Nasdaq Seeks SEC Approval To Trade Tokenized Stocks, Bringing Blockchain To The Equities Market

Nasdaq (NDAQ) on Monday filed a proposal with the Securities and Exchange Commission (SEC) to let investors trade tokenized versions of stocks on its exchange, in addition to the traditional digitized format. 

The proposal is currently under review by the SEC. If the filing is approved, it would allow traders to choose between the traditional route for trading equities and doing so on-chain with tokenized stocks. 

Nasdaq’s stock edged 0.3% higher in pre-market trade. On Stocktwits, retail sentiment around the shares remained in the ‘bearish’ zone.

"The Exchange believes the markets can use tokenization while continuing to provide the benefits and protections of the national market system," the exchange operator said in its filing. It suggested that the tokenized assets should be traded "in regulated markets, namely national securities exchanges, alternative trading systems, and at [Financial Industry Regulatory Authority] regulated broker-dealers."

The request for the rule change has come in after Robinhood (HOOD) announced that it was rolling out tokenized stocks and exchange-traded funds (ETFs) on its platform in July, but only for its users in Europe. This included shares of private companies like Elon Musk’s SpaceX and Sam Altman-led OpenAI.

The move was not well-received by all, especially Altman, but it did spark excitement for blockchain-enabled assets. Tokenization is the process of turning something into a digital token and securing it to the blockchain. The assumption is that tokenization will allow for faster trading and settlement. It would also allow for assets to be traded outside of normal exchange hours. 

The request also comes after SEC Chairman Paul Atkins made tokenization a priority within ‘Project Crypto’ to develop a framework for digital securities markets, earlier this year.

Nasdaq emphasized that tokenized assets would be treated the same as conventional stock trades, with clearing and settlement running through the Depository Trust Co. (DTC). “The mere fact that an order contains tokenized securities or indicates a preference to clear and settle securities in token form shall not affect the priority in which the Exchange executes that order,” Nasdaq wrote in its SEC filing. Under the proposal, stock trades would continue to be logged digitally, but also registered on a blockchain ledger, which the exchange said offers “novel capabilities by which to record evidence of securities ownership and transactions.”

It also clarified that investors in the tokenized shares would retain full ownership rights, including voting and liquidation rights. Nasdaq added that tokenized trading in equities and ETFs would begin once DTC finalizes the necessary infrastructure and post-trade settlement services.

Read also: Dogecoin Leads Top Crypto Tokens As Bitcoin Recovers To $112K

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