SEC Issues “Innovation Exemption” to Facilitate the Trading of Tokenized NMS Stock and Request for Comment
The SEC granted temporary exemptions to allow tokenized stock trading via permissioned automated market makers, seeking public input on further digital asset market reforms.
The U.S. Securities and Exchange Commission issued a temporary order allowing Tokenized Securities Venues (TSVs) to operate without registering as exchanges under the 1934 Securities Exchange Act. The exemption applies specifically to trading tokenized National Market System (NMS) stocks using permissioned automated market makers and liquidity pools. SEC Chairman Paul S. Atkins framed the move as a step toward modernizing capital markets while maintaining investor protections. The relief is designed to facilitate onchain trading in a controlled environment during a five-year review period.
The exemption also temporarily relieves liquidity providers in AMM Liquidity Pools from the definition of "dealer" under the Exchange Act. Providers supplying tokenized NMS stock using proprietary capital may engage in activities such as quoting prices or committing capital without triggering dealer registration. The SEC emphasized that both exemptions are conditional and subject to public interest and investor protection standards. Conditions include standards for participant access and trade agreement protocols within the pools.
SEC officials highlighted the Innovation Exemption as a milestone for tokenized securities trading, signaling openness to digital asset market participation. Jamie Selway, Director of the Division of Trading and Markets, noted the division’s readiness to assist TSV operators and address investor inquiries. The order invites broad public comment on all aspects of the exemptions to inform future regulatory decisions. Comments will be considered alongside potential modifications to the relief framework.
The temporary exemptions are set to expire five years after publication in the Federal Register and on SEC.gov. The order does not represent a permanent policy shift but provides a testing ground for onchain trading infrastructure. The SEC underscored its commitment to continued public engagement while evaluating the impact of tokenized stock trading on market integrity and investor safeguards.