Nasdaq Wins SEC Approval to Trade Tokenized Securities in Pilot Program

Nasdaq’s proposal to trade some shares in tokenized form was received formal approval from the U.S. Securities and Exchange Commission on Wednesday, although the structure would still keep trading and settlement within traditional market rails.

With respect to some securities already listed on the national stock exchange, the changes would start with Russell 1000 stocks and certain index ETFs, requiring tokenized stocks to match their traditional counterparts in terms of rights, symbols and trading priority.

Tokenization is the process of converting a traditional asset, such as a stock or ETF, into a digital asset on a blockchain, linked to the original security that carries the same rights.

Participating brokers can flag an order for tokenized settlement when they enter it, and Nasdaq would pass that instruction to the Depository Trust Company after the trade is executed, the SEC said.

If DTC cannot fulfill the request because the broker or security is not eligible, or because the blockchain or wallet is not compatible, the transaction will be settled in traditional, non-tokenized form.

Declutter has reached out to Nasdaq for comment on when tokenized trading could begin and what still needs to happen before launch.

Same rails, new packaging

Nasdaq has filed proposal in September last year, comparing tokenization to previous market innovations such as decimalization and electronification.

At the time, the exchange argued that existing regulatory structures “mandated by Congress” already apply to tokenized securities regardless of their blockchain properties.

The SEC acknowledged in its approval letter that there were several commenters during the review process questions raised about how Nasdaq’s tokenization model would work.

SIFMA, the premier trade group for the U.S. securities industry, and Cboe Global Markets, one of the largest U.S. exchange operators, focused on the lack of clarity around DTC’s role.

The Digital Chamber, a blockchain policy and advocacy group, argued that the SEC should avoid favoring specific companies or technologies and give issuers more control.

Better Markets, a nonprofit organization focused on financial reform, opposed the proposal due to potential price differentials, regulatory concerns and legal uncertainty.

In late November, major exchanges and market groups urged the SEC to avoid broad exemptions for tokenized securities. warning that looser relief could create uneven rules and new risks around tokenized stocks.

The SEC’s nod to Nasdaq comes as regulators and exchanges demand more structured and coordinated approach to tokenization, although the limits set for Nasdaq suggest that, at least for now, these can only be done through the existing system rather than through a separate location on the chain.

Earlier this year, SEC officials said that tokenized assets are first effects, then technology, it reaffirms its position that placing a security on a blockchain does not change its legal classification under federal law.

Open the door

The approval is important because “it starts to make listed equities more programmable, not just more digital,” Steven Wu, chief operating officer at tokenization engine Clearpool, told me. Declutter.

“The SEC opens the door for these assets to move beyond trading and into broader financial use cases,” Wu said. “The real signal is where this is going. The market structure has already shifted from T+3 to T+1, but the endgame is T+0 and continuous, 24/7 markets.”

The changes introduce “flexibility at the infrastructure layer without disrupting the way markets function today,” he noted, pointing to a longer-term shift toward faster settlement and ultimately to markets that can operate closer to real time.

“Tokenized stocks point toward a model where price development is no longer limited by traditional market hours,” he said.

For institutional players, the SEC’s approval creates “more flexibility at the asset level,” said Samar Sen, head of international markets at institutional digital asset firm Talos. Declutter.

“Institutions will look closely at how tokenized securities align with post-trade infrastructure, especially where settlement still flows through central clearing and settlement systems, and whether liquidity develops consistently across both formats,” he added.