The SEC has exempted onchain stock venues from being exchanges, and from the rule that protects the best price

What happened

The Securities and Exchange Commission issued an order on 17 September 2026, release 34-106402 under file number 4-927, granting two temporary conditional exemptions under section 36(a)(1) of the Securities Exchange Act of 1934. The first takes a new category of venue, a Tokenized Securities Venue, outside the definition of "exchange" in section 3(a)(1). The second takes certain liquidity providers, which the order calls Covered Firms, outside the definition of "dealer" in section 3(a)(5). The order runs to 60 pages and its operative paragraph says the relief lasts "until September 17, 2031". A TSV is defined as an organisation, association or group of persons that brings together buyers and sellers of tokenized listed shares by providing one or more automated market maker liquidity pools for permissioned participants and setting the standards for access to them. "Tokenized NMS Stock" means a listed share tokenized by or on behalf of its issuer, or by a third party unaffiliated with the issuer, provided the token carries the same rights. It expressly excludes a crypto asset issued by a third party that represents that party's own security and gives synthetic exposure to the share, such as a tokenized linked security or a tokenized security-based swap, and it excludes rights and warrants. The conditions are specific. The venue must be a United States person and comply with the sanctions programmes administered by the Office of Foreign Assets Control. Access must be permissioned, whether by allow-listing wallet addresses or by encoding transfer restrictions into the token. The smart contracts must be "auditable, public, and deployed on a public, permissionless distributed ledger". The venue must verify that the token provides holders "the same rights and privileges as does traditional NMS stock of an equivalent class", which the order spells out as the same interest in the company, the same dividends, the same votes and the same share of residual assets on liquidation. It must stop trading concurrently with any stoppage on the primary listing exchange. It cannot conduct primary issuance and it "cannot engage in financing activities". It must publish a notice on its website at least 30 calendar days before operating and tell the Commission in writing within one business day of publishing it. A Covered Firm must trade solely for its own account and "must not hold or custody customer assets". The volume limits are the containment. Tokenized NMS Stock is split into two tiers taken from the Limit Up-Limit Down Plan, and the order describes Tier 1 as all listed shares in the S&P 500 and the Russell 1000 plus certain exchange-traded products trading above $2,000,000 in notional consolidated average daily volume. Tier 1 trading on a venue "cannot exceed 75 symbols traded and 0.25 percent of the average daily share volume during the prior month in the relevant NMS stock". Tier 2 cannot exceed 250 symbols and 2.5 per cent. Affiliated venues must aggregate both figures, which the order says is "intended to help avoid a situation in which businesses are structured into multiple TSVs to avoid triggering the volume and symbol limitations". The chairman's statement puts the order in the week it arrived. "A little over a year ago, the SEC launched 'Project Crypto' with the goal of modernizing the rules and regulations under the Federal securities laws to enable America's financial markets to move onchain. Earlier this week, Congress was unsuccessful in advancing the CLARITY Act despite the tireless efforts of many. So today, the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America's capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the 'Innovation Exemption,'" said Paul S. Atkins, adding that the interim measure "must be followed by durable rulemaking". Jamie Selway, director of the Division of Trading and Markets, said the approval "marks an important milestone for the Commission's work to open our capital markets for tokenized securities". Commissioner Mark T. Uyeda placed the relief in a line that runs through money market funds, index funds and exchange-traded funds, all of which he said grew from the Commission's initial use of its exemptive authority.

Why it matters

What has been suspended is not a filing requirement, it is the price architecture of the National Market System, and the order says so in its own reasoning. Because "prices on AMM Liquidity Pools are generally set based on the ratio of the quantities of the assets in a liquidity pool without directly considering external pricing", the order finds that a venue using such a pool "may be unable to comply with the trade-through requirements of Rule 611 under Regulation NMS". It records the same difficulty with Rule 602(a), which makes an exchange collect and publish the best bids and offers of its members, and with Rule 612 on minimum pricing increments, where AMM pricing in finer increments could be broken by rounding. Rule 611 is the rule that stops a venue executing at a worse price than another venue is publishing. The Commission has decided that a venue which cannot see other venues' prices can trade listed shares anyway, within caps. The Commission also states the consequence. Explaining why an issuer might object to its shares being traded on such a venue, the order names "the potential price dislocation or adverse effects on the price of the underlying NMS stock, particularly given that prices disseminated by an AMM Liquidity Pool are most likely based only on the ratio of the quantities of assets in that liquidity pool". That is the regulator writing down that the price on the venue it has just authorised may not be the price of the share, and then sizing the experiment so that it cannot matter much: a quarter of one per cent of the prior month's volume in a Russell 1000 name, across no more than 75 names. The issuer veto is the other new thing, and it is a property right rather than a disclosure. Where the token was made by an unaffiliated third party, the venue must serve an Issuer Notice at the address on the cover of the issuer's Exchange Act reports, and trading "may not commence until at least 30 calendar days from the date when the issuer receives" it. A written objection inside the window blocks that share on that venue and must be disclosed publicly within five business days. Silence starts trading. Companies now have a say in where their shares trade that they do not have on any registered exchange, and they have it only against third-party tokenizations, which is to say only against the model they have been complaining about. And the exclusion of synthetics draws the line the other way round from the market. The tokens that actually circulate offshore are claims on an issuer rather than shares, which is the structure this desk reported on 9 September when Robinhood described its stock tokens as debt and declined to say who votes the underlying shares. Those instruments are outside this order entirely. So the relief is available for the model that barely exists in the United States and unavailable for the model that has the volume, which means the order is an invitation to build the first rather than a rule for the second.

What is not settled

The order solicits comment through the Commission's internet comment form and by email under file number 4-927 but states no closing date, referring only to publication on SEC.gov and in the Federal Register. No venue has yet filed the notice the order requires, so the number of TSVs is zero. Question 7 asks whether registered broker-dealers participating on a venue need their own relief from Regulation NMS, which would extend the exemption from the venue to the intermediaries; question 9 asks whether the dealer exemption should be permanent. Whether the pool price tracks the share price is the empirical question the caps exist to contain, and nothing in the order requires the venue to publish a comparison. And the treatment of synthetic stock tokens is left open: the order addresses them only to exclude them.