- SEC asks whether ATS and NMS still fit crypto asset securities trading markets.
- Consultation probes crypto ATS disclosures, costs, recordkeeping, and transparency.
- SEC seeks input on trading pairs, system risk controls, and blockchain settlement.
The U.S. Securities and Exchange Commission opened a formal public consultation on crypto trading rules on December 17 in Washington. SEC Commissioner Hester Peirce invited feedback on how crypto assets should trade on national exchanges and alternative trading systems. The move follows new guidance from the Division of Trading and Markets and seeks clearer market structure rules for crypto trading.
SEC Questions Legacy Exchange Rules as Fit Crypto
Notably, Commissioner Peirce framed the consultation around whether existing exchange rules still work for crypto markets. She asked whether the Alternative Trading Systems (ATS), adopted in 1998, and the National Securities Exchange (NMS) reflect modern blockchain-based trading.
The focus is on crypto asset securities and trading pairs involving security and non-security tokens. According to Peirce’s statement, the SEC wants regulated platforms to support compliant crypto trading without excessive burdens.
The Division of Trading and Markets released FAQs addressing trading and settlement issues for mixed crypto pairs. These FAQs explain how national securities exchanges and alternative trading systems can facilitate such trading.
However, the guidance also raises structural questions that current rules may not answer. Crypto trading often involves non-dollar assets, on-chain settlement, and continuous markets. As a result, the SEC is reassessing how legacy equity rules apply to crypto-native models.
Peirce stated that market participants need certainty around trading and clearing arrangements. She emphasized collaboration between regulators and industry participants. This approach builds on earlier SEC crypto task force efforts that focused on market structure rather than enforcement actions.
Focus on ATS, Disclosure, and Market Transparency
The consultation places strong attention on alternative trading systems that handle crypto assets. Notably, the SEC asked whether a specific Form ATS should exist for crypto-focused ATS platforms. Current Form ATS filings remain non-public and are not subject to Commission approval.
However, the SEC questioned whether crypto ATS disclosures should remain confidential. It asked whether public disclosures or Commission review could better protect investors. The statement also sought views on conflicts of interest disclosures and whether private ordering already addresses transparency concerns.
Another key issue involves Form ATS-R quarterly reporting. The SEC asked whether blockchain transparency makes confidential reporting less necessary. On-chain data may already provide detailed transaction records accessible to regulators.
According to the statement, the SEC also seeks feedback on recordkeeping requirements under the regulation ATS. It asked which records remain feasible for crypto platforms using blockchain-based systems. The Commission wants to understand how on-chain records can support regulatory oversight.
Transitioning from disclosure to costs, the SEC raised concerns about disproportionate compliance burdens. Peirce asked which regulatory costs do not justify their benefits for crypto trading platforms. The consultation invites practical input on lowering entry barriers while maintaining market integrity.
Related: Elizabeth Warren Targets DEX Over Security Concerns
Trading Pairs, Risk Controls, and System Compliance
The consultation also addresses technical and operational risks tied to crypto trading. Notably, the SEC asked how platforms should convert non-dollar assets to dollars for compliance purposes. It questioned whether Regulation ATS should prescribe specific conversion methodologies.
System risk controls under Rule 15c3-5 also received attention. The SEC asked whether these controls duplicate other requirements for crypto ATS platforms. It invited views on whether amendments or guidance could improve efficiency without weakening safeguards.
Additionally, the SEC examined Regulation SCI, which governs systems compliance and integrity. Peirce asked whether its costs still justify its benefits for crypto trading platforms. She also questioned whether Regulation SCI applies appropriately to blockchain-based systems.
However, the consultation extends beyond institutional platforms. The SEC asked how to protect individual software developers and automated trading tools. It seeks to avoid regulatory barriers that could restrict decentralized or autonomous trading methods.
The statement confirmed that these questions will guide future work by the SEC’s crypto task force. The Commission also welcomed broader feedback on improving NSE and ATS regulation. This includes crypto-specific issues and general market structure concerns.
Taken together, the consultation outlines a structured reassessment of crypto trading oversight. The SEC is reviewing whether enforcement-focused approaches should give way to updated market rules. The public comment process now invites exchanges, investors, and technology firms to contribute detailed input.
