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SEC Grants Temporary Exemptions for Tokenized Stock Trading on Distributed Ledger Venues

The Securities and Exchange Commission has issued conditional relief allowing permissioned automated market maker platforms to trade tokenized NMS stocks without registering as exchanges or dealers.

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What the Order Does

The Securities and Exchange Commission issued, on September 17, 2026, a temporary and conditional exemptive order designed to facilitate the permissioned trading of tokenized NMS stock using automated market makers (AMMs) and liquidity pools — referred to collectively in the order as "AMM Liquidity Pools." The order was published in the Federal Register on September 22, 2026, as Release No. 34-106402.

The order grants two distinct exemptions. First, it issues to entities designated as "Tokenized Securities Venues" (TSVs) an exemption from the definition of "exchange" under Section 3(a)(1) of the Securities Exchange Act of 1934, referred to in the order as the "TSV Exemption." Second, it issues to certain liquidity providers in an AMM Liquidity Pool — those that supply liquidity in the form of tokenized NMS stock — an exemption from the definition of "dealer" under Section 3(a)(5) of the Exchange Act, referred to as the "Covered Firm Exemption."

Scope and Definitions

The order defines a TSV as an organization, association, or group of persons that brings together buyers and sellers of Tokenized NMS Stock by: (1) providing one or more AMM Liquidity Pools for permissioned participants to interact and agree to terms of a trade, and (2) setting standards for persons to access trading on such AMM Liquidity Pools.

"Tokenized NMS Stock," as defined in the order, means an NMS stock that is either (1) a security tokenized by, or on behalf of, the issuer of the underlying NMS stock, or (2) a security tokenized by a third party that is unaffiliated with the issuer of the underlying NMS stock. The order explicitly excludes from this definition securities where a third party issues a crypto asset representing its own security that provides synthetic exposure to an underlying security, such as a tokenized linked security or a tokenized security-based swap. Rights and warrants are also excluded from Tokenized NMS Stock eligible for trading on a TSV.

The order defines "NMS stock" by reference to 17 CFR 242.600(b)(65) — any NMS security other than an option — and defines "NMS security" by reference to 17 CFR 242.600(b)(64) as any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan or an effective national market system plan for reporting transactions in listed options.

Background and Rationale

The order states that over the past several years, advancements in distributed ledger technology have facilitated innovations in trading across non-security crypto assets, with those innovations having enhanced access and efficiencies for buyers and sellers to discover prices, interact, find counterparties, and execute trades. The order further notes that distributed ledger technology and related applications have led to developments in the tokenization of securities. The SEC describes tokenization as the process of creating a digital representation of a tangible or intangible asset using distributed ledger technology, citing a January 28, 2026 Statement on Tokenized Securities issued jointly by the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets.

The order also accompanies a request for public comment, inviting input on the framework established by the exemptions.

What to Watch

The order is temporary and conditional in nature; the Commission has requested comment alongside its issuance, indicating that the regulatory framework for tokenized NMS stock trading remains subject to further development. Stakeholders engaged in distributed ledger-based securities trading, AMM Liquidity Pool operations, or NMS stock tokenization should monitor the comment process and any subsequent Commission action under this proceeding (File No. 4-927).

Related

Sources

15 cited

Every hard fact above is grounded in and cited to a primary source record.

  1. The SEC issued the order on September 17, 2026.

    federalregister.gov

  2. The order was published in the Federal Register on September 22, 2026, as Release No. 34-106402, File No. 4-927.

    federalregister.gov

  3. The order grants Tokenized Securities Venues (TSVs) an exemption from the definition of 'exchange' under Section 3(a)(1) of the Securities Exchange Act of 1934, referred to as the TSV Exemption.

    federalregister.gov

  4. A TSV is defined as an organization, association, or group of persons that brings together buyers and sellers of Tokenized NMS Stock by providing one or more AMM Liquidity Pools for permissioned participants to interact and agree to terms of a trade, and by setting standards for persons to access trading on such AMM Liquidity Pools.

    federalregister.gov

  5. Tokenized NMS Stock means an NMS stock that is (1) a security tokenized by, or on behalf of, the issuer of the underlying NMS stock, or (2) a security tokenized by a third party that is unaffiliated with the issuer of the underlying NMS stock.

    federalregister.gov

  6. Tokenized NMS Stock does not include securities where a third party issues a crypto asset representing its own security that provides synthetic exposure to an underlying security, such as a tokenized linked security or a tokenized security-based swap.

    federalregister.gov

  7. Tokenized NMS Stock eligible for trading on a TSV does not include rights and warrants.

    federalregister.gov

  8. NMS stock is defined under 17 CFR 242.600(b)(65) as any NMS security other than an option.

    federalregister.gov

  9. NMS security is defined under 17 CFR 242.600(b)(64) as any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan or an effective national market system plan for reporting transactions in listed options.

    federalregister.gov

  10. The order states that over the past several years, advancements in distributed ledger technology have facilitated innovations in trading across non-security crypto assets, enhancing access and efficiencies for buyers and sellers to discover prices, interact, find counterparties, and execute trades.

    federalregister.gov

  11. The order states that distributed ledger technology and related applications have led to developments in the tokenization of securities.

    federalregister.gov

  12. The SEC defines tokenization as the process of creating a digital representation of a tangible or intangible asset using distributed ledger technology.

    federalregister.gov

  13. A Statement on Tokenized Securities was issued jointly by the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, dated January 28, 2026.

    federalregister.gov

  14. The order also includes a request for public comment.

    federalregister.gov

  15. The order grants certain liquidity providers in an AMM Liquidity Pool that supply liquidity in the form of tokenized NMS stock an exemption from the definition of 'dealer' under Section 3(a)(5) of the Exchange Act, referred to as the Covered Firm Exemption.

    federalregister.gov

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