Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend the Exchange's Rules To Enable the Trading of Securities on the Exchange in Tokenized Form

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-103989; File No. SR-NASDAQ-2025-072]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend the Exchange's Rules To Enable the Trading of Securities on the Exchange in Tokenized Form</SUBJECT> <DATE>September 16, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on September 8, 2025, The Nasdaq Stock Market LLC (“Nasdaq” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> The Exchange proposes to amend the Exchange's rules to enable the trading of securities on the Exchange in tokenized form. Specifically, proposed rules Equity 1, Section 1 and Equity 4, Rules 4756, 4757, and 4758 will clarify how Nasdaq trades tokenized securities. The text of the proposed rule change is set forth below. Proposed new language is italicized; deleted text is in brackets. <STARS/> <HD SOURCE="HD1">The NASDAQ Stock Market LLC Rules</HD> <STARS/> <HD SOURCE="HD1">Equity Rules</HD> <HD SOURCE="HD1">EQUITY 1 EQUITY DEFINITIONS</HD> <HD SOURCE="HD1">Section 1 Equity Definitions</HD> (a) When used in the Equity Rules, unless the context otherwise requires: (1) No change. (2) “Security” Unless the context requires otherwise, the term “security” shall mean a <E T="03">“</E> security <E T="03">,” as that term is defined in section 3(a) (10) of the Securities Exchange Act of 1934, as amended, that is either</E> listed on the Exchange or traded on the Exchange pursuant to unlisted trading privileges. <E T="03"> A security may be traded in the Nasdaq Market Center in either traditional form (a digital representation of ownership and rights, but without utilizing distributed ledger (“blockchain” technology)) or tokenized form (a digital representation of ownership and rights which utilizes blockchain technology). A share of a tokenized security shall be tradable in the Nasdaq Market Center together with, on the same Order Book as, and with the same execution priority as, its traditional counterpart, but only if the tokenized security is fungible with, shares the same CUSIP number with, and affords its shareholders the same material rights and privileges as does a share of an equivalent class of the traditional security. </E> <STARS/> <HD SOURCE="HD1">EQUITY 4 EQUITY TRADING RULES</HD> <STARS/> <HD SOURCE="HD1">4756. Entry and Display of Quotes and Orders</HD> (a) <E T="03">Entry of Orders</E> —Participants can enter orders into the System, subject to the following requirements and conditions: (1)-(4) No change. <E T="03">(5) A Participant that wishes for its order to clear and settle in tokenized form shall notate its preference upon entry of the order in the System by selecting a flag that the Exchange designates for this purpose, in accordance with the Exchange's procedures. When a Participant enters an order with the tokenization flag selected, the Exchange will communicate the Participant's clearance and settlement instruction to The Depository Trust Company (“DTC ”). DTC will then carry out the Participant's instruction in accordance with DTC's rules, policies, and procedures, or if it is unable to do so, it will make alternative clearing and settlement arrangements with the Participant.</E> (b) <E T="03">Entry of Quotes</E> —Nasdaq Market Makers and Nasdaq ECNs can enter Quotes into the System from 4:00 a.m. to 8:00 p.m. Eastern Time. Quotes will be processed as Attributable Orders, with such time-in-force designation as the Nasdaq Market Maker or Nasdaq ECN may assign. Entry of Quotes will be subject to the requirements and conditions set forth in section (a) above. <STARS/> <HD SOURCE="HD1">4757. Book Processing</HD> (a) Orders on the Nasdaq Book shall be presented for execution against incoming Orders in the order set forth below: (1)-(4) No change. <E T="03">(5) The mere fact that an order contains tokenized securities or indicates a preference to clear and settle securities in token form shall not affect the priority in which the Exchange executes that order.</E> <STARS/> <HD SOURCE="HD1">4758. Order Routing</HD> (a) <E T="03">Order Routing Process</E> (1) The Order Routing Process shall be available to Participants during System Hours, unless otherwise noted in these rules, and shall route orders as described below. All routing of orders shall comply with Rule 611 of Regulation NMS under the Exchange Act. (A) The System provides a variety of routing options. Routing options may be combined with all available Order Types and Times-in-Force, with the exception of Order Types and Times-in-Force whose terms are inconsistent with the terms of a particular routing option. <E T="03">When the Exchange routes an order that a Participant has designated for clearing and settlement in token form, in accordance with Rule 4756(a)(5), the Exchange will communicate this tokenization instruction to DTC upon receiving an execution for an order that was routed to another trading venue.</E> The System will consider the quotations only of accessible markets. The term <E T="03">“System routing table”</E> refers to the proprietary process for determining the specific trading venues to which the System routes Orders and the Order in which it routes them. Nasdaq reserves the right to maintain a different System routing table for different routing options and to modify the System routing table at any time without notice. The System routing options are: <STARS/> <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The purpose of the proposed rule change is to establish clearly that Nasdaq's member firms and investors may trade tokenized versions of equity securities and exchange traded products (“ETPs”) on the Exchange. The filing describes and applies to one method by which tokenized securities can trade on Nasdaq within the current national market system, using The Depository Trust Company (“DTC”) to clear and settle trades in token form, per order handing instructions that Participants may select upon entering their orders on Nasdaq. <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>  Nasdaq is actively assessing multiple methods of tokenization and trading of tokenized securities. If the Exchange plans to adopt any particular alternative to the DTC approach, then to the extent necessary, it will file rule proposals with the Commission before doing so. </FTNT> <HD SOURCE="HD3">Background</HD> Over time, U.S. equity markets have thrived while absorbing successive waves of technological innovations. Nasdaq ushered in the first wave in the 1970s. Before that time, shares of equity securities existed only in paper form as stock certificates, and stocks were quoted, traded, and physically transferred among buyers and sellers through manual processes. Nasdaq—originally an acronym which stood for the National Association of Securities Dealers Automated Quotations—revolutionized the markets by quoting and trading equity securities electronically (digitally) and in an automated fashion. Subsequent waves of technological innovation followed that were no less revolutionary. Advances in computing technologies led to the rise of sophisticated algorithmic trading strategies, high-volume proprietary trading firms, and electronic market making. Meanwhile, advances in telecommunications enabled trade execution times to shrink from hours to microseconds, and for the dissemination of market data to shift from daily distributions of basic prices lists to lighting fast and efficient disseminations of rich and actionable market insights using modern data transfer infrastructure, cloud computing, and other technical innovations. Securities tokenization is another new technology with potential applications for the securities markets. Put simply, tokenization enables aspects of securities transactions (which again, already are digital) to be recorded on a blockchain—a digital ledger that is encrypted, distributed among its users, and maintained, validated, and secured collectively by its users to ensure its integrity and security and to resist tampering. Today, by contrast, the securities markets employ various distinct and independent parties to perform these tasks, including trade matching, transferring, clearing, settlement, and custody services. These independent parties are highly regulated and trusted to protect investors. Today's system works extraordinarily well, it is already highly efficient and reliable, and it operates at little or no commission cost to retail investors. Although tokenization technology presents novel capabil ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 40k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━