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Anthony L.G., PLLC Securities Law Firm

On January 27, 2022, the SEC approved the country’s 17th stock exchange, the first one of which will utilize blockchain technology.  The new BSTX is a subsidiary of the Boston BOX Exchange and is a joint venture with tZero, which is providing the blockchain technology.  The BSTX is expected to begin operations sometime after June 2022 and will initially only trade securities that first list directly on the BSTX.  Once listed on the BSTX, a security can dual trade on other exchanges.

To begin, the BSTX will trade traditional securities but intends to move into tokenized securities and intends to brand itself with the look and feel of a digital asset exchange as opposed to the more traditional Nasdaq look.  In December 2020, the SEC rejected the Exchange’s original plan to exclusively trade tokenized securities.  The BOX then filed new proposed rules in May 2021 which, after 3 amendments, were approved by the SEC on January 27th.

The BSTX markets itself as providing (i) faster settlements (though note the SEC has now proposed rule changes that would shorten the settlement period for all market participants); (ii) blockchain secured market data where participants will be able to view proprietary data related to trading activity; and (iii) access for early stage companies – though I note that the SEC tightened the leash on the initial easier listing standards.

The SEC has asked for, and received, several changes throughout the process.  Amendment No. 1 made the following modifications: (i) eliminating the proposed suspension of unlisted trading privileges for thinly traded securities; (ii) eliminating a rule that would allow participants to choose same-day or next-day settlement; (iii) remove the Exchange’s ability to change the content of the market data blockchain and other technical modifications related to the blockchain technology; (iv) add text regarding market data products; and (v) eliminate the ability to convert a security to a BSTX listing (as opposed to original listing).

Amendment No. 2 made the following modifications: (i) provide additional technical and connectivity information; (ii) prohibit the listing of securities on the BSTX that is not distinct from an existing class of the same issuer; (iii) provide additional blockchain rule provisions including availability of trading information to non-members; (iv) add a cut-off time by which an execution must occur to be eligible for same-day settlement; (v) modify certain proposed rules to bring them into closer alignment with the rules of other national securities exchanges, including rules regarding securities eligible for trading, prohibitions against trading ahead of customer orders, round lots, minimum price variants, auctions used to open or reopen trading, the dissemination of market data, risk controls, market maker registration process and obligations, business conduct, trading practices, maintaining books and records, off-exchange transactions, scope of the minor rule violation plan, trade reporting and the dissemination of quotations, clearly erroneous executions, and locking and crossing quotations; (vi) eliminated proposed changes to Consolidated Audit Trail requirements; (vii) bringing the proposed listing standards in alignment with other national exchanges; and (viii) eliminate a proposed listing requirement that an applicant provide a legal opinion that its security qualifies as a security under applicable U.S. securities laws.

Amendment No. 3 made the following modifications: (i) align rules to be consistent with the definition of “penny stock” under Exchange Act Rule 5a51-1 (see HERE); (ii) changing a few definitions; and (iii) eliminating initial listing standards for preferred stock that were based on the rules of the NYSE American.

The final approval of the BSTX was conditioned upon the BOX joining all relevant national market system plans, updating its agreement with FINRA, ensuring its membership in the Intermarket Surveillance Group extends to the BSTX, and that the BOX adopted a rule establishing BSTX as a facility of the BOX.

The Author

Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm

Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony L.G., PLLC has served clients providing fast, personalized, cutting-edge legal service.  The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALG legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.

Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including siting on the board of directors of the American Red Cross for Palm Beach and Martin Counties, and providing financial support to the Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others. She is also a financial and hands-on supporter of Palm Beach Day Academy, one of Palm Beach’s oldest and most respected educational institutions. She currently resides in Palm Beach with her husband and daughter.

Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.

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