Gary Gensler, Chairman of the U.S. Securities and Exchange Commission, firmly believes that financial markets are undergoing profound changes and that there is an urgent need to modernize the definition of exchanges and alternative trading platforms.
At the 10th U.S. Treasury Market Summit Forum held on September 26, Gensler reviewed the significant evolution of the capital market since the SEC first implemented a regulatory framework for alternative trading systems in 1998, and shared the SEC’s efforts to keep pace with the times. A series of measures taken to improve and strengthen the regulatory environment.
It is worth noting that Gensler’s long-held view that cryptocurrency exchanges and trading platforms should be brought under the SEC’s regulatory scope is prompting adjustments to regulations in these emerging areas.
Redefining the definition of traders and exchanges
Gensler explained to Treasury Market Forum participants that the current secondary market operation is highly dependent on electronic trading platforms and complex algorithmic strategies. These platforms go beyond the previous regulatory framework for alternative trading systems established by Bob Rubin (70th U.S. Treasury Secretary) and Arthur Levitt (25th SEC Chairman).
In view of the rapid development of trading systems, the SEC introduced a new draft rule in 2022, requiring platforms participating in the Treasury market to register as broker-dealers. This move also expanded the definition of securities market dealers to include proprietary trading companies that use algorithms and high-frequency trading strategies. These companies are actually providing services similar to exchanges and alternative trading platforms.
However, the proposal was met with strong skepticism from cryptocurrency advocates and some politicians. Nevertheless, the rules were re-implemented last year after being revised, with a particular focus on the decentralized finance (DeFi) sector.
Defending the safety of investors and financial markets
Gensler stressed that the new rules are essential to protecting investor rights and maintaining the stability of financial markets. He pointed out that although these trading platforms frequently participate in securities trading activities, they refuse to fulfill their legal obligation to register as dealers with the SEC.
Although the SEC has officially issued a final rule on the definition of a dealer, regulatory changes for alternative trading platforms are still under review. If these changes are passed, the SEC will have the power to require all trading platforms, including cryptocurrency exchanges, to fully comply with its regulations.
Given the ongoing controversy surrounding whether cryptocurrencies should be considered securities, the final approval of the proposal is likely to spark widespread discussion and dissenting voices in the digital asset space.
