Notice2026-01823
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 2, To Amend the Exchange's Rules To Enable the Trading of Securities on the Exchange in Tokenized Form
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 30, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 20 (Friday, January 30, 2026)</title>
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[Federal Register Volume 91, Number 20 (Friday, January 30, 2026)]
[Notices]
[Pages 4138-4145]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01823]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104693; File No. SR-NASDAQ-2025-072]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of a Proposed Rule Change, as Modified by Amendment
No. 2, To Amend the Exchange's Rules To Enable the Trading of
Securities on the Exchange in Tokenized Form
January 27, 2026.
On September 8, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend the Exchange's rules to
enable the trading of securities on the Exchange in tokenized form. The
proposed rule change was published for comment in the Federal Register
on September 22, 2025.\3\ On November 3, 2025, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On December 12, 2025, the
Commission instituted proceedings under Section 19(b)(2)(B) of the
Act,\6\ to determine whether to approve or disapprove the proposed rule
change.\7\ On December 29, 2025, the Exchange filed Amendment No. 1 to
the proposed rule change, which replaced and superseded the original
filing in its entirety. On January 20, 2026, the Exchange filed
Amendment No. 2 to the proposed change, which replaced and superseded
the proposed rule change, as modified by Amendment No. 1, in its
entirety. The proposed rule change, as modified by Amendment No. 2, is
described in Items I and II below, which Items have been substantially
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 2, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 103989 (September
16, 2025), 90 FR 45426 (``Notice''). Comments received on the
proposed rule change are available at: <a href="https://www.sec.gov/comments/sr-nasdaq-2025-072/srnasdaq2025072.htm">https://www.sec.gov/comments/sr-nasdaq-2025-072/srnasdaq2025072.htm</a>.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104173, 90 FR 51424
(November 17, 2025). The Commission designated December 21, 2025, as
the date by which the Commission shall approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 104384, 90 FR 58646
(December 17, 2025).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's rules to enable the
trading of securities on the Exchange in tokenized form during the
pendency of a pilot program to be operated by the Depository Trust
Company (``DTC'') pursuant to the terms of a December 11, 2025
Commission No-Action Letter.\8\ Specifically, proposed rules Equity 1,
Section 1 and Equity 4, Rules 4756, 4757, and 4758 will clarify how
Nasdaq trades tokenized securities under this pilot program. This
Amendment No. 2 supersedes the original filing, as amended by Amendment
No. 1, in its entirety.\9\
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\8\ No-Action Letter Request Related to The Depository Trust
Company's Development of the DTCC Tokenization Services, dated
December 11, 2025, at <a href="https://www.sec.gov/files/tm/no-action/dtc-nal-121125.pdf">https://www.sec.gov/files/tm/no-action/dtc-nal-121125.pdf</a> (the ``No-Action Letter'' or the ``Letter'').
\9\ See Securities Exchange Act Release No. 103989 (September
16, 2025), 90 FR 45426 (September 22, 2025) (SR-NASDAQ-2025-072), as
amended on January 20, 2026.
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[[Page 4139]]
The text of the proposed rule change is detailed below; proposed
new language is italicized and proposed deletions are in brackets.
* * * * *
The NASDAQ Stock Market LLC Rules
* * * * *
Equity Rules
Equity 1 Equity Definitions
Section 1 Equity Definitions
(a) When used in the Equity Rules, unless the context otherwise
requires:
(1) No change.
(2) ``Security'' Unless the context requires otherwise, the term
``security'' shall mean a ``security,'' as that term is defined in
section 3(a)(10) of the Securities Exchange Act of 1934, as amended,
that is either listed on the Exchange or traded on the Exchange
pursuant to unlisted trading privileges. A security may be traded in
the Nasdaq Market Center in either traditional form (a digital
representation of ownership and rights, but without utilizing
distributed ledger (``blockchain'' technology)) or, for the duration
and under the terms of a pilot program operated by the Depository Trust
Company (``DTC''), in tokenized form (a digital representation of
ownership and rights which utilizes blockchain technology). Under the
terms of a Securities and Exchange Commission No-Action Letter issued
to DTC, dated December 11, 2025, only a subset of securities traded on
Nasdaq will be eligible for trading in tokenized form (``DTC Eligible
Securities''). Nasdaq will publish Equity Trader Alerts periodically to
identify for DTC Eligible Participants (as that term is defined in
Equity 4, Rule 4756(a)(5)) a current list of those DTC Eligible
Securities that may trade in tokenized form on the Exchange. A share of
a tokenized DTC Eligible Security shall be tradable in the Nasdaq
Market Center together with, on the same Order Book as, and with the
same execution priority as, its traditional counterpart, but only if
the tokenized security is fungible with, shares the same CUSIP number
with and trading symbol, and affords its shareholders the same rights
and privileges as does a share of an equivalent class of the
traditional security.
* * * * *
Equity 4 Equity Trading Rules
* * * * *
4756. Entry and Display of Quotes and Orders
(a) Entry of Orders--Participants can enter orders into the System,
subject to the following requirements and conditions:
(1)-(4) No change.
(5) A market participant that is eligible to participate in the
Depository Trust Company's (``DTC's'') three-year tokenization pilot
program, pursuant to its terms and those of the Securities and Exchange
Commission No-Action Letter, dated December 11, 2025 (the ``No-Action
Letter'') (each such market participant, a ``DTC Eligible
Participant''), and which wishes for its order in a DTC Eligible
Security (as that term is defined in Equity 1, Section 1(a)(2)) to
clear and settle in tokenized form as part of the DTC tokenization
pilot program shall notate its preference upon entry of the order in
the System by selecting a flag that the Exchange designates for this
purpose, in accordance with the Exchange's procedures. The flag will
indicate the DTC Eligible Participant's preference as to what form the
security will take (i.e., token or traditional) and it also may include
other information or instructions that DTC may require the DTC Eligible
Participant to enter, in accordance with DTC's rules, policies, and
procedures, and the terms of the No-Action Letter, to effectuate the
flag, such as the DTC Eligible Participant's selection of a blockchain
and a digital wallet address for a tokenized DTC Eligible Security (the
Exchange will issue an Equity Trader Alert prior to requiring a DTC
Eligible Participant to enter any such information or instructions to
the flag, other than its tokenization preference). When a DTC Eligible
Participant enters an order for a DTC Eligible Security with the
tokenization flag selected, the Exchange, as an agent or designee of
such DTC Eligible Participant, will communicate the DTC Eligible
Participant's flag, and any associated information or instructions to
DTC. DTC will then carry out the DTC Eligible Participant's
tokenization preference, as set forth in the flag, as well as any
instructions attendant thereto (as discussed herein) to the extent that
the flag or instruction is executable in accordance with DTC's rules,
policies, and procedures, and the terms of the No Action Letter.
Nasdaq's systems will not determine whether a market participant is a
DTC Eligible Participant or whether a security is a DTC Eligible
Security at the time of order entry and selection of the tokenization
flag. Nasdaq also will not determine whether DTC is able to execute a
tokenization order for other reasons, including because the DTC
Eligible Participant wishes to mint the token to a blockchain that is
not compatible with the DTC pilot tokenization program or to a digital
wallet that is not registered with DTC. Thus, if at the time of order
entry, a market participant is not a DTC Eligible Participant, the
security selected for tokenization is not a DTC Eligible Security, or
there are other reasons why DTC cannot execute a tokenization
preference or instruction, then the order will remain in traditional
(non-tokenized) form, in accordance with DTC's rules, policies, and
procedures. It is the sole responsibility of market participants to
determine for themselves whether they are DTC Eligible Participants, if
the securities subject to an order are DTC Eligible Securities, if the
blockchains and wallets to which they wish to mint tokens are
compatible with DTC's pilot tokenization program, or whether the
tokenization instruction is otherwise consistent with the terms of that
program and the No Action Letter.
(b) Entry of Quotes--Nasdaq Market Makers and Nasdaq ECNs can enter
Quotes into the System from 4:00 a.m. to 8:00 p.m. Eastern Time. Quotes
will be processed as Attributable Orders, with such time-in-force
designation as the Nasdaq Market Maker or Nasdaq ECN may assign. Entry
of Quotes will be subject to the requirements and conditions set forth
in section (a) above.
* * * * *
4757. Book Processing
(a) Orders on the Nasdaq Book shall be presented for execution against
incoming Orders in the order set forth below:
(1)-(4) No change.
(5) The mere fact that an order contains tokenized securities or
indicates a preference of a DTC Eligible Participant to clear and
settle DTC Eligible Securities in token form shall not affect the
priority in which the Exchange executes that order.
* * * * *
4758. Order Routing
(a) Order Routing Process
(1) The Order Routing Process shall be available to Participants
during System Hours, unless otherwise noted in these rules, and shall
route orders as described below. All routing of orders shall comply
with Rule 611 of Regulation NMS under the Exchange Act.
(A) The System provides a variety of routing options. Routing
options may be
[[Page 4140]]
combined with all available Order Types and Times-in-Force, with the
exception of Order Types and Times-in-Force whose terms are
inconsistent with the terms of a particular routing option. When the
Exchange routes an order for a DTC Eligible Security that a DTC
Eligible Participant has designated for clearing and settlement in
token form, in accordance with Rule 4756(a)(5), the Exchange will
communicate this tokenization instruction to DTC upon receiving an
execution for an order that was routed to another trading venue. The
System will consider the quotations only of accessible markets. The
term ``System routing table'' refers to the proprietary process for
determining the specific trading venues to which the System routes
Orders and the Order in which it routes them. Nasdaq reserves the right
to maintain a different System routing table for different routing
options and to modify the System routing table at any time without
notice. The System routing options are:
* * * * *
(b) Not applicable.
(c) Not applicable.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to establish clearly
that Nasdaq's member firms and investors that are eligible to
participate in the DTC tokenization pilot program (``DTC Eligible
Participants'') may trade tokenized versions of those equity securities
and exchange traded products (``ETPs'') on the Exchange that are
eligible for tokenization as part of the DTC tokenization pilot program
(``DTC Eligible Securities''), pursuant to the terms of the No Action
Letter. The filing describes and applies to one method by which DTC
Eligible Securities can trade on Nasdaq within the current national
market system, using DTC to clear and settle trades in token form, per
order handing instructions that DTC Eligible Participants may select
upon entering their orders for DTC Eligible Securities on Nasdaq.\10\
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\10\ Nasdaq is actively assessing multiple methods of
tokenization and trading of tokenized securities. If the Exchange
plans to adopt any particular alternative to the DTC approach, then
to the extent necessary, it will file rule proposals with the
Commission before doing so.
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Background
Over time, U.S. equity markets have thrived while absorbing
successive waves of technological innovations. Nasdaq ushered in the
first wave in the 1970s. Before that time, shares of equity securities
existed only in paper form as stock certificates, and stocks were
quoted, traded, and physically transferred among buyers and sellers
through manual processes. Nasdaq--originally an acronym which stood for
the National Association of Securities Dealers Automated Quotations--
revolutionized the markets by quoting and trading equity securities
electronically (digitally) and in an automated fashion. Subsequent
waves of technological innovation followed that were no less
revolutionary. Advances in computing technologies led to the rise of
sophisticated algorithmic trading strategies, high-volume proprietary
trading firms, and electronic market making. Meanwhile, advances in
telecommunications enabled trade execution times to shrink from hours
to microseconds, and for the dissemination of market data to shift from
daily distributions of basic prices lists to lighting fast and
efficient disseminations of rich and actionable market insights using
modern data transfer infrastructure, cloud computing, and other
technical innovations.
Securities tokenization is another new technology with potential
applications for the securities markets. Put simply, tokenization
enables aspects of securities transactions (which again, already are
digital) to be recorded on a blockchain--a digital ledger that is
encrypted, distributed among its users, and maintained, validated, and
secured collectively by its users to ensure its integrity and security
and to resist tampering. Today, by contrast, the securities markets
employ various distinct and independent parties to perform these tasks,
including trade matching, transferring, clearing, settlement, and
custody services. These independent parties are highly regulated and
trusted to protect investors. Today's system works extraordinarily
well, it is already highly efficient and reliable, and it operates at
little or no commission cost to retail investors.
Although tokenization technology presents novel capabilities by
which to record evidence of securities ownership and transactions, the
trading of tokenized securities can, and it must, occur largely as
Congress prescribed when it enacted and subsequently amended the Act.
That is, Nasdaq believes such trading must occur in regulated markets,
namely national securities exchanges, alternative trading systems, and
at FINRA regulated broker-dealers. Nasdaq also believes that it must
occur within the context of an interconnected national market system,
rather than in siloed trading venues where investors would have no
consolidated sense of best market-wide prices and no assured access to
such prices. Furthermore, in Nasdaq's view, such trading should occur
in markets that feature independent and regulated intermediaries to
manage the links in the securities transaction chain safely, soundly,
and in a disinterested manner.\11\
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\11\ Section 11A of the Act states that ``[t]he linking of all
markets for qualified securities . . . will foster efficiency,
enhance competition, increase the information available to brokers,
dealers, and investors, facilitate the offsetting of investors'
orders, and contribute to best execution of such orders'' such that
Congress directed the Commission to ``use its authority under this
chapter to facilitate the establishment of a national market system
for securities (which may include subsystems for particular types of
securities with unique trading characteristics) in accordance with
the findings and to carry out the objectives set forth in paragraph
(1) of this subsection.'' 15 U.S.C. 78K-1(a).
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The existing regulatory structure mandated by Congress applies to
tokenized securities, regardless of whether such securities have
certain unique properties (like the ability to be settled on a
blockchain), much like it did when the SEC allowed securities to be
decimalized and electronified and when exchange traded funds and other
novel securities were approved decades ago. As in those cases, no
significant exemptions or parallel market structure constructs are
needed for tokenized securities to trade alongside other securities. As
Commissioner Peirce stated recently, ``[t]okenized securities are still
securities'' and ``market participants must consider--and adhere to--
the federal securities laws when transacting in these instruments.''
\12\ It is within this context that Nasdaq offers its proposal to trade
tokenized securities.
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\12\ Commissioner Hester M. Peirce, ``Enchanting, but Not
Magical: A Statement on the Tokenization of Securities,'' available
at <a href="https://www.sec.gov/newsroom/speeches-statements/peirce-statement-tokenized-securities-070925">https://www.sec.gov/newsroom/speeches-statements/peirce-statement-tokenized-securities-070925</a>.
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[[Page 4141]]
The Exchange believes the markets can use tokenization while
continuing to provide the benefits and protections of the national
market system. Wholesale exemptions from the national market system and
related protections are neither necessary to achieve the goal of
accommodating tokenization, nor are they in investors' best interests.
To the contrary, they would harm investors and the markets since
investors would lose access to portions of the market if platforms were
not required to connect to the national market system or report trades.
This would erode the National Best Bid and Offer (``NBBO''), a long-
standing concern of many, including the SEC, increase fragmentation
with liquidity pools not accessible to investors outside these
platforms, and result in greater price dislocation.\13\ Thus, the
markets, the issuers, and investors would be blind to activity
occurring on these platforms, which would hinder issuer's ability to
understand stock price movements and even daily trading volume. It
would also impact questions of best execution and investor
protection.\14\ Additionally, issuers would have no understanding of
the total shares traded in any given day in their company's stock,
further diminishing the strength of the public markets.\15\
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\13\ Indeed, a recent news report validates these concerns as to
tokens tracking two widely-held stocks--Apple and Amazon. These
tokens experienced extreme price dislocations from the prices of
their underlying stocks--a result that creates opportunities for
retail investor exploitation as well as insider trading and
manipulation. See Alexander Osipovich and Vicky Ge Huang, ``Want to
Trade Amazon on Crypto Exchange? The Price Might Be Off by 300%,''
Wall Street Journal, July 15, 2025, available at <a href="https://www.wsj.com/finance/stocks/tokenized-stocks-prices-crypto-exchanges-856ea114">https://www.wsj.com/finance/stocks/tokenized-stocks-prices-crypto-exchanges-856ea114</a>.
\14\ That lack of transparency is the current reality in Europe,
which EU regulators are currently attempting to address with the
creation of a consolidated tape. They view the US as a best-in-class
example of providing a complete picture for issuers and investors of
the trading activity and related price discovery in any given day,
and they are now seeking to replicate our model. It would be
detrimental to the underpinnings of our national market system to
abandon that core aspect of our markets.
\15\ As an operator of a primary listing exchange, Nasdaq is
also concerned by the impact of tokenization on securities issuers.
In Europe, trading of tokenized stocks is occurring in a manner that
raises numerous concerns. For example, we understand that some
digital asset trading platforms are offering shares of U.S. equities
to European investors without the prior knowledge or consent of the
issuers of those securities. When issuers list securities on
national securities exchanges, they do so with the expectation that
those securities will trade in a certain form and on certain
markets. Nasdaq believes that tokenizing securities should not occur
in a manner that deprives issuers of their ability to determine
where and how their shares trade. Nasdaq is limited in its ability
to afford issuers a choice as to whether their shares are or become
tokenized by other markets. Nevertheless, we encourage the
Commission to consider the issue as it develops a new regulatory
regime for tokenized securities.
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Finally, we note that in Europe, trading of tokenized stocks is
occurring in a manner that raises investor concerns. A few trading
platforms are purporting to offer investors access to tokenized U.S.
``equities,'' but they are not providing investors with actual shares
in U.S. companies. Instead (and likely contrary to the understanding of
unsophisticated investors), they are providing investors with digitally
tradable rights to traditional digital shares that the platforms
themselves purchase and hold in their own accounts. These digital
rights do not comprise the full extent of the rights to which owners of
traditional digital shares are entitled, including voting rights and
the rights to corporate assets upon liquidation; instead, they merely
convey economic rights associated with shares--the right to realize
appreciation and depreciation in the value of the shares.\16\ Thus, a
purchaser of these tokenized rights receives less value for their money
than do purchasers of traditional digital securities.\17\
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\16\ See ``Kraken Launches xStocks for 24/5 Trading of 60 US
Stocks,'' AInvest, June 30, 2025, available at <a href="https://www.ainvest.com/news/kraken-launches-xstocks-24-5-trading-60-stocks-2506/">https://www.ainvest.com/news/kraken-launches-xstocks-24-5-trading-60-stocks-2506/</a>.
\17\ As the Commission ponders whether to permit similarly
structured products to be offered in the United States, Nasdaq
encourages the Commission consider whether such products should be
marketable as ``equities,'' ``shares,'' or ``stock'' or whether
instead they should be labeled more accurately as derivative
instruments or depository rights to avoid investor confusion.
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Although trading tokenized securities outside of the national
market system would pose significant risks to the markets and
investors, such risks need not occur. Nasdaq submits, as evidenced by
this proposal, that only minor changes to existing rules and practice
are necessary to accommodate the trading of tokenized securities and
that granting broad exemptions would be unwarranted.\18\
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\18\ Nasdaq has previously noted the limitations inherent in the
Commission's exemptive authority. See J. Zecca, ``Digital Assets
Sandbox,'' dated June 6, 2025, at 6-7, available at <a href="https://www.sec.gov/files/digital-assets-sandbox-comment-060625.pdf">https://www.sec.gov/files/digital-assets-sandbox-comment-060625.pdf</a>.
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Nasdaq's Flexible Approach
To tackle the challenge of trading tokenized equities, Nasdaq
offers a simple and safe proposal that accommodates an approach to
tokenization that DTC is pursuing in a tokenization pilot program,
which the SEC approved in its No Action Letter. This approach leverages
existing structures and players and rules, rather than experimenting
with radical new models that are untested in the context of listed
securities and potentially detrimental to investors,' issuers,' and the
markets' best interests.\19\
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\19\ See J. Zecca, ``What's in a Name? A Stock by Any Other Name
. . .'' Nasdaq Inc.'s Response to ``There Must Be Some Way Out of
Here,'' April 25, 2025, at 19-21, available at <a href="https://www.sec.gov/files/ctf-written-input-nasdaq-042525.pdf">https://www.sec.gov/files/ctf-written-input-nasdaq-042525.pdf</a> (discussing the risks of
trading digital assets in Vertically Integrated and Direct-to-retail
digital asset markets).
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As noted above, Nasdaq proposes to trade DTC Eligible Securities
within the confines of existing securities laws and rules. In Nasdaq's
proposal to trade tokenized securities, Nasdaq believes that all
existing Commission and Nasdaq rules that currently apply to trading
non-tokenized securities on the Nasdaq Stock Market will continue to
apply, without modification, except as follows.
Order Entry and Processing
First, the Exchange proposes to amend its definition of a security,
at Equity 1, Section 1, to announce that DTC Eligible Participants may
trade DTC Eligible securities in token form on the Exchange during the
duration of, and pursuant to the terms of the DTC tokenization pilot
program, as authorized by the No-Action Letter. The proposed rule
change also clarifies that the term ``tokenized'' in this instance
refers to digital representations of paper securities that utilize
digital ledger or blockchain technology, as opposed to ``traditional''
securities, which are also digital representations of paper securities,
but do not utilize blockchain technology. The proposal describes how
the Exchange will trade DTC Eligible Securities in token form, noting
that as long as DTC Eligible Securities are fungible with, have the
same CUSIP number and trading symbol as, and afford their holders the
same rights and privileges as do traditional securities of an
equivalent class, then the Exchange will trade DTC Eligible Securities
in token form together with traditional securities on the same Order
Book and according to the same execution priority rules. A tokenized
DTC Eligible Security would be deemed to provide the same rights and
privileges as a traditional security if, among other things, it conveys
an equity interest in an underlying company, a right to receive any
dividends that the company issues to its shareholders, a right to
exercise any voting rights that shareholders are due, and a right to
receive a share of the residual assets of the company upon liquidation.
The Exchange will not treat tokenized instruments to be equivalent to
their traditional counterparts if they do not convey such rights or
share the
[[Page 4142]]
same CUSIP and trading symbol, but instead the Exchange will treat
these instruments as distinct (e.g., derivative securities or
ADRs).\20\ The proposed amended rule text is as follows, with proposed
changes underlined:
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\20\ This rule proposal does not address whether and how Nasdaq
may choose to trade these non-fungible tokenized instruments in the
future pursuant to a proposed Rule change.
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(2) ``Security'' Unless the context requires otherwise, the term
``security'' shall mean a ``security,'' as that term is defined in
section 3(a) (10) of the Securities Exchange Act of 1934, as amended,
that is either listed on the Exchange or traded on the Exchange
pursuant to unlisted trading privileges. A security may be traded in
the Nasdaq Market Center in either traditional form (a digital
representation of ownership and rights, but without utilizing
distributed ledger (``blockchain'' technology)) or, for the duration
and under the terms of a pilot program operated by the Depository Trust
Company (``DTC''), in tokenized form (a digital representation of
ownership and rights which utilizes blockchain technology). Under the
terms of a Securities and Exchange Commission No-Action Letter issued
to DTC, dated December 11, 2025, only a subset of securities traded on
Nasdaq will be eligible for trading in tokenized form (``DTC Eligible
Securities''). Nasdaq will publish Equity Trader Alerts periodically to
identify for DTC Eligible Participants (as that term is defined in
Equity 4, Rule 4756(a)(5)) a current list of those DTC Eligible
Securities that may trade in tokenized form on the Exchange. A share of
a tokenized DTC Eligible Security shall be tradable in the Nasdaq
Market Center together with, on the same Order Book as, and with the
same execution priority as, its traditional counterpart, but only if
the tokenized security is fungible with, shares the same CUSIP number
with and trading symbol, and affords its shareholders the same rights
and privileges as does a share of an equivalent class of the
traditional security.
Second, the Exchange proposes to amend its Order Entry Rule, at
Equity 4, Rule 4756, to describe how a DTC Eligible Participant can
communicate its desire to clear and settle a DTC Eligible Security in
tokenized form. The proposed amended Rule states that a DTC Eligible
Participant that wishes for its order in a DTC Eligible Security to
clear and settle in tokenized form must notate its preference upon
entry of the order in the System by selecting a flag that the Exchange
designates for this purpose, in accordance with the Exchange's
procedures. When a DTC Eligible Participant enters an order for a DTC
Eligible Security with the tokenization flag selected, the Exchange
will communicate the DTC Eligible Participant's tokenization preference
to DTC (on a post-trade basis). The flag will indicate the DTC Eligible
Participant's preference as to what form the security will take (i.e.,
token or traditional) and it also may include other information or
instructions that DTC may require the DTC Eligible Participant to
enter, in accordance with DTC's rules, policies, and procedures, and
the terms of the No-Action Letter, to effectuate the flag, such as the
DTC Eligible Participant's selection of a blockchain and a digital
wallet address for a tokenized DTC Eligible Security (the Exchange will
issue an Equity Trader Alert prior to requiring a DTC Eligible
Participant to enter any such information or instructions to the flag,
other than its tokenization preference). DTC will then carry out the
DTC Eligible Participant's tokenization preference, as set forth in the
flag, as well as any instructions attendant thereto (as discussed
herein) to the extent that the flag or instruction is executable in
accordance with DTC's rules, policies, and procedures, and the terms of
the No Action Letter.
Nasdaq's systems will not determine whether a Participant is a DTC
Eligible Participant or whether a security is a DTC Eligible Security
at the time of order entry and selection of the tokenization flag.
Nasdaq also will not determine whether DTC is able to execute a
tokenization order for other reasons, including because the DTC
Eligible Participant wishes to mint the token to a blockchain that is
not compatible with the DTC pilot tokenization program or deposit it
into a wallet that is not registered with DTC.\21\ Thus, if at the time
of order entry, a market participant is not a DTC Eligible Participant,
the security selected for tokenization is not a DTC Eligible Security,
or there are other reasons why DTC cannot execute a tokenization flag
or instruction, DTC will settle the executed order in traditional (non-
tokenized) form, in accordance with DTC's rules, policies, and
procedures. It is the sole responsibility of market participants to
determine for themselves whether they are DTC Eligible Participants, if
the securities subject to an order are DTC Eligible Securities, if the
blockchains to which they wish to mint tokens are compatible with DTC's
pilot tokenization program, or whether the tokenization instruction is
otherwise consistent with the terms of that program and the No Action
Letter. That said, Nasdaq intends to develop functionality that would
allow for it to check for eligibility at order entry, and it will
submit a rule proposal to effectuate that functionality at the
appropriate time. Third, Nasdaq proposes to amend its Book Processing
Rule, at Equity 4, Rule 4757, to clarify that the mere fact that an
order contains tokenized securities or indicates a preference to clear
and settle securities in token form will not affect the priority in
which the Exchange executes that order.
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\21\ According to the No-Action Letter, any DTC participant
would be permitted--at the DTC participant's election--to
participate in the DTC pilot tokenization services with an exception
(i.e., participants for which DTC has U.S. tax withholding or
reporting obligations, or a Treasury International Capital reporting
obligation). As of October 31, 2025, DTC states that it has U.S. tax
withholding and reporting obligations, or a TIC reporting
obligation, for approximately 11 percent of its participants. Once
DTC resolves outstanding tax and TIC compliance questions, it
envisions offering the services to these participants as well. See
n.8, supra.
Additionally, the No-Action Letter states that DTC will not
execute a tokenization instruction if a DTC Eligible Participant
cannot pass DTC's risk management and compliance controls. See id.
If a transaction would result in a participant breaching its Net
Debit Cap, then the control would not allow that transaction to
process until it could do so without breaching the cap. See id.
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Fourth and finally, the Exchange proposes to amend its Order
Routing Rule, at Equity 4, Rule 4758, to note that when the Exchange
routes orders in DTC Eligible Securities that DTC Eligible Participants
have designated for clearing and settlement in token form, in
accordance with the Exchange's order entry rules and procedures, then
the Exchange will communicate this tokenization instruction to DTC upon
receiving an execution for an order that was routed to another trading
venue.
Apart from the above, as far as Nasdaq's systems and matching
engine are concerned, the Exchange's trading procedures and behavior
will be the same regardless of whether a DTC Eligible Participant opts
to trade tokenized or traditional shares of a DTC Eligible
Security.\22\ Among other things, the following aspects of Nasdaq's
trading system and procedures will not change when trading tokenized
securities:
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\22\ Nasdaq's pricing structure and rates will not vary
depending upon whether a transaction involves a share of a tokenized
stock.
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<bullet> All Exchange order types and attributes will be available
for use by tokenized securities.
[[Page 4143]]
<bullet> All Exchange routing strategies will be available for
orders in tokenized securities.
<bullet> Orders in tokenized securities may participate in all of
the Exchange's trading sessions as well as in its Opening and Closing
Crosses, subject to generally applicable eligibility criteria.
<bullet> Participants may utilize their existing connectivity to
enter orders in tokenized securities.
<bullet> The Exchange's fee schedule will not vary based upon
whether shares that Participants execute are tokenized or traditional
in nature.
<bullet> Market data feeds will not differentiate between tokenized
and traditional shares.
<bullet> The Exchange will comply with any Commission requirements
to report tokenization data to the Consolidated Audit Trail.
<bullet> Market surveillance of tokenized and traditional
securities will rely upon the same underlying data, which will continue
to be accessible by Nasdaq and FINRA.
<bullet> Trades in tokenized securities handled by DTC will
continue to settle on a T+1 basis.
<bullet> Nasdaq's clearly erroneous and risk management measures
will cover tokenized securities.
<bullet> Trading of tokenized securities under this proposal is not
expected to alter the existing proxy distribution process.\23\
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\23\ According to DTC, a DTC Eligible Participant may need to
issue a de-tokenization instruction or DTC may need to force
conversion of the Tokenized Entitlement into a Book-Entry
Entitlement in order to receive a distribution or replacement
security or to issue instructions in relation to the corporate
action. In such situations, DTC would, to the extent feasible,
provide the relevant participants with advance notice of the need to
provide such instruction or DTC's need to take such action. See n.8,
supra.
---------------------------------------------------------------------------
A key benefit of Nasdaq's proposal is that it will readily allow
for trading in tokenized DTC Eligible Securities to occur within the
context of the national market system. The Exchange's proposal will
allow for tokenized DTC Eligible Securities to trade on its market in a
transparent manner, without degrading the NBBO, without further
fragmenting the national market system, without causing price
dislocations or facilitating market manipulation, and without
undermining the investor protections that existing securities law
provide.
Tokenization and Post-Trade Processing
This proposal to offer trading in tokenized securities will become
effective once the requisite infrastructure and post-trade settlement
services have been established by DTC. Nasdaq understands that DTC is
working to develop the necessary infrastructure, services, and
procedures to facilitate such tokenization and the related post-trade
settlement infrastructure and services.\24\ On December 11, 2025, the
Commission issued a No-Action Letter that enables DTC to begin
providing services that support the Exchange's proposal as soon as this
development is complete.\25\
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\24\ Multiple other forms of tokenization and clearance and
settlement are under discussion. The proposed rule change is
specific to the process that Nasdaq understands DTC is developing.
However, Nasdaq will explore additional solutions as they develop,
with the objective of accommodating as much tokenization technology
as possible as efficiently as possible. To the extent that Nasdaq
elects to pursue any alternatives to this Proposal, it will do so
pursuant to a separate filing.
\25\ See n.8, supra.
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The details of DTC's planned service for settling traditional
securities in token form and tokenized securities in traditional form
are set forth in the No-Action Letter, a letter from DTC to the
Commission requesting no-action relief, attached thereto, and on DTC's
website.\26\ Nasdaq refers readers to those documents for a fulsome
description of the DTC pilot tokenization program.
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\26\ See id.; see also <a href="https://www.dtcc.com/digital-assets/tokenization#Tokenization">https://www.dtcc.com/digital-assets/tokenization#Tokenization</a>.
---------------------------------------------------------------------------
By way of summary, Nasdaq understands that the DTC pilot
tokenization program will operate as follows, in conjunction with
Nasdaq. First, to be eligible to trade tokenized securities on Nasdaq,
and for DTC to settle traditional securities in tokenized form or vice
versa, one must be a DTC Eligible Participant. A DTC Eligible
Participant must register with the DTC and obtain or more wallet
addresses on a DTC approved blockchain. DTC also indicates that its
ability to execute tokenization and de-tokenization instructions will
be limited by both the blockchains to which its tokenization service
connects as well as the universe of securities that will be eligible
for its services. According to DTC, only blockchains that meet DTC's
standards for such things as transaction reversal and resiliency, will
be supported by its service. DTC represents that it expects that its
tokenization service will support multiple blockchains, and it expects
to publish its blockchain standards, and its list of supported
blockchains, in the coming months.
According to DTC, securities that are DTC Eligible Securities--
meaning that they are eligible for tokenization and de-tokenization as
part of the DTC tokenization pilot program, will be limited to the
following, for purposes of this proposal: (i) securities in the Russell
1000 Index at the time the service launches as well as any additions to
the index thereafter and notwithstanding the subsequent removal of any
securities from the index; and (ii) ETFs that track major indices, such
as the S&P 500 index and Nasdaq-100 index. These categories of DTC
Eligible Securities will be the only tokenized equities that are
available to trade on Nasdaq under this proposal.
If a DTC Eligible Participant wants to settle a DTC Eligible
Security in token form, then the DTC Eligible Participant will submit
an order handling instruction to the Exchange upon order entry. The DTC
Eligible Participant will do so by selecting a flag designated by the
Exchange for this purpose. The Exchange will then convey it to DTC for
execution on a post-trade basis. Nasdaq understands that the DTC
process is expected to include transfer of the Participant's designated
book-entry position from the Participant's DTC account to a DTC control
account and then conversion to a corresponding position in token form
that DTC would mint and deliver to the Participant's DTC-registered
digital wallet on a blockchain, which DTC would track and reconcile
against the control account.\27\ We also note that insofar as a DTC
Eligible Participant's trades are settled on a net basis, and the DTC
Eligible Participant's net position in a DTC Eligible Security is less
than what the DTC Eligible Participant specified in its tokenization
instruction, then DTC will adjust the instruction to tokenize the DTC
Eligible Security to the extent of the net position.
---------------------------------------------------------------------------
\27\ Nasdaq understands that the DTC process may be available in
the second half of 2026. See DTCC, No Action Letter and DTC
Tokenization Service FAQ, at 2, available at <a href="https://www.dtcc.com/-/media/Files/Downloads/digital-assets/dtc-tokenization-service-faq.pdf">https://www.dtcc.com/-/media/Files/Downloads/digital-assets/dtc-tokenization-service-faq.pdf</a>.
---------------------------------------------------------------------------
DTC states that it will provide tokenization services on a pilot
basis, as described above, for a period of three years after launch,
after which time DTC will sunset the service.\28\ Thus, Nasdaq will
revisit this rule proposal when it knows what, if anything, will
replace the service after it sunsets.
---------------------------------------------------------------------------
\28\ See id., at 1.
---------------------------------------------------------------------------
Nasdaq will alert its Members in an Equity Trader Alert at least 30
calendar days before the Exchange begins trading DTC Eligible
Securities in tokenized form on its market.
Illustrative Example of Trading Tokenized Invesco QQQ on the Exchange
The following illustrates how Nasdaq will trade tokenized
securities on its system. For purposes of this illustration, the
Exchange uses the example of the Invesco QQQ Trust\SM\ ETP (the ``QQQ
[[Page 4144]]
ETF'' or ``QQQ''), the shares of which its sponsor, Invesco Capital
Management LLC (``Invesco''), intends to offer in tokenized form.\29\
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\29\ Although Nasdaq discusses herein the trading of the Invesco
QQQ ETF on the Exchange, this rule proposal would allow Nasdaq to
trade other tokenized versions of securities. We anticipate that
Invesco will file separately with the Commission to obtain any
permission or exemptive relief necessary to have tokenized QQQ
shares traded on the Exchange.
---------------------------------------------------------------------------
An Exchange member that is properly registered with DTC and
eligible to participate in the DTC tokenization pilot program wishes to
place a displayed limit order in a tokenized share of QQQ on behalf of
an investor. The Exchange member would provide instructions to that
effect when it enters the order into Nasdaq's system, as it otherwise
would do. The Exchange would then process that order consistent with
how it processes all orders in QQQ shares in terms of order entry
protocols, order handling, priority, order matching, and trade
reporting. All Exchange Order Types and Attributes that are otherwise
available to a traditional QQQ order in a given scenario would likewise
be available to the tokenized QQQ order. The Exchange would generate
market data about the order in the same way that it does now. The
tokenized QQQ order would be available to match contra orders for
either tokenized or traditional shares of QQQ and would do so without
any special priority relative to other orders in QQQ on the Exchange
book. When a trade occurs involving the order in tokenized QQQ, the
Exchange will report trade information to the SIP as it does now. Until
Nasdaq implements its plan to enable securities to trade on its market
on a 23/5 basis, tokenized shares of QQQ will not be available for
trading on Nasdaq outside of regular and extended trading hours.
The post-trade settlement services, including the eligibility of a
member's orders to be settled in tokenized form, will be determined by
DTC's policies and procedures and the No Action Letter.
2. Statutory Basis
Nasdaq's proposal offers a means by which market participants can
utilize the DTC pilot tokenization program when trading on the
Exchange. The Exchange believes that its proposal is consistent with
Section 6(b) of the Act,\30\ in general, and furthers the objectives of
Section 6(b)(5) of the Act,\31\ in particular, in that it is designed
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest.
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
It is consistent with the Act to permit members of the Exchange to
trade tokenized securities. As explained above, investors increasingly
demand the ability to own and trade tokenized versions of financial
assets, including securities. Such capabilities are available
increasingly in other jurisdictions and to more a limited extent, in
the United States. Thus far, and as compared with other available
solutions, Nasdaq submits that its proposal offers a means of trading
tokenized securities that is consistent with Congressional intent--in
that it will provide for trading to occur within the framework of the
national market system--while serving the best interests of issuers,
investors, and the markets.
Most importantly, the proposal will involve trading tokenized
securities on Nasdaq--the world's leading and most trusted market
operator and provider of market technology. This means that Nasdaq
believes that the trading of tokenized securities that occurs on Nasdaq
will be subject to the full panoply of SEC regulatory obligations and
oversight, as well as Nasdaq rules, which together help to ensure that
trading of all securities on Nasdaq is transparent, fair, orderly,
equitable, and in the best interests of investors. Due to the
application of the national market system rules, the prices of
tokenized securities trading on Nasdaq will be transparent and they
will both contribute to and account for the NBBO. Market makers on
Nasdaq will provide two-sided liquidity, even in times of market
stress. Broker-dealer members of the Exchange will have best execution
obligations to investors when they execute trades of tokenized
securities on Nasdaq. The Exchange itself will be subject to the rigors
of Reg SCI to help ensure that tokenized securities trading occurs in a
manner that is secure, dependable, and resilient as well as to ensure
that Nasdaq is accountable for any failures to do so. Nasdaq's systems
have a track record of reliably processing transactions in
microseconds, even during recent periods of record-high volatility and
message traffic. Nasdaq's world-class surveillance and enforcement
capabilities--which are unique to national securities exchanges--also
will be brought to bear to detect and address fraud and manipulation,
should it occur.
Nasdaq's proposal will also avoid risks inherent in other
tokenization approaches that would potentially fragment liquidity and
isolate it to particular trading platforms and blockchain technologies
that are not interoperable. In such scenarios, tokenized securities
would not trade freely across markets as they do now or access better
prices. Moreover, the markets could suffer to the extent that isolated
liquidity no longer links to the national market system and contributes
to the NBBO.
This proposal to trade tokenized securities on Nasdaq will require
Nasdaq to change very little from its existing structure and practices,
which the Commission has approved and oversees. As noted above, the
tokenization services that DTC will provide in support of Nasdaq's
proposal have been reviewed by the Commission and are subject to the
terms of the No-Action Letter.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange's proposal to
trade tokenized securities on its market are neither intended to nor
will they adversely impact competition. If anything, the Exchange
expects that the proposed changes will promote competition by providing
for the Nasdaq Stock Market to accommodate the demand for tokenized DTC
Eligible Securities among listed companies and DTC Eligible
Participants. Nasdaq believes that its proposal will be particularly
attractive because it will provide for the trading of tokenized DTC
Eligible Securities in a manner that is familiar to market participants
and investors and which is consistent with existing laws and rules.
Indeed, under Nasdaq's proposal, the extent to which market
participants (other than DTC) will need to modify their back-end
systems and practices to accommodate tokenized securities trading
should be minimal--meaning that those systems may simply need to
account for the availability of the new flag and be set up to provide
any information that the flag requires to Nasdaq. Nasdaq notes that
market participants on the Exchange will remain free to trade, clear
and settle securities in traditional form, including both DTC Eligible
Securities and other securities.
In any event, the Exchange operates in a highly competitive market
in which market participants can readily choose between competing
venues if they deem participation in the Exchange's market to no longer
be desirable or if they do
[[Page 4145]]
not wish to trade tokenized securities. In such an environment, the
Exchange must carefully consider the impact that any change it proposes
may have on market participants, understanding that it will likely lose
them to the extent a change is viewed as unfavorable by them. Because
competitors are free to modify the functionality and structure of their
markets, including by availing themselves of the same capabilities that
are being developed to trade tokenized securities, the Exchange
believes that the degree to which its proposal imposes any burden on
competition is limited. Last, to the extent the proposed change is
successful in attracting additional market participants or additional
activity by existing Participants, the Exchange also believes that the
proposed change will promote competition among trading venues by making
the Exchange a more attractive trading venue for Participants and
investors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 2, is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9defe8f1f8b0fef2f0f0f8f3e9eeddeef8feb3faf2eb"><span class="__cf_email__" data-cfemail="6e1c1b020b430d0103030b001a1d2e1d0b0d40090118">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-072 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2025-072. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NASDAQ-2025-072 and should be submitted
on or before February 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-01823 Filed 1-29-26; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.