![]() Crypto trading platforms as "exchanges"Ĭhair Gary Gensler's and Commissioner Caroline Crenshaw's statements accompanying the reopening of the comment period make clear the SEC's position that the current definition of "exchange" applies to numerous crypto trading platforms. ![]() The Reopening Release provides the following example of a communication protocol: "if an entity makes available a chat feature, which requires certain information to be included in a chat message (e.g., price, quantity) and sets parameters and structure … the system would have established communication protocols." III. The Proposed Rules' inclusion of "communication protocols" as an example of an established, non-discretionary method under which buyers and sellers can interact would also broaden the scope of "exchange." Communication protocols "generally use non-firm trading interest as opposed to orders to prompt and guide buyers." The Proposed Rules define "trading interest" to encompass "any non-firm indication of a willingness to buy or sell a security that identifies at least the security and either quantity, direction (buy or sell), or price." Additionally, the Proposed Rules would alter the definition of "exchange" to capture not only actual orders placed on securities exchanges but also conditional offers and exploratory solicitations. The Proposed Rules would make several changes to expand the definition of "exchange": The Proposed Rules' broadened scope of "exchange" For an unregistered exchange, the SEC is empowered to bring a civil action to obtain damages including disgorgement, civil penalty and prejudgment interest. To comply with Regulation ATS, an organization must satisfy the definition of an alternative trading system (ATS) - an organization, association, group of persons, or system that (1) constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities and (2) does not: (i) set rules governing the conduct of subscribers other than the conduct of such subscribers' trading or (ii) discipline subscribers other than by exclusion from trading.įailure to register as an exchange or as a broker-dealer may result in operating as an unregistered exchange in violation of Section 5 of the Exchange Act. ![]() If an organization, association, or group of persons qualifies as an exchange, then it must either register with the SEC as an exchange or register as a broker-dealer and comply with Regulation ATS. ![]()
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