NYSE taps Avalanche for tokenized stock settlement

Ava Labs said on Nov. 9 that Avalanche will provide the core ledger technology for the clearing firm behind an upcoming NYSE-affiliated digital trading venue, according to the company’s announcement. The choice puts Avalanche technology in the post-trade layer of a planned tokenized-equities market, while the venue’s launch and operation remain subject to regulatory approval.

The announcement describes a new digital alternative trading system, or ATS, affiliated with the NYSE. It is designed to support trading, clearing and settlement around the clock for subscribers. Ava Labs did not give a launch date or a transaction volume target in its announcement.

What role will Avalanche play in the venue?

Avalanche will supply ledger technology to the platform’s clearing firm, which will use it to record and settle trades. That makes the blockchain part of the post-trade process; the announcement does not say that the NYSE’s existing exchange will move its trading onto Avalanche.

The design also separates where a tokenized equity is issued from where its trade is settled. NYSE Head of Digital Issuance Dennis Lee said in the announcement that the platform will support equities listed on a range of blockchains, while its settlement ledger must be fast and reliable, keep costs predictable and let the operator control who can participate. In practice, a token issued on one supported network could be traded on the venue and have its trade recorded and settled through the Avalanche-based ledger.

CoinDesk reported that NYSE plans to run a custom blockchain built with Avalanche technology, rather than settle trades on Avalanche’s public network. That detail came from John Nahas, Ava Labs’ chief business officer, in an interview with CoinDesk. A custom network would let the operator set participation rules for the ledger, matching the control requirements Lee described, while still using Avalanche’s underlying technology.

What will traders be able to do, and what is still pending?

The planned ATS is intended to support 24/7 trading, clearing and settlement, but Ava Labs said those functions depend on applicable regulatory approvals. The announcement does not specify which securities will be available at launch, which investors will be eligible, or how the platform will handle the conversion between tokens issued on different blockchains and the settlement ledger.

The project builds on NYSE’s previously announced plan for a digital platform for trading and onchain settlement of tokenized securities. CoinDesk reported that NYSE expects to pair its Pillar trading engine with blockchain-based clearing, settlement and custody, and that the platform aims to support instant settlement and stablecoin-based funding. Those are goals for the planned venue; the Avalanche announcement does not provide operating rules or confirm when those features will be available.

How does the selection fit Wall Street’s blockchain push?

The selection gives Avalanche a role in infrastructure for a traditional exchange operator, as firms across the securities market develop tokenization systems. CoinDesk reported that Nasdaq is developing tokenized-stock infrastructure and that the Depository Trust & Clearing Corporation launched a tokenization service using private blockchain networks. These initiatives address different parts of the market, so the announcements alone do not establish that they will compete on identical terms.

For Avalanche, the confirmed commitment is to provide ledger technology for a clearing firm tied to one planned venue. Neither Ava Labs’ announcement nor CoinDesk’s report says that AVAX, Avalanche’s native token, will be used to pay settlement fees or required to hold the tokenized shares. The commercial and technical significance will depend on the platform’s final design, its approvals and whether it reaches live trading.

Sources and documents

• the company’s announcement — prnewswire.com
• CoinDesk — coindesk.com