The new venue operates under the SEC’s “Innovation Exemption,” an order the agency issued and put into effect on September 17. It says that permissioned onchain trading platforms, which the SEC calls Tokenized Securities Venues, don’t count as “exchanges,” and that the firms providing liquidity don’t have to register as “dealers.”
Davis Polk, which advised a client on the matter, says the relief lasts five years, until September 17, 2031.
Before a venue can list a token made by a third party, it has to give the company a heads-up. The company then has a month to say no, or the venue will start trading. Companies usually have no say over whether a national exchange trades their shares, so the right to object is new.
OKXICE filed a notice on October 4 saying it wants to list tokens tied to more than 60 U.S.-listed companies, including Nvidia (NASDAQ: NVDA), Tesla (NASDAQ: TSLA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and SpaceX, as well as crypto-tied firms such as Coinbase (NASDAQ: COIN), Circle (NYSE: CRCL), Strategy (NASDAQ: MSTR), Robinhood (NASDAQ: HOOD), BitGo (NYSE: BTGO) and Securitize.
Each tokenized stock would trade against either USDC, USDG or Tether’s USDT.
The venue intends to trade 24/7. Notably, its filing does not name the firm minting the tokens.
Can CoreWeave and Broadcom object to having their tokens traded?
Davis Polk says a company can only object to a venue that sends it a notice. Their objection doesn’t stop anyone from tokenizing the company’s stock elsewhere, and the SEC order has no effect on trading overseas.
As of September 13, about $2.43 billion worth of tokenized stock, roughly 84.5% of the whole segment, had been issued without the company’s permission. Meanwhile, tokens issued with consent made up only about $365 million and had hardly grown in a year.
Cryptopolitan reported that the broker Robinhood lists more than 190 stock tokens, which are digital products that track the prices of publicly traded companies. AMC, the company behind one of those stocks, sent Robinhood a cease-and-desist demand over a token tied to AMC shares, and Robinhood refused.
In an October 2 comment letter, Computershare asked the SEC to let companies file a standing objection, so they wouldn’t have to respond to each venue’s notice separately. It also asked for a central, searchable register that would list which venues are seeking to list tokens and which companies have objected.
Hunton Andrews Kurth, a law firm, echoed the sentiments in an October 8 letter that crypto emails often get caught in spam filters, which can lead to the notice being missed. Its clients want the process changed so that a company has to give clear consent that they want their stock tokenized. They want the deadline removed, and they also want a public database saying what tokens are not to be tokenized.
