SEC Staff Says Tokenized Stock Venues Should Set Standards Before Notice

The SEC's Sept. 17 order requires qualifying venues seeking to trade certain tokenized U.S. stocks to post an operating notice at least 30 calendar days before launch. In FAQs dated Oct. 20, SEC staff advised venues to wait until their operating and access standards are established and ready for production before publishing that notice.

The advance-notice condition was already in the order. Staff's FAQ explains how to prepare the notice, but the guidance is nonbinding and adds no obligations.

The notice must appear prominently on a publicly available website in plain English. It must include the disclosures required by the order and give a clear, complete account of how the venue expects to operate when trading begins. The venue must keep the information accurate and amend it as needed. It also must notify the SEC in writing within one business day after posting the notice.

A separate process applies when a venue plans to offer a stock tokenized by a third party unaffiliated with the issuer. The venue must send the issuer written notice and wait at least 30 calendar days from receipt before making the stock available. A timely written objection prevents the venue from offering that stock.

SEC staff guidance allows a venue to identify a stock in its public notice while the issuer objection period is underway, as long as it marks that status. The public notice and issuer objection periods may therefore overlap. If the issuer does not object before its period ends, the venue may then offer the stock and must update its public notice.

The SEC's Oct. 26 exemption page listed TSV LLC, OKXICE TSV and Kephas Corporation d/b/a Perpetuals.com as entities that had submitted written notices of intent. Their notices were dated Sept. 23, Oct. 4 and Oct. 14, respectively. The listings do not establish that the entities qualify for the exemption or meet its conditions, and they do not confirm that any has started trading.

The guidance adds detail to the SEC's conditional framework for tokenized stock venues, which permits qualifying venues and certain liquidity providers to trade certain tokenized U.S. stocks through permissioned automated market makers and liquidity pools. The temporary relief expires Sept. 17, 2031.