Nasdaq's Adena Friedman raises concerns over fragmented markets from tokenized stock derivatives blurring price discovery.
Nasdaq is prioritizing tokenization that brings securities onto blockchain while maintaining direct ownership of the underlying assets, CEO Adena Friedman said, speaking in a recent interview with CNBC’s ‘Squawk Box.’
Friedman identified three approaches to tokenization, including issuing and trading tokenized shares through established market infrastructure, moving share trading outside that system under regulatory exemptions, and issuing stock-backed derivatives.
Nasdaq is focused on the first model as it develops an end-to-end approach to tokenized equities, she said.
“We are very focused on driving tokenization through the core of markets,” she said. “When an investor is buying a company stock, whether it’s in traditional form or it’s in tokenized form, it’s the same thing. They’re buying, they actually own the stock. They own the company.”
Friedman likewise raised concerns that stock-backed tokens and trading outside established market systems could weaken price discovery, fragment liquidity and limit companies’ visibility into trading in their shares.
Daily. Free. Join 34,000+ readers across crypto, finance, and policy.
Friedman raised concerns that trading outside the core market system can reduce visibility into quotes and transactions, potentially undermining price discovery and dividing liquidity across venues.
She also distinguished tokenized shares from derivatives, which do not necessarily confer direct ownership of a company.
“There’s no visibility into the trading with quotes or trades. And it’s nothing’s trackable, all the services that you provide. That’s kind of sitting outside the market environment that’s been created for all US investors and issuers for that matter,” she explained.
“You want to have price discovery. You want this to be centralized liquidity,” she added.
Nasdaq views blockchain as a potential way to improve capital flows across securities such as stocks, Treasuries and money-market instruments, while maintaining the transparency and ownership rights underpinning traditional markets.