Nasdaq Fast-Tracks Tokenized Stocks SEC Approval

Nasdaq’s digital assets leader, Matt Savarese, has revealed that the exchange is prioritizing its proposal for tokenized stocks and plans to "move as quickly as we can" to secure approval from the SEC.

Key Takeaways

Nasdaq is prioritizing its proposal for tokenized stocks with the aim to secure SEC approval quickly.
The proposed "stock tokens" would retain all shareholder rights and comply with market regulations.
Nasdaq’s strategy is evolutionary, focusing on integrating tokenization without disrupting existing market structures.
Initial tokenization benefits will focus on back-end processing efficiencies and enhanced collateral mobility.
Regulatory collaboration is key to advancing tokenization while maintaining investor protection and transparency.

Nasdaq Fast-Tracks Tokenized Stocks SEC Approval

This proposal aims to enable trading of "stock tokens"—digital versions of publicly traded shares—under the current national market system framework.

In a recent CNBC interview, Savarese reiterated that Nasdaq’s goal is not to disrupt the existing system but to responsibly integrate tokenization with SEC oversight.

“We’re not introducing a new, complex financial product. The stock remains the stock,” he explained, reassuring investors that they would keep full shareholder rights and ownership.

The exchange submitted its rule change application in September. This seeks permission to allow listed equities and exchange-traded products to trade in tokenized formats while ensuring investor protections and execution standards align with traditional securities.

Nasdaq’s Tokenization: An Evolutionary Step

Nasdaq's strategy focuses on preserving the existing market structure while introducing blockchain-based settlement options.

“The rules have been in place for decades, and we have no intention of completely overhauling the whole system,” Savarese clarified, stating that trades would continue to operate through Nasdaq's order book under SEC regulations and national market system supervision.

According to the proposal, tokenized shares would hold the same rights as traditional securities, including voting and dividend rights.

“It’s fully interchangeable between the token and its conventional form,” he noted, indicating that clearing firms and the Depository Trust Company would handle tokenized transactions alongside regular stocks using the same ticker symbols and CUSIP identifiers.

Savarese emphasized Nasdaq's role as “the original innovator” in market infrastructure, comparing tokenization to the transition from paper-based to electronic trading the exchange underwent earlier.

“It’s an evolution, not a revolution,” he stated, underscoring the gradual approach to advancing the ecosystem while prioritizing investor needs.

Enhancing Post-Trade Efficiency and Collateral Mobility

Savarese detailed a phased timeline for realizing the benefits of tokenization, with early advantages concentrating on improvements in back-end processing.

Immediate efficiencies would arise from tokenized settlement, although the exchange intends to maintain smooth integration with existing member firm systems before emphasizing faster settlement speeds.

In addition to settlement improvements, better collateral mobility is expected to emerge as a significant mid-term benefit.

“Being able to allocate equity into a collateral pool and allow assets to move instantly will aid in achieving capital efficiency,” Savarese explained. He noted that this would remove the necessity to overcollateralize positions.

In the long term, applications may extend to corporate actions, proxy voting, and programmable smart contract capabilities.

“You begin to tap into the programmable aspects that blockchain and smart contracts are designed for,” he elaborated.

Nasdaq’s acquisition of Calypso as part of its Adenza deal equips the exchange with what Savarese described as “the gold standard” in collateral management software, now integrated with blockchain technology to facilitate the movement of tokenized assets.

Regulatory Path: A Key Focus

Following its September filing, Nasdaq has entered a public comment period, which will conclude by mid-October.

“We’ll push as fast as we can with the SEC to advance this initiative,” Savarese said, expressing optimism that tokenization is a key topic for the current administration.

While he refrained from providing specific timelines for approval, due to various uncertainties like recent government disruptions, he emphasized Nasdaq's collaborative strategy.

“We’re not trying to disrupt the system. We want everyone to join us in this transition and bring tokenization into the mainstream responsibly, led by investor interests,” he asserted.

SEC Chair Paul Atkins has instructed the agency to establish clear guidelines for digital asset classification.

Simultaneously, Commissioner Hester Peirce recently affirmed the regulator's openness to collaborate with tokenization firms, provided they maintain transparency regarding asset details.

Nasdaq's filing coincides with the global tokenized stock market, which has exceeded $465 million in market value, with monthly transfer volumes reportedly increasing by more than 280%, according to RWA.xyz data.

Nasdaq Fast-Tracks Tokenized Stocks SEC Approval

Despite this growth, resistance remains from traditional financial institutions.

The World Federation of Exchanges has called on regulators to enhance oversight of tokenized equities, warning that blockchain-based assets may "mimic" traditional stocks without offering the shareholder rights or market protections typical of regulated securities.