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Stock exchange group raises concerns about tokenised

stocks

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Such stocks lack safeguards of traditional stocks, says

WFE

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Regulators should apply securities rules to tokenised

stocks-WFE

By Elizabeth Howcroft

Aug 25 (Reuters) - A group representing the world's

biggest stock exchanges is urging securities regulators to clamp

down on so-called tokenised stocks, arguing that the

blockchain-based tokens create new risks for investors and risk

damaging market integrity.

Tokenised equities are blockchain-based tokens created to

represent shares in companies. The tokens represent ownership of

the securities but investors do not become shareholders in the

underlying company.

Crypto exchange Coinbase and broker Robinhood

are among those making a push into the nascent sector

that could shake up the securities investing landscape.

Proponents say tokenised equities can cut trading costs,

speed up settlement and facilitate around-the-clock trading.

In a letter to the U.S. Securities and Exchange Commission's

Crypto Task Force, the European Securities and Market Authority,

and IOSCO's Fintech Task Force, the World Federation of

Exchanges (WFE) said it was concerned the tokens "mimic"

equities without providing the same rights or trading

safeguards.

"We are alarmed at the plethora of brokers and

crypto-trading platforms offering or intending to offer

so-called tokenised U.S. stocks," the WFE, a UK-based industry

association for exchanges and clearing houses, said.

"These products are marketed as stock tokens or the

equivalent to stocks when they are not."

The WFE declined to name which brokers and trading platforms

it was referring to.

Issuers of stock - the companies whose stock is being

mimicked - could suffer reputational damage if the tokens fail,

the WFE said.

The WFE's position reflects the concerns of market

infrastructure players and the broader financial sector, WFE CEO

Nandini Sukumar told Reuters, adding that some share issuers had

expressed concerns to their exchanges.

Regulators should apply securities rules to tokenised

assets, clarify legal frameworks for ownership and custody, and

prevent them being marketed as equivalent to stocks, WFE said.

An SEC commissioner said in July tokenised securities must

still meet securities regulations.

In June, trading platform Robinhood launched tokenised

equities for EU customers.

Coinbase is seeking permission from the SEC to offer

tokenised equities to its customers, Reuters reported in June.