alternative trading systems

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The amended definition could provide a new means for the SEC to regulate crypto platforms.

By Stephen P. Wink, Marlon Q. Paz, Naim Culhaci, Ian Irlander, and Deric Behar

We previously published a blog post on the set of proposed amendments (Proposal) issued on January 26, 2022, by the Securities and Exchange Commission (SEC) regarding the regulation of alternative trading systems (ATSs) that would, among other things, substantially expand the activities covered by the definition of an “exchange” as interpreted by Rule 3b-16 under the Exchange Act to capture “Communication Protocol Systems”. Whereas we previously offered our general views on the proposed expansion of definitions and resulting potential impact on the securities industry, now we turn specifically to the potential impact of the Proposal on platforms trading digital assets.

The proposal would require certain systems and platforms currently not subject to any registration requirements to register as broker-dealers and ATSs.

By Stephen P. Wink, Marlon Q. Paz, Naim Culhaci, and Deric Behar

On January 26, 2022, the Securities and Exchange Commission (SEC) issued a set of proposed amendments (Proposal) regarding the regulation of alternative trading systems (ATSs) that would, among other things, substantially expand the definition of an “exchange” as interpreted by Rule 3b-16 under the Securities Exchange Act of 1934 (the Exchange Act) to capture “Communication Protocol Systems.” Specifically, Rule 3b-16’s interpretation of the “exchange” definition would be broadened in several meaningful aspects, including by removing the current requirement that a platform needs to bring together “firm orders” to be deemed an “exchange.”

SEC relief streamlines noncustodial settlement of digital asset trades, but broker-dealer custody is still off-limits.

By Stephen P. Wink, Naim Culhaci, and Deric Behar

On September 25, 2020, the US Securities and Exchange Commission (SEC) issued a no-action letter (the Letter) granting more leeway to registered alternative trading systems (ATSs) that settle trades involving digital asset securities. The no-action relief is intended to reduce operational and settlement risks that ATSs face as they seek ways to provide noncustodial digital asset services, including settlement of trades involving virtual currencies, coins, and tokens.