SEC opens a five-year path for onchain stock trading

The US Securities and Exchange Commission on Sept. 17 granted conditional relief for blockchain venues to trade certain tokenized stocks, creating a temporary route for onchain stock trading. The SEC’s announcement calls the venues Tokenized Securities Venues, or TSVs. The order took effect immediately and runs for five years, until Sept. 17, 2031.

How does a tokenized stock trade on a TSV?

A TSV first sets rules for who may trade, then connects permitted participants to one or more automated market maker liquidity pools. A liquidity provider puts assets into a pool. An algorithm uses the pool’s asset ratios to set prices, and buyers and sellers trade against those pools. The mechanism resembles a shared till: participants add assets, and the pool’s rules determine the available price and amount.

The trades use smart contracts deployed on a public, permissionless blockchain. The SEC’s order requires those contracts to be public and auditable. The trading pool itself can still restrict access to verified or credentialed participants. The SEC’s order says eligible trading pairs can combine tokenized stocks with other tokenized stocks, permitted payment stablecoins or tokenized money market funds.

What does the exemption change for venues and shares?

The SEC temporarily exempts qualifying TSVs from the Exchange Act’s definition of an “exchange.” It also grants conditional relief from the “dealer” definition to certain liquidity providers using their own capital in a TSV pool. This gives those venues and providers a path to operate within the order’s conditions; it does not create a general exemption for crypto trading.

A TSV must verify that a tokenized stock gives its holder the same rights and privileges as the equivalent traditional stock. If an unaffiliated third party creates the token, the venue must notify the stock’s issuer in writing and give it a chance to object before listing it. A TSV must also halt tokenized trading when the underlying stock’s primary listing exchange halts trading.

What limits remain on onchain stock trading?

The relief covers only a limited number of stock symbols and trading volumes. The SEC set separate volume thresholds by stock tier, and a venue that exceeds a threshold may have to pause trading in that stock. TSVs must also publish information about their operations and trading activity. The order invites public comment as the commission considers possible changes and further action.

The shift is meaningful because a blockchain venue can now match buyers and sellers of certain tokenized stocks through liquidity pools, under temporary SEC relief. The conditions keep the route narrow: the underlying stock’s rights must carry through, access can be permissioned, and trading remains tied to the traditional market’s halts and limits.

Sources and documents

• SEC’s announcement — sec.gov
• SEC’s order — sec.gov