The new exchange, dubbed BSTX, is expected to launch in the second quarter, said Jay Fraser, a director. Initially, it will trade securities, such as stocks or exchange-traded funds, listed for the first time on its exchange, but these securities may be traded on competing exchanges.
BSTX’s ultimate goal is to expand trading to all US stocks and potentially token values, Fraser said. Equity tokens are digital versions of shares linked to the underlying stock, usually traded in fractional units.
Fraser says the goal is to make BSTX look more like cryptocurrency exchanges like Coinbase than traditional exchanges like Nasdaq.
In addition to traditional pricing data feeds, BSTX plans to offer a market data feed that will run on a private blockchain. This feed will allow members of the exchange to see their own activity, as well as the activity of other BSTX participants, anonymously and off-line, according to the exchange’s filing.
The exchange plans to expand its use of blockchain, the technology that underpins cryptocurrencies such as bitcoin, in due course to support products such as tokenized securities, Fraser said.
BSTX was originally to be called the Boston Security Token Exchange and planned to trade exclusively in tokenized securities, but the SEC rejected this plan in December 2020.
The exchange will also offer its members the ability to settle trades as quickly as the same day, as opposed to the current standard two-day settlement time, which would free up the cash that counterparties need to commit to trades while reducing the risk of failure of either party.
The entire securities industry is currently debating single-day settlement.
In its Thursday notice, the SEC said that despite blockchain power and faster settlement times, the revised BSTX rules were “substantially similar” to the rules of other exchanges.
BOX is an options exchange jointly owned by TMX Group, operator of the Toronto Stock Exchange, Citadel Securities Principal Investments LLC and broker-dealers, including subsidiaries of Citigroup and UBS.