On December 17, 2025, the staff of the Division of Trading and Markets (the “Staff”) of the Securities and Exchange Commission (“SEC”) released an update to its May 2025 FAQs relating to crypto asset activities and distributed ledger technology. The additional FAQs focus on trading and settlement issues, including how alternative trading systems (“ATSs”) and national securities exchanges (“NSEs”) can facilitate pairs trading (e.g., where one of the crypto assets is a security and the other is a crypto asset that is not a security).
The Staff cautioned that their responses to the FAQs have no legal force or effect, do not alter or amend applicable law, and do not create new or additional obligations.
Pairs Trading Involving Crypto Assets. The Staff confirmed that federal securities laws do not prohibit ATSs or NSEs from offering pairs trading, provided that the ATS or NSE complies with applicable statutory and regulatory requirements. For instance, NSEs may need to amend their rules, and National Market System (“NMS”) Plan amendments may be required to accommodate such trading. An ATS trading pairs must comply with Regulation ATS, including by noticing its pairs trading activities as required by Form ATS or Form ATS-N, as applicable. With respect to Rules 301(b)(8) and (b)(9) of Regulation ATS, which refer to recording and reporting securities transactions in USD, the Staff stated that for transactions based on the value of non-USD assets, such as non-security crypto assets, an ATS could provide transaction value data in USD using consistent, impartial, and reasonable methods commonly used by market participants to convert the value of an asset that is not quoted in USD. Moreover, an ATS that trades NMS stock (“NMS Stock ATS”) that displays subscriber orders to any person (other than an employee of the ATS) and meets the specified volume thresholds must comply with Rules 301(b)(3) and (b)(4) of Regulation ATS. For purposes of Rule 301(b)(3)(ii), for orders based on the value of non-USD assets (such as non-security crypto assets), the Staff stated that the NMS Stock ATS could convert the value of the non-USD asset to USD using the same consistent, impartial, and reasonable methods described above before providing the orders to the relevant NSE or national securities association (“NSA”), in a manner that is consistent with the rules of the NSE or NSA, for inclusion in quotation data made available by the NSE or NSA pursuant to Rule 602 of Regulation NMS.
Form ATS and Form ATS-N Disclosures. ATSs engaging in trading operations involving crypto asset securities, including pairs trading, are required to make disclosures on Form ATS or Form ATS-N. These disclosures may include:
- Any differences in treatment or access to services among subscribers;
- Who may access the system, onboarding requirements, and how subscribers can submit orders and trading interest;
- The securities traded on the ATS;
- The trading operations of the ATS;
- Clearance and settlement processes;
- Third‑party service providers that provide ATS functions or services;
- The products and services the broker‑dealer operator offers subscribers for effecting transactions or submitting, disseminating, or displaying orders and the terms and conditions governing their use; and
- The trading by the broker‑dealer operator and its affiliates on the ATS, and the policies and procedures to protect subscribers’ confidential trading information.
Non-ATS Activities of ATS Broker-Dealer Operators. The Staff clarified that federal securities laws do not prohibit a broker-dealer operator of an ATS from performing broker, custodial, or clearing functions, provided the operator complies with the federal securities laws applicable to each activity.
Clearance and Settlement. The Staff confirmed that a broker-dealer operator of an ATS is not required to register as a clearing agency when clearing and settling transactions in crypto asset securities for its own customers, provided such activities are part of customary brokerage or dealing activity.
Exchange-Traded Products (“ETPs”). With respect to Regulation M, the Staff stated that it would not object if persons transacted in shares of ETPs referencing crypto assets (“crypto ETPs”) under the circumstances described in the Staff’s 2006 Regulation M no-action letter related to commodity-based investment vehicles, including that the crypto ETP shares are listed and traded on an NSE pursuant to SEC approved rules or listing standards, and that such persons do not engage in prohibited activities outside of the Regulation M distribution. The anti-fraud and anti-manipulation provisions of the federal securities laws remain applicable.
In a related statement, SEC Commissioner Hester M. Peirce said that the FAQs signal the Staff’s willingness to engage with market participants seeking to facilitate pairs trading and other crypto asset activities on regulated platforms. In this regard, she emphasized the importance of clear market structure rules that facilitate fair and orderly markets without imposing unnecessary burdens. In her statement, she published a list of questions for feedback that focus on ATSs and NSEs that have a nexus with crypto.
[View source.]
