TD Cowen sees low demand for tokenized stocks under new SEC rules

TD Cowen anticipates low interest in tokenized equities, even as new SEC regulations permit trading outside conventional markets, according to a CoinDesk report.

The Securities and Exchange Commission created an Innovation Exemption last week. This five-year structure permits eligible platforms to run automated market maker pools, provided they do not register as exchanges. The regulatory move came after the CLARITY Act failed to pass Congress.

Reid Noch, a vice president for U.S. equity market structure at TD Cowen, outlined the outlook in a paper released Friday. “We expect limited near-term adoption among both domestic retail investors and institutions,” he wrote. Noch added that because U.S. investors have efficient access to the underlying assets, on-chain platforms need to provide significant advantages to counterbalance thin liquidity and higher operational costs.

TD Cowen data illustrates the weak uptake. In a 24-hour period reviewed by the bank, 99.9% of Figure’s notional trading volume occurred via its standard listed shares, rather than its blockchain tokens. Similarly, a review of Nvidia-related activity on Binance found that 96% of volume derived from perpetual futures, with spot products accounting for just 4%.

Under the new framework, tokens must mirror Nasdaq-listed stocks and retain economic interests, dividends, and voting rights. Third-party tokenizers are required to inform companies prior to trading, allowing issuers a 30-day window to raise objections. Noch concluded that perpetual futures represent the more robust demand channel for crypto-based stock exposure.