Key points
The SEC issued an order on September 17 letting tokenized securities venues trade US stocks for five years without registering as exchanges Only venues running automated market makers qualify, which rules out the order book technology used by major exchanges and large crypto venues Goldman Sachs says AMM pricing "hinders liquidity as markets expand," capping the exemption where trading is deepest Nasdaq and NYSE are tokenizing inside the existing rulebook instead, covering Russell 1000 stocks, with DTCC's service due in October
Goldman Sachs on Friday said the SEC's new tokenized stock order is built to stay small.
The regulator legalized on-chain trading of US equities for the first time this week, but the exemption is open only to venues whose technology gets worse as trading gets bigger, and Wall Street's incumbents are already building the version without those limits.
The order, issued on Sep. 17, grants tokenized securities venues a five-year conditional exemption from registering as exchanges.
Chairman Paul Atkins called it a step "to bring America's capital markets into the digital age." It landed two days after the CLARITY Act fell 11 votes short in the Senate.
The Clause That Sets The Ceiling
Only venues running automated market makers qualify. Central limit order books, used by traditional exchanges and most large centralized crypto venues, do not.
Goldman's analysts read that as intentional. The requirement "appears to be specifically targeted at enabling innovation among smaller, more nascent execution venues in the decentralized finance space, given AMMs function better at smaller scale, whereas CLOBs are more effective for deeper, more liquid markets," they wrote.
The mechanics back that up. As trade sizes grow, AMM pricing produces more slippage, which the bank says "hinders liquidity as markets expand." The permitted technology works where volume is thin and degrades where it is not.
The Limits Stack Up
Venues face caps on the number of symbols they list and the volume they trade. Only natively tokenized stock qualifies, meaning tokens carrying the same dividend and voting rights as the underlying share, which excludes the derivative-style wrappers sold offshore today.
Also Read: Polygon Prepares A Burn That Any Holder Can Set Off, Nailwal Confirms Companies also get a veto. Before listing a tokenized version of a stock it did not create, a venue must notify the issuer and give it a chance to object.
Wall Street Is Building The Bigger Version
The incumbents are tokenizing inside the existing rulebook. Nasdaq won SEC approval in March for a pilot in which tokenized orders meet the same order book as ordinary shares, covering Russell 1000 constituents and major index ETFs, with DTCC's tokenization service due in October. NYSE is on a similar path and building a separate venue for round-the-clock trading and stablecoin-based funding, still subject to approval.
Goldman expects that split to hold, concluding that "given volume caps and corporate issuers' ability to opt out," the order means "minimal impact to volumes at traditional exchanges."
Both Routes Run On A Clock
The venue exemptions lapse after five years and the Nasdaq pilot runs for three.
Goldman's warning goes further. "Regulatory action lacks the permanence of legislation, as it could be reversed or amended by future regulators through rulemaking," the analysts wrote, arguing a full unlock still needs Congress.
The bill that would have delivered it died on the Senate floor two days before this order was signed.
Goldman expects Buy-rated Coinbase to benefit most, pointing to its custody business and its Coinbase Tokenize platform, while Buy-rated Robinhood would need to rebuild its European tokenized stock product to meet the order's native tokenization test. The bank notes it does and seeks to do business with the companies it covers.
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