The SEC's Onchain Stock Limits: 75 Symbols, 0.25% of Volume

On 17 September the SEC issued what it calls the "Innovation Exemption": an order letting a new kind of venue trade tokenised versions of US-listed shares through automated market makers and liquidity pools, without registering as an exchange.

The order has numbers in it that the announcement did not. A venue can trade at most 75 tokenised Tier 1 stocks, and in each of them no more than 0.25% of the underlying stock's average daily share volume. For Tier 2 stocks the limits are 250 symbols and 2.5%.

What the order allows

The order, Release No. 34-106402, creates a category called a Tokenized Securities Venue. A venue brings together buyers and sellers of tokenised NMS stock by running one or more automated market maker liquidity pools for permissioned participants, and by setting the standards for who may access them.

It grants two temporary exemptions. The venue is exempted from the definition of "exchange" in the Securities Exchange Act. Liquidity providers who supply tokenised stock from their own capital, and who may quote prices or commit capital, are exempted from the definition of "dealer." Both run for five years after publication.

Participants can include retail investors. The order says so, and asks each venue to disclose who is eligible.

The limits, in numbers

The two tiers are borrowed from the Limit Up-Limit Down Plan, which has sorted US equities since 2012. Tier 1 is the S&P 500, the Russell 1000, and exchange-traded products trading over $2 million a day. Tier 2 is everything else, less rights and warrants.

The volume share is calculated per stock: a venue's average daily share volume in a token, divided by the underlying stock's average daily share volume in the prior month as reported by the consolidated tape.

The shape of that is worth noticing. The largest and most liquid names get the tightest limit, a tenth of the Tier 2 volume share and fewer than a third of the symbols. The order does not explain the design in those terms. The arithmetic is simple, though: a venue may take up to ten times the share of trading in a smaller stock that it may take in a large one.

The SEC is not certain it has these right. Among the ten numbered questions in its request for comment, it asks directly whether 75 symbols and 0.25%, and 250 symbols and 2.5%, are appropriate.

The conditions

A venue must verify that each token gives holders the same rights and privileges as the underlying share class. If an unaffiliated third party made the token, the venue must give the issuer written notice, and trading cannot begin until 30 calendar days after the issuer receives it; an issuer may object within that window.

Smart contracts must be auditable, public, and deployed on a public, permissionless distributed ledger. Trading in a token must halt whenever the primary listing exchange halts the stock. And a venue must publish a notice on its website at least 30 calendar days before it operates, with further disclosures after that.

Tokenised stock, for these purposes, does not include a crypto asset that a third party issues as its own security to give synthetic exposure to a share, such as a tokenised linked security. The order does not name any product, and HaiPay offers no legal view on where any particular product falls.

The cash leg

This is the part that matters for payments, and it is in a footnote.

Every leg of a trading pair on a venue must be a tokenised NMS stock, a non-security crypto asset, or a tokenised money market fund. Everything that trades is onchain. The order states that it "does not limit the type of non-security crypto asset" a venue can pair with a tokenised stock, and leaves that choice to the venue.

Its own example of the money side is "a payment stablecoin issued by a permitted payment stablecoin issuer." That is a category created by the GENIUS Act, which is not yet in force. The order notes that such stablecoins will categorically not be securities only after the Act's effective date.

That date is the earlier of 18 January 2027 or 120 days after final implementing regulations. HaiPay found no final regulations in the Federal Register as of 21 September, and any issued from today would put the 120-day date after 18 January. On the current record, the legal category behind the SEC's model settlement asset takes effect in 119 days.

In the meantime, the choice of what a tokenised share trades against belongs to whoever runs the venue.

The calendar

No venue can use the exemption before 17 October, because of the 30-day public notice, and only then if its notice went up on the day of the order.

The order had not appeared in the Federal Register by 21 September, four days after it was issued. Its comment period is tied to that publication, so no deadline has yet been set. Comments go to file number 4-927.

What HaiPay could not establish

How many venues intend to operate under the exemption, or whether any has published its 30-day notice. Those notices go on each venue's own website and there is no central list.

What 0.25% of volume means in shares or dollars for any given stock. That depends on each stock's prior-month volume, which changes monthly, and HaiPay did not compute it.

When the five-year clock starts. The order says five years after publication without, in the text HaiPay read, defining publication as the Federal Register date or the date on the SEC's website.

HaiPay did not contact the SEC or any prospective venue.

What to watch

The first 30-day notices. They are public by design, and the first one to appear will show which stablecoin, if any, is chosen as the cash leg.

Federal Register publication, which starts the comment period.

And 18 January 2027, when the regime behind the stablecoin in the SEC's own example takes effect.

This piece reads an SEC order and its fact sheet. It is not legal or investment advice.