'IT'S A NEW DAY': SEC unveils major plan to reshape Wall Street

Core Insights - The SEC is embracing innovations in financial markets, particularly in the area of tokenization and digital assets, which could enhance transparency and reduce risks in trading and settlement processes [5][10][19]. Market Evolution - Over the past 30 years, the U.S. capital markets have shifted from a floor-based trading system to a fully electronic system, significantly changing how transactions are conducted [2][4]. - Individual investors' ownership of public company capital has decreased, with a shift towards investment through vehicles like pension funds, ETFs, and mutual funds [3][4]. Tokenization - Tokenization involves using blockchain technology to represent underlying securities, which could lead to greater transparency and efficiency in ownership tracking and settlement processes [6][7]. - The potential for real-time settlement (T0) as opposed to the traditional T+1 could significantly reduce risks associated with the gap between trade execution and settlement [7][8]. Regulatory Framework - The SEC is working on a new taxonomy to clarify what constitutes a security, particularly in relation to tokenized assets, and plans to introduce an "innovation exemption" to allow companies to experiment within defined parameters [13][15]. - Recent legislation, such as the Genius Act for stablecoins, marks a significant step in recognizing digital products within the regulatory framework [16][17]. Collaboration with CFTC - The SEC aims to harmonize its regulations with the CFTC to create a more efficient marketplace, addressing historical discord between the two agencies [18][20]. - This collaboration is expected to enhance investor protection and facilitate innovation in financial products [19][20].