Security Token Exchanges
Since Initial Coin Offerings have blown up in 2017, regulatory framework has been under constant strain to accommodate the challenges associated with the swiftly changing state of distributed ledger technology. Blockchain has brought about a completely new asset class that needs to be integrated in the traditional financial market. As it could be expected the initiative and solutions arrive from the market players themselves, prompting the regulatory authorities to action.
Current blockchain exchanges are still not equipped, or do not have the required licenses to support trading of securities, to accommodate the surge in security token market companies are coming up with liquidity solutions designed to support them.
Here is a list of organized, licensed exchanges that support security token trading.
tZero (US based)
tZero, a subsidiary of Overstock, is being designed in a very intuitive manner to trade security tokens specifically.
tZero’s security token front-end makes trading security tokens easy, compliant and user-friendly. Plus, to enhance the security, tZero has integrated the existing 15c3-5 risk management software, order management system, matching engine, and a plethora of proprietary technology to support the eventual trading of security tokens.
Also, their highly qualified has partnered with projects like Polymath. Moreover, with their backgrounds, they know what they are doing and how the whole ecosystem will develop in the future.
Currently, tZERO’s private offering for the tZERO security token (TZRO) is currently underway and will end by August 2018, post which the trading platform will go live.
One of the advantages tZero has, is that it owns two SEC registered and FINRA Member broker-dealers, SpeedRoute LLC, a premier routing and execution firm, and PROSecurities LLC, registered as an Alternative Trading System (ATS), which is the first SEC and FINRA regulated ATS to enable and support secondary trading of a crypto security.
Open finance (US based)
Open finance network is another pioneer security token exchange which allows you to trade security tokens if you are a verified investor.
The platform is live now and is the first US-based regulated security token trading platform, built for a tokenized future.
For listing your security token on OFN, the tokens should satisfy and fall under their security token listing framework which they have pre-defined.
For a listing, having a token standard makes approval swift. Some of the approved standards for the same are:
- DS Protocol
Also, they have relationships with leading brokerage houses, custodians, transfer agents and banks. And ever since 2014, they have formed a core group of team of exchange technologists, securities lawyers, and trading veterans which will help them in making this niche also streamlined.
Securities are offered through Sageworks Capital, LLC, an affiliated entity, and a registered broker-dealer and member FINRA/SIPC. CFX Markets is an ATS.
BnkToTheFuture (US based)
BnkToTheFuture is a successful online investment platform with almost 50,000 professional and accredited investors with over $260 million invested in the funding rounds of FinTech, Bitcoin, and blockchain deals listed on its platform including Kraken, BitFinex, BitStamp, and Shape Shift. BnkToTheFuture has recently finished its own ICO with the goal of establishing a platform for the trading of security tokens during 2018.
It has been quite a while since they have been at it and facilitating investments in Bitcoin, blockchain and other disruptive financial companies.
Now, with the launch of their native token-BFT, they have gathered the largest community of high net worth individuals who are interested in investing in Fintech, Bitcoin & blockchain.
In a much simpler form, it is a tokenized secondary market for investors who are ready to invest in futuristic projects which can issue security tokens, traditional bonds, shares, or other forms of digital securities.
And in this way, it will also provide much-needed liquidity to new projects as new crypto capital will be eventually flowing in these markets.
But only accredited investors with annual incomes over $200,000 can invest, and it should be $1000- $10,000 of investment.
Bancor protocol is also joining the security token party.
In fact, it is one of the strongest use cases for Bancor to be one. But for those of you who don’t know about the Bancor protocol, here is a simple explanation of it:
The Bancor Protocol is a new standard for cryptocurrencies called Smart Tokens™, which are autonomously and continuously convertible to other tokens in the network at algorithmically calculated rates.
Bancor is a liquidity solution for security tokens that exists today. It will be used for the SPiCE VC token, and offered to Securitize issuers too. The advantage of the Bancor model is that it allows investors to sell tokens directly back to the issuer without having to find a buyer on the other side. A Bancor relay with the equivalent of 3% of the capital raised, can usually provide better liquidity than most exchanges can provide for small coins, with much less price fluctuations. Here is an interesting read about the growth of the Bancor network.
Templum (US based)
Templum has recently acquired Liquid M Capital, which has an alternative trading system. With that platform, Templum will provide liquidity for tokenized securities in compliance with US security regulations. The company raised $2.7M seed round.
Miami Crypto Exchange (US based)
Miami Crypto Exchange is leading the charge to transform financial investments and instruments into compliant tokens uniquely providing a single trading platform for security tokens and cryptocurrencies with the ease of liquidity to US dollars and providing a gateway to Latin American markets and the world.
MCEX is a fully-compliant-focused security token and cryptocurrency exchange platform equipped with a Florida Money Transmission License, and FinCen registration allowing its proprietary and secure Mercury Cash wallet to provide immediate access to US-Dollar liquidity.
MCEX’s already-advanced-and-progressing roadmap includes a SEC registered FINRA Member Broker-Dealer, and registered-and-licensed Alternative Trading System (ATS).
Some of the traditional stock exchanges have also decided to venture in to the field of security token trading.
GBX – The Gibraltar Blockchain Exchange (Gibraltar)
A subsidiary of the Gibraltar Stock Exchange, and supported by the local regulators, the Gibraltar Blockchain Exchange has announced multiple initiatives for enabling the trading of tokens. One of them, the GSX, is specifically designed to become a world leader in Tokenised Securities, giving birth to a whole new level of access, liquidity, and transparency in the capital markets.
he GBX intends to facilitate token sales similar to existing platforms but from a governed position. The GBX aims to put in place best practices, innovative sponsor staking regime and diligent whitelisting procedures. Coupled with a token marketplace that would consist of only of high quality listings and an equally esteemed, AML/KYC cleared investor pool. In addition, advisory, corporate, banking and payment services are part of the integrated offerings GBX could provide.
The GBX would also provide a top-tier centralised digital asset exchange for high volume, liquidity and quality digital assets. Under construction with institutional-grade technology, multi-sig security, 100% auditable reserves, insurance protection and fiat onboarding capabilities, the future of digital asset trading could begin with the GBX.
The Malta Stock Exchange (Malta)
The Malta Stock Exchange (MSE) in collaboration with digital asset exchange OKEx will create a new institutional grade security-tokens trading platform, says a MSE press release shared with Cointelegraph on July 19.
In mid-spring, major crypto exchange OKEx had moved to Malta, noting their “confidence” in the Maltese government’s approach to cryptocurrencies.
The joint project, named OKMSX, launched after the signing of a Memorandum of Understanding (MoU) between MSE and OKEx, and aims to become a platform for digital asset exchanges with security expertise and client due diligence.
MSX has also signed an agreement with Fifth Force, the operator of the Berlin-based Neufund platform that has support for “any type of security or financial product to be issued as a token on blockchain creating Equity Token Offerings,” says the press release.
Zoe Adamovicz, CEO and Co-founder at Neufund, noted in the press release that the goal of the partnership is to “build the world’s first regulated decentralized global stock exchange,” beginning with a pilot project testing the “market’s reaction.”
It is clear that the march of blockchain across the financial markets is still gaining momentum, while the regulatory support of the new class of assets is still in the initial stages. In order for security tokens to become tradable, liquid assets there has to be clear regulation and oversight. It might yet take some time for the governments to arrive at a comprehensive regulatory stand on crypto assets, however he efforts in this field look promising even today.
The information shared does not provide legal advice. In any token sale, there is a host of legal requirements to consider. Please consult your own securities lawyer.