Financial technology firm Ondo Finance urged the U.S. Securities and Exchange Commission (SEC) on Oct. 15 to delay approval of Nasdaq’s proposed rule change that would allow trading of tokenized securities. The firm’s public letter, titled “A Call for Transparency,” asserted that the proposal should not proceed until the Depository Trust Company (DTC) discloses detailed information about how it will manage the clearing and settlement of tokenized assets. The company argued that this information gap prevents the SEC, investors, and market participants from fully assessing the rule’s implications for market stability, fairness, and compliance with the Securities Exchange Act of 1934.

“Ondo Finance Inc. (Ondo) submits this comment letter in response to the notice of filing of a proposed rule change by The Nasdaq Stock Market LLC (Nasdaq or Exchange),” the company stated, adding:

We have reviewed the proposal and write to express our objection to its approval at this time, prior to additional information being placed on the record.

The firm stressed: “New market rules must be built on clear, public information available to all market participants to use when providing comments. Without more information about how the Depository Trust Company (DTC) will handle tokenized settlement, neither regulators, market participants, nor investors can properly assess how this proposal would function.”

The letter went beyond procedural criticism, warning that the proposal risks creating unequal access to critical market data. It argued that Nasdaq’s reliance on what it described as a “preliminary sense” of DTC’s approach suggests that some market participants have privileged insight into DTC’s plans while others are left in the dark. Such disparities, the firm said, could result in “a material burden on competition” that favors large, established exchanges, banks, and broker-dealers over smaller, digital-native firms. This imbalance, it argued, contradicts Section 6(b)(8) of the Exchange Act, which requires rules to avoid unfair discrimination and promote market access on equitable terms.

In addition, the company contended that Nasdaq’s competition analysis was “fundamentally flawed” because it failed to evaluate the economic effects of this information gap. The letter highlighted that smaller firms may face higher effective costs when developing tokenization infrastructure without full knowledge of DTC’s forthcoming systems, which Nasdaq appears to have considered in its proposal.

Onto Finance reaffirmed its broader position:

While we wholeheartedly agree that tokenization is an important market feature that should be fully supported by Nasdaq, other self-regulatory organizations, market participants, and the Commission, we believe this filing in its current form is deficient.

This imbalance, it cautioned, could discourage innovation by deterring new entrants from participating in blockchain-based securities markets. The firm urged the SEC to use its authority to compel DTC to release its tokenization framework publicly, stating that it would be prepared to support Nasdaq’s proposal once that occurs. The firm concluded that advancing tokenized finance requires open collaboration between regulators, market operators, and innovators. By ensuring that foundational market data is public, Ondo argued, tokenization can deliver on its promise to bridge traditional and decentralized finance without compromising market fairness or investor confidence.

• Why is Ondo Finance asking the SEC to delay Nasdaq’s tokenized securities proposal?
  Ondo Finance believes the SEC should pause approval until the Depository Trust Company (DTC) publicly clarifies how it will handle clearing and settlement of tokenized assets, ensuring transparency and regulatory fairness.
• What key risk does Ondo Finance highlight in Nasdaq’s current proposal?
  The firm warns that unequal access to DTC’s operational information could give large institutions unfair advantages, undermining competition and compliance with Section 6(b)(8) of the Securities Exchange Act.
• How could the proposal affect smaller or digital-native financial firms?
  Ondo argues that limited transparency increases development costs and market barriers for smaller firms, potentially discouraging innovation in blockchain-based securities markets.
• What conditions would make Ondo Finance support Nasdaq’s tokenization plan?
  Ondo stated it would back the proposal once DTC publishes its full tokenization framework, ensuring all market participants have equal access to foundational infrastructure data.

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