[Federal Register Volume 90, Number 181 (Monday, September 22, 2025)]
[Notices]
[Pages 45426-45431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-18305]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103989; File No. SR-NASDAQ-2025-072]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend the Exchange's Rules
To Enable the Trading of Securities on the Exchange in Tokenized Form
September 16, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 8, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's rules to enable the
trading of securities on the Exchange in tokenized form. Specifically,
proposed rules Equity 1, Section 1 and Equity 4, Rules 4756, 4757, and
4758 will clarify how Nasdaq trades tokenized securities.
The text of the proposed rule change is set forth below. Proposed
new language is italicized; deleted text is in brackets.
* * * * *
The NASDAQ Stock Market LLC Rules
* * * * *
Equity Rules
EQUITY 1 EQUITY DEFINITIONS
Section 1 Equity Definitions
(a) When used in the Equity Rules, unless the context otherwise
requires:
(1) No change.
(2) ``Security'' Unless the context requires otherwise, the term
``security'' shall mean a ``security,'' as that term is defined in
section 3(a) (10) of the Securities Exchange Act of 1934, as amended,
that is either listed on the Exchange or traded on the Exchange
pursuant to unlisted trading privileges. A security may be traded in
the Nasdaq Market Center in either traditional form (a digital
representation of ownership
[[Page 45427]]
and rights, but without utilizing distributed ledger (``blockchain''
technology)) or tokenized form (a digital representation of ownership
and rights which utilizes blockchain technology). A share of a
tokenized security shall be tradable in the Nasdaq Market Center
together with, on the same Order Book as, and with the same execution
priority as, its traditional counterpart, but only if the tokenized
security is fungible with, shares the same CUSIP number with, and
affords its shareholders the same material rights and privileges as
does a share of an equivalent class of the traditional security.
* * * * *
EQUITY 4 EQUITY TRADING RULES
* * * * *
4756. Entry and Display of Quotes and Orders
(a) Entry of Orders--Participants can enter orders into the System,
subject to the following requirements and conditions:
(1)-(4) No change.
(5) A Participant that wishes for its order to clear and settle in
tokenized form shall notate its preference upon entry of the order in
the System by selecting a flag that the Exchange designates for this
purpose, in accordance with the Exchange's procedures. When a
Participant enters an order with the tokenization flag selected, the
Exchange will communicate the Participant's clearance and settlement
instruction to The Depository Trust Company (``DTC ''). DTC will then
carry out the Participant's instruction in accordance with DTC's rules,
policies, and procedures, or if it is unable to do so, it will make
alternative clearing and settlement arrangements with the Participant.
(b) Entry of Quotes--Nasdaq Market Makers and Nasdaq ECNs can enter
Quotes into the System from 4:00 a.m. to 8:00 p.m. Eastern Time. Quotes
will be processed as Attributable Orders, with such time-in-force
designation as the Nasdaq Market Maker or Nasdaq ECN may assign. Entry
of Quotes will be subject to the requirements and conditions set forth
in section (a) above.
* * * * *
4757. Book Processing
(a) Orders on the Nasdaq Book shall be presented for execution
against incoming Orders in the order set forth below:
(1)-(4) No change.
(5) The mere fact that an order contains tokenized securities or
indicates a preference to clear and settle securities in token form
shall not affect the priority in which the Exchange executes that
order.
* * * * *
4758. Order Routing
(a) Order Routing Process
(1) The Order Routing Process shall be available to Participants
during System Hours, unless otherwise noted in these rules, and shall
route orders as described below. All routing of orders shall comply
with Rule 611 of Regulation NMS under the Exchange Act.
(A) The System provides a variety of routing options. Routing
options may be combined with all available Order Types and Times-in-
Force, with the exception of Order Types and Times-in-Force whose terms
are inconsistent with the terms of a particular routing option. When
the Exchange routes an order that a Participant has designated for
clearing and settlement in token form, in accordance with Rule
4756(a)(5), the Exchange will communicate this tokenization instruction
to DTC upon receiving an execution for an order that was routed to
another trading venue. The System will consider the quotations only of
accessible markets. The term ``System routing table'' refers to the
proprietary process for determining the specific trading venues to
which the System routes Orders and the Order in which it routes them.
Nasdaq reserves the right to maintain a different System routing table
for different routing options and to modify the System routing table at
any time without notice. The System routing options are:
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to establish clearly
that Nasdaq's member firms and investors may trade tokenized versions
of equity securities and exchange traded products (``ETPs'') on the
Exchange. The filing describes and applies to one method by which
tokenized securities can trade on Nasdaq within the current national
market system, using The Depository Trust Company (``DTC'') to clear
and settle trades in token form, per order handing instructions that
Participants may select upon entering their orders on Nasdaq.\3\
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\3\ Nasdaq is actively assessing multiple methods of
tokenization and trading of tokenized securities. If the Exchange
plans to adopt any particular alternative to the DTC approach, then
to the extent necessary, it will file rule proposals with the
Commission before doing so.
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Background
Over time, U.S. equity markets have thrived while absorbing
successive waves of technological innovations. Nasdaq ushered in the
first wave in the 1970s. Before that time, shares of equity securities
existed only in paper form as stock certificates, and stocks were
quoted, traded, and physically transferred among buyers and sellers
through manual processes. Nasdaq--originally an acronym which stood for
the National Association of Securities Dealers Automated Quotations--
revolutionized the markets by quoting and trading equity securities
electronically (digitally) and in an automated fashion. Subsequent
waves of technological innovation followed that were no less
revolutionary. Advances in computing technologies led to the rise of
sophisticated algorithmic trading strategies, high-volume proprietary
trading firms, and electronic market making. Meanwhile, advances in
telecommunications enabled trade execution times to shrink from hours
to microseconds, and for the dissemination of market data to shift from
daily distributions of basic prices lists to lighting fast and
efficient disseminations of rich and actionable market insights using
modern data transfer infrastructure, cloud computing, and other
technical innovations.
Securities tokenization is another new technology with potential
applications for the securities markets. Put simply, tokenization
enables aspects of securities transactions (which again, already are
digital) to be recorded on a blockchain--a digital ledger that is
encrypted, distributed among its users, and maintained, validated, and
secured collectively by its users to ensure its integrity and security
and to resist tampering. Today, by contrast, the securities markets
employ various
[[Page 45428]]
distinct and independent parties to perform these tasks, including
trade matching, transferring, clearing, settlement, and custody
services. These independent parties are highly regulated and trusted to
protect investors. Today's system works extraordinarily well, it is
already highly efficient and reliable, and it operates at little or no
commission cost to retail investors.
Although tokenization technology presents novel capabilities by
which to record evidence of securities ownership and transactions, the
trading of tokenized securities can, and it must occur largely as
Congress prescribed when it enacted and subsequently amended the Act.
That is, such trading must occur in regulated markets, namely national
securities exchanges, alternative trading systems, and at FINRA
regulated broker-dealers. It also must occur within the context of an
interconnected national market system, rather than in siloed trading
venues where investors would have no consolidated sense of best market-
wide prices and no assured access to such prices. Furthermore, such
trading should occur in markets that feature independent and regulated
intermediaries to manage the links in the securities transaction chain
safely, soundly, and in a disinterested manner.\4\
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\4\ Section 11A of the Act states that ``[t]he linking of all
markets for qualified securities . . . will foster efficiency,
enhance competition, increase the information available to brokers,
dealers, and investors, facilitate the offsetting of investors'
orders, and contribute to best execution of such orders'' such that
Congress directed the Commission to ``use its authority under this
chapter to facilitate the establishment of a national market system
for securities (which may include subsystems for particular types of
securities with unique trading characteristics) in accordance with
the findings and to carry out the objectives set forth in paragraph
(1) of this subsection.'' 15 U.S.C. 78K-1(a).
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The existing regulatory structure mandated by Congress applies to
tokenized securities, regardless of whether such securities have
certain unique properties (like the ability to be settled on a
blockchain), much like it did when the SEC allowed securities to be
decimalized and electronified and when exchange traded funds and other
novel securities were approved decades ago. As in those cases, no
significant exemptions or parallel market structure constructs are
needed for tokenized securities to trade alongside other securities. As
Commissioner Peirce stated recently, ``[t]okenized securities are still
securities'' and ``market participants must consider--and adhere to--
the federal securities laws when transacting in these instruments.''
\5\ It is within this context that Nasdaq offers its proposal to trade
tokenized securities.
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\5\ Commissioner Hester M. Peirce, ``Enchanting, but Not
Magical: A Statement on the Tokenization of Securities,'' available
at https://www.sec.gov/newsroom/speeches-statements/peirce-statement-tokenized-securities-070925.
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The Exchange believes the markets can use tokenization while
continuing to provide the benefits and protections of the national
market system. Wholesale exemptions from the national market system and
related protections are neither necessary to achieve the goal of
accommodating tokenization, nor are they in investors' best interests.
To the contrary, they would harm investors and the markets since
investors would lose access to portions of the market if platforms were
not required to connect to the national market system or report trades.
This would erode the National Best Bid and Offer (``NBBO''), a long-
standing concern of many, including the SEC, increase fragmentation
with liquidity pools not accessible to investors outside these
platforms, and result in greater price dislocation.\6\ Thus, the
markets, the issuers, and investors would be blind to activity
occurring on these platforms, which would hinder issuer's ability to
understand stock price movements and even daily trading volume. It
would also impact questions of best execution and investor
protection.\7\ Additionally, issuers would have no understanding of the
total shares traded in any given day in their company's stock, further
diminishing the strength of the public markets.\8\
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\6\ Indeed, a recent news report validates these concerns as to
tokens tracking two widely-held stocks--Apple and Amazon. These
tokens experienced extreme price dislocations from the prices of
their underlying stocks--a result that creates opportunities for
retail investor exploitation as well as insider trading and
manipulation. See Alexander Osipovich and Vicky Ge Huang, ``Want to
Trade Amazon on Crypto Exchange? The Price Might Be Off by 300%,''
Wall Street Journal, July 15, 2025, available at https://www.wsj.com/finance/stocks/tokenized-stocks-prices-crypto-exchanges-856ea114.
\7\ That lack of transparency is the current reality in Europe,
which EU regulators are currently attempting to address with the
creation of a consolidated tape. They view the US as a best-in-class
example of providing a complete picture for issuers and investors of
the trading activity and related price discovery in any given day,
and they are now seeking to replicate our model. It would be
detrimental to the underpinnings of our national market system to
abandon that core aspect of our markets.
\8\ As an operator of a primary listing exchange, Nasdaq is also
concerned by the impact of tokenization on securities issuers. In
Europe, trading of tokenized stocks is occurring in a manner that
raises numerous concerns. For example, we understand that some
digital asset trading platforms are offering shares of U.S. equities
to European investors without the prior knowledge or consent of the
issuers of those securities. When issuers list securities on
national securities exchanges, they do so with the expectation that
those securities will trade in a certain form and on certain
markets. Nasdaq believes that tokenizing securities should not occur
in a manner that deprives issuers of their ability to determine
where and how their shares trade. Nasdaq is limited in its ability
to afford issuers a choice as to whether their shares are or become
tokenized by other markets. Nevertheless, we encourage the
Commission to consider the issue as it develops a new regulatory
regime for tokenized securities.
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Finally, we note that in Europe, trading of tokenized stocks is
occurring in a manner that raises investor concerns. A few trading
platforms are purporting to offer investors access to tokenized U.S.
``equities,'' but they are not providing investors with actual shares
in U.S. companies. Instead (and likely contrary to the understanding of
unsophisticated investors), they are providing investors with digitally
tradable rights to traditional digital shares that the platforms
themselves purchase and hold in their own accounts. These digital
rights do not comprise the full extent of the rights to which owners of
traditional digital shares are entitled, including voting rights and
the rights to corporate assets upon liquidation; instead, they merely
convey economic rights associated with shares--the right to realize
appreciation and depreciation in the value of the shares.\9\ Thus, a
purchaser of these tokenized rights receives less value for their money
than do purchasers of traditional digital securities.\10\
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\9\ See ``Kraken Launches xStocks for 24/5 Trading of 60 US
Stocks,'' AInvest, June 30, 2025, available at https://www.ainvest.com/news/kraken-launches-xstocks-24-5-trading-60-stocks-2506/.
\10\ As the Commission ponders whether to permit similarly
structured products to be offered in the United States, Nasdaq
encourages the Commission consider whether such products should be
marketable as ``equities,'' ``shares,'' or ``stock'' or whether
instead they should be labeled more accurately as derivative
instruments or depository rights to avoid investor confusion.
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Although trading tokenized securities outside of the national
market system would pose significant risks to the markets and
investors, such risks need not occur. Nasdaq submits, as evidenced by
this proposal, that only minor changes to existing rules and practice
are necessary to accommodate the trading of tokenized securities and
that granting broad exemptions would be unwarranted.\11\
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\11\ Nasdaq has previously noted the limitations inherent in the
Commission's exemptive authority. See J. Zecca, ``Digital Assets
Sandbox,'' dated June 6, 2025, at 6-7, available at https://www.sec.gov/files/digital-assets-sandbox-comment-060625.pdf.
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Nasdaq's Flexible Approach
To tackle the challenge of trading tokenized equities, Nasdaq
offers a simple and safe proposal that accommodates multiple approaches
to
[[Page 45429]]
tokenization. It is an approach that leverages existing structures and
players and rules, rather than experimenting with radical new models
that are untested in the context of listed securities and potentially
detrimental to investors', issuers', and the markets' best
interests.\12\
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\12\ See J. Zecca, ``What's in a Name? A Stock by Any Other Name
. . .'' Nasdaq Inc.'s Response to ``There Must Be Some Way Out of
Here,'' April 25, 2025, at 19-21, available at https://www.sec.gov/files/ctf-written-input-nasdaq-042525.pdf (discussing the risks of
trading digital assets in Vertically Integrated and Direct-to-retail
digital asset markets).
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As noted above, Nasdaq proposes to trade tokenized equity
securities and ETPs within the confines of existing securities laws and
rules. In Nasdaq's proposal to trade tokenized securities, Nasdaq
believes that all existing Commission and Nasdaq rules that currently
apply to trading non-tokenized securities on the Nasdaq Stock Market
will continue to apply, without modification, except as follows.
Order Entry and Processing
First, the Exchange proposes to amend its definition of a security,
at Equity 1, Section 1, to announce that Exchange Participants may
trade tokenized securities on the Exchange. The proposed rule change
also clarifies that the term ``tokenized'' in this instance refers to
digital representations of paper securities that utilize digital ledger
or blockchain technology, as opposed to ``traditional'' securities,
which are also digital representations of paper securities, but do not
utilize blockchain technology. The proposal describes how the Exchange
will trade tokenized securities, noting that as long as tokenized
securities are fungible with, have the same CUSIP number as, and afford
their holders the same material rights and privileges as do traditional
securities of an equivalent class, then the Exchange will trade
tokenized securities together with traditional securities on the same
Order Book and according to the same execution priority rules. A
tokenized equity security would be deemed to provide the same material
rights and privileges as a traditional security if, among other things,
it conveys an equity interest in an underlying company, a right to
receive any dividends that the company issues to its shareholders, a
right to exercise any voting rights that shareholders are due, and a
right to receive a share of the residual assets of the company upon
liquidation. The Exchange will not treat tokenized instruments to be
equivalent to their traditional counterparts if they do not convey such
rights, in whole or in material part, or share the same CUSIP, but
instead the Exchange will treat these instruments as distinct (e.g.,
derivative securities or ADRs).\13\ The proposed amended rule text is
as follows, with proposed changes italicized:
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\13\ This rule proposal does not address whether and how Nasdaq
may choose to trade these non-fungible tokenized instruments in the
future.
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(2) ``Security'' Unless the context requires otherwise, the term
``security'' shall mean a ``security,'' as that term is defined in
section 3(a) (10) of the Securities Exchange Act of 1934, as amended,
that is either listed on the Exchange or traded on the Exchange
pursuant to unlisted trading privileges. A security may be traded in
the Nasdaq Market Center in either traditional form (a digital
representation of ownership and rights, but without utilizing
distributed ledger (``blockchain'' technology)) or tokenized form (a
digital representation of ownership and rights which utilizes
blockchain technology). A share of a tokenized security shall be
tradable in the Nasdaq Market Center together with, on the same Order
Book as, and with the same execution priority as, its traditional
counterpart, but only if the tokenized security is fungible with,
shares the same CUSIP number with, and affords its shareholders the
same material rights and privileges as does a share of an equivalent
class of the traditional security.
Second, the Exchange proposes to amend its Order Entry Rule, at
Equity 4, Rule 4756, to describe how a market Participant can
communicate its desire to clear and settle a security in tokenized
form. The proposed amended Rule states that a Participant that wishes
for its order to clear and settle in tokenized form must notate its
preference upon entry of the order in the System by selecting a flag
that the Exchange designates for this purpose, in accordance with the
Exchange's procedures. When a Participant enters an order with the
tokenization flag selected, the Exchange will communicate the
Participant's order handling instruction to DTC (on a post-trade
basis). DTC would then carry out the Participant's instruction in
accordance with DTC's rules, policies, and procedures, or if it is
unable to do so, it would make alternative clearing and settlement
arrangements with the Participant.
Third, Nasdaq proposes to amend its Book Processing Rule, at Equity
4, Rule 4757, to clarify that the mere fact that an order contains
tokenized securities or indicates a preference to clear and settle
securities in token form will not affect the priority in which the
Exchange executes that order.
Fourth and finally, the Exchange proposes to amend its Order
Routing Rule, at Equity 4, Rule 4758, to note that when the Exchange
routes orders that Participants have designated for clearing and
settlement in token form, in accordance with the Exchange's order entry
rules and procedures, then the Exchange will communicate this
tokenization instruction to DTC upon receiving an execution for an
order that was routed to another trading venue.
Apart from the above, as far as Nasdaq's systems and matching
engine are concerned, the Exchange's trading procedures and behavior
will be the same regardless of whether a member opts to trade tokenized
or traditional shares of a stock.\14\ Among other things, the following
aspects of Nasdaq's trading system and procedures will not change when
trading tokenized securities:
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\14\ Nasdaq's pricing structure and rates will not vary
depending upon whether a transaction involves a share of a tokenized
stock.
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All Exchange order types and attributes will be available
for use by tokenized securities.
All Exchange routing strategies will be available for
orders in tokenized securities.
Orders in tokenized securities may participate in all of
the Exchange's trading sessions as well as in its Opening and Closing
Crosses, subject to generally applicable eligibility criteria.
Participants may utilize their existing connectivity to
enter orders in tokenized securities.
The Exchange's fee schedule will not vary based upon
whether shares that Participants execute are tokenized or traditional
in nature.
Market data feeds will not differentiate between tokenized
and traditional shares.
Market surveillance of tokenized and traditional
securities will rely upon the same underlying data, which will continue
to be accessible by Nasdaq and FINRA.
Trades in tokenized securities handled by DTC will
continue to settle on a T+1 basis.
Nasdaq's clearly erroneous and risk management measures
will cover tokenized securities.
Trading of tokenized securities under this proposal is not
expected to alter the existing proxy distribution process.
A key benefit of Nasdaq's proposal is that it will readily allow
for trading in tokenized securities to occur within the context of the
national market system.
[[Page 45430]]
The Exchange's proposal will allow for tokenized securities to trade on
its market in a transparent manner, without degrading the NBBO, without
further fragmenting the national market system, without causing price
dislocations or facilitating market manipulation, and without
undermining the investor protections that existing securities law
provide.
Tokenization and Post-Trade Processing
This proposal to offer trading in tokenized securities will become
effective once the requisite infrastructure and post-trade settlement
services have been established by DTC, with any required regulatory
approvals having been obtained. Nasdaq understands that DTC is working
to develop the necessary infrastructure, services, and procedures to
facilitate such tokenization and the related post-trade settlement
infrastructure and services.\15\
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\15\ Multiple other forms of tokenization and clearance and
settlement are under discussion. The proposed rule change is
specific to the process that Nasdaq understands DTC is developing.
However, Nasdaq will explore additional solutions as they develop,
with the objective of accommodating as much tokenization technology
as possible as efficiently as possible.
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The following is a preliminary sense of the process that we
understand DTC is contemplating for settling securities in token form.
Nasdaq notes that the DTC process is subject to change, further
refinement, regulatory review and approval, and would operate in
accordance with DTC's rules, polices, and procedures. If a market
Participant wants to settle a security in token form, then the
Participant will submit an order handling instruction to the Exchange
upon order entry. The Participant will do so by selecting a flag
designated by the Exchange for this purpose. The Exchange will then
convey the clearance and settlement instruction to DTC for execution on
a post-trade basis. Nasdaq understands that the DTC process is expected
to include transfer of the Participant's designated book-entry position
from the Participant's DTC account to a DTC control account and then
conversion to a corresponding position in token form that DTC would
mint and deliver to the Participant's DTC-registered digital wallet on
a blockchain, which DTC would track and reconcile against the control
account.\16\
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\16\ Nasdaq understands that the DTC process may be available by
the end of Q3 2026, subject to regulatory review and approval.
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Nasdaq will alert its Members in an Equity Trader Alert at least 30
calendar days before the Exchange begins accepting tokenized securities
for trading on its market.
Illustrative Example of Trading Tokenized Invesco QQQ on the Exchange
The following illustrates how Nasdaq will trade tokenized
securities on its system. For purposes of this illustration, the
Exchange uses the example of the Invesco QQQ Trust\SM\ ETP (the ``QQQ
ETF'' or ``QQQ''), the shares of which its sponsor, Invesco Capital
Management LLC (``Invesco''), intends to offer in tokenized form.\17\
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\17\ Although Nasdaq discusses herein the trading of the Invesco
QQQ ETF on the Exchange, this rule proposal would allow Nasdaq to
trade other tokenized versions of securities. We anticipate that
Invesco will file separately with the Commission to obtain any
permission or exemptive relief necessary to have tokenized QQQ
shares traded on the Exchange.
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An Exchange member wishing to place a displayed limit order in a
tokenized share of QQQ on behalf of an investor would provide
instructions to that effect when it enters the order into Nasdaq's
system, as it otherwise would do. The Exchange would then process that
order consistent with how it processes all orders in QQQ shares in
terms of order entry protocols, order handling, priority, order
matching, and trade reporting. All Exchange Order Types and Attributes
that are otherwise available to a traditional QQQ order in a given
scenario would likewise be available to the tokenized QQQ order. The
Exchange would generate market data about the order in the same way
that it does now. The tokenized QQQ order would be available to match
contra orders for either tokenized or traditional shares of QQQ and
would do so without any special priority relative to other orders in
QQQ on the Exchange book. When a trade occurs involving the order in
tokenized QQQ, the Exchange will report trade information to the SIP as
it does now. Until Nasdaq implements its plan to enable securities to
trade on its market on a 23/5 basis, tokenized shares of QQQ will not
be available for trading on Nasdaq outside of regular and extended
trading hours.
The post-trade settlement services, including the eligibility of a
member's orders to be settled in tokenized form, will be determined by
DTC's policies and procedures.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\19\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
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It is consistent with the Act to permit members of the Exchange to
trade tokenized securities. As explained above, investors increasingly
demand the ability to own and trade tokenized versions of financial
assets, including securities. Such capabilities are available
increasingly in other jurisdictions and to more a limited extent, in
the United States. Thus far, and as compared with other available
solutions, Nasdaq submits that its proposal offers a means of trading
tokenized securities that is consistent with Congressional intent while
serving the best interests of issuers, investors, and the markets.
Most importantly, the proposal will involve trading tokenized
securities on Nasdaq--the world's leading and most trusted market
operator and provider of market technology. This means that the trading
of tokenized securities that occurs on Nasdaq will be subject to the
full panoply of SEC regulatory obligations and oversight, as well as
Nasdaq rules, which together help to ensure that trading of all
securities on Nasdaq is transparent, fair, orderly, equitable, and in
the best interests of investors. Due to the application of the national
market system rules, the prices of tokenized securities trading on
Nasdaq will be transparent and they will both contribute to and account
for the NBBO. Market makers on Nasdaq will provide two-sided liquidity,
even in times of market stress. Broker-dealer members of the Exchange
will have best execution obligations to investors when they execute
trades of tokenized securities on Nasdaq. The Exchange itself will be
subject to the rigors of Reg SCI to help ensure that tokenized
securities trading occurs in a manner that is secure, dependable, and
resilient as well as to ensure that Nasdaq is accountable for any
failures to do so. Nasdaq's systems have a track record of reliably
processing transactions in microseconds, even during recent periods of
record-high volatility and message traffic. Nasdaq's world-class
surveillance and enforcement capabilities--which are unique to national
securities exchanges--also will be brought to bear to detect and
address fraud and manipulation, should it occur.
Nasdaq's proposal will also avoid risks inherent in other
tokenization approaches that would potentially fragment liquidity and
isolate it to
[[Page 45431]]
particular trading platforms and blockchain technologies that are not
interoperable. In such scenarios, tokenized securities would not trade
freely across markets as they do now or access better prices. Moreover,
the markets could suffer to the extent that isolated liquidity no
longer links to the national market system and contributes to the NBBO.
Because this proposal to trade tokenized securities on Nasdaq will
require Nasdaq to change very little from its existing structure and
practices, which the Commission has approved and oversees, this
proposal should not be controversial or a cause of concern.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange's proposal to
trade tokenized securities on its market are neither intended to nor
will they adversely impact competition. If anything, the Exchange
expects that the proposed changes will promote competition by providing
for the Nasdaq Stock Market to accommodate the demand for tokenized
equity securities and ETPs among listed companies, market Participants,
and investors. Nasdaq believes that its proposal will be particularly
attractive because it will provide for the trading of tokenized equity
securities in a manner that is familiar to market Participants and
investors and which is consistent with existing laws and rules. Indeed,
under Nasdaq's proposal, the extent to which market Participants (other
than DTC) will need to modify their back-end systems and practices to
accommodate tokenized securities trading should be minimal. Nasdaq
notes that market Participants on the Exchange will remain free to
trade, clear and settle securities in traditional form.
In any event, the Exchange operates in a highly competitive market
in which market Participants can readily choose between competing
venues if they deem participation in the Exchange's market to no longer
be desirable or if they do not wish to trade tokenized securities. In
such an environment, the Exchange must carefully consider the impact
that any change it proposes may have on its Participants, understanding
that it will likely lose Participants to the extent a change is viewed
as unfavorable by them. Because competitors are free to modify the
functionality and structure of their markets, including by availing
themselves of the same capabilities that are being developed to trade
tokenized securities, the Exchange believes that the degree to which
its proposal imposes any burden on competition is limited. Last, to the
extent the proposed change is successful in attracting additional
market Participants or additional activity by existing Participants,
the Exchange also believes that the proposed change will promote
competition among trading venues by making the Exchange a more
attractive trading venue for Participants and investors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NASDAQ-2025-072 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2025-072. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection.
All submissions should refer to file number SR-NASDAQ-2025-072 and
should be submitted on or before October 14, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18305 Filed 9-19-25; 8:45 am]
BILLING CODE 8011-01-P