The Road Less Traveled: Why LODAS Markets Chose to Register as an ATS

April 24, 2023

Chairman Gensler's Statement Highlights the Importance of Transparency and Accountability through Regulation of Trading Platforms.

SEC Chairman Gary Gensler recently issued a statement touching on a topic that is seldom discussed beyond market-structure experts: Alternative Trading Systems, the well-regulated trading platforms commonly known as ATSs. In his comments, Chairman Gensler discussed the importance of regulating trading platforms and, while focusing on the crypto industry, underscored the importance of transparency and accountability for trading venues across asset classes.

As a registered ATS, LODAS Markets is proud of its commitment to maintain high standards of transparency, accountability, and compliance, furthering our goal of providing a secure and reliable platform for buying and selling non-traded REITs and other alternative investments.

Of course, one question I’m still often asked is “Why did LODAS Markets choose to register as an ATS?” It’s actually simple to answer.

  1. Functionality and High Standards. ATS designation enables LODAS to function like a stock exchange while adhering to high regulatory standards for transparency and accountability, assuring investors that they are dealing with a reputable platform. This is especially important in an environment where market risks are heightened and can quickly escalate, as we see with the commercial real estate market.

  2. Responsibility. Beyond greater transparency, accountability, and regulatory oversight, there's a sense of responsibility that comes with being an ATS. This obliges LODAS to maintain a high level of compliance, risk management, and ethical conduct, diminishing the likelihood of fraudulent activities, such as market manipulation, or other types of misconduct.

  3. History. Early in my career, I was fortunate to work for a groundbreaking firm that launched as an ATS, Bats Trading. Leveraging great technology, innovative ideas and seismic shifts in market structure, the company evolved into Bats Global Markets and grew to operate 15 stock and options exchanges in the US and Europe. Bats is now owned by Chicago-based Cboe Global Markets, and its legacy exchanges continue to serve investors well across numerous asset classes.

As LODAS serves its investors who trade non-listed REITs, Business Development Companies (BDCs) and other vehicles, it’s also worth noting that the SEC's regulatory framework prioritizes technology infrastructure, requiring all ATSs to comply with Regulation Systems Compliance and Integrity (Reg SCI). This is designed to ensure that the systems and controls used by participants are reliable, resilient, and adequately protected against cybersecurity threats.

At LODAS, we exceed Reg SCI’s minimum requirements as we’ve earned SOC II Type 2 compliance, certification entailing comprehensive third-party audits of internal controls and security measures to ensure we meet the highest standards for security and reliability. Just another step to assure investors that their data and trades are protected with the utmost integrity.

While being an ATS – and taking additional steps – naturally come with regulatory compliance costs, significant disclosure requirements, certain trading limitations and strict fee and market functionality guidelines, I echo Chairman Gensler’s underlying sentiment and would like to see more marketplaces seek this designation. It’s a big step to take but, at day’s end, is good for the platform, important for investors and creates a healthier marketplace for all.

Thank you,

Brian King, CEO

Brian King, LODAS CEO

LODAS Securities, LLC Member FINRA / SIPC - LODAS Securities, LLC is a wholly subsidiary of LODAS Markets, Inc.

The information provided herein does not constitute an offer to sell securities or the solicitation of an offer to buy securities, which can only be made by the applicable offering document filed and registered with the appropriate state and/or federal regulatory agencies and sold by broker dealers authorized to do so. There is no guarantee that a market will develop for some securities, and as a result, they may remain illiquid.

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