ProATS Digital Asset Securities Risk Disclosure

Trading in digital asset securities “DAS” entails significant risk of financial loss. You should not commit funds to trading in digital asset securities that you are not prepared to lose entirely. Market prices for DAS can be volatile and highly unpredictable. Whether the future market price for a DASwill move up or down is  speculative and unknowable. Moreover some DAS are priced under five dollars per share and are considered low priced securities or penny stocks “LPDAS” .
You should not trade in DAS or LPDAS unless you understand the associated risks. This Risk Disclosure discusses some of the principal risks of trading in DAS/LPDAS, but it does not and cannot describe every risk or consideration involved in holding, trading, or engaging in transactions in DAS/LPDAS and low priced DAS/LPDAS. This Risk Disclosure forms a part of and utilizes certain terms that are defined in the Terms of Use.
For the purposes of this disclosure, “digital asset security” and “digital asset securities” mean one or more securities under Section 2(a)(1) of the Securities Act (i.e. that is a digital representation of value and may function as a medium of exchange or medium for investment, and which are evidenced on, and may be electronically received and stored using distributed ledger technology, also known as blockchain). Low-priced digital asset securities have the same meaning as digital asset security and trade at a price below five dollars per share. 
Risks of trading DAS/LPDAS include, but are not limited to, the following:
  1. DAS/LPDAS Market Risk: Market Prices for digital asset securities can be volatile and highly unpredictable. Volatility in the price of DAS/LPDAS may increase your exposure and your risk of experiencing significant losses in trading DAS/LPDAS, and these risks and exposure may be significantly greater than those you would face in trading traditional securities. Whether the future market price for a DAS/LPDAS will move up or down or even sustain a market value is speculation and unknowable. ProATS makes no representations or warranties about whether a DAS/LPDAS will always continue to trade in the digital asset security trading market. Any DAS/LPDAS is subject to delisting without prior notice at the sole discretion of ProATS.
  2. Price Risk: There is not currently a proven valuation methodology for reliably and accurately analyzing the valuation of a DAS/LPDAS or its related blockchain network. While traditional valuation methodologies are often applied to DAS/LPDAS, DAS/LPDAS have some key distinctions in relation to traditional securities. For example, many DAS/LPDAS and their related networks derive value from networks effects, whereby once a critical mass of users or DAS/LPDAS holders is reached, the value of an additional user or DAS/LPDAS holder joining the network may have an outsized impact on the value of the network as a whole. This, along with other unique characteristics of DAS/LPDAS as an asset class and particular characteristics of specific DAS/LPDAS, makes it difficult to accurately assess the valuation of any DAS/LPDAS or its related network. DAS/LPDAS prices may be extremely volatile. A customer’s decision to buy, sell or hold a particular DAS/LPDAS for a short period of time may result in a significant or complete loss in value of such DAS/LPDAS. Many DAS/LPDAS are subject to great amounts of investor speculation and therefore, frequent and, at times, large price fluctuations. Additionally, because the volume of DAS/LPDAS units in circulation may be small, one trade or a group of trades may have a significant impact on the price of a DAS/LPDAS. This could result in a large holder of a particular DAS/LPDAS having an outsized influence over its price, which may give such a holder the ability to manipulate the price of that DAS/LPDAS.
  3. Liquidity Risk: Markets for DAS/LPDAS can at times become “illiquid,” which means there can be a scarcity of persons who are willing to trade at any one time, regardless of price. Thinly traded or illiquid markets have potential increased risk of loss because they can experience high volatility of prices and in such markets market participants may find it impossible to liquidate market positions except at very unfavorable prices. There is no guarantee that the markets for ProATS or for any DAS/LPDAS will be active and liquid or permit you to establish or liquidate positions in the DAS/LPDAS when desired or at favorable prices. If an investor holds a certain DAS/LPDAS and there is not sufficient demand for that DAS/LPDAS, an investor may not be able to sell such DAS/LPDAS and have liquidity over his, her or its DAS/LPDAS.
  4. Legal Risk: The legality of DAS/LPDAS and their trading may not be clear and may vary under the laws of different jurisdictions throughout the world. This can mean that the legality of holding or trading DAS/LPDAS is not always clear. Whether and on what basis a DAS/LPDAS may constitute property, an asset, or a right of any kind might vary from one jurisdiction to another. You are responsible for knowing and understanding how the laws applicable to you or your property, your rights, your assets, or to lending address, limit, regulate, and/or tax the DAS/LPDAS you trade or hold.
  5. DAS/LPDAS Technology Risks: The technology on which we and your custodian rely to execute and settle trades of DAS/LPDAS, including communications between our systems, the custodian’s systems, and the blockchains or distributed ledgers underlying these DAS/LPDAS, may not function properly. This may be because of problems internal to ProATS and our ATS, including a failure relating to API integrations, or problems outside of our control, responsibility and ability to guard against or remedy, including a failure of your custodian to properly safeguard “private keys'' providing control over such DAS/LPDAS, cyber-attacks or external security breaches at your custodian, or malicious attacks against the relevant blockchain. Any such malfunction may adversely affect the ability of our customers to execute trades of DAS/LPDAS on our ATS or access their DAS/LPDAS held at their custodian. Moreover, our ATS order matching system may not function properly in cases of increased trading volume. Furthermore, your custodian’s security systems and custodial procedures may have undetected defects that could make them vulnerable to malicious attacks, hacking and the potential theft of DAS/LPDAS held in the custody of your approved custodian, and we will have no control or responsibility over such failure or any ability to remedy or guard against such attacks. If the technology used by ProATS or your custodian does not work as anticipated, trading of DAS/LPDAS on our system could be limited or even suspended, and it is possible that your DAS/LPDAS may be stolen or become inaccessible.
  6. DAS/LPDAS Vulnerabilities Risks: Your DAS/LPDAS are held at your custodian, and any failures in maintaining the security of those digital assets are outside of our control and we will not be able to remedy them. Furthermore, we do not maintain and are not responsible for the safety and security of the blockchain networks on which ownership of and transactions in your DAS/LPDAS will be recorded, and the protection of these blockchains against attack and theft, and are therefore unable to mitigate these risks on your behalf. Specifically, these blockchain networks are vulnerable to hackers and cyber-attacks, and may themselves be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of DAS/LPDAS or the decline in value of DAS/LPDAS. Transactions in DAS/LPDAS on these blockchains may also be irreversible, including mistaken transactions or theft. The blockchain technologies on which DAS/LPDAS are ultimately recorded are also susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, selfish-mining attacks and race condition attacks. Any successful attacks present a risk to these blockchains’ expected proper execution and sequencing of DAS/LPDAS transactions and expected proper execution and sequencing of contract computations, which could have an adverse effect on the value of the underlying DAS/LPDAS. Although there are ways to limit such risks, including through the use of certain consensus mechanisms that could reduce the risk of mining attacks, there can be no assurance that such measures, if implemented, will successfully defend against known or novel mining attacks, and in any event, we are unable to take such measures ourselves and therefore cannot control, mitigate, and do not take responsibility for any of the foregoing risks.
  7. DAS/LPDAS Wallet Risks: We are not responsible for your DAS/LPDAS wallet (“Wallet”) held at the custodian. Moving and storing DAS/LPDAS in your Wallet exposes your DAS/LPDAS to risks of total loss from, among others things, security breaches from cyber-attacks that hack and steal DAS/LPDAS, electronic or technological failures that impede or prevent market access and market performance, recordkeeping errors and any insolvency, bankruptcy or material financial losses of the custodian. Any failures in DAS/LPDAS vulnerabilities of your Wallet are out of our control, and we will not be able to remedy or guard against such failures.
  8. Risk of DAS/LPDAS Wallet Freeze: ProATS may inform your custodian who may freeze your DAS/LPDAS Wallet in the event that you are believed to be engaged in suspicious activity or freeze your ProATS account if you are in breach of any of the Terms of Use. If your DAS/LPDAS Wallet is frozen by the custodian, you will not be able to trade or to make transfers to or from your DAS/LPDAS Wallet. This will also result in the closure of your open orders.
  9. Market Default Risk: ProATS operates and administers the trading platform for DAS/LPDAS. ProATS is not a counterparty to any trade and has no financial responsibility or liability for any failure of market participants to honor their financial obligations; there is always a risk that one or more market participants will renege, default, or otherwise fail to honor their financial obligations or will be unwilling or unable to abide by the terms of their agreements. In the event that risk materializes, other market participants can and likely will incur financial losses or reductions in gains from their own open positions in DAS/LPDAS.
  10. Conflicts of Interest: ProATS may charge fees for trading and therefore benefits from trading activity (sometimes called volume) regardless of whether the trading is profitable to you. ProATS and its affiliates and personnel have certain actual or potential conflicts of interest related to the decision to support or not support a DAS/LPDAS or increase or decrease the scope of the services made available for such DAS/LPDAS. ProATS and its affiliates and personnel may be a counterparty to any trade executed by you without your knowledge.
  11. Risk of Lack of Public Information: Both DAS and LPDAS may not have available public information.  Most large, publicly-traded companies file periodic reports with the U.S. Securities and Exchange  Commission (SEC) that provide information relating to the company’s assets, liabilities and performance  over time. In contrast, information about DAS and LPDAS can be extremely difficult to find, making them more likely to be the subject of an investment fraud scheme and making it less likely that quoted  prices in the market will be based on full and complete information about the company. Reliable information regarding issuers of DAS and LPDAS, their prospects, or the risks associated with  investing in such securities may not be available. Certain issuers of DAS/LPDAS have no obligation to provide information to investors. Some issuers register securities with the SEC and may provide regular reports to investors. Others however may not be required to maintain such registration or provide such reports. DAS/LPDAS may continue to be traded if issuers are delinquent in their reporting obligation to the  SEC or other federal or state regulatory agencies.

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Digital asset securities may not be suitable for all investors. Investors should note that investing or trading in digital asset securities could involve substantial risks, including no guarantee of returns, costs associated with selling and purchasing, and no assurance of liquidity, which could impact their price and the investor's ability to sell, and possible loss of principal invested. There is always the potential of losing part or all of your money when you invest in digital asset securities. Research our firm with FINRA's BrokerCheck

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