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The SEC exempts tokenized stock venues from the exchange definition

17 September 2026

The Securities and Exchange Commission issued an order on 17 September 2026 permitting permissioned trading of tokenized shares on venues that are not registered exchanges, with access limited to “verified or credentialed users and liquidity providers” under standards the venue sets.1 The mechanism is exemption rather than authorisation: acting under section 36(a)(1) of the Securities Exchange Act, the Commission orders that a “Tokenized Securities Venue” complying with its conditions “shall be exempt from the definition of ‘exchange’ under section 3(a)(1) of the Exchange Act,” and that a “Covered Firm” so complying “shall be exempt from the definition of ‘dealer’ under section 3(a)(5) of the Exchange Act.”12 The conclusion runs the relief “until September 17, 2031”; the order’s introduction and the Commission’s press release instead describe it as “[s]et to expire five years after publication,” and publication had not occurred.13

The Commission that issued it has three members and five seats. Under 15 U.S.C. 78d(a) the Commission is “composed of five commissioners,” of whom “[n]ot more than three … shall be members of the same political party.”4 Chairman Paul S. Atkins, quoted in the Commission’s press release describing the order as acting “within its statutory authority, to bring America’s capital markets into the digital age,” and Commissioners Hester M. Peirce and Mark T. Uyeda each published a statement on the day it issued; none was styled as a dissent.356 The order records no vote, and is signed “By the Commission” over the name of the Deputy Secretary.1 It carries a request for comment and ten enumerated questions, including “Should the TSV Exemption be permanent?” and “Is the length of the temporary TSV Exemption appropriate?”1 Comments reference File Number 4-927, but the order had not appeared in the Federal Register and was not on public inspection when this was checked, so no closing date is fixed.7

  1. Two distinct definitions are switched off, capturing two distinct parties. The “exchange” definition at section 3(a)(1) captures the venue, and meeting it “triggers the requirement to register as a national securities exchange pursuant to section 5 of the Exchange Act.”18 The “dealer” definition at section 3(a)(5) captures a Covered Firm — “any liquidity provider in an AMM Liquidity Pool that supplies liquidity in the form of Tokenized NMS Stock using proprietary capital” — and section 15(a)(1) makes it unlawful for an unregistered dealer to effect transactions in securities.19 Section 36(a)(1) lets the Commission exempt any person, security or transaction from any provision of the Act where that is “necessary or appropriate in the public interest, and is consistent with the protection of investors.”10 The order’s conclusion finds the exemptions “are necessary and appropriate in the public interest, consistent with section 36(a)(1) of the Exchange Act.”1 The Commission describes the order as “an interim, targeted measure.”1

  2. The permission is bounded by hard numbers, and breaching them is graduated. Tokenized stock is split into two tiers taken from the Limit Up-Limit Down Plan. Tier 1 — the most liquid names — “cannot exceed 75 symbols traded and 0.25 percent of the average daily share volume during the prior month”; Tier 2 cannot exceed “250 symbols traded and 2.5 percent.”111 On a volume limit, “[t]he first time a TSV exceeds a volume threshold in a Tokenized NMS Stock, it will not be required to take any action, other than to ensure that it does not exceed the volume thresholds going forward.” On each subsequent breach “the TSV must immediately pause trading in such Tokenized NMS Stock for three months,” notify its participants immediately, and amend its public notice “within five business days.”1 The grace does not extend to the symbol counts: “[t]he stepped compliance approach only applies with respect to the volume limitations and not to the limitations in the number of symbols,” and a venue exceeding those “would not meet the conditions of the TSV Exemption.”1

  3. The conditions are aimed at keeping the token tethered to the share. A venue “must verify that the Tokenized NMS Stock made available for trading on the TSV provides holders the same rights and privileges as does traditional NMS stock of an equivalent class.”1 Trading must stop “concurrently with any stoppage of trading in the underlying NMS stock on the primary listing exchange, which includes a halt or a suspension.”1 Smart contracts “must be auditable, public, and deployed on a public, permissionless distributed ledger.”1 Where a third party unaffiliated with the issuer does the tokenising, the venue must send an “Issuer Notice,” and trading “may not commence until at least 30 calendar days from the date when the issuer receives the Issuer Notice”; a timely written objection is a veto, and the venue must amend its public notice within five business days.1 The order attaches six conditions in all, including a requirement to publish a Notice covering the venue’s operations and trading activities and those of its affiliates.31

  4. Exempting the venue from the exchange definition takes it out of Regulation NMS, while leaving the antifraud provisions in place. A complying venue “would not be considered a trading center or a market center under Regulation NMS, and thus the rules under Regulation NMS applicable to exchanges, ATSs, trading centers, and market centers would not apply to such TSV.”112 What the order does not reach, it says so expressly: it “does not provide an exemption from any other applicable laws, including but not limited to the anti-fraud and anti-manipulation provisions of the Federal securities laws, such as the obligations under section 10(b) of the Exchange Act and Rule 10b-5 thereunder”; offers and sales must still be registered under the Securities Act or exempt from registration, and “[n]o primary issuance or initial offerings of securities are permitted on a TSV”; the venue must be a U.S. person and comply with OFAC sanctions programmes; and the relief “cannot be relied upon” by a firm subject to statutory disqualification under section 3(a)(39).1

The order sits alongside the Commission’s proposed Regulation Crypto Assets, published 21 August and open for comment until 20 October, which approaches the same subject from the registration side rather than the trading side (see SEC proposes to define when a crypto investment contract has ceased to exist).13

Footnotes

  1. Securities and Exchange Commission, “Order Granting Temporary Conditional Exemptive Relief, Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934, from the Definition of ‘Exchange’ in Section 3(a)(1) of the Exchange Act for the Use of Certain Distributed Ledger Trading Venues for Tokenized NMS Stocks and from the Definition of ‘Dealer’ in Section 3(a)(5) of the Exchange Act for Certain Liquidity Providers for Tokenized NMS Stocks, and Request for Comment,” Release No. 34-106402, File No. 4-927, 17 September 2026, 60 pages. Quoted: the introduction, for the “permissioned trading” framing, the TSV and Covered Firm definitions, and the “[s]et to expire five years after publication” and “interim, targeted measure” passages; the discussion of the exchange definition and Regulation NMS, including note 36 on section 5 registration; the section on distributed ledger applications, for the smart-contract condition; the sections on the Public Notice, the Issuer Notice and Notice of Issuer Objection, the rights-and-privileges verification, and the stoppage of trading; section F on the symbol and volume limits, including the Tier 1 and Tier 2 figures, the stepped compliance approach and note 74 excluding symbol limits from it; the passages disclaiming exemption from other laws, barring primary issuance, and excluding firms under statutory disqualification; the request for comment and its numbered questions; and section VII, the conclusion, ordering the exemptions “until September 17, 2031” and making the section 36(a)(1) findings. Signed “By the Commission. J. Matthew DeLesDernier, Deputy Secretary.” https://www.sec.gov/files/rules/exorders/2026/34-106402.pdf ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7 ↩8 ↩9 ↩10 ↩11 ↩12 ↩13 ↩14 ↩15 ↩16 ↩17 ↩18 ↩19

  2. Securities Exchange Act of 1934 § 3(a)(1) (definition of “exchange”) and § 3(a)(5) (definition of “dealer”), 15 U.S.C. § 78c(a)(1) and (a)(5). https://www.govinfo.gov/link/uscode/15/78c?link-type=html ↩

  3. Securities and Exchange Commission, “SEC Issues ‘Innovation Exemption’ to Facilitate the Trading of Tokenized NMS Stock and Request for Comment,” press release 2026-90, 17 September 2026. Quoted for Chairman Atkins’s statement that the Commission is acting “within its statutory authority, to bring America’s capital markets into the digital age,” and cited for its enumeration of six conditions, of which the public-notice condition is the one not otherwise quoted from the order here. The release also states that the exemptions “are set to expire five years after publication,” and quotes Jamie Selway, Director of the Division of Trading and Markets. Where the press release and the order differ in wording, the order governs. https://www.sec.gov/newsroom/press-releases/2026-90-sec-issues-innovation-exemption-facilitate-trading-tokenized-nms-stock-request-comment ↩ ↩2 ↩3

  4. 15 U.S.C. § 78d(a): the Commission is “to be composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate. Not more than three of such commissioners shall be members of the same political party.” https://www.govinfo.gov/link/uscode/15/78d?link-type=html ↩

  5. Three statements were published on 17 September 2026: Chairman Paul S. Atkins, “Statement on the Innovation Exemption: A Bridge Toward Durable Rulemaking”; Commissioner Hester M. Peirce, “Slumber Number: Innovation Exemption Statement”; and Commissioner Mark T. Uyeda, “Statement on the Innovation Exemption.” Commissioner Peirce writes that “[t]he innovation exemption has arrived,” and that in issuing the order “the Commission is rejecting the approach that the mythological Procrustes would have taken,” instead “using its exemptive authority to tailor the bed to fit the sleeper.” Peirce’s statement was read in full; the Atkins and Uyeda statements were identified from the Commission’s speeches-and-statements feed and are cited here for their existence and titles rather than their contents, which is why the body does not characterise them beyond noting that none is styled as a dissent. https://www.sec.gov/newsroom/speeches-statements/peirce-slumber-number-innovation-exemption-statement-091726 ↩

  6. Securities and Exchange Commission, “SEC Commissioners,” read 18 September 2026, listing Chairman Paul S. Atkins (Chairman since 2025), Commissioner Hester M. Peirce (since 2018) and Commissioner Mark T. Uyeda (since 2022). Three sitting members against five statutory seats; that the remaining two are vacant is inference from the page listing no others, not a statement the Commission makes there. https://www.sec.gov/about/sec-commissioners ↩

  7. Federal Register API queries run 18 September 2026: a full-text search for “Tokenized NMS” returned no documents, and the order did not appear among Securities and Exchange Commission documents on public inspection. The order states that it “will be published on SEC.gov and in the Federal Register.” A comment deadline that runs from publication therefore has no start date yet, though the order’s comment channels — a web form, an email address and a paper address — are open. This is a negative across the Federal Register’s own API at a point in time, not a statement that publication will not happen. https://www.federalregister.gov/api/v1/documents.json?conditions%5Bterm%5D=%22Tokenized+NMS%22 ↩

  8. Securities Exchange Act of 1934 § 5, 15 U.S.C. § 78e, making it unlawful for a broker, dealer or exchange to effect transactions in securities on an unregistered exchange; § 6, 15 U.S.C. § 78f, governs registration. The order cites both, together with 17 CFR 240.3b-16(a). https://www.govinfo.gov/link/uscode/15/78e?link-type=html ↩

  9. Securities Exchange Act of 1934 § 15(a)(1), 15 U.S.C. § 78o(a)(1), making it unlawful for an unregistered broker or dealer to effect transactions in, or induce the purchase or sale of, any security. https://www.govinfo.gov/link/uscode/15/78o?link-type=html ↩

  10. Securities Exchange Act of 1934 § 36(a)(1), 15 U.S.C. § 78mm(a)(1), authorising the Commission to exempt any person, security or transaction from any provision of the Act or rules thereunder “to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.” The order’s conclusion states the finding in the conjunctive — “necessary and appropriate” — where the statute is disjunctive. https://www.govinfo.gov/link/uscode/15/78mm?link-type=html ↩

  11. National Market System Plan to Address Extraordinary Market Volatility, the “Limit Up-Limit Down Plan,” whose Tier 1 and Tier 2 classifications the order adopts for this purpose. Because the LULD Plan excludes rights and warrants from its Tier 1 and Tier 2, tokenized NMS stock for purposes of the exemption excludes them too. The order explains that it sets a higher symbol limit for Tier 2 because there are more Tier 2 securities, and that separate limits “incentivize TSVs to make available for trading Tokenized NMS Stocks that are not only the most liquid securities.” https://www.luldplan.com/plans ↩

  12. Regulation NMS, 17 CFR 242.600-614, the rules governing order protection, access, sub-penny quoting and market data for national market system securities. The order cites the part as a whole at note 41. https://www.ecfr.gov/current/title-17/chapter-II/part-242/subject-group-ECFRac68bdd026a46db ↩

  13. Securities and Exchange Commission, “Regulation Crypto Assets,” proposed rule, 91 FR 54510, published 21 August 2026, FR Doc. 2026-17183, Release Nos. 33-11434 and 34-106150, comments due 20 October 2026. See SEC proposes to define when a crypto investment contract has ceased to exist. https://www.federalregister.gov/documents/2026/08/21/2026-17183/regulation-crypto-assets ↩

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