jakiro
Author: Aki
Nasdaq recently submitted a landmark proposal to the U.S. Securities and Exchange Commission (SEC), seeking to modify exchange rules to allow trading tokenized securities on its market.This means that US stocks such as Apple and Amazon listed on Nasdaq are expected to be listed on Nasdaq in the form of blockchain tokens in the future.If the proposal is approved, it will be the first case where major U.S. stock exchanges allow tokenized stock trading, and also marks the first time that the core market of Wall Street has introduced blockchain technology on a large scale.This article will systematically sort out the key points of the Nasdaq proposal, the motivations behind it, and the huge market changes that may be brought about by this move, and what impact will the “US stock market” track and related sectors, and look forward to the potential development path of this innovative measure.
Proposal points: Detailed explanation of the modification of Nasdaq trading rules
The 19b-4 rule modification file submitted to the SEC this time is to allow member brokers and investors to choose to list the Nasdaq market.Stock and Exchange Trading Products (ETP)Trading and settlement in tokenized form.Specifically, the following rules revisions are included:
1. Expand the definition of “securities” and add tokenized form
The proposal first modified the exchange’s definition of “securities”, emphasizing that “tokenized securities are still securities”, rejecting the “island-style” trading model that is decoupled from the main market and expanding it into two forms.
Traditional form:Refers to the digital accounting representation of asset ownership and equity, but does not use distributed ledgers or blockchain technology.That is, the electronic accounting form currently adopted by the US stock market, which is essentially consistent with the electronic registration of paper securities.
Tokenization form:Refers to the digital representation of asset ownership and equity, which uses blockchain (distributed ledger) technology for recording and transfer.In short, it means issuing the equity corresponding to the stock on the blockchain and expressing it in the form of tokens.
Nasdaq clearly stipulates that a tokenized securities are considered to be equivalent securities only when they have completely homogenized characteristics with their corresponding traditional securities and can be traded in the same order book together with the traditional form.This means that the token must meet: it is interchangeable with traditional stocks, share the same CUSIP code (security unified identification code), and grant holders the same substantive rights and privileges as traditional stocks — — — — — — — — — — — — — — — equity income requirements for the company, dividend rights, voting rights, and the remaining asset allocation rights during liquidation of the company.If the tokenization form fails to grant the same rights as the original stock (no voting rights, no shareholder equity, etc.), or does not have the same CUSIP as the original stock, the exchange will not treat it as equivalent to traditional securities, but rather as a different product, such as a derivative or American depositary receipt (ADR).
Because of this high standard, most so-called “tokenized stocks” on the market, such as Robinhood “Stock Tokens” and Xstocks, actually do not meet the above conditions. At best, they are shadow tokens that map stock prices, do not represent real equity, and are usually not granted voting rights; dividends are mostly reflected in reinvestment or cash equivalents; legal relations mostly point to SPVs, issuance carriers rather than listed companies themselves, and most products are mainly cash redemption, and directly “change back to the original stock” will be subject to custody and compliance restrictions.
2. Unified matching, diversion settlement: transaction and clearing mechanism
Nasdaq plans to fully integrate tokenized securities with traditional securities at the trading level.The proposal stipulates that as long as the token version of a certain stock meets the above homogeneity requirements, the same order book will be shared with traditional stocks and transaction matching will be conducted according to the same order matching and priority rules.In other words, in the eyes of the exchange’s matchmaking engine, there is no difference between tokenized and non-tokenized buying and selling instructions, and they are treated equally.In fact, Nasdaq emphasized: “In the trading stage, there is no difference between the two, and in essence, the transaction execution process is completely consistent.”
The difference is reflected in the settlement level.After the transaction is completed, the current US stock transaction is usually passedAmerican Deposit Trust Company (DTC)Complete clearing settlement.After introducing the tokenization form, Nasdaq will give transaction participants a new option.The settlement can be used in the form of tokens.The specific process is:
When a broker enters an order into the exchange, he or she can choose to indicate that the order wants to be cleared and settled in tokens.If the order is traded and marked as token settlement, Nasdaq will pass the clearing instructions for the transaction to DTC, and DTC will perform the transfer of the securities through the blockchain in the backend.
DTC will complete the process of registering stock ownership as on-chain tokens based on its own business rules and systems (the blockchain settlement platform it is developing).The entire process is transparent and insensitive to front-end investors. The transaction is still matched by Nasdaq, but the liquidation and settlement have changed from traditional electronic bookkeeping to blockchain registration, and the stocks are finally held on-chain addresses in the form of tokens.
It is worth noting that Nasdaq’s move is not to start a new market, but to rely on the existing market infrastructure to introduce blockchain as the underlying recording technology, but does not change the front-end trading mechanism. Therefore, the prices of traditional stocks and token stocks are unified in the trading stage, the market depth and liquidity are shared, and information transparency and risk control monitoring are also completely consistent.As Nasdaq said in the document, this plan aims to prevent different versions of tokenized stocks from fighting and breaking liquidity on multiple blockchains, and ensure that the core mechanisms of national market systems such as price discovery and optimal execution are not affected.This will solve the pain points of the previous “tokenized stocks”, namely multi-chain (ETH/SOL, etc.) + multi-market (compliant on-site vs. crypto exchanges/DEX) + regional compliance restrictions, resulting in insufficient liquidity caused by market-making capital and order thin dispersion.
3. Trading time limit: 24/7 trading is not available yet
Since its launch, tokenized stocks have always had problems such as thin periods of US stocks’ closing and high impact costs. This misalignment in trading periods has also caused the problem of insufficient liquidity decoupling from price to a certain extent. Therefore, many investors are concerned about whether tokenized stocks can break through the current trading period restrictions of US stocks and achieve “24/7” all-weather trading?Nasdaq’s proposal gives a cautious answer. At the current stage, tokenized securities can only be traded within the existing trading period and will not extend or break through the trading time. Tokenized stocks cannot be traded outside normal and extended trading hours. They will still follow US stock practices and can only be traded during the regular trading (9:30–16:00) and pre- and after-market sessions from Monday to Friday Eastern Time. Weekend or late night trading is not supported.
4. Implementation path of on-chain settlement
Behind the Nasdaq tokenized stock trading is the core clearing institution in the traditional financial market — ——The American Custody Trust and Clearing Company (DTC).It is worth mentioning that DTC has been exploring DLT clearing in recent years. Its “Project Ion” project is a blockchain-based stock settlement platform aimed at achieving T+0 and even real-time delivery.According to public information, Project Ion was launched in a parallel trial operation environment in 2022, processing settlement instructions for more than 100,000 stock transactions every day. DTC cooperated with enterprise blockchain technology provider R3 to develop the platform, using R3’s Corda distributed ledger software, and built a private license chain as the underlying architecture. This network is a non-public alliance chain.
thusSpeculation, Nasdaq tokenized transactions are more likely to run based on DTC’s licensed chain platform, rather than public chains such as Ethereum that the community has discussed.In this way, DTC can still operate traditional systems as authoritative records in parallel with the new DLT systems to ensure safe and redundant.Therefore, under the Nasdaq solution, on-chain settlement may actually occur in a controlled “consortium chain” environment where nodes are maintained by financial infrastructure operators such as DTC.This ensures transaction privacy, network reliability and regulatory controllability, and also meets Wall Street’s high standards for transaction settlement systems.
The alliance chain allows participants to go through access control, and data privacy and transaction speed are more controllable and meet regulatory requirements.Therefore, it can be foreseen that the records of Nasdaq tokenized stocks will not appear on public blockchain browsers, but will be stored in a distributed ledger jointly maintained by Nasdaq, DTC and related custodians.As for how to deploy specific smart contracts, Nasdaq did not specify in public documents, but it can be seen that Nasdaq does not intend to introduce a completely open token trading environment, but allows blockchain as a “behind-the-scenes technology” to improve efficiency, and front-end trading behavior still occurs within the controlled system.It is just to use blockchain records in accounting methods, that is, investors will hold on-chain records recognized by regulators, rather than crypto tokens that are completely freely circulated from the traditional system.
Why does Nasdaq apply for tokenized securities?
Blockchain has great potential in improving the efficiency of infrastructure in the financial market. Currently, the transaction settlement of US stocks is still T+1 (T+2 in some markets), while blockchain technology can achieve close-real-time (T+0 or even within a few seconds), reducing the retention time of funds and securities, and reducing counterparty risks.In addition, blockchain’s transparent and tamper-free distributed ledgers can provide complete audit trails, reducing reconciliation and manual operational errors.Nasdaq hopes to introduce tokenized settlement to accelerate post-transaction process and reduce the cost of clearing and custody links.It can be said that this is an attempt to innovate the securities settlement mechanism from the underlying technology.Nasdaq said in the document: “Today’s stocks and other securities have evolved from the original paper-based transformation to electronic records, and tokenization is just another way to represent assets by numbers.”By embracing blockchain, the exchange has demonstrated its determination to promote financial technology innovation to avoid lagging behind in the new wave of technology. It is expected that the scale of the asset tokenization market is ushering in explosive growth, and the total market value of global tokenized assets will soar from about US$2.1 trillion in 2024 to approximately US$41.9 trillion in 2032, with an annual compound growth rate of up to 45.8%.
Therefore, investors and issuers have shown strong interest in securities tokenization, which represents a huge emerging market cake.Regulators and market entities in many countries are actively exploring securities on the chain, and the United States cannot lag behind. As a market organizer, Nasdaq hopes to adapt to this trend and provide customers with new trading options, thereby attracting more capital to gather in the US market.Through early layout, Nasdaq can consolidate its competitiveness in the digital asset era, especially in the context of the White House actively promoting crypto asset innovation and creating a digital asset-friendly regulatory environment. It is also necessary to ensure that tokenized securities develop within the compliance framework and prevent market fragmentation.As mentioned above, many tokenized stocks are currently traded on offshore unregulated platforms, lacking investor protection, and different platforms work their own ways, resulting in liquidity fragmentation and market opacity. Nasdaq’s proposal is intended to include these innovations in the mainstream regulatory system, thereby avoiding investors falling into the risk of unregulated by pursuing novel concepts.
Although exchanges will not radically open up various dazzling functions in the short term, in the long run, stock tokenization has opened up space for imagination for financial innovation.For example, stocks can participate in decentralized finance (DeFi) as on-chain collateral, and equity tokens can be programmatically integrated into smart contracts, realize automated dividends, voting, and even building brand new derivatives and index products.These scenarios that are difficult to achieve under the traditional architecture are expected to gradually become possible after tokenization.But it should be noted that Nasdaq’s tokenized securitiesThe trading venue is still on Nasdaq, that is, matchmaking in a compliance and centralized environment, not everyone can trade on the chain anonymously.
Conclusion: Long-term Opportunities and Industry Outlook
Nasdaq’s promotion of tokenized securities trading is undoubtedly a major innovation in the underlying technology of securities trading.It marks a key step forward for traditional financial markets toward the blockchain era.From regulatory approval to technical preparation, this change cannot be achieved overnight. According to Nasdaq’s statement in the application documents, the readiness time for the relevant blockchain settlement infrastructure may be until the end of the third quarter of 2026.Nasdaq expects that assuming the proposal is approved by the SEC and the DTC’s distributed ledger settlement system will be launched by then, U.S. investors are expected to see the first batch of securities transactions delivered in tokens at the end of Q3 2026.
For investors, it is necessary to recognize that this is a long-term theme, the GENIUS bill opens a new era of stablecoin compliance, and the Nasdaq tokenized securities could be the next game-changing milestone.In the next few years, policy promotion and technological milestones related to this topic will continue to become the market focus, raising phased investment opportunities, such as oracles, RWA and other sectors.As Nasdaq management said, innovation should take place within the national market system to protect investors, and should not be left in an unregulated offshore wilderness. As Nasdaq tokenized stocks gradually land, it will unlock greater imagination space for institutional funds to participate in on-chain stocks.
For example, large institutions can obtain real stock tokens through official channels and then invest in DeFi with confidence to earn profits.This is a high-level capital that is difficult to attract at present to shadow token platforms.For ordinary users, it lacks a certain necessity to hold the shadow version of “not enjoying shareholder rights” after sovereign exchanges provide compliant stock tokens.
Although the prospects are bright, we also need to face up to the potential limitations.First, in the early stages, there may be limited areas where ordinary investors can directly benefit.At present, it is quite convenient for American retail investors to trade stocks through securities companies. After Nasdaq tokenization, their transaction costs or thresholds will not be significantly reduced immediately.For non-professional investors, the benefits such as 24/7 trading may not necessarily be expected to fluctuate the stocks for trading 7 days a week and there is no rest time.Smart contracts are inevitably vulnerable or hacking risks. If there is a problem with tokenized stock contracts, it is unknown who will bear the responsibility.In addition, there have been significant price deviations in some overseas unregulated tokenized stock transactions, exposing the problems of insufficient liquidity and potential manipulation.Under the Nasdaq scheme, this kind of deviation is expected to decrease because the tokens are supported by real stocks and traditional market makers participate in pricing.
Nasdaq tokenized stock trading will become a major milestone in the commercial application of blockchain technology.It means that blockchain is no longer limited to the cryptocurrency circle, but is truly entering the core scenario of mainstream finance.From the perspective of industry status, this is an authoritative endorsement of the blockchain and Web3 ecosystem, which will inspire more companies and developers to invest in this field.From the perspective of financial history, this event may be regarded as the starting point for the digital transformation of the traditional securities market, similar to the exchanges’ shift from paper to electronic trading decades ago.For the Web3 community, this is an opportunity to put ideals into reality: concepts such as decentralization and tokenization can only be released with the most value when combined with the real economy.This may not be the most utopian result for purely decentralized idealists, but it has greatly promoted the process of large-scale application of blockchain.
