if you like for me to speak up at any point please please let me know your honors we have a motion to supplement the administrative record pending this regards certain prior rules manuals for the other limited volume exchanges and this morning we received a document package with the cd enclosed this was provided by the securities and exchange commission and is postmarked postmarked february third this here contains the rules manuals for the trade point limited volume exchange as well as the successor entities which would be the vertex stock exchange and then s w s europe these are very material documents and these were provided in response to a four requests we've been fighting for these documents since august and you say there is a motion there is a motion pending is that what you said correct your honor is it cover the documents that you referred to the documents which you  copies through our own research and then also through prior for requests and those copies are on certificate on there are simply copies that we have detained from our own research as well as follow but we've asked for certified ok now what's the motion precisely what precisely is the motion let's stop the the argument time that will give you were will restore that the minutes but what precisely is the motion that  said as already been filed in his painting i believe it's entitled motion to supplement the administrative record you know when that was  right well once you proceed with your argument the motion i don't frankly don't recall whether that motion there's any been any disposition whether there's been an order to take it with the case but the court will will consider the motion and your comments this morning but once you proceed with your argument and if i may before we begin we've made a copy for our own records mean i submit this as evidence for this proceeding well i'm not sure that that would be appropriate and particularly at this late point in time before argument i think your best course is simply to proceed with your argument and let any filings that you might have married speak for themselves in the court will will will take those up when the case is considered thank you your honor so it's your contention material decides the case the outcome of this case following and not following what you're saying correct your honor be the primary argument on appeal is the exercise of suffering the tory powers i am your honor yes we have a colleague who is not a member of this panel who frequently details leading people that are here to argue that he never reads footnotes so that if you have something of importance that you think in the case ought to be presented put it in the  body of the brief and as i was reading your brief i noticed that in fifty six pages you have forty six footnotes some of which take up a little more than a half a page and i tell you that i read all of the footnotes but it when they're reduced size type it gets a little tejas as you go along so i would suggest that you might take that into consideration the next time you appear before our court at least because you may get our colleague and he won't be able  know what you've said about half of the time and thank you for your patience your honor i will a definite take your note under advisement for the future it's your honor sir throughout life all have an opportunity to speak about what it is we have we do for a living at times i have an opportunity to discuss this case generally with friends and colleagues and the first first thing i  we are litigating against a federal government agency and the question that i receive in response is well what did you do wrong nothing i say in fact we initiated a lawsuit the next question would be well how much money are you seeking and i respond none in fact we're not seeking any monetary damages all we're seeking is to prefer an agency to process an application and we're fighting to be regulated i am the chief regulatory officer of amc and sitting to my right is gregory wilson he is the chief executive officer now in the record below you will notice reference to two other entities one of which is convergence securities i am the former chief executive officer there was a registered broker dealer i had the private placement of securities mr wilson owns and operate second broker dealer to this day that broker dealer is a variable investment advisors inc and one of the business lines include with that for is the operation of an alternative trading system in fact mr wilson has been operating one for fifteen years and he's one of the first applicants for n a automation has changed our lives and as it continues to change in our lives every day and many years ago if you are planning a business trip or vacation you may speak to a travel agent and seek a recommendation where to go where to stay maybe even what activities to undertake while you're there today the vast majority of us go online we make our own trip we decide to own hotels and activities this is the core of amc fully automated matching systems in essence we operate as an exchange a virtual stock exchange were each one of member firms will be fully automated matching systems this will be a portal by which are multiple portals by which an investor can enter on into this exchange and enter into securities transactions on one member site or through what we call an order routing functionality enter a transaction onto one member site and have that routed for execution to a second member so i know this entire process would happen underneath the umbrellas regulatory structure we call  if there's only two things that i'll ask this panel above all else after all the documents you've reviewed and all the argument you've heard there that there are the following number one remained this matter with instructions qualify for that right and or have i missed something in your fifty six page we spent a great deal of time in our briefs criticizing what the f c c has done in this particular instance knowledge that in fact i think it's a great agency but in this particular instance i believe they failed and they feel they're pretty to flee now the best way i can respond is to tell you what should have the f c c done and what should they still do in the first of which the first part of the exercise will be to identify whether any statute or regulation is being violated they've sat on this application for two years and they can't identify a single one number two what they should do second is identify the specific regulatory gaps the specific concerns they have with the application and once they identify the specific concerns the specific regulatory gaps then they should s primary argument on appeal he asks why do you want to the self regulatory powers what if you just submitted the application for exempt status and stop there to explain to me what what's in it for you absolutely and the answer involves regulation a t s since the adoption of regulation e t s any system which discharges all of the regulatory functions is required to register as a broker dealer  regulating our members and hence we would report directly to the f c c so if you were simply a limited value exempt exchange who would regulate you without the self regulatory powers that the c c is complaining about where does the regulation come that's a great question your honor and the best example we can provide is in the trade point manuals and you'll find that in the motion to supplement administrative record the statement that unlimited volume exchange has never exercised these powers is false that what not exercise what  the regulation well let me let me ask the question a different way then are there limited volume exempt exchanges that do not exercise regulatory powers in existence right now there's only one limited volume exchange that we are aware of in existence now and from our research every limited volume exchange has exercised to some degree tiered regulatory structure here and this is it predates the commission's own existence and you'll see references to treatise material as well as nine hundred eighty eight case of belton v hatch a stock exchanges have been regulating their members before the f c c even came into existence now that the commission is there the way that it works is that we saw for regulate our members subject to the commission's oversight so you would become  trade point and the warrants exemptions the orders granting them this is exactly what the commission had done these are the only two applicants in the last eighty years and what they have done is set up a specific conditions on which these exchanges can operate great question your honor and the f c c has answered that in the trade point of filings the way that they've interpreted limited volume is staying below the lowest average daily trading volume of any registered international exchange so hence this is a temporary it's a conditional exemption is a start a provision and give us an opportunity to begin operations until we hit that level of transaction volume where would be required to register so your description of a limited is limited line exemption was designed for the regional stock exchanges stock exchanges like the st paul many apple a stock exchange and following the adoption of the exchange act this would be a provision to allow them to continue to operate without all of the burden of registering as a foreign national securities exchange who would look over there were a product or activities in that situation beyond just and i guess i'm not understanding what your point was with these were regional stock exchanges and they were allowed to continue to operate when the exchange act was adopted so this was a temporary provision to allow them to continue without the disproportionate burden of registering as a national exchange so they are self regulating organizations without any connection of oversight outside so th right well we believe that to be true now we were quested the the four manuals with respect to these earliest exchanges including the honolulu exchange which continued to nine hundred seventy seven the commission does not have any supporting the record that these commission these exchanges had not exercised offering a tory powers but we believe that they had we believe that they are this is the core these are run as private clubs so if a member didn't meet their stellar commitment or engage in let's say unscrupulous behavior they would be sanctioned internally by the exchange is there anything for you from registering as an exchange is there something about the limited  they'll call us and i'm going to answer that question then i'll reserve the remainder of my time but there are various reasons that we've chosen this and as the applicant we're entitled to decide what form of application we'd like to file there are certain economic benefits for us things such as allowing unregistered securities to trade on this platform and hence this is the decision we've made and that the form of application we've identified is the appropriate one thank you today your honour's william shire review the securities and exchange commission the commission rejected exemption exempt of application because the commission to terminate it was inconsistent with the exchange i am c wants to be what's called a self regulatory organization that's an organization that has the ability to enforce the federal securities laws it's an it organization that is essentially deputize under the close supervision of the commission to regulate its members do you have lots of self regulating organizations now don't you we do your honor we have approximately twenty right now all of them are registered exchanges registered clearing agencies or register a registered national securities exchange the critical defining term there is a register amc however has determined that it wants to be an exempt exchange but congress in one nine hundred seventy five was very concerned about the exercise of self regulatory quasi governmental authority that we're that we're talking about and congress overhauled the exchange act and as we discussed in the exempt of order and as we discuss in our briefs congress carefully defined what we're going is ations could be a sorrows and not surprisingly all of these are registered entities as relevant here it's a registered exchange is there something about that registration that is some addition maybe that's where you're going but is there some additional screening background what it what and what what's actually decided what entities would exercise and the congress didn't actually allow the commission to expand the list that's in three eight to six but your honour's precisely correct there are considerations that even if the commission did have the authority very rigorous and demanding standards were imposed for exchanges that want to register and become so called national securities exchanges perhaps even more importantly thirty vast number of powers were added for the and as well in section twenty one d and e of the exchange act congress added additional powers for the commission to exercise with respect esser of those powers include among other things the ability to go into federal court and order an s commission approves it it includes the ability to without asking the compressor o first to modify any of their rules it includes the ability to review any disciplinary decisions it includes the ability to  members of an s r o board of directors and other officers what propose their self regulatory powers the f c c would not have that same it it sort of makes rumblings of opting in to section one thousand the regime doesn't work that way congress first of all specified who could exercise these cause i governmental powers and who could not and then it provided extensive registration mechanisms and oversight mechanisms to make sure that the commission was constantly monitoring the exercise of these powers and that only appropriate private entities were exercising these quasi governmental powers and so your honor the commission looked at what congress did in one nine hundred seventy five and it decided that emcees proposal to be an exempt exchange is inconsistent with that and moreover your honor he's made mention of  s participants what the commission said in both of those exempt of orders and it has been taken commissions consistent view since those nine hundred seventy five members is that the section five exemption exist to re small exchanges of the s r o obligations the commission said that in both the watch and the tray point orders so what you have here your honour's is a situation where mc is seeking an example of an application that in the commission's view exist actually relieve an exchange that otherwise would have to register of those s r o obligations to allow them not to register to seek an exemption but as a result they also become subject to less registration  avoid the demanding registration requirements and they also avoid the extensive oversight mechanisms that congress established it's a trade off over who does who has the oversight over the limited volume exempt exchanges with first year and i should clarify that in our understanding no limited volume neither of those limited boy exempt exchanges are still in operation both ceased operating under exam to borders and a pproximately two thousand nine period they transition into i believe the trade point actually just now operates in the u k and switzerland and i am not not not perfectly sure about the arizona exchange i'd be on the dangerous territory if i if i started to speculate he's going to share the critical point is that with respect to those two exempt exchanges they were subject to of enforcement actions against their members for violations of age changes that power existed either with other s r o as to which of these their members also were members or  or resided with the commission but it never it never resided with these entities and are in essence saying to you that you are and it's a registered exchange with it's registered national securities association and its rights are clearing agencies it's not exempt exchanges it's not as though in one thousand nine hundred seventy five congress wasn't aware that there were exempt exchanges out there congress certainly was aware of a and b you know when one looks at that say for instance the senate report that cited in both i think our brief and in the exam to the  of application you actually read read through that it's it's frankly an extraordinary it's extraordinary how concerned congress was at that time about entities private entities that's what we're dealing with are private entities exercising exchange i bill i believe and i may be wrong or believe there are a c f t c regulated entity you don't deal with the green exchanges that is my understanding your honor that that's the commodity futures trading commission that regulates those but the critical point your hono that the commission has never given any either of these exempt exchanges that post nine hundred seventy five the authority to enforce the securities laws to make rules to go on site and examine these entities their members books and records to make sure not you know i know ministers to galaxy has talked about the trade point manuals you won't see that in the trade point manuals the trade point was it if i can just step back it was a u k exchange that the united states was the c was granting a limited exemption for a limited volume exemption so that they could allow residents of certain members of the united states to trade on a platform it was an exchange that was governed by u k law even after the commission granted exemption it would be extraordinary for the united states securities and exchange commission to empower a foreign registered exchange to actually enforce u s securities and it didn't happen and it didn't happen in the watch setting either in this proposing would be members there actually the exchanges so so there's been a lot of revision to emcees application throughout this sort of i think tried to comply with the staff concerned that look these are the exchanges that's what a t s is are essential as we talk about in our brief you're not actually proposing to operate an exchange so there's that threshold issue that the commission would have to look at their proposal is more like a shopping cent not i actually think that's not a fair thing where you know you go the shopping mall there are all these individual stores but you don't actually think of all the buyers and sellers in each store always sort of constantly interacting with the same within the same platform there but there was that issue also there was a common letter during this period by first trade i believe where they identified a slew of other concerns with applications the commission hasn't even dealt into those yet so analysis and i think that's wrong i mean that's that's not certainly how the commission has ever approached any of the exempt of orders the commission has always imposed some degree of conditions for instance even going back to the one nine hundred thirty five exeunt of orders to make sure that the folks who were operating these exchange were doing so consistent with the public interest in the protection of investors and we don't think that that's that's appropriate that's that makes a fair in any degree of sense it's not exempt of orders typically work which are inherently discretionary in your brief you include table which is you prepared a chart it compares one form or occasion with amendments and you pointed out that your conclusion is that what they did was take out s r o self regulatory organization and substitute a limited volume example regulatory organization they just quit using that right they've sort of made their own terminology but can you give me an example could give the court example of what else you would have expected to say in the amended applications that would be more conducive to their to that to this request i get i don't want to speak for commission but i think you know i think it's fair to say that the commission has since the one nine hundred seventy five amendments never deputized one of these exempt exchanges to actually go out and enforce the securities laws and it empties application they actually say that amended application they actually say they want to be a quote dedicated s r o for automated matching systems not withstanding this change in terminology mc proposes throughout their throughout their rule book in the application they talked about it in the district court proceedings and they talked about it even in their last public comment on the mc plans to be an s r o they've they've changed the names but but it's it's an s r o they're talking about and that's the commission's position both b mr shah he took a little extra time to complete his a it's are so the court will allow you an extra minute thank you had a minute to your time there and you can finish thank you very much your honor the commission is represented that they have never allowed a limited volume exempt exchange to exercise self regulatory powers after the seventy five amendments you'll see in the in the docket below that false they've exercise disciplinary powers over members they can sanction members and in fact betrayed point you'll see reference that they would empower english arbitrators to apply u s securities laws in their proceedings for any us members now we're not asking for much from the commission we're willing to comply we've offered several amendments just tell us what you need us to do what amendments you need if there are substantive or fits just terminology will comply we're willing to spend a lot of tell us what you what we can do to be compliant absent is that actually the role do you think of the s c c and its staff to provide you with an applicant with detailed instructions or as to how to make your applications acceptable but here's the problem with their current order we have no idea what's wrong we could submit one hundred applications and have a moving target the whole time it was about this definition of the processing period they denied it on another ground all we're asking is to give us an opportunity to know how to correct what's worse another exchange can come reste our application file it and they can be approved in essence the commission doesn't want to create any precedent on this limited volume exemption and that's all we're asking for we want to comply we just need to know how i see my time is up just very briefly we've also included a chart i recommend this may be a helpful point this is on page seventy eight of the august thirty first brief and this is just kind of a quick summary of the self regulatory and it's been well argued it is submitted