Why this investment bank expects little demand for tokenized stocks despite SEC’s new trading rules
Reported by CoinDesk · AI-assisted summary by ChikoCorp AI News Desk
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Summary
The U.S. Securities and Exchange Commission (SEC) introduced a five-year Innovation Exemption framework permitting tokenized stock trading via automated market maker pools without traditional exchange registration. Despite this, TD Cowen predicts limited near-term adoption by U.S. investors due to easy existing access to stocks and low issuer interest in tokenization. TD Cowen highlights that perpetual futures currently have much higher trading volumes than tokenized spot stock products.
Why it matters
The source implies that while the SEC’s new rules facilitate tokenized stock trading innovation, tokenized stocks face challenges such as limited liquidity and operational complexity that may hinder widespread adoption. The SEC’s framework aims to create a regulated space for tokenized securities, but its impact may be muted as investors gravitate more towards perpetual futures for crypto-based stock exposure.
Key context
The SEC’s Innovation Exemption allows tokenized stocks to trade through automated market makers (AMMs) instead of traditional order books, potentially enabling 24/7 trading if liquidity supports it. Tokenized stocks must comply with strict requirements preserving shareholder rights and must notify issuers before trading. The Clarity Act, which would have provided broader crypto market structure legislation, recently failed to advance. The example of Figure (FIGR) illustrates low demand for tokenized stocks compared to traditional shares.
Key numbers and entities
The SEC is the regulatory body implementing the new rules. TD Cowen, a financial services firm, provided analysis and commentary through VP Reid Noch. Figure (Nasdaq: FIGR) was cited as a case study, where 99.9% of trading volume occurred in traditional shares versus tokenized shares. In a Binance snapshot, 96% of Nvidia-related volume was from perpetual futures compared to 4% from spot tokenized products.
What remains unclear
The source does not detail the specific criteria for eligibility under the Innovation Exemption or the exact caps on trading volume. It also lacks information on how the secondary market or retail user experience might evolve under the new framework. Further clarity on issuer perspectives beyond a few conversations and how broader U.S. policy developments might shift is not provided.