U.S. SEC approves new U.S. exchange with blockchain feed, faster settlement

NEW YORK, Jan 28 (Reuters) – The U.S. Securities and
Exchange Commission (SEC) late on Thursday approved the
country’s 17th stock exchange, a subsidiary of Boston-based BOX
Exchange, which will incorporate blockchain technology.

The new exchange, named BSTX, aims to launch in the second
quarter, said Jay Fraser, a director. It will initially trade
securities, such as stocks or exchange-traded funds, first
listed on its exchange, but those securities would be tradable
on rival bourses.

BSTX ultimately aims to expand trading to all U.S. stocks
and potentially tokenized securities, Fraser said. Stock tokens
are digital versions of equities pegged to the underlying share,
usually traded in fractional units.

Fraser said the aim is for BSTX to look “more like” crypto
exchanges such as Coinbase as opposed to traditional
exchanges like Nasdaq.

In addition to traditional pricing data feeds, BSTX plans to
offer a market data feed that will operate on a private
blockchain. That feed will allow exchange members to see their
own activity, as well as the activity of other BSTX participants
on an anonymized, delayed basis, the exchange filing said.

The exchange plans to expand its use of blockchain, the
technology that underpins cryptocurrencies such as bitcoin, over
time to support products like tokenized securities, Fraser said.

BSTX was originally going to be called the Boston Security
Token Exchange and planned to exclusively trade tokenized
securities, but the SEC rejected that plan in December of 2020.

The exchange will also give members the option to settle
trades as quickly as the same day, as opposed to the current
two-day standard settlement time, which would free up cash
counterparties have to pledge against trades while also reducing
the risk of either party defaulting.

The securities industry as a whole is currently debating
moving to single-day settlement.

In its Thursday notice, the SEC said https://www.sec.gov/rules/sro/box/2022/34-94092.pdf
that notwithstanding the blockchain feed and faster settlement
times, BSTX’s revised rules was “substantively similar” to the
rules of other stock exchanges.

BSTX is a joint venture between BOX and tZero, which is
providing the blockchain technology.

BOX is an options exchange jointly owned by Toronto Stock
Exchange operator TMX Group, Citadel Securities Principal
Investments LLC, and brokers including arms of Citigroup
and UBS.
(Reporting by John McCrank; Editing by Bernard Orr and Sandra
Maler)