North Capital Authorized to Trade Digital Asset Securities Through Its PPEX Alternative Trading System
NCPS completes a FINRA continuing membership application process to qualify PPEX ATS
North Capital, a market-leading provider of technology and brokerage services for exempt securities offerings, announced that it has completed the membership approval process with FINRA and achieved acceptance of Form ATS Initial Operations Report by the U.S. Securities and Exchange Commission, paving the way for secondary trading of unregistered securities, including digital asset securities, on its Alternative Trading System (ATS), the Public Private Execution Network (PPEX.com).
“We’re very happy to have obtained the regulatory approvals necessary to commence operations of the PPEX ATS,” said Jim Dowd, founder and CEO of North Capital. “The evolution of organized secondary markets will help bring liquidity and transparency to exempt securities investments. As the value of private securities has grown exponentially over recent years, issuers and investors have indicated that they are keen to see secondary markets develop.”
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The launch of the ATS is a natural extension of North Capital’s existing private securities infrastructure, TransactCloud, which enables issuers, funding platforms and broker-dealers to participate in primary exempt securities offerings, including digital asset securities. To date, the firm has been involved in over 1,000 primary offerings totaling $1.9 billion. Secondary markets do not exist for most private company securities, but the introduction of new trading venues such as the PPEX ATS holds potential for enhanced liquidity for investors.
“Though the growth in private markets has been significant over the past five years, many investors and advisors avoid investing in private company securities because of the lack of liquidity and transparency,” said Sara Borazan, Managing Director and Head of Business Development at North Capital. “As organized secondary markets begin to develop, we expect primary markets to continue to expand and grow as well.”
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Mike Weaver, Managing Director and Head of Asset Management, noted that “securities eligible for listing on the PPEX ATS include common equity, preferred equity, junior debt, senior debt, hybrid securities such as convertibles or structured products, or any other security that is exempt from registration and uncertificated in form. This covers the vast majority of securities with which our clients are involved.” The PPEX ATS will include detailed listing requirements for securities that are “tokenized” —electronically represented through a transferable digital token on a centralized or decentralized, proprietary, or open-source ledger system.
Establishing acceptable rules and procedures related to digital asset securities was a key part of the regulatory approval process that the firm underwent. “Private securities have been around for decades, but digital asset securities are new and present unique challenges. Our regulatory counsel, Ellenoff, Grossman & Schole, LLP helped us to work through these complex new issues,” said Dowd. “They were a great resource throughout the process.”
“Shortly after the passage of the JOBS Act in 2012, intermediaries and investors began talking about secondary markets for exempt securities. I believe that regulated ATSs, like the PPEX ATS, offer the best pathway for the development of secondary markets. As we have observed in working with our clients involved with disrupting areas of the securities markets, the client, just like North Capital, must have the vision, knowledge and persistence to see its commercial objectives come to fruition notwithstanding the challenges, costs and inevitable frustrations. We were pleased to support the North Capital team working with FINRA and the SEC Division of Trading and Markets,” said Douglas Ellenoff, founding partner of EGS and a recognized thought-leader in JOBS Act-related securities initiatives.
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