The New York Stock Exchange is building a venue using blockchain technology to allow for trading tokenized stocks and exchange-traded funds around the clock.
NYSE, which is owned by Intercontinental Exchange Inc., plans to use its existing technology that matches buyers and sellers, combined with private blockchain networks, to facilitate the trading of tokenized securities in real-time, according to executives. The company is looking to launch the new digital trading platform later this year, pending regulatory approval.
“This reflects an evolution of NYSE’s trading capabilities which went from trading floor, to electronic order-book, to blockchain,” Michael Blaugrund, vice president of strategic initiatives at ICE, said in an interview. “It allows for new types of investor accessibility, and will create new opportunities for retail to participate in the stablecoin-funded markets that have attracted their attention.”
The firm is in active dialogue with the US Securities and Exchange Commission as it seeks permission to operate the new platform, he said. Part of the digital infrastructure would allow for trades to be funded, and settled in real time, as opposed to the one-day delay that now exists in today’s equity markets.
“We think it aligns with the retail investor’s emerging desire to be able to trade something at 5:04 p.m. on a Saturday and then use that money to buy something else at 5:05 p.m. on a Saturday,” Blaugrund said. “This would facilitate that trade in a way that traditional equity infrastructure cannot.”
NYSE’s plans are addressing some of the foundational elements of how stocks are defined, issued and settled — questions that could decide whether tokenization becomes embedded in the plumbing of Wall Street. The New York Stock Exchange is the largest equities exchange operator in the US by volume.
A tokenized security is a digital representation of a security that can be traded on a blockchain network, rather than in a brokerage account. They have been touted as a way to deepen liquidity, support fractional ownership and widen access of the US stock markets because they can be traded at all hours of the day.
Blaugrund said the new venue is just one of several digital strategies that ICE is exploring. The company is also looking at new clearing infrastructure that would support trading 24 hours a day, 7 days a week. ICE is working with banks to support tokenized deposits, eventually looking to move money and manage funding requirements for trading outside of traditional banking hours.
“This is just the first step in a broader re-platforming, in a longer journey for ICE and for the industry,” Blaugrund said.
Round-the-Clock Access
NYSE’s main competitor in the US, Nasdaq, asked regulators in September to let investors trade tokenized versions of stocks on its public exchange. The company proposed that tokenized securities should trade under the same rules of execution and documentation as the underlying security, and that tokenized assets should be clearly labeled as such.
Supporters of tokenization say the move could be a step toward round-the-clock access to certain assets. NSYE already outlined its path to extend trading hours on its Arca equities venue, with plans to offer trading 22 hours on weekdays. That separate proposal got initial approval from the SEC in February, pending updates to the market’s data feed which is a necessary step for exchanges to offer extended trading hours.
NYSE’s new digital venue could be another push toward non-stop trading, and help bridge the gap between traditional markets and digital finance. Skeptics counter that the digital technology may be new, but the underlying risks in lending and borrowing remain unchanged — and that winning over regulators and major investors will be essential before such trades become routine.
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