WASHINGTON
The Securities and Exchange Commission approved a temporary "Innovation Exemption" on Sept. 17, permitting limited trading of tokenized National Market System stocks using onchain automated market makers and liquidity pools.
The decision grants Tokenized Securities Venues temporary relief from classification as an "exchange" under the Securities Exchange Act of 1934, allowing software and pools of capital to facilitate stock trades outside traditional exchange structures.
SEC Commissioner Mark Uyeda said the approach allows the agency to "experiment responsibly, learn, and translate old protections to new contexts." The regulator is treating the initiative as a controlled laboratory to study real trading activity before considering permanent rules.
Uyeda cited historical precedent: money market funds, index funds, and exchange-traded funds all received SEC exemptions before becoming standard financial products.
TSVs operating under the exemption must meet strict conditions: public notice of operations, transaction transparency, coordination for trading stoppages, comprehensive recordkeeping, and robust technology safeguards. Trading volume is capped under existing limit up-limit down tiers to keep the experiment contained.
Dollar-denominated transaction data—price, size, time, and liquidity pool address—must be publicly available at regular intervals. TSVs must also disclose end-of-day liquidity pool sizes and daily trading volumes.
The detailed disclosure requirements give the SEC granular data to evaluate whether the experiment poses risks to market integrity or investor protection.
The exemption extends relief to liquidity providers who commit their own capital to these markets, subject to distinct disclosure and recordkeeping requirements.
The SEC is soliciting public feedback on the exemption, requesting input backed by metrics, case studies, incident analyses, and experiences from both live and test environments. The information will directly shape permanent rules.
