On September 8, 2025, in the newest in a series of proposed rule amendments, Nasdaq has proposed amendments to enable the trading of digital assets, including tokenized securities. The purpose of the rule change is to clearly establish that brokers and investors can trade tokens on the Exchange. To effectuate the amendment, Nasdaq is proposing to (i) add blockchain backed equities, including tokenized securities, to the definition of a “security,” (ii) update order entry and routing procedures to include tokenized securities; and (iii) update book processing to align tokenized securities with the same clearance and settlement priority as traditional securities.
Background
Over the years, U.S. equity markets have transformed to support technological innovations including, for example, moving from paper to electronic securities, shortening settlement cycles, instant price dissemination, and allowing for algorithmic electronic trading. Tokenization, which involves recording securities transactions using digital ledger blockchain technology, is such an innovation. Nasdaq believes that as long as the use of tokenized securities occurs in regulated markets, on national security exchanges or alternative trading systems, using FINRA regulated broker-dealers, DTC and existing clearing agencies, the current regulatory structure applies just as it does for traditional securities. That is, no significant exemptions or parallel market structure constructs are needed for tokenized securities.
Nasdaq believes the markets can use tokenization while continuing to provide the benefits and protections of the national market system. Moreover, Nasdaq believes that the rule changes are necessary to protect investors and the U.S. trading system. In particular, by allowing for the trading of tokenized securities under the current market structures, Nasdaq will avoid the growth and continuation of a secondary cottage industry that portends to allow for tokenized trading in U.S. equities but in reality only offers digitally tradeable rights to securities that such platforms purchase and hold in their own accounts.
Further, Nasdaq submits that only minor changes to existing rules and practice are necessary to accommodate the trading of tokenized securities and that granting broad exemptions would be unwarranted.
Proposed Rule Changes
As indicated above, to effectuate the amendment, Nasdaq is proposing to (i) add blockchain backed equities, including tokenized securities, to the definition of a “security,” (ii) update order entry and routing procedures to include tokenized securities; and (iii) update book processing to align tokenized securities with the same clearance and settlement priority as traditional securities.
Order Entry and Processing
Nasdaq proposes to amend the definition of a security such that exchange participants may trade tokenized securities. The amendment will clarify that “tokenized” refers to digital representations of paper securities that utilize digital ledger or blockchain technology, as opposed to “traditional” securities, which are also digital representations of paper securities, but do not utilize blockchain technology. Further, the definition will state that tokenized securities must be fungible with, have the same CUSIP number as, and their holders the same material rights and privileges as do traditional securities of an equivalent class. Nasdaq will trade tokenized securities together with traditional securities on the same Order Book and according to the same execution priority rules.
A tokenized equity security would be deemed to provide the same material rights and privileges as a traditional security if, among other things, it conveys an equity interest in an underlying company, a right to receive any dividends that the company issues to its shareholders, a right to exercise any voting rights that shareholders are due, and a right to receive a share of the residual assets of the company upon liquidation.
Nasdaq also proposed to amend its order entry rule to provide a methodology for communicating a desire to clear and settle a security in tokenized form. Nasdaq will create a notation flag that may be selected to designate the desire to trade in tokenized form. DTC would then carry out the Participant’s instruction in accordance with DTC’s rules, policies, and procedures.
Likewise, Nasdaq will amend its book processing rule to clarify that the mere fact that an order contains tokenized securities or indicates a preference to clear and settle securities in token form will not affect the priority in which the Exchange executes that order.
Finally, Nasdaq will amend its order routing rule to note that when the Exchange routes orders that have designated for clearing and settlement in token form, it will communicate this tokenization instruction to DTC upon receiving an execution for an order that was routed to another trading venue.
Apart from these changes, as far as Nasdaq’s systems and matching engine are concerned, the Exchange’s trading procedures and behavior will be the same regardless of whether a member opts to trade tokenized or traditional shares of a stock.
Tokenization and Post-Trade Processing
Nasdaq’s proposed rule changes would become effective once the requisite infrastructure and post-trade settlement services have been established by DTC, with any required regulatory approvals having been obtained. Nasdaq understands that DTC is working to develop the necessary infrastructure, services, and procedures to facilitate such tokenization and the related post-trade settlement infrastructure and services.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
Contact Anthony, Linder & Cacomanolis, PLLC. Inquiries of a technical nature are always encouraged.
Follow Anthony, Linder & Cacomanolis, PLLC on Facebook, LinkedIn, YouTube, Pinterest and Twitter.
Anthony, Linder & Cacomanolis, PLLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
© Anthony, Linder & Cacomanolis, PLLC
