TD Cowen Sees Low Demand for Tokenized Stocks Under SEC Rules
TD Cowen predicts minimal adoption of tokenized equities, citing existing market efficiency and issuer reluctance.
Key points
- TD Cowen predicts limited adoption of tokenized stocks due to existing efficient access to U.S. shares.
- Figure’s data shows 99.9% of trading volume remains on traditional Nasdaq shares despite token availability.
- Perpetual futures account for 96% of Nvidia-related crypto volume, outperforming spot token products.
TD Cowen assesses that demand for tokenized stocks will remain limited despite the SEC's new regulatory framework. The investment bank argues that U.S. investors already possess efficient access to underlying shares, reducing the incentive to switch to tokenized alternatives.
Reid Noch, vice president of U.S. equity market structure at TD Cowen, stated that tokenized venues must offer compelling benefits to offset liquidity constraints and operational complexity. The bank expects minimal near-term adoption among both retail and institutional investors, as reported by CoinDesk.
SEC framework introduces AMM trading limits
The SEC's Innovation Exemption creates a five-year framework allowing qualified venues to operate automated market maker pools without registering as exchanges. This structure permits round-the-clock trading through asset pools rather than traditional order books, provided liquidity is sufficient.
However, the agency imposed strict conditions on the experiment. Tokens must represent Nasdaq-listed stocks and preserve all economic rights, including dividends and voting. Issuers retain a 30-day window to object to third-party tokenization, and trading volumes are capped.
Issuer interest remains negligible in practice
TD Cowen’s conversations with dozens of issuers revealed minimal interest in tokenizing their stocks. Even among retail-facing companies, only crypto-adjacent firms like Figure have shown significant engagement with blockchain-native share structures.
Figure’s market data illustrates the disparity in adoption. During a 24-hour period analyzed by TD, 99.9% of notional trading volume occurred through traditional Nasdaq-listed shares. The blockchain-native tokens carried the same economic exposure and voting rights but attracted negligible liquidity.
Perpetual futures dominate crypto stock exposure
For traders seeking stock exposure via crypto platforms, perpetual futures present a stronger demand story than tokenized spot products. TD Cowen notes that these derivatives align better with retail investors' preference for leverage and continuous trading.
A Binance snapshot of Nvidia-related volume highlighted this trend. 96% of notional volume came from perpetual futures, while only 4% originated from spot products. TD expects platforms to continue expanding these leveraged derivatives both domestically and internationally.
