Why this investment bank expects little demand for tokenized stocks despite SEC’s new trading rules

The agency’s new Innovation Exemption creates a five-year framework for qualifying tokenized securities venues to operate automated market maker pools without registering as exchanges.

Certain liquidity providers can also avoid dealer registration, subject to conditions. The move came just days after the Clarity Act failed to advance , leaving broader crypto market structure legislation stalled.

But Reid Noch, vice president of U.S. equity market structure at TD Cowen, expects the new market to remain small, at least for now.

“We expect limited near-term adoption among both domestic retail investors and institutions,” Noch wrote in a paper on Friday. “U.S. investors already have efficient access to the underlying shares, and tokenized venues must offer a compelling benefit to offset limited liquidity and additional operational complexity.”

That gets to the central problem for tokenized stocks: they need to solve something the existing U.S. stock market doesn’t.