SEC Issues “Innovation Exemption” to Facilitate the Trading of Tokenized NMS Stock and Request for Comment

The Securities and Exchange Commission has granted temporary, conditional exemptive relief to Tokenized Securities Venues, or TSVs, from the definition of an "exchange" in the Securities Exchange Act of 1934. This decision aims to enable TSVs to trade tokenized National Market System (NMS) stock using innovative permissioned automated market makers and liquidity pools, known as AMM Liquidity Pools.

SEC Chairman Paul S. Atkins stated that this move brings America's capital markets into the digital age and invites public comment on the Innovation Exemption. The exemption is subject to conditions that ensure its public interest and investor protection. Additionally, the order grants a conditional exemption from the definition of "dealer" to liquidity providers in AMM Liquidity Pools used by TSVs who supply liquidity using proprietary capital.

This exemption is also set to expire five years after publication. The order invites public comment on potential modifications to the exemptive relief and next steps.