This article explores the opportunity to build new onchain trading infrastructure under the defined regulatory framework.
What is a Tokenized Securities Venue (TSV)?
A TSV is a new framework for trading certain tokenized U.S. stocks through permissioned automated market maker (AMM) liquidity pools. These stocks, known as National Market System (NMS) stocks, are listed on U.S. national securities exchanges such as the NYSE and Nasdaq.
An AMM pool is a smart contract that holds two assets, such as a tokenized stock and a stablecoin. Rather than matching buy and sell orders through a traditional order book, a pricing formula determines each trade based on the pool’s balances.
Under the SEC’s framework, tokenized stocks must provide the same rights and privileges as the equivalent traditional shares.
More:Read the full SEC Innovation Exemption → (PDF, opens in a new tab)
What the SEC’s Innovation Exemption permits
The order provides qualifying TSVs with an exemption from the Exchange Act’s definition of an “exchange,” along with separate, conditional relief from the definition of a “dealer” for certain liquidity providers trading their own capital.
The exemption establishes a limited framework for secondary-market trading. It does not eliminate the need to meet applicable regulatory conditions or resolve the legal and operational requirements associated with tokenized securities.
A TSV must:
- Control participation. Establish eligibility standards and restrict trading to permissioned participants, with applicable U.S. and sanctions requirements in place.
- Preserve shareholder rights. Support tokenized stocks that provide the same rights and privileges as the equivalent traditional shares.
- Enforce trading restrictions. Support permitted trading pairs, secondary trading only, and restrictions on lending, hypothecation, and extending credit.
- Coordinate with traditional markets. Halt trading in a tokenized stock when trading in the underlying stock is halted or suspended on its primary listing exchange.
- Maintain transparency and records. Meet the order’s requirements for transaction data, public auditability, and record-keeping.
- Meet listing and volume limits. Observe the applicable limits on eligible symbols and trading volume.
The framework also includes an issuer-notification process for third-party tokenized stocks, a five-year term, and an SEC public-comment process.
A TSV adds a venue control layer to infrastructure you may already have
In some cases, much of the underlying infrastructure of a TSV may already be available through tokenized assets, public ledgers, and AMM liquidity.
The engineering challenge is making those components work together within the TSV framework.
That requires a control layer that applies the order’s conditions across the TSV.
The venue control layer has four core responsibilities:
- Admission and participation: Determine who can access the venue and which assets they can trade.
- Trade enforcement: Apply trading restrictions, volume limits, and market-halt controls.
- Auditability and reporting: Produce the records and transaction data the SEC order requires.
- Operational control: Manage permissions, upgrades, emergency actions, and the halt and volume data the venue relies on.
Scope your TSV implementation
Building a TSV means integrating these controls with your existing infrastructure and designing for requirements that may evolve.
Moonsong can identify what you can reuse, what needs to be built, and how to scope the implementation.