Deal Box Daily Episode 4: July 27th, 2021
In this episode, Jon Alvarado & John Nance of Deal Box Inc. are joined by Richard Johnson of Texture Capital to discuss ATS Platforms and new paths to liquidity for private companies.
Youtube: Deal Box Daily Ep. 4: July 27, 2021
What is an ATS (Alternative Trading System) ?
It is a registration available via the SEC that allows a platform to become an electronic communications network for the purposes of order matching and building order books for the purchase and sale of private securities in an electronic trading environment.
History of the ATS:
In the 90’s exchanges were in pre-decimalization. Nasdaq and other exchanges priced
securities pieces of a dollar using fractions of eighths. Academics discovered traders only bidded using whole numbers and not fractions. The reason why Nasdaq was using even eighths was because of collusion and they could have a wider spread. Thus the SEC implemented Reg ATS in 1999. Its purpose was to create competition and allow other market makers match orders electronically. One of the first ATSs to come out was Deposit System operated by ITG. This led to multiple trading venues and innovations.
How is Texture bringing retail investors to a previously institutional environment?
Texture is focused on private securities. The SEC has allowed for fewer reporting requirements for private companies, however they are only allowed to be sold to accredited investors. Reg D allows firms to raise an unlimited amount of capital but only from accredited investors. However, after a one year holding period, there is an option to sell to non-accredited investors. Reg A allows firms to raise up to $75M, had to be qualified by the SEC but the SEC has been wary of qualifying digital assets. Texture wants to start working with companies doing Reg A so they can create a retail ATS space.
Are companies that are subject to 15c2-11 trying to go to an ATS or reaching out to Texture?
Richard has spoken to firms that are listed on the OTC that are interested in private placement. Texture doesn’t have reporting requirements, per-se, but does expect transparency from the issuer on their platform. They want to have a marketplace where investors can make informed investment decisions about companies on their platform.
About Deal Box:
Deal Box is frictionless, intelligent venture investing for the digital age. A specialty consulting firm focused on capital markets strategy, Deal Box utilizes both traditional and digital securities to enhance capital formation for early ventures and growth-stage companies. Through an industry leading Investment Packaging diligence process, Deal Box digitizes highly-vetted securities in private companies to redefine the ownership experience for retail and professional investors.
Founded in 2016, Deal Box was created to democratize venture capital. Through an institutional level approach to capital formation and best-in-class technology, Deal Box has packaged hundreds of early-to-mid stage companies, generating millions in both direct and syndicated over the last four years.