E-commerce giant Overstock’s newly launched security token exchange tZERO is now live, according to a press release published January 24.
Per the release, accredited investors can now trade their tZERO security tokens that were first introduced during the firm’s security token offering (STO) in August 2018.
The STO raised $134 million from over 1,000 accredited investors who purchased tZERO security tokens at $10 a piece, and investors involved in the pre-sale got them between $5 and $8 apiece. According to tZERO’s Telegram group, the first trade saw 10 tokens bought at $8 apiece, which is $2 lower than the STO price.
The tZERO Security Token Exchange Platform
The trading of tZERO security tokens is made possible through a digital securities brokerage account at Dinosaur Financial Group. According to the press release, Dinosaur will act as a broker-dealer because they partnered with tZERO subsidiary PRO Securities to provide an alternative trading system for tZERO security tokens.
Regarding the trading platform, the CEO of tZERO, Saum Noursalehi said:
“The world of security tokens has lacked a regulated venue for secondary trading. The trading of our own security tokens is the crossing of the Rubicon for the new world of digital assets. This will create liquidity, democratize access, bring transparency and efficiency to global markets and accelerate the adoption of security tokens.”
Moreover, the tZERO trading platform will operate during normal market hours between 9:30 am and 4 pm EST to position itself with mainstream Wall Street finance and appease regulators. However, the technology enables tZERO to be traded 24/7, which is a major goal of theirs in the future.
Noursalehi explained their approach with the platform in an interview with Coindesk where he stated:
“Our approach has been incremental: getting some benefits of blockchain but not going full-blown, and this is also something that made the regulators comfortable with letting us move forward. Initially, we did it to kind of mimic the market, but Dino is our broker-dealer at this point and we wanted to make sure there is support available for investors during the broker’s business hours.”
Furthermore, Noursalehi explained that tZERO will hopefully become its own retail broker-dealer within the coming months, and will then have the capacity to serve retail traders instead of only accredited investors.
Another big goal of tZERO is to develop their technological capacity so they can help other companies issue their own security tokens and trade them on the platform. This will bring in a great deal of revenue, as at present tZERO does not charge traders fees and therefore has little revenue.
“We make revenue through some of our traditional businesses. A lot of the money in this space comes from doing token offerings: if we can offer it as a service to the companies that want to raise capital, you can drag significant revenues from it.”
However, Noursalehi told CoinDesk charging fees isn’t yet a priority, as tZERO is currently focused on proof of concept and driving adoption.
tZERO Is an Alternative Trading System — a Better Exchange Is Yet to Come
tZERO has been designed as an alternative trading system (ATS), which is a trading venue subject to less regulation than an exchange. However, this limits the platform to being registered as a broker-dealer and deals solely with private equity, not publicly traded companies.
This is a problem for Noursalehi and Overstock chairman, Patrick Byrne, the firm’s blockchain visionary whose goal is to disrupt the whole traditional system of security trading. Therefore, tZERO is planning to launch a new exchange for publicly traded stocks.
According to Noursalehi, tZERO partnered with BOX Digital Markets, a subsidiary of the Boston’s Options Exchange, to create the securities token marketplace Byrne and himself are aiming to build. He further added that this new exchange will be called the Boston Security Token Exchange (BSTX).
This new exchange will use the same technology as tZERO and will be the first US-based exchange to trade this type of asset.
Adding to this, Noursalehi said:
“As companies become publicly traded they would move from our ATS (tZERO) to BSTX exchange.”
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