The U.S. Securities and Exchange Commission has granted temporary, conditional relief allowing Tokenized Securities Venues to facilitate permissioned trading of tokenized National Market System stock through automated market makers and liquidity pools on public, permissionless distributed ledgers. The order exempts qualifying venues from the Exchange Act definition of an exchange and certain liquidity providers using proprietary capital from the definition of a dealer. The exemptions expire five years after publication and advance the SEC’s previously signaled focus on establishing a regulatory framework for tokenized securities trading. Trading is subject to limits on symbols and volume, and venues must verify that tokenized shares provide the same rights and privileges as equivalent traditional shares. Venues must use public, auditable smart contracts, halt trading when the underlying stock is halted on its primary listing exchange, disclose specified operational and trading information, and give issuers notice and an opportunity to object before offering stock tokenized by an unaffiliated third party. Synthetic instruments that provide exposure to an underlying security are excluded. Covered liquidity providers must limit their securities activities to tokenized stock trading through a qualifying liquidity pool and notify the SEC. A venue must publish specified notice at least 30 calendar days before beginning operations and notify the SEC within one business day after publication. The order also seeks public comment on potential modifications to the exemptions and further regulatory action for onchain trading.

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