tZERO ATS is the premier alternative trading system for the issuance and trading of security tokens. This platform was among the first to receive a nod of approval from the U.S. Securities and Exchange Commission (SEC) to operate. As such, tZERO is the largest secondary trading platform for digital securities in the world.
According to the firm’s founder and former CEO, Patrick Byrne, the goal of tZERO was to provide users with the ability to no longer rely on traditional institutional market structures. Rather, he introduced a new type of trading platform based on cryptographically-secured, decentralized ledgers that provided enhanced market integrity.
What Problems Does tZERO Solve?
tZERO is a secondary market and blockchain ecosystem that focuses primarily on traditionally illiquid investments. These investments, such as private equity in large private firms or commercial real estate, provide investors with limited options for secondary liquidity.
Even when an investor finds a secondary trading platform, the process is notoriously slow and expensive. Additionally, this type of investment lacks transparency compared to traditional securities investments. These reasons have left investors with a lack of trust in the market. tZERO seeks to regain this trust via an open blockchain-based approach that puts investors’ needs first.
Less Liquidity in the Market
Private liquidity is another market that tZERO has the potential to revolutionize. Today, there are half as many public companies as there were in 2000. Firms continue to remain private and focus on fundraising campaigns that are exclusive to accredited investors. Accredited investors are investors that have over $1 million in liquid assets. These events, known as private Series A funding rounds, are off-limits to most investors.
tZERO changes the game because it enables average investors to trade shares of private companies as easily and as they trade shares of public stocks such as Apple. In this way, tZERO pioneered the effort to bring greater efficiency and transparency to capital markets through their next-generation trading platform.
How tZERO ATS Works
tZERO is an ideal addition to the industry because it provides the market with an easy way to tokenize and trade high-quality securities across a variety of industries. Specifically, users of the platform trade conventional un-certificated securities. In the tZERO ecosystem, the digital securities function as a means to provide more transparency to investors rather than an actual tokenized security. Consequently, all records are still maintained in the same manner as traditional securities.
In the tZERO ecosystem, all buyers and sellers trade through a dark pool. This strategy allows tZERO to act as a matchmaker in the transactions. Acting as a matchmaker carries different regulatory responsibilities when compared to your traditional broker. This approach affords tZERO more flexibility in the market.
History of tZERO
tZERO’s journey to the top begins in 2014. It was at that time that the company’s CEO began working with Overstock’s Medici blockchain project. The goal of Medici was to allow overstock to sell cryptocurrencies to the public. Notably, tZERO is owned by the tZERO Group, Inc. This firm is a majority-owned subsidiary of the publicly traded firm, Overstock.com Inc. (NASDAQ:OSTK)
In December 2017, tZERO began to offer users Simple Agreements for Future Equity (SAFEs). These financial instruments allow firms to raise funds outside of the traditional debt and equity markets. Later that year, tZERO acquired Pro Securities. Pro Securities is a FINRA regulated broker-dealer. The company also acquired the FINRA-regulated agency brokerage firm, SpeedRoute. This company specializes in routing equity orders to US market centers.
In 2018, the platform launched tZERO Advisors. This update allowed users more functionality within the ecosystem. Specifically, users can create a customizable, diversified portfolio of equities in minutes. The very next year, tZERO partnered with Boston Options Exchange. The goal of the partnership was to offer publicly traded, registered security tokens.
tZERO ATS (alternative trading system) officially went live in January 2019. The platform’s launch received international media coverage. Additionally, the firm hired a new CEO, Saum Noursalehi, in 2020 to oversee the company’s expansion into the secondary security token markets.
tZERO was the first blockchain-based ATS to receive regulatory approval. This places the platform in a prime position for market expansion. This positioning helped tZERO to capture the lion’s share of the security token secondary markets.
In June 2020, tZERO recorded record growth on the platform. Today, tZERO accounts for over 90% of all global security token trade volume. Additionally, the platform is responsible for over 80% of the total token dollar value of the sector. Notably, news of these milestones pushed Overstock’s shares are up 8%.
How to Trade on tZERO ATS
To trade on tZERO ATS you need to sign up for a brokerage account. This process requires you to complete a full registration including KYC/AML compliance. Critically, your broker must be a subscriber to tZERO ATS. Your other option is to start an account with a broker-dealer that possesses a settlement account with a subscriber to tZERO ATS.
TZROP is the native security token for the tZERO ecosystem. The token’s issuance came via a private placement during August 2018. This ERC-20 compliant token functions as security to qualified investors on the tZERO platform. tZERO token holders receive quarterly dividends equal to 10% of tZERO’s adjusted gross revenue. In this way, TZROP provides investors direct exposure to revenue growth.
How to Get TZROP
You will need a brokerage account at Dinosaur Financial, LLC to get your hands on some TZROP. Originally, this token was exclusively traded by accredited investors. However, tZERO announced that TZROP is now available to be resold to non-accredited investors under Rule 144 under the Securities Act of 1933.
tZERO ATS – A Market Leader
It only takes a quick glimpse at tZERO’s market dominance to ascertain the vital role this platform plays in the market. tZERO is a true pioneer in the security token sector. Consequently, this platform will remain the dominant exchange in the secondary securities market for years to come.