Why Robinhood Stock Crushed it on Wednesday

The regulator aims to make trading in next-generation securities easier.

An article concerning a development that could benefit Robinhood Markets (NASDAQ: HOOD) helped boost the price of the next-generation brokerage on Wednesday. Investors took the report as excellent news for the financial services company and reacted by pushing its shares up almost 9%.

Well before market open, Reuters reported that the Securities and Exchange Commission (SEC) is preparing a policy allowing cryptocurrency companies to transact in crypto products such as tokenized stocks.

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Citing unnamed "analysts and lawyers," the news agency added that SEC chair Paul Atkins will formally announce the policy in the near future. Tokenized stocks, which are digital assets that sit on blockchains and are tied to actual shares of companies, can be traded outside of market hours and settled near-instantaneously, among other advantages over traditional equity transacting.

Atkins has proposed an "innovation exemption" framework under which the intermediaries typical in securities trading can be bypassed under certain circumstances. This would allow for that direct and immediate transacting promised by tokenized stocks.

Unlike some of the more established brokerages, Robinhood began embracing crypto trading years ago. It's very much a tech-forward company, to the point where it already operates a trading platform for tokenized stocks. Unfortunately for enthusiasts of such products in the U.S., this isn't fully legal in the U.S.; this service is only available for European Union (EU) clients.

At least, not yet. Should that change, as per the Reuters report, Robinhood would undoubtedly score a win. I don't blame investors for piling into the stock on that possibility.