TD Securities has cautioned that efforts by Nasdaq to bring tokenization into capital markets could produce a dual-market structure, with conventional US exchanges operating alongside blockchain-based trading platforms. The warning came in a recent note authored by Reid Noch, vice president of US equity market structure at TD Securities. Noch highlighted plans by both Nasdaq and the New York Stock Exchange to introduce tokenization into alternative trading systems, a category of venue that matches buyers and sellers outside of traditional exchanges.
According to Noch, Nasdaq is pursuing three parallel initiatives in this space: improving post-trade settlement processes, enabling companies to issue tokenized shares, and supporting trading on offshore platforms such as Kraken. Taken together, these efforts could give rise to two distinct systems — one operating within the regulated US market and another functioning through offshore, blockchain-based venues. TD Securities notes that this separation raises meaningful concerns about how the same underlying assets would be handled across different environments.
A central concern is that tokenized shares backed by real stocks could trade outside the US regulatory framework, potentially behaving differently from traditional holdings. This could result in the same stock being available at different prices on different platforms simultaneously. For everyday investors, such fragmentation could make markets more difficult to monitor and may gradually draw trading activity away from established exchanges.
The broader market for tokenized assets has expanded rapidly in recent years, with equities emerging as a primary area of focus. Kraken’s xStocks platform, which offers tokenized versions of publicly traded shares on blockchain-based venues, has surpassed $25 billion in cumulative trading volume, representing approximately 150% growth since November. This trajectory points to increasing appetite among traders for around-the-clock access to equity markets beyond standard trading hours.
However, TD Securities notes that continuous trading also carries new risks, including reduced liquidity during off-peak periods and price discrepancies between platforms. These factors could complicate price discovery and introduce volatility that is less common in traditional market structures. The firm did not respond to a request for additional comment before publication.
Coinbase has also moved into tokenized equities as part of its broader ambition to build an all-encompassing exchange, intensifying competition between crypto platforms and conventional financial institutions for equity trading business. Meanwhile, NYSE has been exploring its own tokenization efforts through a partnership with Securitize, aimed at developing infrastructure for tokenized securities that could support extended or round-the-clock trading. These parallel developments across both crypto-native and traditional players suggest the push toward tokenized equities is accelerating on multiple fronts.
The convergence of these initiatives underscores a broader structural shift in how financial markets may operate in the coming years. Whether regulators will move to bring offshore tokenized trading venues under existing frameworks remains an open question. The outcome of that regulatory debate is likely to shape how — and where — equity trading ultimately takes place.
Originally reported by CoinTelegraph.
