Sep. 13, 2025
Brent Taylor [REDACTED] September 30, 2025 Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: SR‑NASDAQ‑2025‑072 – Proposed Rule Change To Enable Trading of Tokenized Securities and ETPs To the Commissioners and Staff of the SEC: I appreciate the opportunity to comment on Nasdaq’s proposed rule change to permit tokenized equities and exchange‑traded products (ETPs). I write to offer a policy recommendation: the SEC should adopt, as a foundational reference model, the Swiss approach to tokenized securities (as implemented via SIX Digital Exchange and the DLT Act) as a flexible, hybrid template for U.S. tokenization efforts. Rationale: 1. Regulatory clarity and legal recognition. Switzerland’s DLT Act gives legal certainty to tokenized securities, establishing them as valid uncertificated securities with well‑defined rights. This framework allows issuers to opt in to tokenization, while preserving investor rights and recordkeeping transparency. The U.S. would benefit from similar clarity—for example, by explicitly recognizing tokenized securities issued under issuer consent, and by distinguishing them from third‑party “wrapped” tokens. This aligns with Commissioner Peirce’s view that tokenized securities remain securities under U.S. law. 2. Coexistence of legacy and tokenized systems. Rather than mandating a full overhaul, Switzerland permits tokenized issuances and traditional issuances to coexist—allowing market participants to choose which form to issue or trade. This opt-in hybrid model minimizes disruption and gives market actors time to adapt. The SEC should avoid forcing a binary choice between legacy and blockchain-based settlement; instead, it should facilitate coexistence and interoperability. 3. Preserving market integrity and investor protections. The Swiss model balances innovation with investor protection because tokenized trading is conducted within a regulated exchange and central securities depository framework, which maintains surveillance, reporting, corporate actions, voting rights, and other critical functions. The U.S. should similarly insist that trading of tokenized securities be subject to national market structure protections, transfer agent rules, and clarity on disclosure and voting rights. The Nasdaq filing’s requirement that tokenized securities must have fungibility with traditional shares and preserve material rights is a strong step, but should be paired with clear policy guardrails. 4. Avoiding fragmentation and liquidity risk. Tokenization experiments that proceed without issuer coordination risk fragmenting liquidity (between tokenized and non-tokenized shares), impairing price discovery, and creating arbitrage risks. Switzerland’s approach avoids this by giving the issuer the choice whether to tokenize and by aligning recordkeeping and corporate governance. The SEC has flagged this risk in its sandbox commentary, noting that issuers should have the option to “opt out” of tokenization. 5. Phase-in flexibility and pilot testing. The Swiss rollout was incremental—starting with tokenized bonds and financial instruments, then gradually expanding to equities. A similar U.S. approach—perhaps via pilot programs or sandbox testing—would allow regulators and market participants to stress-test tokenization under realistic conditions while evaluating settlement, custody, and investor behaviors. The SEC should consider creating a pilot tokenization sandbox with clear exit criteria and consumer protections. The Nasdaq proposal itself could serve as an initial pilot. No broad exemptions or unmonitored peer-to-peer permissionless tokenization should be permitted until core questions around settlement, custody, transfer, and disclosure are resolved. Conclusion and Recommendation : In sum, the SEC should endorse an issuer-led tokenization model based on Switzerland’s hybrid DLT + legacy system, enabling tokenized securities to coexist within traditional regulated markets. This approach would safeguard investor protections, corporate governance standards, and market integrity—while enabling the U.S. to modernize and expedite settlement, reduce counterparty risk, and unleash innovation in real-world asset tokenization. I respectfully recommend that the SEC integrate Swiss-style optionality, sandbox testing, and legal clarity into its review of SR‑NASDAQ‑2025‑072 and any broader tokenization rule making. Thank you for considering these recommendations. Sincerely, Brent Taylor