Key Takeaways
- The London Stock Exchange Group (LSEG) recently debuted a new tokenization platform for private funds.
- Nasdaq has applied for approval to list tokenized securities.
- With LSEG and Nasdaq getting serious about tokenization, other major exchange operators risk falling behind.
After years of piloting the technology, the London Stock Exchange Group (LSEG) and Nasdaq are building distributed ledger technology (DLT) for securities markets.
As tokenization enters the financial mainstream, recent announcements from LSEG and Nasdaq ramp up the pressure on other exchange operators to deliver their own blockchain infrastructures.
LSEG Launches DLT Platform
On Monday, Sept. 15. LSEG debuted its Digital Markets Infrastructure (DMI)—a new tokenization platform for private funds.
In an announcement, the firm described it as “blockchain-powered.” But in related documentation, it uses the more general term, DLT, leaving unanswered questions about DMI’s exact architecture.
The new platform is less “on-chain” than existing solutions like Six Digital Exchange (SDX). Tokens don’t represent the legal asset. They exist only as digital records maintained by LSEG.
Nonetheless, DMI’s significance shouldn’t be understated.
LSEG is much more than the operator of the London Stock Exchange. Through its subsidiaries, London Clearing House (LCH) and Refinitiv, it is a data and infrastructure powerhouse which is deeply embedded in global financial markets.
As the firm embraces tokenization, it could have profound consequences far beyond the U.K.
Nasdaq’s Push Into Tokenized Securities
In a Securities and Exchange Commission filing dated Sep. 8, Nasdaq proposed a rule change that will allow it to list tokenized securities on its exchange.
Rather than building a parallel venue for on-chain stocks and exchange-traded products (ETPs), the company proposes keeping tokenized and traditional shares on the same order book.
If approved, the move would make Nasdaq the first major global exchange to list security tokens, following the pioneering path taken by the Luxembourg Stock Exchange.
Nasdaq’s initiative is different in scope to LSEG’s infrastructure play. But taken together, they indicate the increasingly critical role DLT plays in the securities lifecycle, from issuance and distribution to post-trade settlement and servicing.
Where Exchange Operators Stand in Tokenization Race
With LSEG and Nasdaq getting serious about tokenization, other major exchange operators risk falling behind.
New York Stock Exchange (NYCE) owner Intercontinental Exchange (ICE) has been notably absent from the recent wave of blockchain innovation.
Likewise, Euronext, which operates bourses in Amsterdam, Paris, Brussels, and Dublin, hasn’t made any significant moves in the space since acquiring a stake in Tokeny in 2019.
Among other major players, Hong Kong Exchanges and Clearing (HKEX) has integrated DLT for the creation and redemption of ETPs.
Meanwhile, mainland China’s state-run securities exchanges mostly remain in the pilot stage of blockchain deployment.
Future Directions For On-Chain Finance
The world financial system is complex. Whether they chose to co-list tokenized securities alongside traditional ones or build entirely new venues, exchange operators can’t simply migrate assets to the blockchain overnight.
In the U.S, the Depository Trust & Clearing Corporation (DTCC) is making slow but steady progress on DLT integration. This could pave the way for Nasdaq, ICE and others to fully embrace the technology as they connect to new blockchain-based clearing and settlement infrastructures.
Equivalent DLT platforms from Euroclear and Clearstream could have the same impact for non-U.S. exchanges.
Away from the traditional financial stack, a new generation of tokenized asset marketplaces aren’t waiting for stock exchanges or clearing houses to update their technology.
Through special purpose vehicles and other legal instruments, platforms like XStocks and Ondo Global Markets are bringing the ease and accessibility of crypto to real-world assets, complete with stablecoin payments and 24/7 permissionless trading.
These solutions package off-chain securities in a tokenized wrapper, competing with the brokerage platforms owned by banks and investment managers.
Now, as LSEG, Nasdaq, and others build out their blockchain infrastructure, platforms rooted in the spirit of decentralized finance are ready to run with it.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
