US Public Company Led by FTX Europe Head to Trade Tokenized Stocks Under SEC Exception

Key Points of This Article

• Second case following OKXICE, with trading expected to start as early as mid-November
• Exchange stablecoins on their own L2 AMM

Planning to Establish a Trading Facility for Tokenized Stocks in the US

On the 14th, US Nasdaq-listed fintech company Perpetuals.com announced its intention to utilize the SEC's "Innovation Exemption". They plan to operate a trading facility for tokenized US stocks. The CEO is Patrick Gruen, who led FTX Europe, the European division of FTX.

The Innovation Exemption is a temporary framework introduced by the SEC on September 17, allowing for a period of five years. If certain conditions are met, a "Tokenized Securities Trading Facility (TSV)" can trade tokenized US-listed stocks on the blockchain without registering as a stock exchange. Token holders must be granted rights equivalent to those of physical stocks, such as dividends and voting rights. Issuing companies can raise objections to the handling of their stocks during a 30-day notification period.

This notification marks the second case under this framework. The first case was a joint venture between cryptocurrency exchange OKX and Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), which issued a notification on October 4.

Operations Managed by US Subsidiary, Trading via L2 AMM

According to the notification confirmed by CoinDesk, operations in the US will be handled by the Delaware-based subsidiary Kephas Corporation. The trading will adopt an automated market maker (AMM) mechanism that determines prices based on the asset ratios in a pool, without using an order book. The use of the pool will be permission-based, initially operating on the Ethereum-compatible Layer 2 "Kronos X Public" developed by Perpetuals. In each pool, tokenized stocks will be exchanged for US dollar-pegged stablecoins, initially expected to be USDC.

The start date for trading has not been confirmed. After the 30-day notification period, if market data, compliance systems, and smart contract audits are in place, trading could begin as early as mid-November. The company explained in a press release that it will enable 24/7 trading, near-instant settlement, and the ability to hold in small units.

Stock Tokens from the FTX Era as the Origin

For Gruen's team, tokenized stocks are not a new venture. The Swiss company Digital Assets AG, co-founded by him, developed tokens linked to the stock prices of Tesla and Coinbase in 2021, providing them to Binance, FTX, and Bittrex. The company was later acquired by the FTX Group and became FTX Europe, with Gruen leading the division until FTX's collapse in November 2022.

Gruen stated in a statement that the Perpetuals team has been a long-time "pioneer" in tokenization. He further noted that entering the US market will allow them to leverage their foundation and expertise even more. The company's technology is used in the multi-faceted trading facility PM MTF Ltd, compliant with European MiFID II and MiCA regulations. They have also entered into contracts to tokenize over $300 million in physical commodities.

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