How the SEC Could Clear the Way for 24/7 Stock Trading — Barrons.com

By Joe LightFor investors in the U.S., 24/7 stock trading could soon become a reality.A huge step in that direction could come as soon as Friday, when the Securities and Exchange Commission is expected to release crypto-related proposals for approval at an open meeting.One set of them would make it easier for crypto firms to raise money through token sales without meeting all the typical requirements of traditional public offerings. That proposed rule cleared a review by the White House Office of Management and Budget on Wednesday, though there's likely to be a public comment period and revisions before final approval.The SEC could also use the meeting on Friday to unveil details of another highly anticipated proposal, which Chairman Paul Atkins has called the "innovation exemption." The exemption would allow firms to expand the trading of real-world assets like stocks to the blockchain.An SEC spokesperson declined to comment.In a speech in April, Atkins said the agency was on the cusp of releasing the exemption, which he said would "provide market participants with a cabined framework to begin facilitating the trading of tokenized securities on-chain in a compliant fashion."The SEC held off on issuing the crypto rules to give Congress time to reach an agreement on the so-called Clarity Act, a bill that would put most crypto trading outside the purview of the SEC. The agreement didn't happen. The Senate failed to take a vote on the bill before its August recess, lowering its chances of passing this year.So now, many executives in the crypto industry expect that the agency will do what it can to give them regulatory relief using its existing legal authorities.Crypto firms have already dabbled in tokenized stocks, though they're prevented from offering them to U.S. investors except in limited cases.Proponents of stock tokenization say it will bring many benefits of the blockchain to traditional markets. A traditional stock trade right now settles one business day after it's executed, whereas a tokenized trade could settle instantly. That — combined with the ability to move stablecoins instantly over blockchains — removes some of the hurdles that make 24/7 stock trading difficult to pull off today.The exemption could also be a catalyst for the tokens of "decentralized finance" protocols that could host tokenized stock trading, wrote analysts for Compass Point Research & Trading in a note this week.The analysts pointed to Hyperliquid, and its "HYPE" token," as one case in point. That exchange is focused on futures, rather than equities. Despite Bitcoin falling this year, the HYPE token has more than doubled after the platform saw an explosion in after-hours trading in oil and gold around Iran War developments."We could see other crypto prices rerate if DeFi earnings quality improves after the SEC's innovation exemption is released," the analysts wrote.If the exemption does move forward on Friday, a key question will be how large the SEC allows the pilots to be.Some crypto firms have wanted the SEC to allow them to tokenize the stocks of companies whether or not the companies themselves give their approval. That would let the markets grow rapidly but give the firms limited say in where their stock is traded. Bloomberg News this week reported that the SEC could instead propose allowing issuers to object to a tokenized listing.SEC Commissioner Hester Peirce, who leads the agency's crypto task force, in a May post on X wrote she expected the innovation exemption to be "limited in scope."Write to Joe Light at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.