SEC approves Nasdaq's proposal to introduce tokenized securities trading

The US Securities and Exchange Commission (SEC) has approved Nasdaq's proposal to allow the trading of tokenized securities, according to a filing on Wednesday.

The decision enables Nasdaq to support a pilot program under which certain stocks and exchange-traded funds (ETFs) can be issued and settled in tokenized form. The SEC noted the proposal meets the requirements of the Securities Exchange Act of 1934.

Nasdaq's tokenized securities program structure

The program will apply to securities that are classified as "DTC Eligible Securities." These include stocks listed in the Russell 1000 Index and ETFs tracking major benchmarks such as the S&P 500 and Nasdaq-100.

Under the new system, tokenized securities will function the same as traditional shares. They will carry the same CUSIP number, trade under the same symbols, and give investors identical rights, including dividend and voting rights.

Traders who want to use tokenized settlement can select that option when placing orders by adding a "tokenization flag," providing a blockchain network and wallet address. After trades are executed, Nasdaq will send the details to the Depository Trust Company (DTC) for clearing and settlement.

Both tokenized and traditional trades will run on the same system, with no differences in pricing, order execution, fees, or settlement timelines. Oversight will be handled by Nasdaq and the Financial Industry Regulatory Authority (FINRA) using existing monitoring systems.

Nasdaq first submitted the proposal in September. After reviewing public feedback and amendments, the SEC concluded that the structure aligns with existing market regulations.

The rollout will depend on the completion of infrastructure under DTC's ongoing pilot program. Trading of tokenized securities will not begin until that process is finalized.

Nasdaq is required to notify market participants at least 30 days before launch through an Equity Trader Alert. Any future expansion beyond this pilot, or changes to how tokenization is implemented, will require additional regulatory approval.

The move comes as financial institutions continue to leverage blockchain in traditional markets, particularly in restructuring settlement processes and asset management.