The New York Stock Exchange (NYSE) is preparing a new digital trading platform where U.S. stocks and ETFs can be traded as tokenized securities, with continuous trading hours and instant settlement, subject to regulatory approval.
The new platform will combine the exchange's existing Pillar trading engine with blockchain-based settlement and retention systems. Its goal is to facilitate the trading of tokenized stocks and mutual funds that are fungible with traditionally issued securities, as well as securities issued directly as digital tokens. Tokenized owners should still be entitled to dividends and ordinary shareholder rights.
The solution is part of a broader digital strategy at Intercontinental Exchange (ICE), which owns the NYSE and operates several regulated marketplaces and clearing houses globally. ICE sees tokenization and operations on blockchain as the next step in modernizing market infrastructure for trading, settlement, management and capital raising.
According to the NYSE, the platform should support trading 24/7 with orders stated in dollar amounts, not just the number of shares. This allows for fractional trading in U.S. stocks and ETFs, where investors can buy smaller portions of a stock than is normally traded on an exchange.
The settlement is planned through tokenized capital and stable digital means of payment, including stablecoins. The platform is designed to be able to support multiple blockchains for settlement and custody, which can provide flexibility for different players in the market.
The new trading venue shall be regulated according to established market structure principles and shall be available to qualified brokers on non-discriminatory terms. NYSE stresses that the launch depends on necessary approvals from relevant regulatory authorities.
Tokenized securities on the platform should be fully integrated with the current market for U.S. stocks and ETFs. In this way, investors should be able to trade the same underlying securities in both traditional and tokenized formats, with equal rights related to ownership.
As part of the digital venture, ICE is working to adapt its clearing infrastructure to 24-hour trading and the use of tokenized capital. The company is working with BNY and Citi, among others, to test tokenized deposits in their clearing houses.
Its purpose is to enable clearing members to move and manage capital outside regular business hours in the banking system, meeting margin requirements and funding needs across jurisdictions and time zones. ICE sees this as a step towards more flexible and continuous liquidity in the markets.
“For more than two centuries, the NYSE has changed the way markets work,” says Lynn Martin, president of NYSE Group. She describes the venture as a step towards a more holistic on-chain market infrastructure, while emphasizing investor protection and regulatory frameworks for the exchange.
Michael Blaugrund, vice president of strategic initiatives at ICE, cites support for tokenized securities as an important element of the company's strategy. “Supporting tokenized securities is an important step in ICE's strategy to operate on-chain market infrastructure for trading, settlement, custody and capital raising in a new era for global finance,” he says.
Image credit: By TomaSee, CC BY 3.0
