Sixty-three stocks and no order book
The joint venture half-owned by the New York Stock Exchange's parent has filed its notice under the SEC's tokenised-stock exemption. Its prices will come from Uniswap pools rather than the stock market, a single key can pause them, and one company has already said no.
Tyler Prahm via UnsplashOKXICE, the joint venture between the crypto exchange OKX and Intercontinental Exchange, the owner of the New York Stock Exchange, has published the notice that the SEC's new exemption requires before a venue can trade tokenised U.S. shares. The notice is dated 4 October and lists 63 stocks. They range from Nvidia, Microsoft and Apple to JPMorgan, Goldman Sachs, Walmart and Coca-Cola, and include crypto-linked companies such as Coinbase, Circle, Strategy, Robinhood, BitGo and Securitize. Each will trade against one of three stablecoins, USDC, USDG or Tether's USDT, 24 hours a day, seven days a week. Andrew Cuomo, the former New York governor who co-chairs the venture, called it "a landmark step toward a truly global, 24/7 Wall Street".
The SEC does not approve these venues one by one. Its order of 17 September exempts a "Tokenized Securities Venue" from the definition of an exchange if it meets the order's conditions, notifies the agency and publishes a notice of how it works. The notice is that document, and it is frank about what the venue is not. OKXICE LLC, a Texas company owned 50-50 by ICE and an OKX holding company, says the venue "is not registered with the Securities and Exchange Commission (the 'SEC') in any capacity" for this activity, is not subject to Regulation NMS, and is not subject to the fair-access rules that apply to exchanges. "Unfair and unreasonably discriminatory denials or limitations of access of TSV Participants by the TSV are not subject to SEC review."
There is no order book. Trading happens in Uniswap v4 liquidity pools on X Layer, the layer-2 network built by OKX, with an OKXICE extension that lets in only wallets holding a non-transferable "soulbound" token issued after identity and sanctions checks. Prices follow Uniswap's constant-product formula: each purchase raises the pool price and each sale lowers it. "OKXICE TSV's smart contracts do not use oracles or any other external market data," the notice says, so prices "may therefore differ from prices of the underlying NMS stock, particularly outside the regular trading hours" of the primary exchange. At three on a Sunday morning, the price of tokenised Nvidia will be whatever its pool says it is.
The pools depend on whoever chooses to fill them. Any approved participant can supply liquidity, and the notice warns that liquidity providers "may be unregulated, lightly capitalized and are under no obligation to provide liquidity". They can withdraw at any time. As of the notice, no OKXICE affiliate will act as one. There is no margin and no credit, so every trade must be fully funded. The venue has no policies to address maximal extractable value, the practice of reordering pending transactions for profit. It relies on permissioning, market surveillance by its affiliate OKX Inc. and the power to revoke a wallet's access.
Control sits with OKX. Upgrades to the smart contracts, creating pools and withdrawing a liquidity provider's funds need a multi-signature approval from OKX Technology and OKXICE staff. Pausing pools and adding or removing wallets are done "through a separate single signature administrative key managed by OKX Technology Inc." Changes "take effect without a timelock, so TSV Participants may receive no advance notice of an upgrade." The contract that issues the access tokens "has been audited internally, but not by external auditors". The pool extension is to be audited by an outside firm before it is deployed. The venue's website and back-end systems are hosted in the United States by Alibaba Cloud's Singapore company, and participants' personal data is held by Amazon Web Services in Oregon.
The exemption limits how big this can get. Stocks in Tier 1 of the market's limit-up, limit-down plan, which covers the S&P 500 and the Russell 1000 and so names such as Nvidia and Apple, are capped at 75 symbols per venue and at 0.25 per cent of each stock's average daily volume in the previous month. Smaller Tier 2 stocks are capped at 250 symbols and 2.5 per cent. OKXICE says its contracts keep a running daily total and will reject any trade that would cross the line. A second breach in the same stock means a three-month pause.
Companies get a say, and one has used it. When the tokens are made by a third party rather than by the company itself, the order requires the venue to notify the company and wait at least 30 days after it receives that notice. If the company objects within that time, the stock cannot be listed. The notice records an objection from Cerebras Systems. It does not name the firm that will make the tokens, saying only that a third-party "Tokenizer" will hold the shares one for one through a registered broker-dealer, and that, on the tokenizer's representations, holders get the same dividends and votes as ordinary shareholders. It also warns that if that broker-dealer fails, whether tokens held in a self-custodied wallet would count as customer property or be covered by SIPC "is uncertain".
The notice gives no launch date. ICE invested in OKX in March, at a valuation CoinDesk put at $25bn. The exemption runs until September 2031, and the SEC's order says any material change to a venue's operations must be published 20 days in advance. For now the first 24-hour stock venue backed by the NYSE's owner has put its design on record. It has no order book and no oracles, its prices are set by its pools, and its own risk disclosures are long.