Matter Labs Technologies, Inc. asked the SEC to allow private execution at tokenized-stock venues to preserve trading confidentiality, with a smart contract on a public ledger verifying each resulting state-change proof.
The company’s Nov. 4 comment concerns a temporary SEC exemption for venues trading tokenized National Market System stocks. The order requires covered venue smart contracts to be deployed on a public, permissionless ledger and available for public audit. Matter Labs wants the agency to accept a system that executes trades elsewhere while a smart contract on a qualifying ledger verifies a proof for every change to the system’s recorded state.
Matter Labs said public execution could reveal institutional trading information and create opportunities for front-running or sandwich attacks. Its proposal would let trading participants keep execution details private while the public contract checks the resulting changes.
The company also acknowledged limits to what those proofs can establish. A proof alone would not show whether an operator included transactions fairly, kept the venue running or enabled the SEC to observe trading activity. Participants would still rely on the operator to include their transactions and maintain service.
Matter Labs proposed publishing the software code, disclosing operator control and withdrawal arrangements, and maintaining SEC access to trading records. Matter Labs said it licenses blockchain technology to U.S. financial institutions and does not intend to operate a venue.
The SEC says appearing on its venue notice list does not establish eligibility for the exemption. Matter Labs has asked the agency to clarify the public-ledger condition through staff guidance or a change to the order; the private-execution approach remains its proposal.
