Trading Strategies & Tech
Legal Token Trading and Regulated ICOs – Industry Game changer
27 Sept 2017
Initial Coin Offerings (ICOs) start their steps towards full regulation after being announced today a new ‘alternative trading system’ (ATS) under the supervision of both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
The agreement, called tØ, has been possible thanks to a joint venture between the capital markets arm of Overstock’s subsidiary Medici , fintech firm ReGen and investment bank Argon Group. All companies with high influence and experience in investment and market-specialized.
The three companies have agreed to launch a ‘first-of-its-kind’ alternative trading system (ATS) that will provide a platform for the exchange of cryptographic tokens categorized in the U.S. as securities.
Moreover and under the US watchdogs, this ATS will offer a legally approved, regulated alternative to a major securities exchange, such as the New York Stock Exchange and Nasdaq.
In this ATS, the mentioned companies have a long-running experience in Blockchain-based financing. Nonetheless, Overstock’s Medici is actually its capital markets arm, fintech firm RenGen is focused on market maker and Argon Group is a well known investment bank specializing in ICO capital raising.
This means a huge leap on for the Blockchain as its revolutionary token-based ICO financing system was struggling to get supported by the authorities.
Overstock’s CEO, Patrick Byrne, has welcomed this new regulated venture and, even going further, has told CoinDesk that, for him, it’s a historic event as they are opening a new type of capital market.
For now, this ATS will be valid only in the US. It is to see if others International and National Authorities are to follow. Although it feels inevitable and has to be welcomed by all of those who believed in the blockchain technology and its possibilities.
A first-of-its-kind Alternative Trading System
The launch of this ATS responds of months of preparation and regulated-based ICOs seek. As statements by Overstock made in June indicated the company was looking for new ways to utilize technology originally developed as part of a planned blockchain stock market offering aimed at traditional capital markets.
As one of the main problems ICOs financing programs have seen since they first were launched was the struggle to exchange them, or even get them inserted in the regular capital markets. Therefore, they were pushed away of the main capital streams and thus reaching a small percentage of investors.
Nevertheless, the the market for cryptocurrency investments is booming, having eclipsed the $2 billion mark this year, according to CoinDesk.
The light ahead is even brighter, at least, so Argon’s general counsel and interim CEO, Emma Channing , sees it. She recently said that she believes her firm’s new ATS could see $2 billion in trading within the next 12 months. Put another way, Argon projects that the total ICO issuance volume could soon top $4 billion.
In addition to creating liquidity for a new type of security, Byrne said the new platform will have appeal in that it will reduce transaction costs by 80–90 percent over the model now in use by traditional securities exchanges.
The benefits of blockchain would also allow trades to clear at the time of execution, compared to the current three-day time lag that investors currently experience at traditional stock exchanges, he said.
According to Byrne, decreased costs and faster settlement times will mean a fairer market, with greater liquidity and more efficient price discovery.
