or why not? If so, please specify the provisions
59
of Regulation NMS from which broker-dealer TSV Participants would need relief and
explain the necessity of such relief.
8. Should the Commission modify the Covered Firm Exemption in any way? Why or
why not? If so, describe how the Covered Firm Exemption should be modified.
9. Should the Covered Firm Exemption be permanent? If so, what conditions of the
exemption should Covered Firms be subject to on a permanent basis? Is the length of
the temporary Covered Firm Exemption appropriate? If not, what should the duration
be?
10. Are the conditions of the Covered Firm Exemption appropriate? Do any of the
conditions, including those relating to the activities of the market participant as well
as the maintenance of records, and disclosures, pose any challenges for market
participants? Please explain.
Electronic Comments:
Use the Commissions internet comment form (https://www.sec.gov/comments/4-
927/order-granting-temporary-conditional-exemptive-relief-pursuant-section-36a1-
securities-exchange-act); or
Send an email to rule-comments@sec.gov. Please include File Number 4-927 on the
subject line.
Paper Comments:
Send paper comments to Secretary,
NE,
All submissions should refer to File Number 4-927. This file number should be included
on the subject line if email is used. To help the Commission process and review your comments
60
more efficiently, please use only one method. The Commission will post all comments on the
Commissions internet website (https://www.sec.gov/rules-regulations/2026/09/4-927).
Persons submitting comments are cautioned that we do not redact or edit personal identifying
information from comment submissions; you should submit only information that you wish to
make available publicly.
VII. Conclusion
It is hereby ORDERED that pursuant to section 36(a)(1) of the Exchange Act that, until
herein shall be exempt from the definition of exchange under section 3(a)(1) of the Exchange
Act and a Covered Firm complying with the conditions set forth herein shall be exempt from
the definition of dealer under section 3(a)(5) of the Exchange Act. The Commission
determines the exemptions set forth above are consistent with the public interest and the
protection of investors and are necessary and appropriate in the public interest, consistent with
section 36(a)(1) of the Exchange Act.
By the Commission.
Deputy Secretary.
-------------
Order Granting Temporary Conditional
Exemptive Relief for Trading of
Tokenized NMS Stock on Tokenized
Securities Venues
Background
Over the past several years, advancements in distributed ledger technology have
facilitated innovations in trading across non-security crypto assets. Increasingly, market
participants are seeking to buy and sell tokenized NMS stock using automated market
maker (AMM) and liquidity pool distributed ledger technology. However, a TSV that
trades tokenized NMS stock may face substantial challenges with complying with the
Federal securities laws without potentially burdensome changes to its business model.
TSVs and the use of distributed ledger technology can offer several benefits to market
participants, including enabling investor self-custody, around-the-clock trading, fractional
ownership of shares, and near instantaneous settlement, while improving efficiencies and
providing greater transparency.
The order granting the exemptions known as the Innovation Exemption allows market
participants to obtain the potential benefits of distributed ledger technology for trading
tokenized NMS stock. Specifically, the order facilitates trading in tokenized NMS stock
using distributed ledger technology while maintaining appropriate investor protections and
fair and orderly market principles as the Commission further considers potential regulatory
changes or other actions.
Highlights of the Order Granting Exemptive Relief
The order facilitates the permissioned trading of tokenized NMS stock using innovative
AMMs and liquidity pools (together referred to as AMM Liquidity Pools) on public,
permissionless blockchain by exempting TSVs from the definition of exchange in the
Exchange Act (TSV Exemption). A TSV is an organization, association, or group of
persons that brings together buyers and sellers in tokenized NMS stock by: (1) providing
one or more
terms of a trade and (2) setting standards for persons to access trading on such AMM
The order grants a five-year, conditional exemption from the definition of exchange in the
Securities Exchange Act of 1934 (Exchange Act) to certain trading venues that provide the
use of automated market makers and liquidity pools and set standards for persons to access
trading to buy and sell tokenized NMS stock (Tokenized Securities Venues or TSVs).
The order also grants a five-year, conditional exemption from the definition of dealer in the
Exchange Act to certain liquidity providers that provide liquidity in tokenized NMS stock and
may also be engaged in additional activities that are indicia of dealing activity, such as quoting
pricing to customers or entering into agreements to provide committed capital.
FACT SHEET | Order Granting Temporary Conditional Exemptive Relief for Trading of Tokenized NMS Stock
on Tokenized Securities Venues
tokenized by, or on behalf of, the issuer of the underlying NMS stock; or (2) a security
tokenized by a third party that is unaffiliated with the issuer of the underlying NMS stock.
Tokenized NMS stock does not include securities where a third party issues a crypto
asset representing its own security that provides synthetic exposure to an underlying
security, such as a tokenized linked security or a tokenized security-based swap.
The order also exempts from the definition of dealer in the Exchange Act any liquidity
provider in an
using proprietary capital, as well as engaging in additional dealer activities, such as quoting
pricing to customers or entering into agreements to provide committed capital (Covered
Firm), subject to conditions (Covered Firm Exemption). Among other things, for the
exemption to be available, a liquidity providers securities activities must be limited to
activities related to the trading of tokenized NMS stock in an
pursuant to the TSV Exemption.
The exemptions are subject to conditions that are carefully scoped to ensure that they
further the goals of protecting investors; maintaining fair, orderly, and efficient markets; and
facilitating capital formation, which include, among others, the following conditions:
Tokenized NMS stock traded on a TSV is subject to limits on the number of
symbols and volume traded;
A TSV must verify that the tokenized NMS stock made available for trading on the
TSV provides holders the same rights and privileges as does traditional NMS stock
of an equivalent class;
Before making available for trading tokenized NMS stock that is tokenized by an
unaffiliated third party, the TSV must provide written notice and an opportunity to
object to the issuer of the underlying NMS stock;
Smart contracts used by a TSV must be auditable, public, and deployed on a
public, permissionless distributed ledger; and
A TSV must provide public notice about its operations, trading activities, and the
trading activities of its affiliates on the TSV.
Whats Next
The order will be published on the SECs website and in the
commencement of trading of any third-party tokenized NMS stock on a TSV, the TSV must
provide to the issuer of the underlying NMS stock a notice and the ability to object to such trading.
Additionally, at least 30 calendar days before operating, a TSV must publish a copy of a notice
prominently on its publicly available website that includes certain information, and within one
business day of publication of the notice, the TSV must provide the Commission written notice
that it intends to operate pursuant to the TSV Exemption.
A Covered Firm operating pursuant to the Covered Firm Exemption must provide written notice to
the Commission of its role as a Covered Firm, and disclose on any public-facing website, if
applicable, certain information.
The order solicits public comment about possible modifications to the exemptive relief and
potential next steps.
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