SEC Facilitates Trading of Certain NMS Stocks

The SEC has released an order1 that grants “temporary, conditional exemptions to facilitate the permissioned trading of tokenized NMS stock using innovative automated market makers . . . and liquidity pools.” Specifically, tokenized securities venues would be exempt from the definition of “exchange” under the Securities Exchange Act of 1934. In the words of SEC Chairman Paul Atkins, this exemption, which is also known as the “Innovation Exemption,” is intended to “bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks.”

The order also contains an exemption for “certain liquidity providers in an AMM Liquidity Pool that supply liquidity in the form of tokenized NMS stock” from the Exchange Act’s definition of a “dealer.”

The exemptions expire five years after the publication of the order (i.e., on September 17, 2031). The SEC will be monitoring how the exemptions are applied and is requesting feedback from the public on possible modifications that may be made to them (the order contains 10 potential questions for respondents to consider).

For more information, see the press release and fact sheet — as well as the statements by SEC Chairman Paul Atkins and SEC Commissioners Mark Uyeda and Hester Peirce — on the SEC’s Web site.