Key Takeaways
- • SEC formally approved Nasdaq's proposal to enable tokenized stock trading on regulated exchanges, allowing investors to settle trades in either traditional or tokenized form on a trade-by-trade basis as of May 2026.
- • Initial scope limited to Russell 1000 stocks and major ETFs, with settlement remaining on T+1 basis through DTC-managed blockchain wallets, preserving existing market protections and regulatory oversight.
- • Tokenized securities must be fungible with traditional counterparts, carrying materially the same rights and privileges, ensuring that tokenization serves as a settlement mechanism rather than creating distinct asset classes.
- • DTC developing settlement infrastructure to convert positions into token form and deliver tokens to participants' blockchain-registered wallets, with order types and fee schedules remaining unchanged.
- • Regulatory framework maintains national market system protections, rejecting wholesale exemptions and confirming that tokenized trading will operate under existing SEC oversight and market participant structures.
Summary
The SEC has approved Nasdaq's landmark proposal to enable tokenized stock trading on a regulated national exchange, marking a significant integration of blockchain technology into traditional equities markets. The approval permits investors to elect settlement in either traditional or tokenized form on a trade-by-trade basis, establishing a dual-settlement framework that preserves existing market infrastructure while introducing distributed ledger technology.
Nasdaq submitted the proposed rule change on September 8, 2025, and the SEC has now formally authorized implementation. The proposal is grounded in the principle that traditional securities are already traded electronically, and settlement via blockchain represents a natural extension of existing market practices. Critically, the framework limits tokenized securities to those that are fungible with traditional counterparts and carry materially the same rights and privileges—a safeguard that excludes many tokens currently traded on unregulated platforms from this approved structure.
The initial rollout will focus on securities within the Russell 1000 Index and ETFs tracking major benchmarks. The Depository Trust Company (DTC) is actively developing the settlement infrastructure required to convert positions into token form and deliver them to participants' DTC-registered wallets on blockchain networks. Trades will continue settling on a T+1 basis, and existing order types and fee schedules will remain unchanged, minimizing operational disruption for market participants.
A foundational principle underpinning the approval is that tokenization should operate within traditional regulatory structures and market oversight. Nasdaq explicitly stated in its proposal that "the markets can use tokenization while continuing to provide the benefits and protections of the national market system," and the SEC has endorsed this position by declining to grant wholesale exemptions from national market system requirements. This approach ensures that tokenized equity trading remains subject to existing SEC oversight, price transparency rules, and investor protections rather than migrating to alternative or less-regulated venues.
For institutional investors and asset managers, the approval signals a pathway toward operational efficiency in settlement and custody, with blockchain-based infrastructure reducing post-trade friction while maintaining regulatory certainty. The staged rollout beginning with liquid, index-constituent securities provides a controlled environment to validate the infrastructure before potential expansion to broader equity universes.
Nasdaq submitted the proposed rule change on September 8, 2025, and the SEC has now formally authorized implementation. The proposal is grounded in the principle that traditional securities are already traded electronically, and settlement via blockchain represents a natural extension of existing market practices. Critically, the framework limits tokenized securities to those that are fungible with traditional counterparts and carry materially the same rights and privileges—a safeguard that excludes many tokens currently traded on unregulated platforms from this approved structure.
The initial rollout will focus on securities within the Russell 1000 Index and ETFs tracking major benchmarks. The Depository Trust Company (DTC) is actively developing the settlement infrastructure required to convert positions into token form and deliver them to participants' DTC-registered wallets on blockchain networks. Trades will continue settling on a T+1 basis, and existing order types and fee schedules will remain unchanged, minimizing operational disruption for market participants.
A foundational principle underpinning the approval is that tokenization should operate within traditional regulatory structures and market oversight. Nasdaq explicitly stated in its proposal that "the markets can use tokenization while continuing to provide the benefits and protections of the national market system," and the SEC has endorsed this position by declining to grant wholesale exemptions from national market system requirements. This approach ensures that tokenized equity trading remains subject to existing SEC oversight, price transparency rules, and investor protections rather than migrating to alternative or less-regulated venues.
For institutional investors and asset managers, the approval signals a pathway toward operational efficiency in settlement and custody, with blockchain-based infrastructure reducing post-trade friction while maintaining regulatory certainty. The staged rollout beginning with liquid, index-constituent securities provides a controlled environment to validate the infrastructure before potential expansion to broader equity universes.
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