🕙 I Want to Trade Stocks in a Market That Doesn't Sleep: SEC Moves to Update Transfer Agent Rules

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The Securities and Exchange Commission just took another big step toward modernizing the plumbing of the U.S. financial system from trading through settlement. This week, the Commission proposed a sweeping update to the rules governing transfer agents—the firms responsible for maintaining issuers’ official ownership records, processing transfers and generally making sure that a share owned by Alice does not accidentally become two shares owned by Bob. Most of these rules have not been substantively updated since the late 1970s and early 1980s, when physical certificates and manual processing were still the default and “digital asset” had practically no meaning. Meanwhile, the SEC is also preparing for its Sept. 17 roundtable on 24-hour trading. The agenda covers exchange and broker readiness, overnight surveillance, closing-price mechanics, clearing and settlement, expected liquidity, cybersecurity, staffing, market-data continuity and the eventual road from extended weekday trading toward a genuinely 24/7 market. These sound like two separate projects (transfer-agent rules over here, trading hours over there), but they arrive at the same place. A market can only trade as continuously as its ownership records and its clearing, settlement, and compliance rails allow. The pieces are already moving:

• On June 26, the SEC approved expanded operating hours for the consolidated stock-market data feeds from 9:00 p.m. Sunday through 8:00 p.m. Friday, with a one-hour technical pause each weeknight.

• On June 29, DTCC’s NSCC went live with 24x5 clearing, operating from Sunday evening through Friday evening.

• On Aug. 5, the SEC approved temporary overnight price bands. Unlike daytime Limit Up–Limit Down rules, hitting the overnight band will not automatically trigger a trading pause.

• On Dec. 6, FINRA’s Trade Reporting Facilities are scheduled to extend their hours to match the broader overnight-market rollout.

The market is already 24/7 in a way; you just have to know the right people or have a broker who will take overnight orders (for a fee of course). Investors can access alternative trading systems (ATSs) and broker platforms, but the consolidated national-market infrastructure that makes regular-session quotes and trades legible is not yet running overnight. The result is a patchwork rather than one cohesive market.

Our take

You might ask, “why are we not already there?” Talk to anyone at a bank or fund about what happens after the closing bell, and you’ll have your (likely frustrated) answer. Unless everything is happening inside one platform, or you have some of the best infrastructure money can buy, and sometimes even then, end-of-day processes still take time. Positions, cash, failed deliveries, and corporate actions all have to be reconciled across institutions. Someone’s ledger says one thing, someone else’s ledger says another, and several people spend the evening determining who owns what and where the human error occurred. Most of this is a vestige of decades of inefficiencies built up as the financial ecosystem evolved: different ledgers, different forms of securities, different custodians, different settlement systems, and an institutional structure in which everyone maintains a separate truth and then conducts a nightly séance to see whether the truths match.

Blockchains and common standards have spent more than a decade demonstrating how far shared state and programmable settlement can go toward solving that problem. Even the traditional incumbents are now proving the point. JPMorgan says its Kinexys currently processes roughly $7 billion per day and has processed more than $4 trillion since inception. It is largely private and permissioned, yes, but it is nevertheless a shared, programmable ledger operating at institutional scale.

The important point is not the ideological purity of using a blockchain; it’s the overall efficiency increase of the entire financial system through common standards and platforms. The proposed rule changes for TAs would recognize blockchain and distributed-ledger technology as expressly permitted recordkeeping media. To be fair, this was not necessarily prohibited before. The existing rules are explicitly technologically neutral, and that allowed transfer agents to argue with a straight face and some SEC staff guidance to back them up, that an onchain record satisfied their obligations.

Galaxy and our onchain transfer agent Superstate have done this with GLXY shares on Solana. Superstate, acting as the registered transfer agent, records legal ownership onchain in real time. Those shares are still restricted to verified investors and allowlisted wallets, so this is not yet permissionless stock composable throughout DeFi, but it demonstrates that the underlying model was already possible.

The SEC’s proposal would close the distance between “our lawyers think this is permitted” and “the rulebook explicitly allows it.” Lawyers, after all, are very expensive consensus mechanisms. Consensus, rollback, and fork risks do not disappear; they become operational risks a TA has to control and document rather than reasons to not use blockchains at all. The most interesting part comes from Commissioner Hester Peirce, who zeroed in on the proposal’s most heretical question (from a regulator's perspective):

“Should transfer agents continue to be required to collect names and physical addresses of securityholders or should the rule allow other identifiers, such as email and digital wallet addresses, to be collected instead?”

This must have started the most passive-aggressive email chain ever CC’d to the AML/KYC maxis, but it is a fascinating question.

Proponents for personal privacy would welcome the change, but it raises some difficult questions given the pastiche of securities regulation we are currently saddled with.

Can tokenized stocks be bearer assets? The obvious analogy to bearer bonds is imperfect but useful here. With a true bearer instrument, possession is the be-all and end-all (just ask Hans Gruber what he was looking for in Nakatomi Plaza). Congress largely tax-nuked U.S. bearer issuance decades ago, rather than pretending that the concept was metaphysically impossible and declaring them illegal. Not all tokenized stocks are, or should be, bearer instruments. But for one that is designed to travel in a bearer-like manner, a public wallet address is strictly more information than an issuer would have in a true bearer model. It is persistent, observable, and auditable. It is not the same thing as knowing the human being behind it, but it is also not “no information.”

Then come the fun follow-on questions. What happens when one wallet, or 20 wallets controlled by the same person, crosses the 5% beneficial-ownership threshold? A wallet address does not file a Schedule 13D or 13G. The person controlling it does. Cross 10% and the Section 16 reporting regime enters the chat as well. Presumably identity could remain private at ordinary ownership levels and be revealed when a statutory threshold is crossed, but somebody still needs a defensible method for aggregating addresses under common control.

And what exactly constitutes control? A private key? A multisig signatory? A smart contract? An account held through a custodian? A DAO vote? A wallet managed by an adviser but economically owned by a client? These have been thorny questions for DAO designers and governance-token architects; how do you differentiate aligned voters from a cluster of wallets controlled by one entity without explicit lines of ownership? Taking these questions to their logical extremes outlines the points where there is an obvious break with other regulations.

Then there is a bigger issue. If a wallet address can be the registered holder, and an address is all that is required for the TA’s ownership record, could issuer-sponsored tokenized shares eventually move away from closed, whitelisted systems and circulate freely on public networks, the way xStocks and other SPV stock wrappers like Robinhood’s Euro stocks do?

The SEC has already made clear that putting a security onchain does not alter the application of the securities laws. Beneficial-ownership reporting, transfer restrictions, sanctions controls and the broader BSA/KYC stack surrounding brokers, custodians and regulated financial institutions will not evaporate because the certificate became a token. On the other hand, the proposal itself asks whether requiring full names and physical addresses creates unnecessary unauthorized-disclosure risk. There is an enormous policy gap between “a blockchain may maintain the ownership record” and “any anonymous wallet may freely receive the security.” Still, changing the transfer agent rule would matter. It could reduce the amount of personally identifiable information parked in centralized, breachable databases.

The benefits of automated, standardized settlement systems built on blockchains and open protocols are increasingly compelling. For people who don’t care about settlement and think around-the-clock markets are useful only for degenerate behavior, read the research on overnight returns varying statistically from market hours. Material information arrives while the primary exchanges are closed, and overnight price changes are meaningfully driven by that information (this was explicitly addressed in the SEC’s August release on overnight price bands). A closed exchange does not create informational silence; it creates a division between investors who can access OTC or alternative venues and investors who cannot.

This proposal lays the groundwork for the sober version of what DeFi has been trying to do for years. Letting more investors trade nearly around the clock, and eventually 24/7, should compress the rents charged by brokers "finding" overnight liquidity, commodifying more basic financial functions. It will not eliminate intermediation, but it can force middlemen to compete on service and cost rather than mere access.

Information flow does not stop when markets are closed. Right now, the only thing a closed market does is let privileged firms access the OTC markets. The regulations are now, finally, catching up. Onward and upward. - Thad Pinakiewicz