Mapping the exemption’s requirements to controls
Operating a TSV under the exemption means meeting a range of regulatory requirements, like enforcing trading restrictions, maintaining specific records, and complying with applicable anti-fraud and anti-manipulation rules.
The table below maps key requirements of the SEC’s Innovation Exemption to the technical and operational controls needed to implement them. The controls reflect Moonsong’s engineering interpretation of how a venue can meet these requirements.
| TSV Obligation | What the order requires | Technical and operational controls |
|---|---|---|
| Participant eligibility and access | Limit trading to permissioned participants and comply with applicable sanctions requirements. | Bind verified participants to approved wallets and check current eligibility on every trading path, including direct pool calls. Reject expired or revoked credentials. Maintain identity verification, sanctions screening, and access-management procedures. |
| Eligible assets and trading pairs | Trade eligible tokenized NMS stocks in permitted pairs; exclude primary issuance. | Maintain an admission registry with approved securities, pairings, and current status. Block unapproved activity. Verify eligibility and offering basis before admission, and reassess when conditions change. |
| Third-party tokenization | Notify the issuer, wait 30 calendar days from receipt, and honor timely objections. | Track issuer receipt, waiting-period expiry, and objections. Block trading until admission conditions are met. Assign responsibility for issuer responses, admission updates, and required disclosures. |
| Shareholder rights | Verify that token holders receive equivalent rights and privileges. | Document how holders receive dividends, votes, communications, and other entitlements. Track pooled ownership and allocations, and reconcile corporate actions and exceptions with issuers and service providers. |
| Symbol and volume limits | Limit the number of stocks traded in each tier and each stock’s trading volume, counting affiliated venues together. Repeat volume breaches require a three-month pause in that stock. | Block listings above each tier’s stock limit. Track each stock’s volume across pools and affiliates, and reject trades that would exceed its preventive daily budget. Separately check actual volume against regulatory limits using official market data, record breaches, and enforce required pauses. |
| Market halts and suspensions | Stop trading concurrently with the primary listing exchange and notify participants immediately. | Check authenticated halt status before execution; block trades when status is halted, stale, or unknown. Measure enforcement delay, notify participants, and resume only when all applicable trading restrictions are cleared. |
| Prohibited financing | No venue borrowing, hypothecation, or credit for purchasing tokenized stock. | Exclude financing functions and require full asset delivery at settlement. Review treasury practices, agreements, and integrations for prohibited financing. Full delivery does not establish where participants obtained their funds. |
| Transaction transparency | Publish free, machine-readable USD transaction data within ten minutes, with 30-day history. | Publish required trade and pool data using a documented USD valuation method. Reconcile completeness, monitor delay, and block new trading before backlogs threaten deadlines. Correct and escalate overdue reports separately. |
| Venue governance | Disclose who can upgrade, modify, suspend, override, or discontinue venue applications. | Separate emergency, operational, structural, and upgrade permissions. Apply appropriate multisig approvals and time locks, record changes, manage keys, and keep deployed authorities aligned with disclosures. |
| Public notices | Publish advance notice at least 30 calendar days before operations begin, notify the SEC within one business day of publication, and maintain disclosures on the prescribed schedule. | Confirm operations and access standards are ready for production before publishing, following SEC staff guidance. Assign notice owners and deadlines, review disclosures when assets or operations change, keep all versions public, and complete required advance disclosures. |
| Public ledger and auditability | Deploy public, auditable applications on a public, permissionless ledger. | Publish contract addresses, source code, versions, and authorities. Verify that source matches deployed contracts after each release or upgrade, preserving a history of the rules in force. |
| Books and records | Maintain required U.S. records throughout the exemption and for three years afterward; provide access for examination. | Archive required records, decision inputs, and policy versions. Capture onchain failures and rejections observed by venue services. Apply U.S. storage and retention controls, and test retrieval and regulatory exports. |
| Significant operational events | Notify participants immediately and the SEC promptly, remedy the event, and notify participants of remediation. | Monitor critical services and participant impacts. Define escalation, response owners, notifications, and recovery procedures. Preserve incident records and communications, and verify recovery before restoring affected services. |
Engineering the TSV control layer
Meeting the SEC’s requirements for an eligible TSV depends on how a venue translates them into technical architecture.
For example, every trading path must enforce eligibility, admission, halt, and volume controls before settlement, including transactions submitted directly to the pool.
The example below illustrates how these controls work together in a tokenized stock trade.
Controls in action: A tokenized stock trade
An eligible trader submits a swap to buy a tokenized stock using a stablecoin. Before the trade executes, the venue checks the trader’s eligibility, confirms the stock is approved for trading, verifies that trading is not halted, and checks the stock’s remaining trading budget.
If all checks pass, the trade executes. The venue records the outcome and makes the required trade data available.
Open questions that shape the implementation
The control map provides a starting point, but some decisions behind it still require interpretation. Three questions illustrate where the answer can change how a venue’s controls are designed and operated.
What does “concurrent” halt enforcement mean for an onchain venue?
A primary-market halt must reach the venue’s execution controls through market-data feeds and blockchain transactions. What propagation delay, if any, satisfies the concurrent-stoppage requirement remains unresolved. Moonsong recommends measuring that delay and blocking new trading when halt status cannot be verified. Whether the resulting timing meets the requirement needs to be established through legal review.
How should the venue calculate its average daily trading volume?
The calculation needs a defined averaging period for venue activity and consistent treatment of data corrections and stock splits. These choices can affect whether a venue has exceeded its limit. Moonsong recommends conservative daily trading budgets to reduce the risk of breaches, alongside a separate regulatory calculation. The calculation methodology should be agreed before launch, with daily trading budgets providing an additional preventive control.
What evidence is sufficient to demonstrate equivalent shareholder rights?
The venue needs to establish both the holder’s legal entitlement and how dividends, voting rights, and other benefits reach that holder, including when tokens sit in liquidity pools. The required evidence will depend on the tokenization structure. Moonsong recommends defining the verification standard with the issuer or tokenizer and legal counsel, then making asset admission depend on that review.
Moonsong can help assess how these open questions affect your architecture and translate the agreed approach into technical controls and operating procedures.