Nasdaq’s tokenized equity pilot wins SEC nod: what it means for markets

The US Securities and Exchange Commission has cleared a rule change that allows Nasdaq to move ahead with a pilot program for tokenized equities.

Under the approved framework, selected participants will be able to settle stock trades in tokenized form through a pilot operated by the Depository Trust Company, a key subsidiary of the DTCC that handles post-trade clearing and settlement. 

The program builds on Nasdaq’s September proposal, which outlined a system where certain high-volume equities could be traded either in their conventional format or as tokenized representations on the same venue.

Trading mechanics remain tightly aligned with the existing market structure.

Tokenized shares will sit on the same order book as standard equities, carry identical tickers and identifiers, and execute at the same price with equal priority. 

Investors holding these tokenized instruments will retain the same rights and privileges as traditional shareholders, a point the SEC emphasised in its approval.

Participation in the pilot will be restricted to eligible entities, with flexibility to choose between traditional settlement and tokenized settlement. 

The scope is also limited, covering securities within the Russell 1000 index along with exchange-traded funds tied to the S&P 500 and Nasdaq 100, ensuring the trial remains focused on the most liquid segments of the US equity market.

SEC softens its stance

Regulatory concerns had surfaced during the review process, particularly around market surveillance and the risk of price discrepancies between tokenized and traditional shares. 

According to the SEC, those issues were addressed through amendments that clarified operational safeguards and monitoring mechanisms.

Even with the approval, the agency continues to frame tokenization within existing legal boundaries. 

Under Chair Paul Atkins, the SEC has started exploring targeted adjustments to accommodate blockchain-based securities, including a proposed “innovation exemption” that could allow certain fundraising activities without full registration requirements. 

At the same time, officials have reiterated that tokenized securities do not fall outside the scope of federal securities laws.

Nasdaq partners with Kraken

Earlier this month, the exchange disclosed a partnership with crypto exchange Kraken, through its parent Payward, and tokenization platform backed to build a gateway connecting regulated equity markets with blockchain networks. 

The initiative is designed to allow securities to move between conventional systems and on-chain environments while preserving issuer oversight and compliance standards.

Other major market operators are also stepping into the space.

Intercontinental Exchange, the parent company of the New York Stock Exchange, recently backed a similar project with crypto exchange OKX, with initial rollout plans targeting 2026.