Dear Congress: A Venture Exchange Must Be Inclusive of Alternative Trading Systems

scott GarrettSeveral publicly traded companies have sent a letter to Representatives Scott  Garrett and Carolyn Maloney addressing the hot topic of venture exchanges.  The subject of venture exchanges has been making the rounds on Capital Hill, and at the SEC, as policy makers search for the best path to create liquidity for securities in SMEs. The debate has been engendered at least in part by the JOBS Act which created new securities exemptions but did not clearly address how purchasers may sell any acquired securities. OTC Markets, an Alternative Trading System (ATS) sees a new opportunity for their services – and they don’t think they should be cut out.

Carolyn Maloney 2Garrett is the Chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises.  Maloney is the ranking member on this subcommittee that has oversight on the discussion.

The letter sent to Garrett and Maloney was signed by OTC Markets “graduates”. These are companies that have moved up from OTC to NASDAQ or the NYSE. These 6 firms state;

“Each of us traded on the OTCQX Best and/or OTCQB Venture marketplaces operated by OTC Markets Group before graduating to a national securities exchange listing. We benefited from trading in these markets, and also have a specific understanding of some of the key issues facing smaller SEC reporting companies.”

These companies believe that Congress should look closely at ATS’s.

“We ask that any venture marketplace legislation be inclusive of organized over-the- counter markets and ATSs as well as national securities exchanges, and that such legislation address the vital issues set forth above.”

Cromwell Coulson at SECCromwell Coulson, CEO of OTC Markets, has in the past been critical of possible policy that would create a monopoly environment or excluded ATS’s;

“Some industry insiders are floating the misguided idea that small company trading should be consolidated on “venture exchanges.” This is an old idea that’s been around since the days of former New York Stock Exchange Chairman Dick Grasso: that markets are somehow better served if brokers can only trade on one exchange. We see it as asking regulators to grant a monopoly on secondary share trading to restrict competition.”

Venture Exchanges LogoThe letter states that limiting trading to one type of platform would “trample the innovation and competition that allowed our companies to develop and thrive.”

Currently there is a draft bill circulating on the Hill where an Office of Venture Exchanges may be created at the SEC.

Beyond the issue of Venture Exchanges, the missive continues to list 5 proposals to improve capital access and liquidity for SMEs – including state “Blue Sky” preemption.

The letter, embedded below, has also been delivered to SEC Chair Mary Jo White and other legislators.


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