The New York Stock Exchange (NYSE) is proposing rule changes to allow it to trade tokenized securities.
In a notice published by the U.S. Securities and Exchange Commission (SEC), the regulator is seeking feedback on a proposal from the New York Stock Exchange LLC to adopt a new rule, and revise several existing rules, to enable trading in tokenized securities as part of a pilot program to be operated by the Depository Trust Company (DTC).
Under the proposal, eligible members of the exchange would be able to trade tokenized versions of equity securities and exchange traded products (ETPs) within the existing national market system, using DTC to clear and settle trades in token form — subject to the same conditions imposed on Nasdaq by the SEC.
In March, the SEC approved a proposal that was filed last year by Nasdaq Stock Market LLC seeking permission to trade tokenized securities too.
In its filing, the NYSE said that it believes that “the existing regulatory structure … applies to tokenized securities, regardless of whether such securities have certain unique properties like the ability to be settled on a blockchain, much like it did when the [SEC] allowed securities to be decimalized and electronified and when exchange traded funds and other novel securities were initially approved.”
It also argued that no significant exemptions are needed for tokenized securities to trade alongside traditional securities, “and that the markets can accommodate tokenization while continuing to provide the benefits and protections of the national market system.”
“The exchange believes that this approach will leverage existing structures, players, and rules in a way that is beneficial to investors and in the markets’ best interests,” it said.
The proposed rules provide that tokenized versions of securities will use the same trading symbol as the traditional versions, confer the same rights on shareholders — such as proxy voting and dividend rights — and will be traded in the same order book, following the same execution priority rules.
Additionally, the same rules that currently apply to non-tokenized securities will continue to apply to the tokenized versions.
The proposal is out for a 21-day public comment period.