In a game-changing development for the future viability of digital asset securities trading, staff of the Division of Trading and Markets of the SEC issued a No-Action Letter to FINRA on September 25, 2020 clarifying a structure under which registered broker-dealers could operate alternative trading systems that allow for real-time trading of blockchain-based securities, without running afoul of the custody requirements of Rule 15c3-3.  The structure was originally proposed to the SEC staff in a request for no-action relief from Davis Polk & Wardwell partners Annette Nazareth and Zachary Zweihorn on behalf of several clients, but the staff ultimately decided to issue the relief more broadly as industry-wide no-action guidance to FINRA.

This communication, which we believe may be of interest to our clients and friends of the firm, is for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice. This may be considered attorney advertising in some jurisdictions. Please refer to the firm's privacy notice for further details.