Market structure — the rules governing how securities are quoted, traded, cleared, and settled — is among the most technically complex areas of US securities regulation. The SEC’s Regulation NMS (National Market System), ATS regulations, broker-dealer net capital rules, and clearing agency registration requirements were developed for traditional securities markets and contain provisions that either do not map to digital assets or actively impede digital securities market development.
The Digital Asset Markets Association (DAMA) is a trade organization focused specifically on this intersection: advocating for market structure rules that accommodate digital securities, representing the exchanges, trading platforms, and broker-dealers who need functional regulatory frameworks to operate.
The ATS Problem for Digital Securities
Alternative Trading Systems (ATSs) are SEC-regulated secondary markets for securities — the platforms where tokenized fund interests, digital bonds, and other tokenized securities can trade after issuance. The current ATS regulatory framework (Regulation ATS, adopted 1998, updated 2018) was designed for traditional equity and fixed income trading.
Key mismatches with digital securities:
24/7 trading: Traditional ATSs are expected to operate during market hours. Digital securities can technically trade continuously. ATS rules regarding operational requirements, surveillance, and reporting do not contemplate 24/7 operations.
Settlement: ATS rules assume DTCC-based T+1 or T+2 settlement. Digital securities settle via smart contract in seconds or minutes. The rules do not clearly accommodate blockchain-based settlement without DTC participation.
Custody integration: ATS rules assume broker-dealers maintain customer accounts in traditional custodial form. Digital securities held in blockchain wallets raise questions about how ATS participant requirements apply.
Token standards: ATS rules specify how securities must be quoted and traded; they do not address ERC-20, ERC-3643, or other token standards.
DAMA’s primary legislative and regulatory position: the SEC should modernize Regulation ATS to accommodate digital securities trading platforms, creating clear operational requirements that ATS operators can implement without uncertainty.
Broker-Dealer Rules for Digital Securities
Broker-dealers who facilitate digital securities transactions face similar framework mismatches. The SEC’s broker-dealer net capital rules (Rule 15c3-1) determine how much capital broker-dealers must hold against customer assets. Digital securities custody does not fit neatly into existing capital treatment frameworks.
DAMA advocates for a “digital broker-dealer” registration category — or modifications to existing rules — that provide: (1) appropriate net capital treatment for digital asset custody, (2) clear customer protection rules for blockchain-based customer accounts, (3) modified record-keeping requirements that accommodate blockchain transaction records, and (4) clear rules for broker-dealers using smart contracts for trade execution rather than traditional order management systems.
Key Member Companies
tZERO: Founded by Overstock.com’s Patrick Byrne, tZERO is an SEC-registered ATS and broker-dealer specifically designed for digital securities trading. tZERO has listed tokenized equity, tokenized PE fund interests, and digital bonds. Its operational experience makes it a natural DAMA member — tZERO has encountered every regulatory gap in existing ATS rules firsthand.
INX: A regulated digital securities exchange and token offering platform, INX completed a 2020 SEC-registered token IPO (the first SEC-registered security token offering to retail US investors) and operates a compliant trading platform for digital securities. INX brings unique perspective as both an issuer of registered digital securities and an exchange operator.
CFTC Engagement on Digital Asset Derivatives
The digital securities market intersects with derivatives when participants seek to hedge tokenized asset positions. DAMA engages with the CFTC on proposed rules for digital asset derivatives — futures, options, and swaps on tokenized assets. Key questions: how are digital asset swap dealer thresholds calculated? Can tokenized bonds serve as eligible collateral for CFTC-regulated swap margin requirements? These questions require CFTC guidance that existing commodity derivatives rules do not clearly address.
Relationship to Broader Trade Associations
DAMA occupies a specific niche: market structure for digital securities. It complements rather than competes with the Blockchain Association (broader crypto advocacy), Chamber of Digital Commerce (education and general advocacy), and SIFMA (traditional finance with digital interests). DAMA’s narrow focus on trading and market structure enables deeper technical engagement on ATS, broker-dealer, and clearing issues than broader organizations with more diverse policy portfolios. In the regulatory advocacy ecosystem, DAMA’s technical specificity is its primary contribution — providing comment letters and testimony that go beyond general advocacy to detailed market structure analysis.