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May 7, 2023

Inveniam's comments on the proposed SEC safeguarding rule

Inveniam's comments on the proposed SEC safeguarding rule

Inveniam's comments on the proposed SEC safeguarding rule

Yesterday we submitted our comments on the proposed SEC safeguarding rule. This effort was led by the indefatigable Christos Polyzois. His work on Q53 on Atomic Settlement is a masterpiece. Quotes from our comments on Q53 below:

"We recommend defining atomic settlement of a business transaction as the indivisibly common fate of all its actions: inevitable eventual completion of all actions or inevitable eventual roll-back of any tentative actions.

From a practical standpoint:

  • Given that the block time for most blockchains is a few minutes or even a few seconds, the atomic settlement on blockchain within a few block periods can be considered almost instant in comparison to traditional (non-blockchain) settlement timeframes measured in days.
  • Given that the commit point is typically reached at the same time (i.e., in the same block) for all actions and that the completion of all actions becomes inevitable, atomic settlement can be considered to provide almost simultaneous settlement of both legs of a transaction, similar to DVP.
  • Differences between trade time and settlement time fade or disappear. The commit point can be considered a common reference point for both trade and settlement.

In conclusion, indivisibility of trades is the property which reduces the opportunities for abuse of an investor’s assets, and it is also the property that atomic settlement provides. In light of this risk reduction and of the efficiency and speed benefits outlined above, we urge the Commission to promulgate rules and interpretations that expressly permit and encourage the use of blockchain for atomic settlement of trades. We further recommend that the Commission articulate safe harbors which enable parties to a transaction to avail themselves of atomic settlement in a way that they can be sure is compliant."

A number of people helped on this excellent project, Thank you Christos and to those who assisted him.

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