Tokenized stocks may see limited U.S. demand: TD Cowen

The U.S. Securities and Exchange Commission (SEC) recently introduced a five-year exemption allowing qualifying Tokenized Securities Venues to trade tokenized National Market System (NMS) stocks using permissioned automated market makers (AMMs). However, a TD Cowen analysis, authored by Reid Noch, indicates limited domestic demand from U.S. investors, institutions, and listed companies for these products. The report highlights that American investors already possess efficient access to deep liquidity, low-cost brokerage, and fast electronic execution for traditional shares, diminishing the perceived benefits of tokenized alternatives. While blockchain venues could offer 24/7 trading, TD Cowen warns that continuous access does not guarantee favorable execution, especially with thin liquidity in AMM pools outside main U.S. trading hours. Discussions with dozens of issuers revealed minimal interest in offering tokenized shares, with only crypto-linked businesses like Figure showing more engagement. For instance, Figure's Nasdaq-listed FIGR shares accounted for 99.9% of its notional trading volume compared to its blockchain-native FGRS shares. This suggests that even with equal economic and governance rights, tokenized stocks struggle to attract significant activity from established markets. TD Cowen anticipates stronger demand for perpetual futures, citing a snapshot of Nvidia trading on Binance where perpetuals generated 96% of notional volume versus 4% for spot products, indicating a preference for leveraged price exposure over tokenized ownership.