Nasdaq Proposes Facilitating Trading of Tokenized Securities

The Nasdaq Stock Market LLC ("Nasdaq") proposed amending its rules to enable the trading of securities on the Exchange in tokenized form during the pendency of a pilot program operated by the Depository Trust Company ("DTC").

In its proposed rulemaking, Nasdaq explained that the amendment would allow "DTC Eligible Participants" to clear and settle trades for specific securities—initially those in the Russell 1000 Index and major ETFs—using blockchain technology pursuant to a December SEC No-Action Letter. The Exchange stated that tokenized securities would trade on the same Order Book and with the same execution priority as their traditional counterparts. To utilize the service, participants would notate a preference for tokenized settlement via a specific "flag" during order entry; if the participant or security is ineligible, the trade would default to traditional settlement processes.

Nasdaq said the proposal was consistent with the Exchange Act because: (i) it conducts trading within the national market system, thereby preserving the National Best Bid and Offer and preventing the market fragmentation associated with siloed digital asset platforms; (ii) it ensures tokenized shares remain fungible and convey the exact same rights—such as voting and dividends—as traditional securities, avoiding the risks of derivative "digital rights" models observed in Europe; (iii) it applies existing regulatory frameworks, including Regulation SCI and real-time surveillance, to tokenized transactions; and (iv) it leverages the trusted infrastructure of the DTC for post-trade settlement rather than untested third-party models.

Comments on the proposal must be submitted on or before February 20, 2026.