The SEC on Friday voted to reopen the comment period on a proposal that would expand the definition of "exchange" under Rule 3b-16 of the Securities Exchange Act of 1934.
The proposal, unveiled in January 2022, would broaden the exchange definition to include systems that trade treasuries and other government securities and require those systems to register as national securities exchanges or as broker-dealers and comply with Regulation ATS for alternative trading systems.
Currently, those systems do not fall within the definition of exchange and are not required to comply with the same federal securities laws and regulations applicable to registered exchanges or ATSs. As a result, market participants who use these systems are not availed to the same investor protection and fair and orderly market principles that apply to today's registered exchanges and ATSs, the SEC said in a fact sheet last year.
In a 3-2 vote Friday with the commission's two Republicans dissenting, the SEC reopened the proposal's comment period for 30 days after publication in the Federal Register.
The announcement of the reopening highlighted the applicability of existing rules to platforms that trade crypto asset securities, including decentralized finance, or "DeFi" systems, and provided supplemental information and economic analysis for systems that would be included in the new, proposed exchange definition. The SEC also requested information and public comment on crypto asset securities trading on such systems.
"I believe this supplemental release will help address comments on the proposal from various market participants, particularly those in the crypto markets," said SEC Chairman Gary Gensler in a statement. "Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws. Investors in the crypto markets must receive the same time-tested protections that the securities laws provide in all other markets."
