Nasdaq has filed a proposal with the SEC to allow trading of tokenized stocks and ETFs on its main order book, aiming for integration by Q3 2026.

Executive Summary

Nasdaq is seeking SEC approval to trade tokenized versions of listed stocks and ETFs alongside traditional securities. The proposal aims to integrate blockchain-based settlement into the national market system by the third quarter of 2026, pending regulatory approval. This initiative reflects a growing institutional interest in tokenization within regulated frameworks.

The Event in Detail

On September 8, 2025, Nasdaq filed a rule change with the SEC to enable member firms and investors to trade tokenized equities and exchange-traded products (ETPs) on the Nasdaq Stock Market. According to Nasdaq President Tal Cohen, this integration aims to reduce market friction, accelerate settlement times, and automate processes. The Depository Trust Company (DTC) is targeted to handle clearing and settlement for the tokens, with participants able to choose between tokenized or traditional forms at order entry.

Market Implications

The integration could lead to increased liquidity and accessibility for tokenized assets, attracting both traditional and crypto investors. Nasdaq anticipates that blockchain integration will streamline trading operations by reducing settlement times and improving transaction transparency. The exchange emphasizes that tokenized shares must carry the same rights and privileges as the underlying security to qualify for unified trading and execution priority. This approach aims to ensure that markets can adopt tokenization without waiving core investor protections.

Expert Commentary

Chuck Mack, Nasdaq’s Senior Vice President of North American Markets, stated that the goal is to integrate digital assets into Nasdaq’s current infrastructure and systems, advancing financial innovation while maintaining stability, fairness, and investor protection. SEC Commissioner Hester Peirce has clarified that tokenized securities must still adhere to existing securities laws.

Broader Context

The move by Nasdaq is part of a broader trend of Wall Street firms exploring tokenization. The exchange has criticized some overseas platforms for offering exposure to U.S. equities without granting investors actual share ownership, positioning its approach as a higher standard. The market capitalization of tokenized stocks has grown significantly, driven by a shift towards custody of actual stocks and the extension to derivatives. Lawmakers are also drafting market-structure legislation to clarify how tokenized assets fit within existing regulatory frameworks. Institutions like the World Federation of Exchanges (WFE) and the International Organization of Securities Commissions (IOSCO) are advocating for robust regulatory frameworks to safeguard investors and maintain market integrity.

Despite the enthusiasm, regulators remain cautious about potential risks associated with tokenization. ESMA has warned that numerous tokenized stocks fail to assure crucial shareholder rights, such as voting privileges or dividend entitlements. Nasdaq aligns its proposal with the view that any blockchain integration will occur within the national market system, ensuring tokenized securities provide the same material rights as traditional securities.