Leadership1 publisher3 min readPublished
SEC lets AMM venues trade tokenized US stocks without exchange registration until 2031
SEC exemptions issued September 17 let permissioned AMM pools trade tokenized US stocks for five years without exchange, ATS or dealer registration. The order is interim and open to comment, so teams building now are designing to AMM-only, OFAC-screened terms the SEC can still rewrite.
The Board Room · Leadership desk
What happened
- On September 17, 2026, the SEC exempted tokenized-stock venues using automated market makers from the definition of exchange, and their liquidity providers from the definition of dealer.
- The relief took effect immediately, and the SEC is requesting comment on every aspect of it.
- Both exemptions expire on September 17, 2031, five years after they were issued.
- Venues must permission access, and the operator must be a US person that complies with OFAC prohibitions and requirements.
- The relief covers automated market makers only, and Sullivan & Cromwell reads it as excluding standalone central limit order book protocols.
Compiled by The Board RoomSomething wrong?How this is made
Why it matters
- constraint Teams that want firm quotes in an on-chain order book get no cover from this order, so they must build a pool instead or take the registration route.
- exposure Access control and sanctions compliance become duties of a US-person operator, so offshore operators and open-access pool designs fall outside the relief.
- decision Market makers can now weigh supplying tokenized stock to pools without taking on dealer registration, as long as the pool meets the order's conditions.
- precedent With the SEC weighing future rulemaking, venues operating under these conditions will generate the record any permanent rule is drafted against.
The board-deck version fits on one slide. Tokenized versions of listed US stocks can now trade on-chain in a regulated setting, with no exchange or ATS registration for the venue and no dealer registration for the liquidity providers who stock its pools [2]. It is incomplete because every part of that sentence is conditional.
The order says plainly what problem it is solving. According to a Sullivan & Cromwell memorandum on the order, the SEC cited the trade-through prohibition in Regulation NMS Rule 611 and the quotation display, dissemination and attribution rules in Rule 602(e) as requirements that would present significant challenges for an AMM pool [8]. Both require linkages with other venues and market utilities that are not integrated with blockchain technology [8]. Positions taken under the agency's prior leadership had raised questions about whether such a pool must register as an exchange or ATS, and whether its liquidity providers are dealers [7]. The SEC answered both for now by exemption under Exchange Act Section 36(a)(1), the provision that permits relief in the public interest and consistent with investor protection [5].
The same lawyers supply the skeptic's case. They wrote that the scope "is relatively narrow and it includes several meaningful limitations" [9]. Their list covers the AMM-only scope, the permissioning and OFAC duties, and limits on which securities qualify [10][11][12]. One detail matters for product teams: a venue under the order may still offer participants non-firm trading interest, such as indications of interest and requests for quotes [11].
The narrowness has a use. A compliance lead now has one design, a permissioned AMM pool run by a US person that meets OFAC requirements, that the SEC has exempted from the exchange definition as long as the conditions hold [1][10]. Before September 17, the same lead had only prior agency positions that raised questions about registration [7].
Time is the harder constraint. The relief has run since the day it was issued [3], and the 60 months to expiry include whatever build and onboarding time a venue needs [1]. Whether the conditions carry into a permanent rule is not known yet. The order describes itself as an interim, targeted measure to facilitate trading of Tokenized NMS Stock using distributed ledger technology while the SEC considers the need for future rulemaking or other related actions [6].
This quarter's decision has two parts: whether to answer the SEC's request for comment on all aspects of the order, and whether to scope a pilot that would give that comment evidence [3]. Next quarter's consequence follows from the first. A firm that builds to the AMM model accepts the order's conditions for as long as it operates under them [2]. A firm that waits for rulemaking leaves the argument over those conditions to others. I'd expect comment letters from firms running a live pool to carry more weight with the SEC than letters from firms still deciding.
What to watch
- Comment letters from AMM venue operators, liquidity providers and incumbent exchanges, and whether the SEC amends the conditions in response.
- Any SEC rulemaking proposal on Tokenized NMS Stock that would replace the interim order before it expires in 2031.
- Whether the SEC extends similar relief to central limit order book protocols, which the current order appears not to cover.