SEC approves five-year innovation exemption for tokenized securities trading

The Securities and Exchange Commission on September 17 approved an “innovation exemption” letting firms run tokenized securities trading free of heavy securities regulation for five years, then convened a roundtable on preparations for round-the-clock markets the same day, about an hour after the order was issued.

The order opens a five-year window for firms that want to trade securities represented as on-chain tokens, a market structure the agency discussed at a roundtable at its Washington headquarters on 24-hour trading. Chairman Paul Atkins said several preparations for extended trading hours are already underway or in place, and that he has asked staff to consider steps to pair a growth-friendly environment with protections against harmful market behavior.

Atkins told the roundtable that tokenization could help the securities industry manage inventory in real time, reduce settlement failures and mitigate the risk of abusive naked short selling, with the goal of eliminating that possibility altogether. He framed the shift toward continuous markets as investors gaining the ability to react more quickly to events.

Commissioner Hester Peirce struck a more cautious note. Firms may worry that expanded trading hours would widen spreads, increase price volatility, leave less time to handle technology problems and complicate transaction monitoring, she said, and companies may also worry about overnight drama such as social media rumors moving a stock while the corporate office is closed. Her remarks described industry concerns, not an agency position.

Strategy Inc. chief executive Michael Saylor said the Innovation Exemption enables 24/7 on-chain trading of the company’s STRC preferred stock and MSTR common stock through qualifying venues, calling it a breakthrough for American capital markets. The statement was relayed on X rather than made in a first-party filing, and which venues would qualify is not specified. No final rulemaking on the SEC’s broader tokenized securities framework has been confirmed.

The company context matters: Strategy recently repurchased $139 million of STRC while its bitcoin holdings held at 845,050 BTC, after shifting its focus toward the preferred share.