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Franklin Templeton Explores SEC Relief for Tokenized Fund Trades
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Franklin Templeton is exploring whether regulatory exemptions could allow tokenized money market funds and ETFs to trade through blockchain venues.
Key facts
- The global investment manager reported preliminary assets under management (AUM) of $1.79 trillion as of Sept. 30
- Franklin Templeton’s blockchain-based fund recordkeeping dates to the 2021 launch of the Franklin Onchain U.S. Government Money Fund, or FOB
- Trading tokenized money market funds and exchange-traded funds (ETFs) through blockchain liquidity pools raises regulatory questions that Franklin Templeton (NYSE: BEN) brought to Securities and Exchange Commission (SEC) staff on Oct
- Section 22(d) of the Investment Company Act of 1940 generally requires sales at the price stated in the fund’s prospectus
Summary
Trading tokenized money market funds and exchange-traded funds (ETFs) through blockchain liquidity pools raises regulatory questions that Franklin Templeton (NYSE: BEN) brought to Securities and Exchange Commission (SEC) staff on Oct. 9. For money market funds, the proposed agenda considered whether investors could exchange blockchain-based fund shares for tokenized National Market System (NMS) stocks through a trading pair on a blockchain venue. The legal question concerns rules governing the price at which investors buy and sell redeemable fund shares. Section 22(d) of the Investment Company Act of 1940 generally requires sales at the price stated in the fund’s prospectus. The SEC’s innovation exemption, issued Sept. 17, temporarily exempts qualifying blockchain venues and liquidity providers from certain exchange and dealer requirements, subject to conditions.