An Overstock’s tZero affiliate is looking for legal jurisdiction to instigate a market where registered security tokens will be traded publicly.
On Friday, the Securities and Exchange Commission unleashed a rule change proposal that will authorize Boston Securities and Token Exchange to come up with an equity trading platform. It will be automated and have its ownership documentation stored on the ethereum platform. BSTX is, however, going to list the securities tokens that are full-fledged.
This is unlike tZERO, which owns 50 percent of the shares. tZERO handles the exempt security tokens from SEC registration requirements, and its trading platform was launched in January. The 129-page rule change proposal by SEC that was unleashed on Friday gives a clue of how this proposed exchange will come to run one day.
The exchange would be based on the ethereum blockchain and would be updating their ownership records every single day after the close of trading activities. The people responsible for approving wallet addresses, wallet managers, would have to cover the gas bill to send their daily dealings to the ethereum blockchain. However, the exchange believes that this amount will not be that significant.
Listed tokens on the exchange would have to be in tandem with the ERC-20 standard. They should also have additional security standards in the protocol. The security measures ought to be indicated by three smart contracts to track whitelisted addresses, ownership, and compliance with set rules.
BSTX proposes to be operational for trading between 9:30 am and 4:00 pm eastern, just like the two central stock exchanges NASDAQ and NYSE at Wall Street. The rules proposed for this platform resemble the traditional exchange rules that are already in place. Many people will ask how they will determine who is making trades and whether they are even allowed in the first place.
With the traditional markets, the Financial Industry Regulatory Authority assigns a participant with an ID (MPID). The firm is a self-regulatory organization. But for BSTX, the users will use an authorized wallet address to identify themselves.