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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices substitute for real-time market data. A
BSTX Participant would have the ability to download market data from the BSTX
Market Data Blockchain, which it could use to, for example, back test trading strategies or evaluate executions received on BSTX.
Finally, in order to promote clarity with respect to how a BSTX Participant may use the BSTX Market Data Blockchain, the Exchange proposes to provide in Rule 17020c3 that the information available on the BSTX
Market Data Blockchain does not act as a substitute for any recordkeeping obligations of a BSTX Participant. The Exchange notes that broker-dealers recordkeeping obligations generally require a much broader set of records covering the entirety of a broker-dealers trading activity across all trading centers.35 As a result, the Exchange would not expect that a BSTX
Participant would ever rely on the BSTX
Market Data Blockchain, which would contain only its trading activity on BSTX, as a substitute for its independent recordkeeping obligations.

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Periodic Audit of the BSTX Market Data Blockchain by the Exchange To help ensure the proper functioning of the BSTX Market Data Blockchain and accuracy of information thereon, the Exchange proposes in Rule 17020c3 to periodically audit the BSTX Market Data Blockchain.
Specifically, the Exchange proposes to perform the audit at least bi-annually to ensure that the BSTX Market Data Blockchain accurately captures order and transaction data on BSTX. The Exchange expects that it will initially audit the BSTX Market Data Blockchain more frequently e.g., monthly during the first year of operation to make sure the BSTX Market Data Blockchain operates as intended during the period of time when the Exchange expects BSTX Participants to be familiarizing themselves with the BSTX Market Data Blockchain.
Benefits of the BSTX Market Data Blockchain The Exchange believes that there are two primary benefits related to the BSTX Market Data Blockchain. First, the Exchange believes that a BSTX
Participant may find the information useful to them for a variety of purposes such as to review the BSTX Participants trading activity on BSTX, determine what the market was at a particular point in time on BSTX for a given Security, evaluate execution quality on BSTX, or download the data to back-test 35 See
e.g., 17 CFR 240.17a3.

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trading strategies. As proposed, the BSTX Market Data Blockchain requires no affirmative obligation on the part of the BSTX Participant. As a result, if a BSTX Participant does not find the BSTX Market Data Blockchain to be of use to it, it could simply ignore it without cost or penalty.
Second, the Exchange believes that the BSTX Market Data Blockchain will help familiarize BSTX Participants with the use and capabilities of blockchain technology in a manner that does not impose any burden on them or other market participants. The Commission has stated that it is mindful of the benefits of increasing use of new technologies for investors and the markets, and has encouraged experimentation and innovation . . . 36
stating further that information and communications technologies are critical to healthy and efficient primary and secondary markets. 37 Regarding the judgment of whether the benefits of certain technologies are meritorious, the Commission has explained its view that the market will ultimately prove the worth of technologywhether the benefits to the industry and its investors of developing and using new services are greater than the associated costs. 38
Consistent with these statements, the Exchange believes that promoting use of blockchain technology through the BSTX Market Data Blockchain will allow BSTX Participants to observe and increase their familiarity with the capabilities and potential benefits of blockchain technology in a context that operates within the current equity market infrastructure and that the proposal will thereby advance and protect the publics interest in the use and development of new data processing techniques that may create opportunities for more efficient, effective and safe securities markets.39
36 Securities and Exchange Commission, The Impact of Recent Technological Advances on the Securities Markets Sep. 1997, https
www.sec.gov/news/studies/techrp97.htm.
37 Id.
38 Id.
39 Report of the Senate Committee on Banking, Housing & Urban Affairs, S. Rep. No. 9475, at 8
1975 expressing Congress finding that new data processing and communications systems create the opportunity for more efficient and effective markets. While the Exchange believes that its proposal represents an introductory step in pairing the benefits of blockchain technology with the current equity market infrastructure, other market participants and FINRA have recognized additional potential benefits to blockchain technology in various applications related to the securities markets. FINRA has stated one of the proposed benefits of blockchain technology is the ability to offer a timestamped, sequential, audit trail of transaction records. This may provide regulators and other interested parties e.g., internal audit, public auditors with the opportunity to leverage
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Moreover, the Exchange believes that new technology, such as blockchain technology, may be able to help perfect the mechanism of a free and open market and a national market system, consistent with Section 6b5 of the Exchange Act.40
In the event of any disruption to the BSTX Market Data Blockchain or a BSTX Participants access to the BSTX
Market Data Blockchain, there would be no impact on the ability of market participants to trade Securities, which the Exchange believes furthers the protection of investors and the public interest, consistent with Section 6b5
of the Exchange Act.41 There would also be no disruption in the distribution of market data related to Securities because the BSTX Market Data Blockchain operates as a separate and distinct service of the Exchange.
Trading Securities on Other National Securities Exchanges Securities would be eligible for trading on other national securities exchanges that extend UTP to them, other than with respect to Thinly Traded Securities as discussed below in Part II.H. As described above in Part II.E, Securities would be held in street name at DTC, have a CUSIP number, and would clear and settle through the facilities of a clearing agency registered with the SEC i.e., NSCC and DTC
respectively. As a result, Securities would be able to trade on other exchanges and OTC in the same manner as other NMS stock. Accordingly, other exchanges would generally be able to extend UTP to Securities in accordance with Commission rules. The BSTX
Market Data Blockchain would not the technology to view the complete history of a transaction where it may not be available today and enhance existing records related to securities transactions. Financial Industry Regulatory Authority, Distributed Ledger Technology:
Implications of Blockchain for the Securities Industry January 2017, available at: https
www.finra.org/sites/default/files/FINRA_
Blockchain_Report.pdf. Further, Paxos Trust Company echoed similar themes in connection with its receipt of no-action relief from the Commission staff, and explained in its request letter certain benefits of blockchain technology including greater data accuracy and transparency, advanced security, and increased levels of availability and operational efficiency . . . . See Letter from Jeffrey S. Mooney, Division of Trading and Markets, Securities and Exchange Commission to Charles Cascarilla and Daniel Burstein, Paxos Trust Company, LLC re: Clearing Agency Registration Under Section 17Ab1 of the Securities Exchange Act of 1934 October 28, 2019, https
www.sec.gov/divisions/marketreg/mr-noaction/
2019/paxos-trust-company-102819-17a.pdf. The Exchange believes such benefits may be generally relevant to future potential applications of blockchain technology.
40 15 U.S.C. 78fb5.
41 Id.

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