An Open Letter to the SEC: A Call for Transparency

Today, Ondo submitted a letter to the SEC regarding Nasdaq's proposed rule changes for trading tokenized securities. Tokenization is transforming global markets, and as a leader in real-world asset tokenization, we believe this proposal should not move forward until critical information is made public.

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.

Tokenization is ushering in the next era of financial innovation and access, and should advance through open collaboration and transparent standards. In the meantime, we've asked the SEC to gather more information before making a final decision. With DTC's plans in the open, we look forward to working with Nasdaq and the entire tokenization industry to help usher in the next era of tokenized finance.

To explain our perspective, we have published the following letter to the SEC:

Re: File No. SR-NASDAQ-2025-072 - A proposal to amend the Exchange's rules to enable the trading of securities on the Exchange in tokenized form

Dear Ms. Countryman,

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), File No. SR-NASDAQ-2025-072 (Proposal). 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.

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 because:

1. It relies on Nasdaq's "preliminary sense" of the process that it understands the Depository Trust Company (DTC) to be contemplating for settling securities in token form, no direct evidence of which is on the record. This deprives the Commission of information needed to determine whether the proposed rule change is consistent with the requirements of the Securities Exchange Act of 1934 (Exchange Act).

2. Nasdaq's reference to such information, which we presume to be credible, also itself implies differential access to information relevant and necessary for Ondo and other market participants to provide meaningful comment on the proposed rule change.

3. Such lack of timely access to relevant information on tokenization initiatives - expected by Nasdaq to be introduced by DTC within one year - represents a material burden on competition for Ondo and other companies with business interests in such initiatives. That is inconsistent with Section 6(b)(8) of the Exchange Act, particularly its potential anti-competitive effects and the limitations it imposes on market access.

4. Nasdaq itself acknowledges in the Proposal that the new features being proposed may need to be adjusted based on the final features of related systems introduced by DTC, and the Proposal will not be effective until the DTC features exist. Therefore, there is no harm, and there is much benefit to be gained, in the Commission instituting proceedings to seek more information regarding the related DTC initiatives for review by the public.

We also note that the most material deficiencies noted above are capable of being cured if and when sufficient additional information regarding the related DTC initiatives is available publicly. Accordingly, we invite the Commission, before deciding whether to approve or reject the Proposal, to use its authority to encourage DTC to release such information as promptly as practicable. Ondo is prepared to consider supporting this Proposal upon the public release of such information. However, should this not occur prior the date when a Commission decision is required to be made, for these and the other reasons set forth more fully below, we respectfully request that the Commission institute proceedings to review the Proposal for disapproval.

I. Ondo Finance

Ondo is a financial technology company that bridges traditional finance and decentralized finance by creating, managing and/or administering tokenized versions of real-world assets (RWAs). Our mission is to make institutional-grade financial products, such as U.S. government securities, money market funds, U.S. listed stocks, and ETFs, accessible to a broader audience on blockchains.

• Ondo Short-Term US Treasuries (OUSG): OUSG is a tokenized fund representing interests in short-term U.S. government securities. The underlying assets are held in institutional funds, such as BlackRock's USD Institutional Digital Liquidity Fund (BUIDL), [Others].

• US Dollar Yield Token (USDY): USDY is a tokenized note secured by short-term U.S. Treasuries and bank deposits. It is designed to provide non-U.S. investors with an interest-bearing, USD-denominated stablecoin alternative.

• Ondo Stocks (OGM): OGM is the largest platform tokenizing publicly traded U.S. stocks and ETFs. The platform enables investors outside the United States to gain economic exposure to 100+ U.S. stocks and ETFs by minting, transferring, and redeeming securities-backed tokens on Ethereum, with other chains expected soon.

  • OGM tokens provide their holders with economic exposure to the value of their underlying publicly traded assets, including the value of dividends (less applicable tax withholdings).
  • However, the Tokens are not themselves stocks or ETFs, and they do not provide their holders with rights to hold or receive their respective underlying assets.
  • OGM tokens are fully backed and secured by U.S. stocks and ETFs (and cash in transit) held with one or more U.S.-registered broker-dealers.

II. The Nasdaq Proposal

The Proposal seeks to amend Nasdaq's rules to enable the trading of securities on the Exchange in tokenized form. Specifically, rules Equity 1, Section 1 and Equity 4, Rules 4756, 4757, and 4758 are proposed to be amended to clarify how Nasdaq would trade tokenized securities. We believe the Commission should not make a determination to approve or disapprove the Proposal at this time for the following reasons:

A. Nasdaq fails to provide sufficient factual information to evaluate the Proposal

Nasdaq states that its 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 also states that it "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, but provides limited information regarding those features - presenting only "a preliminary sense" of the process that it understands DTC is contemplating for settling securities in token form, plus an expectation that such functions will be introduced by DTC within one year.

Form 19b-4 is intended to elicit information necessary for the public to provide meaningful comment on the proposed rule change, and for the Commission to determine whether the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder, as applicable to the self-regulatory organization and in accordance with the requirements for a 19b-4 filing. Due to the complete absence of direct factual information on the public record regarding the clearing and settlement features fundamentally necessary for the Proposal to function as intended, the Proposal clearly does not meet the Commission requirements for approval at this time.

By way of example, the Proposal notes that if a Participant places an order in a tokenized security, DTC would be expected to carry out the instruction in accordance with its (not yet established) rules, policies and procedures -- but if it cannot do so, it would make alternative arrangements with the Participant. We believe specific features of this kind are impossible for Ondo and other interested parties to evaluate without knowing more about both how DTC's policies and procedures would function in the first instance and in the alternative when handling tokenized securities transactions. By allowing the Proposal to proceed at this time, the Commission would potentially create indefinite room for principal rules, policies and procedures and "alternative arrangements" to be established, without meaningful input from the public.

We also recognize that this aspect of the Proposal is not within Nasdaq's control, as the deficiencies noted above are capable of being cured only when sufficient additional information regarding the related DTC initiatives is available publicly. Accordingly, before deciding whether to approve or reject the Proposal, we invite the Commission to use its authority to encourage DTC to release such information as promptly as practicable. Ondo is prepared to consider supporting this Proposal upon the release of such information. Until such time, however, we believe the Commission must find that the Proposal does not meet its standards for approval.

B. The Proposal burdens market competition

The Proposal introduces features that rely fundamentally on functions to be provided by DTC, and provides summary information regarding the form those functions are expected to take. Nasdaq's reference to such information, which we presume to be credible, itself implies differential access to information relevant and necessary for Ondo and others to comment on the proposal in an informed manner. While Nasdaq frames its proposal as fair and equitable, the tiered access to information regarding new market features being developed by DTC is unfairly discriminatory and places a disproportionate burden on smaller market participants and new entrants not privy to such information.

Such lack of timely access to relevant information on tokenization initiatives represents a material burden on competition for Ondo and other companies with business interests in such developments that is inconsistent with Section 6(b)(8) of the Exchange Act–particularly regarding its potential anti-competitive effects and the limitations it imposes on market access.

• Higher effective costs for smaller firms: Nasdaq's analysis fails to account for the actual economic impact of its preferential access to information regarding DTC's plans that were relevant to its development of the Proposal. Such access heavily favors incumbent exchanges, banks, broker-dealers, and other members of DTC regardless of their capabilities to contribute to the tokenization of U.S. equity markets. For digital native firms such as Ondo, the higher effective cost of accessing essential information on new market developments such as those referenced but not described in relevant detail in the Proposal may hinder their ability to compete on equal footing.

• Discourages competition and innovation: The high entry barriers created by this differential access to valuable market information may deliberately stifle competition and innovation, putting digital native firms at a competitive disadvantage. This is particularly harmful for new market entrants attempting to offer innovative new blockchain-based products and services that rely on access to legacy equity trading and settlement systems, directly or indirectly. Nasdaq has failed to account for the value of these advantages it benefited from when developing the Proposal in its competition analysis.

C. Nasdaq's competition analysis is deficient

Nasdaq's self-assessment that the Proposal "does not impose any burden on competition not necessary or appropriate" is fundamentally flawed as it lacks an adequate factual basis.

• Fails to consider specific competitive impacts: Nasdaq's analysis is generic and does not adequately address the specific burdens that may be imposed on smaller and new market participants, depending on the specific features of the related DTC functionality. Accordingly, there is no direct factual evidence in the filing - or otherwise in the public domain - that Nasdaq could have used to consider the potential for competitive harm.

• Contradicts the Exchange Act's purpose: The Exchange Act explicitly requires Nasdaq rules to be designed to "promote just and equitable principles of trade" and "foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities". Nasdaq's proposal to take advantage of the discriminatory access to information described above runs contrary to these core principles. Such advantages, in going to market sooner or promulgating technology standards, even if only marginal, are discriminatory and inappropriate for a national securities exchange to pursue - if and when they do become available - given their privileged role in the marketplace and the specific requirements of the Exchange Act.

III. Conclusion and requested action

We again note that the most material deficiencies described above are capable of being cured if and when sufficient additional information regarding the related DTC initiatives is available publicly. However, should such information not be available prior the date when a Commission decision is required to be made, for the reasons set forth above, we respectfully request the Commission to institute proceedings to review the Proposal for disapproval. Thank you for your consideration of our views on these important issues.

Sincerely,

Peter Curley
Head of Global Regulatory Affairs