JP Morgan and SIFMA Flag Structural Gaps in SEC Tokenised Stock Exemption
Key points
- JP Morgan's Eddie Wen raised concerns at SIFMA's annual conference about issuer rights over share representation on tokenised platforms and the risk that liquidity migrates to the least-regulated venues.
- The SEC's Innovation Exemption for tokenised securities venues took effect on 17 September without a prior comment period.
- SIFMA's comment letter flags two core weaknesses: issuers have only one narrow opportunity to block a third-party token of their stock, and volume caps apply per venue rather than in aggregate across all TSVs.
- Two tokenised securities venues have published formal notices and could begin trading within weeks, while 16 issuers have already objected to at least one of them.
- SIFMA is requesting a longer issuer objection window, a named issuer contact requirement, post-initial objection rights, and SEC publication of aggregate trading volumes by stock.
During SIFMA’s annual conference, JP Morgan‘s Eddie Wen raised two pointed questions about the Securities and Exchange Commission‘s Innovation Exemption for tokenised securities venues (TSVs): whether issuers retain any meaningful say over how their shares are represented and traded on tokenised platforms, and whether liquidity will simply flow to whichever venues impose the lightest constraints. SIFMA has since filed a formal comment letter that converts those questions into specific reform requests, revealing fault lines in a framework that took effect on 17 September without prior public comment.
The comment letter identifies two structural problems. First, issuers currently get a single, narrow window to block a third-party tokenisation of their stock, with no named contact requirement and no mechanism to object after that initial period closes. Second, the trading volume caps are applied per venue rather than in aggregate, and because anyone can open a TSV, the per-venue limit offers limited protection against fragmented volume that collectively exceeds any meaningful threshold. SIFMA is asking the SEC to monitor aggregate trading across all venues and to publish those figures on a per-stock basis, and it notes that the Commission intends to publish a list of active TSVs on its website.
The stakes are not theoretical. Two venues have already published formal notices and could begin trading within weeks, and 16 issuers have objected to at least one of them. That combination, a live framework, active venues, and a rising objection count, means the gaps SIFMA identifies are immediately operational rather than hypothetical. Whether the SEC responds before the first trades settle is the central question to watch.