38768 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

1 17 CFR 249.640. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 232, 240, 242, and 249 

[Release No. 34–83663; File No. S7–23–15] 

RIN 3235–AL66 

Regulation of NMS Stock Alternative 

Trading Systems 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission is adopting amendments to 

regulatory requirements in Regulation 

ATS under the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) applicable to 

alternative trading systems (‘‘ATSs’’) 

that trade National Market System 

(‘‘NMS’’) stocks (hereinafter referred to 

as ‘‘NMS Stock ATSs’’), including so 

called ‘‘dark pools.’’ First, we are 

adopting new Form ATS–N, which will 

require NMS Stock ATSs to disclose 

information about their manner of 

operations, the broker-dealer that 

operates the ATS (‘‘broker-dealer 

operator’’), and the ATS-related 

activities of the broker-dealer operator 

and its affiliates. Second, as amended, 

the regulations will require public 

posting of certain Form ATS–N filings 

on the Commission’s website, which 

will be accomplished through the 

Commission’s Electronic Data 

Gathering, Analysis, and Retrieval 

system (‘‘EDGAR’’) and require each 

NMS Stock ATS that has a website to 

post on its website a direct URL 

hyperlink to the Commission’s website. 

Third, the amendments that we are 

adopting today provide a process for the 

Commission to review Form ATS–N 

filings and, after notice and opportunity 

for hearing, declare an NMS Stock 

ATS’s Form ATS–N ineffective. Fourth, 

the regulations, as amended, will 

require all ATSs subject to the 

regulations to place in writing its 

safeguards and procedures to protect 

subscribers’ confidential trading 

information. We are also adopting 

conforming amendments. 

DATES: 

Effective Date: October 9, 2018. 

Compliance Dates: The applicable 

compliance dates are discussed in the 

section of the release titled ‘‘VIII. 

Effective Date and Compliance Date.’’ 

FOR FURTHER INFORMATION CONTACT: 

Tyler Raimo, Senior Special Counsel, at 

(202) 551–6227; Matthew Cursio, 

Special Counsel, at (202) 551–5748; 

Marsha Dixon, Special Counsel, at (202) 

551–5782; Jennifer Dodd, Special 

Counsel, at (202) 551–5653; David 

Garcia, Special Counsel, at (202) 551– 

5681; or Megan Mitchell, Special 

Counsel, at (202) 551–4887; Office of 

Market Supervision, Division of Trading 

and Markets, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–7010. 

SUPPLEMENTARY INFORMATION: We are 

adopting: (1) Amendments to 17 CFR 

242.300 through 242.303 (‘‘Regulation 

ATS’’) to add new 17 CFR 242.304 

(‘‘Rule 304’’) under the Exchange Act to 

provide new conditions for NMS Stock 

ATSs seeking to rely on the exemption 

from the definition of ‘‘exchange’’ 

provided by 17 CFR 240.3a1–1(a) (‘‘Rule 

3a1–1(a)’’) of the Exchange Act; (2) new 

Form ATS–N 1 under the Exchange Act, 

which NMS Stock ATSs will file to 

comply with the new conditions 

provided under Rule 304; and (3) 

related amendments to 17 CFR 242.300; 

17 CFR 242.301, 17 CFR 242.303, and 17 

CFR 240.3a1–1 under the Exchange Act 

(respectively, ‘‘Rule 300,’’ ‘‘Rule 301,’’ 

and ‘‘Rule 303’’ of Regulation ATS, and 

‘‘Rule 3a1–1’’). We are also adopting 

amendments to 17 CFR 242.301(b)(10) 

and 17 CFR 242.303 (‘‘Rules 301(b)(10) 

and 303 of Regulation ATS’’) under the 

Exchange Act to require all ATSs to 

make and keep written safeguards and 

written procedures to protect 

subscribers’ confidential trading 

information. 

Table of Contents 

I. Introduction 

II. Background 

A. Role of ATSs in the Current Equity 

Market Structure 

1. Significant Source of Liquidity for NMS 

Stocks 

2. Operational Complexity; Conflict of 

Interests 

B. Exemption for Alternative Trading 

Systems 

C. Conditions to the ATS Exemption; 

Confidential Notice Regime 

D. Concerns Regarding the Lack of 

Operational Transparency 

III. Heightened Regulatory Requirements for 

NMS Stock ATSs 

A. Exchange Act Rule 3a1–1(a) Exemption: 

New Conditions for NMS Stock ATSs 

1. Comments on the Rule 304 

Requirements; Effectiveness 

a. Comments on Form ATS–N Requirement 

b. Comments on Effects on ATSs Relative 

to National Securities Exchanges 

c. Comments on Effectiveness Requirement 

2. Comments on Extending Rule 304 to 

Non-NMS Stock ATSs 

B. Amendments to Existing Regulation 

ATS Rules for NMS Stock ATSs 

1. Rule 300(k): Definition of NMS Stock 

ATS 

2. Rule 301(a): Exemption From 

Compliance With Regulation ATS 

3. Rule 301(a)(5): Exemptions From Certain 

Requirements of Regulation ATS 

Pursuant to Application to the 

Commission 

4. Rule 301(b)(2): Form ATS Reporting 

Requirements No Longer Apply to NMS 

Stock ATSs 

5. Rule 301(b)(9): Form ATS–R Quarterly 

Reports 

6. Rule 303: Recordkeeping Requirements 

for Form ATS–N 

7. Comments Recommending Changes To 

Other Existing Regulation ATS Rules 

IV. Form ATS–N Filing Process; Effectiveness 

Review 

A. Initial Form ATS–N 

1. Rule 304(a)(1)(i): Filing and 

Effectiveness Requirement 

2. Rule 304(a)(1)(ii): Commission Review 

Period 

3. Rule 304(a)(1)(iii): Effectiveness; 

Ineffectiveness Determination 

a. Comments on the Standard of Review To 

Accept Filings on Form ATS–N 

b. Comments on the Review for 

Declarations of Ineffectiveness 

c. Effectiveness, Ineffectiveness Process 

d. Effectiveness; Ineffectiveness 

Determinations Under Rule 301(a)(1)(iii) 

4. Rule 304(a)(1)(iv): Transition for Legacy 

NMS Stock ATSs 

a. Rule 304(a)(1)(iv)(A): Initial Filing 

Requirements 

b. Rule 304(a)(1)(iv)(B): Commission 

Review Period; Ineffectiveness 

Determination 

c. Rule 304(a)(1)(iv)(C): Amendments to 

Initial Form ATS–N 

B. Rule 304(a)(2): Form ATS–N 

Amendments 

1. Rule 304(a)(2)(i): Filing Requirements 

a. Material Changes 

(i) Comments on Advance Notice 

(ii) Comments on Materiality 

(iii) Order Display and Fair Access 

Amendments 

b. Updating Amendments 

c. Correcting Amendments 

2. Rule 304(a)(2)(ii): Commission Review 

Period; Ineffectiveness Determination 

C. Rule 304(a)(3): Notice of Cessation 

D. Rule 304(a)(4): Suspension, Limitation, 

or Revocation of the Exemption From the 

Definition of Exchange 

E. Rule 304(b): Public Disclosure of Form 

ATS–N and Related Commission Orders 

1. Rule 304(b)(1): Form ATS–N ‘‘Report’’ 

2. Rule 304(b)(2): Making Public Form 

ATS–N Filings and Commission Orders 

a. Public Disclosure of Effective Initial 

Form ATS–N, As Amended 

b. Public Disclosure of Orders of an 

Ineffective Initial Form ATS–N 

c. Public Disclosure of Form ATS–N 

Amendments 

d. Public Disclosure of Ineffective Form 

ATS–N Amendment 

e. Public Disclosure of Notices of Cessation 

f. Public Disclosure of Each Order 

Suspending, Limiting, or Revoking the 

Rule 3a1–1(a)(2) Exemption 

3. Rule 304(b)(3): Disclosure of Form ATS– 

N on the NMS Stock ATS’s Website 

V. Form ATS–N Disclosures 

A. Form ATS–N Disclosure Requirements 

and Definitions 


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Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 38769 

1. Rule 304(c): Disclosure Requirements 

2. Terminology 

a. Definitions for Form ATS–N 

(i) Proposed Defined Terms 

(ii) New Defined Terms 

b. Comments on the Definition of 

‘‘Subscriber’’ 

B. Cover Page and Part I of Form ATS–N: 

Identifying Information 

1. Cover Page 

2. Part I of Form ATS–N: Identifying 

Information 

a. Part I: Identifying Information 

b. Comments on Proposed Exhibit 1 

c. ATS Governance Structure and 

Compliance Programs and Controls 

C. Part II of Form ATS–N: ATS-Related 

Activities of the Broker-Dealer Operator 

and Affiliates 

1. Broker-Dealer Operator and its Affiliate 

Trading Activities on the NMS Stock 

ATS 

a. Proposed Requests and Response to 

Comments 

b. Adopted Part II, Item 1 and 2 of Form 

ATS–N; ATS-Related Trading Activities 

of the Broker-Dealer Operator and its 

Affiliates 

2. Order Interaction with Broker-Dealer 

Operator; Affiliates 

3. Arrangements with Trading Centers 

4. Other Products and Services 

5. Activities of Service Providers 

a. Shared Employees 

b. Third-Party Service Providers 

6. Protection of Confidential Trading 

Information 

7. Differences in Availability of Services, 

Functionalities, or Procedures 

8. Other Recommendations From 

Commenters 

D. Part III Form ATS–N: Manner of ATS 

Operations 

1. Types of ATS Subscribers 

2. Eligibility for ATS Services 

3. Exclusion From ATS Services 

4. Hours of Operations 

5. Means of Entry 

6. Connectivity and Co-Location 

7. Order Types and Attributes 

8. Order Sizes 

9. Conditional Order and Indications of 

Interest 

10. Opening and Reopening 

11. Trading Services, Facilities and Rules 

12. Liquidity Providers 

13. Segmentation; Notice 

14. Counter-Party Selection 

15. Display 

16. Routing 

17. Closing 

18. Trading Outside of Regular Trading 

Hours 

19. Fees 

20. Suspension of Trading 

21. Trade Reporting 

22. Clearance and Settlement 

23. Market Data 

24. Order Display and Execution Access 

25. Fair Access 

26. Aggregate Platform-Wide Data; Trading 

Statistics 

a. Disseminated Aggregated Platform-Wide 

Data 

b. Other Standardized Statistical 

Disclosures 

VI. Amendments to Rule 301(b)(10) and Rule 

303(a)(1) for Written Safeguards and 

Written Procedures To Protect 

Confidential Trading Information 

VII. EDGAR Filing Requirements; Structured 

Data 

VIII. Effective Date and Compliance Date 

IX. Paperwork Reduction Act 

A. Summary of Collection of Information 

1. Requirements Relating to Rule 301(b)(10) 

and 303(a)(1) of Regulation ATS 

2. Requirements Relating to Rules 

301(b)(2)(viii) and 304 of Regulation 

ATS, Including Form ATS–N 

B. Proposed Use of Information 

1. Amendments to Rule 301(b)(10) and 

303(a)(1) of Regulation ATS 

2. Rules 301(b)(2)(viii), 304 of Regulation 

ATS, Including Form ATS–N, and 

301(b)(9) 

C. Respondents 

D. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

1. Rules 301(b)(10) and 303(a)(1)(v) of 

Regulation ATS 

a. Baseline Measurements 

b. Burdens 

2. Rules 301(b)(2)(viii) and 304 of 

Regulation ATS, Including Form ATS–N 

a. Baseline Measurements 

b. Burdens 

(i) Analysis of Estimated Additional 

Burden for Form ATS–N 

(a) Part I 

(b) Part II 

(c) Part III 

(ii) Estimated Burden Above the Current 

Baseline for an Initial Form ATS–N, 

Form ATS–N Amendment, and Notice of 

Cessation on Form ATS–N 

(a) Initial Form ATS–N 

(b) Form ATS–N Amendments 

(c) Notice of Cessation on Form ATS–N 

(iii) ATSs That Trade Both NMS and NonNMS Stocks 

(iv) Access to EDGAR 

(v) Recordkeeping Requirements 

E. Collection of Information Is Mandatory 

F. Confidentiality of Responses to 

Collection of Information 

G. Retention Period for Recordkeeping 

Requirements 

X. Economic Analysis 

A. Background 

B. Baseline 

1. Current NMS Stock ATSs 

2. Current Reporting Requirements for 

NMS Stock ATSs 

3. Lack of Standardized Public Disclosure 

4. NMS Stock ATS Treatment of Subscriber 

Confidential Trading Information 

5. Competition 

a. Competition Between NMS Stock ATSs 

and Registered National Securities 

Exchanges 

b. Competition Among NMS Stock ATSs 

c. Competition Between Broker-Dealers 

That Operate NMS Stock ATSs and 

Broker-Dealers That Do Not Operate 

NMS Stock ATSs 

6. Effect of NMS Stock ATSs on the 

Current Market for NMS Stock Execution 

Services 

a. Trading Costs 

b. Price Discovery 

c. Market Efficiency 

C. Economic Effects and Effects on 

Efficiency, Competition, and Capital 

Formation 

1. Economic Effects of Enhanced Filing 

Requirements of Form ATS–N 

a. Benefits 

b. Costs 

2. Economic Effects of Public Disclosure of 

Form ATS–N 

a. Benefits 

(i) Benefits of Public Disclosure of 

Standardized Information of Operations 

of NMS Stock ATSs 

(ii) Benefits of Public Disclosure of the 

ATS-Related Activities of the BrokerDealer Operator and Its Affiliates 

(iii) Benefits of Public Disclosure of 

Aggregate Platform-Wide Order Flow 

and Execution Statistics 

(iv) Benefits of Filing Form ATS–N in a 

Structured Format 

b. Costs 

(i) Costs to NMS Stock ATSs 

(ii) Price Impact Costs 

(iii) Filing in Structured Format 

3. Economic Effects of Written Safeguards 

and Written Procedures To Protect 

Subscribers’ Confidential Trading 

Information 

a. Benefits 

b. Costs 

4. Impact on Efficiency, Competition, and 

Capital Formation 

a. Competition 

(i) Entry of New and Continuation of 

Legacy NMS Stock ATSs 

(a) Enhance Filing Requirements of Form 

ATS–N 

(b) Implementation and Ongoing 

Compliance Costs 

(c) Public Disclosure of Form ATS–N 

(ii) Effects on Changes in Number of NMS 

Stock ATSs on Market Participant 

Trading Costs 

(iii) Innovation 

b. Efficiency 

c. Capital Formation 

D. Reasonable Alternatives 

1. Require NMS Stock ATSs To Publicly 

Disclose Current Form ATS 

2. Require Form ATS–N but Deem 

Information Confidential 

3. Require NMS Stock ATSs To Publicly 

Disclose Form ATS–N but not Declare 

Form ATS–N Ineffective 

4. Initiate Differing Levels of Public 

Disclosure Depending on NMS Stock 

ATS Characteristics 

5. Require NMS Stock ATSs To Register as 

National Securities Exchanges and 

Become SROs 

6. Discontinue Quarterly Volume Reports 

on Form ATS–R 

7. Require NMS Stock ATSs To Operate as 

Limited Purpose Entities 

8. Prohibit Broker-Dealer Operators and 

Affiliates From Trading on the NMS 

Stock ATS 

9. Lower the Fair Access Threshold for 

NMS Stock ATSs 

10. Requirements To Disclose Aggregate 

Platform-Wide Order Flow and 

Execution Statistics to All Subscribers 

11. Specify Alternative Structured Formats 

for Form ATS–N 

12. Specify Other Filings Methods for Form 

ATS–N 


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38770 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

2The term ‘‘dark pool’’ is not used or defined in 

the Exchange Act or Commission rules. For 

purposes of this release, the term refers to NMS 

Stock ATSs that do not publicly display quotations 

in the consolidated quotation data. See Securities 

Exchange Act Release No. 76474 (Nov. 18, 2015), 

80 FR 80998, 81008 n.123 (Dec. 28, 2015) 

(‘‘Proposal’’). Currently, NMS Stock ATSs operate 

predominantly as dark pools. See infra Section 

II.A.1. 

A ‘‘trading center’’ means a national securities 

exchange or national securities association that 

operates an SRO trading facility, an ATS, an 

exchange market maker, an OTC market maker, or 

any other broker or dealer that executes orders 

internally by trading as principal or crossing orders 

as agent. 17 CFR 242.600(b)(78). Some trading 

centers, such as OTC market makers, also offer dark 

liquidity, primarily in a principal capacity, and do 

not operate as ATSs. For purposes of this adopting 

release, these trading centers are not defined as dark 

pools because they are not ATSs. 

3Securities Exchange Act Release No. 40760 

(December 8, 1998), 63 FR 70844, 70863 (December 

22, 1998) (Regulation of Exchanges and Alternative 

Trading Systems) (‘‘Regulation ATS Adopting 

Release’’). 

4See Proposal, supra note 2. Section 11A(a)(2) of 

the Exchange Act (15 U.S.C. 78k–1(a)(2)) enacted as 

part of the Securities Acts Amendments of 1975 

(‘‘1975 Amendments’’) (Pub. L. 94–29, 89 Stat. 97 

(1975)) directs the Commission, having due regard 

for the public interest, the protection of investors, 

and the maintenance of fair and orderly markets, to 

use its authority under the Exchange Act to 

facilitate the establishment of a national market 

system for securities in accordance with the 

Congressional findings and objectives set forth in 

Section 11A(a)(1) of the Exchange Act. See 15 

U.S.C. 78k–1(a)(1). See also Regulation ATS 

Adopting Release, supra note 3, at 70858; Proposal, 

supra note 2, at 80999–81000. 

5Comments received on the Proposal are 

available on the Commission’s website, available at: 

https://www.sec.gov/comments/s7-23-15/ 

s72315.shtml. See Appendix A for a citation key to 

comment letters cited in this release. 

6 If any of the provisions of these rules, or the 

application thereof to any person or circumstance, 

is held to be invalid, such invalidity shall not affect 

other provisions or application of such provisions 

to other persons or circumstances that can be given 

effect without the invalid provision or application. 

7See Securities Exchange Act Release No. 39884 

(April 21, 1998), 63 FR 23504, 23523 (April 29, 

1998) (‘‘Regulation ATS Proposing Release’’) at 

23543 n.341. 

8See id. at 23540 n.313 and accompanying text. 

9 Data compiled from Forms ATS submitted to the 

Commission as of March 31, 2018. 

NYSE National, Inc. (f.k.a. National Stock 

Exchange, Inc.) was not trading as of March 31, 

2018 but filed a proposed rule change with the 

Commission for its proposed relaunch. See 

Securities Exchange Act Release No. 82819 (March 

7, 2018) 83 FR 11098 (March 13, 2018) (NYSENAT– 

2018–02) (notice of proposed ruled change). The 

Commission has approved the proposed rule 

change. See Securities Exchange Act Release No. 

83289 (May 17, 2018) 83 FR 23968 (May 23, 2018) 

(NYSENAT–2018–02) (order approving proposed 

ruled change). 

In contrast to dark pools, an ATS could be an 

Electronic Communication Network (‘‘ECN’’), 

which are ATSs that provide their best-priced 

orders for inclusion in the consolidated quotation 

data, whether voluntarily or as required by Rule 

301(b)(3) of Regulation ATS. See Rule 600(b)(23) of 

Regulation NMS, 17 CFR 242.600(b)(23) (definition 

of ‘‘electronic communications network’’); see also 

2010 Equity Market Structure Release, supra note 

13, at 3599. In general, ECNs offer trading services 

(such as displayed or non-displayed order types, 

maker-taker pricing, and data feeds) that are 

analogous to national securities exchanges. See id. 

Currently, however, based on Form ATS filings, 

there are no NMS Stock ATSs operating as ECNs. 

10See infra Table 1—‘‘NMS Stock ATSs Ranked 

by Dollar Trading Volume—January 1, 2018 to 

March 30, 2018’’ (citing Trade and Quote (TAQ) 

Data). 

11 Data compiled from Forms ATS and Forms 

ATS–R filed with the Commission as of the end of, 

and for the first quarter of 2018. 

12See infra Table 1—‘‘NMS Stock ATSs Ranked 

by Dollar Trading Volume—January 1, 2018 to 

March 30, 2018.’’ See id. (citing Trade and Quote 

(TAQ) Data). 

During the second quarter of 2015, there were 38 

ATSs that reported transactions in NMS stocks, 

accounting for 59 billion shares traded in NMS 

stocks ($2.5 trillion), which represented 

approximately 15.0% of total share trading volume 

(15.4% of total dollar trading volume) on all 

national securities exchanges, ATSs, and non-ATS 

OTC trading venues combined. See Proposal, supra 

note 2, at 81008 n.121 and accompanying text. 

Competitors for listed-equity (NMS) trading 

services also include several hundred OTC market 

makers and broker-dealers. 

13See Regulation of Non-Public Trading Interest, 

Securities Exchange Act Release No. 60997 

(November 13, 2009) 74 FR 61208, 61209 n.9 

(November 23, 2009) (‘‘Regulation of Non-Public 

Trading Interest’’). 

In 2009, there were 32 active dark pools trading 

in NMS stocks. See Securities Exchange Act Release 

XI. Regulatory Flexibility Act Certification 

I. Introduction 

NMS Stock ATSs, including trading 

centers commonly referred to as dark 

pools,2 have become an integral part of 

the national market system. Since the 

adoption of Regulation ATS in 1998,3

the number of these ATSs, and the 

volume of NMS stocks traded on them, 

has significantly increased. NMS Stock 

ATSs, which meet the definition of an 

exchange but are not required to register 

as national securities exchanges, 

compete with, and operate with 

complexity akin to, national securities 

exchanges. Many NMS Stock ATSs are 

operated by multi-service brokerdealers, whose business activities have 

become increasingly intertwined with 

those of the ATS, adding further 

complexity to their operations of NMS 

Stock ATSs and creating the potential 

for conflicts between the interests of the 

broker-dealer operator and the ATS’s 

subscribers. 

Despite their role in the equity 

markets, little information is widely 

available to market participants about 

NMS Stock ATSs, which restricts their 

ability to adequately assess these ATSs 

as potential routing destinations. On 

November 18, 2015, we proposed to 

amend Regulation ATS with the stated 

goals of enhancing operational 

transparency for NMS Stock ATSs to 

enable market participants to make 

more informed order routing decisions, 

and to facilitate better Commission 

oversight of these trading venues.4 To 

achieve these goals, we proposed to 

require NMS Stock ATSs to publicly 

report on new Form ATS–N information 

about how the ATS operates and 

activities of the broker-dealer operator 

and its affiliates that relate to the ATS; 

and provide a process for the 

Commission to determine whether an 

NMS Stock ATS qualifies for the 

exemption from the definition of 

‘‘exchange,’’ in which the Commission 

would, by order, declare a Form ATS– 

N effective or, after notice and 

opportunity for hearing, ineffective. 

We received 32 comment letters on 

the Proposal from a variety of interested 

persons, including ATSs, a national 

securities exchange, broker-dealers, 

institutional investors, industry trade 

groups, the Commission’s Investor 

Advocate, and the Attorney General of 

the State of New York.5 Commenters 

generally support the goals of the 

Proposal, although some commenters 

express concern about various specific 

elements, and recommend certain 

modifications or clarifications. We are 

adopting Form ATS–N and amendments 

to Regulation ATS and Exchange Act 

Rule 3a1–1(a) with modifications from 

the Proposal, as discussed below.6

II. Background 

A. Role of ATSs in the Current Equity 

Market Structure 

1. Significant Source of Liquidity for 

NMS Stocks 

At the time Regulation ATS was 

proposed, there were 8 registered 

national securities exchanges,7 and the 

Commission estimated that there were 

approximately 43 systems that would be 

eligible to operate as ATSs.8 As of 

March 31, 2018, there were 21 registered 

national securities exchanges and 87 

ATSs with a Form ATS on file with the 

Commission. Of these, there were 12 

national securities exchanges that trade 

NMS stocks and 41 ATSs that had 

noticed on Form ATS that they expect 

to trade NMS stocks.9 Approximately 

502.8 billion shares ($25.4 trillion) were 

traded in NMS stocks during the first 

quarter of 2018.10 During this period, 

the 33 ATSs that reported transactions 

in NMS stocks 11 accounted for 57.3 

billion shares (approximately $2.9 

trillion in dollar volume), representing 

11.4% of the combined total share 

trading volume (11.5% of the total 

dollar volume) in NMS stocks on all 

national securities exchanges, ATSs, 

and non-ATS OTC trading centers.12 By 

comparison, the number of active dark 

pools trading NMS stocks in 2002 was 

approximately 10,13 and in 2009, dark 


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Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 38771 

No. 61358 (January 14, 2010), 75 FR 3594 (January 

21, 2010) (‘‘2010 Equity Market Structure 

Release’’)), at 3598 n.22 and accompanying text. 14See id. at 3598. 15The NMS Stock ATS with the greatest volume 

executed approximately 20.1% of NMS Stock ATS 

share volume and 2.3% of the total consolidated 

NMS stock share trading volume. 

The market share percentages were calculated by 

Commission staff using aggregate trade data 

reported by ATSs to the FINRA equity trade 

reporting facilities and made available on FINRA’s 

website and TAQ Data. See infra Table 1—‘‘NMS 

Stock ATSs Ranked by Dollar Trading Volume— 

January 1, 2018 to March 30, 2018.’’ 

Pursuant to FINRA rules, each ATS is required 

to use a unique MPID in its reporting to FINRA, 

such that its volume reporting is distinguishable 

from other transaction volume reported by the 

broker-dealer operator of the ATS, including 

volume reported for other ATSs operated by the 

same broker-dealer. See FINRA Rules 6160, 6170, 

6480, and 6720. FINRA aggregates on a weekly basis 

ATS data reported by ATSs to the FINRA equity 

trade reporting facilities. The data can be viewed on 

a security-by-security basis or by ATS. See FINRA 

Rules 6110 and 6610. See also Securities Exchange 

Act Release No. 76931 (January 19, 2016), 81 FR 

4076 (January 25, 2016) (SR–FINRA–2016–002) 

(notice of filing and immediate effectiveness of a 

proposed rule change relating to ATS volume and 

trading information) (‘‘FINRA ATS Reporting 

Notice’’). 

16ATSs that traded NMS stocks prior to the 

adoption of Regulation ATS did not offer the same 

services and functionalities that they do today. See 

Proposal, supra note 2, at 81009. 

17See id. at 81009–81010. 

18Market participants may include many 

different types of persons seeking to transact in 

NMS stocks, including broker-dealers and 

institutional or retail investors. See id. at 81001 

n.28 and accompanying text. 

19See Proposal, supra note 2, at 81010, 81041– 

81043. 

20See id. 

21See id. at 81010. 

22See id. Some technology or functions of an ATS 

may be licensed from a third party. The brokerdealer operator of the ATS is nonetheless legally 

responsible for ensuring that all aspects of the ATS 

comply with applicable laws. See id. at 81041 

n.362. 

23See id. at 81041. 

24See id. For example, the broker-dealer operator 

determines the source of market data that the NMS 

Stock ATS uses to calculate the NBBO and how the 

NBBO will be calculated. 

25Throughout the Proposal and this release, 

broker-dealer operators of NMS Stock ATSs that 

provide brokerage or dealing services in addition to 

operating an ATS are referred to as ‘‘multi-service 

broker-dealers.’’ See id. at 81001 n.30. 

26See infra Section V.D.19. 

27These non-ATS, OTC activities in NMS stocks 

may include operating as an OTC market maker or 

block positioner or operating an internal brokerdealer system. See 2010 Equity Market Structure 

Release, supra note 13, at 3599–3600. Additionally, 

an affiliate of the broker-dealer operator of an NMS 

Stock ATS may also operate non-ATS trading 

centers. 

28See id. See also infra Section V.C (discussing 

comments on the proposed disclosure requirements 

of Form ATS–N). 

29See 17 CFR 240.3b-16. See generally Regulation 

ATS Adopting Release, supra note 3. See also 

Proposal, supra note 2, at 81004 (discussing the 

current exemption from the definition of exchange 

available to ATSs). 

pools accounted for 7.9% of NMS share 

volume.14 Additionally, no individual 

ATS executed more than 20.1% of the 

total share volume on NMS Stock ATSs 

or more than 2.3% of total NMS stock 

share volume during the first quarter of 

2018.15 Given this dispersal of trading 

volume in NMS stocks among an 

increasing number of trading centers, 

NMS Stock ATSs, with their 

approximately 11.4% market share, 

represent a significant source of 

liquidity in NMS stocks. 

2. Operational Complexity; Conflict of 

Interests 

NMS Stock ATSs have grown 

increasingly complex in terms of the 

services and functionalities that they 

offer subscribers, and they have used 

advances in technology to improve the 

speed, capacity, and efficiency of the 

trading functionalities that they offer to 

execute orders in NMS stocks.16

Additionally, NMS Stock ATSs today 

offer a wide range of order types, 

matching systems to bring together 

orders and counterparties in NMS 

stocks, order interaction protocols, or 

opportunities to customize trading 

parameters, such as parameters that 

allow subscribers to preference 

interaction of their order flow with that 

of certain other specific subscribers or 

types of subscribers.17 A variety of 

market participants use these ATSs to 

display or execute orders and trading 

interest in NMS stocks, including 

broker-dealers that route customer 

orders to ATSs for execution and 

potential price improvement, and asset 

managers that seek to execute large size 

orders without suffering adverse price 

impact.18

The relationships between brokerdealer operators 19 and the ATSs they 

operate have also become more complex 

and intertwined since the adoption of 

Regulation ATS.20 The broker-dealer 

operator of an NMS Stock ATS controls 

all aspects of the operation of the ATS, 

including, among other things: the 

means of access to the ATS; who may 

trade on the ATS; how orders are 

matched and executed; and any 

differences in access to services among 

subscribers.21 The broker-dealer 

operator, or its affiliate, may also own, 

and control access to, the technology 

and systems that support the trading 

facilities of the NMS Stock ATS, or 

provide and control the personnel 

servicing the ATS’s trading facilities.22

Additionally, the broker-dealer operator, 

or in some cases, its affiliates, 

determines the means by which orders 

are entered on the ATS, in many cases, 

through the use of a smart order router 

that is owned and operated by the 

broker-dealer operator or one of its 

affiliates.23 The broker-dealer operator, 

or in some cases, its affiliates, also 

controls the market data that the ATS 

uses to match, and execute orders and 

the transmission of, and access to, 

confidential order and execution 

information sent to and from the ATS.24

The operations of the NMS Stock ATS 

and the other operations of the brokerdealer operator are usually closely 

intertwined, and the broker-dealer 

operator may leverage its information 

technology, systems, personnel, and 

market data, and those of its affiliates, 

to operate the ATS. 

Furthermore, ATSs that trade NMS 

stocks are increasingly operated by 

multi-service broker-dealers that engage 

in significant brokerage and dealing 

activities in addition to operation of 

their ATS.25 These other business 

activities may include, among others, 

providing algorithmic trading software, 

agency sales desk support, and 

automated smart order routing services, 

often with, or through, their affiliates. 

As indicated by commenters, the fees 

charged to subscribers for their use of an 

NMS Stock ATS operated by a multiservice broker-dealer are generally 

bundled with other services offered by 

the broker-dealer operator to 

subscribers.26 Multi-service brokerdealers that also operate NMS Stock 

ATSs may use the ATS as a complement 

to the broker-dealer’s other service lines. 

For instance, the broker-dealer operator 

of an NMS Stock ATS, or its affiliate, 

may also operate an OTC market making 

desk or principal trading desk,27 or may 

have other business units that actively 

trade NMS stocks on a principal or 

agency basis in the ATS or at other 

trading centers.28 Some of these brokerdealer operators that operate multiple 

NMS Stock ATSs may use their ATSs as 

an opportunity to execute orders ‘‘in 

house’’ before seeking contra-side 

interest at other execution venues. A 

multi-service broker-dealer may also 

execute orders in NMS stocks internally 

(and not within its ATS) by trading as 

principal against such orders or crossing 

orders as agent in a riskless principal 

capacity, before routing the orders to its 

NMS Stock ATS or another external 

trading center. Consequently, the nonATS trading centers operated by the 

broker-dealer operator of an NMS Stock 

ATS, or its affiliates, may compete with 

the ATS for the execution of 

transactions in NMS stocks. 

B. Exemption for Alternative Trading 

Systems 

Exchange Act Rule 3b–16(a) 29

provides a functional test to assess 


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30See 15 U.S.C. 78f. 

31See 17 CFR 240.3b–16(a). 

32See Regulation ATS Adopting Release, supra 

note 3, at 70852. Specifically, Rule 3b–16(b) 

excludes from the definition of exchange systems 

that perform only traditional broker-dealer 

activities, including: (1) systems that route orders 

to a national securities exchange, a market operated 

by a national securities association, or a brokerdealer for execution, or (2) systems that allow 

persons to enter orders for execution against the 

bids and offers of a single dealer if certain 

additional conditions are met. 

33See 17 CFR 240.3b–16(e). 

34 15 U.S.C. 78e. 

35Pursuant to Section 3(a)(1) of the Exchange Act, 

the statutory definition of ‘‘exchange’’ means ‘‘any 

organization, association, or group of persons, 

whether incorporated or unincorporated, which 

constitutes, maintains, or provides a market place 

or facilities for bringing together purchasers and 

sellers of securities or for otherwise performing 

with respect to securities the functions commonly 

performed by a stock exchange. . . .’’ 15 U.S.C. 

78c(a)(1). 

36 15 U.S.C. 78f. A ‘‘national securities exchange’’ 

is an exchange registered as such under Section 6 

of the Exchange Act. 

A trading platform that meets the definition of 

‘‘exchange’’ under Section 3(a)(1) of the Exchange 

and fails to register with the Commission as a 

national securities exchange pursuant to Section 6 

of the Exchange Act, unless exempt, risks operating 

as an unregistered exchange in violation of Section 

5 of the Exchange Act. See, e.g., Report of 

Investigation Pursuant to Section 21(a) of the 

Securities Exchange Act of 1934: The DAO, 

Securities Exchange Act Release No. 81207 (July 25, 

2017) https://www.sec.gov/litigation/investreport/ 

34-81207.pdf (‘‘DAO Report’’) (finding that certain 

tokens offered and sold by a ‘‘virtual’’ organization 

were securities, and confirming that issuers of 

distributed ledger or blockchain technology-based 

securities must register offers and sales of such 

securities unless a valid exemption applies, and 

that securities exchanges providing for trading in 

these securities must register unless they are 

exempt). Specifically, we confirmed that a system 

that meets the criteria of Rule 3b–16(a), and is not 

excluded under Rule 3b-16(b), must register as a 

national securities exchange pursuant to Sections 5 

and 6 of the Exchange Act or operate pursuant to 

an appropriate exemption. See id. at Section III.D. 

See also In the Matter of BTC Trading, Corp. and 

Ethan Burnside, Respondents, Securities Exchange 

Act Release No. 73783 (December 8, 2014), https:// 

www.sec.gov/litigation/admin/2014/33-9685.pdf 

(order instituting administrative and cease-anddesist proceedings, making findings, and imposing 

remedial sanctions and a cease-and-desist order and 

alleging, among other things, that an operator of two 

online venues through which account holders could 

trade securities using virtual currencies violated 

Section 5 of the Exchange Act by failing to register 

the trading venues as exchanges). 37Section 3(a)(26) of the Exchange Act defines a 

self-regulatory organization as any national 

securities exchange, registered securities 

association, registered clearing agency, or (with 

limitations) the Municipal Securities Rulemaking 

Board. See 15 U.S.C. 78c(a)(26). See also Proposal, 

supra note 2, at 81000–81001 nn. 20–26 and 

accompanying text (discussing certain differences 

between certain obligations and benefits applicable 

to national securities exchanges and those 

applicable to ATSs). 

38See, e.g., 15 U.S.C. 78f and 78s. 

39See Section 6(b)(1) of the Exchange Act, 15 

U.S.C. 78f(b)(1). The Commission must also find 

that the national securities exchange has rules that 

meet certain criteria. See generally Exchange Act 

Section 6(b)(2) through (10), 15 U.S.C. 78f(b)(2) 

through (10). 

40See generally Section 19(b) of the Exchange 

Act, 15 U.S.C. 78s(b), and Exchange Act Rule 19b– 

4, 17 CFR 240.19b–4. 

41See 17 CFR 240.3a1–1(a)(2). 

42See id. Rule 3a1–1 also provides two other 

exemptions from the definition of ‘‘exchange’’ for 

any ATS operated by a national securities 

association and any ATS not required to comply 

with Regulation ATS pursuant to Rule 301(a) of 

Regulation ATS. See 17 CFR 240.3a1–1(a)(1) and 

(3). 

Rule 3a1–1(b) provides an exception to the Rule 

3a1–1(a) exemptions pursuant to which the 

Commission may require a trading system that is a 

substantial market to register as a national securities 

exchange, if the Commission finds doing so is 

necessary or appropriate in the public interest or 

consistent with the protection of investors. See 17 

CFR 240.3a1–1(b). See also Regulation ATS 

Adopting Release, supra note 3, at 70857–70858. 

43See 17 CFR 242.300(a); 17 CFR 242.301(a); and 

242.301(b)(1). In addition to the other requirements 

of Regulation ATS, to qualify for the Rule 3a1–1(a) 

exemption, an organization, association, or group of 

persons must otherwise meet the definition of 

‘‘exchange.’’ 

44See generally Sections 5, 6, and 19 of the 

Exchange Act, 15 U.S.C. 78e, 78f, and 78s. 

45See 15 U.S.C. 78e. 

whether a trading platform meets the 

definition of exchange, and if so, 

triggers the requirement to register as a 

national securities exchange pursuant to 

Section 5 of the Exchange Act 30 and 

comply with the requirements 

applicable to exchanges. Under Rule 

3b–16(a), ‘‘an organization, association, 

or group of persons shall be considered 

to constitute, maintain, or provide ‘a 

market place or facilities for bringing 

together purchasers and sellers of 

securities or for otherwise performing 

with respect to securities the functions 

commonly performed by a stock 

exchange,’ if such organization, 

association, or group of persons: (1) 

Brings together the orders for securities 

of multiple buyers and sellers; and (2) 

uses established, non-discretionary 

methods (whether by providing a 

trading facility or by setting rules) under 

which such orders interact with each 

other, and the buyers and sellers 

entering such orders agree to the terms 

of a trade.’’ 31 Exchange Act Rule 3b– 

16(b) explicitly excluded certain 

systems that the Commission believed 

were not exchanges.32 Accordingly, a 

system is not included in the 

Commission’s interpretation of 

‘‘exchange’’ if: (1) The system fails to 

meet the two-part test in paragraph (a) 

of Rule 3b–16; (2) the system falls 

within one of the exclusions in 

paragraph (b) of Rule 3b–16; or (3) the 

Commission otherwise conditionally or 

unconditionally exempts 33 the system 

from the definition. 

Section 5 of the Exchange Act 34

requires an organization, association, or 

group of persons that meets the 

definition of ‘‘exchange’’ under Section 

3(a)(1) of the Exchange Act,35 unless 

otherwise exempt, to register with the 

Commission as a national securities 

exchange pursuant to Section 6 of the 

Exchange Act.36 Registered national 

securities exchanges are also SROs,37

and must comply with regulatory 

requirements applicable to both national 

securities exchanges and SROs.38 Before 

a national securities exchange may 

commence operations, the Commission 

must approve the national securities 

exchange’s application for registration 

filed on Form 1. Section 6(b) of the 

Exchange Act requires, among other 

things, that the national securities 

exchange be so organized and have the 

capacity to carry out the purposes of the 

Exchange Act and to comply, and 

enforce compliance by its members and 

persons associated with its members, 

with the federal securities laws and the 

rules of the exchange.39 Both a national 

securities exchange’s registration 

application and the Commission’s order 

approving the application are public. 

After registering, a national securities 

exchange must file with the 

Commission any proposed changes to 

its rules.40 The initial application on 

Form 1, amendments thereto, and filings 

for proposed rule changes, in 

combination, publicly disclose 

important information about national 

securities exchanges, such as the trading 

services they offer and fees they charge 

for those services. 

Exchange Act Rule 3a1–1(a)(2) 41

exempts from the Exchange Act Section 

3(a)(1) definition of ‘‘exchange’’ an 

organization, association, or group of 

persons that complies with Regulation 

ATS,42 which requires, among other 

things, meeting the definition of an ATS 

and registering as a broker-dealer.43 As 

a result of the exemption, an 

organization, association, or group of 

persons that meets the definition of an 

exchange and complies with Regulation 

ATS is not required by Section 5 of the 

Exchange Act to register as a national 

securities exchange pursuant to Section 

6 of the Exchange Act, is not an SRO, 

and, therefore, is not required to comply 

with regulatory requirements applicable 

to national securities exchanges and 

SROs.44 An ATS that fails to comply 

with the requirements of Regulation 

ATS would no longer qualify for the 

exemption provided under Rule 3a1– 

1(a)(2), and thus, risks operating as an 

unregistered exchange in violation of 

Section 5 of the Exchange Act.45

C. Conditions to the ATS Exemption; 

Confidential Notice Regime 

Rule 300(a) of Regulation ATS defines 

an ATS as: ‘‘any organization, 

association, person, group of persons, or 


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46See 17 CFR 242.300(a). 47See Regulation ATS Adopting Release, supra 

note 3, at 70859. As we noted when we adopted 

Regulation ATS, any system that uses its market 

power to regulate its participants should be 

regulated as an SRO. We stated that it would 

consider a trading system to be ‘‘governing the 

conduct of subscribers’’ outside the trading system 

if it imposed on subscribers, as conditions of 

participation in trading, any requirements for which 

the trading system had to examine subscribers for 

compliance. In addition, we stated our belief that 

if a trading system imposed as conditions of 

participation, directly or indirectly, restrictions on 

subscribers’ activities outside of the trading system, 

such a trading system should be a registered 

exchange or operated by a national securities 

association, but that the limitation would not 

preclude an ATS from imposing credit conditions 

on subscribers or requiring subscribers to submit 

financial information to the ATS. See id. 

48See id. 

49Pursuant to Rule 301(a), certain ATSs that are 

subject to other appropriate regulations are not 

required to comply with Regulation ATS. These 

ATSs include those that are: Registered as a 

national securities exchange under Section 6 of the 

Exchange Act; exempt from national securities 

exchange registration based on the limited volume 

of transactions effected; operated by a national 

securities association; Registered as a broker-dealer 

under Sections 15(b) or 15C of the Exchange Act, 

or are banks, that limits their activities to certain 

instruments; or exempted, conditionally or 

unconditionally, by Commission order, after 

application by such ATS. See 17 CFR 242.301(a). 

50See 17 CFR 242.301(b)(1). 

51Section 15(b)(8) of the Exchange Act requires 

a broker or dealer to become a member of a 

registered national securities association, unless it 

effects transactions in securities solely on an 

exchange of which it is a member. 15 U.S.C. 

78o(b)(8). See also Regulation ATS Adopting 

Release, supra note 3, at 70903 (discussing some of 

the regulatory obligations of registered brokerdealers, such as membership in an SRO and 

compliance with that SRO’s rules). For example, a 

broker-dealer that is a FINRA member must file an 

application for approval of a material change to its 

business operations (as defined in FINRA Rule 

1011(k)). See FINRA Rule 1017(a). Among other 

obligations, a broker-dealer operator of an NMS 

Stock ATS that is a FINRA member is subject to 

trade reporting requirements pursuant to FINRA 

rules. See, e.g., supra note 15 (discussing FINRA 

trade reporting requirements applicable to NMS 

Stock ATSs). 

52Form ATS and the Form ATS Instructions are 

available at http://www.sec.gov/about/forms/ 

formats.pdf. 

53See 17 CFR 242.301(b)(2)(i). The Commission 

stated in the Regulation ATS Adopting Release that 

Form ATS would provide the Commission the 

opportunity to identify problems that might impact 

investors before the system begins to operate. See 

Regulation ATS Adopting Release, supra note 3, at 

70864; Proposal, supra note 2, at 81005 n.70 and 

accompanying text. Unlike a Form 1 filed by a 

national securities exchange, Form ATS is not 

approved by the Commission. Instead, Form ATS 

provides the Commission with notice about an 

ATS’s operations prior to commencing operations. 

See Regulation ATS Adopting Release, supra note 

3, at 70864. 

54See Proposal, supra note 2, at 81005. 

55 17 CFR 242.301(b)(2)(vii). See Form ATS. 

56As we noted in the Proposal, some ATSs may 

currently make voluntary public disclosures. See 

Proposal, supra note 2, at 81011, n.156. See also 

infra note 559 and accompanying text (discussing 

comments regarding voluntary postings of Form 

ATS by NMS Stock ATSs). 

57Form ATS is used for three types of 

submissions: Initial operation reports; amendments 

to initial operation reports; and cessation of 

operations reports. An ATS designates the type of 

submission on the form. See Form ATS. 

58See 17 CFR 242.301(b)(2)(ii). A ‘‘material 

change,’’ includes, but is not limited to, any change 

to the operating platform, the types of securities 

traded, or the types of subscribers. In addition, the 

Commission has stated that ATSs implicitly make 

materiality decisions in determining when to notify 

their subscribers of changes. See Regulation ATS 

Adopting Release, supra note 3, at 70864. See also 

infra Section IV.B.1.a.ii (discussing the materiality 

standard that would apply to the filing of 

amendments on Form ATS–N). 

59See 17 CFR 242.301(b)(2)(iii). 

60See 17 CFR 242.301(b)(2)(iv). 

61See 17 CFR 242.301(b)(2)(v). 

62See Regulation ATS Adopting Release, supra 

note 3, at 70864. 

63See 17 CFR 242.301(b)(2)(vii); Form ATS at 3, 

General Instructions A.7. Under the final rules, 

NMS Stock ATSs that trade only NMS stocks will 

not be required to file Form ATS in accordance 

with Rules 301(b)(2)(i) through (vii), but instead 

will be required to comply with the requirements 

of new Rule 304 and file Form ATS–N. See infra 

Section III.B.4. See also infra Sections IV.A, B, and 

C. 

system: (1) [t]hat constitutes, maintains, 

or provides a market place or facilities 

for bringing together purchasers and 

sellers of securities or for otherwise 

performing with respect to securities the 

functions commonly performed by a 

stock exchange within the meaning of 

[Rule 3b–16]; and (2) [t]hat does not: (i) 

[s]et rules governing the conduct of 

subscribers other than the conduct of 

such subscribers’ trading on such 

organization, association, person, group 

of persons, or system; or (ii) [d]iscipline 

subscribers other than by exclusion 

from trading.’’ 46 Governing the conduct 

of or disciplining subscribers are 

functions performed by an SRO that we 

believe should be regulated as such.47

Accordingly, pursuant to the definition 

in Rule 300(a), a trading system that 

performs SRO functions, or performs 

functions common to national securities 

exchanges, such as establishing listing 

standards, is precluded from the 

definition of ATS and would be 

required to register as a national 

securities exchange or be operated by a 

national securities association (or seek 

another exemption).48

Rule 301(b)(1) of Regulation ATS 

requires that every ATS that is subject 

to Regulation ATS, pursuant to 

paragraph (a) of Rule 301,49 be 

registered as a broker-dealer under 

Section 15 of the Exchange Act.50 As a 

registered broker-dealer, an ATS must 

also, in addition to complying with 

Regulation ATS, comply with brokerdealer filing and conduct obligations, 

including becoming a member of an 

SRO, such as the Financial Industry 

Regulatory Authority (‘‘FINRA’’), and 

comply with SRO rules.51 An ATS must 

also comply with Rule 301(b)(2) of 

Regulation ATS, which currently 

requires all ATSs to file an initial 

operation report with the Commission 

on Form ATS 52 at least 20 days before 

commencing operations.53 Form ATS 

requirements include that an ATS 

provide information about: Classes of 

subscribers and differences in access to 

the services offered by the ATS to 

different groups or classes of 

subscribers; securities the ATS expects 

to trade; any entity other than the ATS 

involved in its operations; the manner 

in which the system operates; how 

subscribers access the trading system; 

procedures governing order entry; and 

procedures governing execution, 

reporting, clearance, and settlement of 

transactions effected through the ATS.54

Regulation ATS states that information 

filed by an ATS on Form ATS is 

‘‘deemed confidential when filed’’ 55

and ATSs are not otherwise required to 

publicly disclose such information.56

ATSs must notify the Commission of 

any changes in their operations by filing 

an amendment to its Form ATS initial 

operation report. There are three types 

of amendments to an initial operation 

report.57 First, if any material change is 

made to its operations, the ATS must 

file an amendment on Form ATS at least 

20 calendar days before implementing 

such change.58 Second, if any 

information contained in the initial 

operation report becomes inaccurate for 

any reason and has not been previously 

reported to the Commission as an 

amendment on Form ATS, the ATS 

must file an amendment on Form ATS 

correcting the information within 30 

calendar days after the end of the 

calendar quarter in which the system 

has operated.59 Third, an ATS must 

promptly file an amendment on Form 

ATS correcting information that it 

previously reported on Form ATS after 

discovery that any information was 

inaccurate when filed.60 Also, upon 

ceasing to operate as an ATS, an ATS 

is required to promptly file a cessation 

of operations report on Form ATS.61 As 

is the case with respect to initial 

operation reports, Form ATS 

amendments and cessation of operations 

reports serve as notice to the 

Commission of changes to the ATS’s 

operations,62 and Rule 301(b)(2)(vii) and 

the Instructions to the form state that 

Form ATS is ‘‘deemed confidential.’’ 63

Rule 301(b)(9) of Regulation ATS also 

requires an ATS to periodically report 

certain information about transactions 

on the ATS and information about 

certain activities on Form ATS–R within 

30 calendar days after the end of each 

calendar quarter in which the market 


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64See 17 CFR 242.301(b)(9)(i). Form ATS–R and 

the Form ATS–R Instructions are available at 

https://www.sec.gov/about/forms/formats-r.pdf. In 

the Regulation ATS Adopting Release, the 

Commission stated that the information provided 

on Form ATS–R would permit the Commission to 

monitor the trading on ATSs. See Regulation ATS 

Adopting Release, supra note 3, at 70878. 

65See Form ATS–R at 4, Items 1 and 2 (describing 

the requirements for Exhibit A and Exhibit B of 

Form ATS–R). Form ATS–R also requires an ATS 

that is subject to the fair access obligations under 

Rule 301(b)(5) of Regulation ATS to provide as 

Exhibit C, a list of all persons granted, denied, or 

limited access to the ATS during the period covered 

by the Form ATS–R and designate for each person 

(a) whether it was granted, denied, or limited 

access; (b) the date the ATS took such action; (c) 

the effective date of such action; and (d) the nature 

of any denial or limitation of access. ATSs must 

also complete and file Form ATS–R within 10 

calendar days after ceasing to operate. See 17 CFR 

242.301(b)(9)(ii); Form ATS–R at 2, General 

Instructions A.2 to Form ATS–R. 

66See 17 CFR 242.301(b)(2)(vii); Form ATS–R at 

2, General Instruction A.7. 

67See generally infra Section III. See also Section 

III.B.5. 

68See 17 CFR 242.301(b)(3)(i). 

69See 17 CFR 242.301(b)(3)(ii). 

70See 17 CFR 242.301(b)(3)(iii). 

71See 17 CFR 242.301(b)(4). In addition, if the 

national securities exchange or national securities 

association to which an ATS provides the prices 

and sizes of orders under Rules 301(b)(3)(ii) and 

301(b)(3)(iii) establishes rules designed to assure 

consistency with standards for access to quotations 

displayed on such national securities exchange, or 

the market operated by such national securities 

association, the ATS shall not charge any fee to 

members that is contrary to, that is not disclosed 

in the manner required by, or that is inconsistent 

with any standard of equivalent access established 

by such rules. See id. 

72 17 CFR 242.301(b)(5)(i). 

73See 17 CFR 242.301(b)(5)(ii). Regulation ATS 

does not mandate compliance with these 

requirements when an ATS reaches the 5% trading 

threshold in an NMS stock if the following 

conditions are met: The ATS matches customer 

orders for a security with other customer orders; 

such customers’ orders are not displayed to any 

person, other than employees of the ATS; and such 

orders are executed at a price for such security 

disseminated by an effective transaction reporting 

plan, or derived from such prices. See 17 CFR 

242.301(b)(5)(iii). 

74The fair access requirements also apply for 

non-NMS stocks when an ATS reaches a 5% trading 

threshold in certain securities other than NMS 

stocks, including certain equity securities, 

municipal securities, and corporate debt securities. 

See 17 CFR 242.301(b)(5)(i). 

75See Regulation ATS Adopting Release, supra 

note 3, at 70874. 

76See Securities Exchange Act Release No. 73639 

(November 19, 2014), 79 FR 72251 (December 5, 

2014) (adopting final rules for systems compliance 

and integrity) (‘‘SCI Adopting Release’’). 

77See 17 CFR 242.301(b)(6). 

78Regulation SCI does not apply to ATSs that 

trade municipal securities or corporate debt 

securities. See SCI Adopting Release, supra note 76, 

at 72262. 

79Regulation SCI defines ‘‘SCI entity’’ to mean 

‘‘an SCI self-regulatory organization, SCI alternative 

trading system, plan processor, or exempt clearing 

agency subject to [the Commission’s Automation 

Review Policies].’’ See 17 CFR 242.1000. 

80Regulation SCI defines ‘‘SCI alternative trading 

system’’ or ‘‘SCI ATS’’ to mean an ATS, which 

during at least four of the preceding six calendar 

months: (1) Had with respect to NMS stocks (a) five 

percent (5%) or more in any single NMS stock, and 

one-quarter percent (0.25%) or more in all NMS 

stocks, of the average daily dollar volume reported 

by applicable transaction reporting plans, or (b) one 

percent (1%) or more in all NMS stocks of the 

average daily dollar volume reported by applicable 

transaction reporting plans; or (2) had with respect 

to equity securities that are not NMS stocks and for 

which transactions are reported to a self-regulatory 

organization, five percent (5%) or more of the 

average daily dollar volume as calculated by the 

self-regulatory organization to which such 

transactions are reported. However, an SCI ATS is 

not required to comply with the requirements of 

Regulation SCI until six months after satisfying the 

aforementioned criteria. See 17 CFR 242.1000. 

81See SCI Adopting Release, supra note 76, 79 FR 

at 72252. 

82See 17 CFR 242.301(b)(7). 

has operated.64 Form ATS–R requires 

quarterly volume information for 

specified categories of securities, as well 

as a list of all securities traded on the 

ATS during the quarter and a list of all 

subscribers that were participants 

during the quarter.65 As with respect to 

Form ATS, Rule 301(b)(2)(vii) and the 

instructions to Form ATS–R state that 

Form ATS–R is ‘‘deemed 

confidential.’’ 66 Under the amendments 

we are adopting, the requirements of 

Rule 301(b)(9) will continue to apply to 

all ATSs, including NMS Stock ATSs, as 

will the other requirements of 

Regulation ATS other than the Form 

ATS reporting requirements of Rule 

301(b)(2).67

Under Rule 301(b)(3), an ATS that (1) 

displays subscriber orders in an NMS 

stock to any person (other than an 

employee of the ATS) and (2) during at 

least four of the preceding six calendar 

months, had an average daily trading 

volume of 5% or more of the aggregate 

average daily share volume for that 

NMS stock, as reported by an effective 

transaction reporting plan, must comply 

with certain order display and 

execution access obligations.68 An ATS 

that meets these criteria must comply 

with Rule 301(b)(3)(ii), which requires 

the ATS to provide to a national 

securities exchange or national 

securities association (each an SRO), for 

inclusion in the quotation data made 

available by the SRO to vendors, the 

prices and sizes of its orders at the 

highest buy price and lowest sell price 

for that NMS stock that are displayed to 

more than one subscriber.69 An ATS 

that meets the volume threshold also is 

required to comply with Rule 

301(b)(3)(iii), which sets forth certain 

access standards regarding the orders 

that the ATS is required to provide to 

an SRO pursuant to Rule 301(b)(3)(ii).70

Under Rule 301(b)(4), an ATS must not 

charge any fee to broker-dealers that 

access the ATS through a national 

securities exchange or national 

securities association that is 

inconsistent with the equivalent access 

to the ATS that is required under Rule 

301(b)(3)(iii).71

Under Rule 301(b)(5)—and even if the 

ATS does not display subscribers’ 

orders to any person (other than an ATS 

employee)—an ATS with 5% or more of 

the average daily volume in an NMS 

stock during at least four of the 

preceding six calendar months, as 

reported by an effective transaction 

reporting plan, must: 72 Establish 

written standards for granting access to 

trading on its system; not unreasonably 

prohibit or limit any person in respect 

to access to services offered by such 

ATS by applying the above standards in 

an unfair or discriminatory manner; 

make and keep records of all grants of 

access including, for all subscribers, the 

reasons for granting such access, and all 

denials or limitations of access and 

reasons, for each applicant, for denying 

or limiting access; and report the 

information required in Exhibit C of 

Form ATS–R regarding grants, denials, 

and limitations of access.73 These 

requirements are referred to as the ‘‘fair 

access’’ requirements and apply on a 

security-by-security basis.74 A denial of 

access to a market participant after an 

ATS reaches the 5% fair access 

threshold in an NMS stock would be 

reasonable if it is based on objective 

standards.75

Prior to the Commission’s adoption of 

Regulation SCI,76 NMS Stock ATSs were 

required to comply with Rule 301(b)(6), 

which requires certain ATSs trading 

20% or more of the volume in any 

equity security or debt securities to 

comply with standards regarding the 

capacity, integrity, and security of their 

automated systems.77 Regulation SCI 

superseded and replaced Rule 

301(b)(6)’s requirements with regard to 

ATSs that trade NMS stocks and equity 

securities that are not NMS stocks 78 and 

requires SCI entities,79 including NMS 

Stock ATSs that meet the definition of 

an ‘‘SCI ATS,’’ 80 to establish written 

policies and procedures reasonably 

designed to ensure that their systems 

have levels of capacity, integrity, 

resiliency, availability, and security 

adequate to maintain their operational 

capability and promote the maintenance 

of fair and orderly markets, and that 

they operate in a manner that complies 

with the Exchange Act.81

Rule 301(b)(7) 82 requires all ATSs, 

regardless of the volume traded on their 

systems, to permit the examination and 

inspection of their premises, systems, 

and records, and cooperate with the 

examination, inspection, or 

investigation of subscribers, whether 

such examination is being conducted by 


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83See 17 CFR 242.301(b)(8). 

84See 17 CFR 242.302. 

85See 17 CFR 242.303. In the Regulation ATS 

Adopting Release, the Commission stated that these 

requirements to make, keep, and preserve records 

are necessary to create a meaningful audit trail and 

to permit surveillance and examination to help 

ensure fair and orderly markets. See Regulation 

ATS Adopting Release, supra note 3, at 70877–78. 

86See 17 CFR 242.301(b)(10)(i). 

87See 17 CFR 242.301(b)(10)(ii). 

88See 17 CFR 240.301(b)(11). 

89When we proposed Regulation ATS, we said 

that ‘‘it is important that the investing public not 

be confused about the market role [ATSs] have 

chosen to assume.’’ See Regulation ATS Proposing 

Release, supra note 7 at 23523. We expressed 

concern that ‘‘use of the term ‘exchange’ by a 

system not regulated as an exchange would be 

deceptive and could mislead investors that such 

alternative trading system is registered as a national 

securities exchange.’’ See id. 

90See, e.g., CFA Institute Letter at 2; ICI Letter at 

3; Better Markets Letter at 2; Investor Advocate 

Letter at 14; Luminex Letter at 1. 

91See, e.g., SIFMA Letter at 2; Investor Advocate 

Letter at 4; LeveL ATS Letter at 2. Other 

commenters also recognized that the role of NMS 

Stock ATSs has changed since the adoption of 

Regulation ATS. See, e.g., Schneiderman Letter at 

1; Virtu Letter at 2; UBS Letter at 1; Fidelity Letter 

at 1; ICI Letter at 2–3; STANY Letter at 2–3. 

92See, e.g., Consumer Federation of America 

Letter at 4; ICI Letter at 2; HMA Letter at 18; 

Schneiderman Letter at 1–2; Better Markets Letter 

at 2; CFA Institute Letter at 2; SIFMA Letter at 8. 

See also infra Section V.D (describing comments on 

proposed disclosures required by Form ATS–N). 

93See, e.g., CBOE Letter at 1; CFA Institute Letter 

at 3; Consumer Federation of America Letter at 2; 

ICI Letter at 3. See also Investor Advocate Letter at 

14; Luminex Letter at 1; Consumer Federation of 

America Letter at 4; UBS Letter at 5–7; AI Letter at 

2. One commenter critiques both the current 

regulatory regime for ATSs, as well as the Proposal, 

but describes issues with the lack of transparency 

and states that the Proposal represents an important 

enhancement in the oversight of ATSs. See Better 

Markets Letter at 1–2. 

94 In the Regulation ATS Adopting Release, the 

Commission recognized the potential for abuse 

involving a broker-dealer that operates an ATS and 

offers other traditional brokerage services, and 

expressed concern about the potential for the 

misuse of confidential trading information. See 

Regulation ATS Adopting Release, supra note 3, at 

70879. See also Proposal, supra note 2, at 81041– 

81042 n.367 and accompanying text. 

95See, e.g., Consumer Federation of America 

Letter at 4; LeveL ATS Letter at 3; Fidelity Letter 

at 2 n.4. See also KCG Letter at 2; Luminex Letter 

at 3–4; Liquidnet Letter at 11. 

Not all NMS Stock ATSs, however, are operated 

by multi-service broker-dealers. See, e.g., BIDS 

Letter at 1. This commenter describes itself as the 

owner and broker-dealer operator of an NMS Stock 

ATS that does not engage in any proprietary trading 

and does not have any trading affiliates. 

The rules being adopted today would not require 

a broker-dealer that operates an NMS Stock ATSs 

to limit it business only to operating the ATS. We 

believe that the Form ATS–N disclosures will 

inform market participants about the ATS-related 

activities of the broker-dealer operator and its 

affiliates that give rise to potential conflicts between 

the interests of the broker-dealer operator and 

subscribers that use the services of the NMS Stock 

ATS. See infra Sections X.D.7 (discussing the 

alternative of requiring NMS Stock ATSs to operate 

as limited purpose entities) and V.C.8 (discussing 

comments stating that the Commission should 

prohibit conflicts of interest arising from the other 

business activities of the broker-dealer operator of 

an NMS Stock ATS, and those of its affiliates, and 

the Commission’s response to those comments). 

See also HMA Letter at 3 and attachment The 

Dark Side of the Pools: What Investors Should 

Learn from Regulator’s Action, September 15, 2015, 

at 10; Investor Advocate Letter at 8; Better Markets 

Letter at 2; infra Section V.C (discussing comments 

related to disclosures about the activities of an NMS 

Stock ATS’s broker-dealer affiliate and those of its 

affiliates). 

96See, e.g., Schneiderman Letter at 2; Better 

Markets Letter at 2–3; Consumer Federation of 

America Letter at 5; and HMA Letter at 12, 16–17. 

See also CFA Institute Letter at 2; Fidelity Letter at 

4; Investor Advocate Letter at 5; Citadel Letter at 1– 

7. 

One commenter, however, observes that in the 

recent settlements cited in the Proposal, there were 

conflicts of interest related to commercial 

relationships that had nothing to do with affiliates, 

and believes that all differential treatment of 

subscribers should be disclosed and recommends 

limiting disclosures regarding affiliate 

relationships. See Markit Letter at 8. Under the 

requirements we are adopting today, NMS Stock 

ATSs must disclose on Form ATS–N differences in 

treatment of subscribers and the broker-dealer 

operator and affiliate, and we have, in response to 

commenters, revised questions of Form ATS–N to 

narrow the scope of information related to affiliates 

to be disclosed. See infra Sections V.C and D. 

See also Proposal, supra note 2, at 81042–81043 

n.374 (citing prior settled enforcement actions 

against ATSs that trade NMS stocks). Since the 

Proposal, we have entered additional settlements 

Continued 

the Commission or by an SRO of which 

such subscriber is a member. Rule 

301(b)(8) 83 requires all ATSs to make 

and keep current the records specified 

in Rule 302 of Regulation ATS 84 and 

preserve the records specified in Rule 

303 of Regulation ATS.85

Under Rule 301(b)(10), all ATSs must 

establish adequate safeguards and 

procedures to protect subscribers’ 

confidential trading information, which 

includes limiting access to the 

confidential trading information of 

subscribers to those employees of the 

ATS who are operating the system or 

responsible for its compliance with 

Regulation ATS or any other applicable 

rules; and implementing standards 

controlling employees of the ATS 

trading for their own accounts.86

Furthermore, all ATSs must adopt 

and implement adequate oversight 

procedures to ensure that the above 

safeguards and procedures are 

followed.87 Finally, Rule 301(b)(11) 88

expressly prohibits any ATS from using 

the word ‘‘exchange’’ or derivations of 

the word ‘‘exchange,’’ such as the term 

‘‘stock market,’’ in its name.89

D. Concerns Regarding the Lack of 

Operational Transparency 

Despite their role in the equity 

markets and complexity of their 

operations, NMS Stock ATSs are not 

required under Regulation ATS to 

publicly disclose information about 

their operations. We are concerned that 

little information is widely available to 

market participants about NMS Stock 

ATSs, and that the lack of, or 

differential access to, information about 

operations of NMS Stock ATSs inhibits 

the ability of market participants to 

assess NMS Stock ATSs as potential 

trading venues. These concerns are 

shared by several commenters.90

Commenters also concur with our belief 

that NMS Stock ATSs today play a 

significant role in equity market 

structure, and that their role has 

changed since Regulation ATS was 

adopted in 1998.91 In addition, 

commenters reinforce our belief that 

NMS Stock ATSs have become more 

operationally complex, that the 

potential for conflicts of interest has 

risen as a result of that complexity, and 

that the conditions to the exemption for 

NMS Stock ATSs should be modified.92

Commenters also express concern about 

the lack of operational transparency for 

NMS Stock ATSs.93 Given the 

complexities of NMS Stock ATS 

operations, the lack of information 

about the ATS’s order types, priority 

rules, segmentation procedures, use of 

market data, and fees, for example, may 

impede the ability of market 

participants to adequately understand 

how their orders in NMS stocks would 

interact, match, and execute. 

We are also concerned that the lack of 

available information about the ATSrelated activities of the broker-dealer 

operator and its affiliates may hinder 

the ability of market participants to 

evaluate potential conflicts of interest, 

and thus limit their ability to protect 

their interests. Because of overlap 

between a broker-dealer’s ATS 

operations and its other operations, 

there is a risk of information leakage of 

subscribers’ confidential trading 

information to other business units of 

the broker-dealer operator or its 

affiliates.94 Several commenters 

describe NMS Stock ATS operational 

structures that exemplify the kinds of 

relationships about which the 

Commission expressed concern, or 

otherwise reinforce our belief that the 

complex relationship between an NMS 

Stock ATS and its broker-dealer 

operator, or its affiliates, creates 

potential conflicts of interest.95 Further, 

in recognizing the current potential for 

conflicts of interest that exist as a result 

of the complexity of the operations of 

NMS Stock ATSs, the relationship many 

have with their broker-dealer operator 

or its affiliates, and the lack of 

transparency about those operations and 

potential conflicts, many commenters 

also highlight recent enforcement 

actions brought by the Commission.96


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regarding NMS Stock ATSs. See In the Matter of 

Barclays Capital Inc., Securities Exchange Act 

Release No. 77001 (Jan. 31, 2016), https://

www.sec.gov/litigation/admin/2016/33-10010.pdf 

(order instituting administrative and cease-anddesist proceedings, making findings, and imposing 

remedial sanctions and a cease-and-desist order); In 

the Matter of Credit Suisse Securities (USA) LLC, 

Securities Act Release No. 77002 (Jan. 31, 2016), 

https://www.sec.gov/litigation/admin/2016/33- 

10013.pdf (order instituting administrative and 

cease-and-desist proceedings, making findings, and 

imposing remedial sanctions and a cease-and-desist 

order) (‘‘Crossfinder Settlement’’); In the Matter of 

Credit Suisse Securities (USA) LLC, Securities Act 

Release No. 77003 (Jan. 31, 2016), https://

www.sec.gov/litigation/admin/2016/33-10014.pdf 

(order instituting administrative and cease-anddesist proceedings, making findings, and imposing 

remedial sanctions and a cease-and-desist order); In 

the Matter of Deutsche Bank Securities Inc., 

Securities Exchange Act Release No. 79576 (Dec. 

16, 2016), https://www.sec.gov/litigation/admin/ 

2016/33-10272.pdf (order instituting administrative 

and cease-and-desist proceedings, making findings, 

and imposing remedial sanctions and a cease-anddesist order). 

97See infra notes 34–40 and accompanying text 

(discussing the regulatory framework applicable to 

national securities exchanges, including that 

national securities exchanges are self-regulatory 

organizations (‘‘SROs’’)). See also Regulation ATS 

Adopting Release, supra note 3; infra Section II.B 

(discussing the current requirements of Regulation 

ATS applicable to all ATSs). 

98See Proposal, supra note 2, at 81042 n.372 and 

accompanying text. 

99See 15 U.S.C. 78s(b). 

100See id. 

101See Proposal, supra note 2, at 81010. 

102See id. at 81042. We believe that to 

understand the operations of an NMS Stock ATS, 

it is necessary to understand the relationship and 

interactions between the NMS Stock ATS and its 

registered broker-dealer operator as well as the 

relationship and interactions between the NMS 

Stock ATS and the affiliates of its broker-dealer 

operator. 

103 17 CFR 240.3a1–1(a)(2). 

104 In Exchange Act Rules 3a1–1(a)(2) and (3), 

Regulation ATS is currently defined as ‘‘17 CFR 

242.300 through 242.303.’’ We are amending the 

references to Regulation ATS to define Regulation 

ATS as ‘‘17 CFR 242.300 through 242.304.’’ We also 

proposed conforming Rule 3a1–1(a)(3) by changing 

the reference to Rule 303 to Rule 304 to make clear 

that an NMS Stock ATS that meets the requirements 

of Rule 301(a) is not required to comply with 

Regulation ATS, which would be amended to 

include proposed Rule 304. No changes were 

proposed to Rule 3a1–1(a)(1), which exempts any 

ATS that is operated by a national securities 

association. 

105Proposed Rule 304(a) provided that, unless not 

required to comply with Regulation ATS pursuant 

to Rule 301(a) of Regulation ATS, an NMS Stock 

ATS must comply with Rules 300 through 304 of 

Regulation ATS (except Rule 301(b)(2)) to be 

exempt from the definition of an ‘‘exchange’’ 

pursuant to Exchange Act Rule 3a1–1(a)(2). We are 

adopting proposed Rule 304(a) with certain 

modifications. As adopted, Rule 304(a) will state, 

‘‘[u]nless not required to comply with Regulation 

ATS pursuant to § 242.301(a), an NMS Stock ATS 

must comply with §§ 242.300 through 242.304 

(except §§ 242.301(b)(2)(i) through (vii)) to be 

exempt pursuant to § 240.3a-1(a)(2)’’ (emphasis 

added). The adopted rule text specifies the 

subparagraphs of Rule 301(b)(2) with which an 

NMS Stock ATS would not be required to comply. 

We believe that specifying the applicable 

subsections of Rule 301(b)(2) provides greater 

clarity, because Rule 301(b)(2)(viii) will apply to 

NMS Stock ATSs that also trade non-NMS stocks. 

The reference to Rule 301(b)(2) in the proposed rule 

text could be confusing to market participants 

because it does not make clear that Rule 

301(b)(2)(viii) applies to certain NMS Stock ATSs. 

We believe that the added specificity in the adopted 

rule clarifies that only Rules 301(b)(2)(i) through 

(vii) will not be applicable to NMS Stock ATSs. See 

infra Section III.B.4. In addition, to reduce any 

potential ambiguity and improve readability, the 

adopted rule text deletes the language that states 

that the NMS Stock ATS would need to comply 

with the requirements to be exempt ‘‘from the 

definition of an ‘exchange’’’ pursuant to Exchange 

Act Rule 3a1–1(a)(2). 

NMS Stock ATSs, which meet the 

definition of ‘‘exchange’’ but are not 

required to register with the 

Commission as national securities 

exchanges, compete with national 

securities exchanges and operate with 

similar complexity. Unlike national 

securities exchanges, NMS Stock ATSs 

are not required to, among other things, 

publicly disclose their operations and 

fees.97 In addition, because we review 

the rules of national securities 

exchanges, a process which requires, 

among other things, that to approve 

certain rule changes, the Commission 

find 98 that the national securities 

exchange’s proposed rule changes are 

consistent with the Exchange Act,99

each existing national securities 

exchange has implemented rules that 

restrict affiliation between the national 

securities exchange and its members to 

mitigate the potential for conflicts of 

interest. We believe that the regulatory 

differences between NMS Stock ATSs 

and national securities exchanges with 

regard to disclosure obligations may 

create a competitive imbalance between 

two functionally similar trading centers 

that trade the same security. 

Transparency has long been a 

hallmark of the U.S. securities markets, 

and is one of the primary tools used by 

investors to protect their interests.100

We believe that one of the most 

important functions the Commission 

can perform for investors is to ensure 

that they have access to the information 

they need to protect and further their 

own interests.101 The amendments that 

we are adopting to Regulation ATS and 

Exchange Act Rule 3a1–1 are designed 

to address the concerns identified above 

and provide benefits to a wide range of 

market participants. Public disclosures 

on Form ATS–N will provide market 

participants with information about the 

operations of an NMS Stock ATS, which 

they can use to understand how orders 

interact, match, and execute in an NMS 

Stock ATS and compare to other NMS 

Stock ATSs and national securities 

exchanges. Form ATS–N will also 

provide the public with information 

about the ATS-related activities of the 

broker-dealer operator and its affiliates, 

which can be used by market 

participants to assess potential conflicts 

of interest and information leakage.102

Collectively, the Form ATS–N public 

disclosures will allow market 

participants to better evaluate an NMS 

Stock ATS as a potential trading 

destination for their orders and help 

them better protect their interests. The 

Form ATS–N public disclosures are also 

designed, in part, to bring the 

operational transparency requirements 

for NMS Stock ATSs more in line with 

the requirements for national securities 

exchanges. Finally, we believe that our 

process for reviewing Form ATS–N 

filings, which provides for Commission 

review of disclosures for compliance 

with the requirements of Rule 304 and 

Form ATS–N, and a potential 

declaration of ineffectiveness of a Form 

ATS–N, after notice and opportunity for 

hearing, will facilitate better 

Commission oversight of NMS Stock 

ATSs and thus, better protection of 

investors. 

III. Heightened Regulatory 

Requirements for NMS Stock ATSs 

A. Exchange Act Rule 3a1–1(a) 

Exemption: New Conditions for NMS 

Stock ATSs 

ATSs that trade NMS stocks operate 

pursuant to the exemption provided by 

Exchange Act Rule 3a1–1(a)(2), which 

exempts from the definition of an 

‘‘exchange’’ any ATS that complies with 

Rules 300 through 303 of Regulation 

ATS.103 Given our concerns regarding 

the lack of public transparency around 

the operations of NMS Stock ATSs and 

the ATS-related activities of the brokerdealer operator and its affiliates, we 

proposed to expand the conditions of 

the Rule 3a1–1(a)(2) exemption to 

enhance operational transparency and 

oversight for these ATSs. We are 

adopting this requirement as 

proposed.104 We proposed to require 

NMS Stock ATSs to comply with 

proposed Rule 304, in addition to 

existing Rules 300 through 303 of 

Regulation ATS (except Rule 301(b)(2)), 

to be eligible for the exemption.105

Proposed Rule 304(a)(1)(i) set forth two 

new fundamental conditions to the Rule 

3a1–1(a)(2) exemption: (1) An NMS 

Stock ATS must file Form ATS–N with 

the Commission (instead of the current 

Form ATS), and (2) the Commission 

must declare the Form ATS–N effective 

before the NMS Stock ATS can operate 

pursuant to the exemption. Adopted 

Rule 304(a)(1)(i) deletes the proposed 

condition that the Commission declare 

the Form ATS–N effective, and provides 

that the Form ATS–N must be effective 


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106See infra Section IV.A.3. 

107 In Exchange Act Rules 3a1–1(a)(2) and (3), 

Regulation ATS is currently defined as ‘‘17 CFR 

242.300 through 242.303.’’ We proposed amending 

these references to Regulation ATS to define 

Regulation ATS as ‘‘17 CFR 242.300 through 

242.304.’’ We also proposed conforming Rule 3a1– 

1(a)(3) by changing the reference to Rule 303 to 

final Rule 304 to make clear that an NMS Stock ATS 

that meets the requirements of Rule 301(a) is not 

required to comply with Regulation ATS, which 

would be amended to include proposed Rule 304. 

No changes were proposed to Rule 3a1–1(a)(1), 

which exempts any ATS that is operated by a 

national securities association. 

108See SIFMA Letter at 2; Barnard Letter at Public 

comment on IOSCO’s Consultation Report on Issues 

Raised by Dark Liquidity; Anonymous Letter at 1; 

Luminex Letter at 1; MFA/AIMA Letter at 1–2; 

Fidelity Letter at 1; UBS Letter at 1; Markit Letter 

at 3–4; Schneiderman Letter at 1; ICI Letter at 3; 

CFA Institute Letter at 3, 6; CBOE Letter at 1; KCG 

Letter at 1; PDQ Letter at 1; STA Letter at 2; 

Liquidnet Letter at 1; STANY Letter at 1; FINRA 

Letter at 1; HMA Letter at 1, 5; Citadel Letter at 1; 

Better Markets Letter at 3–4; BIDS Letter at 1–2; 

SSGA Letter at 2; T. Rowe Price Letter at 1; AI Letter 

at 2–3; Consumer Federation of America Letter at 

4; Morgan Stanley Letter at 1; Investor Advocate 

Letter at 2, 6; LeveL ATS Letter at 1; Virtu Letter 

at 2; MFA Letter 2 at 30. But see Morgan Stanley 

Letter at 1, 3 (stating that it is important to balance 

public disclosure with disclosure more suitable for 

the Commission (see discussion below and infra 

note 150 and accompanying text); that certain 

disclosure requirements, such as any disclosure 

around broker trading infrastructure and order 

handling practices beyond ATS operations, should 

apply to all brokers (see discussion infra note 217– 

218and accompanying text and infra Section 

III.A.2); and that the Proposal treats all ATSs like 

exchanges and fails to account for distinct ATS 

models (see discussion below and infra note 176 

and accompanying text)). One commenter 

commented only on whether the Proposal should 

apply to ATSs that trade only fixed-income 

securities. See MarketAxcess Letter; infra Section 

III.A.2. 109See generally Virtu Letter; T. Rowe Price 

Letter; Schneiderman Letter; ICI Letter; MFA/AIMA 

Letter; Consumer Federation of America Letter; 

CBOE Letter; Citadel Letter; Anonymous Letter; 

Better Markets Letter; Investor Advocate Letter. See 

also CFA Institute Letter at 6; SIFMA Letter at 3. 110See SIFMA Letter at 3; Virtu Letter at 2; T. 

Rowe Price at 1; Schneiderman Letter at 1; MFA/ 

AIMA Letter at 2; MFA Letter 2 at 30; CBOE Letter 

at 1; Citadel Letter at 1; Consumer Federation of 

America Letter at 6; CFA Institute Letter at 3; 

Anonymous Letter at 1; KCG Letter at 3; Morgan 

Stanley Letter at 1; Investor Advocate Letter at 6; 

Better Markets Letter at 1. 

111See ICI Letter at 4–6; Consumer Federation of 

America Letter at 6; CFA Institute Letter at 3; 

Citadel Letter at 3; KCG Letter at 3; STA Letter at 

2; MFA/AIMA Letter at 4; CBOE Letter at 1; Investor 

Advocate Letter at 2, 8. 

112See Luminex Letter at 1; Fidelity Letter at 1; 

SSGA Letter at 2; KCG Letter at 1; Citadel Letter at 

1; ICI Letter at 3; STA Letter at 2; Schneiderman 

Letter at 2; Consumer Federation of America Letter 

at 6; Investor Advocate Letter at 11. 

113See Luminex Letter at 1. 

114See STA Letter at 2; Consumer Federation of 

America Letter at 6; Investor Advocate Letter at 3, 

11–12. 

115See Citadel Letter at 1. 

116See Investor Advocate Letter at 12. 

117See CBOE Letter at 1. 118 Id. 119See infra Section X.B.6 (discussing the effects 

of NMS Stock ATSs on the market for NMS stock 

execution services, including fragmentation). 120See infra Section X.C (discussing the expected 

economic effects of today’s rulemaking, as well as 

its expected effects on efficiency, competition, and 

capital formation). 

121See STA Letter at 2. 

122See CFA Institute Letter at 3; Schneiderman 

Letter at 2; Investor Advocate Letter at 11–12. 

123See Investor Advocate Letter at 11, 12. 

pursuant to Rule 304(a)(1)(iii) or Rule 

304(a)(1)(iv)(A). Adopted Rule 

304(a)(1)(iii) has been modified to 

provide that Form ATS–N will become 

effective if the Commission does not 

otherwise declare Form ATS–N 

ineffective—the Commission will not be 

declaring Form ATS–N filings 

effective.106

We proposed to amend Rules 3a1– 

1(a)(2) and (3) to require compliance 

with proposed Rule 304 as a condition 

to operating pursuant to the Rule 3a1– 

1(a)(2) exemption.107 We received 

several comments on the proposal to 

expand the conditions of the Rule 3a1– 

1(a)(2) exemption for NMS Stock ATSs 

and require these ATSs to comply with 

Rule 304. We also received comments 

on the application of the Proposal to 

ATSs that trade securities other than 

NMS stocks, and, specifically, requiring 

these types of ATSs to file a Form ATS– 

N and operate pursuant to the 

effectiveness process. Both sets of 

comments are discussed below. 

1. Comments on the Rule 304 

Requirements; Effectiveness 

Nearly all commenters agree with our 

stated goal of enhancing operational 

transparency for NMS Stock ATSs.108

Several commenters agree that the 

Commission should adopt the 

heightened disclosure requirements of 

proposed Rule 304.109 In particular, 

several commenters support enhancing 

the disclosure and oversight regime for 

NMS Stock ATSs as progress toward 

increasing operational transparency in 

NMS Stock ATSs.110 Specifically, some 

commenters express support for NMS 

Stock ATSs to file Form ATS–N as a 

tool to improve transparency.111 Several 

commenters assert that more 

transparency regarding ATS operations 

could help market participants evaluate 

and compare trading venues so they can 

determine where to route orders.112 One 

commenter states that ‘‘it is good for 

investors to have access to information 

on how their orders are handled and 

with whom they are dealing.’’ 113

Several commenters believe that making 

Form ATS–N filings public would 

encourage competition among trading 

venues,114 and one commenter asserts 

that the proposed transparency 

requirements could reduce competitive 

imbalances between NMS Stock ATSs 

and national securities exchanges.115

With respect to the Commission’s 

effectiveness determination for Form 

ATS–N, another commenter states that 

‘‘given the level of competition between 

exchanges and NMS Stock ATSs, this 

effectiveness determination would 

better align the Commission’s oversight 

among different types of trading 

venues.’’ 116 One commenter, however, 

believes that ATSs do not add sufficient 

value to offset the regulatory inequity 

and market fragmentation they have 

created.117 This commenter also states 

that the Proposal represents 

‘‘meaningful progress in the effort to 

increase the operational transparency of 

NMS Stock ATSs.’’ 118 The Proposal was 

not designed to eliminate the exemption 

from the definition of exchange that is 

currently available to all ATSs, 

including NMS Stock ATSs. We believe 

that NMS Stock ATSs play a significant 

role in equity market structure and 

provide market participants with a 

variety of trading models to facilitate the 

interaction and execution of orders in 

NMS stocks. 

We believe that the current market for 

NMS stock execution services, 

consisting of national securities 

exchanges, NMS Stock ATSs, and other 

off-exchange venues, has resulted in an 

improvement to market efficiency.119

The changes to the requirements for 

NMS Stock ATSs that we are adopting 

today will increase operational 

transparency for these ATSs, bringing it 

more in line with the operational 

transparency for national securities 

exchanges, while continuing to 

recognize the difference in the business 

structure of ATSs as registered brokerdealers. We also believe that while the 

rules adopted today will increase the 

regulatory burden for NMS Stock ATSs 

and could result in some NMS Stock 

ATSs electing to no longer operate as an 

ATS, those NMS Stock ATSs that 

remain may compete more heavily with 

each other and with national securities 

exchanges, which could ultimately 

result in improvements to efficiency and 

capital formation.120

Another commenter believes that 

increased disclosure will aid in 

developing industry-based standards.121

Three commenters state that increased 

disclosure will boost investor 

confidence,122 and according to one of 

these commenters, increased 

transparency and investor confidence 

could lead to more investors using NMS 

Stock ATSs, and result in greater price 

discovery and lower costs of capital 

formation.123

We believe that a wide range of 

market participants will benefit from the 

enhanced operational transparency, 


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124See Citadel Letter at 1; Consumer Federation 

of America Letter at 6; HMA Letter at 10; Luminex 

at 1; SIFMA Letter at 35. 

125See SSGA Letter at 2. 

126See ICI Letter at 3. 

127See, e.g., Proposal, supra note 2, at 81002 n.36 

and accompanying text, 81013 n.187 and 

accompanying text (discussing that the Consumer 

Federation of America previously commented that 

Form ATS should require ATSs to provide ‘‘critical 

details about an ATS’s participants, segmentation, 

and fee structure’’ because the ‘‘information will 

allow market participants, regulators, and third 

party analysts to assess whether an ATS’s terms of 

access and service are such that it makes sense to 

trade on that venue’’). 

128See Luminex Letter at 2–3; PDQ Letter at 2; 

Fidelity Letter at 5; STANY Letter at 3; Morgan 

Stanley Letter at 2. 

129See Fidelity Letter at 5; STANY Letter at 3. 

130See infra Sections X.C.1 and X.C.2. We have 

considered any additional burden that may result 

from completion of Form ATS–N and the benefits 

of the additional information that will be made 

available to market participants by requiring NMS 

Stock ATSs to file Form ATS–N, and making Form 

ATS–N public. See id. 

131For example, we have narrowed a request for 

information regarding trading by affiliates of the 

broker-dealer operator on the NMS Stock ATS by 

requiring only the disclosures of affiliates that can 

enter or direct the entry of orders and trading 

interest into the ATS. See infra Section V.C.1. We 

are not requiring NMS Stock ATSs to provide 

proposed Exhibit 1 to Form ATS–N. See infra 

Section V.B.2. Exhibit 1 would have required that 

NMS Stock ATSs provide a copy of any materials 

currently provided to subscribers or other persons 

related to the operations of the ATS or the 

disclosures on Form ATS–N, such as frequently 

asked questions, manuals, and marketing materials. 

132See infra Section V.C. 

133See infra Section X.C.4. 

134See Consumer Federation of America Letter at 

3. 

135See id. 

136See Investor Advocate Letter at 8. 

137See Morgan Stanley Letter at 1. 

138See Proposal, supra note 2, at 81011. 

139See Luminex Letter at 2–3; STANY Letter at 

3. 

140See STANY Letter at 3; PDQ Letter at 2; 

Fidelity Letter at 5. 

141See STANY Letter at 3. 

including, for example, fund managers 

and the many brokers that subscribe to 

NMS Stock ATSs and route their orders, 

and those of their customers, to NMS 

Stock ATSs for execution. Five 

commenters observe, for example, that 

more transparency regarding ATS 

operations could assist market 

participants in achieving best 

execution.124 One commenter states that 

disclosure of material aspects of ATS 

operations that allow market 

participants to weigh the costs and 

benefits of venues is ‘‘particularly 

important for asset managers who are 

acting in a fiduciary capacity.’’ 125

Another commenter believes that 

making Form ATS–N filings publicly 

available would provide a ‘‘valuable 

tool for funds to use to assess NMS 

Stock ATSs, make informed routing 

decisions, and evaluate the performance 

of their brokers.’’ 126

We believe that the information 

disclosed on Form ATS–N will help 

brokers meet their best execution 

obligations to their customers, as they 

should be better able to assess the 

trading venues to which they route 

orders.127 We also believe that asset 

managers and institutional investors, 

who subscribe to an NMS Stock ATS or 

whose orders may be routed to an NMS 

Stock ATS by their brokers, should have 

more information about how NMS Stock 

ATSs operate, including how orders and 

trading interest of the institutional 

investor may be displayed or made 

known outside the ATS. This 

information also will enable asset 

managers to better evaluate the routing 

decisions of their brokers, including 

whether their brokers routed their 

orders to a venue that best fits their 

trading interests. 

a. Comments on Form ATS–N 

Requirement 

Some commenters, however, believe 

NMS Stock ATSs should not be required 

to comply with new Rule 304 and the 

Commission should instead simply 

amend Regulation ATS to require 

making Form ATS public for NMS Stock 

ATSs.128 Two of these commenters 

assert that the Commission should 

mandate disclosure of current Form 

ATS as a first step to increase disclosure 

before considering implementing more 

burdensome disclosure requirements.129

We are not adopting commenters’ 

suggestion to make Form ATS public 

rather than requiring NMS Stock ATSs 

to comply with Rule 304 and file Form 

ATS–N. First, we believe that new Form 

ATS–N requires important additional 

disclosures that are not made under 

existing Form ATS.130 While Form 

ATS–N will require NMS Stock ATSs to 

disclose more information than Form 

ATS, in response to certain comments, 

we have reduced the burden of 

completing Form ATS–N by narrowing 

the scope of several requests for 

information and, in some cases, 

eliminating certain requests from the 

form.131 We have also simplified Form 

ATS–N to make completing and 

maintaining the form less burdensome 

and have modified questions so as not 

to solicit competitively sensitive 

information.132 We believe that Form 

ATS–N disclosures will help market 

participants compare and evaluate NMS 

Stock ATSs and make better informed 

decisions about where to route their 

orders to achieve their trading or 

investment objectives, enhance 

execution quality, and improve 

efficiency and capital allocation.133

Based on Commission staff’s 

experience reviewing disclosures made 

by ATSs on Form ATS over the past 19 

years and as discussed in the Proposal, 

we have observed that ATSs have often 

provided minimal, rudimentary, and 

summary disclosures about their 

operations on Form ATS. One 

commenter agrees with our assessment, 

stating that based on its review of 

publicly available Forms ATS, the forms 

‘‘often provide minimal and often 

generalized information’’ with respect to 

classification and segmentation of 

subscribers, means of access to the ATS, 

matching priority, order interaction, 

order types, and how the NBBO is 

calculated, and they are often missing 

‘‘critical details’’ about their 

operations.134 Further, this commenter 

states that ‘‘[r]arely do Form ATSs 

provide information relating to their fee 

structures and potential or actual 

conflicts of interest.’’ 135 According to 

another commenter, current Form ATS 

is ‘‘not adequate’’ to allow the 

Commission and market participants to 

‘‘understand how NMS Stock ATSs 

operate in today’s environment, given 

the complexity and the potential for 

significant conflicts of interest with the 

broker-dealer operator.’’ 136 In addition, 

one commenter observes that market 

participants currently receive ‘‘varying 

levels’’ of information about the 

operations of the NMS Stock ATS.137 As 

described in the Proposal,138 we believe 

that the complexity of NMS Stock ATS 

operations has increased substantially 

and in a manner that causes the current 

disclosure requirements of Form ATS to 

result in an insufficient, and 

inconsistent, level of detail about the 

operations of NMS Stock ATSs. 

Two commenters argue that a new 

Form ATS–N is unnecessary because 

most of the fundamental information 

required in Form ATS–N is currently 

covered by Form ATS.139 In addition, 

three commenters suggest that, as an 

alternative to requiring NMS Stock 

ATSs to file and make public Form 

ATS–N, we should clarify the requests 

for information on Form ATS and 

mandate that the revised Form ATS be 

made public.140 One of these 

commenters believes such an approach 

would help achieve the Commission’s 

goal of operational transparency, while 

‘‘maintaining a regulatory structure 

under which NMS Stock ATSs can 

continue to innovate.’’ 141 Even if we 

were to ‘‘clarify’’ the requests for 

information on Form ATS to 

standardize disclosures and make 

current and past Forms ATS public, 

Form ATS does not require the 


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142See id. at 4. 

143See supra notes 109–123 and accompanying 

text. 

144See infra Section V. 

145See SSGA Letter at 2; PDQ Letter at 2; Morgan 

Stanley Letter at 2. 

146See SSGA Letter at 2. See also Fidelity Letter 

at 8 (discussing that, from a due diligence 

perspective, subscribers may require NMS Stock 

ATS information). 

147See SSGA Letter at 2. See also PDQ Letter at 

2. 

148See PDQ Letter at 2. 

149See Virtu Letter at 2; Schneiderman Letter at 

1; ICI Letter at 3; Consumer Federation of America 

Letter at 6; and Citadel Letter at 1. 

150See Morgan Stanley Letter at 2 (asserting that 

‘‘standardization is the key to concise, comparable 

and meaningful information regarding ATS 

operations’’). This commenter states that while it 

supports the Proposal’s effort to mandate 

transparency, it is concerned that proposed Form 

ATS–N ‘‘will result in more subjective, narrative 

responses that will not lend themselves to side-byside comparison.’’ See id. at 1. 

151See id. at 2. 

152See Proposal, supra note 2, at 81123. See also 

infra Section V.A.1. We believe that requiring NMS 

Stock ATSs to provide only ‘‘yes’’ or ‘‘no’’ 

responses would limit ATSs, which provide diverse 

services and often operate uniquely, from 

accurately describing their operations and inhibit 

market participants from fully understanding the 

operations of the ATS or the ATS-related activities 

of the broker-dealer operator and its affiliates. See 

id. (discussing the Commission’s belief that 

narrative responses are important for market 

participants to understand the operations of NMS 

Stock ATSs given differences across ATSs, and 

provide NMS Stock ATSs with the flexibility in 

their responses). 

153See CFA Institute Letter at 3; UBS Letter at 2. 

See also KCG Letter at 1. 

disclosure of certain information that 

will be required by Form ATS–N. For 

example, Form ATS–N requires NMS 

Stock ATSs to disclose information 

about the ATS-related activities of the 

broker-dealer operator and its affiliates 

that will allow market participants to 

assess potential conflicts of interest and 

information about the NMS Stock ATS’s 

safeguards and procedures to protect 

confidential trading information. The 

disclosure requirements of Form ATS 

are not sufficient to provide market 

participants with adequate information 

about the operational complexity of 

NMS Stock ATSs and the ATS-related 

activities of the broker-dealer operator 

and its affiliates that exist today. Form 

ATS–N is designed to provide market 

participants with more robust, detailed, 

and standardized disclosures, and to 

enable market participants to better 

understand the operations of NMS Stock 

ATSs and potential conflicts of interest 

between ATS operations and the other 

ATS-related activities of the brokerdealer operator and its affiliates. 

One commenter who suggests making 

Form ATS public as an alternative to 

requiring Form ATS–N expresses 

concern that the ‘‘crippling amount of 

detail’’ required to be disclosed under 

Form ATS–N would not be useful to 

market participants.142 We do not 

believe that Form ATS–N, as modified 

from the Proposal, will require a 

‘‘crippling’’ level of detail that will only 

be useful to the Commission, and 

several commenters agree that the Form 

ATS–N disclosures would be useful for 

market participants in comparing 

trading venues and assessing conflicts of 

interest.143 While Form ATS–N will 

require NMS Stock ATSs to disclose 

more information than Form ATS, we 

have recognized commenters’ concerns 

regarding the burden of completing 

Form ATS–N by narrowing the scope of 

several requests, eliminating certain 

requests altogether, and simplifying its 

format.144

Other commenters discuss how 

market participants currently glean 

information about ATSs, and suggest 

that such methods could serve as 

alternatives to the requirements of Rule 

304, or inform the Rule 304 

requirements.145 One commenter states 

that it performs periodic due diligence 

on ATSs because it believes that as a 

fiduciary, it should only trade on 

venues or exchanges that further its 

goals of satisfying ‘‘best execution,’’ that 

protect client information, and generally 

support principles of fair access.146 This 

commenter also states that currently, 

market participants perform such due 

diligence by sending ATSs 

questionnaires.147 Similarly, another 

commenter observes that ATSs are 

incentivized to respond to these 

questionnaires to attract participants, 

and therefore, the Commission should 

not place additional disclosure burdens 

on ATSs.148 We do not believe that the 

practice of some market participants 

individually soliciting information 

about the operations of NMS Stock 

ATSs and conflicts of interest through 

questionnaires is an adequate 

alternative to Form ATS–N. We believe 

that disclosures on Form ATS–N should 

be easily accessible to all market 

participants. This is particularly 

important for NMS Stock ATSs given 

how orders in NMS stocks may be 

routed among various trading centers 

before receiving an execution. Based on 

the Commission’s experience, responses 

to questionnaires are generally 

unavailable to non-subscribers, 

including potential subscribers and 

customers of current subscribers. 

Without this information, potential 

subscribers would be unable to fully 

assess an NMS Stock ATS as a trading 

center and customers of subscribers 

would be inhibited from assessing their 

broker’s routing decisions. In addition, 

we believe, as indicated by 

comments,149 that the publicly 

available, standardized disclosure 

regime that will result from Rule 304 

and Form ATS–N is critical for all 

market participants to receive equal 

information about NMS Stock ATSs. 

One commenter suggests that, as an 

alternative to the proposed Form ATS– 

N, the Commission should mandate that 

ATS operators publicly disclose current 

and historical Form ATS filings and 

related amendments, and responses to 

standardized, frequently asked 

questions (‘‘FAQs’’) regarding ATS 

operations.150 The commenter believes 

that this approach would be ‘‘more 

balanced and appropriate’’ and ‘‘less 

burdensome and faster to 

implement.’’ 151 For the reasons 

discussed above in this section, we 

believe that the requests on Form ATS 

are not designed to produce adequate 

information for market participants 

about the operational complexity of 

NMS Stock ATSs and the ATS-related 

activities of their broker-dealer 

operators and their affiliates. We also 

believe that making public an ATS’s 

responses to standardized, FAQs 

regarding its operations would not 

achieve the same level of disclosure that 

Form ATS–N will require, and would 

not facilitate our oversight of NMS 

Stock ATSs. Based on Commission 

experience, the information required to 

be disclosed on Form ATS–N exceeds 

the information provided by NMS Stock 

ATSs in their responses to FAQs and 

will provide a greater benefit to market 

participants. In addition, NMS Stock 

ATSs must file Form ATS–N disclosures 

with the Commission, which will be 

subject to Commission review before 

they become public. As discussed in the 

Proposal, the public disclosures on 

Form ATS–N are designed to 

standardize the information available to 

all market participants about NMS Stock 

ATSs and facilitate their ability to 

compare and evaluate these trading 

venues.152 Finally, we believe that the 

burden resulting from filing a Form 

ATS–N would not be significant 

compared to requiring an NMS Stock 

ATS to prepare disclosures on Form 

ATS and responses to FAQs. 

We received four comments about the 

application of Rule 304 to some or all 

NMS Stock ATSs. We received three 

comments expressing the importance of 

the Commission’s need to heighten the 

regulatory requirements for all NMS 

Stock ATSs.153 In particular, one 

commenter states that the Commission’s 

additional disclosure requirements are 

important for creating a consistent and 


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154See UBS Letter at 2. 

155See id. 

156See CFA Institute Letter at 3. 

157See STANY Letter at 2. See also Luminex 

Letter at 1. 

158See STANY Letter at 2. 

159National securities exchanges are subject to 

the same public rule filing and registration 

requirements irrespective of the volume transacted 

on the exchange. While an NMS Stock ATS may not 

transact significant overall volume in NMS stocks, 

that ATS may transact a significant volume of 

orders in certain NMS stocks or orders for certain 

subscribers. Additionally, we also believe that 

applying the enhanced regulatory requirements 

only to larger NMS Stock ATSs could create an 

opportunity for arbitrage without appropriate 

benefit, in that an NMS Stock ATS may be 

incentivized to structure their operations to avoid 

being subject to enhanced requirements. We believe 

that the burden of complying with the enhanced 

regulatory requirements imposed on lower volume 

NMS Stock ATSs is justified by the benefits. See 

infra Section X.D.4. 160One commenter expresses its concern that 

‘‘small and innovative ATSs will be frustrated by 

the requirement that changes to their technology 

must be approved by the Commission prior to 

implementation.’’ See STANY Letter at 2. The 

Commission will not ‘‘approve’’ material 

amendments, but instead, may declare amendments 

ineffective if the disclosures filed by an NMS Stock 

ATS on Form ATS–N are materially deficient with 

respect to their completeness or comprehensibility. 

See infra Section IV.B.2. In addition, we are 

requiring that NMS Stock ATSs publicly disclose a 

brief summary of a material amendment upon 

filing, and after the Commission has had an 

opportunity to review the amendment, the material 

amendment would be made public. This change 

from the Proposal is in response to commenters 

who believe that an ATS may be placed at a 

competitive disadvantage if it is required to 

publicly file a material change 30 calendar days 

before implementing the change. See infra Section 

IV.E.2.c. 

161See infra Section X.D.4. 

162See infra Section V.C and Section X.C.4.a. 

163See infra Section X.D.4. 

164See supra note 58 and accompanying text. 

165See infra Section IV.B.1.a. 

166See, e.g., Anonymous Letter at 1, Citadel Letter 

at 1; Markit Letter at 4; STANY Letter at 3. 

167See Anonymous Letter at 1; Citadel Letter at 

1. 

168See Markit Letter at 4; STANY Letter at 3. 

169See Markit Letter at 4. 

170See Proposal, supra note 2, at 81011. 

171See id. 

fair set of obligations for all NMS Stock 

ATSs while providing market 

participants and subscribers with 

complete information.154 This 

commenter observes that although an 

ATS may have a small share of volume 

relative to the overall equities trading 

marketplace, it does not necessarily 

follow that such ATS has a similarly 

small share of each subscriber’s flow.155

Another commenter cautions the 

Commission about allowing exemptions 

based on metrics such as dollar volume, 

trading volume, or number of 

subscribers because allowing such 

exemptions could increase ‘‘incentives 

and opportunities’’ for regulatory 

arbitrage, and may result in unintended 

consequences.156 On the other hand, 

one commenter argues that the 

Commission should take a tiered 

regulatory approach to NMS Stock ATSs 

by applying certain of the enhanced 

requirements only to larger NMS Stock 

ATSs.157 This commenter suggests that 

to foster competitive innovations among 

NMS Stock ATSs, the Commission 

should only apply the requirement of 

prior Commission ‘‘approval’’ of 

changes before they are implemented to 

‘‘larger ATSs with a substantial market 

footprint.’’ 158

We continue to believe that requiring 

all NMS Stock ATSs to publicly file a 

Form ATS–N, irrespective of the volume 

of NMS stocks transacted on the ATS is 

appropriate, and does not agree that its 

objectives would be achieved by 

applying Rule 304 on a tiered basis to 

NMS Stock ATSs. Given that brokerdealers can route their customers’ orders 

to any NMS Stock ATS for execution, 

we do not believe that transaction 

volume in NMS stocks serves as a proxy 

for whether customers of broker-dealers 

or subscribers to an ATS should have 

information about how their orders 

would be prioritized, matched, or 

executed on an NMS Stock ATS or 

understand the ATS-related activities of 

the broker-dealer operator and its 

affiliates that may give rise to conflicts 

of interest.159 As a result, customers of 

broker-dealers that route their orders to 

NMS Stock ATSs with low volume will 

have the same level of information to 

assess their broker-dealers’ routing 

decisions as customers of broker-dealers 

that may route orders to any other NMS 

Stock ATSs. Amending Exchange Act 

Rule 3a1–1(a) to apply the requirements 

of Rule 304 to all NMS Stock ATSs 

would promote efficient and effective 

market operations by providing 

information all market participants can 

use to evaluate all NMS Stock ATSs that 

could be potential destinations for their 

orders. We believe that these 

requirements, including the requirement 

that NMS Stock ATSs file amendments 

to Form ATS–N in advance of adopting 

material changes,160 would not place an 

undue burden on smaller NMS Stock 

ATSs or their ability to innovate.161

Smaller NMS Stock ATSs that are not 

operated by multi-service broker-dealer 

operators and do not engage in other 

brokerage or dealing activities in 

addition to their ATS operations would 

have a lower burden than other ATSs 

because certain sections of Form ATS– 

N (such as several items of Part II) may 

not be applicable to these NMS Stock 

ATSs.162 We believe that the reduction 

in costs from exempting small NMS 

Stock ATSs would be minimal as 

compared to the benefits that would 

result from requiring the same level of 

transparency from small NMS Stock 

ATSs as from other NMS Stock ATSs.163

Further, under Regulation ATS, every 

ATS must currently wait 20 calendar 

days from the date of filing an 

amendment to Form ATS–N before 

implementing a material change to its 

operations.164 In addition, we believe 

that the new process for NMS Stock 

ATSs applicable to filing material 

amendments is appropriate,165 and, like 

the other requirements of Rule 304, 

should be applied consistently across 

NMS Stock ATSs, regardless of their 

size or trading volume. The Commission 

review process for Form ATS–N 

amendments is designed to improve 

operational transparency for all market 

participants and not only for market 

participants that use NMS Stock ATSs 

with significant trading volume as 

compared to other NMS Stock ATSs. 

b. Comments on Effects on ATSs 

Relative to National Securities 

Exchanges 

We received comments regarding the 

competitive effect of Rule 304 on ATSs 

relative to national securities 

exchanges.166 Some commenters 

support public disclosure of Form ATS– 

N on the grounds that the current 

differences in transparency 

requirements for ATSs and national 

securities exchanges are competitively 

unfair.167 On the other hand, other 

commenters express concern about the 

competitive burden that the 

requirements of Rule 304 could place on 

ATSs.168 Specifically, one commenter 

states that not extending the enhanced 

transparency requirements to national 

securities exchanges may ‘‘result in a 

competitive advantage to 

exchanges.’’ 169 We believe that the new 

disclosure requirements for NMS Stock 

ATSs are not more rigorous than the 

disclosure standards for national 

securities exchanges and will not 

provide national securities exchanges 

with a competitive advantage over NMS 

Stock ATSs. National securities 

exchanges are required to publicly file 

proposed rule changes with the 

Commission to disclose, among other 

things, their manner of operations and 

fees.170 These proposed rules changes 

are subject to notice and comment from 

the public, as well as Commission 

consideration, pursuant to Section 19(b) 

and 17 CFR 240.19b–4 (Rule 19b–4).171

This is not the case for NMS Stock 

ATSs. Furthermore, Form ATS–N is 

designed to solicit information about 

ATS-related activities of the brokerdealer operator and its affiliates to help 


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172See Proposal, supra note 2, at 81042 n. 370– 

372 and accompanying text. In cases where we have 

approved exceptions to this prohibition, there have 

been limitations and conditions on the activities of 

the national securities exchange and its affiliated 

member designed to address concerns about 

potential conflicts of interest and unfair competitive 

advantage. See id. at 81042 n.372. 

173See STANY Letter at 3. 

174See supra Section II.D. 

175See infra Section X.C.2.a (discussing the 

economic benefits of the new disclosure 

requirements). See also Section X.C.4.a.i. 

176See Morgan Stanley Letter at 3. 

177See id. at 2–3. 

178See Fidelity Letter at 4. 

179See 15 U.S.C. 78f. An ATS is not required to 

comply with the requirements of Rule 301(b) if it 

is registered as an exchange under Section 6 of the 

Exchange Act. See 17 CFR 242.301(a)(1). 

180See 17 CFR 240.19b–4(f)(2). Another 

commenter states that while Regulation ATS 

recognizes the distinction between national 

securities exchanges and ATS offerings, the 

regulatory structure tailored for national securities 

exchanges can be seen throughout much of the 

Proposal and proposed Form ATS–N, and included 

as examples the Proposal’s focus on disclosures 

regarding subscribers, subscriber manuals, and fees, 

as well as the public posting upon filing of 

amendments to Form ATS–N. See Morgan Stanley 

Letter at 3–4. This commenter believes this 

approach is contrary to the objectives of Regulation 

ATS and urges the Commission to reconsider 

aspects of the Proposal that have the effect of not 

recognizing the materially different roles that ATSs 

and exchanges are intended to play in the U.S. 

marketplace. See id at 4. We agree that registered 

broker-dealers that operate ATSs should continue to 

be able to avail themselves of the exemption from 

the definition of ‘‘exchange’’ provided by Exchange 

Act Rule 3a1–1 and Regulation ATS, but believe 

that due to changes in the role and operation of 

NMS Stock ATSs since the adoption of Regulation 

ATS, it is in the public interest to update the 

requirements for that exemption applicable to that 

subset of ATSs. Also many of the disclosure items 

identified by this commenter are the kinds of 

disclosures other commenters have described as 

significant to their understanding of the operation 

of NMS Stock ATSs. 

181See infra Section V.D.19. 

182See generally 15 U.S.C. 78s(b); 17 CFR 

240.19b–4. 

183See 15 U.S.C. 78f(b). 

market participants better understand 

potential conflicts of interest and 

information leakage. In the context of 

national securities exchanges, we have 

expressed concern that the affiliation of 

a national securities exchange with one 

of its members raises potential conflicts 

of interest, and the potential for unfair 

competitive advantage; and because the 

Commission reviews the rules of 

national securities exchanges, a process 

which requires, among other things, that 

to approve certain rule changes the 

Commission find that the proposed rule 

change is consistent with the Exchange 

Act, each existing national securities 

exchange has implemented rules that 

restrict affiliation between the exchange 

and its members to mitigate the 

potential for these types of conflicts of 

interest.172 NMS Stock ATSs are not 

subject to such restrictions with respect 

to the activities of their broker-dealer 

operator and its affiliates that may raise 

conflicts of interests. 

Another commenter states its view 

that requiring public disclosure of Form 

ATS–N will ‘‘alter the competitive 

landscape . . . between NMS Stock 

ATSs and national securities 

exchanges.’’ 173 We continue to believe 

that since the adoption of Regulation 

ATS, the market in execution services 

for NMS stocks has evolved such that 

trading functions of NMS Stock ATSs 

have become more functionally similar 

to those of national securities 

exchanges.174 The enhanced 

transparency requirements for NMS 

Stock ATSs are designed to allow 

market participants to compare 

execution services of NMS Stock ATSs 

against national securities exchanges, to 

appropriately calibrate the level of 

transparency between NMS Stock ATSs 

and national securities exchanges, and 

to foster even greater competition for 

order flow of NMS stocks between those 

trading centers.175

One commenter asserts that the 

Proposal treats all ATSs as stand-alone, 

exchange-like price/time priority 

models and fails to account for distinct 

ATS models (e.g. price/capacity/size 

priority and interval VWAP crossing) 

and does not consider that an ATS may 

be part of a broader, integrated 

electronic offering available to clients 

choosing to access the markets through 

a full-service broker-dealer.176 This 

commenter also states that while 

Regulation ATS recognizes the 

distinction between exchanges and ATS 

offerings, the regulatory structure 

specifically tailored for exchanges can 

be seen throughout much of the 

Proposal and proposed Form ATS–N, 

such as in the Proposal’s focus on: 

Subscribers, in the way an exchange has 

members; a subscriber manual, in the 

way an exchange has a rule book; and 

fees, similar to an exchange fee 

schedule.177

One commenter questions why the 

Commission has determined that NMS 

Stock ATSs should be subject to 

‘‘essentially similar disclosure 

requirements’’ as national securities 

exchanges without affording NMS Stock 

ATSs benefits such as limited immunity 

and market data revenue that national 

securities exchanges receive.178 NMS 

Stock ATSs, unlike registered national 

securities exchanges, are registered as 

broker-dealers and exempt from the 

requirements of, among other 

provisions, Sections 6 and 19(b) of the 

Exchange Act. However, an NMS Stock 

ATS that desires the benefits afforded to 

national securities exchanges can 

choose to register as a national 

securities exchange under Section 6 of 

the Exchange Act 179 and be subject to 

the requirements of, among other 

provisions, Sections 6 and 19(b) of the 

Exchange Act. In addition, we do not 

agree with the commenter’s view that 

the disclosure requirements with which 

NMS Stock ATSs must comply are 

‘‘essentially similar’’ to the disclosure 

requirements imposed on national 

securities exchanges. For example, a 

national securities exchange is required 

to file with the Commission all rule 

changes establishing or changing a due, 

fee, or other charge assessed to 

members, which the Commission 

reviews for consistency with the 

Exchange Act.180 In contrast, an NMS 

Stock ATS will be required to provide 

disclosure on the types of fees and 

charges of the NMS Stock ATS.181

Further, disclosure is only one of the 

requirements to which national 

securities exchanges are subject. 

Notably, the rules and changes to the 

rules of national securities exchanges 

are required to be filed with the 

Commission and are subject to public 

notice and comment.182 NMS Stock 

ATSs are not subject to these 

requirements, as well as many others, 

applicable to national securities 

exchanges.183

While NMS Stock ATSs and national 

securities exchanges are subject to 

different regulatory regimes, NMS Stock 

ATSs are trading centers that perform 

similar trading functions as national 

securities exchanges and have evolved 

to become more like national securities 

exchanges in their operations. We 

believe that Form ATS–N, as adopted, 

accommodates the differences between 

the regulatory requirements for national 

securities exchanges and those of NMS 

Stock ATSs while increasing public 

operational transparency for NMS Stock 

ATSs. The Commission does not agree 

that NMS Stock ATSs are being treated 

like national securities exchanges and 

believes that Form ATS–N is designed 

in a manner that allows ATSs to explain 

their unique business models. For 

example, NMS Stock ATSs will be able 

to explain their trading models, and 

associated facilities and procedures, in 

Part III, Item 11 of adopted Form ATS– 

N (‘‘Trading, Rules and Facilities’’). In 

addition, Part III, Item 19 (‘‘Fees’’) 

requires an NMS Stock ATS to identify 

and describe the types of fees or charges 

of the ATS and any differences among 

subscribers, whereas national securities 

exchanges are required to publicly post 

their complete fee schedules and any 

changes are subject to the SRO rule 

filing process under Section 19 of the 


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184See, e.g., infra Section V.D.11 (describing Part 

III, Item 11 of Form ATS–N, which asks NMS Stock 

ATSs to provide a summary of their marketplaces 

and the means and facilities for bringing together 

the orders of multiple buyers and sellers on the 

NMS Stock ATS). 

185See infra Section IV.A.1. As adopted, the 

Commission will not declare initial Form ATS–N 

filings effective under Rule 304. 

186See Citadel Letter at 3; HMA Letter at 7–8; and 

Investor Advocate Letter at 11–12. 

187See MFA/AIMA Letter at 4; CFA Institute 

Letter at 4; and PDQ Letter at 2. Two commenters 

do not object to the effectiveness process. See 

Liquidnet Letter at 3 and STANY Letter at 2. 

188See Luminex Letter at 1; Fidelity Letter at 8– 

9. 

189See Luminex Letter at 1. 

190See Fidelity Letter at 8–9. 

191See supra note 189 and accompanying text. 

192See infra Sections IV.A.3.c and IV.A.4.a. 

193See id. 

194See infra Section X.C. 

195See supra note 190 and accompanying text. 

See also infra Section IV.A.3.d. 

196See supra note 190 and accompanying text. 

197See infra Section X.C.4. 

198See infra Section IV.A.3. 

199The term ‘‘U.S. Government securities’’ is 

defined under Section 3(a)(42) of the Exchange Act. 

See 15 U.S.C. 78c(a)(42) (defining ‘‘government 

securities’’ as, among other things, ‘‘securities 

which are direct obligations of, or obligations 

guaranteed as to principal or interest by, the United 

States’’). 

200For purposes of this discussion, we are using 

the term ‘‘OTC Equity Security’’ as it is defined in 

FINRA’s 6400 rule series for quoting and trading in 

OTC Equity Securities. FINRA defines OTC Equity 

Security as ‘‘any equity security that is not an ‘NMS 

stock’ as that term is defined in Rule 600(b)(47) of 

SEC Regulation NMS; provided, however, that the 

term ‘OTC Equity Security’ shall not include any 

Restricted Equity Security,’’ which FINRA defines 

as ‘‘any equity security that meets the definition of 

‘restricted security’ as contained in Securities Act 

Rule 144(a)(3).’’ See FINRA Rules 6420(f), (k). 

201See Proposal, supra note 1, at 81018. 

202See Proposal, supra note 2. See also infra note 

668 and accompanying text (discussing the term 

‘‘trading center’’). 

203For purposes of this discussion, references to 

non-ATS OTC trading centers, as used herein, 

encompass all executions that occur off a national 

securities exchange and outside an ATS, including 

when a broker-dealer is acting as an OTC market 

maker, block positioner (i.e., any broker-dealer in 

the business of executing, as principal or agent, 

Exchange Act. The Commission also 

understands that some broker-dealer 

operators offer their NMS Stock ATSs 

along with other execution and routing 

services. We believe that requests on 

Form ATS–N are appropriately 

designed, and provide narrative 

flexibility, to elicit information about 

the varying NMS Stock ATS models, 

including those of multi-service brokerdealers.184

c. Comments on Effectiveness 

Requirement 

We proposed that to qualify for the 

exemption from the definition of 

‘‘exchange,’’ an NMS Stock ATS’s Form 

ATS–N must be declared effective by 

the Commission; as adopted, a Form 

ATS–N must be effective for the ATS to 

qualify for the exemption.185 Several 

commenters express their support for 

requiring that Form ATS–N be subject to 

Commission review,186 and some 

commenters support the proposed 

requirement that Form ATS–N be 

declared effective by the 

Commission,187 while other 

commenters raise concerns about 

requiring that Form ATS–N be declared 

effective by the Commission.188 One 

commenter states that the proposed 

effective/ineffective process is 

‘‘unnecessary’’ and ‘‘will have a chilling 

effect’’ on, or stifle innovation of, ATS 

operations.189 Another commenter 

similarly questions the need for the 

Commission to make a determination of 

effectiveness for Form ATS–N, and 

expresses concern that such a process 

would increase the regulatory risk for 

new NMS Stock ATSs and stifle 

innovation in the ATS marketplace by 

delaying the effectiveness of NMS Stock 

ATSs whose features, while meeting 

regulatory requirements, do not meet 

industry norms.190

We do not believe that requiring Form 

ATS–N to become effective after 

Commission review is 

‘‘unnecessary;’’ 191 rather, the review 

process will facilitate the Commission’s 

oversight of NMS Stock ATSs and help 

ensure that information required by the 

form is disclosed in a complete and 

comprehensible manner. We have 

modified the proposed effectiveness 

process for initial Form ATS–N so that 

the Commission will not declare initial 

Form ATS–N effective; instead, initial 

Form ATS–N, as amended, will become 

effective, unless declared ineffective, 

upon the earlier of: (1) The completion 

of review by the Commission and 

publication pursuant to Rule 304(b)(2), 

or (2) the expiration of the Commission 

review period, or, if applicable, the 

extended review period.192 Form ATS– 

N will nevertheless be subject to 

Commission review, and, as proposed, 

the Commission may declare a Form 

ATS–N ineffective if it finds, after 

notice and opportunity for hearing, that 

such action is necessary or appropriate 

in the public interest, and is consistent 

with the protection of investors.193 We 

believe that requiring Form ATS–N to 

be effective, which would occur only 

after being subject to Commission 

review, could incentivize NMS Stock 

ATSs to make more detailed and 

informative disclosures than under 

current Form ATS. While requiring 

Form ATS–N to be effective may have 

some impact on innovation,194 our 

review of Form ATS–N is designed to 

mitigate any effect on innovation, and 

accordingly would focus on, for 

example, the completeness and 

comprehensibility of the Form ATS–N 

disclosures and not include a review of 

the merits of the disclosures or whether 

such trading functionalities meet 

industry norms.195 We do not believe 

that requiring Form ATS–N to be 

effective will unduly increase the 

‘‘regulatory risk’’ of launching a new 

NMS Stock ATS as one commenter 

suggests.196 We understand that the 

Commission review process will 

generate some uncertainty for NMS 

Stock ATSs as a Form ATS–N could be 

declared ineffective, which is not 

currently the case with respect to Form 

ATS.197 The Commission review 

process, however, will not be merit 

based, and determinations of 

ineffectiveness will require the 

Commission to make certain findings 

after notice to the NMS Stock ATS and 

opportunity for hearing.198 In addition, 

the rule provides that if the Commission 

does not declare the Form ineffective 

before the end of a fixed time period, 

the Form ATS–N will become effective. 

We believe that these factors will 

provide NMS Stock ATSs with greater 

regulatory certainty regarding the 

effectiveness process. 

2. Comments on Extending Rule 304 to 

Non-NMS Stock ATSs 

Rule 304 of Regulation ATS, as 

proposed and adopted, would apply 

only to NMS Stock ATSs, as defined in 

Rule 300(k) of Regulation ATS. We are 

concerned that, given the significance of 

NMS Stock ATSs in equity market 

structure and their operational 

complexities, the lack of transparency 

around NMS Stock ATSs operations 

could inhibit market participants’ 

ability to evaluate NMS Stock ATSs as 

potential routing destinations for their 

orders in NMS stocks. As discussed in 

the Proposal, we did not propose to 

apply Rule 304 to non-NMS Stock 

ATSs, which would include ATSs that 

trade corporate or municipal fixed 

income securities (‘‘Fixed Income 

ATSs’’), U.S. Government securities 

(‘‘Government Securities ATSs’’),199 or 

OTC Equity securities (‘‘OTC Equity 

Securities ATSs’’).200 We sought 

comment on whether Rule 304, in 

whole or in part, should apply to Fixed 

Income ATSs, Government Securities 

ATSs, and OTC Equity Securities 

ATSs.201 We also did not propose to 

apply Rule 304 to any other type of 

trading center besides NMS Stock 

ATSs,202 such as non-ATS OTC trading 

centers 203 or national securities 

exchanges. 


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block size trades for its customers), or operation of 

an internal broker-dealer system. See 17 CFR 

242.600(b)(52) (defining ‘‘OTC market maker’’ as 

any dealer that holds itself out as being willing to 

buy and sell to its customers, or others, in the 

United States, an NMS stock for its own account on 

a regular or continuous basis otherwise than on a 

national securities exchange in amounts of less than 

block size); 17 CFR 242.600(b)(9) (defining ‘‘block 

size’’ as an order of at least 10,000 shares or for a 

quantity of stock having a market value of at least 

$200,000); and 17 CFR 240.17a–3(a)(16)(ii)(A) 

(defining ‘‘internal broker-dealer system’’ as any 

facility, other than a national securities exchange, 

an exchange exempt from registration based on 

limited volume, or an alternative trading system as 

defined in Regulation ATS that provides a 

mechanism, automated in full or in part, for 

collecting, receiving, disseminating, or displaying 

system orders and facilitating agreement to the 

basic terms of a purchase or sale of a security 

between a customer and the sponsor, or between 

two customers of the sponsor, through use of the 

internal broker-dealer system or through the broker 

or dealer sponsor of such system). See also 2010 

Equity Market Structure Release, supra note 13, at 

3599–3600. 

204See Better Markets Letter at 3, 8; CFA Institute 

Letter; Citadel Letter; Consumer Federation of 

America Letter at 6–7; Fidelity Letter at 6–7; HMA 

Letter at 5–6, 10, 12; ICI Letter at 11; Investor 

Advocate Letter at 2, 12–15; KCG Letter at 12–13; 

Liquidnet Letter at 3; Luminex Letter at 2, 4; 

MarketAxess Letter; Markit Letter at 2, 4, 9; MFA/ 

AIMA Letter 2–4; MFA Letter 2 at 30; Morgan 

Stanley Letter at 5–6; PDQ Letter at 2; SIFMA Letter 

at 3, 5; STANY Letter at 5; T. Rowe Price Letter at 

2; Virtu Letter at 2. 

205See Fidelity Letter at 7; ICI Letter at 11; 

Luminex Letter at 2; Morgan Stanley Letter 2, 5; 

Investor Advocate Letter at 2–3; PDQ Letter at 2; 

STANY Letter at 3; SIFMA Letter at 3–4. 

206See Better Markets Letter at 3, 8; CFA Institute 

Letter at 3–4; Consumer Federation of America 

Letter at 6–7; HMA Letter 5–6, 10, 12. 

207See ICI Letter at 11; Liquidnet Letter at 3. 

208See Consumer Federation of America Letter at 

6; Better Markets Letter at 8; CFA Institute Letter 

at 3–4; HMA Letter at 10; MFA/AIMA Letter at 2– 

3. 

209See Fidelity Letter at 6–7; KCG Letter at 12– 

13; Liquidnet Letter at 3; MarketAxess Letter at 3– 

4 ; Markit Letter at 9; SIFMA Letter at 3. 

210See Fidelity Letter at 6; SIFMA Letter at 34– 

35; Markit Letter at 9; Investor Advocate Letter at 

12–16; ICI Letter at 11. See also Luminex Letter at 

4. 

211See Better Markets Letter at 8; CFA Institute 

Letter at 3–4; Citadel Letter at 4–5; Investor 

Advocate Letter at 16–17; KCG Letter; Liquidnet 

Letter at 3; MFA/AIMA Letter at 2–7; SIFMA Letter 

at 3, 5, 35–36; Virtu Letter at 2. 

212Some commenters specifically support 

operational transparency and enhanced monitoring 

of trading activity for Government Securities ATSs. 

See Virtu Letter at 2; Better Markets Letter at 8; CFA 

Institute Letter at 3–4; Citadel Letter at 4–5; MFA/ 

AIMA Letter at 2–7. See also Liquidnet Letter at 3 

(stating that it does ‘‘not object’’ to the requirements 

of Regulation ATS applying to systems that cross 

trades in U.S. Government securities). 

213See Citadel Letter at 4–5; Liquidnet Letter at 

3; Investor Advocate Letter at 16–19; Virtu Letter at 

2. One commenter combined its support for 

transparency of ATSs that trade U.S. Government 

securities and Fixed Income ATSs. See MFA/AIMA 

Letter at 3–4 

214See SIFMA Letter at 34–35; Markit Letter at 9; 

Investor Advocate Letter, at 14. See also Fidelity 

Letter at 6. 

215See KCG Letter at 13; SIFMA Letter at 3, 5, 36. 

216See supra note 209 accompanying text. 

217See ICI Letter at 12; Morgan Stanley Letter at 

2–3. 

218See id. See also Fidelity Letter at 11–12. 

Another commenter recommends that the 

Commission be required to conduct a review within 

a designated time-period to assess the effectiveness 

of the new rules and determine if any refinements 

should be proposed. See T. Rowe Price Letter at 3. 

In addition, one commenter suggests that regulators 

periodically monitor the development of the market 

and technological developments, and take 

appropriate action as needed. See Barnard Letter at 

3. In addition to the Commission’s ongoing 

oversight responsibilities under the Exchange Act, 

Rule 304 provides a process for the Commission to 

review disclosures filed on Form ATS–N, either 

through an initial Form ATS–N, Form ATS–N 

amendment, or cessation of operations. 

219See 5 U.S.C.—App; Securities Exchange Act 

Release No. 81958 (October 26, 2017), 82 FR 50460 

(October 31, 2017) (Notice of Federal Advisory 

Committee Establishment). 

220See Recommendation for the SEC to Review 

the Framework for the Oversight of Electronic 

Trading Platforms for Corporate and Municipal 

Bonds (July 16, 2018) available on the 

Commission’s website at https://www.sec.gov/ 

spotlight/fixed-income-advisory-committee/fimsacelectronic-trading-platforms-recommendation.pdf. 

We received several comments 

generally supporting operational 

transparency and about whether or not 

to apply Rule 304 to non-NMS Stock 

ATSs.204 Of the commenters generally 

supporting enhanced operational 

transparency, several encourage the 

Commission to make the current Form 

ATS public for all ATSs.205 Some 

commenters urge the Commission to 

amend Regulation ATS to apply Rule 

304 to all ATSs.206 Two commenters 

explicitly support applying the Proposal 

solely to NMS Stock ATSs.207

Several commenters specifically argue 

for extending Rule 304, including Form 

ATS–N, to Fixed Income ATSs.208

Several commenters, however, 

recommend against extending the 

Proposal requirements for NMS Stock 

ATSs to Fixed Income ATSs.209 Several 

commenters suggest that the 

Commission require Fixed Income ATSs 

to make their Forms ATS public.210

We also received several comments 

that specifically address enhancing 

operational transparency for, or 

extending Rule 304 to, Government 

Securities ATSs.211 Several commenters 

support applying Rule 304 requirements 

to Government Securities ATSs,212

while several state that Regulation ATS 

should be amended to include 

electronic platforms for U.S. 

Government securities.213 Other 

commenters believe that the 

Commission should gather additional 

information on fixed income markets, 

which include U.S. Government 

securities markets, and as an interim 

step, make the Form ATS filings for 

these ATSs public.214 We also received 

comments that specifically oppose 

applying the Proposal requirements to 

Government Securities ATSs,215 or more 

generally oppose expanding Rule 304 to 

non-NMS Stock ATSs.216

We also received comments regarding 

enhancing operational transparency for 

other non-ATS OTC trading centers— 

namely broker-dealers that internalize 

order flow.217 In general, these 

commenters point out the discrepancy 

in disclosure obligations that would 

result from the Proposal, or the 

possibility that broker-dealers would 

route order flow to non-ATS trading 

centers as a result.218

Given the range of commenter views 

on these questions and our belief that it 

is appropriate to take an incremental 

approach by first applying the amended 

regime to NMS Stock ATSs before 

considering a further step, we are not 

amending Rule 3a1–1(a) and Regulation 

ATS for non-NMS Stock ATSs. We 

intend to monitor the implementation 

and effectiveness of Rule 304 to NMS 

Stock ATSs, and should we decide to 

take further action with respect to nonNMS Stock ATSs, we would do so in a 

separate rulemaking and take into 

account our experience with Rule 304 

and NMS Stock ATSs. 

The Commission notes that the Fixed 

Income Market Structure Advisory 

Committee (‘‘FIMSAC’’) was formed in 

2017 pursuant to the Commission’s 

authority under the Federal Advisory 

Committee Act to provide the 

Commission with diverse perspectives 

on the structure and operations of the 

U.S. fixed income markets, as well as 

advice and recommendations on matters 

related to fixed income market 

structure.219 The FIMSAC recently 

issued recommendations for the 

Commission to review the framework 

for the oversight of electronic trading 

platforms for municipal securities and 

corporate bonds. Specifically, the 

FIMSAC recommended that the 

Commission form, together with FINRA 

and the MSRB, a joint working group to 

review the regulatory framework for 

oversight of electronic trading platforms 

used in the municipal securities and 

corporate bond markets.220 In light of 

recent recommendations of the 

FIMSAC, and comments received, we 

will review the regulatory framework for 

fixed income electronic trading 

platforms, including to consider 

whether we should propose 

amendments to Regulation ATS (and 

any other applicable rules) to account 

for operational and regulatory 

differences among electronic trading 


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221We believe that the concept of NMS Stock 

ATSs ‘‘trading’’ or ‘‘transacting’’ in NMS stocks, 

should be familiar to existing NMS Stock ATSs as 

Form ATS requires disclosure regarding, among 

other things ‘‘the types of securities the [ATS] 

trades’’ and ‘‘the name of any entity, other than the 

[ATS] that will be involved in the operation of the 

[ATS], including the execution, trading, clearing, 

and settling of transactions on behalf of the [ATS].’’ 

See Form ATS. Additionally, Form ATS requires 

disclosure regarding ‘‘[t]he procedures governing 

execution, reporting, clearance and settlement of 

transactions effected through the [ATS]’’; and Form 

ATS–R requires NMS Stock ATSs to ‘‘[p]rovide the 

total unit and dollar volume of transactions’’ in 

specified securities categories. See Form ATS and 

Form ATS–R. 

222As proposed, an NMS Stock ATS would 

include any ATS that effects transactions in 

securities that are listed on a national securities 

exchange (other than options, debt or convertible 

debt). See Proposal, supra note 2, at 81015–81016. 

223ATSs that are not subject to Rule 301(a) 

include those that are: Registered as an exchange 

under Section 6 of the Exchange Act; exempt from 

national securities exchange registration based on 

limited volume; operated by a national securities 

association; registered as a broker-dealer, under 

Sections 15(b) or 15C of the Exchange Act, or that 

are banks, and that limit their securities activities 

to certain instruments; or exempted, conditionally 

or unconditionally, by Commission order, after 

application by such ATS from one or more of the 

requirements of Rule 301(b). See 17 CFR 242.301(a). 

See also Regulation ATS Adopting Release, supra 

note 3, at 70859–63. 

224See 17 CFR 242.301(a)(5). 

225Regulation ATS Adopting Release, supra note 

3, at 70863. 

226The Commission continues to also have 

general exemptive authority pursuant to Section 

36(a) of the Exchange Act to grant both conditional 

and unconditional exemptions from any provisions 

or provisions of the Exchange Act, or any rule or 

regulation thereunder (including Rule 304 and any 

other provision of Rule 3a1–1 and Regulation ATS), 

to the extent necessary or appropriate in the public 

interest and consistent with the protection of 

investors. See 15 U.S.C. 78mm(a). 

227See Investor Advocate Letter at 8. 

228See id. See also infra notes 723–725 and 

accompanying text (discussing this comment in the 

specific context of disclosures regarding affiliates of 

the broker-dealer operator). 

229See Investor Advocate Letter at 9. For 

example, in the context of any exemptions from the 

requirements applicable to disclosures regarding 

affiliates of the broker-dealer operator of an NMS 

Stock ATS, the commenter encouraged the 

Commission to consider providing guidance as to 

what facts and circumstances it might consider 

when evaluating a broker-dealer operator’s request 

for exemptive relief. See id. See also infra notes 

723–725 and accompanying text. 

platforms for municipal securities and 

corporate bonds. 

B. Amendments to Existing Regulation 

ATS Rules for NMS Stock ATSs 

To operate pursuant to the Exchange 

Act Rule 3a1–1a(2) exemption, NMS 

Stock ATSs will be required to comply 

with new Rule 304, in addition to the 

applicable existing Rules 300 through 

303 of Regulation ATS. In light of the 

new requirements of Rule 304, we are 

adopting, with modifications discussed 

below, amendments to several existing 

rules of Regulation ATS. 

1. Rule 300(k): Definition of NMS Stock 

ATS 

Proposed Rule 300(k) of Regulation 

ATS defined ‘‘NMS Stock ATS’’ in new 

paragraph (k) as ‘‘an alternative trading 

system, as defined in § 242.300(a), that 

facilitates transactions in NMS stocks, 

as defined in § 242.300(g).’’ We received 

no comments on the proposed 

definition of NMS Stock ATS and are 

adopting Rule 300(k) with 

modifications. We are replacing 

‘‘facilitates transactions in’’ with 

‘‘trades.’’ The term ‘‘trades’’ is well 

understood in the context Regulation 

ATS 221 and the term ‘‘facilitates’’ is not 

used in the definition of an ATS. This 

change is non-substantive and will 

clarify the rule text.222 Accordingly, 

Rule 300(k), as adopted, defines an 

‘‘NMS Stock ATS’’ as ‘‘an alternative 

trading system, as defined in paragraph 

(a) of [Rule 300], that trades NMS 

stocks, as defined in paragraph (g) of 

[Rule 300].’’ 

2. Rule 301(a): Exemption From 

Compliance With Regulation ATS 

We made explicit in proposed Rule 

304(a) that NMS Stock ATSs must 

comply with Rules 300 through 304, 

unless not required to comply with 

Regulation ATS pursuant to Rule 301(a). 

Pursuant to Rule 301(a), certain ATSs 

that are subject to other appropriate 

regulations are not required to comply 

with Regulation ATS.223 To the extent 

that an NMS Stock ATS meets the 

criteria of the Rule 301(a) exemption, 

such ATS would not be required to 

comply with Rules 300 through 304 of 

Regulation ATS. We received no 

comments on the application of Rule 

301(a) to NMS Stock ATSs and are 

adopting as proposed this language in 

Rule 304(a) to make clear that Rules 300 

through 303 of Regulation ATS, 

including Rule 301(a) continue to apply 

to NMS Stock ATSs, unless otherwise 

provided by Rule 301(a). 

3. Rule 301(a)(5): Exemptions From 

Certain Requirements of Regulation ATS 

Pursuant to Application to the 

Commission 

Rule 301(a)(5) of Regulation provides 

that an ATS shall comply with the 

requirements of Rule 301(b) unless such 

ATS is exempted, conditionally or 

unconditionally, by Commission order 

after application by such ATS, from one 

or more of the requirements of Rule 

301(b), and that the Commission will 

grant such exemption only after 

determining that such an order is 

consistent with the public interest, the 

protection of investors, and the removal 

of impediments to, and perfection of, a 

national market system.224

When adopting Rule 301(a)(5), we 

stated that while the requirements of 

Regulation ATS are appropriate for all 

ATSs, a system may develop in the 

future for which these requirements 

may not be appropriate. The 

Commission expected to issue such an 

order only under unusual 

circumstances, and only after making 

the applicable determination.225 The 

requirements of Rule 304 were not part 

of Regulation ATS at the time the 

Commission adopted Rule 301(a)(5). We 

believe that, given the amendments to 

Regulation ATS that will require NMS 

Stock ATSs to comply with the filing 

requirements of Rule 304, including 

filing Form ATS–N, instead of the Form 

ATS filing requirements of Rules 

301(b)(2)(i)–(vii), it may be appropriate 

under certain limited, unusual facts and 

circumstances for the Commission to 

exempt an NMS Stock ATS, 

conditionally or unconditionally, by 

Commission order, from one or more 

requirements of Rule 304. As such, we 

are amending Rule 301(a)(5) to include 

exemptions from the requirements of 

Rule 304.226

In response to the Proposal, we 

received one comment regarding 

possible use of the Commission Section 

36 exemptive authority in connection 

with the requirements of Rule 304.227

This commenter states that instead of 

modifying the requirements under the 

Proposal in such a way that could result 

in less relevant information being 

provided to the Commission and to the 

public, certain concerns of other 

commenters could be addressed through 

use of the Commission’s Section 36 

exemptive authority. Specifically, this 

commenter observes that an NMS Stock 

ATS could seek relief tailored to its 

unique facts and circumstances 

pursuant to Section 36(a)(1) of the 

Exchange Act, and that Section 36(a)(1) 

permits the Commission to grant both 

conditional and unconditional 

exemptions from any provisions of a 

rule, to the extent necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors.228 This commenter also states 

that using Section 36 exemptive 

authority would be consistent with the 

manner in which the Commission 

generally treats requests it receives from 

regulated entities, and encourages the 

Commission to consider providing 

guidance as to what factors it might 

consider when evaluating a request for 

specific exemptive relief.229 We believe 

that amendments made to Rule 301(a)(5) 

make clear that the Commission could 


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230See HMA Letter at 10; SIFMA Letter at 31; 

KCG Letter at 10. 

231See SIFMA Letter at 31. 

232See id. 

233See KCG Letter at 10. The commenter states 

that, for example, if a broker-dealer operator 

provides a disclosure that it routes orders to the 

ATS from its algorithmic business, and the data 

center from which the algorithmic business 

operates subsequently experiences systems issues 

that force it to stop routing orders to the ATS, the 

disclosure would no longer be accurate and the 

broker-dealer operator would not be in position to 

provide 30-calendar day advance notice of the 

change. 

234See HMA Letter at 10. 

235As amended, Rule 301(a)(5) will apply to 

ATSs that have received exemptive relief from one 

or more requirements of Rule 304. See Rule 

301(a)(5). 

236Applications for exemptive relief from the 30- 

calendar day advance notice requirement of Rule 

304(a)(2)(i)(A) generally should, for example, 

contain a description of the circumstances that 

necessitate the implementation of the material 

change on an expedited basis, and why, in the view 

of the NMS Stock ATS, expedited implementation 

is necessary or appropriate in the public interest, 

and consistent with the protection of investors, 

such as why the expedited implementation is 

necessary to prevent substantial harm to investors. 

The Commission will not consider hypothetical or 

anonymous requests for exemptive relief. 

237See Rule 301(b)(2)(vii). 

238See Liquidnet Letter at 3. We received two 

comments regarding the application of Rule 

301(b)(2)(i) through (vii) to Legacy NMS Stock ATSs 

that have filed a Form ATS–N that has not yet 

become effective. See Liquidnet Letter at 3; BIDS 

Letter at 2–3. We are adopting a transitional rule 

that will not require a Legacy NMS Stock ATS to 

amend its Form ATS under Rule 301(b)(2) if it has 

filed a Form ATS–N with the Commission that has 

not yet become effective. We are instead requiring 

such Legacy NMS Stock ATS to file amendments 

on Form ATS–N pursuant to the requirements of 

Rule 304(a)(2)(i)(A) through (C). Rule 304(a)(1)(v)(C) 

is discussed below in greater detail. See infra 

Section IV.A.4.c. 

239See Liquidnet Letter at 3. 

exempt an NMS Stock ATS, 

conditionally or unconditionally, by 

order, after application by the ATS from 

one or more of the requirements of Rule 

304 of Regulation ATS provided that the 

Commission determines that such an 

exemption is consistent with the public 

interest, the protection of investors, and 

removal of impediments to, and 

perfection of the mechanisms of, a 

national market system. 

We also received other comments 

regarding specific exceptions from the 

proposed requirements of Rule 304. 

Specifically, three commenters suggest 

providing an exception to the 30- 

calendar day advance notice 

requirement for material changes in case 

of exigent circumstances.230 One 

commenter states that unless the 

Commission narrows the materiality 

standard for material amendments, the 

30-calendar day advance notice 

requirement could affect an ATS 

operator’s ability to take ‘‘decisive 

action.’’ 231 This commenter further 

believes that NMS Stock ATS operators 

often must take decisive action without 

time for a lengthy review and approval 

process, given that the speed of 

response to technical or operational 

issues (including cybersecurity) often is 

measured in seconds. This commenter 

believes there should be a carve-out for 

exigent circumstances when an NMS 

Stock ATS must act swiftly.232 Another 

commenter states that there could be 

situations in which it would be difficult 

for an NMS Stock ATS to meet the 30- 

calendar day advance notice 

requirement based on ongoing business 

changes, and that the Commission 

should clarify that certain Form ATS–N 

disclosures may be subject to immediate 

change without notice.233 Another 

commenter states that the Commission 

should allow for more rapid action (than 

the 30-day advance notice requirement) 

in the event of an ‘‘external emergency,’’ 

such as an extreme market event, but 

that such circumstances should be rare 

and only granted upon express approval 

of the Commission, upon a finding that 

such action is necessary to protect 

investors and promote fair and efficient 

markets.234

We believe that there may be unusual 

circumstances under which an NMS 

Stock ATS may need to seek an 

exemption from the requirements of 

Rule 304 or the disclosure requirements 

of Form ATS–N. For example, under 

exceptionally rare occasions, an NMS 

Stock ATS may need to make a material 

change to its operations on an expedited 

basis to prevent substantial harm to 

market participants, such as in response 

to a significant operational or marketwide event. The amendments to Rule 

301(a)(5) are designed to address these 

concerns.235 Applications for relief from 

a requirement of Rule 304 generally 

should explain why the applicant 

believes the relief sought is consistent 

with the public interest, the protection 

of investors, and the removal and 

impediments to, and perfection of the 

mechanism of, a national market 

system.236

As noted by commenters, 

circumstances may necessitate the 

implementation of a material change to 

the operations of an NMS Stock ATS on 

an expedited basis. We believe that, 

based on particular facts and 

circumstances, it may be appropriate to 

grant such an exemption from the 30- 

day advance notice requirement of Rule 

304(a)(2)(i)(A), for example, in the event 

of extraordinary, unforeseen 

circumstances, and if delaying 

implementation pursuant to the 30- 

calendar day advance notice 

requirement would cause substantial 

harm to subscribers or other markets 

trading NMS stocks. By comparison, to 

the extent that an NMS Stock ATS may 

need to change its operations in 

response to an operational problem, as 

suggested by one commenter, an NMS 

Stock ATS could proactively develop 

and disclose in the relevant Form ATS– 

N Item alternative procedures that the 

ATS would apply if the ATS 

experiences a systems problem that 

causes it to be unable to perform a 

particular function. For example, an 

NMS Stock ATS that routes orders and 

trading interest resting in the ATS to 

destinations outside the ATS could 

state, for example, that the NMS Stock 

ATS will either execute or cancel orders 

and trading interest submitted to the 

ATS if the ATS is unable to route orders 

and trading interest away from the ATS 

due to a systems problem. 

4. Rule 301(b)(2): Form ATS Reporting 

Requirements No Longer Apply to NMS 

Stock ATSs 

We proposed in Rule 304 to except 

NMS Stock ATSs from complying with 

Rule 301(b)(2) of Regulation ATS. 

Existing Rule 301(b)(2) requires an ATS 

to file with the Commission a Form ATS 

initial operation report, amendments to 

the Form ATS initial operation report, 

and cessation of operations reports on 

Form ATS, all of which are ‘‘deemed 

confidential when filed.’’ 237 We 

proposed this exception to make clear 

that NMS Stock ATSs would not be 

required to comply with the Form ATS 

reporting requirements provided in Rule 

301(b)(2) because the NMS Stock ATS 

would file a Form ATS–N pursuant to 

Rule 304. We also proposed Rule 

301(b)(2)(viii) to make clear that NMS 

Stock ATSs must file with the 

Commission the reports and 

amendments required by Rule 304 and 

that NMS Stock ATSs were not subject 

to Rule 301(b)(2) of Regulation ATS. We 

also proposed that ATSs that effect 

transactions in both NMS stocks and 

non-NMS stocks would be subject to the 

requirements of proposed Rule 304, 

with respect to NMS stocks, and Rule 

301(b)(2), with respect to non-NMS 

stocks. 

We received one comment regarding 

proposed Rule 301(b)(2)(viii).238 The 

commenter states that requiring an ATS 

that transacts in both NMS stocks and 

non-NMS Stocks to file reports on Form 

ATS–N with respect to NMS stocks but 

also file reports on Form ATS with 

respect to non-NMS stocks could be 

unduly burdensome.239 The commenter 

states that an ATS should have the 

option to file reports on Form ATS–N 


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240See id. 

241An ATS that trades both NMS stocks and nonNMS stocks will be required to amend its Form 

ATS, after the ATS files Form ATS–N, by removing 

information that pertains solely to the ATS’s NMS 

stock operations. Amending Form ATS in this 

manner should help ensure that the Form ATS 

accurately describes the ATS’s non-NMS stock 

operations. 

242See Liquidnet Letter at 3. 

243See supra Section III.A. 

244For example, Rule 611 of Regulation NMS, 

which requires a trading center to establish, 

maintain, and enforce written policies and 

procedures that are reasonably designed to prevent 

trade-throughs on that trading center, subject to 

certain exceptions, applies only to protected 

quotations in NMS stocks, and not to non-NMS 

stocks. See 17 CFR 242.611. 

245See supra Section III.A. 

246See infra Section IV.A.4. 

247To reduce redundancy, we are revising the 

proposed rule text to state that the Legacy NMS 

Stock ATS must file ‘‘reports’’ (rather than ‘‘the 

reports and amendments’’) required by Rule 304. 

Rule 304(b)(1) provides that every Form ATS–N, 

which will include every amendment filed on Form 

ATS–N, shall constitute a ‘‘report’’ within the 

meaning of sections 11A, 17(a), 18(a), and 32(a) (15 

U.S.C. 78k–1, 78q(a), 78r(a), and 78ff(a)), and any 

other applicable provisions of the Exchange Act. 

248See Proposal, supra note 2, at 81022–24, 

81027–31. Without this modification, Rule 

301(b)(2)(viii) could be interpreted, contrary to the 

Commission’s intention, to except an NMS Stock 

ATS from compliance with all of Rule 301(b)(2), 

including Rule 301(b)(2)(viii) itself. 

249EDGAR will be ready to accept Form ATS–N 

filings on January 7, 2019, and we have conformed 

Rule 301(b)(2)(iii) to be consistent with the EDGAR 

ability to accept Form ATS–N filings. 

250See infra Section IV.A.1 (discussing the filing 

requirements for new NMS Stock ATSs). 

251See infra Section IV.A.4.a. 

for all U.S. equities that it trades, 

whether listed or unlisted because an 

ATS operator would otherwise have the 

burden of maintaining two separate ATS 

filings for what the commenter believes 

is essentially the same functionality.240

We do not believe that requiring an 

ATS that trades both NMS stocks and 

non-NMS stocks to file reports on Form 

ATS–N with respect to NMS stocks, but 

also file reports on Form ATS with 

respect to non-NMS stocks, will be 

unduly burdensome. We recognize the 

additional burdens for NMS Stock ATSs 

resulting from the requirement to file 

disclosures on new Form ATS–N; 

however, we estimate that the burden 

for these ATSs to maintain their Forms 

ATS will decrease, because they will no 

longer be required to disclose 

information about their NMS stock 

operations on Form ATS.241 We also 

believe that allowing a broker-dealer 

operator to choose to disclose 

information on Form ATS–N about 

trading in non-NMS stocks, as suggested 

by the commenter,242 would likely 

result in incomplete disclosures about 

the ATS’s non-NMS stock operations 

that may be confusing or not useful to 

market participants. Form ATS–N was 

specifically designed to solicit 

information about trading in NMS 

stocks on an ATS to allow market 

participants to understand the ATS’s 

NMS stock operations and readily 

compare the ATS against other ATSs 

and national securities exchanges that 

trade NMS stocks.243 While many of the 

requests on Form ATS–N could apply to 

Fixed Income ATSs or Government 

Securities ATSs, the requests are not 

fully tailored to solicit information 

about trading in those types of securities 

and the systems that trade them. For 

example, transactions in NMS stocks 

are, in some cases, subject to different 

federal securities laws and Commission 

rules than transactions in other 

securities, such as fixed income 

securities.244 Because Form ATS–N is 

specifically designed for NMS Stock 

ATSs, subscribers relying on Form 

ATS–N disclosures to assess a non-NMS 

Stock ATS, such as one that trades fixed 

income securities, as a potential trading 

venue may not receive a complete or 

comprehensible understanding of the 

ATS’s fixed income operations, or fixed 

income activities of the broker-dealer 

operator and its affiliates as such 

activities relate to the ATS, because 

Form ATS–N does not solicit such 

information. We believe that allowing 

NMS Stock ATSs to choose whether to 

integrate information about trading in 

non-NMS stocks on a Form ATS–N 

could make the disclosures confusing 

for users and make it difficult for them 

to compare the operations of an NMS 

Stock ATS against other NMS Stock 

ATSs. 

Because we are adopting rules that 

require NMS Stock ATSs to file Form 

ATS–N pursuant to Rule 304, we are 

adopting Rule 304(a) with modifications 

to provide that an NMS Stock ATS 

would specifically be excepted from 

compliance with Rules 301(b)(2)(i) 

through (vii) of Regulation ATS, which 

govern the filing of Form ATS.245 An 

NMS Stock ATS that is operating 

pursuant to an initial operation report 

on Form ATS as of January 7, 2019 

(‘‘Legacy NMS Stock ATS’’) will be 

required to file a Form ATS–N no earlier 

than January 7, 2019 and no later than 

February 8, 2019.246

We are also adopting Rule 

301(b)(2)(viii) to provide for how Legacy 

NMS Stock ATSs transition from filing 

a Form ATS to filing a Form ATS–N. We 

are defining the term ‘‘Legacy NMS 

Stock ATS’’ to mean an NMS Stock ATS 

that is operating pursuant to an initial 

operation report on Form ATS as of 

January 7, 2019. We are also replacing 

proposed language that stated that an 

NMS Stock ATS would not be subject to 

the requirements of Rule 301(b)(2) with 

language stating that a Legacy NMS 

Stock ATS shall be subject to the Form 

ATS filing requirements of Rule 

301(b)(2)(i) through (vii) until the 

Legacy NMS Stock ATS files an initial 

Form ATS–N with the Commission 

pursuant to Rule 304(a)(1)(iv)(A), and 

that thereafter, the Legacy NMS Stock 

ATS shall file reports 247 pursuant to 

Rule 304(a)(1)(iv)(A). We intended in 

the Proposal to except a Legacy NMS 

Stock ATS from compliance with Rule 

301(b)(2)(i) through (vii) after it filed 

Form ATS–N, but also intended that a 

Legacy NMS Stock ATSs be subject to 

Rule 301(b)(2)(viii), which requires 

NMS Stock ATSs to file reports required 

by Rule 304.248 We believe that this 

modification will make clear that, until 

a Legacy NMS Stock ATS files its Form 

ATS–N with the Commission, the 

Legacy NMS Stock ATS must amend 

Form ATS in compliance with Rule 

301(b)(2) of Regulation ATS. 

We are also including language in 

Rule 301(b)(2)(viii) stating that as of 

January 7, 2019, an entity seeking to 

operate as an NMS Stock ATS shall not 

be subject to the ATS filing 

requirements of Rule 301(b)(2)(i) 

through (vii) and shall file reports 

pursuant to Rule 304.249 Rule 

301(b)(2)(viii) describes the reporting 

obligations of Legacy NMS Stock ATSs, 

and we believe that this additional 

language will make clear that NMS 

Stock ATSs must file an initial Form 

ATS–N, and that they do not need to 

comply with Rule 301(b)(2)(i) through 

(vii) and therefore should not file Form 

ATS.250

We recognize that an entity may wish 

to start operating as an NMS Stock ATS 

between the time the final rule is 

adopted and January 7, 2019. During 

that time, an entity must file an initial 

operation report on Form ATS and 

comply with Rule 301(b)(2); after 

January 7, 2019, the ATS, which would 

operate as a Legacy NMS Stock ATS, 

must file an initial Form ATS–N 

between January 7, 2019 and February 

8, 2019 pursuant to Rule 

304(a)(1)(iv)(A).251 As of January 7, 

2019, an entity that seeks to operate as 

an NMS Stock ATS must comply with 

Rule 304 (and not with Rules 

301(b)(2)(i) through (vii)) and file an 

initial Form ATS–N with the 

Commission. 

We are adopting, with a nonsubstantive modification, the proposed 

Rule 301(b)(2)(viii) requirement that an 

ATS that effects transactions in both 

NMS stocks and non-NMS stocks be 

subject to the requirements of new Rule 

304 with respect to NMS stocks and 


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252This modification is being made for clarity 

and consistency with the Rule 300(k) definition of 

NMS Stock ATS. See supra Section III.B.1. 

253See 17 CFR 242.301(b)(2)(i) and (vii), 

respectively. 

254See 17 CFR 242.301(b)(9). 

255See Regulation ATS Adopting Release, supra 

note 3, at 70878. The information filed on Form 

ATS–R permits the Commission to monitor trading 

on an ATS. 

256We did not propose any other changes to Rule 

301(b)(9). Form ATS–R would continue to be 

deemed confidential. 

257See supra note 15. 

258See SIFMA Letter at 8 n.16. 

259Form ATS–R requires ATSs to provide, among 

other things, trading volumes, a list of all 

subscribers that were participants of the ATS, and 

a list of all securities traded. The information on 

Form ATS–R permits the Commission to monitor 

ATSs for compliance with the fair access 

requirements of Rule 301(b)(5), as ATSs subject to 

those requirements must report quarterly on Form 

ATS–R the persons to whom they grant, deny, or 

limit access to the ATS, as well as the date of the 

action, the effective date of the action, and the 

nature of the denials of limitations of access. See 

Form ATS–R; see also Regulation ATS Adopting 

Release, supra note 3, at 70878. 

260See HMA Letter at 11 n.64. 

261See supra Section X.D.6. 

262See supra Section III.B.4. 

263See infra Section IV. 

264 17 CFR 242.301(a). 

265See Proposal, supra note 2, at 81087. 

266See 17 CFR 242.301(b)(8). 

267See 17 CFR 242.302. 

268See 17 CFR 242.303. 

269See 17 CFR 242.303(a)(1). 

270See id. 

271See supra notes 77–81 and accompanying text. 

272See supra notes 72–75 and accompanying text. 

273See 17 CFR 242.303(a)(2). 

274See 17 CFR 242.301(b)(2). 

275See supra notes 72–75 and accompanying text. 

276See 17 CFR 242.301(b)(2). 

277See 17 CFR 242.303(a)(2)(ii). 

Rule 301(b)(2) with respect to non-NMS 

stocks. We are modifying the 

requirement to replace ‘‘effects 

transactions in’’ with ‘‘trades.’’ As 

adopted, Rule 301(b)(2)(viii) requires 

that an ATS that trades both NMS stocks 

and non-NMS stocks be subject to the 

requirements of new Rule 304 with 

respect to NMS stocks and Rule 

301(b)(2) with respect to non-NMS 

stocks.252 By adopting Rule 304 and 

Form ATS–N, we believe it has 

addressed concerns raised by NMS 

Stock ATSs, as discussed above and in 

the Proposal, but that applying Rule 304 

to the non-NMS Stock ATS operations 

of ATSs that trade both NMS stocks and 

non-NMS stocks would impose unequal 

regulatory burdens across ATSs that 

transact in non-NMS stocks. Finally, we 

are adopting as proposed nonsubstantive amendments to Rule 

301(b)(2)(i) and Rule 301(b)(2)(vii) to 

delete outdated references to dates for 

phased-in compliance with Regulation 

ATS for ATSs that were operational as 

of April 21, 1999, and to update the 

name of the Division of Trading and 

Markets, respectively.253

5. Rule 301(b)(9): Form ATS–R 

Quarterly Reports 

We also proposed to amend Rule 

301(b)(9) of Regulation ATS,254 which 

provides that an ATS shall report 

transaction volume on Form ATS–R on 

a quarterly basis and within 10 calendar 

days after it ceases operation,255 to 

require an ATS that trades both NMS 

stocks and non-NMS stocks to 

separately report its transactions in 

NMS stocks on one Form ATS–R, and 

its transactions in non-NMS stocks on 

another Form ATS–R.256

We received two comments regarding 

Form ATS–R. One commenter states 

that in light of information on FINRA’s 

website regarding ATSs,257 and the 

detailed disclosures in periodic 

disclosures required by Form ATS–N, 

the Commission should no longer 

require an NMS Stock ATS to file Form 

ATS–R.258 We are not amending 

Regulation ATS at this time to remove 

the requirement for NMS Stock ATSs to 

file Form ATS–R. Notwithstanding the 

disclosure on FINRA’s website of 

certain volume information for ATSs 

that trade NMS stocks, we continue to 

believe that the form helps the 

Commission oversee and monitor the 

trading activity of NMS Stock ATSs, 

because Form ATS–R provides the 

Commission with information that is 

unavailable on the FINRA website.259

Another commenter states that to 

alleviate burdens on ATSs and promote 

more meaningful comparisons across 

firms and venues, the Commission 

should significantly revise reporting 

obligations on Form ATS–R.260 The 

commenter does not specify how Form 

ATS–R should be revised; however, we 

believe that the role Form ATS–R plays 

in helping the Commission to oversee 

and monitor the trading activities of 

NMS Stock ATSs justifies the burden on 

NMS Stock ATSs to file Form ATS– 

R.261

6. Rule 303: Recordkeeping 

Requirements for Form ATS–N 

We proposed amending Rules 

303(a)(1) and 303(a)(2) of Regulation 

ATS to reflect the proposed 

amendments to Rule 301(b)(2) 262 and 

the addition of Rule 304.263 In addition, 

the proposed rules would make minor 

technical amendments to Rule 303. We 

received no comments on the proposed 

amendments to Rule 303 and are 

adopting these requirements as 

proposed. 

Unless not required to comply with 

Regulation ATS pursuant to Rule 

301(a) 264 of Regulation ATS, an ATS 

must comply with the recordkeeping 

requirements of Regulation ATS.265

Specifically, Rule 301(b)(8) 266 requires 

an ATS to make and keep current the 

records specified in Rule 302 267 and to 

preserve the records specified in Rule 

303.268 Before the adoption of the 

amendments to Rule 303, Rule 303(a)(1) 

required an ATS to preserve certain 

records for at least three years, the first 

two years in an easily accessible 

place.269 Specifically, Rule 303(a)(1) 270

required an ATS to preserve: (1) All 

records required to be made pursuant to 

Rule 302; (2) all notices provided to 

subscribers, including notices 

addressing hours of operations, system 

malfunctions, changes to system 

procedures, maintenance of hardware 

and software, and instructions 

pertaining to access to and denials of, or 

limitations on, access to the ATS; (3) 

documents made or received in the 

course of complying with the system 

capacity, integrity, and security 

standards in Rule 301(b)(6), if 

applicable; 271 and (4) if the ATS is 

subject to the fair access requirements 

under Rule 301(b)(5),272 a record of its 

access standards. Rule 303(a)(2) 273

requires that certain other records must 

be kept for the life of the ATS and any 

successor enterprise, including 

partnership articles or articles of 

incorporation (as applicable), and 

copies of reports filed pursuant to Rule 

301(b)(2),274 which includes current 

Form ATS, and records made pursuant 

to Rule 301(b)(5).275 In particular, 

reports required to be maintained for the 

life of the ATS, or any successor 

enterprise, include initial operation 

reports, amendments, and cessation of 

operations reports, filed on Form 

ATS.276

We are amending the record 

preservation requirements of Rule 303 

to incorporate the preservation of 

records that would be created pursuant 

to the requirements that NMS Stock 

ATSs file initial Form ATS–N, Form 

ATS–N amendments, and notices of 

cessation on Form ATS–N, instead of 

Form ATS. Specifically, we are 

amending Rule 303(a)(2)(ii) to require 

that an ATS shall preserve, for the life 

of the enterprise and of any successor 

enterprise, copies of reports filed 

pursuant to Rule 301(b)(2) or—in the 

case of an NMS Stock ATS—Rule 304, 

and records made pursuant to Rule 

301(b)(5).277 As a result, because an 

NMS Stock ATS will be required to file 

initial Form ATS–N, Form ATS–N 

amendments, and notices of cessation 

on Form ATS–N pursuant to Rule 304, 


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278NMS Stock ATSs that had previously made 

filings on Form ATS must preserve those filings for 

the life of the enterprise, as well as filings made 

going forward on Form ATS–N. See id. We believe 

that the amendments to Rule 303 are necessary to 

create a meaningful audit trail of an ATS’s current 

and previous written safeguards and procedures 

pursuant to Rule 301(b)(2) and permit surveillance 

and examination staff to help ensure fair and 

orderly markets without imposing any undue 

burden on ATSs. 

279See infra Section VI. 

280See Proposal, supra note 2, at 81058, 81083. 

281See Citadel Letter at 3; Liquidnet Letter at 14– 

15; see also supra Section II.C (discussing the order 

display and execution access requirements under 

Rule 301(b)(3) of Regulation ATS). 

282See Citadel Letter at 3. 

283The commenter believes that the threshold for 

the order display requirement may prevent it from 

offering functionalities that may provide market 

participants flexibility in how they display block 

orders. See Liquidnet Letter at 14–15. 

284See Citadel Letter at 2–3; Liquidnet Letter at 

9–12; see also supra Section II.C (discussing the fair 

access requirements under Rule 301(b)(5) of 

Regulation ATS). 

285See Citadel Letter at 2. 

286See Liquidnet Letter at 10. 

287See UBS Letter at 8. In 2009, the Commission 

published a proposal to address certain practices 

with respect to undisplayed liquidity, which is 

trading interest that is available for execution at a 

trading center, but is not included in the 

consolidated quotation data that is widely 

disseminated to the public. See Regulation of NonPublic Trading Interest at 61209 (proposal to 

amend, among other things, Rule 301(b)(3) of 

Regulation ATS). 

288See Barnard Letter at 2. 

289See supra Section III.A.1. See also Rule 

301(a)(1)(i). 

290We are making the following non-substantive 

modifications to Rule 304(a)(1)(i): (1) Deleting the 

phrase ‘‘from the definition of ‘exchange’;’’ (2) 

changing the phrase ‘‘in accordance with the 

instructions therein’’ to ‘‘in accordance with the 

conditions of this section;’’ and (3) adding the term 

‘‘initial’’ before ‘‘Form ATS–N.’’ 

instead of on Form ATS pursuant to 

Rule 301(b)(2), the NMS Stock ATS 

must preserve those reports for the life 

of the enterprise and of any successor 

enterprise pursuant to Rule 303(a)(2) as 

amended.278 We are not amending the 

recordkeeping requirements of Rule 302, 

or any other amendments to the record 

preservation requirements of Rule 

303(a)(2). 

We are also adopting a minor 

technical amendment to Rule 303(a). 

Currently, Rule 303(a) references 

‘‘paragraph (b)(9) of § 242.301’’ when 

setting forth the record preservation 

requirements for ATSs; this reference is 

incorrect, as Rule 301(b)(9) describes the 

filing requirements, rather than the 

recordkeeping requirements, for ATSs. 

We are therefore adopting a change to 

correct the above reference to 

‘‘paragraph (b)(8) of § 242.301.’’ In 

addition, we are adopting an 

amendment to Rule 303(a)(1) to 

incorporate amendments to Rule 

301(b)(10).279

7. Comments Recommending Changes 

to Other Existing Regulation ATS Rules 

In the Proposal, we requested 

comment on other potential changes to 

Regulation ATS rules, including the 

order display and execution access 

requirement in Rule 301(b)(3) and the 

fair access requirement in Rule 

301(b)(5).280 We received two comments 

recommending changes to Rule 

301(b)(3) of Regulation ATS.281 One 

commenter urges the Commission to 

consider lowering or eliminating the 

threshold for the order display 

requirement.282 Another commenter 

states that lowering the threshold for the 

order display requirement would result 

in reduced choice and higher trading 

costs for long-term investors, and urges 

the Commission to provide a block 

exemption from the order display 

requirement.283

In addition, the Commission received 

two comments recommending changes 

to the fair access requirements in Rule 

301(b)(5).284 One commenter urges the 

Commission to eliminate the 5% trading 

volume fair access threshold, in light of 

the importance of NMS Stock ATSs to 

equity markets today.285 Another 

commenter states that rather than 

lowering the trading volume threshold 

that triggers the fair access requirement 

of Rule 301(b)(5), the Commission 

should exclude block executions from 

counting towards the fair access 

threshold.286 In addition, one 

commenter believes that, in connection 

with Rule 301(b)(3) of Regulation ATS 

(order display and execution access), it 

is not appropriate to include actionable 

indications of interest in the definitions 

of ‘‘bid’’ and ‘‘offer’’ under Regulation 

NMS.287 Another commenter states that 

actionable indications of interest should 

be treated as quotes and should be 

transparent to the public.288

We are not adopting changes to the 

order display and execution 

requirement or the fair access 

requirement at this time. We believe 

that it is appropriate to take an 

incremental approach by first applying 

the amended regime to NMS Stock 

ATSs before considering a further step 

and we intend to monitor the 

effectiveness of Rule 301(b)(3) and Rule 

301(b)(5) requirements. Should the 

Commission decide to take further 

action with regard to these 

requirements, such as proposing to 

amend Regulation ATS, the Commission 

would do so in a separate rulemaking 

and take into account its experience 

with Rule 304 and NMS Stock ATSs. 

IV. Form ATS–N Filing Process; 

Effectiveness Review 

A. Initial Form ATS–N 

1. Rule 304(a)(1)(i): Filing and 

Effectiveness Requirement 

Rule 304(a)(1)(i) requires that an NMS 

Stock ATS operate pursuant to an 

effective initial Form ATS–N to be 

exempt from the definition of 

‘‘exchange.’’ Proposed Rule 304(a)(1)(i) 

(‘‘Filing’’) provided that no exemption 

from the definition of ‘‘exchange’’ is 

available to an NMS Stock ATS 

pursuant to § 240.3a1–1(a)(2) unless the 

NMS Stock ATS files with the 

Commission a Form ATS–N, in 

accordance with the Instructions 

therein, and the Commission declares 

the Form ATS–N effective. Proposed 

Rule 304(a)(1)(i) also included 

transitional provisions for Legacy NMS 

Stock ATSs to file Form ATS–N and 

operate under Rule 304. These provided 

that if an NMS Stock ATS is operating 

pursuant to a previously-filed initial 

operation report on Form ATS as of the 

effective date of the final rule, such 

NMS Stock ATS shall file with the 

Commission a Form ATS–N, in 

accordance with the Instructions 

therein, no later than 120 calendar days 

after the effective date of the final rule. 

Further, proposed Rule 304(a)(1)(i) 

would have provided that an NMS 

Stock ATS operating as of the effective 

date of the final rule may continue to 

operate pursuant to a previously-filed 

initial operation report on Form ATS 

pending the Commission’s review of the 

filed Form ATS–N. We are adopting 

Rule 304(a)(1)(i) (‘‘Filing and 

Effectiveness Requirement’’) with 

modifications and relocating the 

provisions applicable to Legacy NMS 

Stock ATSs to another provision within 

Rule 304(a)(1). Rule 304(a)(1)(i) sets 

forth two principal conditions of the 

Exchange Act Rule 3a1–1(a)(2) 

exemption for NMS Stock ATSs: (1) The 

NMS Stock ATS must file an initial 

Form ATS–N, and (2) the initial Form 

ATS–N must be effective.289

We are relocating the provisions of 

proposed Rule 304(a)(1)(i) regarding the 

filing of Form ATS–N by Legacy NMS 

Stock ATSs during the Commission 

review period to Rule 304(a)(1)(iv) to 

better organize the rule text, particularly 

in light of other changes we are making 

to the proposed rule in response to 

comments. In addition, we are making 

other, non-substantive modifications 

that we believe will not impact NMS 

Stock ATSs and will result in a more 

readable rule text for the public.290

We are also changing Rule 304(a)(1)(i) 

to state that the exemption for NMS 

Stock ATSs will not be available unless 

‘‘the initial Form ATS–N is effective 


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291See Rule 301(b)(1). An entity seeking to 

operate as an NMS Stock ATS that has filed an 

initial operation report on Form ATS prior to 

January 7, 2019, but has not yet become operational 

pursuant to Rule 301(b)(2)(i), must file an initial 

operation report on Form ATS–N, in accordance 

with the conditions of Rule 304, and the initial 

Form ATS–N must become effective before the new 

NMS Stock ATS may commence operations. 

292See infra Section IV.A.4.b. 

293See CFA Institute Letter at 4; Liquidnet Letter 

at 3; PDQ Letter at 2. See also infra note 435. 

294See CFA Institute Letter at 4. 

295See Liquidnet Letter at 3. See also PDQ Letter 

at 2. 

296See Proposal, supra note 2, at 81023–81024. 

See infra Section IV.A.4.b for a description of Rule 

304(a)(1)(iv)(B), which provides the Commission 

review period for Legacy NMS Stock ATSs. 

297See Proposal, supra note 2, at 81024. 

298See HMA Letter at 7–8. 

299See Rule 304(a)(1)(iii); Rule 304(a)(1)(iv)(A). 

See also Section IV.A.4.b. 

300See Rule 304(a)(1)(ii)(A); 304(a)(1)(iv)(B). See 

also infra Section IV.A.4.b. 

301See Consumer Federation of America Letter at 

10. 

pursuant to paragraph (a)(1)(iii) or 

(a)(1)(iv)(A) of [Rule 304]’’ rather than 

the proposed rule text, which stated that 

the exemption is available only if ‘‘the 

Commission declares the Form ATS–N 

effective.’’ This change is made in 

connection with adopted Rule 

304(a)(1)(iii) and Rule 304(a)(1)(iv)(A), 

which, in response to comments, 

provide that an initial Form ATS–N for 

both a non-Legacy NMS Stock ATS and 

Legacy NMS Stock ATS, as amended, 

becomes effective, unless declared 

ineffective, upon the earlier of: (1) The 

completion of review by the 

Commission and publication pursuant 

to Rule 304(b)(2) or (2) the expiration of 

the Commission review period, or, if 

applicable, the end of the extended 

review period. Accordingly, we are 

adopting Rule 304(a)(1)(i), which 

provides that no exemption is available 

to an NMS Stock ATS pursuant to Rule 

3a1–1(a)(2) unless the NMS Stock ATS 

files with the Commission an initial 

Form ATS–N, in accordance with the 

conditions of Rule 304 and the initial 

Form ATS–N is effective pursuant to 

Rule 304(a)(1)(iii) or Rule 

304(a)(1)(iv)(A). Consequently, an NMS 

Stock ATS that is not a Legacy NMS 

Stock ATS operating pursuant to an 

initial operation report on Form ATS as 

of January 7, 2019, will be required to 

comply with the requirements of Rule 

304 as of that date. 291

2. Rule 304(a)(1)(ii): Commission 

Review Period 

Rule 304(a)(1)(ii) describes the timing 

for the Commission’s review of initial 

Form ATS–N for Legacy NMS Stock 

ATSs. Proposed Rule 304(a)(1)(ii) 

provided the timing for the 

Commission’s review of initial Form 

ATS–N as adopted for both Legacy NMS 

Stock ATSs and non-Legacy NMS Stock 

ATSs. The timing for the Commission’s 

review of initial Form ATS–N for 

Legacy NMS Stock ATSs is provided by 

Rule 304(a)(1)(iv)(B).292

Proposed Rule 304(a)(1)(ii)(A) 

(‘‘Review period and extension of the 

120-day review period’’) provided that 

the Commission would declare a Form 

ATS–N filed by a Legacy NMS Stock 

ATS effective or ineffective no later than 

120 calendar days from filing with the 

Commission. Proposed Rule 

304(a)(1)(ii)(A) also provided that the 

Commission could extend the review 

period for Forms ATS–N filed by Legacy 

NMS Stock ATSs: (1) An additional 120 

calendar days if the Form ATS–N is 

unusually lengthy or raises novel or 

complex issues that require additional 

time for review, in which case the 

Commission will notify the NMS Stock 

ATS in writing within the initial 120- 

calendar day review period and will 

briefly describe the reason for the 

determination for which additional time 

for review is required; or (2) any 

extended review period to which a 

duly-authorized representative of the 

NMS Stock ATS agrees in writing. 

Proposed Rule 304(a)(1)(ii)(B) would 

have provided that the Commission 

would declare a Form ATS–N filed by 

an non-Legacy NMS Stock ATS effective 

or ineffective no later than 120 calendar 

days from filing with the Commission. 

The proposed rule also would have 

provided that the Commission may 

extend the Form ATS–N review period 

for: (1) An additional 90 days, if the 

Form ATS–N is unusually lengthy or 

raises novel or complex issues that 

require additional time for review, in 

which case the Commission will notify 

the NMS Stock ATS in writing within 

the initial 120-calendar day review 

period and will briefly describe the 

reason for the determination for which 

additional time for review is required; 

or (2) any extended review period to 

which a duly-authorized representative 

of the NMS Stock ATS agrees in writing. 

We received three comments regarding 

the length of the Commission review 

period and extended review period for 

Form ATS–N filings.293 One commenter 

states that the 120-calendar day period 

for the Commission to review Form 

ATS–N filings is a reasonable amount of 

time for the Commission to process each 

filing, and the 120-day extension of the 

review period for Form ATS–N filings 

by Legacy NMS Stock ATSs that are 

particularly novel or complex is 

agreeable.294 Another commenter does 

not object to the proposed period for 

reviewing Form ATS–N.295 We continue 

to believe that an initial review period 

of 120 calendar days for Form ATS–N 

filings would provide the Commission 

adequate time to carry out its oversight 

functions with respect to its review of 

Forms ATS–N filed by both Legacy 

NMS Stock ATSs and non-Legacy NMS 

Stock ATSs, including its 

responsibilities to protect investors and 

maintain fair, orderly, and efficient 

markets.296 We also continue to believe 

that extended review periods of 120 

calendar days for Form ATS–N filings 

by Legacy NMS Stock ATSs, and 90 

calendar days for filings by non-Legacy 

NMS Stock ATSs, that are unusually 

lengthy or raise novel or complex 

issues, are appropriate. As discussed in 

the Proposal, these time periods will 

allow the Commission and its staff to 

conduct a thorough review of certain 

lengthy, novel, or complex Form ATS– 

N filings and provide sufficient 

opportunity to discuss a filing with an 

NMS Stock ATS if necessary.297

One commenter worries the review 

process may devolve into other market 

centers seeking to have the Commission 

preserve their market positions, and 

urges the Commission to promptly 

evaluate and act on initial Form ATS– 

N filings.298 We believe that the 

proposed time periods for review of 

Form ATS–N filings are appropriate. 

The Commission could, depending on 

the length and complexity of a Form 

ATS–N filing, complete the review prior 

to the expiration of the review period; 

thus, the Form ATS–N would become 

effective upon publication, pursuant to 

Rule 304(b)(2).299 The review periods 

and extended review periods combined 

cannot exceed 240 calendar days for a 

Legacy NMS Stock ATS or 210 calendar 

days for a non-Legacy NMS Stock ATS 

unless the NMS Stock ATS agrees, in 

writing, to a longer review period.300

In addition, one commenter states that 

the proposed process for determining 

whether an NMS Stock ATS qualifies 

for the exemption from the definition of 

‘‘exchange’’ could, in light of the 

Commission’s SRO rule filing review 

responsibilities, overwhelm staff by 

adding potentially hundreds of new 

NMS Stock ATS filings.301 This 

commenter expresses concern that 

Commission staff may spend too much 

time reviewing whether an NMS Stock 

ATS meets its procedural obligations 

rather than trying to better understand 

the ‘‘substance, merits, and potential 

misconduct of ATSs’ trading operations 

and activities, and how they fit into the 

broader market structure,’’ and worries 

that Commission staff ‘‘might get caught 

in a procedural morass and miss the 


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302See id. 

303See id. at 2, 10. 

304We are: (1) Deleting proposed Rule 

304(a)(1)(iv), which stated that the Commission 

would issue an order declaring a Form ATS–N 

effective or ineffective and (2) adding the words ‘‘by 

order’’ to adopted Rule 304(a)(1)(ii). These changes 

simplify the rule text without changing the 

Commission’s proposal to inform the public about 

the ineffectiveness of Form ATS–N by issuing an 

order. 

305We are deleting text that states that this 

provision applies to ‘‘an NMS Stock ATS that was 

not operating as of [effective date of the final rule]’’ 

as it will be clear that the provisions of Rule 

304(a)(1)(ii) apply to the filing of initial Form ATS– 

N by non-Legacy NMS Stock ATSs and that the 

provisions of Rule 304(a)(1)(iv) will apply to filings 

by Legacy NMS Stock ATSs. 

306See proposed Rule 304(a)(1)(iv). 

307See Rule 304(b)(2)(i). 

308See Proposal supra note 2, at 81026. 

309See infra Sections IV.B.1.b and IV.B.1.c. 

Amendments will be subject to Commission review 

under Rule 304(a)(2)(ii), which states that the 

Commission will, by order, declare ineffective any 

Form ATS–N amendment no later than 30 calendar 

days from filing of such amendment with the 

Commission if the Commission finds that such 

action is necessary or appropriate in the public 

interest, and is consistent with the protection of 

investors. 

310See id. 

311Unlike non-Legacy NMS Stock ATSs, Legacy 

NMS Stock ATSs will operate during the 

Commission review period pursuant to a filed, but 

not yet effective, initial Form ATS–N. Accordingly, 

Legacy NMS Stock ATSs may file amendments to 

their Form ATS–N during the Commission review 

period to make material changes to their operations 

and introduce new functionalities. See infra Section 

IV.A.4.c. 

312The Commission could, however, complete its 

review of a refiled initial Form ATS–N in less than 

120 calendar days from the date of filing, and the 

Form ATS–N would become effective upon 

publication. See Rules 304(a)(1)(ii)-(iii) and 304(b). 313We are making additional changes from 

proposed Rule 304(a)(1)(ii) to: (1) Rename the 

paragraph from ‘‘Review period and extension of 

the 120-day review period’’ to ‘‘Commission review 

period;’’ (2) add to the end of the first sentence that 

the Commission may declare an initial Form ATS– 

N ineffective no later than 120 calendar days from 

the date of filing with the Commission ‘‘or, if 

applicable, the end of the extended review period;’’ 

(3) specify that the Commission will declare an 

initial Form ATS–N ineffective no later than 120 

calendar days from ‘‘the date of’’ filing with the 

Commission; (4) add the word ‘‘initial’’ before Form 

ATS–N; and (5) add the word ‘‘calendar’’ before 

‘‘day’’ in the description of the 90-day extension 

period. 

314See proposed Rule 304(a)(1)(iii). 

forest for the trees.’’ 302 This commenter 

compares the proposed review process 

for Form ATS–N filings to the review 

and approval process for SRO rule 

changes, and states that unless the 

Commission is more willing than it has 

previously been to challenge 

applications, the proposed process for 

reviewing Form ATS–N filings will 

devolve into an ‘‘unreasonably 

burdensome exercise for Commission 

staff while providing little benefit to 

market integrity or investor 

protection.’’ 303 We do not believe that 

the review process would be 

unreasonably burdensome to the 

Commission or its staff. The 

Commission’s review will not be meritbased; instead, it will focus on the 

completeness and comprehensibility of 

disclosures. In addition, under the 

adopted rules, a Form ATS–N, as 

amended, will become effective, unless 

declared ineffective, upon the earlier of 

the completion of Commission review 

or the end of the Commission review 

period. This streamlined process will 

facilitate efficient Commission review, 

which is designed to protect investors 

by allowing the Commission to review 

disclosures on Form ATS–N for 

potential deficiencies that might 

otherwise confuse or mislead market 

participants about the operations of the 

NMS Stock ATS or the ATS-related 

activities of the broker-dealer operator 

and its affiliates. 

We are adopting proposed Rule 

304(a)(1)(ii)(B) with modifications, 

renumbering the proposed rule as Rule 

304(a)(1)(ii) (‘‘Commission review 

period’’), and relocating Rule 

304(a)(1)(ii)(A), which relates to Legacy 

NMS Stock ATSs, to Rule 

304(a)(1)(iv)(B). We are modifying 

proposed Rule 304(a)(1)(ii) to state that 

the Commission ‘‘may,’’ ‘‘by order,’’ 304

as provided in Rule 304(a)(1)(iii), 

declare an initial Form ATS–N filed by 

an NMS Stock ATS ineffective no later 

than 120 calendar days from the date of 

filing with the Commission or, if 

applicable, the end of the extended 

review period.305 Proposed Rule 

304(a)(1)(iv) (‘‘Order regarding 

effectiveness’’) would have required the 

Commission to issue an order to declare 

a Form ATS–N effective or ineffective. 

We are not adopting the proposed 

requirement 306 that the Commission 

issue an order to declare a Form ATS– 

N effective because, as described below, 

the Commission will only issue orders 

of ineffectiveness. In addition, to 

improve readability, the adopted rule 

references the ineffectiveness process in 

Rule 304(a)(1)(iii). The Commission will 

make public, on its website, any 

effective initial Form ATS–N, as 

amended.307

We are modifying Rule 304(a)(1)(ii) to 

add a provision that will allow NMS 

Stock ATSs to amend their initial Forms 

ATS–N during the Commission review 

period. We discussed in the Proposal 

that during the Commission’s review, 

the Commission staff may provide 

comments to the entity, and may request 

that the entity supplement information 

in the Form ATS–N or revise its 

disclosures on Form ATS–N.308 In 

addition, an NMS Stock ATS may need 

to update disclosures on its initial Form 

ATS–N to otherwise reflect changes 

during the Commission review period. 

To allow an NMS Stock ATS to correct 

or update its disclosures on an initial 

Form ATS–N during the review period, 

we are modifying Rule 304(a)(1)(ii) to 

provide that during the review period of 

the initial Form ATS–N, the NMS Stock 

ATS shall amend its initial Form ATS– 

N pursuant to the requirements of Rules 

304(a)(2)(i)(B) and (C), which are 

discussed further below.309 We believe 

that updates or corrections to an NMS 

Stock ATS’s disclosures about its 

intended operations would be properly 

filed as updating or correcting 

amendments pursuant to Rules 

304(a)(2)(i)(B) and (C).310 We believe 

allowing an entity seeking to operate as 

an NMS Stock ATS to amend its initial 

Form ATS–N during the Commission 

review period will promote 

transparency and facilitate complete 

and comprehensible disclosures. Once 

an initial Form ATS–N becomes 

effective, the Commission will make 

public the initial Form ATS–N, as 

amended, which will incorporate any 

amendments that were filed during the 

Commission review period. An NMS 

Stock ATS (other than a Legacy NMS 

Stock ATS),311 however, seeking to 

amend its initial Form ATS–N to make 

a material change to its Form ATS–N 

disclosures during the Commission 

review period must withdraw its initial 

Form ATS–N and may refile a new, 

initial Form ATS–N pursuant to Rule 

304(a)(1). We believe a material change 

to the disclosures on an initial Form 

ATS–N would necessitate a full review 

period.312 In addition, we have made 

several technical, non-substantive 

modifications to Rule 304(a)(1)(ii) that 

are designed to improve the readability 

of the rule, reduce potential ambiguity, 

or both.313

3. Rule 304(a)(1)(iii): Effectiveness; 

Ineffectiveness Determination 

Rule 304(a)(1)(iii) describes the 

process by which an initial Form ATS– 

N would become effective, or be 

declared ineffective by the Commission. 

Proposed Rule 304(a)(1)(iii) 

(‘‘Effectiveness’’) provided that the 

Commission will declare effective a 

Form ATS–N if the NMS Stock ATS 

qualifies for the Rule 3a1–1(a)(2) 

exemption and that the Commission 

will declare ineffective a Form ATS–N 

if it finds, after notice and opportunity 

for hearing, that such action is necessary 

or appropriate in the public interest, 

and is consistent with the protection of 

investors.314 Proposed Rule 304(a)(1)(iv) 

(‘‘Order regarding effectiveness’’) 


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315See Proposal, supra note 2, at 81024–81026. 

316See Rule 304(c); Instructions to Form ATS–N. 

The Commission’s staff may become aware of 

information, as a result of discussions with the 

NMS Stock ATS or otherwise, that calls into 

question, for example, the currency or accuracy of 

the disclosures on a Form ATS–N, which may 

result in a determination to begin the process to 

declare the Form ATS–N ineffective. See infra 

Section IV.A.3.d. 

317See SIFMA Letter at 28. 

318See id. 

319See id. 

320See proposed Instructions to Form ATS–N. As 

adopted, the Instructions to Form ATS–N state that: 

‘‘An NMS Stock ATS must provide all the 

information required by Form ATS–N, including 

responses to each Item, as applicable, and the 

Exhibits, and disclose information that is accurate, 

current and complete. . . . A filing that is defective 

may be rejected and not accepted by the EDGAR 

system. Any filing so rejected shall be deemed not 

to have been filed.’’ The Instructions to Form ATS– 

N replace the proposed cite to 17 CFR 240.0–3 

under the Exchange Act, which applies to paper 

filings, with a cite to Regulation S–T, which applies 

to electronic filings, because the form will be 

electronically filed via EDGAR. See Instructions to 

Form ATS–N. Because Form ATS–N will be 

electronically filed, we do not believe it is 

necessary to return a copy of Form ATS–N filings 

and are therefore replacing the word ‘‘returned’’ 

with ‘‘rejected’’ to specify this. 

We are also modifying the Instructions to Form 

ATS–N to delete the phrase: ‘‘and must present the 

information in a clear and comprehensible 

manner.’’ See Instructions to Form ATS–N. This 

modification to the Instructions to Form ATS–N 

will streamline the instructions by removing 

confusing language relating to the Commission’s 

standard of review, but will not modify an NMS 

Stock ATS’s obligations with respect to Form ATS– 

N. Additionally, the Commission has reorganized 

the Instructions to differentiate between an NMS 

Stock ATS’s filing obligations, and the 

consequences of incompleteness or similar 

deficiency. 

We are modifying our guidance and the rule text 

for determinations of ineffectiveness, and believe 

these modifications to the Instructions to Form 

ATS–N better align them with that guidance and 

adopted rule text and reduce any potential 

confusion about the difference between an NMS 

Stock ATS’s obligations with respect to completing 

Form ATS–N and the standard of review that the 

Commission will apply when determining whether 

to declare a Form ATS–N ineffective. See infra 

Section IV.A.3.d. See also infra Section V.A.1 

(discussing the Form ATS–N disclosure 

requirements). 

321See Proposal, supra note 2, at 81024 n.284. 

322See 17 CFR part 232. 

323Proposal, supra note 2, at 81024 n.284. 

324See id. 

325See proposed Rule 303(a)(1)(iii). 

326See Proposal, supra note 2, at 81024. 

provided that the Commission will issue 

an order to declare a Form ATS–N 

effective or ineffective. Proposed Rule 

304(a)(1)(iv) also provided that upon the 

effectiveness of the Form ATS–N, the 

NMS Stock ATS may operate pursuant 

to the conditions of Rule 304, and if the 

Commission declares a Form ATS–N 

ineffective, the NMS Stock ATS shall be 

prohibited from operating as an NMS 

Stock ATS. Proposed Rule 304(a)(1)(iv) 

further provided that a Form ATS–N 

declared ineffective would not prevent 

the NMS Stock ATS from subsequently 

filing a new Form ATS–N. We also 

discussed in the Proposal our 

preliminary beliefs regarding when it 

would be necessary or appropriate in 

the public interest to declare ineffective 

a Form ATS–N.315 We received several 

comments related to proposed Rule 

304(a)(1)(iii), proposed Rule 

304(a)(1)(iv), and the standard of review 

for declaring Form ATS–N filings 

effective or ineffective, which are 

summarized below. 

Pursuant to Rule 304 and Form ATS– 

N, as adopted and as discussed below, 

an NMS Stock ATS must provide all the 

information required by the form and 

respond to each item, as applicable, and 

disclose information that is accurate, 

current, and complete. A Form ATS–N 

filing that is defective may be rejected. 

If the filing is accepted for review, it 

will become effective unless the 

Commission finds, after notice and 

opportunity for hearing, that it is 

necessary or appropriate in the public 

interest, and consistent with the 

protection of investors, to declare the 

filing ineffective. Responsibility for 

current, complete, and accurate 

disclosures rests with the NMS Stock 

ATS.316 The Commission will consider 

whether it is necessary or appropriate in 

the public interest, and consistent with 

the protection of investors, to declare an 

initial Form ATS–N filing ineffective 

because, for example, the Form ATS–N 

was filed by an entity that does not meet 

the proposed definition of NMS Stock 

ATS; one or more disclosures reveal 

non-compliance with federal securities 

laws, or the rules or regulations 

thereunder, including Regulation ATS; 

or the disclosures are materially 

deficient with respect to completeness 

or comprehensibility. 

a. Comments on the Standard of Review 

To Accept Filings of Form ATS–N 

The determination of whether to 

reject a Form ATS–N filing is separate 

from the Commission’s determination to 

declare a filed Form ATS–N ineffective 

after Commission review. We received 

one comment regarding the process 

pursuant to which a Form ATS–N 

would be accepted for Commission 

review.317 The commenter states that 

the Commission should not review a 

Form ATS–N filing for accuracy and 

completeness in connection with 

accepting a Form ATS–N filing, but 

rather that such review should be 

conducted when the Commission is 

considering whether to declare the Form 

ATS–N effective or ineffective.318 The 

commenter states that the Commission’s 

standards for accepting a Form ATS–N 

should be clear and objective, and Form 

ATS–N should be rejected only for 

purely ‘‘technical deficiencies.’’ 319

As proposed, the Instructions to Form 

ATS–N required that ‘‘[a]n NMS Stock 

ATS must respond to each item, as 

applicable, in detail and disclose 

information that is accurate, current, 

and complete. An NMS Stock ATS must 

provide all the information required by 

the form, including the exhibits, and 

must present the information in a clear 

and comprehensible manner. A filing 

that is incomplete or similarly deficient 

may be returned to the NMS Stock 

ATS.’’ 320 In the Proposal, we stated that 

‘‘a Form ATS–N that contains technical 

deficiencies, such as missing pages or 

one in which the entity does not 

respond to all questions, including subquestions, would not be complete and 

would be returned to the NMS Stock 

ATS.’’ 321

We believe that it would be 

appropriate to reject a Form ATS–N if 

the filing is defective.322 For example, a 

Form ATS–N is defective if it is missing 

sections or missing responses to any 

questions, including sub-questions, or 

does not comply with the electronicfiling requirements. A decision to reject 

a Form ATS–N filing, and not accept it 

for review, would be for reasons distinct 

from Commission review pursuant to 

Rule 304(a)(1)(iii), as discussed below. 

The rejection of a Form ATS–N would 

not prejudice any decision by the 

Commission regarding ineffectiveness 

should the NMS Stock ATS resubmit a 

Form ATS–N.323 An NMS Stock ATS 

also may choose to withdraw a filed 

Form ATS–N.324 The Commission will 

apply the same standard when 

determining whether to accept an 

amendment to Form ATS–N for review 

or reject the filing. 

b. Comments on the Review for 

Declarations of Ineffectiveness 

We proposed that the Commission 

will declare effective a Form ATS–N if 

the NMS Stock ATS qualifies for the 

Rule 3a1–1(a)(2) exemption, and will 

declare it ineffective if it finds, after 

notice and opportunity for hearing, that 

such action is necessary or appropriate 

in the public interest, and is consistent 

with the protection of investors.325 We 

discussed in the Proposal that the 

Commission would use Form ATS–N to 

evaluate whether an entity qualifies for 

the exemption, and would evaluate, 

among other things, whether the entity 

satisfies the definition of NMS Stock 

ATS.326 We also discussed our 

preliminary beliefs regarding when it 

would be necessary or appropriate in 

the public interest to declare ineffective 


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327See id. at 81024–81026. 328See id. 329See id. at 81026. With respect to compliance 

with federal securities laws, we stated that the 

Commission’s evaluation would involve a ‘‘redflag’’ review of the Form ATS–N disclosures. See 

id. at 81025. With respect to whether an entity 

meets the definition of NMS Stock ATS, we stated 

our preliminary belief that proper classification of 

an entity would clearly indicate to market 

participants, as well as the Commission, the 

functions that entity performs and the regulatory 

framework and attendant obligations that attach to 

that entity. See id. at 81024 n.288 and 

accompanying text. 

330See MFA/AIMA Letter at 4. 

331See Investor Advocate Letter at 11. 

332See id. 

333See id. 334See id. We agree with the commenter and 

intend to help market participants understand the 

reason the Form ATS–N was declared ineffective by 

explaining the Commission’s reasoning for the 

ineffective declaration in the Commission order. 

See supra Section IV.A.3.d. 335See LeveL ATS Letter at 8–9. 336See SIFMA Letter at 32. 337See id. 338See id. at 33. 339See id. 340See id. 341See id. 

342See id. at 30. 

343See id. at 30 (emphasis in original). See also 

Proposal, supra note 2, at 81025. Another 

commenter states that it recognizes the difficulty 

associated with identifying every potential scenario 

that might cause a Form ATS–N to be declared 

ineffective, but requests that the Commission 

provide additional guidance to ensure that NMS 

Stock ATS operators understand the standard to be 

applied. See LeveL ATS Letter at 9. 

344See SIFMA Letter at 30. 

345See id. 

346See Fidelity Letter at 2, 9. This commenter 

requests that the Commission implement a 

‘‘completeness review’’ under which the 

Commission would review responses to Form ATS– 

N for completeness and consistency without 

considering the merits of each answer. The 

commenter also requests that the Commission 

provide additional guidance with respect to the 

process by which it could declare a Form ATS–N 

ineffective, and questions how review by 

Commission staff of initial filings will be 

undertaken to ensure consistency across Form 

ATS–N filings. See id. at 9. 

a Form ATS–N, and provided 

examples.327 We stated that it would be 

necessary and appropriate in the public 

interest to declare a Form ATS–N 

ineffective if the Commission finds, 

after notice and opportunity for hearing, 

that: An entity does not meet the 

definition of NMS Stock ATS; one or 

more disclosures on Form ATS–N are 

materially deficient with respect to their 

accuracy, currency or completeness; or 

one or more disclosures reveal noncompliance with federal securities laws, 

or the rules and regulations thereunder, 

including Regulation ATS.328 We also 

stated that a declaration of effectiveness 

would not constitute a finding that the 

NMS Stock ATS’s operations are 

consistent with the Exchange Act, but 

rather only address the issue of whether 

the NMS Stock ATS had complied with 

the requirements of Form ATS–N.329

We received several comments 

regarding the standard that the 

Commission would apply to declare a 

Form ATS–N effective or ineffective. 

One commenter asserts that it would be 

helpful to have the Commission review 

initial Forms ATS–N for completeness 

and accuracy, and legal and regulatory 

compliance, and to help standardize the 

level of disclosure across NMS Stock 

ATSs.330 Another commenter urges the 

Commission to move forward with the 

effectiveness determination as 

proposed.331 This commenter states that 

market participants will use the 

information disclosed on Form ATS–N 

to evaluate whether a particular NMS 

Stock ATS would be a desirable venue 

to which to route their orders, and that 

it is important that the detailed 

information be accurate, current, and 

complete.332 This commenter also states 

that the Commission should be able to 

conduct a ‘‘red flag’’ review of the 

disclosures for apparent noncompliance with the federal securities 

laws, and avoid having a noncompliant 

NMS Stock ATS begin operation with 

inadequate system operations; this 

commenter states that while not 

affording complete certainty, this review 

process would be an improvement over 

the review process for Form ATS.333

Further, the commenter states that the 

notice and hearing process will furnish 

the industry with useful information 

regarding specific regulatory concerns 

and questions.334 One commenter 

expresses concern that the Commission 

would lack objective standards to 

evaluate initial Forms ATS–N and 

amendments.335 Another commenter 

believes that in the Proposal, the 

Commission did not articulate a 

‘‘consistent standard of review’’ for 

declaring a Form ATS–N or Form ATS– 

N amendment effective or ineffective.336

The commenter expresses its view that 

the standard for declaring a Form ATS– 

N ineffective should be only if the Form 

ATS–N is ‘‘materially deficient with 

respect to completeness,’’ 337 asserting 

that criteria such as currency, accuracy, 

and fair presentation are subjective 

standards that could make it difficult for 

NMS Stock ATSs to understand the 

level of disclosure necessary to satisfy 

the Commission’s review requirements, 

and therefore require extended 

discussion with the Commission.338

Further, the commenter believes that 

such subjective standards would be 

difficult to standardize in application 

from firm to firm, would complicate the 

Commission’s review of Form ATS–N, 

and are unnecessary to increase the 

operational transparency of NMS Stock 

ATSs and to ensure a consistent level of 

information regarding NMS Stock ATSs 

is available to market participants.339

The commenter believes that the rule’s 

directives to consider whether to 

declare a Form ATS–N ineffective 

would provide the Commission with 

flexibility to determine whether 

declaring a Form ATS–N ineffective is 

‘‘necessary or appropriate in the public 

interest’’ and ‘‘consistent with the 

protection of investors,’’ and therefore 

that including additional subjectivity in 

the Commission’s standard is 

unnecessary.340 The commenter 

believes that NMS Stock ATSs would 

have other incentives to ensure the 

accuracy of their Forms ATS–N.341

This commenter also states that the 

Commission should only find a 

disclosure to be ‘‘materially deficient’’ 

with respect to the accuracy, currency, 

and completeness in an ‘‘extreme 

situation, not a circumstance where 

additional color or language might be 

viewed as preferable to a disclosure as 

filed,’’ and asserts that a response that 

is facially responsive to a question on 

Form ATS–N should be deemed 

sufficient.342 This commenter agrees 

with the examples of ‘‘materially 

deficient’’ disclosures that the 

Commission provided in the Proposal, 

but also requests that the Commission 

provide examples of ‘‘disclosures that 

would not be viewed as materially 

deficient.’’ 343 Additionally, this 

commenter states that if the 

Commission declares an initial Form 

ATS–N or amendment ineffective, it 

should provide the NMS Stock ATS 

with a clear written statement of the 

reasons for the declaration.344 The 

commenter urges the Commission to 

provide clarity and practical guidance 

around its expectations on declaring 

Form ATS–N filings effective.345

Another commenter raises concerns that 

the process for declaring Form ATS–N 

effective or ineffective may result in the 

Commission staff undertaking meritbased reviews of the disclosures on 

Form ATS–N that could be used to 

delay the effectiveness of NMS Stock 

ATSs whose features, ‘‘while meeting 

regulatory requirements, do not meet 

current industry norms.’’ 346

We believe that it would be necessary 

or appropriate in the public interest, 

and consistent with the protection of 

investors, to declare ineffective a Form 

ATS–N if, for example, the Commission 

finds, after notice and opportunity for 

hearing, the Form ATS–N was filed by 

an entity that does not meet the 

definition of NMS Stock ATS; one or 

more disclosures reveal non-compliance 


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347See infra Section IV.A.3.d. 

348See id. 

349See infra notes 404–407 and accompanying 

text. 

350See Consumer Federation of America Letter at 

2, 10–11. 

351See id. at 11. 

352See Investor Advocate Letter at 12. See also 

supra note 340 and accompanying text. Pursuant to 

Rule 304(a)(1)(iii) the Commission will issue an 

order declaring an initial Form ATS–N filing 

ineffective if it finds, after notice and opportunity 

for hearing, that such action is necessary or 

appropriate in the public interest, and is consistent 

with the protection of investors if, for example, the 

Form ATS–N was filed by an entity that does not 

meet the definition of NMS Stock ATS; one or more 

disclosures reveal non-compliance with federal 

securities laws, or the rules or regulations 

thereunder, including Regulation ATS; or the 

disclosures are materially deficient with respect to 

completeness or comprehensibility. 

353See HMA Letter at 8; Consumer Federation of 

America Letter at 11. 

354See id. 

355See HMA Letter at 8. 

356See Fidelity Letter at 9. 

357See Rule 304(a)(1)(iii). 

358See Consumer Federation of America Letter at 

2, 10. 

359See supra note 405. 

360See infra notes 404–407 and accompanying 

text. 

361See supra note 356. 

with federal securities laws, or the rules 

or regulations thereunder, including 

Regulation ATS; or one or more 

disclosures on Form ATS–N are 

materially deficient with respect to their 

completeness or comprehensibility.347

We are providing additional examples 

of when, depending on the facts and 

circumstances, the Commission may 

make such a finding.348 In response to 

comments regarding the scope of the 

Commission’s review of initial Form 

ATS–N filings and the standard to be 

applied for declarations of 

ineffectiveness, we are making clear that 

the Commission will not be conducting 

a merit-based review.349

c. Effectiveness, Ineffectiveness Process 

The Commission received comments 

about the proposed process by which a 

Form ATS–N would become effective or 

ineffective, including the potential 

implications of the proposed process. 

One commenter expresses concern that 

a declaration of effectiveness may give 

market participants a false sense of 

security that the Commission’s deeming 

an NMS Stock ATS’s Form ATS–N 

‘‘effective’’ will be tantamount to the 

Commission’s approval of an ATS’s 

operations on the merits, as market 

participants may not fully understand 

that a declaration of effectiveness only 

implies that the NMS Stock ATS has 

met the Form ATS–N filing 

requirements, and that the Commission 

is not approving the merits of the NMS 

Stock ATS’s operations or conflicts of 

interest. 350 The commenter believes 

that such mistaken belief could cause 

market participants to route orders to 

venues that are not in their best 

interests.351 Another commenter states 

that there is the danger that the 

Commission review process would 

encourage market complacency, and 

that the Commission, through guidance 

in this adopting release and continuing 

investor education, should help to 

ensure that: (1) Investors understand 

that such a determination would not 

constitute a finding that the NMS Stock 

ATS’s operations are necessarily 

consistent with the Exchange Act; and 

(2) operators of NMS Stock ATSs 

understand that the determination 

would not preclude the Commission 

from later determining that an NMS 

Stock ATS has violated federal 

securities laws.352

We also received two comments about 

an NMS Stock ATS potentially using a 

declaration of effectiveness to shield 

itself from potential liability.353 Both 

express concern that, although the 

Proposal explains that a declaration of 

effectiveness is not an ‘‘approval’’ of 

Form ATS–N, the process could be used 

to inappropriately inoculate NMS Stock 

ATS operators from liability.354 One of 

these commenters states that its concern 

is heightened by a recent court decision 

in which the court found that the 

Commission’s review and approval of 

exchanges’ activities made the activities 

legal.355 One commenter believes that a 

declaration of ineffectiveness will 

‘‘sound the death knell’’ for an NMS 

Stock ATS and that the opportunity to 

file a new Form ATS–N would be of no 

practical value because the marketplace 

would not use the ATS.356

While we do not believe that 

providing a process by which Form 

ATS–N filings will become effective or 

ineffective 357 would risk misleading 

market participants about the kind of 

review that will be undertaken by the 

Commission,358 we are modifying the 

process for initial Form ATS–N filings 

to become effective, to mitigate any such 

risk. Accordingly, the Commission will 

not declare initial Form ATS–N filings 

effective pursuant to Rule 304(a)(1)(iii). 

Further, the Commission will only 

declare ineffective an initial Form ATS– 

N if it finds, after notice and 

opportunity for hearing, that such action 

is necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. An initial Form 

ATS–N, as amended, will become 

effective, unless declared ineffective, 

upon the earlier of completion of review 

by the Commission and publication 

pursuant to Rule 304(b)(2), or the 

expiration of the review period, or, if 

applicable, the extended review period. 

Unlike proposed rule changes filed by 

national securities exchanges, the 

Commission will not make affirmative 

findings about Form ATS–N filings with 

regard to consistency with the Exchange 

Act in the general course of the review 

of Form ATS–N filings.359 As discussed 

below, the Commission’s review will 

not focus on the merits of the Form 

ATS–N disclosures, such as determining 

the strengths and weaknesses of the 

trading platform or a protocol offered by 

the NMS Stock ATS, nor is the 

Commission making findings regarding 

whether the means by which orders will 

interact on the trading platform are 

consistent with certain provisions of the 

Exchange Act.360 If disclosures on Form 

ATS–N reveal non-compliance with 

federal securities laws or the rules and 

regulations thereunder, however, the 

Commission may find that it is 

appropriate to declare the filing 

ineffective. We believe that the scope of 

the Commission’s review is clear and 

that the benefits of the Commission 

review process for Form ATS–N filings 

justify any risk that market participants 

misunderstand that the Commission is 

not performing a merit review of Form 

ATS–N. We further believe that 

adopting a process for initial Form 

ATS–N filings to become effective 

without the Commission affirmatively 

declaring them effective by order will 

help signal to market participants that 

the Commission is not passing on the 

merits of the NMS Stock ATSs’ 

disclosures regarding their operations. 

Even if we assume that a declaration of 

ineffectiveness will ‘‘sound the death 

knell,’’ as suggested by a commenter,361

or result in reputational harm to an 

NMS Stock ATS, the process for 

declaring a Form ATS–N filing 

ineffective will be consistent with the 

Commission’s objective to protect 

investors and the public interest and 

will provide NMS Stock ATSs with 

opportunities to avoid or mitigate such 

a declaration. An NMS Stock ATS 

would be given notice and an 

opportunity for hearing to respond to 

the Commission’s concerns. A nonLegacy NMS Stock ATS would also 

have the option of withdrawing and 

subsequently refiling its Form ATS–N. 

In addition, during the Commission 

review period, both non-Legacy NMS 

Stock ATSs and Legacy NMS Stock 

ATSs can amend their initial Form 

ATS–N to cure potential deficiencies. 

Additionally, if the Commission does 


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362See CFA Institute Letter at 5. 

363See id. at 4. 

364See Rule 304(a)(1)(iv)(A). See also infra 

Section IV.A.4.a (discussing the initial Form ATS– 

N requirements for Legacy NMS Stock ATSs). 

365See infra note 368 and accompanying text. 

366We are adopting a process that allows NMS 

Stock ATSs to file an updating and correcting 

amendment to an initial Form ATS–N during the 

Commission review period. See supra Section 

IV.A.2. We are adding to Rule 304(a)(1)(iii) that an 

initial Form ATS–N ‘‘as amended’’ will become 

effective, which includes any amendments filed to 

the initial Form ATS–N during the Commission 

review period. Amendments filed by an NMS Stock 

ATS to an initial Form ATS–N during the 

Commission review period are subject to Rule 

304(a)(2)(ii), which provides that the Commission 

will, by order, declare ineffective any Form ATS– 

N amendment no later than 30 calendar days from 

filing with the Commission. The Commission will 

have 30 calendar days to declare any amendments 

ineffective, including amendments to Form ATS–N 

that are filed during the Commission review period. 

For example, if an NMS Stock ATS files an 

updating or correcting amendment to an initial 

Form ATS–N on calendar day 110 of the 

Commission review period, and the initial Form 

ATS–N becomes effective on calendar day 120, the 

updating or correcting amendment could be 

declared ineffective by the Commission up to an 

additional 20 calendar days after the initial Form 

ATS–N becomes effective—until the Commission’s 

30-calendar day review period has expired. 

367We are also making technical changes to the 

proposed text of Rule 304(a)(1)(iii) by adding to 

Rule 304(a)(1)(iii) the word ‘‘initial’’ before Form 

ATS–N and renaming the paragraph as 

‘‘Effectiveness; Ineffectiveness determination.’’ 

In the Proposal, we stated that it would be 

necessary or appropriate in the public interest, and 

consistent with the protection of investors, to 

declare ineffective a Form ATS–N if it finds, after 

notice and opportunity for hearing, that one or more 

disclosures on Form ATS–N are materially deficient 

with respect to their accuracy, currency, or 

completeness. See Proposal, supra note 2, at 81025. 

As discussed further below, we are modifying the 

proposed guidance regarding when it may be 

necessary or appropriate to declare a Form ATS–N 

ineffective. 

We are also modifying the Instructions to Form 

ATS–N to better align them with that guidance, and 

to reduce any potential confusion about the 

difference between an NMS Stock ATS’s obligations 

with respect to completing Form ATS–N and the 

standard of review that the Commission will apply 

when determining whether to declare a Form ATS– 

N ineffective. See supra note 320. 

The same standard for declarations of 

ineffectiveness will apply to filings of both initial 

Form ATS–N and Form ATS–N amendments. See 

infra Section IV.B.2. 

368We are deleting the following language, which 

was part of proposed Rule 304(a)(1)(iv): ‘‘The 

Commission will issue an order to declare a Form 

ATS–N effective or ineffective.’’ This is addressed 

in the adopted rule text stating that ‘‘[a]n initial 

Form ATS–N, as amended, filed by an NMS Stock 

ATS will become effective, unless declared 

ineffective, upon the earlier of: (1) [T]he completion 

of review by the Commission and publication 

pursuant to paragraph (b)(2)(i) of [Rule 304] or (2) 

[t]he expiration of the review period, or, if 

applicable, the end of the extended review period, 

pursuant to paragraph (a)(1)(ii) of [Rule 304]’’ and 

that ‘‘[t]he Commission will, by order, declare an 

initial Form ATS–N ineffective if it finds, after 

notice and opportunity for hearing, that such action 

is necessary and appropriate in the public interest, 

and is consistent with the protection of investors.’’ 

See Rule 304(a)(1)(iii)(B). In addition, we are not 

adopting the language that states ‘‘[u]pon the 

effectiveness of the Form ATS–N, the NMS Stock 

ATS may operate pursuant to the conditions of this 

section’’ or language that states ‘‘[i]f the 

Commission declares an initial Form ATS–N 

effective, the NMS Stock ATS may operate pursuant 

to the conditions of this section’’ for purposes of 

clarity and readability. Rule 304(a)(1)(i) provides 

that an initial Form ATS–N must be effective for the 

NMS Stock ATS to avail itself of the Rule 3a1– 

1(a)(2) exemption (see supra Section IV.A.1), and 

Rule 304(a)(1)(iii) specifies when an initial Form 

ATS–N filing will become effective. Rule 

304(a)(1)(iii) also states that: (1) if the Commission 

declares an initial Form ATS–N ineffective, the 

NMS Stock ATS shall be prohibited from operating 

as an NMS Stock ATS ‘‘pursuant to § 240.3a1– 

1(a)(2);’’ and (2) an initial Form ATS–N declared 

ineffective ‘‘does’’ not (rather than ‘‘would’’ not) 

prevent the NMS Stock ATS from subsequently 

filing a new Form ATS–N. 

declare an initial Form ATS–N 

ineffective, the NMS Stock ATS will 

have an opportunity to revise its 

disclosures, or change its operations, 

and subsequently file a new initial Form 

ATS–N, and such filing could become 

effective. 

In addition, one commenter argues 

that a Form ATS–N should be 

considered ineffective upon filing until 

the Commission affirmatively declares it 

effective or ineffective.362 However, this 

commenter also recommends that if the 

Commission fails to declare a Form 

ATS–N effective or ineffective within 

the 120-calendar day review period, or 

does not extend the review period, the 

‘‘default decision’’ should be that the 

Form ATS–N is declared effective.363

We believe that it would be appropriate 

for an initial Form ATS–N to become 

effective if the Commission does not 

declare, by order, the filing ineffective 

during the initial review period, or in 

the case of an extended review period, 

during the extended period, to provide 

certainty about timing of the 

Commission’s review to the NMS Stock 

ATS and to market participants. 

Providing for an initial Form ATS–N 

filed by a Legacy NMS Stock ATS to 

become effective in this manner will 

allow the Legacy NMS Stock ATS to 

continue to operate without disruption 

to its subscribers (provided the 

Commission does not declare the Form 

ATS–N ineffective).364 Considering an 

initial Form ATS–N ineffective upon 

filing, before the Commission has 

completed the review, as suggested by a 

commenter, would cause a Legacy NMS 

Stock ATS to stop operating, which may 

harm the market participants that 

currently use the services on the Legacy 

NMS Stock ATS. Once an initial Form 

ATS–N is effective, Rule 304(a)(4) 

provides a process for the Commission 

to suspend, limit, or revoke the 

exemption for the NMS Stock ATS. 

Given this change in the effectiveness 

determination process, we do not 

believe that requiring that an initial 

Form ATS–N filing be considered 

ineffective upon filing would provide 

any additional benefit, because an NMS 

Stock ATS (except for a Legacy NMS 

Stock ATS) may not operate pursuant to 

the conditions of the Rule 3a1–1(a)(2) 

exemption unless its Form ATS–N has 

become effective, pursuant to Rule 

304(a)(1)(iii). 

d. Effectiveness; Ineffectiveness 

Determinations Under Rule 301(a)(1)(iii) 

We are adopting Rule 304(a)(1)(iii) 

with modifications, and relocating most 

of proposed Rule 304(a)(1)(iv), with 

modifications,365 to adopted Rule 

304(a)(1)(iii) (‘‘Effectiveness; 

Ineffectiveness determination’’). For the 

reasons described above, we are 

modifying Rule 304(a)(1)(iii) to provide 

that an initial Form ATS–N filed by an 

NMS Stock ATS, as amended,366 will 

become effective, unless declared 

ineffective, upon the earlier of: (1) The 

completion of review by the 

Commission and publication pursuant 

to Rule 304(b)(2)(i), or (2) the expiration 

of the review period, or, if applicable, 

the end of the extended review period, 

pursuant to Rule 304(a)(1)(ii). Rule 

304(a)(1)(iii) will further provide that 

the Commission will, by order, declare 

ineffective an initial Form ATS–N if it 

finds, after notice and opportunity for 

hearing, that such action is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors.367

We are also relocating two provisions 

of proposed Rule 304(a)(1)(iv), with 

non-substantive modifications,368 to 

adopted Rule 304(a)(1)(iii). As a result, 

Rule 304(a)(1)(iii) states that if the 

Commission declares an initial Form 

ATS–N ineffective, the NMS Stock ATS 

shall be prohibited from operating as an 

NMS Stock ATS pursuant to § 240.3a1– 

1(a)(2); and that an initial Form ATS–N 

declared ineffective does not prevent 

the NMS Stock ATS from subsequently 

filing a new Form ATS–N. We believe 

Rule 304(a)(1)(iii), as modified, clearly 

explains when an initial Form ATS–N 

will become effective or declared 

ineffective, and the consequences of an 

order of ineffectiveness. Accordingly, an 

NMS Stock ATS whose initial Form 

ATS–N has become effective may 

commence operations and will be 

required to comply with Rule 304 as 

well as applicable provisions of Rules 

300 through 303 of Regulation ATS. An 

NMS Stock ATS whose initial Form 

ATS–N was declared ineffective would 

be prohibited from operating pursuant 


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369The initial filing of Form ATS–N by Legacy 

NMS Stock ATSs is discussed further below. See 

infra Section IV.A.4.a. 

370See Proposal, supra note 2, at 81024–26. 

371See supra notes 343, 345, and 346 and 

accompanying text. See also supra notes 335–340 

and accompanying text discussing commenter 

concerns regarding whether the Commission 

articulated an objective or consistent standard of 

review. 

372See infra notes 404–407 and accompanying 

text. 

373See Proposal, supra note 2, at 81024–81025. 

374See Rule 300(k). 

375For example, an ATS that is not an NMS Stock 

ATS would be subject to different conditions under 

Regulation ATS to be eligible for the Rule 3a1– 

1(a)(2) exemption. Similarly, depending on the facts 

and circumstances, an entity that is not an ATS may 

be subject to requirements as a broker-dealer, but 

not the conditions of Regulation ATS, or may be 

required to register as a national securities 

exchange. See Proposal, supra note 2, at 81024 

n.288 and accompanying text. 

376See Proposal at 81025–26. 

377 17 CFR 242.301(b)(1). 

378 15 U.S.C. 78o(b)(8). 

379 15 U.S.C. 78o–3. 

380See 17 CFR 301(b)(1). Rule 301(b)(1) of 

Regulation ATS requires an ATS to register as a 

broker-dealer under Section 15 of the Exchange Act. 

381See 15 U.S.C. 78o(b)(1). 

382See 17 CFR 242.301(b)(1). 

383Specifically, Rule 612(a) of Regulation NMS 

provides that ‘‘no national securities exchange, 

national securities association, alternative trading 

system, vendor, or broker or dealer shall display, 

rank, or accept from any person a bid or offer, an 

order, or an indication of interest in any NMS stock 

priced in an increment smaller than $0.01 if that 

bid or offer, order, or indication of interest is priced 

equal to or greater than $1.00 per share.’’ See 17 

CFR 242.612(a). 

to the Rule 3a1–1(a)(2) exemption. 

Similarly, a Legacy NMS Stock ATS 

whose initial Form ATS–N was declared 

ineffective would no longer be eligible 

for the Rule 3a1–1(a)(2) exemption and 

would be required to cease 

operations.369 If the Commission 

declares an initial Form ATS–N 

ineffective, the NMS Stock ATS that 

filed the form could subsequently file a 

new Form ATS–N for Commission 

consideration. 

In the Proposal, we provided certain 

examples of scenarios in which we 

believed that it would be necessary or 

appropriate in the public interest, and 

consistent with the protection of 

investors, to declare ineffective a Form 

ATS–N, after notice and opportunity for 

hearing.370 We continue to believe that 

the examples provided in the Proposal 

are appropriate for the Commission to 

declare a Form ATS–N ineffective and 

will provide NMS Stock ATSs and 

market participants with clarity with 

respect to when the Commission could 

find, after notice and opportunity for 

hearing, it necessary or appropriate in 

the public interest, and consistent with 

the protection of investors, to declare 

ineffective a Form ATS–N. We are also 

providing additional clarity with respect 

to this guidance. 

Several commenters request 

additional guidance and clarity 

regarding the Commission’s review of 

initial Form ATS–N filings and Form 

ATS–N amendments and the 

circumstances under which the 

Commission may declare a Form ATS– 

N ineffective.371 We believe that it 

would be necessary or appropriate in 

the public interest, and consistent with 

the protection of investors, to declare 

ineffective a Form ATS–N if the 

Commission finds, for example, after 

notice and opportunity for hearing, the 

Form ATS–N was filed by an entity that 

does not meet the definition of NMS 

Stock ATS; one or more disclosures 

reveal non-compliance with federal 

securities laws, or the rules or 

regulations thereunder, including 

Regulation ATS; or one or more 

disclosures on Form ATS–N are 

materially deficient with respect to their 

completeness or comprehensibility. 

Given that the objective of Rule 304 is 

to provide market participants with 

information about NMS Stock ATSs 

through Form ATS–N disclosures, our 

review is designed to focus on the Form 

ATS–N disclosures and is not a meritbased review of the operations of the 

NMS Stock ATS or the ATS-related 

activities of the broker-dealer 

operator.372

We believe 373 that it would be 

necessary to declare ineffective a Form 

ATS–N if the Form ATS–N was filed by 

an entity that does not satisfy the 

definition of ATS, and more 

specifically, the definition of NMS 

Stock ATS.374 The proper classification 

of an entity would clearly indicate to 

market participants, as well as the 

Commission, the functions that entity 

performs and the regulatory framework 

and attendant obligations that attach to 

that entity.375 We believe that the 

review of Form ATS–N disclosures will 

help mitigate concerns that market 

participants may be confused or misled 

about whether an entity in fact meets 

the definition of an NMS Stock ATS. If 

an entity does not meet the definition, 

market participants may hold false 

expectations about how their orders 

may interact or be matched with other 

orders or they may not fully understand 

whether the entity with which they are 

doing business is required to comply 

with Regulation ATS. 

We believe that it would be necessary 

to declare Form ATS–N ineffective if 

one or more disclosures reveal noncompliance with federal securities laws, 

including Regulation ATS. As discussed 

in the Proposal,376 the Commission will 

conduct a ‘‘red-flag’’ review for 

instances of non-compliance with 

federal securities laws that seem 

apparent from the disclosures on Form 

ATS–N. For example, as a condition to 

the Rule 3a1–1(a)(2) exemption, Rule 

301(b)(1) of Regulation ATS requires 

that an ATS register as a broker-dealer 

under Section 15 of the Exchange 

Act.377 Section 15(b)(8) of the Exchange 

Act 378 prohibits a registered broker or 

dealer from effecting a transaction 

unless the broker or dealer is a member 

of a securities association registered 

pursuant to Section 15A of the 

Exchange Act 379 or effects transactions 

solely on a national securities exchange 

of which it is a member. Therefore, to 

comply with Regulation ATS, and thus 

qualify for the Rule 3a1–1(a)(2) 

exemption, an ATS must become a 

member of an SRO and comply with the 

rules of the SRO, including obtaining 

approval by the SRO to operate an ATS 

in accordance with applicable SRO 

rules. If an entity were to file a Form 

ATS–N before registering as a brokerdealer under Section 15 of the Exchange 

Act, the entity would not be in 

compliance with Rule 301(b)(1) of 

Regulation ATS.380 Moreover, if the 

entity were to file a Form ATS–N before 

becoming a member of an SRO, the 

entity would not be in compliance with 

Rule 301(b)(1) of Regulation ATS 

because Section 15(b)(1) of the 

Exchange Act provides that a 

Commission order granting registration 

is not effective until the broker-dealer 

has become a member of a national 

securities association registered 

pursuant to Section 15A of the 

Exchange Act,381 and the Commission’s 

order granting broker-dealer registration 

would not be effective.382 As another 

example, if the Form ATS–N reveals 

non-compliance with Regulation NMS, 

including, among other provisions, Rule 

612, known as the ‘‘Sub-Penny Rule,’’ 

which prohibits market participants, 

including ATSs, from displaying, 

ranking, or accepting orders, quotations, 

or indications of interest in NMS stock 

priced in an increment smaller than 

$0.01,383 the Form ATS–N would not be 

consistent with Rule 304 because the 

NMS Stock ATS would operate in a 

manner that may violate the federal 

securities laws. 

We believe that it would be necessary 

to declare Form ATS–N ineffective if 

one or more disclosures are materially 

deficient with respect to their 

completeness and comprehensibility. 

The following are non-exhaustive 

examples of Form ATS–N disclosures 

that may be deficient with respect to 


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384These are some, but not all, of the types of 

circumstances that could result in the Commission 

declaring a Form ATS–N ineffective due to being 

materially deficient with respect to completeness. 

We also provided some of these examples in the 

Proposal as examples of disclosures that could 

cause the Commission to declare a Form ATS–N 

ineffective because it contains one or more 

disclosures that appear to be materially deficient. 

See Proposal, supra note 2, at 81025. Because we 

are modifying the standard of review to focus on 

completeness and comprehensibility, some of the 

examples discussed in the Proposal are also 

discussed below to show application of the 

standard the Commission is adopting to the same 

scenarios. 

385This example was discussed in the Proposal 

as an example of a disclosure that may be materially 

deficient because it may not be sufficiently detailed. 

See Proposal, supra note 2, at 81025. 

386See id. Another example would be if the NMS 

Stock ATS fails to describe which order would 

receive priority where two or more orders are 

otherwise on par, such as a situation in which a 

customer and non-customer order are at the same 

price in a price priority system. 

387These examples were discussed in the 

Proposal as examples of disclosures that may be 

materially deficient because they would not be 

accurate. See Proposal, supra note 2, at 81025. 

388These are some, but not necessarily all, of the 

types of circumstances that could result in the 

Commission declaring a Form ATS–N ineffective 

due to being materially deficient with respect to 

comprehensibility. 

389 In the Proposal, this was provided as an 

example of a disclosure that may be materially 

deficient because it may not be accurate; however, 

inconsistent disclosures in a Form ATS–N also may 

render disclosures unclear as to which rule or 

procedure, for example, controls and how the NMS 

Stock ATS intends to operate. See Proposal, supra 

note 2, at 81025. Depending on the facts and 

circumstances, inconsistent or contradictory 

disclosures in a Form ATS–N may be materially 

deficient with respect to comprehensibility. 

390See supra note 342 and accompanying text. 

391See supra note 343 and accompanying text. 

392See Fidelity Letter at 9. See also supra note 

346. 

393See MFA/AIMA Letter at 4. See also supra 

note 330 and accompanying text. 

394See infra Section V (discussing modifications 

to Proposed Form ATS–N). 

their completeness: 384 an NMS Stock 

ATS discloses an order type on Form 

ATS–N but does not describe the key 

attributes of the order type, such as 

time-in-force limitations that can be 

placed on the ability to execute the 

order, the treatment of unfilled portions 

of orders, or conditions for cancelling 

orders in whole or in part; 385 an NMS 

Stock ATS describes some of its priority 

rules, but fails to describe conditions or 

exceptions to its priority rules, or fails 

to describe any priority overlays; 386 an 

NMS Stock ATS, in response to Part II, 

Item 1 of adopted Form ATS–N, 

discloses that a principal trading desk of 

the broker-dealer operator trades on the 

NMS Stock ATS, but does not explain 

advantages the broker-dealer operator 

receives compared to other subscribers; 

an NMS Stock ATS, in response to Part 

III, Item 19 of adopted Form ATS–N, 

fails to provide complete information 

about fees and rebates charged for use 

of the NMS Stock ATS; an NMS Stock 

ATS discloses that it has only one class 

of subscribers but the Commission or its 

staff learns through discussions (during 

the review period) with the NMS Stock 

ATS or otherwise that the ATS in fact 

has several classes of subscribers; or an 

NMS Stock ATS discloses that it has 

two classes of subscribers that are 

charged the same trading fees, but the 

Commission or its staff learns through 

discussions with the ATS or otherwise 

that in fact one class receives more 

favorable fees than the other.387

The following are non-exhaustive 

examples of Form ATS–N disclosures 

that may be deficient with respect to 

their comprehensibility: 388 Form ATS– 

N includes inconsistent information 

among the disclosures, such as a 

statement by the NMS Stock ATS in one 

part of the form that the ATS uses 

private feeds to calculate the NBBO but 

in another part of the form indicates that 

it uses the SIP; 389 the NMS Stock ATS 

states in one part of Form ATS–N that 

it does not segment its orders but 

provides a description in another part of 

the Form ATS–N that indicates that the 

ATS offers a functionality that allows 

institutional investors to limit their 

trading activity to interactions with 

other institutional investors; the Form 

ATS–N disclosures indicate that the 

NMS Stock ATS uses time/price priority 

to execute orders but provides an 

example that demonstrates an order 

received before an identically priced 

order does not receive priority over the 

later order; or the NMS Stock ATS states 

in one part of the Form ATS–N that it 

provides certain order types, transacts 

in certain types of securities, or 

provides access to certain classes of 

subscribers, and there is contrary 

disclosure in other parts of the Form 

ATS–N. 

We do not agree with the commenter 

that believes that the term materially 

deficient should be understood to 

represent only ‘‘extreme 

situation[s].’’ 390 The Commission 

review will focus on whether the lack of 

completeness or comprehensibility in a 

Form ATS–N disclosure would prevent 

market participants from understanding 

an ATS’s operations or the ATS-related 

activities of its broker-dealer operator or 

its affiliates. We believe that subscribers 

and market participants will rely on 

Form ATS–N disclosures to understand 

and evaluate the operations of the NMS 

Stock ATS and conflicts of interest that 

may arise from the ATS-related 

activities of the broker-dealer operator 

and its affiliates and use this 

information to help determine where to 

route their orders, or the orders of their 

customers. We believe that a disclosure 

on Form ATS–N that is materially 

deficient with respect to its 

completeness or comprehensibility 

could mislead market participants or 

impede their ability to understand an 

NMS Stock ATS’s operations, or the 

ATS-related activities of its brokerdealer operator, which would frustrate 

the purpose of the transparency goals of 

this rulemaking. We do not believe that 

it would be practical, as one commenter 

suggests,391 to provide examples of 

disclosures that the Commission would 

not view as materially deficient because 

the context of each disclosure is crucial 

to determining whether a disclosure is 

complete and comprehensible. Whether 

a disclosure deficiency is material 

depends on the facts and circumstances, 

as does whether the deficiency would 

support a finding that the deficiency is 

such that a declaration of 

ineffectiveness would be in the public 

interest and consistent with the 

protection of investors. 

As discussed above, one commenter 

questions how the Commission’s review 

will be undertaken to help ensure 

consistency across filings when initial 

Form ATS–N filings are made ‘‘without 

any prior knowledge of the detail the 

Commission expects,’’ 392 and another 

states that it ‘‘would be helpful’’ to have 

the Commission review initial filings to, 

among other things, help ‘‘standardize 

the level of disclosure across NMS Stock 

ATSs.’’ 393 We have revised Form ATS– 

N in a number of ways in response to 

comments. For instance, we added more 

‘‘yes’’ or ‘‘no’’ questions, separated 

questions into distinct subject matter 

categories, provided additional 

examples as guidance, and made 

requests more explicit for more targeted 

responses.394 These changes to Form 

ATS–N are designed to better inform 

NMS Stock ATSs of the requirements of 

Form ATS–N and to solicit more 

consistent responses from NMS Stock 

ATSs. However, NMS Stock ATSs 

operate differently, and with different 

complexities, and use different terms to 

describe their systems. While this could 

lead to different levels of disclosures 

among ATSs, we believe that the 

combination of refinements to the form, 

and the Commission’s review of all 

Forms ATS–N filed by Legacy NMS 

Stock ATSs during the same period of 

time, will assist the Commission in 

providing a consistent level of comment 

on the forms that will help facilitate a 

more consistent and standard level of 

information disclosed across NMS Stock 

ATSs. 


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395See supra notes 362–363 and accompanying 

text. 

396See supra note 356 and accompanying text. 

397See supra note 344 and accompanying text. 

398See CBOE Letter at 2. 399See Citadel Letter at 3. 400See UBS Letter at 4. 401See id. Another commenter, in expressing the 

view that Form ATS–N amendments should not be 

made public upon filing, states that doing so would 

risk turning the effectiveness process into an 

extended review, notice, and comment period, 

which the commenter believes would be 

inappropriate and unwarranted. See SIFMA Letter 

at 31–32. 

402See supra Section IV.A.3.c. 

403See supra note 359 and accompanying text. 

404See, e.g., supra note 346 and accompanying 

text. 

405Proposed rule changes filed by national 

securities exchanges pursuant to Section 19 of the 

Exchange Act must be consistent with the Exchange 

Act. In addition, filings made pursuant to Section 

19(b)(2) require the Commission to approve a 

proposed rule change if it finds the proposed rule 

change is consistent with the Exchange Act and the 

rules and regulations thereunder, or it must 

disapprove the proposed rule change. While a 

disclosure that reveals non-compliance with the 

federal securities laws or the rules and regulations 

thereunder may be a basis for the Commission 

finding that a declaration of ineffectiveness would 

be in the public interest and consistent with the 

protection of investors, Regulation ATS is a 

disclosure regime, and the Commission will not be 

making findings on consistency with the Exchange 

Act with respect to disclosures on Form ATS–N. 

406See Regulation ATS Adopting Release, supra 

note 3, at 70910. 

407See id. at 70847. 

Any order declaring a Form ATS–N 

ineffective will require the Commission 

to find that such action is necessary or 

appropriate in the public interest, and 

consistent with the protection of 

investors. Rule 304(a)(1)(iii) provides 

that the Commission must provide 

notice to the NMS Stock ATS and 

provide an opportunity for a hearing. As 

such, an NMS Stock ATS will have the 

opportunity to be heard before the 

Commission declares its Form ATS–N 

ineffective. 

As discussed above, we do not agree 

with a commenter’s suggestion that a 

Form ATS–N be considered ineffective 

upon filing.395 We also do not agree 

with the comment that a declaration of 

ineffectiveness of a Form ATS–N will 

prejudice an entity such that a revised 

filed Form ATS–N will have no 

practical value.396 We anticipate a 

dialogue between Commission staff and 

the NMS Stock ATS regarding the Form 

ATS–N disclosures and an NMS Stock 

ATS will have the opportunity to amend 

its initial Form ATS–N during the 

Commission review period. If a Form 

ATS–N is declared ineffective by the 

Commission, the Commission’s order 

will provide the basis for the declaration 

of ineffectiveness, and the NMS Stock 

ATS will have the opportunity to file 

another Form ATS–N that addresses the 

basis for the ineffectiveness 

determination. To the extent that the 

NMS Stock ATS files a revised initial 

Form ATS–N or Form ATS–N 

amendment that no longer contains, for 

example, material deficiencies with 

respect to its completeness or 

comprehensibility, the Form ATS–N 

would become effective, assuming no 

other basis for an ineffectiveness 

determination. Regarding the comment 

that the Commission should provide an 

NMS Stock ATS with a clear written 

statement of the reasons for a 

declaration of ineffectiveness,397 the 

Commission intends to provide the 

basis for declaring a Form ATS–N 

ineffective in an order declaring a Form 

ATS–N ineffective, which will help the 

NMS Stock ATS address disclosure 

deficiencies if the ATS decides to refile 

an initial Form ATS–N and help market 

participants understand the reason the 

Form ATS–N was declared ineffective. 

We also received three comments 

regarding whether the Commission 

should add a requirement to make 

available Form ATS–N filings for public 

notice and comment before the 

Commission declares a Form ATS–N 

effective or ineffective. One commenter 

notes that the rule filings of national 

securities exchanges are made publicly 

available and subject to notice and 

comment before approval, and that 

Form ATS–N should be the same.398

Another commenter expresses the view 

that it would be helpful for the 

Commission to receive feedback from 

market participants regarding Form 

ATS–N filings, and supports 

harmonizing the process with the 

application and filing process for 

national securities exchanges.399 One 

commenter, however, expresses the 

view that Form ATS–N should not be 

subject to a public notice and comment 

process.400 This commenter states that 

the Commission has long recognized 

several fundamental differences 

between national securities exchanges 

and ATSs, and that imposing a public 

notice and comment period on ATSs 

would not be equitable and would 

impede dynamic market structure 

advances because the Commission has 

fostered competition among different 

types of trading venues.401

We believe that it would not be 

appropriate to subject Form ATS–N 

filings to public notice and comment, as 

some commenters suggest. The 

Commission did not propose to subject 

Form ATS–N filings to a public notice 

and comment process. As discussed 

above,402 the Commission is not 

performing a review of the merits of 

initial Form ATS–N disclosures, such as 

determining the strengths and 

weaknesses of the trading platform or a 

protocol offered by the NMS Stock ATS. 

The Commission also is not making 

findings regarding whether the means 

by which orders will interact on the 

trading platform are, or are not, 

consistent with the Exchange Act, as is 

the case with respect to certain SRO rule 

filings.403 Rather the Commission’s 

review of Form ATS–N disclosures will 

focus on the completeness and 

comprehensibility of the disclosures, 

which does not lend itself to public 

notice and comment. We do not believe 

that public comment would facilitate 

the review of Form ATS–N, and are not 

subjecting Form ATS–N filings to a 

process similar to SROs’ proposed rule 

change filings, which are subject to 

notice and comment, and consideration 

by the Commission. 

The standard of review for 

ineffectiveness of Form ATS–N filings 

that we are adopting does not include 

an evaluation of the merits of the 

services that an NMS Stock ATS offers 

to subscribers. As discussed above, 

some commenters raise concerns about 

whether the Commission review process 

will result in imposing substantive 

standards on NMS Stock ATSs.404 Rule 

304 and Form ATS–N are designed to 

enhance operational transparency for 

NMS Stock ATSs, and therefore, the 

standard of review undergirding the 

Commission review will focus on the 

disclosures on Form ATS–N, as 

described above, and not the manner in 

which the NMS Stock ATS operates. 

Unlike proposed rule changes filed by 

national securities exchanges, the 

Commission will not make affirmative 

findings about Form ATS–N filings with 

regard to consistency with the Exchange 

Act.405 Regulation ATS was designed to 

encourage innovation 406 and provide 

enough flexibility to accommodate the 

business objectives of, and benefits 

provided by, alternative trading 

systems.407 As follows, the standard of 

review for ineffectiveness of Form ATS– 

N is designed to enhance the 

transparency objectives of the new 

disclosure requirements in a manner 

consistent with allowing NMS Stock 

ATSs to continue to innovate and 

provide benefits to the market. The 

Commission review is not intended to 

evaluate an NMS Stock ATS’s services 

against industry norms, nor approve or 

disapprove aspects of the NMS Stock 

ATS’s operations, for example, a new 

trading functionality, order type, or 

execution protocol. 


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408We are adopting Rule 304(a)(1)(iv) to delineate 

the initial filing process applicable to Legacy NMS 

Stock ATSs from the initial filing process 

applicable to non-Legacy NMS Stock ATSs. This 

differs from the proposed rule text, which 

integrated the requirements applicable to Legacy 

NMS Stock ATSs within the requirements 

applicable to all NMS Stock ATSs set forth in 

proposed Rule 304(a)(1)(i) through (iii). Providing 

these requirements in a separate section of the rule 

better organizes the rule text so filers can more 

easily understand the initial Form ATS–N filing 

process that is applicable to Legacy NMS Stock 

ATSs and is responsive to comments, which are 

discussed below. 

409Although the Form ATS for a Legacy NMS 

Stock ATS will no longer have any legal effect for 

purposes of the exemption after the ATS files a 

Form ATS–N, a Form ATS will nevertheless 

continue to be subject to the federal securities laws 

and the regulations thereunder, including 

Regulation ATS, as a Form ATS previously filed 

with the Commission will constitute a ‘‘report’’ 

within the meaning of sections 11A, 17(a), 18(a), 

and 32(a), and any other applicable provisions of 

the Exchange Act. See 17 CFR 242.301(b)(2)(vi). 

410See Rule 304(a)(1)(iv)(A). 

411See Proposal, supra note 2, at 81026. 

412See CFA Institute Letter at 5; BIDS Letter at 

3. 

413See CFA Institute Letter at 4. 

414See also supra note 412 and accompanying 

text. 415See BIDS Letter at 2–3; SIFMA Letter at 29. 416See BIDS Letter at 2. 417See SIFMA Letter at 29. 418See id. 419See BIDS Letter at 2–3; SIFMA Letter at 29. 420See BIDS Letter at 2. 

4. Rule 304(a)(1)(iv): Transition for 

Legacy NMS Stock ATSs 

a. Rule 304(a)(1)(iv)(A): Initial Filing 

Requirements 

Rule 304(a)(1)(iv) describes the 

process through which Legacy NMS 

Stock ATSs would file their initial Form 

ATS–N. We are adopting Rule 

304(a)(1)(iv) (‘‘Transition for Legacy 

NMS Stock ATSs’’) to provide a process 

for a Legacy NMS Stock ATS to file its 

initial Form ATS–N, and to continue to 

operate while its initial Form ATS–N is 

under Commission review.408 Adopted 

Rule 304(a)(1)(iv)(A) (‘‘Initial Form 

ATS–N filing requirements’’) requires 

that a Legacy NMS Stock ATS shall file 

with the Commission an initial Form 

ATS–N, in accordance with the 

conditions of Rule 304(a)(1)(iv), no 

earlier than January 7, 2019, and no 

later than February 8, 2019. Further, 

adopted Rule 304(a)(1)(iv)(A) provides 

that an initial Form ATS–N filed by a 

Legacy NMS Stock ATS shall supersede 

and replace for purposes of the 

exemption the previously-filed Form 

ATS (including any amendments to 

Form ATS) of the Legacy NMS Stock 

ATS.409 The Legacy NMS Stock ATS 

may operate, on a temporary basis, 

pursuant to the filed initial Form ATS– 

N, and any amendment thereto, during 

the review of the initial Form ATS–N by 

the Commission.410 In addition, adopted 

Rule 304(a)(1)(iv)(A) provides that an 

initial Form ATS–N filed by a Legacy 

NMS Stock ATS, as amended, will 

become effective, unless declared 

ineffective, upon the earlier of: (1) The 

completion of review by the 

Commission and publication pursuant 

to Rule 304(b)(2) or (2) the expiration of 

the review period, or, if applicable, the 

end of the extended review period, 

pursuant to Rule 304(a)(1)(iv)(B). 

Adopted Rule 304(a)(1)(iv) modifies 

proposed Rule 304(a)(1)(i) to address 

certain commenter concerns, as 

described below. Under the proposed 

rule, an NMS Stock ATS operating as of 

the effective date of the final rule would 

continue to operate pursuant to its 

previously filed initial operation report 

on Form ATS, pending the 

Commission’s review of the filed Form 

ATS. We modified this proposed 

process in response to comments. In the 

Proposal, we asked whether the 

Commission should allow a Legacy 

NMS Stock ATS to continue operations 

pursuant to Form ATS pending the 

Commission’s review of Form ATS– 

N.411 Two commenters express support 

for certain aspects of the proposed 

transition process for Legacy NMS Stock 

ATSs (including that the Commission 

allow Legacy NMS Stock ATSs to 

operate during the Commission review 

period).412 One commenter states that it 

supports requiring Legacy NMS Stock 

ATSs to file an initial Form ATS–N.413

A Legacy NMS Stock ATS will be 

required to file an initial Form ATS–N 

to continue to operate pursuant to the 

Rule 3a1–1(a)(2) exemption with respect 

to its Rule 3b–16 activity in NMS stocks 

beyond January 7, 2019. This provision 

will allow a Legacy NMS Stock ATS to 

continue its current operations without 

disruptions to the ATS or its current 

subscribers and provide the Legacy 

NMS Stock ATS with sufficient time to 

make an orderly transition from 

compliance under the current 

Regulation ATS requirements to 

compliance with Rule 304. 

Under the adopted rule, both Legacy 

NMS Stock ATSs and non-Legacy NMS 

Stock ATSs will be required to file an 

initial Form ATS–N. We believe that 

market participants should have access 

to the same level of information 

disclosed by both Legacy NMS Stock 

ATSs and non-Legacy NMS Stock ATSs 

as market participants will consider 

routing orders to both types of NMS 

Stock ATS. Allowing Legacy NMS Stock 

ATSs to file Form ATS instead of Form 

ATS–N would limit the amount of 

information available to market 

participants about these ATSs’ 

operations and the ATS-related 

activities of their broker-dealer 

operators, and would thereby make it 

difficult for market participants to 

assess Legacy NMS Stock ATSs as 

potential routing destinations for their 

orders. 

We believe that a Legacy NMS Stock 

ATS should be permitted to continue to 

operate during the Commission review 

period for initial Form ATS–N.414

Therefore, we are adopting Rule 

304(a)(1)(iv)(A) to transition Legacy 

NMS Stock ATSs from operating 

pursuant to Form ATS to operating 

pursuant to Form ATS–N without 

interruption. As noted above, the 

transition for Legacy NMS Stock ATSs 

will benefit Legacy NMS Stock ATSs 

and their subscribers, as subscribers will 

be able to continue to send their orders 

to Legacy NMS Stock ATSs without 

disruption. 

Two commenters request clarification 

about the process for a Legacy NMS 

Stock ATS to file an initial Form ATS– 

N and its obligations to update its Form 

ATS on file with the Commission while 

the Commission reviews its initial Form 

ATS–N.415 One commenter expresses 

concerns about the regulatory and legal 

uncertainties that could result from a 

Legacy NMS Stock ATS operating while 

having filed with the Commission both 

a Form ATS and a Form ATS–N.416

Similarly, another commenter requests 

clarification about how a Legacy NMS 

Stock ATS should handle material 

changes to the NMS Stock ATS’s Form 

ATS.417 This commenter also asks the 

Commission to clarify whether a Legacy 

NMS Stock ATS should amend its Form 

ATS to avoid potential liability caused 

by the NMS Stock ATS submitting the 

additional information required in Form 

ATS–N.418

These commenters suggest processes 

that they believe will address these 

concerns.419 One commenter suggests 

that the Commission deem effective a 

Legacy NMS Stock ATS’s Form ATS–N 

upon filing but nevertheless subject it to 

a review and comment period by the 

Commission.420 We are not adopting 

this suggestion because labeling an 

initial Form ATS–N ‘‘effective’’ before 

the Commission has completed the 

review could mislead market 

participants. Another commenter 

suggests that a Legacy NMS Stock ATS 

that makes changes to its operations 

during the 120-calendar day review 

period or extended review period 

should only be required to amend its 

Form ATS, and that the Legacy NMS 

Stock ATS should not be required to 


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421See SIFMA Letter at 29. 

422A Legacy NMS Stock ATS may file 

amendments pursuant to Rule 304(a)(1)(iv)(C) 

during the Commission review period. A change 

subject to a material amendment filed by a Legacy 

NMS Stock ATS within 30 calendar days of the end 

of the 240-calendar day extended review period, as 

provided by Rule 304(a)(1)(iv)(B)(1), or other period 

to which the Legacy NMS Stock ATS agrees in 

writing described in Rule 304(a)(1)(iv)(B)(2), may 

only be implemented by the Legacy NMS Stock 

ATS after the expiration of the 30-calendar day 

period provided by Rule 304(a)(2)(i)(A), and the 

Commission may declare such an amendment 

ineffective, as appropriate, until the 30-calendar 

day review period expires. 

423See CFA Institute Letter at 5. 

424This provision, which was proposed as the 

second sentence of proposed Rule 304(a)(1)(i) is 

now the first sentence of adopted Rule 

304(a)(1)(iv)(A). In the adopted rule, we are making 

technical, non-substantive modifications to the 

proposed rule text, including: (1) Referring to ‘‘an’’ 

NMS Stock ATS rather than ‘‘the’’ NMS Stock ATS; 

(2) defining an NMS Stock ATS operating pursuant 

to an initial operation report on Form ATS as of the 

effective date as a ‘‘Legacy NMS Stock ATS;’’ (3) 

revising the definition of Legacy NMS Stock ATS 

to state that it operates pursuant to ‘‘an initial 

operation report’’ rather than a ‘‘previously filed’’ 

initial operation report; and (4) adding to Rule 

304(a)(1)(i) the term ‘‘initial’’ before Form ATS–N. 

We are also changing the term ‘‘in accordance with 

the instructions therein’’ to ‘‘in accordance with the 

conditions of this section’’ because we intended for 

NMS Stock ATSs to comply with all of the 

applicable provisions of Rule 304, including any 

procedural provisions, in addition to the 

Instructions on Form ATS–N. 

425See Proposal, supra note 2, at 81023. 

426See 17 CFR 242.301(b)(2). See supra notes 57– 

63 and accompanying text. 

also amend its initial Form ATS–N until 

the Commission declares it effective, 

and that the NMS Stock ATS could then 

file a ‘‘clean-up’’ amendment to its 

initial Form ATS–N.421 We are not 

adopting this approach because, as 

discussed below, our adopted approach 

to require a Legacy NMS Stock ATS to 

amend Form ATS–N would be less 

burdensome for the ATS than requiring 

the Legacy NMS Stock ATS to amend its 

Form ATS during the Commission 

review period and Form ATS–N after 

the Form ATS–N becomes effective. 

In response to these commenters, and 

after considering their alternative 

suggestions, we are adopting Rule 

304(a)(1)(iv)(A), which is modified from 

proposed Rule 304(a)(1)(i), to provide 

that a filed Form ATS–N shall 

supersede and replace for purposes of 

the exemption a Legacy NMS Stock 

ATS’s previously-filed Form ATS. After 

considering the comments, we 

acknowledge that if the Commission 

were to require a Legacy NMS Stock 

ATS to file and amend both Form ATS 

and Form ATS–N during the 

Commission review period for an initial 

Form ATS–N, the Legacy NMS Stock 

ATS could incur additional legal and 

regulatory risks, as it would be required 

to make changes to two forms and 

ensure that the information on the two 

forms is consistent. The disclosures on 

an initial Form ATS–N would include 

the vast majority of information 

provided to the Commission on Form 

ATS that pertains to the ATS’s NMS 

stock operations. Therefore, we believe 

that the modifications to the proposed 

rule would alleviate the burden on 

Legacy NMS Stock ATSs of filing two 

separate documents with the 

Commission that would likely contain 

significantly overlapping information. 

In addition, to address the commenters’ 

concerns, and facilitate the ability of a 

Legacy NMS Stock ATS to maintain 

only one filing for a limited time during 

the transition, we are also modifying 

proposed Rule 304(a)(1)(i), and adopting 

as Rule 304(a)(1)(iv)(A), to provide that 

the Legacy NMS Stock ATS may 

operate, on a provisional basis, pursuant 

to the filed Form ATS–N, and any 

amendments thereto,422 during the 

Commission review period of the filed 

initial Form ATS–N. This provision is 

designed to facilitate an orderly 

transition for Legacy NMS Stock ATSs 

from the Form ATS regime to the Form 

ATS–N regime while at the same time 

requiring an appropriate level of 

disclosure by NMS Stock ATSs. 

In addition, we are adopting a 

provision in Rule 304(a)(1)(iv)(A) that 

provides that an initial Form ATS–N 

filed by a Legacy NMS Stock ATS, as 

amended, will become effective, unless 

declared ineffective, upon the earlier of: 

(1) The completion of review by the 

Commission and publication pursuant 

to Rule 304(b)(2) or (2) the expiration of 

the review period, or, if applicable, the 

end of the extended review period, 

pursuant to Rule 304(a)(1)(iv)(B). We are 

adding this provision to reflect changes 

to the effectiveness process; this 

provision is designed to replace parts of 

proposed Rule 304(a)(1)(iii). In addition, 

because we are adopting a process that 

allows a Legacy NMS Stock ATS to 

amend its initial Form ATS–N during 

the Commission review period, we are 

adding to Rule 304(a)(1)(iv)(A) that a 

Legacy NMS Stock ATS’s Form ATS–N 

‘‘as amended’’ will become effective, 

which will include any amendments 

made to an initial Form ATS–N during 

the Commission review period. 

Finally, proposed Rule 304(a)(1) 

would have required Legacy NMS Stock 

ATSs to submit their initial Form ATS– 

N filings within 120 days of the effective 

date of this rulemaking. We received 

one comment supporting the 

requirement that Legacy NMS Stock 

ATSs file Form ATS–N within 120 

calendar days of the effective date of the 

final rule, ‘‘given the reasonable 

assumption that the operators of the 

ATS should be very familiar with the 

operational structure of said ATS.’’ 423

We are modifying proposed Rule 

304(a)(1)(i) (as part of adopted Rule 

304(a)(1)(iv)(A)) to require Legacy NMS 

Stock ATSs to file an initial Form ATS– 

N no earlier than January 7, 2019, and 

no later than February 8, 2019 and 

making additional technical 

modifications.424 We believe that this 

will provide adequate time following 

the date that the enhanced disclosure 

requirements under Rule 304 become 

effective and for NMS Legacy NMS 

Stock ATSs to prepare and file an initial 

Form ATS–N with the Commission. 

NMS Stock ATSs will file Form ATS– 

N via EDGAR, which will be ready to 

accept Form ATS–N filings on January 

7, 2019. We agree with the commenter 

that a Legacy NMS Stock ATSs should 

be knowledgeable of the operations of 

its system and the ATS-related activities 

of the broker-dealer operator and its 

affiliates and believes that requiring 

Legacy NMS Stock ATSs to file their 

initial Form ATS–N between January 7, 

2019 and February 8, 2019 provides 

these with reasonable time to prepare 

and file their disclosures on Form ATS– 

N.425 We note that, until a Legacy NMS 

Stock ATS files its initial Form ATS–N 

with the Commission, the Legacy NMS 

Stock ATS must provide notice of 

changes to its operations by amending 

its Form ATS on file with the 

Commission pursuant to Rule 301(b)(2) 

of Regulation ATS.426

b. Rule 304(a)(1)(iv)(B): Commission 

Review Period; Ineffectiveness 

Determination 

Rule 304(a)(1)(iv)(B) provides the 

process and timing for the Commission 

to review a Legacy NMS Stock ATS’s 

initial Form ATS–N, and, if applicable, 

declare such initial Form ATS–N 

effective. We are adopting Rule 

304(a)(1)(iv)(B) (‘‘Commission review 

period; Ineffectiveness determination’’), 

which provides that the Commission 

may, by order, as provided in Rule 

304(a)(1)(iii), declare an initial Form 

ATS–N filed by a Legacy NMS Stock 

ATS ineffective no later than 120 

calendar days from the date of filing 

with the Commission, or, if applicable, 

the end of the extended review period. 

The Commission may extend the initial 

Form ATS–N review period for a Legacy 

NMS Stock ATS for: (1) An additional 

120 calendar days if the initial Form 

ATS–N is unusually lengthy or raises 

novel or complex issues that require 

additional time for review, in which 

case the Commission will notify the 


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427See supra notes 294–295 and accompanying 

text. 428See Proposal, supra note 2, at 81023–24. See 

also supra notes 296–297 and accompanying text. 429See supra Section IV.A.3. We added language 

to the proposed rule text, and created a separate 

paragraph (B) of Rule 304(a)(1)(iv) to address the 

Commission review period for Legacy NMS Stock 

ATS amendments including: (1) Specifying, 

consistent with the proposed rule text, that the 

Commission will declare ‘‘by order’’ an initial Form 

ATS–N ineffective and referencing the paragraphs 

under the rule that delineate the process pursuant 

to which the Commission will do so; (2) specifying 

that the Commission will declare an initial Form 

ATS–N ineffective no later than 120 calendar days 

from ‘‘the date of’’ filing with the Commission; (3) 

adding to the first sentence that the Commission 

may declare an initial Form ATS–N ineffective no 

later than 120 calendar days from the date of filing 

with the Commission, ‘‘or, if applicable, the end of 

the extended review period’’ to reduce ambiguity 

regarding the length of the Commission review 

period; (4) specifying that the Commission will 

notify the Legacy NMS Stock ATS of any extension 

of the review period within the 120 ‘‘calendar day’’ 

review period; (5) specifying that the Commission 

review period described in this section applies to 

‘‘initial’’ Form ATS–N; and (6) using the defined 

term ‘‘Legacy NMS Stock ATS’’ throughout the 

paragraph. 

430See SIFMA Letter at 29. 

431Because its initial Form ATS–N supersedes 

and replaces a Legacy NMS Stock ATS’s Form ATS 

for purposes of the exemption and the initial Form 

ATS–N can be amended, a Legacy NMS Stock ATS 

may not withdraw its initial Form ATS–N. See infra 

Section V.B.1. 

432See infra note 434. 

433See SIFMA Letter at 29. 

434The Commission could also, in the case of a 

Legacy NMS Stock ATS, provide in its order of 

ineffectiveness a period of time for the NMS Stock 

ATS to wind down its operations. Because 

Commission orders of ineffectiveness would be 

made public, market participants would also have 

notice of any wind down period. 

435See BIDS Letter at 3; SIFMA Letter at 29. 

Legacy NMS Stock ATS in writing 

within the initial 120-calendar day 

review period and will briefly describe 

the reason for the determination for 

which additional time for review is 

required; or (2) any extended review 

period to which a duly-authorized 

representative of the Legacy NMS Stock 

ATS agrees in writing. 

As discussed above, we received 

comments on the 120-calendar day 

review period and extended review 

periods that either support or do not 

object to the time frames proposed for 

both non-Legacy NMS Stock ATSs and 

Legacy NMS Stock ATSs.427 We 

continue to believe that 120 calendar 

days typically would provide the 

Commission adequate time to carry out 

its oversight functions with respect to 

the review of Forms ATS–N filed by 

Legacy NMS Stock ATSs, including its 

responsibilities to protect investors and 

maintain fair, orderly, and efficient 

markets, and that the extended review 

period for filings that are unusually 

lengthy or raise novel or complex issues 

will allow the Commission and its staff 

to conduct a thorough review and 

provide sufficient opportunity to 

discuss the filing with the NMS Stock 

ATS if necessary.428 We are adopting 

Rule 304(a)(1)(iv)(B), which was 

proposed as part of Rule 304(a)(1)(ii)(A), 

with modifications, consistent with and 

for the reasons discussed above with 

respect to the Commission review 

period for Form ATS–N filings by nonLegacy NMS Stock ATSs.429

One commenter suggests that if the 

Commission declares a Legacy NMS 

Stock ATS’s initial Form ATS–N 

ineffective, the NMS Stock ATS should 

have the opportunity to amend its Form 

ATS–N so that the form would be 

effective before the NMS Stock ATS is 

required to cease operating.430 During 

the review process, we expect to engage 

in dialogue with the Legacy NMS Stock 

ATSs about their Form ATS–N 

disclosures. To the extent any 

deficiencies exist with the Form ATS– 

N disclosures, we expect that the Legacy 

NMS Stock ATSs typically will have an 

opportunity to understand and cure 

deficiencies in the filing before the 

Commission declares the Form ATS–N 

ineffective. If, after discussion with 

Commission staff, a Legacy NMS Stock 

ATS determines that it needs more time 

to address deficiencies in its initial 

Form ATS–N to avoid a Commission 

declaration of ineffectiveness, a Legacy 

NMS Stock ATS could consent to an 

extended Commission review period 

under Rule 304(a)(1)(iv)(B)(2). Prior to 

declaring a Legacy NMS Stock ATS’s 

Form ATS–N ineffective, the 

Commission will provide the ATS with 

notice and opportunity for hearing 

about the Commission’s intention to 

declare the form ineffective. After the 

Commission declares a Form ATS–N 

ineffective, however, the Legacy NMS 

Stock ATS will not have an opportunity 

to amend its Form ATS–N.431 Upon its 

Form ATS–N being declared ineffective, 

a Legacy NMS Stock ATS must cease 

operating pursuant to the Rule 3a1–1(a) 

exemption,432 and to the extent that the 

ATS does continue to operate, the 

Commission could find it to be an 

unregistered national securities 

exchange, and thus operating in 

violation of Section 5 of the Exchange 

Act. 

This commenter also states that a 

declaration of ineffectiveness should 

remain confidential until the Legacy 

NMS Stock ATS has amended the Form 

ATS–N and the amended form is 

‘‘approved.’’ 433 We do not agree with 

the commenter’s suggestion. As 

discussed immediately above, there will 

be an opportunity during the review 

process for the ATS to supplement its 

filing. Once its initial Form ATS–N is 

declared ineffective, a Legacy NMS 

Stock ATS would not be able to operate 

pursuant to the Rule 3a1–1(a)(2) 

exemption and would not be able to 

amend its Form ATS–N after it is 

declared ineffective. It could file a new 

Form ATS–N, which the Commission 

will review without prejudice. We 

believe that it is in the public interest 

for the Commission to make an order of 

ineffectiveness for a Legacy NMS Stock 

ATS publicly available so that market 

participants have notice of the operating 

status of the NMS Stock ATS and can 

make appropriate adjustments to their 

routing strategies.434

Two commenters request clarification 

about whether amending an initial Form 

ATS–N as a result of a material change 

during the Commission review period 

would toll the review period, and 

suggest that the review period should 

not restart with every amendment.435

The filing of a Form ATS–N material 

amendment by a Legacy NMS Stock 

ATS, even if filed within 30 days of the 

expiration of the Commission’s 

extended review period, would not toll 

the review period for the Form ATS–N; 

initial Form ATS–N will become 

effective in accordance with the 

timeframes set forth in Rule 

304(a)(1)(iv)(A). However, a change 

reflected in a material amendment that 

is filed within 30 days of the expiration 

of the Commission review period could 

not be implemented until the end of the 

Commission’s 30-calendar day review 

period pursuant to Rule 304(a)(2)(i)(A). 

c. Rule 304(a)(1)(iv)(C): Amendments to 

Initial Form ATS–N 

Rule 304(a)(1)(iv)(C) describes the 

process through which Legacy NMS 

Stock ATSs would amend their initial 

Form ATS–N during the Commission 

review period. We are adopting Rule 

304(a)(1)(iv)(C) (‘‘Amendments to initial 

Form ATS–N’’), which requires that 

during the review period of the initial 

Form ATS–N filed by a Legacy NMS 

Stock ATS, the Legacy NMS Stock ATS 

shall amend its initial Form ATS–N 

pursuant to the requirements of Rule 

304(a)(2)(i)(A) through (D). The adopted 

rule differs from the Proposal. As 

proposed, during the Commission 

review period for an initial Form ATS– 

N filed by a Legacy NMS Stock ATS, the 

Legacy NMS Stock ATS would have 

been required to continue operating 

pursuant to its existing Form ATS initial 

operation report and file amendments 

on Form ATS to provide notice of 

changes to the operations of its 


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436See Proposal, supra note 2, at 81023; see also 

17 CFR 242.301(b)(2)(ii) through (iv). The 

Commission is modifying the proposed rule by 

creating a new paragraph (C) of Rule 304(a)(1)(iv), 

which provides a process for reporting changes 

during the Commission review period for Legacy 

NMS Stock ATSs. 

437See supra note 409. 

438See supra note 415 and accompanying text. 

439See supra notes 420 and 421 and 

accompanying text. 

440See supra note 415 and accompanying text. 

441See id. 

442See Liquidnet Letter at 4. 443See infra note 587 and accompanying text. 

444The proposed rule text required that an NMS 

Stock ATS amend ‘‘an effective’’ Form ATS–N in 

accordance with the ‘‘instructions therein.’’ We 

have modified this requirement in the Rule 

304(a)(2)(i) as adopted by deleting the word 

‘‘effective’’ because, as discussed in Section 

IV.A.4.c, we are adopting Rule 304(a)(1)(ii) and 

Rule 304(a)(1)(iv)(C), which allow an NMS Stock 

ATS to amend a Form ATS–N that has not yet 

become effective. 

In addition, we are replacing the rule text that 

stated that an NMS Stock ATS shall amend Form 

ATS–N in accordance with ‘‘the instructions 

therein’’ with text requiring an NMS Stock ATS to 

amend Form ATS–N in accordance with ‘‘the 

conditions of this section’’ because we intended for 

NMS Stock ATSs to comply with all of the 

applicable provisions of Rule 304, including any 

procedural provisions, in addition to the 

Instructions on Form ATS–N. 

We are also adding a separate amendment filing 

process for changes to information disclosed in Part 

III, Item 24 and 25 of Form ATS–N. See infra 

Sections IV.B.1.a.iii. Because in Rule 304(a)(2)(i)(D) 

we are specifying treatment for order display and 

fair access amendments, which generally would be 

material changes, we are also adding that Rule 

304(a)(2)(i)(A) applies ‘‘except as provided by’’ Rule 

304(a)(2)(i)(D). See infra Sections IV.B.1.a.iii. 

system.436 Because adopted Rule 

304(a)(1)(iv)(A) states that a filed Form 

ATS–N will supersede and replace for 

purposes of the exemption a Legacy 

NMS Stock ATS’s previously-filed Form 

ATS, a Legacy NMS Stock ATS will no 

longer file Form ATS amendments once 

it files an initial Form ATS–N. Instead, 

a Legacy NMS Stock ATS will be 

required to update Form ATS–N during 

the Commission review period.437 If the 

ATS trades both NMS stocks and nonNMS stocks, such ATS would update its 

Form ATS with respect to its non-NMS 

stock operations. 

As discussed above, two commenters 

request that the Commission clarify the 

process for filing amendments during 

the Commission review period for 

Legacy NMS Stock ATSs 438 and suggest 

alternative approaches.439 The 

modifications in adopted Rule 

304(a)(1)(iv)(C) are designed to address 

the comments requesting clarification 

about the process for reporting material 

changes during the time the 

Commission reviews the initial Form 

ATS–N of a Legacy NMS Stock ATS.440

Adopted Rule 304(a)(1)(iv)(C) also 

addresses the alternative approaches 

that the commenters suggest by 

requiring a Legacy NMS Stock ATS to 

update its Form ATS–N (rather than 

Form ATS), and operate pursuant to its 

Form ATS–N (rather than Form 

ATS).441 We believe that Rule 

304(a)(1)(iv)(C) will relieve any 

unnecessary burden from maintaining 

two forms and ease the transition to the 

Form ATS–N regime. 

In addition, one commenter asked the 

Commission to adopt a process that 

would allow Legacy NMS Stock ATSs to 

introduce a new functionality or make 

changes during the 120-calendar day 

review period for the initial Form ATS– 

N.442 We agree with the commenter that 

Legacy NMS Stock ATSs should have a 

method to make changes to their 

operations and introduce new 

functionalities during the Commission 

review period. In accordance with Rule 

304(a)(1)(iv)(C), during the Commission 

review period, the Legacy NMS Stock 

ATSs may make changes to the 

operations of the ATS and shall file 

amendments to reflect those changes 

pursuant to the requirements of Rule 

304(a)(2)(i)(A) through (D). For example, 

during the period of Commission review 

of its initial Form ATS–N, a Legacy 

NMS Stock ATS may make a material 

change to its operations, provided that 

it files with the Commission an 

amendment to its Form ATS–N 

describing such change at least 30 

calendar days prior to the date of 

implementation of such change, 

pursuant to Rule 304(a)(2)(i)(A). A 

change subject to a material amendment 

filed by a Legacy NMS Stock ATS may 

be implemented by the Legacy NMS 

Stock ATS after the expiration of the 30- 

calendar day period provided by Rule 

304(a)(2)(i)(A). 

Rule 304(a)(1)(iv)(C) provides that a 

Legacy NMS Stock ATS shall amend its 

initial Form ATS–N pursuant to the 

requirements of Rule 304(a)(2)(i)(A) 

through (D), which govern the process 

for filing amendments to Form ATS–N. 

Amendments will be subject to 

Commission review and could be 

declared ineffective under Rule 

304(a)(2)(ii). Filed Form ATS–N 

amendments will not be made public 

until the Legacy NMS Stock ATS’s 

initial Form ATS–N becomes effective 

and publicly available. Once a Legacy 

NMS Stock ATS’s initial Form ATS–N 

becomes effective, the Commission will 

make public the Form ATS–N, as 

amended, which will incorporate any 

amendments that the Legacy NMS Stock 

ATS filed to the initial Form ATS–N 

during the Commission review period, 

except for any material amendments 

still subject to the 30-calendar day 

Commission review period.443 In 

connection with the changes described 

above, we are adopting Rule 

304(a)(1)(iv)(C), which provides that a 

Legacy NMS Stock ATS shall amend its 

filed Form ATS–N during the 

Commission review pursuant to the 

requirements of Rule 304(a)(2)(i)(A) 

through (D). 

B. Rule 304(a)(2): Form ATS–N 

Amendments 

1. Rule 304(a)(2)(i): Filing Requirements 

Rule 304(a)(2)(i) describes the types of 

amendments that NMS Stock ATSs 

would be required to file to their Form 

ATS–N. We proposed Rule 304(a)(2)(i) 

(‘‘Form ATS–N amendment filing 

requirements’’) to require an NMS Stock 

ATS to update information disclosed on 

Form ATS–N concerning its manner of 

operations and the ATS-related 

activities of its broker-dealer operator 

and its affiliates. Proposed Rule 

304(a)(2)(i) would have required an 

NMS Stock ATS to amend an effective 

Form ATS–N in accordance with the 

Instructions therein: (A) at least 30 

calendar days prior to the date of 

implementation of a material change to 

the operations of the NMS Stock ATS or 

to the activities of the broker-dealer 

operator or its affiliates that are subject 

to disclosure on Form ATS–N; (B) 

within 30 calendar days after the end of 

each calendar quarter to correct any 

other information that has become 

inaccurate for any reason and has not 

been previously reported to the 

Commission as a Form ATS–N 

amendment; or (C) promptly, to correct 

information in any previous disclosure 

on Form ATS–N, after discovery that 

any information filed under proposed 

Rule 304(a)(1)(i) or (a)(2)(i)(A) or (B) was 

inaccurate or incomplete when filed. 

We are adopting Rule 304(a)(2)(i) with 

modifications. As adopted, Rule 

304(a)(2)(i) requires an NMS Stock ATS 

to amend a Form ATS–N in accordance 

with the conditions of Rule 304: 444 (1) 

At least 30 calendar days, except as 

provided by Rule 304(a)(2)(i)(D), prior to 

the date of implementation of a material 

change to the operations of the NMS 

Stock ATS or to the activities of the 

broker-dealer operator or its affiliates 

that are subject to disclosure on Form 

ATS–N; (2) no later than 30 calendar 

days after the end of each calendar 

quarter to correct information that has 

become inaccurate or incomplete for 

any reason and was not required to be 

reported to the Commission as a Form 

ATS–N amendment pursuant to Rules 

304(a)(2)(i)(A), (C), or (D); (3) promptly, 

to correct information in any previous 

disclosure on Form ATS–N, after 


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445See cover page to Form ATS–N. 

446See proposed Rule 304(a)(2)(i)(A). 

447See Proposal, supra note 2, at 81027–28. 

448See id. at 81028. 

449See MFA/AIMA Letter at 4. 

450See HMA Letter at 9. 

451See Liquidnet Letter at 4; KCG Letter at 5. 

452See Liquidnet Letter at 4. 

453See id. 

454See KCG Letter at 5. 

455See Fidelity Letter at 10. 

456See KCG Letter at 5. 

457See KCG Letter at 4. 

458See supra Section IV.A.3. 

459See Liquidnet Letter at 5. 

460See id. 

461See infra Section IV.B.1.a.ii. 

discovery that any material information 

previously filed on Form ATS–N was 

inaccurate or incomplete when filed; 

and (4) no later than seven calendar 

days after information required to be 

disclosed in Part III, Items 24 and 25 on 

Form ATS–N has become inaccurate or 

incomplete. Form ATS–N requires an 

NMS Stock ATS filing an amendment to 

‘‘select one’’ of the four types of 

amendments; each amendment type is 

mutually exclusive.445

a. Material Changes 

(i) Comments on Advance Notice 

We proposed that an NMS Stock ATS 

would be required to amend an effective 

Form ATS–N at least 30 calendar days 

prior to the date of implementation of a 

material change to the operations of the 

NMS Stock ATS or to the activities of 

the broker-dealer operator or its 

affiliates that are subject to disclosure 

on Form ATS–N.446 In the Proposal, we 

stated that a 30-calendar day advance 

notice period would give the 

Commission the opportunity to clarify 

any questions that might arise or to take 

action, if appropriate, regarding 

problems that may impact market 

participants, before the NMS Stock ATS 

implemented the change.447 We also 

stated that such advance notice would 

allow market participants to evaluate 

the changes before implementation and 

assess the NMS Stock ATS as a 

continued, or potential, trading 

venue.448

We received several comments 

relating to the proposed 30-calendar day 

advance notice requirement for material 

changes in proposed Rule 

304(a)(2)(i)(A). One commenter states 

that it supports the requirement that an 

NMS Stock ATS file a material 

amendment to Form ATS–N 30 days in 

advance of implementing a material 

change to the operations of the NMS 

Stock ATS, or the activities of the 

broker-dealer operator or its affiliates.449

Another commenter states that although 

advance notice of 20 calendar days 

before implementing a material change 

may be adequate, it believes that the 30- 

calendar day advance notice 

requirement strikes an appropriate 

balance between an NMS Stock ATS’s 

ability to innovate, while also providing 

market participants and regulators 

adequate time to evaluate and respond 

to the intended change.450

Two commenters suggest that instead 

of requiring 30 calendar days of advance 

notice, the Commission should require 

NMS Stock ATSs to file an amendment 

on Form ATS–N at least 20 calendar 

days in advance of implementing a 

material change, which is the same as 

the current requirement for filing 

amendments to Form ATS.451 One 

commenter believes the 30-calendar day 

advance notice period would provide 

minimal benefit for the Commission 

because the Commission may at any 

time object to an NMS Stock ATS’s 

functionality or require clarification.452

This commenter also states that 

lengthening the advance notice period 

would create an unnecessary delay for 

NMS Stock ATSs in introducing new 

functionality and improving existing 

functionality and processes.453 The 

other commenter supports retaining the 

20-calendar day advance notice period, 

stating that due to the breadth of 

disclosures on Form ATS–N and the fact 

that Form ATS–N disclosures will be 

made public, market participants will 

have access to a much greater level of 

information about ATS operations and 

changes than in the past.454 Another 

commenter states that a process for 

reviewing Form ATS–N amendments 

that extends beyond 30 days could have 

a significant impact on NMS Stock ATS 

operations, particularly with regard to 

the launch of new technologies.455

We are adopting Rule 304(a)(2)(i)(A) 

with modifications. We do not agree 

with commenters who believe that the 

current 20-calendar day advance notice 

period for material amendments to be 

filed on Form ATS would be more 

appropriate for NMS Stock ATSs than a 

30-calendar day period. We believe that 

a 30 calendar day advance notice period 

for a material change would allow the 

Commission sufficient time to review 

the amendment and determine, if 

necessary, whether the filing should be 

declared ineffective. Although we agree 

with the commenter that states that 

market participants will have access to 

more information regarding NMS Stock 

ATS operations than in the past,456

given the complexity of NMS Stock 

ATSs today and the breadth of 

disclosures required on Form ATS–N, 

the 10 additional calendar days 

provides the Commission with the 

necessary time to review, and 

communicate with the NMS Stock ATS 

about, the Form ATS–N disclosures. We 

believe that the benefits of a longer 

advance notice period justify any 

potential burden on an NMS Stock ATS 

and any potential delay to the 

introduction of a new technology. We 

believe that a 30-calendar day review 

period will benefit subscribers and 

market participants as the time will 

allow the Commission to help ensure 

that disclosures made available to the 

public are complete and 

comprehensible. 

One commenter states that the 

advance notice requirement for material 

changes would be close to an ‘‘advance 

notice and approval’’ approach that may 

effectively result in a merit review 

process of NMS Stock ATS 

operations.457 As discussed above with 

respect to the Commission’s review of 

an initial Form ATS–N pursuant to Rule 

304(a)(1)(iii),458 the Commission’s 

review of a Form ATS–N amendment 

does not weigh the merits of a change 

that is the subject of a Form ATS–N 

amendment. Rather, the Commission’s 

review is focused on the completeness 

and comprehensibility of the 

disclosures themselves. 

Another commenter expresses 

concern regarding situations in which it 

files a material amendment to Form 

ATS–N but needs to modify a 

functionality based on customer 

feedback or unanticipated workflows or 

scenarios.459 The commenter states that 

it would be beneficial for an NMS Stock 

ATS to have the flexibility to make 

modifications without delay, as long as 

any modifications were disclosed in 

advance to customers, would not 

adversely impact customers, and do not 

change the key elements of the new 

functionality that had been previously 

described in a Form ATS–N 

amendment.460 In addition to providing 

advance notice to the public about a 

potential material change to the NMS 

Stock ATS, the advance notice period 

allows the Commission to review the 

disclosures on Form ATS–N, and we 

believe that the review will help ensure 

that market participants receive 

complete and comprehensible 

disclosures. We are providing guidance 

for determining whether a change is 

material.461 In deciding whether to 

implement a modification to a 

functionality without delay in response 

to customer feedback or unanticipated 

workflows or scenarios, an NMS Stock 

ATS is required to determine if, in light 

of all relevant facts and circumstances, 


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462 In the event that it is appropriate for the 

Commission to exempt an NMS Stock ATS, 

conditionally or unconditionally, by Commission 

order, after application by the ATS, from the 

advance filing requirement, the Commission will be 

able to issue exemptions. See supra note 226 and 

accompanying text. 463See Proposal, supra note 2, at 81028. 464See id. at 81028 n.309. 465See BIDS Letter at 3; SIFMA Letter at 30–31. 466See infra note 468 and accompanying text. 467See Liquidnet Letter at 4. 

468See Proposal, supra note 2, at 81028. 

469See BIDS Letter at 3–4; Fidelity Letter at 10; 

UBS Letter at 3; SIFMA Letter at 31. 

470See SIFMA Letter at 31. 

471See id. 

472See KCG Letter at 5. 

473See SIFMA Letter at 30–31. 

474See Fidelity Letter at 10. 

475See SIFMA Letter at 5. 

476See UBS Letter at 3. 

477See Liquidnet Letter at 4. 

478See SIFMA Letter at 30–31. 

the modification constitutes a material 

change. If the modification does not 

constitute a material change, the NMS 

Stock ATS could implement the change 

and file an updating amendment. 

However, if the modification is material, 

the NMS Stock ATS must file a material 

amendment and wait 30 calendar days 

before implementing the change.462

(ii) Comments on Materiality 

In the Proposal, we stated our belief 

that a change to the operations of an 

NMS Stock ATS, or the disclosures 

regarding the activities of the brokerdealer operator and its affiliates, would 

be material if there is a substantial 

likelihood that a reasonable market 

participant would consider the change 

important when evaluating the NMS 

Stock ATS as a potential trading 

venue.463 We continue to believe that 

this standard of materiality is 

appropriate. This standard of materiality 

is similar to materiality standards 

applied in the context of securities 

disclosures made pursuant to other 

rules.464

Some commenters agree that 

materiality is an appropriate standard 

for requiring advance notice.465 One 

commenter states that it agrees with the 

guidance regarding materiality set forth 

in the Proposal 466 but notes that facts 

and circumstances could determine 

whether the scenarios the Commission 

provided in the Proposal would likely 

constitute material changes, and states 

that although the scenarios set forth in 

the Proposal are helpful examples, they 

are broadly written.467 We continue to 

believe that scenarios that are 

particularly likely to implicate a 

material change would include: (1) A 

broker-dealer operator or its affiliates 

beginning to trade on the NMS Stock 

ATS; (2) a change to the broker-dealer 

operator’s policies and procedures 

governing the written safeguards and 

written procedures to protect the 

confidential trading information of 

subscribers pursuant to Rule 

301(b)(10)(i) of Regulation ATS; (3) a 

change to the types of participants on 

the NMS Stock ATS; (4) the 

introduction or removal of a new order 

type on the NMS Stock ATS; (5) a 

change to the order interaction and 

priority procedures; (6) a change to the 

segmentation of orders and participants; 

(7) a change to the manner in which the 

NMS Stock ATS displays orders or 

quotes; and (8) a change of a service 

provider to the operations of the NMS 

Stock ATS that has access to 

subscribers’ confidential trading 

information.468 This list is not intended 

to be exhaustive, and we do not mean 

to imply that other changes to the 

operations of an NMS Stock ATS or the 

activities of the broker-dealer operator 

or its affiliates could not constitute 

material changes. Further, the NMS 

Stock ATS should generally consider 

whether the cumulative effect of a series 

of changes to the operations of the NMS 

Stock ATS or the activities of the 

broker-dealer operator or its affiliates 

with regard to the NMS Stock ATS is 

material. In addition, in determining 

whether a change is material, an ATS 

generally should consider whether such 

change would affect: (1) The 

competitive dynamics among ATS 

subscribers; (2) the execution quality or 

performance of the orders of any 

subscriber or category of subscribers; (3) 

the fees that any subscriber or category 

of subscribers would pay to access and/ 

or use the ATS; (4) the nature or 

composition of counter-parties with 

which any subscriber or category of 

subscribers interact; and (5) the relative 

speed of access or execution of any 

subscriber or group of subscribers. 

Some commenters ask that we 

provide greater clarity with respect to 

the types of changes that would be 

material changes.469 One commenter 

states that we should provide examples 

of types of changes that would not be 

considered material or would be 

excluded from being considered 

‘‘material’’ given the impracticality of 

the 30-calendar day amendment period, 

and states that changes that are not 

subscriber-facing (e.g., changes to 

software, hardware, or other trading 

infrastructure) should not be deemed to 

be material changes.470 This commenter 

also states that NMS Stock ATSs should 

not be required to make a good-faith 

decision that a change is not material 

‘‘only to be informed that the 

Commission has decided the change is 

material based on an unpublished 

standard.’’ 471 Another commenter states 

that the ‘‘standard’’ for determining 

material changes is one of the most 

difficult and potentially unworkable 

obligations under the Proposal.472

Another commenter states that the 

Commission should provide ‘‘clear and 

objective standards’’ on what triggers 

the requirement for an NMS Stock ATS 

to file a Form ATS–N amendment; this 

commenter states that if the 

Commission staff regards every change 

as material, then it means nothing to 

provide that amendments are required 

only for material changes.473 In 

addition, one commenter states that a 

clearer ‘‘definition’’ of what is 

considered a ‘‘material amendment’’ is 

critical to NMS Stock ATS broker-dealer 

operators due to the fact that NMS Stock 

ATSs must provide advance notice 

before implementing a material 

change.474 Another commenter observes 

that NMS Stock ATSs have operations, 

offerings, and interactions that regularly 

evolve and states that it is ‘‘essential’’ 

for NMS Stock ATSs to have ‘‘clear and 

specific expectations’’ on what types of 

changes would be deemed material and 

what level of detail should be included 

in the disclosures.475 Another 

commenter states that without 

descriptive and informative 

commentary from the Commission, 

there will be uncertainty and disparity 

as to which changes are actually filed by 

NMS Stock ATS operators as material 

changes, and suggests that the 

Commission provide a clear set of 

standards that would trigger a Form 

ATS–N amendment.476

We continue to believe that the 

Proposal’s guidance regarding whether a 

change is material is appropriate. In 

addition, we agree with the comment 

that a change that falls in one of the 

categories set forth in the Proposal, 

including a change to the manner in 

which the NMS Stock ATS displays 

orders or trading interest, such as the 

font size in which orders are 

displayed,477 would not be a material 

change if there would not be a 

substantial likelihood that a reasonable 

market participant would consider the 

change important when evaluating the 

NMS Stock ATS as a potential trading 

venue. We also do not believe that 

market participants should be 

concerned, as suggested by one 

commenter,478 that the Commission 

staff may regard ‘‘every change’’ as 

material and thereby render 


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479See BIDS Letter at 3–4. 

480See STA Letter at 5. 

481See supra note 475 and accompanying text. 

482See Part II, Items 4, 5, 6, and 7 of adopted 

Form ATS–N; Part III, Items 2, 3, 5, 6, 11, 13, and 

19 of adopted Form ATS–N. 483See UBS Letter at 3. 484See Regulation SCI Adopting Release, supra 

note 76, 79 FR at 72341–42. 

485See HMA Letter at 9–10. 

486See Proposal, supra note 2, at n.500. 

487See id. at n.506. 

meaningless the Commission’s 

materiality guidance. 

One commenter notes that NMS Stock 

ATSs may over-file material 

amendments to avoid risk, and that 

over-filing would cost substantial time 

and resources for NMS Stock ATSs, as 

well as burden the Commission staff 

that will be processing and reviewing 

the submissions.479 Another commenter 

expresses concern that the requirements 

for amending Form ATS–N would 

create a reporting regime that is ‘‘overly 

voluminous’’ and may be less effective 

for market participants seeking 

transparency.480

The Commission does not believe that 

its materiality standard will result in 

overreporting or underreporting of 

information by an NMS Stock ATS or 

create an overly time-consuming and 

voluminous Form ATS–N amendment 

filing process for NMS Stock ATSs or 

the Commission. The Commission 

recognizes that Form ATS–N will 

require an NMS Stock ATS to provide 

more information about its operations 

and ATS-related activities of the brokerdealer operator and its affiliates than 

Form ATS. The Commission also 

recognizes that the structure and 

complexities of NMS Stock ATS 

operations have significantly changed 

since Regulation ATS was adopted, and 

believes that these changes require 

enhanced disclosures for subscribers to 

better understand how NMS Stock ATSs 

operate. Given the technology 

advancements and the proclivity for 

NMS Stock ATSs to enhance the 

operations of their ATSs, and the fact 

that market participants search for the 

best trading venue for their orders, we 

believe that it is important for an NMS 

Stock ATS to amend its Form ATS–N as 

required to ensure disclosures on Form 

ATS–N are complete and 

comprehensible. Based on the 

Commission experience with Form ATS 

filings, we believe that we have 

provided reasonable estimates of the 

time and resources that NMS Stock 

ATSs will need to expend to ensure that 

disclosures on amended Form ATS–N 

are accurate, current, and complete. 

With regard to the commenter that 

asks for more specificity about the level 

of detail that amendments to Form 

ATS–N require,481 we have revised 

Parts II and III of adopted Form ATS– 

N to make requests more explicit and 

clear about information that would be 

responsive to form requirements, and in 

some questions, we are requiring NMS 

Stock ATSs to provide a ‘‘summary’’ or 

a ‘‘list’’ of information.482 These 

changes are designed to provide an 

NMS Stock ATS with more specificity 

about the level of detail that is required 

by the form and to alleviate the burden 

on NMS Stock ATSs. Further, we 

revised Form ATS–N to remove certain 

terms that commenters believe are vague 

and, in some cases, reduced the scope 

of information requested, and revised 

requests in adopted Form ATS–N to 

make more explicit what we meant by 

these terms. We believe that the requests 

in adopted Form ATS–N, as revised 

from the Proposal, provide NMS Stock 

ATSs the appropriate level of specificity 

for them to understand the information 

that is required by the form. In addition, 

the Commission will apply the same 

standard of review for declaring 

ineffective a Form ATS–N amendment 

as it will apply for declaring ineffective 

an initial Form ATS–N. 

One commenter states that it may be 

worth considering an approach that 

leverages the Regulation SCI framework 

of major changes determined to be 

material because such an approach 

would help ensure consistency between 

different Commission regulations that 

impact and govern ATSs.483 We are 

declining to adopt the commenter’s 

suggestion to apply the Regulation SCI 

framework for materiality. Regulation 

SCI does not define material systems 

changes but requires an SCI entity to 

establish written criteria for identifying 

a change to its SCI systems and the 

security of indirect SCI systems as 

material and to report to the 

Commission those changes the SCI 

entity identified as material in 

accordance with such criteria.484

Additionally, Form ATS–N is a public 

reporting form, and we believe the 

materiality guidance for material 

amendments to Form ATS–N is more 

appropriate than the Regulation SCI 

framework because it provides NMS 

Stock ATSs, market participants, and 

the Commission a clearer standard for 

determining whether a change would be 

material in the context of public 

reporting. 

In addition, one commenter states that 

because consumers of ATS disclosures 

vary widely in business models and 

sophistication, the Commission should 

not create ‘‘tiers’’ of materiality, and 

states that although the Commission has 

always understood that some ‘‘material’’ 

factors may be more or less important to 

different market participants, it should 

not substitute its priorities and relative 

rankings of importance for those of 

diverse market participants.485 We are 

not adopting ‘‘tiers’’ of materiality or 

using our own priorities or other 

relative ‘‘rankings’’ to determine 

whether a change to an NMS Stock 

ATS’s operations is material. The 

materiality of any change is dependent 

on the specific facts and circumstances, 

and we believe that creating tiers of 

materiality would add unnecessary 

complexity and would be inconsistent 

with the Commission’s approach to 

materiality in other contexts. 

(iii) Order Display and Fair Access 

Amendments 

In the Proposal, we stated that if an 

NMS Stock ATS triggers the Rule 

301(b)(3)(i) order display and execution 

access volume thresholds after 

commencing operations pursuant to an 

effective Form ATS–N, the Commission 

generally would consider this to be a 

material change to the operations of the 

NMS Stock ATS.486 We also stated in 

the Proposal that if an NMS Stock ATS 

triggers the Rule 301(b)(5)(i) fair access 

volume thresholds after commencing 

operations pursuant to an effective Form 

ATS–N, the Commission would 

generally consider this to be a material 

change to the operations of the NMS 

Stock ATS.487

Under Rule 304(a)(i)(2)(A), an NMS 

Stock ATS is required to file a material 

amendment at least 30 calendar days 

prior to the date of implementation of a 

material change. We continue to believe 

that it generally would be a material 

change to the operations of an NMS 

Stock ATS if the ATS were to exceed 

the order display and execution access 

threshold or become subject to the order 

display and execution access 

requirements under Rule 301(b)(3). 

Likewise, we continue to believe that it 

generally would be a material change to 

the operations of an NMS Stock ATS if 

the ATS were to exceed the fair access 

threshold or become subject to the order 

display and execution access 

requirements under Rule 301(b)(5). We 

recognize, however, that an NMS Stock 

ATS may not be able to comply with the 

30-calendar day advance notice period 

for material amendments because the 

ATS may not be able to foresee when it 

will exceed the order display and 

execution access or fair access volume 

thresholds. To provide market 

participants with information about 

when an NMS Stock ATS becomes 

subject to, or no longer is subject to, the 


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488Because order display and fair access 

amendments generally would be material changes, 

we are also adding to Rule 304(a)(2)(i)(A) that such 

amendments must be filed under Rule 

304(a)(2)(i)(A) ‘‘except as provided by’’ Rule 

304(a)(2)(i)(D). 

489 In the Proposal, we referred to these 

amendments as ‘‘periodic amendments.’’ See 

Proposal, supra note 2, at 81029. We believe that 

calling these amendments ‘‘updating amendments’’ 

reduces any potential ambiguity regarding the 

timing and purpose of these amendments, which is 

discussed below. 

490Proposed Rule 304(a)(2)(i)(B). 

491See Liquidnet Letter at 7. 

492See id. 

493See Proposal, supra note 2, at 81029. 

494See Proposal, supra note 2 at 81084 (stating 

that to comply with the requirements of Part IV, 

Item 16 (adopted Part III, Item 26), an NMS Stock 

ATS would file a Form ATS–N amendment within 

30 calendar days after the end of each calendar 

quarter). See also infra Section V.D.26.a. 

order display and execution access and 

fair access requirements, while not 

placing an undue burden on the NMS 

Stock ATS, we are adding to Rule 

304(a)(2)(i) new subparagraph (D) to 

require an NMS Stock ATS to amend its 

Form ATS–N no later than seven 

calendar days after a change to the 

information required to be disclosed in 

Part III, Items 24 and 25 on Form ATS– 

N by an NMS Stock ATS (‘‘order display 

and fair access amendments’’).488 We 

believe that requiring NMS Stock ATSs 

to disclose changes to the information 

required to be disclosed in Part III, Items 

24 and 25 of adopted Form ATS–N no 

later than seven calendar days from 

such changes will provide sufficient 

time for NMS Stock ATSs to comply 

with the requirement, while providing 

market participants with timely notice. 

b. Updating Amendments 

We proposed in Rule 304(a)(2)(i)(B) 

that an NMS Stock ATS is required to 

update its Form ATS–N within 30 

calendar days after the end of each 

calendar quarter to correct any other 

information that has become inaccurate 

for any reason and has not been 

previously reported to the Commission 

as a Form ATS–N amendment. 

We are amending Rule 304(a)(2)(i)(B) 

to expand the circumstances under 

which ‘‘updating amendments’’ 489

would be filed. As proposed, NMS 

Stock ATSs would have been required 

to file updating amendments to correct 

information that has become 

‘‘inaccurate.’’ 490 We are amending Rule 

304(a)(2)(i)(B) also to require that NMS 

Stock ATSs file updating amendments 

to correct information that has become 

‘‘incomplete.’’ Although we received no 

comments directly on proposed Rule 

304(a)(2)(i)(B), one comment on the 

amendment process in general expresses 

the view that an ATS must have the 

ability to update its filing to address 

ambiguities in how its rules would 

apply to different scenarios or uses.491

The commenter also states that if an 

ATS determines that it can ‘‘make its 

disclosure clearer, add detail, or 

improve the organization of the 

disclosure, the ATS should be 

encouraged to do so.’’ 492 We are 

modifying proposed Rule 304(a)(2)(i)(B) 

to specify that an NMS Stock ATS will 

be required to file an updating 

amendment to revise disclosures that 

become ‘‘inaccurate or incomplete.’’ 

Although, as proposed, Rule 304(a)(2)(i) 

did not explicitly require an NMS Stock 

ATS to disclose changes (other than 

material changes under Rule 

304(a)(2)(i)(A)) that would render its 

Form ATS–N incomplete, the 

Commission stated its intent for Rule 

304(a)(2)(i)(B) to provide a ‘‘a 

mechanism for NMS Stock ATSs to 

disclose changes to their operations or 

to update information that does not 

constitute a material change.’’ 493 We 

continue to believe that it is important 

that market participants have access to 

accurate, current, and complete 

disclosures on Form ATS–N. 

Accordingly, the Commission is 

requiring that an NMS Stock ATS 

disclose, no later than 30 calendar days 

after the end of the calendar quarter, 

changes that would render its Form 

ATS–N inaccurate or incomplete, but 

would not be required to be filed as 

correcting, material, or order display 

and fair access amendments. 

We also are revising Rule 

304(a)(2)(i)(B) to provide that an 

updating amendment shall be filed ‘‘no 

later than’’ 30 calendar days after the 

end of the calendar quarter. This change 

allows, but does not require, an NMS 

Stock ATS to file amendments required 

by Rule 304(a)(2)(i)(B) earlier than the 

30 calendar day window at the end of 

each calendar quarter. 

In addition, proposed Rule 

304(a)(2)(i)(B) would have required an 

NMS Stock ATS to file an amendment 

to correct ‘‘any other’’ information that 

has not been previously reported as a 

Form ATS–N amendment. We believe 

that, as proposed, the phrase ‘‘any 

other’’ information could be vague and 

therefore, it could have been unclear 

when it would be permitted for an NMS 

Stock ATS to file an updating 

amendment, as opposed to a material or 

correcting amendment. To distinguish 

between what information may be filed 

pursuant to Rule 304(a)(2)(i)(B), rather 

than as a material amendment under 

Rule 304(a)(2)(i)(A), correcting 

amendment under Rule 304(a)(2)(i)(C), 

or order display and fair access 

amendment under Rule 304(a)(2)(i)(D), 

we are making a change to provide that 

updating amendments shall be filed to 

correct information that ‘‘was not 

required to be reported to the 

Commission as a Form ATS–N 

amendment pursuant to paragraphs 

304(a)(2)(i)(A), (C), or (D) of this 

section.’’ 

We believe that requiring NMS Stock 

ATSs to correct information that has 

become inaccurate or incomplete for 

any reason (and was not required to be 

reported to the Commission as a 

material amendment, correcting, or 

order display and fair access 

amendment) no later than 30 calendar 

days after the end of each calendar 

quarter would tailor the reporting 

burden for filing amendments on NMS 

Stock ATSs to the degree of significance 

of the change in a manner that does not 

compromise the Commission’s oversight 

of NMS Stock ATSs or its ability to 

protect investors and the public interest. 

For example, if an NMS Stock ATS that 

publishes or otherwise provides to one 

or more subscribers or persons aggregate 

platform-wide order flow and execution 

statistics of the NMS Stock ATS that are 

not otherwise required disclosures 

under Rule 605 of Regulation NMS, the 

NMS Stock ATS could, depending on 

the facts and circumstances, disclose 

changes to such statistics in a updating 

amendment no later than 30 calendar 

days after the end of the calendar 

quarter in which the changes 

occurred.494

We continue to believe that allowing 

NMS Stock ATSs to implement nonmaterial changes immediately would 

allow NMS Stock ATSs to make 

updating changes to their operations 

and disclosures without delay, while at 

the same time provide disclosure about 

those changes to market participants 

and the Commission within an 

appropriate time frame. Updating 

amendments, like all amendments to 

Form ATS–N, will be subject to 

Commission review pursuant to Rule 

304(a)(2)(ii) and could be declared 

ineffective if the Commission makes the 

required findings. 

c. Correcting Amendments 

We proposed in Rule 304(a)(2)(i)(C) to 

require an NMS Stock ATS to amend its 

Form ATS–N promptly to correct 

information in any previous disclosure 

on Form ATS–N after discovery that any 

information previously filed on Form 

ATS–N was inaccurate or incomplete 

when filed. We proposed that such 

amendments will be subject to 


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495See Proposed Rule 304(a)(2)(ii). 

496See Liquidnet Letter at 7. 

497See Fidelity Letter at 10. 

498 In addition, we are adopting Rule 

304(a)(2)(i)(C) with technical modifications. The 

rule text of proposed Rule 304(a)(2)(i)(C) stated that 

an NMS Stock ATS must amend Form ATS–N upon 

discovery that any information ‘‘filed under 

paragraphs (a)(1)(i) or (a)(2)(i)(A) or (B)’’ was 

inaccurate or incomplete when filed. This 

inadvertently excluded applying the requirement to 

inaccurate or incomplete information filed under 

paragraph (a)(2)(i)(C). We believe that deleting the 

cross-references and simply stating that an NMS 

Stock ATS must file an amendment when ‘‘any 

previous disclosure on Form ATS–N’’ was 

materially inaccurate or incomplete when filed 

would require that an NMS Stock ATS correct 

materially incomplete or inaccurate information on 

initial Form ATS–N and any amendment thereto 

(including any amendment previously required by 

Rule 304(a)(2)(C)). We are making this change to 

correct this error, and to specify that an NMS Stock 

ATS would have an obligation to promptly correct 

a materially inaccurate or incomplete disclosure on 

any initial Form ATS–N or amendment thereto. 

Generally, we will consider a correcting 

amendment to be filed ‘‘promptly,’’ if it is filed 

within five business days after discovery that any 

material information previously filed on Form 

ATS–N was materially inaccurate or incomplete 

when filed. 

In addition, we are making a technical change by 

defining the type of amendment described in Rule 

304(a)(2)(i)(C) as a ‘‘correcting amendment.’’ 

499See supra Section IV.B.1.a. 

500We are also making several other changes to 

Rule 304(a)(2)(ii): (1) Reordering some of the 

language of Rule 304(a)(2)(ii) from the proposed 

rule text; (2) changing the heading of the paragraph 

from ‘‘Commission review period’’ to ‘‘Commission 

review period; Ineffectiveness determination’’; (3) 

revising the proposed rule text that stated ‘‘If the 

Commission declares a Form ATS–N Amendment 

ineffective, the NMS Stock ATS shall be prohibited 

from operating pursuant to the ineffective Form 

ATS–N’’ to simply state ‘‘A Form ATS–N 

amendment declared ineffective shall prohibit the 

NMS Stock ATS from operating pursuant to the 

ineffective Form ATS–N amendment’’; (4) deleting 

references to the defined term ‘‘Form ATS–N 

Amendment’’; (5) stating that a Form ATS–N 

amendment declared ineffective ‘‘does’’ not (rather 

than ‘‘would’’ not) prevent the NMS Stock ATS 

from subsequently filing a new Form ATS–N 

amendment; and (6) referring to amendments filed 

pursuant to Rule 304(a)(2)(i)(A) ‘‘through (D)’’. 

501See Proposal, supra note 2, at 81029. 

502See id. at 81030. 

503See id. 

504See supra note 359 and accompanying text. 

505See supra Section IV.A.3. 

Commission review pursuant to Rule 

304(a)(2)(ii).495

We received one comment regarding 

proposed Rule 304(a)(2)(i)(C) that 

supports allowing an NMS Stock ATS to 

file a Form ATS–N amendment to 

correct information in a previous Form 

ATS–N disclosure that was inaccurate 

or incomplete when filed.496

Another commenter is generally 

concerned about the amount and types 

of amendment filings required under the 

Proposal, and the burden that filing 

such amendments could impose on 

NMS Stock ATSs.497 To address this 

concern, we are modifying proposed 

Rule 304(a)(2)(i)(C) to require that NMS 

Stock ATSs file correcting amendments 

after discovery that any information 

previously filed on Form ATS–N was 

materially inaccurate or incomplete 

when filed.498 We believe that it is 

appropriate to require NMS Stock ATSs 

to promptly file an amendment only 

when the information previously filed 

was materially inaccurate or incomplete 

because such information is likely to be 

important to current subscribers and 

market participants and could impact 

their decision to use the NMS Stock 

ATS’s services. Corrections of 

immaterial inaccuracies and 

completeness can be made by updating 

amendments. In determining whether 

previously filed information is 

materially inaccurate or incomplete, an 

NMS Stock ATS should consider the 

factors it would consider in determining 

whether a change would require a 

material amendment.499

2. Rule 304(a)(2)(ii): Commission 

Review Period; Ineffectiveness 

Determination 

Rule 304(a)(2)(ii) provides the process 

through which the Commission would 

review and declare Form ATS–N 

amendments to Form ATS–N. Proposed 

Rule 304(a)(2)(ii) (‘‘Commission review 

period; Ineffectiveness determination’’) 

provided that the Commission will, by 

order, if it finds that such action is 

necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors, declare 

ineffective any Form ATS–N 

amendment filed pursuant to Rule 

304(a)(2)(i)(A) through (C) no later than 

30 calendar days from filing with the 

Commission. The proposed rule also 

provided that if the Commission 

declares a Form ATS–N amendment 

ineffective, the NMS Stock ATS shall be 

prohibited from operating pursuant to 

the ineffective Form ATS–N 

amendment. Under proposed Rule 

304(a)(2)(ii), the NMS Stock ATS could 

have, however, continued to operate 

pursuant to a Form ATS–N that was 

previously declared effective. In 

addition, the proposed rule provided 

that a Form ATS–N amendment 

declared ineffective would not prevent 

the NMS Stock ATS from subsequently 

filing a new Form ATS–N amendment 

that resolves the disclosure deficiency 

that resulted in the declaration of 

ineffectiveness. We are adopting Rule 

304(a)(2)(ii) with modifications to 

provide that the Commission will, by 

order, declare ineffective any Form 

ATS–N amendment filed pursuant to 

Rule 304(a)(2)(i)(A) through (D), no later 

than 30 calendar days from filing with 

the Commission, if the Commission 

finds that such action is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors.500

We stated in the Proposal that the 

Commission could declare ineffective a 

Form ATS–N amendment if one or more 

disclosures on an amended Form ATS– 

N are materially deficient with respect 

to its accuracy, currency, completeness, 

or fair presentation.501 We also stated 

that it could declare ineffective a Form 

ATS–N amendment if it finds that such 

action is necessary or appropriate in the 

public interest, and is consistent with 

the protection of investors, because the 

amendment disclosures reveal that, 

under a ‘‘red flag’’ review, the activity 

described would not comply with the 

federal securities laws or the rules or 

regulations thereunder, including 

Regulation ATS.502 We further stated 

that like the review of an initial Form 

ATS–N, the Commission’s review of a 

Form ATS–N amendment would focus 

on the disclosures made on Form ATS– 

N, and that the Commission would not 

be precluded from later determining 

that an NMS Stock ATS had violated the 

federal securities laws or the rules and 

regulations thereunder.503 As discussed 

above in the context of initial Form 

ATS–N filings, we are not performing a 

review of the merits of the disclosures 

on Form ATS–N amendments, such as 

determining the strengths and 

weaknesses of the trading platform or a 

protocol offered by the NMS Stock ATS. 

The Commission also is not making 

findings regarding whether the means 

by which orders will interact on the 

trading platform are, or are not, 

consistent with the Exchange Act, as is 

the case with respect to certain SRO rule 

filings.504 As with respect to initial 

filings of Form ATS–N, the Commission 

could declare a Form ATS–N 

amendment ineffective if the 

Commission finds that such action is 

necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. The Commission 

notes that this process will be similar to 

the review process for initial Form 

ATS–N. Accordingly, the examples 

provided above to illustrate scenarios 

that would cause the Commission to 

declare an initial Form ATS–N 

ineffective (e.g., materially deficient 

disclosures with respect to 

completeness or comprehensibility) 

would equally apply in the context of a 

Form ATS–N amendment filed with the 

Commission.505


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506See Liquidnet Letter at 5–6. 

507See id. at 6. 

508See supra Section IV.A.3. 

509See Liquidnet Letter at 5. 

510Although we acknowledged in the Proposal 

that the Commission staff would likely engage in 

discussions with NMS Stock ATSs during the 

review period, we did not propose a process for 

NMS Stock ATSs to amend a material amendment 

during the Commission review period. See 

Proposal, supra note 2, at 81035. The adopted 

process is similar to the process we are adopting to 

allow non-Legacy NMS Stock ATSs to amend initial 

Form ATS–N during the Commission review 

period. See supra Section IV.A.2. 

511Rule 304(a)(2)(ii) states that the Commission 

will, by order, declare ineffective any Form ATS– 

N amendment no later than 30 calendar days from 

filing of such amendment with the Commission. We 

will have 30 calendar days to declare any 

amendment ineffective, including updating or 

correcting amendments to material amendments 

that are filed during the Commission review period. 

For example, if an NMS Stock ATS files an 

updating or correcting amendment to a material 

amendment on calendar day 25 of the Commission 

review period of the material amendment, the 

updating or correcting amendment could be 

declared ineffective by the Commission up to 25 

calendar days after the Commission review period 

for the material amendment expires—until the 

Commission’s 30-calendar day review period for the 

updating or correcting amendment has expired. 

512See KCG Letter at 5. 

513See id. 

514See id. at 7–8. 

515See PDQ Letter at 1. 

We received comments regarding the 

proposed process for reviewing Form 

ATS–N amendments. One commenter 

expresses support for the proposal not 

to require the Commission to 

affirmatively declare material 

amendments effective, and states that 

such a requirement might serve as an 

impediment to NMS Stock ATSs 

seeking to introduce a new 

functionality, would unnecessarily 

burden Commission staff, and would 

discourage NMS Stock ATSs from filing 

changes more than 30 days in advance 

of implementation.506 This commenter 

expresses concern that requiring preapproval of changes to Form ATS–N 

would inhibit informal communication 

between an NMS Stock ATS and the 

Commission staff in cases where an ATS 

may otherwise be willing to share 

information with the Commission staff 

in advance of filing.507 We are not 

adopting a rule to declare a Form ATS– 

N amendment effective. The 

Commission’s oversight function of 

NMS Stock ATSs will be preserved 

because the Commission will be able to 

declare ineffective a Form ATS–N if it 

finds that such action is necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors. This process will be similar to 

the review process for initial Form 

ATS–N.508 Accordingly, the examples 

provided above to illustrate scenarios 

that would cause the Commission to 

declare an initial Form ATS–N 

ineffective (e.g., materially deficient 

disclosures with respect to 

completeness or comprehensibility) 

would equally apply in the context of a 

Form ATS–N amendment filed with the 

Commission. 

One commenter does not object to the 

Commission having the ability to 

declare a material amendment 

ineffective, but hopes the Commission 

would identify concerns as soon as 

practical during the review period so an 

NMS Stock ATS could address any 

issues.509 The Commission intends to 

engage in dialogue with an NMS Stock 

ATS regarding its Form ATS–N 

amendment disclosures and 

communicate to the NMS Stock ATS 

any concerns so the ATS may amend its 

disclosures, as appropriate or necessary 

to avoid an ineffective declaration. Such 

dialogue will benefit market 

participants by creating more effective 

disclosures in Form ATS–N 

amendments that will help enable them 

to make more informed routing 

decisions. To facilitate this, we are 

adopting a process for an NMS Stock 

ATS to file, during the Commission’s 

review of a material amendment, a 

correcting or updating amendment 

pursuant to Rule 304(a)(2)(i)(B) through 

(C) to the material amendment.510 This 

process is designed to promote 

transparency and facilitate complete 

and comprehensible disclosure. Any 

updating or correcting amendments to a 

material amendment filed during the 

Commission review period will be 

subject to Commission review under 

Rule 304(a)(2)(ii).511 Although a 

correcting or updating amendment is 

not subject to an implementation delay, 

Rule 304(a)(2)(i)(A) requires that the 

NMS Stock ATS delay the 

implementation of the change subject to 

the material amendment until 30 

calendar days following filing of the 

material amendment; therefore, any 

correcting or updating amendment that 

amends a material amendment during 

the Commission review could not be 

implemented before the material 

amendment that it is amending is 

effective. 

In contrast, we believe a material 

change to a Form ATS–N material 

amendment could reflect a significant 

change to the intended operations of the 

ATS or the ATS-related activities of its 

broker-dealer operator, which would 

necessitate a full review period. 

Therefore, we are modifying Rule 

304(a)(a)(2)(ii) to specify that an NMS 

Stock ATS making material changes to 

a filed material amendment during the 

Commission review period shall 

withdraw its filed material amendment 

and, if the NMS Stock ATS chooses to 

pursue the change, must file a new 

material amendment pursuant to Rule 

304(a)(2)(i)(A). 

Another commenter suggests that 

similar to the current process for 

reviewing Form ATS amendments, the 

Commission should require advanced 

notice of material changes, but not 

impose a review process for 

ineffectiveness.512 The commenter 

states that requiring NMS Stock ATSs to 

provide advance notice and receive 

Commission ‘‘approval’’ before an NMS 

Stock ATS can implement a material 

change could incent an NMS Stock ATS 

to err on the side of submitting ‘‘vague’’ 

disclosures, which are less helpful to 

market participants, so that it has 

‘‘sufficient operational flexibility’’ to 

make future changes, or could stifle 

ATS innovation as NMS Stock ATSs 

may be reluctant to make changes that 

would be subject to the ‘‘approval/ 

disapproval’’ review process.513 The 

commenter further states that NMS 

Stock ATS operators should be allowed 

to furnish universal operations and 

systems material via a web link, and 

updates to such materials should not be 

subject to advance notice and 

Commission review because requiring 

an NMS Stock ATS to provide advance 

notice of changes to operations and 

systems ‘‘would cause lengthy delays 

and stifle NMS Stock ATS technical 

innovation.’’ 514 Another commenter 

observes that ‘‘approval’’ of Form ATS– 

N amendments ‘‘would require positive 

response from the Commission instead 

of the current passive approval after a 

certain period of time.’’ 515

We are declining to adopt the 

commenter’s suggestion to not review 

Form ATS–N amendments for 

ineffectiveness because the review 

process allows the Commission to better 

fulfill its oversight responsibilities of 

NMS Stock ATSs and to help ensure 

that Form ATS–N amendments contain 

disclosures that are complete and 

comprehensible. We also disagree with 

the commenter’s view that the 

Commission review process will 

incentivize NMS Stock ATSs to make 

vague disclosures to allow for 

operational flexibility. Rather, we 

believe that without a process to declare 

ineffective a Form ATS–N amendment, 

an NMS Stock ATS may have less 

incentive to provide complete and 

comprehensible disclosures. 

While the review process for Form 

ATS–N amendments may have some 


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516See infra Section X.C. 

517See supra note 514 and accompanying text. 

518See Rule 304(a)(2)(i)(B). 

519Several commenters address our proposed 

review process for all Form ATS–N filings, rather 

than specifically addressing the review of Form 

ATS–N amendments. See supra Section IV.A.3. 

520After ceasing operations, the broker-dealer 

operator of an NMS Stock ATS will be required to 

file Form ATS–R within 10 calendar days as 

required by Rule 301(b)(9) of Regulation ATS. 521As proposed, Rule 304(a)(3) states that an 

NMS Stock ATS shall notice its cessation at least 

10 business days ‘‘before’’ the date it ‘‘ceases’’ to 

operate. As adopted, Rule 304(a)(3) states that an 

NMS Stock ATS shall notice its cessation at least 

10 business days ‘‘prior to the date’’ it ‘‘will cease’’ 

to operate. We believe these changes enhance the 

readability of the rule. 

522We made technical, non-substantive changes 

from the proposed rule by: (1) Replacing references 

to an ‘‘NMS Stock ATS’s exemption’’ to ‘‘the 

exemption for an NMS Stock ATS’’ throughout Rule 

304(a)(4); and (2) deleting the reference to ‘‘the 

definition of an ‘exchange’ ’’ in Rule 304(a)(4). 

523See CFA Institute Letter at 4; Liquidnet Letter 

at 7–8; HMA Letter at 5–6; Better Markets Letter at 

7. 

524See CFA Institute Letter at 4. 

525See id. 

526See HMA Letter at 5. 

527See supra Section III.A.2. 

528See Liquidnet Letter at 7–8. 

529 In the Regulation ATS Adopting Release, we 

stated our belief that the enhanced regulation of 

alternative trading systems that choose to remain 

registered broker-dealers under Regulation ATS 

provides more protection for the investors who use 

impact on innovation by ATSs,516 under 

the rules adopted today and consistent 

with proposed Rule 304(a)(2)(ii), the 

Commission will not be declaring Form 

ATS–N amendments ‘‘effective;’’ if the 

30-calendar day review period elapses 

and the Commission has not declared an 

amendment ineffective, the NMS Stock 

ATS may commence operating pursuant 

to the Form ATS–N amendment. 

Further, Form ATS–N amendments will 

not be approved by the Commission and 

the amendment review process, like the 

review process for initial Form ATS–N, 

will not be a merit-based review, but 

rather will focus on the completeness 

and comprehensibility of the 

disclosures. We are declining to adopt 

the commenter’s suggestion to allow an 

NMS Stock ATS to change its operations 

and systems without a review process 

and by furnishing a web link.517 We 

believe that it is important that 

subscribers have advance notice of 

material changes and that the 

Commission has the opportunity to 

review material amendments to the 

Form ATS–N disclosures. If the NMS 

Stock ATS makes changes that are not 

material, the NMS Stock ATS can 

implement such changes and report 

them by way of an updating 

amendment.518

Other commenters express the same 

concerns with regard to the review 

process for Form ATS–N amendments 

as they did for the review process for 

initial Form ATS–N. These comments 

are addressed above.519 With respect to 

determining whether to declare an 

amendment to Form ATS–N ineffective, 

the Commission will apply the same 

standard of review that will be applied 

to initial filings. 

C. Rule 304(a)(3): Notice of Cessation 

Rule 304(a)(3) provides the 

requirement for NMS Stock ATSs to 

provide notice if they plan to cease to 

operate. Proposed Rule 304(a)(3) 

(‘‘Notice of cessation’’) provided that an 

NMS Stock ATS shall notice its 

cessation of operations on Form ATS–N 

at least 10 business days before the date 

the NMS Stock ATS ceases to operate as 

an NMS Stock ATS. Proposed Rule 

304(a)(3) also provided that a notice of 

cessation shall cause the Form ATS–N 

to become ineffective on the date 

designated by the NMS Stock ATS. 

We received no comments regarding 

proposed Rule 304(a)(3). We believe that 

10 business days is a reasonable period 

within which an NMS Stock ATS will 

provide notice that it intends to cease 

operations and will give market 

participants sufficient time to seek 

alternative routing destinations for their 

orders.520 We are adopting Rule 

304(a)(3) with non-substantive 

modifications.521

D. Rule 304(a)(4): Suspension, 

Limitation, or Revocation of the 

Exemption From the Definition of 

Exchange 

Paragraph (i) of proposed Rule 

304(a)(4) (‘‘Suspension, limitation, and 

revocation of the exemption from the 

definition of exchange’’) provided that 

the Commission will, by order, if it 

finds, after notice and opportunity for 

hearing, that such action is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors, suspend for a period not 

exceeding twelve months, limit, or 

revoke an NMS Stock ATS’s exemption 

from the definition of ‘‘exchange’’ 

pursuant to Rule 3a1–1(a)(2). Further, 

proposed Rule 304(a)(4)(ii) provided 

that if an NMS Stock ATS’s exemption 

is suspended or revoked pursuant to 

proposed Rule 304(a)(4)(i), the NMS 

Stock ATS would be prohibited from 

operating pursuant to the exemption 

from the definition of an ‘‘exchange’’ 

pursuant to Rule 3a1–1(a)(2). In 

addition, proposed Rule 304(a)(4)(i) 

provided that if an NMS Stock ATS’s 

exemption is limited pursuant to 

proposed Rule 304(a)(4)(i), the NMS 

Stock ATS shall be prohibited from 

operating in a manner otherwise 

inconsistent with the terms and 

conditions of the Commission order. We 

are adopting Rule 304(a)(4) with minor 

modifications.522

We received four comments regarding 

proposed Rule 304(a)(4).523 One 

commenter supports the Commission’s 

proposal to introduce a mechanism for 

the suspension for a period not 

exceeding 12 months, limitation, or 

revocation of the exemption provided 

under Rule 3a1–1(a)(2) because it 

believes that there must be a clear 

mechanism for removing non-compliant 

trading venues from ‘‘the exchangewaiver regime rather than relying on 

more general enforcement powers.’’ 524

This commenter asserts that considering 

whether an NMS Stock ATS has 

accurately and timely filed Form ATS– 

N in determining whether the ATS 

qualifies for an exemption ‘‘is necessary 

to ensure the credibility of these public 

disclosure documents and the 

accountability of the entities seeking the 

exemption.’’ 525

In addition, one commenter states that 

the Commission ‘‘should be empowered 

to suspend, limit, or revoke an ATS’s 

exemption from the definition of an 

‘exchange’, irrespective of the assets 

traded on the ATS.’’ 526 We have 

determined to apply the additional 

conditions to the Exchange Act Rule 

3a1–1(a) exemption, including Rule 

304(a)(4), only to NMS Stock ATSs 527

and are not adopting Rule 304(a)(4) to 

apply to non-NMS Stock ATSs at this 

time. We will consider the comment if 

we propose in the future to apply Rule 

304, including Rule 304(a)(4), to nonNMS Stock ATSs. We intend to monitor 

the implementation of Rule 304 to NMS 

Stock ATSs, and should we decide to 

take further action with applying Rule 

304, including Rule 304(a)(4), to nonNMS Stock ATSs, we would do so in a 

separate rulemaking and take into 

account our experience with Rule 304 

and NMS Stock ATSs. 

One commenter is concerned that the 

process to suspend, limit, or revoke an 

NMS Stock ATS’s exemption provided 

under Rule 3a1–1(a)(2) could result in a 

sanction (such as suspension or 

revocation of its exemption) that is 

‘‘disproportionate to the alleged 

violation,’’ and asks the Commission to 

reconsider such requirement.528 The 

Rule 304(a)(4) process for the 

suspension, limitation, or revocation of 

the Rule 3a1–1(a)(2) exemption is 

designed in part to help prevent failure 

by an NMS Stock ATS to adhere to the 

conditions for the exemption. The 

conditions of the Rule 3a1–1(a) 

exemption are designed to, among other 

things, protect investors.529 We believe 


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these systems. See Regulation ATS Adopting 

Release, supra note 3, at 70857. 

530See Proposal, supra note 2, at 81032. 

531See supra note 522 and accompanying text. In 

the Proposal, we provided examples of when it 

would be appropriate to provide for the suspension, 

limitation, or revocation of an NMS Stock ATS’s 

exemption pursuant to Rule 3a1–1(a)(2). See 

Proposal, supra note 2 at 81032. 

532 If the Commission revoked or suspended the 

exemption of an NMS Stock ATS, the Commission 

could provide in its order a period of time for the 

NMS Stock ATS to wind down its operations. 

Because Commission orders revoking or suspending 

the exemption would be made public, market 

participants would also have notice of any wind 

down period. Additionally, if the Commission 

revoked the exemption of an NMS Stock ATS and 

the entity wished to continue operations, the entity 

could do so only if it were registered as a national 

securities exchange pursuant to Section 6 of the 

Exchange Act or were exempted by the Commission 

from such registration based on the limited volume 

of transactions effected on such exchange, or seeks 

another exemption. See 17 CFR 242.301(a)(1)–(2). 

The entity would not be prohibited from filing a 

new Form ATS–N, pursuant to Rule 304(a)(1)(i). An 

NMS Stock ATS that has had its exemption 

suspended or limited may, depending on the facts 

and circumstances, be able to file a Form ATS–N 

amendment or revise its operations to come into 

compliance with the conditions of the exemption or 

the provision of any other federal securities law that 

may have been the basis of the Commission’s 

findings. 

533See Proposal, supra note 2, at 81033. 

534See id. If the Commission finds that an NMS 

Stock ATS implemented a material change to its 

operations, but failed to disclose the material 

change on its Form ATS–N, the Commission could 

determine to allow the ATS to continue to operate 

as disclosed on its Form ATS–N, but prohibit the 

ATS from engaging in the undisclosed activity until 

the ATS properly amends its Form ATS–N in 

accordance with Rule 304(a)(2). Or, if the 

Commission finds that an NMS Stock ATS offers an 

order type that resulted in violations of the 

Commission’s rules restricting the acceptance and 

ranking of orders in impermissible sub-penny 

increments, the Commission could allow the ATS 

to continue to operate but prohibit the ATS from 

offering the order type, if it finds that doing so is 

necessary or appropriate in the public interest, and 

consistent with the protection of investors. 

535See Proposal, supra note 2, at 81033. 

536See id. 

537See id. 

538See id. 

that it is important to provide a process 

tailored to the regulatory structure for 

NMS Stock ATSs for the Commission to 

use in the event an NMS Stock ATS 

does not meet the conditions of the 

exemption as investor protections may 

be at risk. As proposed, prior to issuing 

an order suspending, limiting, or 

revoking an NMS Stock ATS’s 

exemption pursuant to Rule 304(a)(4)(i), 

the Commission would provide notice 

and opportunity for hearing to the NMS 

Stock ATS, and make the findings 

specified in Rule 304(a)(4)(i), that, in the 

Commission’s opinion, the suspension, 

limitation, or revocation is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors. We believe that this process 

will provide an NMS Stock ATS with 

adequate opportunity to respond before 

Commission action, and will provide 

the Commission with an appropriate 

tool, subject to notice and hearing 

safeguards, to protect the public from an 

NMS Stock ATS that fails to comply 

with Regulation ATS or otherwise 

violates any provision of the federal 

securities laws. 

The exemption from the definition of 

‘‘exchange’’ provided under Rule 3a1– 

1(a)(2) is conditional upon initial and 

ongoing compliance with Regulation 

ATS. As a result of this rulemaking, the 

conditions of the Rule 3a1–1(a)(2) 

exemption are being expanded for NMS 

Stock ATSs. An ATS that fails to 

comply with those conditions would 

fall outside the scope of the exemption. 

We believe that it is appropriate to 

provide a process by which the 

Commission may, by order, suspend, 

limit, or revoke an NMS Stock ATS’s 

exemption provided under Rule 3a1– 

1(a)(2) if the NMS Stock ATS is 

operating or has operated in a manner 

such that the exemption for the NMS 

Stock ATS is not necessary or 

appropriate in the public interest, or is 

inconsistent with the protection of 

investors,530 and are adopting Rule 

304(a)(4) substantially as proposed.531

We believe that a determination as to 

whether to suspend, limit, or revoke an 

NMS Stock ATS’s exemption would 

depend on the particular facts and 

circumstances; however, we believe that 

revocation of the exemption would be 

appropriate upon the existence of a 

problem involving the ATS that 

significantly impacts the public interest 

and the protection of investors. 

Pursuant to Rule 304(a)(4)(ii), an NMS 

Stock ATS whose exemption has been 

suspended or revoked would be 

prohibited from operating pursuant to 

the Rule 3a1–1(a)(2) exemption; if an 

NMS Stock ATS were to continue to 

engage in Rule 3b–16 activity in NMS 

stocks without the exemption, it would 

be operating as an unregistered national 

securities exchange because it would no 

longer qualify for the exemption.532 If 

an NMS Stock ATS’s exemption were 

limited pursuant to Rule 304(a)(4)(i), the 

NMS Stock ATS would be prohibited 

from operating in a manner otherwise 

inconsistent with the terms and 

conditions of the Commission order, 

and if it operated in a manner 

inconsistent with the terms and 

conditions of the order, it would risk 

operating as an unregistered national 

securities exchange. The exemption 

provided under Rule 3a1–1(a)(2) is 

conditional upon initial and ongoing 

compliance with Regulation ATS. We 

believe that the process for suspending, 

limiting, or revoking an NMS Stock 

ATS’s exemption, if necessary or 

appropriate in the public interest, and 

consistent with the protection of 

investors, will protect investors in the 

event of non-compliance by an NMS 

Stock ATS with the conditions with 

which the NMS Stock ATS must adhere 

to continue to qualify for the exemption. 

We also continue to believe that 

providing a process by which the 

Commission can determine to suspend, 

limit, or revoke an NMS Stock ATS’s 

exemption will provide appropriate 

flexibility to address the specific facts 

and circumstances of an NMS Stock 

ATS’s failure to comply with Regulation 

ATS.533 This process will also allow the 

Commission to consider the nature of 

the violation of federal securities laws 

and the potential harm to investors as a 

result of the non-compliance or 

violation. The process for the 

Commission to limit the exemption in 

Rule 3a1–1(a)(2) will allow flexibility to 

address specific disclosures or activities 

that are the cause of the non-compliance 

with Regulation ATS or that violate 

federal securities laws.534 We believe 

that, depending on the facts and 

circumstances, it may be more 

appropriate in the public interest, and 

consistent with the protection of 

investors, to limit the scope of an NMS 

Stock ATS’s exemption, instead of 

revoking or suspending the exemption 

and causing the NMS Stock ATS to 

cease operating as an ATS.535 By 

comparison, we believe it would be 

more appropriate to revoke the 

exemption of an NMS Stock ATS that 

no longer meets the definition of NMS 

Stock ATS or is no longer a registered 

broker-dealer, as these conditions are 

fundamental to the exemption.536

Additionally, we believe that it could be 

necessary or appropriate in the public 

interest, and consistent with the 

protection of investors, to revoke the 

exemption of an NMS Stock ATS if, for 

example, the NMS Stock ATS appears to 

be violating, or to have violated, the 

antifraud provisions of the federal 

securities laws.537 Nonetheless, the 

entry of an order revoking an NMS 

Stock ATS’s exemption would not 

prohibit the broker-dealer operator of 

the NMS Stock ATS from continuing its 

other broker-dealer operations.538

Another commenter requests 

clarification regarding the process for 

revoking, suspending, or limiting an 

NMS Stock ATS’s exemption. The 

commenter asks the Commission to 

clarify how an ATS could reestablish its 

exemption provided under Rule 3a1– 

1(a)(2) after it has been revoked. This 

commenter also questions whether there 


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539See CFA Institute Letter at 5. 

540See infra note 532 and accompanying text. 

541See CFA Institute Letter at 5. 

542See Better Markets Letter at 7. 

543See generally Exchange Act Section 21C. The 

use of the process whereby the Commission could 

suspend, limit, or revoke an NMS Stock ATS’s Rule 

3a1–1(a)(2) exemption would not preclude the 

Commission from using its enforcement authority, 

such as, for example, pursuant to Sections 10(b), 

15(b)(4), and 15(c) (15 U.S.C. 78(j)(b), 15 U.S.C. 

78o(b)(4); 15 U.S.C. 78o(c)). Rather, it would 

provide an additional means of helping to ensure 

that NMS Stock ATSs that no longer qualify for the 

Rule 3a1–1(a)(2) exemption are unable to take 

advantage of the exemption. For example, if an 

NMS Stock ATS failed to file a Form ATS–N 

amendment to disclose material changes to the 

operation of the ATS, the Commission could invoke 

the process to suspend, limit, or revoke the ATS’s 

exemption, but would not be precluded from 

bringing an action against the broker-dealer 

operator of the ATS for failing to comply with Rule 

304(a)(2), or violating the antifraud provisions of 

the federal securities laws. 

544See 17 CFR 301(b)(2)(vi). 

545 15 U.S.C. 78k–1, 78q(a), 78r(a), and 78ff(a). 

See 17 CFR 242.301(b)(2)(vi). Section 17(a) of the 

Exchange Act imposes recordkeeping requirements 

on national securities exchanges and registered 

securities associations; Section 18(a) of the 

Exchange Act imposes liability for false or 

misleading statements with respect to a material 

fact in applications, reports, or documents filed 

pursuant to the Exchange Act or any rule or 

regulation thereunder; and Section 32(a) of the 

Exchange Act provides for penalties against any 

person that willfully violates any provision of, or 

that willfully and knowingly makes, or causes to be 

made, any false or misleading statements with 

respect to a material fact in any application, report, 

or document required to be filed under the 

Exchange Act or any rule or regulation thereunder. 

546See Better Markets Letter at 7; SIFMA Letter 

at 33. 

547See Better Markets Letter at 7. 

548See SIFMA Letter at 33. 

549See id. 

550See id. 

551See infra Section V. 

will be penalties for non-compliance or 

whether the Commission’s deliberations 

on the re-submitted Form ATS–N would 

in any way differ from those on initial 

Form ATS–N.539 An NMS Stock ATS 

whose exemption has been revoked 

cannot operate pursuant to the Rule 

3a1–1(a)(2) exemption, and if such 

entity were to continue to engage in 

Rule 3b–16 activity, it could be 

determined to be an unregistered 

national securities exchange in violation 

of Section 5 of the Exchange Act.540 To 

operate as an NMS Stock ATS after 

revocation, the entity would need to file 

a new initial Form ATS–N with the 

Commission. The Commission would 

review the Form ATS–N without 

prejudice and would not apply a 

different standard than it would to any 

other entity filing Form ATS–N 

pursuant to Rule 304(a)(1). 

One commenter also requests 

clarification regarding the procedure 

that the Commission will follow for an 

NMS Stock ATS that has had its 

exemption suspended for the maximum 

12 months.541 Upon the expiration of 

the suspension period, an NMS Stock 

ATS could operate pursuant to its initial 

Form ATS–N, as long as its exemption 

is not otherwise limited or revoked and 

the NMS Stock ATS is otherwise in 

compliance with Rule 304. The 

suspension period is not to exceed 12 

months, and the Commission could 

order a suspension period of less than 

12 months. During the suspension 

period, the Commission could 

reevaluate the status of the NMS Stock 

ATS’s exemption and determine, 

pursuant to Rule 304(a)(4), to revoke or 

limit the Rule 3a1–1(a) exemption if the 

Commission finds, after notice and 

opportunity for hearing, that such action 

is necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. 

An additional commenter questions 

what action the Commission would take 

in the event that there are ‘‘ambiguous, 

seemingly incomplete, or otherwise 

questionable disclosures that do not rise 

to the level of material deficiency,’’ and 

suggests that the Commission apply 

‘‘intermediate’’ sanctions, such as 

monetary fines and the temporary 

suspension of the right to operate as an 

NMS Stock ATS without notice or 

hearing.542 The purpose of Rule 

304(a)(4) is to prohibit the NMS Stock 

ATSs from operating in a manner 

inconsistent with the Rule 3a1–1(a)(2) 

exemption, which we believe is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors. We do not 

believe it is appropriate to impose 

monetary fines or temporarily suspend 

an NMS Stock ATS’s exemption without 

such due process, as suggested by the 

commenter. Any suspension, limitation, 

or revocation of an NMS Stock ATS’s 

exemption provided by Rule 3a1–1(a)(2) 

would not preclude the Commission 

from using its enforcement authority if 

the NMS Stock ATS fails to comply 

with the federal securities laws.543

E. Rule 304(b): Public Disclosure of 

Form ATS–N and Related Commission 

Orders 

1. Rule 304(b)(1): Form ATS–N 

‘‘Report’’ 

Rule 304(b)(1) provides that every 

Form ATS–N would constitute a report 

under the Exchange Act. Paragraph (1) 

of proposed Rule 304(b) (‘‘Public 

disclosures’’) provided that every Form 

ATS–N filed pursuant to Rule 304 shall 

constitute a ‘‘report’’ within the 

meaning of Sections 11A, 17(a), 18(a), 

and 32(a) and any other applicable 

provisions of the Exchange Act. Because 

proposed Form ATS–N is a report that 

is required to be filed under the 

Exchange Act, it would be unlawful for 

any person to willfully or knowingly 

make, or cause to be made, a false or 

misleading statement with respect to 

any material fact in Form ATS–N. 

Proposed Rule 304(b)(1) is nearly 

identical to current Rule 

301(b)(2)(vi),544 which provides that 

every notice or amendment filed 

pursuant to Rule 301(b)(2), including 

Form ATS, shall constitute a ‘‘report’’ 

within the meaning of Sections 11A, 

17(a), 18(a), and 32(a), and any other 

applicable provisions of the Exchange 

Act.545

We received two comments on 

proposed Rule 304(b)(1).546 One 

commenter supports that Form ATS–N 

shall constitute a ‘‘report’’ within the 

meaning of applicable provisions of the 

Exchange Act.547 The other commenter 

expresses concern regarding the 

potential liability and consequences of 

the provision that Form ATS–N would 

constitute a ‘‘report’’ within the 

meaning of Sections 11A, 17(a), 18(a), 

and 32(a) of the Exchange Act in light 

of the increased disclosure requirements 

under Form ATS–N.548 This commenter 

states that although this same standard 

applies to current Form ATS, the 

potential for an NMS Stock ATS to 

unknowingly but willfully file a 

statement that turns out to be false is 

heightened by the increased amount and 

scope of disclosure contemplated under 

Form ATS–N.549

We do not believe that the fact that 

Form ATS–N requires more detailed 

disclosures than Form ATS would 

justify reducing the potential liability 

for false or misleading statements made 

in Form ATS–N disclosures. The 

information required on Form ATS–N is 

designed to provide the public with 

transparency into an NMS Stock ATS’s 

operations and the ATS-related 

activities of the broker-dealer operator 

and its affiliates. Although the 

commenter does not directly object to 

Rule 304(b)(1), the commenter argues 

that the Commission should narrow the 

scope of disclosures and standardize the 

Form ATS–N format in light of the 

potential liability this presents.550 In 

response to the comments, we have 

modified certain requests on Form 

ATS–N to remove language that some 

commenters believe is vague, and in 

many cases, changed questions to solicit 

more general information.551 Further, 

given that Form ATS–N will be made 

public, we expect that market 

participants will rely on these 

disclosures when making routing 


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552To conform to changes that provide that we 

will not issue orders of effective initial Form ATS– 

N, we have eliminated proposed Rule 304(b)(2)(i) 

from adopted Rule 304(b)(2). See supra Section 

IV.A.1. In addition, the Commission made the 

following technical, non-substantive modifications 

to the proposed text of Rule 304(b)(2): (1) 

Renumbered proposed Rule 304(b)(2)(ii) through 

(vii); (2) reordered proposed Rule 304(b)(2)(iii) so 

that ‘‘Effective Form ATS–N’’ is adopted Rule 

304(b)(2)(i); (3) changed the proposed language 

stating that the Commission ‘‘would’’ make public 

the documents specified in Rule 304(b)(2)(i)–(vii) to 

the Commission ‘‘will’’ make public the documents 

specified in Rule 304(b)(2)(i) through (vi); (4) 

specified that the Commission will publish ‘‘initial’’ 

Form ATS–N, as amended, under adopted Rule 

304(b)(2)(i); (5) changed the proposed language that 

the Commission will make public each ‘‘Order of 

ineffectiveness of a Form ATS–N’’ to ‘‘Order of 

ineffective initial Form ATS–N’’; (6) changed 

references to uppercase ‘‘Amendment’’ in adopted 

Rule 304(b)(2)(iii) and (iv) to lowercase; (7) changed 

the language in adopted Rule 304(b)(2)(iv) from 

describing an ‘‘Order of ineffectiveness of a’’ Form 

ATS–N amendment to a ‘‘Order of ineffective’’ 

Form ATS–N amendment; and (8) modified 

language in the rule to state that the order 

suspending, limiting, or revoking the exemption in 

adopted Rule 304(b)(2)(vi) will apply to the 

exemption for an ‘‘NMS Stock ATS.’’ We are 

adopting these changes to simplify and improve the 

clarity of the rule text and we do not believe that 

these changes impact the operation of the proposed 

rules. Because we are providing a process for NMS 

Stock ATSs to amend their initial Forms ATS–N 

during the Commission review period, we are also 

revising proposed Rule 304(b)(2)(iii) (renumbered 

as Rule 304(b)(2)(i)) to state that the Commission 

will publish initial Form ATS–N, ‘‘as amended,’’ to 

specify that the initial Form ATS–N will reflect 

amendments made during the Commission review 

period. See supra Section IV.A.2 and Section 

IV.A.4.b. In addition, in response to comments, we 

are adopting a modified requirement that for 

material amendments, the cover page of the 

material amendment will be made public upon 

filing and the entirety of the material amendment, 

as amended, will be made public upon the 

expiration of the Commission review period. See 

infra Section IV.E.2.c. We are also adding to Rule 

304(b)(2)(iii)(B) that the Commission will make 

public each updating or correcting amendment filed 

to a material amendment following the expiration 

of the review period for the material amendment 

pursuant to Rule 304(a)(2)(ii). See id. We are also 

adopting Rule 304(b)(2)(iii)(B) to provide that the 

Commission will make the entirety of order display 

and fair access amendments, as well as updating 

amendments and correcting amendments, public 

upon filing. See id. We are also adopting Rule 

304(b)(2)(iii)(A) to specify that the Commission will 

not make public the entirety of a material 

amendment that it declares ineffective. See id. 

553See supra note 93 and accompanying text. 

554See supra note 108. 

555See Proposal, supra note 2, at 81035. 

556See 17 CFR 240.301(b)(2)(vii). 

557See 15 U.S.C. 78s(b). 

558See Alternative Trading System (‘‘ATS’’) List, 

http://www.sec.gov/foia/docs/atslist.htm. 

559See, e.g., Consumer Federation of America 

Letter at 3; HMA Letter at 2; Morgan Stanley Letter 

at 1. 

560See supra notes 110–123 and accompanying 

text. 

561See CFA Institute Letter at 6; BIDS Letter at 

3; UBS Letter at 3; LeveL ATS Letter at 7. 

562See LeveL ATS Letter at 7. 

decisions or assessing their brokers’ 

routing practices, so it is critical that the 

disclosures constitute a ‘‘report’’ and are 

subject to the applicable consequences. 

We also believe that making Form ATS– 

N disclosures subject to liability as a 

‘‘report’’ under the Exchange Act further 

will incentivize NMS Stock ATS 

operators to make truthful statements on 

Form ATS–N. We are adopting Rule 

304(b)(1) as proposed. 

2. Rule 304(b)(2): Making Public Form 

ATS–N Filings and Commission Orders. 

Rule 304(b)(2) provides which Form 

ATS–N filings and related orders the 

Commission would make public. 

Proposed Rule 304(b)(2) provided that 

we would make public, via posting on 

the Commission’s website, each (1) 

order of effectiveness of a Form ATS–N; 

(2) order of ineffectiveness of a Form 

ATS–N; (3) effective Form ATS–N; (4) 

filed Form ATS–N amendment; (5) 

order of ineffectiveness of a Form ATS– 

N amendment; (6) notice of cessation; 

and (7) order suspending, limiting, or 

revoking the exemption from the 

definition of an ‘‘exchange’’ pursuant to 

Exchange Act Rule 3a1–1(a)(2). We are 

adopting Rule 304(b)(2) with 

modifications discussed below.552 In 

addition, as proposed, we specify that 

we will make NMS Stock ATS filings 

public via posting on the Commission’s 

website. 

As discussed above, many 

commenters support making Form 

ATS–N public, observing that market 

participants do not currently have 

access to sufficient, standardized 

information about the operations and 

ownership of NMS Stock ATSs.553

Nearly all commenters agree with the 

Commission’s stated goal of enhancing 

transparency.554 Although many 

commenters express general support for 

public disclosure of Form ATS–N, many 

commenters recommend certain 

modifications or clarifications. 

We continue to believe that making 

Form ATS–N filings publicly available 

is important because most market 

participants have limited access to 

information that permits them to 

adequately compare and contrast how 

an NMS Stock ATS would handle its 

orders with how a national securities 

exchange or other NMS Stock ATS 

would handle its orders.555 Currently, a 

Form ATS filed with the Commission by 

an ATS that trades NMS stocks is 

‘‘deemed confidential when filed’’ 

under Rule 301(b)(2)(vii) of Regulation 

ATS,556 whereas a national securities 

exchange is required to both (1) make 

available to the public its entire 

rulebook and (2) publicly file all 

proposed rule changes pursuant to 

Section 19(b) of the Exchange Act.557

The only information the Commission 

currently makes publicly available 

regarding ATSs is a list of the names 

and locations of ATSs with a Form ATS 

on file with the Commission, which is 

updated monthly.558 Unless an NMS 

Stock ATS voluntarily publicizes how 

its functionalities operate, market 

participants have limited information to 

adequately compare and contrast the 

operation of the ATS with that of a 

national securities exchange or another 

NMS Stock ATS. And when NMS Stock 

ATSs voluntarily make their Forms 

ATS–N public, the lack of uniformity or 

standardization makes it difficult to 

compare disclosures across ATSs. 

Currently, approximately 20 NMS Stock 

ATSs voluntarily post a Form ATS on 

their website. Some commenters, 

however, observe that in the absence of 

mandatory and uniform disclosure 

requirements, Forms ATS vary in 

content and the level of detail disclosed, 

and are therefore difficult to 

compare.559 Accordingly, through Form 

ATS–N, we are adopting disclosures 

that will provide information that 

market participants can use to perform 

these comparisons as they evaluate the 

ATS as a potential destination for their 

orders. 

We are adopting Rule 304(b)(2), with 

the modifications to address 

commenters’ concerns, to mandate 

greater public disclosure of NMS Stock 

ATS operations through the publication 

of Form ATS–N. Adopted Rule 304(b)(2) 

provides that the Commission will make 

Form ATS–N and related filings 

available via posting on the 

Commission’s website. NMS Stock ATS 

broker-dealer operators will submit 

Form ATS–N filings via EDGAR, and 

the Commission will make such filings 

available on its website. 

a. Public Disclosure of Effective Initial 

Form ATS–N, As Amended 

Several commenters express support 

for proposed Rule 304(b)(2)(iii), which 

would make public an effective Form 

ATS–N.560 Four commenters agree with 

the Commission’s approach of making 

initial Forms ATS–N publicly available 

once the Commission declared such 

forms effective.561 One commenter 

asserts that publishing a filing that is 

not yet effective, and may ultimately not 

be ‘‘approved,’’ will cause confusion 

among market participants regarding the 

manner of operation of the NMS Stock 

ATS.562 Another commenter states that 

requiring disclosure of Forms ATS–N 

that the Commission has declared 

ineffective ‘‘may place undue suspicion 

from market participants on ATSs that 

fail to gain exemption status on the first 


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563See CFA Institute Letter at 6. 

564Material amendments filed by Legacy NMS 

Stock ATSs during the Commission review period 

are subject to Rule 304(b)(2)(iii)(A), which provides 

that the entirety of a material amendment will not 

be made public until the expiration of the 

Commission’s 30-calendar day review period. 

Therefore, under Rule 304(b)(2)(iii)(A), material 

amendments filed during the final 30 calendar days 

of the Commission review period would not be 

made public until the 30-calendar day Commission 

review period for such amendments has expired. 

For example, if an NMS Stock ATS files a material 

amendment on calendar day 230 of the Commission 

review period, and the Form ATS–N becomes 

effective on calendar day 240, the material 

amendment would remain subject to the 

Commission’s review, and not publicly disclosed, 

for an additional 20 calendar days—until the 

Commission’s 30-calendar day review period has 

expired. Under Rule 304(b)(2)(iii)(A), the cover page 

for any material amendments during the 

Commission review would be made public when 

the initial Form ATS–N becomes effective. 

565See Liquidnet Letter at 3; SSGA Letter at 2; 

Fidelity Letter at 7–8; STANY Letter at 3; UBS 

Letter at 6–8; Luminex Letter at 2,4; PDQ Letter at 

2; SIFMA Letter at 4. 

566See Liquidnet Letter at 3. 

567See, e.g., MFA/AIMA Letter at 2; 

Schneiderman Letter at 2; ICI Letter at 1; CFA 

Institute Letter at 3; Consumer Federation of 

America Letter at 6. 

568See Rule 304(a)(1)(ii). 

569See SSGA Letter at 2; Fidelity Letter at 7–8; 

STANY Letter at 3; UBS Letter at 6–8; Luminex 

Letter at 2,4; PDQ Letter at 2; SIFMA Letter at 4. 

570See Luminex Letter at 2; SIFMA Letter at 4; 

KCG Letter at 6. 

571See infra Section V. 

572See id. 

573See Fidelity Letter at 8; UBS Letter at 7; 

Luminex Letter at 2–4; SIFMA Letter at 16. 

574See Fidelity Letter at 8; UBS Letter at 7. 

575See Fidelity Letter at 4; Luminex Letter at 2– 

4. 

576See UBS Letter at 7. 

577See SIFMA Letter at 16. 

578See PDQ Letter at 2. 

579See infra Section V.B.2. Exhibit 1 would have 

required NMS Stock ATSs to attach a copy of any 

materials currently provided to subscribers or other 

persons related to the operations of the NMS Stock 

ATS or the disclosures on Form ATS–N. The 

determination not to adopt this proposed 

requirement renders irrelevant the comment 

regarding allowing NMS Stock ATSs to post 

updated marketing materials on their websites. See 

infra note 705 and accompanying text. 

580See infra Sections V.D.5, V.D.13, V.D.16. 

attempt.’’ 563 The Commission will make 

only effective Forms ATS–N public 

because this would be less confusing for 

market participants. We expect that in 

the course of reviewing an initial Form 

ATS–N, Commission staff would likely 

engage in discussions with the entity 

regarding its disclosures and could 

request the entity to revise or augment 

its disclosures to cure deficiencies and 

provide market participants with greater 

clarity regarding the entity’s operations. 

Accordingly, we continue to believe that 

it would be premature to make publicly 

available an initial Form ATS–N filing 

before it becomes effective because of 

the potential confusion that may result 

from making public disclosures on an 

initial Form ATS–N that is not effective. 

Therefore, under adopted Rule 

304(b)(2)(i), the Commission will make 

public an effective initial Form ATS–N, 

as amended. 

Adopted Rule 304(a)(1)(ii)(B) and 

Rule 304(a)(1)(iv)(C) provide processes 

for NMS Stock ATSs to amend their 

initial Forms ATS–N during the 

Commission review period. If, for 

example, the Commission staff provides 

comments to a broker-dealer operator 

suggesting modifications designed to 

enhance the completeness and 

comprehensibility of its initial Form 

ATS–N disclosures, the NMS Stock ATS 

would have the opportunity to file an 

amendment to respond to such 

comments during the Commission 

review period. We believe that it is 

appropriate to make public initial Form 

ATS–N, as revised by any such 

amendments (except for material 

amendments during the Commission 

review period),564 when the initial Form 

ATS–N becomes effective. Accordingly, 

we are revising proposed Rule 

304(b)(2)(iii) (renumbered as Rule 

304(b)(2)(i)) to state that the 

Commission will publish initial Form 

ATS–N, ‘‘as amended.’’ 

Some commenters express concerns 

regarding the timing of publicly 

disclosing a filed Form ATS–N.565 One 

commenter states its view that for 

Legacy NMS Stock ATSs that are filing 

Form ATS–N for the first time, the 

Commission should not make any 

Forms ATS–N public until the date on 

which the Commission has completed 

the review of the initial Form ATS–N 

filings for all Legacy NMS Stock ATSs, 

so that a Legacy NMS Stock ATS is not 

disadvantaged by making its Form ATS– 

N public prior to other Legacy NMS 

Stock ATSs.566 As we stated in the 

Proposal, and as many commenters have 

agreed,567 the public has a strong 

interest in public disclosure about the 

operations of NMS Stock ATSs. For 

some Legacy NMS Stock ATSs, the 

review period may be extended 

pursuant to Rule 304(a)(1)(iv)(B). We 

believe that disclosure of all Legacy 

NMS Stock ATSs’ Forms ATS–N should 

not be delayed during any extended 

review period that may be necessary for 

the Commission to review any Legacy 

NMS Stock ATS’s initial Form ATS–N 

that raises novel or complex issues and 

therefore requires additional time for 

review.568 Additionally, some NMS 

Stock ATSs may not wish to delay 

public disclosure once their Forms 

ATS–N become effective, and it is 

neither in the public interest nor in the 

interest of those NMS Stock ATSs to 

withhold effective Forms ATS–N from 

the public. 

Several commenters suggest that the 

Commission should make certain 

information required by Form ATS–N 

available only to the Commission.569

Some commenters state that the scope of 

items required for public disclosure, 

particularly those related to the 

administration of the ATS, is too 

detailed and may not be helpful to 

market participants in making routing 

decisions.570 We believe that Form 

ATS–N, as adopted, solicits the 

appropriate level of information about 

NMS Stock ATSs that would be useful 

to subscribers and market 

participants.571 In response to 

commenters, we have revised proposed 

Form ATS–N to remove certain requests 

that commenters believe are not relevant 

to subscribers, limited the scope of 

certain requests that commenters 

believe to be too broad, and narrowed 

certain requests to only require 

summary information or specific 

information to avoid the disclosure of 

commercially sensitive information.572

We nevertheless believe that responses 

to Form ATS–N requests must be 

sufficiently detailed for subscribers and 

market participants to adequately 

understand the operations of an NMS 

Stock ATS and the ATS-related 

activities of the broker-dealer operator 

and its affiliates. 

Other commenters express concern 

that publicly disclosing Form ATS–N 

could result in the disclosure of an NMS 

Stock ATS’s proprietary or 

commercially sensitive information.573

In particular, and as discussed further 

below, commenters express concern 

about disclosing information regarding 

classification of subscribers,574 details 

about administrative operations of 

broker-dealer operators,575 and 

contractual agreements between brokerdealer operators and their clients,576

and NMS Stock ATSs and their 

vendors.577 One commenter raises 

concern about customer 

confidentiality.578 We have determined 

not to adopt the proposed Exhibit 1 

requirements 579 and have revised the 

Form ATS–N requests to not seek 

disclosure of certain information that 

could be proprietary or commercially 

sensitive, such as routing tables or 

numerical order flow segmentation 

metrics.580 We do not believe that the 

vast majority of information responsive 

to adopted Form ATS–N would be 

proprietary or commercially sensitive. 

Furthermore, we do not believe that the 

requests of adopted Form ATS–N, as 

modified, would require NMS Stock 


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581See SSGA Letter at 2. 

582See T. Rowe Price Letter at 2. 

583See SSGA Letter at 2. 

584See infra Sections V.C.6, V.D.6, V.D.13, 

V.D.23. 

585One commenter believes that an ATS should 

have the ability to file supplemental materials with 

the Commission that are not part of the public filing 

as long as the ATS’s public filing accurately 

responds to all questions on the Form ATS–N. See 

Liquidnet Letter at 9. We have determined not to 

adopt a formal process through which broker-dealer 

operators can disclose supplemental information for 

Commission review alone. We believe that the 

primary purpose of Form ATS–N is to provide the 

public with critical information regarding NMS 

Stock ATS operations and affiliate relationships. 

586See T. Rowe Price Letter at 2. 

587See Section IV.E.2.c. 

588See supra notes 574–578 and accompanying 

text. 

589See Investor Advocate Letter at 10–11. 

590See supra note 584 and accompanying text. 

591See 17 CFR. 240.24b–2. 

592See FINRA Letter at 2–3. 

593See supra note 552. 

594We proposed this requirement as Rule 

304(b)(2)(i) and are adopting this requirement as 

Rule 304(b)(2)(ii). 

595See supra note 433 and accompanying text. 

596Adopted Rule 304(b)(2)(ii) states that this 

provision applies to each ‘‘[o]rder of ineffective 

initial Form ATS–N’’ instead of the proposed 

language, which stated that the provision would 

apply to each ‘‘[o]rder of ineffectiveness of a Form 

ATS–N.’’ As discussed above, the Commission will, 

by order, declare ineffective an initial Form 

ATS–N if it finds, after notice and opportunity for 

hearing, that such action is necessary or appropriate 

in the public interest, and is consistent with the 

protection of investors. See supra Section IV.A.3. 

We believe that the revised rule text reduces any 

potential ambiguity by specifying that the public 

disclosure requirement applies to orders related to 

‘‘initial’’ Form ATS–N and simplifying the rule 

language. 

597See Proposal, supra note 2, at 81028. 

598See ICI Letter at 3; Liquidnet Letter at 6; 

SIFMA Letter at 31; UBS Letter at 3; BIDS Letter at 

4; STA Letter at 5; STANY Letter at 2; CFA Institute 

Letter at 6; LeveL ATS Letter at 7. 

ATSs to compromise customer 

confidentiality when making thorough 

and accurate disclosures. 

Some commenters that believe that 

Form ATS–N disclosures may be too 

detailed to be helpful to market 

participants 581 or that they may 

disclose proprietary or commercially 

sensitive information suggest that the 

Commission make only parts of Form 

ATS–N public, or delay public 

disclosure of certain parts of Form ATS– 

N.582 Specifically, one commenter 

suggests that the Commission require 

NMS Stock ATSs to submit a full Form 

ATS–N to the Commission, but only 

provide that a selected sub-set of fields 

be publicly disclosed.583 We are not 

adopting the commenters’ suggestions to 

limit public disclosures because the vast 

majority of adopted Form ATS–N will 

not require the disclosure of proprietary 

or commercially sensitive 

information.584 In addition, not making 

certain items public would undercut the 

transparency that is the primary 

purpose of this rulemaking.585 Another 

commenter suggests that the 

Commission should consider ‘‘tiering’’ 

proprietary information by first making 

it only available to the Commission and 

subscribers, and after a ‘‘reasonable’’ 

time lag, further disseminating such 

information to the general public.586 In 

response to commenter concerns, the 

cover page of the filed material 

amendment will be made public by the 

Commission upon filing and, unless the 

Commission declares the material 

amendment ineffective, the entirety of 

the material amendment, as amended, 

will be made public by the Commission 

following the Commission’s 30-calendar 

day review period.587

Another commenter states that, 

although the Commission should not 

address commenters’ concerns regarding 

disclosure of sensitive or proprietary 

information,588 by automatically making 

any portion of Form ATS–N 

confidential, if a ‘‘genuine need for 

confidentiality exists,’’ the broker-dealer 

can obtain confidential treatment under 

Commission Rule 24b–2, and suggests 

that the Commission provide guidance 

around the use of this limited 

exception.589 We believe that questions 

on adopted Form ATS–N, as modified, 

do not solicit the type of information 

that typically would constitute 

confidential information.590 The 

existing processes for obtaining 

confidential treatment will remain 

available to broker-dealer operators.591

Furthermore, the purpose of Form ATS– 

N is to create a public transparency 

regime for NMS Stock ATSs, with 

commensurate benefits, and allowing 

disclosures to be made only to the 

Commission would be contrary to the 

purposes of this rulemaking. 

In addition, FINRA requests that the 

Commission require NMS Stock ATSs to 

file duplicate copies of Form ATS–N 

submissions with FINRA so that FINRA 

has access to these filings before they 

become effective, or in the event that 

they are deemed ineffective and thus 

never made public.592 Requiring an 

NMS Stock ATS to provide Form ATS– 

N filings to the SRO of which the ATS 

is a member before the filings become 

effective or are declared ineffective 

would place additional administrative 

burdens on the NMS Stock ATS, 

particularly in the event the NMS Stock 

ATS amends its Form ATS–N during 

discussion with the Commission staff. 

We continue to believe that making 

Form ATS–N public will enhance the 

information available to market 

participants and benefit the 

marketplace, and therefore are adopting 

Rule 304(b)(2)(i), to provide that the 

Commission will make public each 

effective initial Form ATS–N, as 

amended.593

b. Public Disclosure of Orders of an 

Ineffective Initial Form ATS–N 

Because the Commission will not 

issue orders of effective initial Forms 

ATS–N, adopted Rule 304(b)(2) does not 

include each ‘‘Order of effectiveness of 

a Form ATS–N.’’ We continue to believe 

that it is appropriate to make public 

each order of ineffective Form ATS–N, 

substantially as proposed,594 to provide 

the public with notice regarding the 

regulatory status of potential trading 

venues; if a Form ATS–N is declared 

ineffective, the ATS may not operate 

pursuant to the exemption from the 

definition of ‘‘exchange,’’ and the public 

should be aware of such regulatory 

status. 

Other than the comment about orders 

of ineffectiveness relating to a Legacy 

NMS Stock ATS’s initial Form ATS–N, 

which is discussed above,595 we 

received no comments on making public 

orders of effective or ineffective Form 

ATS–N. We continue to believe that it 

is necessary to make public an order of 

ineffective Form ATS–N for market 

participants to be informed of the 

operating status of an NMS Stock ATS. 

Therefore, we are adopting Rule 

304(a)(2)(ii) to provide that orders of 

ineffective initial Form ATS–N will be 

made public, with modifications to 

reduce any potential ambiguity and 

improve readability of the rule text.596

c. Public Disclosure of Form ATS–N 

Amendments 

We proposed, in Rule 304(a)(2)(iv), 

making all filed amendments to Form 

ATS–N public; as proposed, Form ATS– 

N amendments would have been public 

during the Commission review period 

and prior to the Commission’s 

determination of whether a Form ATS– 

N amendment should be declared 

ineffective. 

In the Proposal, we asked whether 

commenters believe that the 

Commission should make public on its 

website upon filing a Form ATS–N 

amendment for a material change, and 

whether there should be a delay in 

when the Form ATS–N for a material 

change is made public.597 We received 

several comments on this aspect of the 

Proposal.598 Although one commenter 

agrees with our proposal to make Form 

ATS–N amendments public upon filing 

because it would keep market 

participants informed about changes to 


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599See ICI Letter at 3, n.3. 

600See Liquidnet Letter at 6; SIFMA Letter at 31; 

UBS Letter at 3; BIDS Letter at 4; STA Letter at 5; 

STANY Letter at 2; CFA Institute Letter at 6; LeveL 

ATS Letter at 7. Some commenters state that an 

amendment to Form ATS–N should not be made 

public until it is declared effective. See, e.g., SIFMA 

Letter at 31; UBS Letter at 3. We, however, did not 

propose, and are not adopting, a process for 

declaring amendments to Form ATS–N effective. 

The Commission will have a 30-calendar day 

review period to declare amendments to Form 

ATS–N ineffective. See supra Section IV.B.2. 

601See LeveL ATS Letter at 7–8. See also SIFMA 

Letter at 31; STANY Letter at 2. 

602See BIDS Letter at 4; UBS Letter at 3; LeveL 

ATS Letter at 7. 

603See UBS Letter at 3. 

604See Liquidnet Letter at 6–7. 

605See BIDS Letter at 4. 606See SIFMA Letter at 32. 

potential trading venues,599 several 

other commenters express concerns 

about making Form ATS–N 

amendments public upon filing or argue 

that the Commission should make 

amendments public only once the 

related changes are operative.600 Some 

of these commenters state that public 

disclosure of changes to ATS operations 

at least 30 calendar days before such 

changes are implemented may burden 

the ability of NMS Stock ATSs to act 

competitively, or may reduce the 

competitive advantage associated with 

being the first to innovate.601 In 

addition, commenters assert that making 

public Form ATS–N amendments that 

may never be implemented could be 

confusing or misleading to market 

participants; 602 one commenter states 

that publicly disclosing material 

changes in advance of implementation 

could cause market participants to not 

understand current operations of an 

NMS Stock ATS versus its proposed, 

future operations.603 One commenter 

asserts that immediate publication of 

amendments would stifle dialogue 

between the NMS Stock ATS and 

Commission staff.604 Another 

commenter states that it does not 

believe that making Form ATS–N 

amendments public upon filing would 

provide a benefit to market participants 

as ‘‘existing documents’’ should be 

adequate for market participants 

considering whether to use a particular 

NMS Stock ATS.605

We are modifying the proposed rules 

for making Form ATS–N amendments to 

an effective Form ATS–N public. In 

response to commenters’ concerns, we 

are adding new subparagraph 

(b)(2)(iii)(A) to Rule 304 to provide that, 

for material amendments (as defined by 

Rule 304(a)(2)(i)(A)) to an effective Form 

ATS–N, the cover page of the filed 

material amendment will be made 

public by the Commission upon filing 

and, unless the Commission declares 

the material amendment ineffective, the 

entirety of the material amendment, as 

amended, will be made public by the 

Commission following the 

Commission’s 30-calendar day review 

period. In addition, we are adding new 

subparagraph (b)(2)(iii)(B) to Rule 304 to 

provide that, for updating, correcting, 

and order display and fair access 

amendments (as defined by Rule 

304(a)(2)(i)(B), (C), and (D), respectively) 

to an effective Form ATS–N, the entirety 

of the updating, correcting, or order 

display and fair access amendment will 

be made public by the Commission 

upon filing. We are also adding to 

subparagraph (b)(2)(iii)(B) that an 

updating or correcting amendment filed 

to a material amendment will be made 

public by the Commission following the 

expiration of the review period for such 

material amendment pursuant to 

paragraph (a)(2)(ii) of Rule 304. 

We share the commenters’ concerns 

that making public Form ATS–N 

material amendments before expiration 

of the Commission’s 30-day calendar 

review period could be confusing or 

misleading to the public, particularly in 

the event the material amendment is 

declared ineffective and the related 

change is never implemented. One 

commenter asserts that advance 

disclosure of Form ATS–N amendments 

may burden market participants who 

feel obligated to review premature 

disclosures for possible effects on them 

and their underlying customers.606 We 

believe that publicly disclosing the 

cover page to a Form ATS–N material 

amendment during the review period, 

and disclosing the entire material 

amendment following the expiration of 

30-calendar day Commission review 

period, when the related changes can be 

implemented, will reduce any potential 

for confusion and will not pose an 

undue burden on market participants. 

In addition, we share the commenters’ 

concerns that providing advance public 

notice of material changes to NMS Stock 

ATSs could burden ATSs, which would 

be required to provide at least 30- 

calendar day advance notice of material 

changes to all market participants, 

including their competitors. Requiring 

such advance public notice of material 

changes before they are implemented 

could reduce incentives for NMS Stock 

ATSs to innovate. 

However, we continue to believe that 

market participants that are planning 

routing strategies would benefit from 

advance notice that the NMS Stock ATS 

is planning changes to its operations or 

conflicts of interest. To minimize the 

potential competitive harm of advance 

public notice, while also providing the 

benefits of immediate public 

transparency, the Commission will 

make public the cover page of a material 

amendment to an effective Form ATS– 

N upon filing of such amendment. The 

cover page will indicate that the NMS 

Stock ATS has filed a material 

amendment and provide a brief 

narrative about the content of the 

amendment. An NMS Stock ATS is 

required to indicate the part and item 

number of Form ATS–N that is subject 

to the change, state whether or not such 

change will apply to all subscribers and 

the broker-dealer operator, and provide 

a brief summary of the changes. For 

example, if an NMS Stock ATS is 

introducing a new order type, the brief 

narrative might state: ‘‘The ATS is 

amending Part III, Item 7(a) of Form 

ATS–N to include a new order type, 

which will be available to all 

subscribers.’’ 

In addition, we are adding, in new 

subparagraph (b)(2)(iii)(A) to Rule 304, 

that the Commission will, following the 

expiration of the 30-calendar day 

Commission review period pursuant to 

Rule 304(a)(2)(ii), make public the 

entirety of the material amendment ‘‘as 

amended.’’ We are providing a process, 

under Rule 304(a)(2)(ii), for NMS Stock 

ATSs to file updating and correcting 

amendments under Rule 304(a)(2)(i)(B) 

and (C), respectively, to material 

amendments during the Commission 

review period. In addition, Rule 

304(b)(2)(iii)(B) provides that an 

updating or correcting amendment filed 

to a material amendment will be made 

public by the Commission following the 

expiration of the review period for such 

material amendment pursuant to Rule 

304(a)(2)(ii). We believe that disclosing 

updating and correcting amendments to 

material amendments before expiration 

of the Commission’s 30-day calendar 

review period for the material 

amendment (and before the material 

amendment is made public) could be 

confusing or misleading to the public as 

the underlying material amendment 

would not yet be public or operative. 

We will make public material 

amendments ‘‘as amended;’’ material 

amendments will reflect any updating 

and correcting amendments filed during 

the Commission review period. Such 

amended disclosures could provide 

market participants with more complete 

and comprehensible information about 

NMS Stock ATS operations and the 

activities of their broker-dealer 

operators and affiliates. Accordingly, 

Rule 304(b)(2)(iii)(B) provides that an 

updating or correcting amendment filed 

to a material amendment will be made 

public by the Commission following the 


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607See Rule 304(a)(2)(i)(B) and supra Section 

IV.B.1.b. 

608See Rule 304(a)(2)(i)(C). 

609See Rule 304(a)(2)(i)(D). 

610See LeveL ATS Letter at 7; UBS Letter at 3. 

611An updating or correcting amendment to a 

material amendment during Commission review 

will not be made public until the material 

amendment that is amended becomes public. We 

believe this is appropriate because updating and 

correcting amendments to a material amendment 

during Commission review would amend a material 

amendment that is not yet public or operative. 612See SIFMA Letter at 31. 613See SIFMA Letter at 32; Morgan Stanley Letter 

at 4; KCG Letter at 4. 

614See supra Section IV.B.2. 

615See UBS Letter at 3; STA Letter at 5. 

616See supra Section IV.A.2. 

617See supra note 438 and accompanying text. 

618See supra Section IV.A.4. 

expiration of the review period for such 

material amendment pursuant to Rule 

304(a)(2)(ii), and Rule 304(b)(2)(iii)(A) 

provides that a material amendment 

will be made public, as amended, which 

would incorporate any amendments that 

were filed to the material amendment 

during the Commission review period. 

The change to delay making the 

entirety of Form ATS–N material 

amendments, as amended, public until 

after the Commission has completed the 

review will not impact the manner in 

which we proposed to make public 

updating, correcting, and order display 

and fair access amendments. Form 

ATS–N updating amendments require 

NMS Stock ATSs to, no later than 30 

calendar days after the end of a calendar 

quarter, correct information that has 

become inaccurate or incomplete for 

any reason and was not required to be 

reported to the Commission as a Form 

ATS–N amendment pursuant to Rules 

304(a)(2)(i)(A), (C), or (D).607 NMS Stock 

ATSs are required to correct information 

in any previous disclosure on Form 

ATS–N through a correcting amendment 

after discovery that any material 

information previously filed on Form 

ATS–N was inaccurate or incomplete 

when filed.608 Order display and fair 

access amendments are required to be 

filed no later than seven calendar days 

after information required to be 

disclosed in Part III, Items 24 and 25 on 

Form ATS–N has become inaccurate or 

incomplete.609 We proposed that all 

amendments, which include Form 

ATS–N updating and correcting 

amendments (as well as material 

amendments), be made public upon 

filing. Two commenters assert that 

publicly disclosing changes that the 

Commission could later declare 

ineffective could create confusion 

among market participants.610

Although, as adopted, the Commission 

would not make the entirety of material 

amendments public until after its 30- 

calendar day review period expires, 

because correcting, updating, and order 

display and fair access amendments 

would be made public upon filing, the 

Commission could declare such an 

amendment ineffective after it has been 

made public. We continue to believe 

that, even with the risk of some 

confusion if updating, correcting, and 

order display and fair access 

amendments later were declared 

ineffective, it is appropriate to make 

updating, correcting, and order display 

and fair access amendments to an 

effective Form ATS–N public upon 

filing because the related changes, any 

inaccurate or incomplete disclosures 

about the operation of the NMS Stock 

ATS, or triggering of the order display 

and execution access and fair access 

thresholds, may have been implemented 

at or before the time of filing, and we 

believe that it is crucial that market 

participants have updated information 

about current NMS Stock ATS 

operations.611

With respect to amendments declared 

ineffective, one commenter states that 

such amendments should be returned to 

the NMS Stock ATS and not be made 

publicly accessible.612 Under Rule 

304(b)(2)(iii)(A), as adopted, the 

Commission is specifying that it will not 

make public the entirety of a material 

amendment that it declares ineffective. 

The Commission would, however, upon 

filing, make public on its website the 

cover page of the material amendment, 

and subsequently, any order of 

ineffectiveness related to such material 

amendment. In addition, because the 

Commission will make public updating, 

correcting, and order display and fair 

access amendments to an effective Form 

ATS–N upon filing, such amendments 

will be publicly available even if the 

Commission declares such amendments 

ineffective during its 30-calendar day 

review period. We believe that it is 

appropriate to make public updating, 

correcting, and order display and fair 

access amendments upon filing, even if 

the Commission could later declare 

them ineffective, because, unlike 

material amendments, the disclosures 

included in updating, correcting, and 

order display and fair access 

amendments have been implemented 

and reflect an NMS Stock ATS’s current 

operations and affiliate relationships. If 

the Commission later declares an 

updating, correcting, or order display 

and fair access amendment ineffective, 

it will issue an order of ineffectiveness, 

which the Commission will make public 

to notify market participants that such 

change is no longer in effect. 

Three commenters state that by 

making pending amendments public, 

the Commission may incidentally turn 

the process into a review, notice, and 

comment period.613 Under the adopted 

rule, the Commission will not make 

material amendments to Form ATS–N 

public until the Commission review 

period has expired. Further, the 

Commission does not believe that 

publicly disclosing the brief description 

of a material amendment on the cover 

page of Form ATS–N or publicly 

disclosing correcting, updating, and 

order display and fair access 

amendments upon filing will create a 

public notice, comment, and review 

period, as the Commission is not 

soliciting public comments on 

amendments.614 This process will be 

distinct from the proposed rule filing 

process for national securities 

exchanges, in which the Commission 

solicits comment for proposed rule 

changes and considers whether rule 

changes are consistent with the 

Exchange Act. 

Two commenters suggest that material 

amendments should be made public 

after the Commission has completed its 

review, but prior to implementation.615

We are not adopting this suggestion 

because doing so would require that, to 

provide additional time for public 

disclosure after the end of the 

Commission review period, either the 

Commission truncate the period for 

Commission review from the entire 30- 

calendar day advance notice period, 

which we believe is necessary for the 

review,616 to a shorter segment of the 

total 30-calendar day advance notice 

period, or require that NMS Stock ATSs 

disclose changes further in advance, 

which could potentially be burdensome 

for NMS Stock ATSs. 

In addition, we received comments 

asking for clarification regarding the 

process for a Legacy NMS Stock ATS to 

file amendments to its Form ATS while 

the Commission is reviewing the ATS’s 

initial Form ATS–N.617 In response, we 

are requiring that a Legacy NMS Stock 

ATSs amend only its initial Form ATS– 

N, and not its Form ATS, during the 

Commission review period.618 Further, 

a Legacy NMS Stock ATS’s Form ATS– 

N will not be made public until the end 

of the Commission review period under 

Rule 304(a)(1)(iv)(B). Rule 304(b)(2)(iii) 

provides that amendments to an 

effective Form ATS–N will be made 

public. Accordingly, amendments to a 

Form ATS–N filed by a Legacy NMS 

Stock ATS during the Commission 

review period will not be made public 

until after the Commission review 

period has ended and the Form ATS–N 


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619See supra note 552. 

620See id. 

621See ICI Letter at 11. 

622See supra note 552. We are making one 

modification to specify that this applies to the 

exemption ‘‘for an NMS Stock ATS.’’ 

623See CFA Institute Letter at 6; UBS Letter at 3. 

624See CFA Institute Letter at 6. 

625See UBS Letter at 3. 

626See Proposal, supra note 2, at 81035. 

627See id. 

628See Proposed Form ATS–N, Part V. 

629The Commission is deleting the word 

‘‘electronically’’ and the language ‘‘and contain an 

electronic signature’’ in the first sentence of 

proposed Rule 304(c)(2). All NMS Stock ATSs are 

required to file Form ATS–N through EDGAR. 

Therefore, we believe that referencing the term 

‘‘electronic’’ and ‘‘electronic signature’’ is 

redundant because all filings are electronically 

submitted through EDGAR. We are deleting the 

second sentence (regarding manually signing a 

signature page or document) and instead adding a 

reference to 232.302 of Regulation S–T, which 

includes the general rules for electronic filings, 

including rules governing electronic signatures. We 

are also modifying the third sentence of Rule 

304(c)(2) to state that any report filed under Rule 

becomes effective. We believe that 

making Form ATS–N amendments 

public before the initial Form ATS–N is 

public would provide little utility, and 

would likely only confuse market 

participants. At the end of the 

Commission review period, a Legacy 

NMS Stock ATS’s initial Form ATS–N 

will be made public, along with all filed 

correcting, updating, and order display 

and fair access amendments, material 

amendments for which the 

Commission’s 30-calendar day review 

period has expired, and the cover pages 

to any material amendments during the 

Commission review period. 

d. Public Disclosure of Orders of 

Ineffective Form ATS–N Amendment 

Under Rule 304(b)(2)(iv), the 

Commission will make public each 

order of ineffective Form ATS–N 

amendment. This would provide notice 

to market participants that the 

Commission had declared a Form ATS– 

N amendment ineffective. We received 

no comments on making public orders 

of ineffective Form ATS–N 

amendments. We are adopting proposed 

Rule 304(b)(2)(v) as adopted Rule 

304(b)(2)(iv).619

e. Public Disclosure of Notices of 

Cessation 

Under Rule 304(b)(2)(v) (which was 

proposed as Rule 304(b)(2)(vi)),620 the 

Commission will make public each 

notice of cessation of a Form ATS–N 

filed pursuant to Rule 304(a)(3). One 

commenter states that it supports our 

proposal to make notices of cessation 

publicly available.621 No commenters 

express opposition to such requirement. 

We continue to believe that making 

public each properly filed Form ATS–N 

notice of cessation will provide the 

public with notice that the NMS Stock 

ATS will cease operations and that the 

organization, association, or group of 

persons no longer operates pursuant to 

the exemption provided under 

Exchange Act Rule 3a1–1(a)(2). The 

notice of cessation will provide market 

participants with the date that the NMS 

Stock ATS will cease operations, as 

designated by the NMS Stock ATS, and 

allow them to make arrangements to 

select alternative routing destinations 

for their orders. Therefore, we are 

adopting as proposed the requirement 

for public disclosure of notices of 

cessation. 

f. Public Disclosure of Each Order 

Suspending, Limiting, or Revoking the 

Rule 3a1–1(a)(2) Exemption 

Under proposed Rule 304(b)(2)(vii), 

the Commission would make public 

each order suspending, limiting, or 

revoking the exemption provided 

pursuant to Rule 3a1–1(a)(2). We did 

not receive any comments on this 

requirement. We believe that it is 

important for market participants to be 

aware of whether an NMS Stock ATS is 

subject to an order suspending, limiting, 

or revoking the exemption from the 

definition of ‘‘exchange’’ when they are 

making their routing decisions because 

such an order could prevent an NMS 

Stock ATS from operating, or it could 

limit its functionality. Therefore, we are 

adopting substantially as proposed the 

requirement that the Commission make 

public each order suspending limiting, 

or revoking the exemption from the 

definition of ‘‘exchange,’’ as 

renumbered Rule 304(b)(2)(vi).622

3. Rule 304(b)(3): Disclosure of Form 

ATS–N on the NMS Stock ATS’s 

Website 

Proposed Rule 304(b)(3) required each 

NMS Stock ATS to make public via 

posting on its website a direct URL 

hyperlink to the Commission’s website 

that contains the documents 

enumerated in proposed Rule 304(b)(2). 

We received two comments on 

proposed Rule 304(b)(3).623 One 

commenter supports adding a 

requirement for NMS Stock ATSs to 

post the effective Forms ATS–N on their 

own websites and not simply provide 

links to the Commission’s website.624

Another commenter requests that rather 

than requiring materials to be posted 

centrally through the Commission, the 

Commission should allow an NMS 

Stock ATS to post its disclosure 

materials on its public website.625 We 

are not adopting a requirement that an 

NMS Stock ATS post its filings on its 

own website because it believes that 

requiring each NMS Stock ATS to 

provide a link to the Commission’s 

website, which will link to Form ATS– 

N filings in EDGAR, will provide market 

participants easy and uniform access to 

Form ATS–N filings. The link to the 

Commission website would provide 

users with access to all new filings 

available in EDGAR. 

We are adopting, with modifications, 

the requirement that each NMS Stock 

ATS make public via posting on its 

website a direct URL hyperlink to the 

Commission’s website that contains the 

documents enumerated in proposed 

Rule 304(b)(2). We continue to believe 

that the requirement of posting on the 

NMS Stock ATS’s website a direct URL 

hyperlink to the Commission’s website 

would make it easier for market 

participants to review an NMS Stock 

ATS’s Form ATS–N filings by providing 

an additional means for market 

participants to locate Form ATS–N 

filings that are made available through 

the Commission’s website.626

V. Form ATS–N Disclosures 

A. Form ATS–N Disclosure 

Requirements and Definitions 

1. Rule 304(c): Disclosure Requirements 

Proposed Rule 304(c)(1) required 

NMS Stock ATSs to respond to each 

item on Form ATS–N, as applicable, in 

detail, and disclose information that is 

accurate, current, and complete. Unlike 

proposed Rule 304(c)(2), reports 

required under Rule 304 must be filed 

electronically on Form ATS–N, include 

all information as prescribed in Form 

ATS–N and the Instructions thereto, and 

contain an electronic signature that is 

authenticated by manual signature. 

Further, proposed Rule 304(c)(2) 

required that such document be 

executed before or at the time Form 

ATS–N is electronically filed and be 

retained by the NMS Stock ATS in 

accordance with Rule 303.627 The 

proposed Form ATS–N required the 

signator to represent that the 

information and statements in the 

applicable Form ATS–N, including 

exhibits, schedules, or other documents 

attached to the Form ATS–N, and other 

information filed with the Form ATS–N, 

are current, true, and complete.628

We are adopting Rule 304(c)(2), with 

technical and non-substantive 

modifications to reduce redundancy and 

reduce potential ambiguity about the 

filing requirements for Form ATS–N.629


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304 shall be executed ‘‘at, or prior to,’’ the time the 

Form ATS–N is filed (instead of ‘‘before or at’’). We 

are also adding a reference to the Instructions in 

Form ATS–N, which includes the requirement for 

NMS Stock ATSs to maintain a paper copy with 

original manual signatures, instead of including a 

reference to retaining Form ATS–N in accordance 

with § 242.303, as proposed. 

630See Proposal, supra note 2, at 81005. 

631See id. at 81037. 

632See SIFMA Letter at 33; Better Markets Letter 

at 7. 

633See Better Markets Letter at 7. 

634See SIFMA Letter at 33. 

635See Form ATS at 1. 

636See Form 1 at 1. 

637We changed the heading of proposed Rule 

304(c) from ‘‘Form ATS–N filing requirements’’ to 

‘‘Form ATS–N disclosure requirements,’’ which we 

believe more accurately describes the purpose and 

content of the paragraph. 638See Rule 304(c)(1). 639See Instructions to Form ATS–N. 640See, e.g., Form ATS–N Part III, Item 13(a) 

(instructing NMS Stock ATS to provide a summary 

of the parameters for each segmented order 

category). 641 In addition, to avoid potential confusion, we 

are removing ‘‘in detail’’ from Rule 304(c)(1) and 

instead, specifying that the Form ATS–N must be 

filed ‘‘in accordance with the instructions therein.’’ 

See Rule 304(c)(1). 

642See T. Rowe Price Letter at 2. 643See Fidelity Letter at 8. 

644See SSGA Letter at 2–3; BIDS Letter at 4–5; 

Fidelity Letter at 5; STANY Letter at 5; UBS Letter 

at 2–3; KCG Letter at 8–9, 11; Morgan Stanley Letter 

at 1; STA Letter at 2; SIFMA Letter at 9; LeveL ATS 

Letter at 6–7. 

645See STANY Letter at 3; Luminex Letter at 4; 

KCG Letter at 4; SSGA Letter at 2; SIFMA Letter 

at 7. 

646See STA Letter at 2; KCG Letter at 3–4; SIFMA 

Letter at 9. 

647See SSGA Letter at 2. 

648See Liquidnet Letter at 18. 

649See SSGA Letter at 2; Fidelity Letter at 5; STA 

Letter at 2; BIDS Letter at 4–5; KCG Letter at 8–9; 

Morgan Stanley Letter at 1. 

650See SSGA Letter at 2; BIDS Letter at 4; STANY 

Letter at 5; STA Letter at 2; UBS Letter at 2–3; KCG 

Letter at 8–11; SIFMA Letter at 9; LeveL ATS Letter 

at 6. 

In the Proposal, the Commission stated 

that Regulation ATS requires NMS 

Stock ATSs to register as broker-dealers 

with the Commission, which entails 

becoming a member of an SRO, such as 

FINRA, and fully complying with the 

broker-dealer regulatory regime.630 The 

Commission requested comment on 

whether the certification under FINRA 

Rule 3130 would help ensure an NMS 

Stock ATS’s compliance with proposed 

Rule 304, including the requirement 

that disclosures on Form ATS–N be 

accurate, current, and complete.631 The 

Commission received two comment 

letters regarding the requirement that an 

authorized person certify that the form 

is ‘‘current, true, and complete.’’ 632 One 

commenter supports the certification 

requirement.633 Another commenter 

expresses concern about immaterial 

errors being a basis for liability.634

The Commission continues to believe 

that it is appropriate to require 

authorized persons to certify that the 

Form ATS–N is ‘‘current, true, and 

complete.’’ We believe that market 

participants will rely on Form ATS–N 

disclosures to understand the operations 

of an NMS Stock ATS and ATS-related 

activities of the broker-dealer operator, 

and decide whether that trading center 

would be a desirable venue for their 

orders. The information contained on 

Form ATS–N will also be available for 

Commission use, including as part of its 

oversight functions. Further, existing 

Form ATS also requires authorized 

persons to certify that the information 

and statements in the form, exhibits, 

schedules and other documents 

attached are ‘‘current, true, and 

complete.’’ 635 In addition, Form 1, the 

application for registration or exemption 

from registration as a national securities 

exchange, requires a similar 

certification.636 Neither of these 

certifications includes a materiality 

qualifier, and the Commission does not 

believe that it would be appropriate to 

include a materiality qualifier in Form 

ATS–N. 

We are adopting Rule 304(c)(1) with 

certain modifications.637 Specifically, 

adopted Rule 304(c)(1) requires that 

‘‘[a]n NMS Stock ATS must file a Form 

ATS–N in accordance with the 

Instructions therein.’’ 638 The adopted 

Instructions to Form ATS–N require, 

among other things, that ‘‘[a]n NMS 

Stock ATS must provide all the 

information required by Form ATS–N, 

including responses to each Item, as 

applicable, and the Exhibits, and 

disclose information that is accurate, 

current, and complete.’’ 639 Similar to 

the Instructions of proposed Form ATS– 

N, the Instructions to adopted Form 

ATS–N asks an NMS Stock ATS to 

respond to each item ‘‘in detail.’’ In 

response to comments, we revised some 

of the requests on Form ATS–N to 

solicit ‘‘a summary of information’’ to 

tailor further, as appropriate, the 

required disclosure or avoid requiring 

the disclosure of personal or 

commercially sensitive information.640

Accordingly, we are revising the 

Instructions to require that ‘‘unless 

otherwise provided’’ (i.e., where the 

request indicates that the ATS is 

required to disclose ‘‘summary’’ 

information), the NMS Stock ATS 

respond to each request in detail.641

One commenter suggests that an NMS 

Stock ATS should be permitted to 

disclose additional information to its 

subscribers and potential customers, 

outside of the Form ATS–N process, or 

respond to requests for information from 

market participants.642 Similarly, one 

commenter states that NMS Stock ATSs 

should be allowed to separately disclose 

information, upon request, regarding 

order segmentation to subscribers who 

require such information from a ‘‘due 

diligence perspective’’ and who, due to 

the nature of their trading, would not 

present gaming concerns.643 We believe 

that it would be inconsistent with the 

goals of this rulemaking were its 

adoption to chill communication 

between broker-dealer operators and 

subscribers about the NMS Stock ATS. 

The adopted enhanced disclosure 

requirements do not prohibit brokerdealer operators from communicating 

with subscribers and other market 

participants about information not 

otherwise required by Form ATS–N in 

a manner that is consistent with federal 

securities laws and the rules or 

regulations thereunder. A broker-dealer 

operator responding to a request for 

information from a subscriber or market 

participant generally should evaluate 

whether the information provided in 

response to these requests must be 

disclosed on Form ATS–N if the 

information does not already appear in 

its Form ATS–N. 

The Commission received several 

comments on the general format of the 

Form ATS–N. Several commenters 

suggest that the Commission modify 

Form ATS–N so that the requests for 

information result in disclosures that 

are more standardized and allow market 

participants to more easily compare 

Form ATS–N filings.644 Some 

commenters express concern that 

requesting what they characterize as 

‘‘extraneous’’ information could obscure 

the information that market participants 

would find the most relevant.645 Some 

of these commenters also express 

concern that the volume of data that 

NMS Stock ATSs would provide in 

response to questions that require 

narrative responses would make it 

difficult for participants to understand 

ATS operations 646 or conduct due 

diligence.647

Although one commenter expressly 

agrees with the Commission’s approach 

of requiring summaries of 

amendments,648 several commenters 

state that narrative responses on Form 

ATS–N are likely to vary widely, and 

could make comparing multiple 

platforms difficult.649 Multiple 

commenters advocate for replacing 

some of the proposed narrative 

responses to Form ATS–N with ‘‘yes’’ or 

‘‘no’’ responses.650 One commenter 

states that requiring ATSs to respond in 

a ‘‘yes’’ or ‘‘no’’ format would support 


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651See LeveL ATS Letter at 7. 

652See BIDS Letter at 4; SIFMA Letter at 12; 

LeveL ATS Letter at 7. 

653See BIDS Letter at 5. 

654The Commission is making one technical 

change to the proposed term ‘‘affiliate’’ by 

capitalizing the defined term ‘‘Person.’’ This change 

is meant to identify the term Person as a defined 

term for purposes of the Form ATS–N. 

655See LeveL ATS Letter at 3, n.5. 

656See id. at 4, n.7. 

657See UBS Letter at 4. This commenter states 

that the broker-dealer operator of its ATS has well 

over 300 global affiliates under the definition set 

forth in the Proposal, and that not all such affiliates 

are users of the ATS; only orders routed by a small 

number of affiliates end up in its ATS. See id. The 

commenter also points out that as proposed, it 

would need to disclose every affiliate regardless of 

whether it has any interactions with the ATS. See 

id. 

658See HMA Letter at 15. 

659See LeveL ATS Letter at 3, n.6. 

660See id. 

more fulsome disclosure and create a 

universal standard of review, as 

allowing narrative responses may allow 

ATSs to disclose only the information 

that they deem appropriate.651 Some 

commenters recognize that ‘‘yes’’ or 

‘‘no’’ information may need to be 

supplemented by short narrative 

responses.652 One commenter suggests 

introducing a tabular format, where 

reasonable, to capture the disclosures 

required by Forms ATS–N would 

facilitate comparison of Forms ATS– 

N.653

The Commission has revised the 

format of proposed Form ATS–N to 

further standardize the form’s requests, 

better organize questions by subject 

matter, reduce redundancy, reduce 

ambiguity, make more explicit requests 

on Form ATS–N to facilitate complete 

responses, and achieve the appropriate 

balance between yes/no and narrative 

responses. For instance, the adopted 

format of Form ATS–N changes several 

questions from proposed Form ATS–N 

for certain subject matters (e.g., order 

display, co-location services, and 

segmentation) to require ‘‘yes’’ or ‘‘no’’ 

responses with further narrative 

disclosure required in connection with 

‘‘yes’’ responses. We believe that adding 

more ‘‘yes’’ or ‘‘no’’ questioning in Form 

ATS–N will help standardize responses 

and address commenters’ concerns 

about facilitating market participants’ 

review and comparisons of Form ATS– 

N disclosures. We continue to believe, 

however, that narrative responses 

enable market participants to 

understand the operations of the NMS 

Stock ATS and the ATS-related 

activities of the broker-dealer operator, 

particularly in light of the different 

trading functionalities, options, and 

procedures that are offered across NMS 

Stock ATSs, and provide NMS Stock 

ATSs with the flexibility to 

communicate required information to 

the public that is required by the form. 

Also, certain requests have been 

amended to only require summary 

information. We believe that requiring 

summaries for certain disclosures could 

help reduce potential extraneous 

information. 

2. Terminology 

a. Definitions for Form ATS–N 

(i) Proposed Defined Terms 

As proposed, Form ATS–N would 

have set forth definitions of the 

following terms: (1) Affiliate; (2) 

alternative trading system; (3) brokerdealer operator; (4) control; (5) NMS 

security; (6) NMS Stock; (7) NMS Stock 

ATS; (8) order; (9) person; and (10) 

subscriber. 

The Commission received several 

comments regarding the proposed 

definitions of ‘‘affiliate.’’ The 

Commission is adopting the definition 

of the term ‘‘affiliate,’’ with a technical 

change,654 to mean ‘‘with respect to a 

specified Person, any Person that 

directly, or indirectly, controls, is under 

common control with, or is controlled 

by, the specified Person.’’ One 

commenter states that the proposed 

definition of ‘‘affiliate’’ would include, 

among others, owners of the ATS 

operator, without regard for whether the 

affiliate is separately registered as a 

broker-dealer and therefore subject to 

the Commission’s jurisdiction.655 The 

commenter notes that the definition of 

‘‘affiliate’’ would include persons 

‘‘under common control with’’ the NMS 

Stock ATS operator, with control 

meaning at least 25% ownership, such 

that the threshold would capture 

entities that operate independently from 

one another.656 Similarly, another 

commenter points out that although the 

Proposal contains a customary 

definition of the term ‘‘affiliate,’’ the 

definition is not limited in any way that 

focuses on direct interactions or 

relationships with the NMS Stock 

ATS.657

We do not believe that the status of 

an affiliate’s registration with the 

Commission should limit the scope of 

the disclosures about that affiliate in 

Form ATS–N. However, the adopted 

Form ATS–N conflicts-of-interest 

disclosures are tailored to inform market 

participants about how affiliates of the 

broker-dealer operator trade on the NMS 

Stock ATS and how the use of the ATS 

by affiliates may affect the handling and 

execution of orders from unaffiliated 

parties. While the definition of 

‘‘affiliate’’ in Form ATS–N may 

encompass a large number of entities for 

some ATSs, Form ATS–N is designed to 

solicit information that is relevant to a 

market participant’s evaluation of an 

NMS Stock ATS as a potential trading 

venue. Therefore, while we have not 

amended the proposed definition of 

‘‘affiliate,’’ the disclosures about affiliate 

activity on an NMS Stock ATS are not 

designed to require information about 

affiliates that the Commission and 

commenters believe would be 

extraneous to a market participant’s 

evaluation of conflicts of interest and 

information leakage on the ATS. 

We received two comments regarding 

the proposed definition of ‘‘control.’’ 

After carefully considering these 

comments, we are adopting the 

definition of ‘‘control,’’ as proposed, to 

mean: 

the power, directly or indirectly, to direct the 

management or policies of the broker-dealer 

of an alternative trading system, whether 

through the ownership of securities, by 

contract, or otherwise. A Person is presumed 

to control the broker-dealer of an alternative 

trading system, if that Person (1) is a director, 

general partner, or officer exercising 

executive responsibility (or having similar 

status or performing similar functions); (2) 

directly or indirectly has the right to vote 

25% or more of a class of voting securities 

or has the power to sell or direct the sale of 

25% or more of a class of voting securities 

of the broker-dealer of the alternative trading 

system; or (3) in the case of a partnership, has 

contributed, or has the right to receive, upon 

dissolution, 25% or more of the capital of the 

broker-dealer of the alternative trading 

system. 

One commenter expresses support for 

the Commission’s proposal that the 

definition of control contain a 25% 

ownership threshold that the 

commenter states currently serves as a 

presumption of control and is consistent 

with that used in other areas of the 

securities laws.658 Another commenter 

states, however, that the proposed 

definition of ‘‘control’’ provides that 

certain persons are presumed to control 

the broker-dealer operator of an NMS 

Stock ATS, but that there is no 

corresponding safe harbor whereby 

persons are presumed not to control an 

NMS Stock ATS.659 Accordingly, the 

commenter opines that an NMS Stock 

ATS operator may feel obligated to 

provide overly broad disclosures, which 

could confuse subscribers regarding 

potential conflicts.660

Disclosures related to affiliates extend 

to persons that control, are controlled 

by, or are under common control with 

the broker-dealer operator, and, as a 

result, parallel the disclosures related to 

‘‘control affiliates’’ that broker-dealer 


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661See Form BD at 2 (defining ‘‘control affiliate’’). 

662 17 CFR 242.300(f). 

663See Proposal, supra note 1, at 81044. 

664See SIFMA Letter at 10. 

665See infra Section V.C.1. 

666See KCG Letter at 8. 

667See id. at 8–9. This commenter also asserts 

that it is imperative for the Commission to clarify 

that the interaction between the NMS Stock ATS 

and any non-ATS trading center may be subject to 

change and the ATS operator does not need file and 

receive Commission approval before 

implementation. See id. We note that the 

materiality of any changes to the interaction and 

coordination between non-ATS trading centers and 

the NMS Stock ATS that would require disclosure 

on Form ATS–N should be evaluated based on the 

facts and circumstances related to each change. 

668See 17 CFR 242.600(b)(78). 

operators must make on Form BD.661

The Commission disagrees that an NMS 

Stock ATS operator may feel obligated 

to provide unnecessarily broad 

disclosures regarding potential conflicts 

of interest due to the proposed 

definition of ‘‘control.’’ The presumed 

control tests set forth in the adopted 

definition of ‘‘control’’ are meant to 

provide clarity to NMS Stock ATSs as 

to when an entity and the broker-dealer 

operator are defined as ‘‘affiliated,’’ 

which would trigger the NMS Stock 

ATSs’ disclosure duties under Part II of 

adopted Form ATS–N. We believe that 

the enumerated circumstances under 

which there is presumed control involve 

factors (such as a shared executive or 

25% ownership) that would likely result 

in one entity or person having the 

power, directly or indirectly, to direct 

the management or policies of the 

broker-dealer operator of an ATS. 

Therefore, in such situations, a 

presumption of control is appropriate. 

On the other hand, because control can 

manifest itself in several ways under the 

adopted definition, the Commission 

does not feel that there are certain facts 

that would warrant a presumption of no 

control. For example, the unique facts 

and circumstances of several different 

ownership structures could result in 

different conclusions regarding control, 

even though the various structures 

contain some similarities. Accordingly, 

the Commission has not added 

provisions setting forth circumstances 

under which there would be a 

presumption of no control. 

The Commission is adopting as 

proposed the changes to the definition 

of ‘‘control’’ under Rule 300(f) in 

Regulation ATS. The definition of the 

term control being adopted herein 

contains the additional phrase ‘‘the 

broker-dealer of’’ before the two 

instances of the phrase ‘‘an alternative 

trading system’’ and before the phrase 

‘‘the alternative trading system’’ in 

subsections (2) and (3) of the 

definition.662 As discussed in the 

Proposal, the purpose of this difference 

is to make clear that, because an ATS 

must register as a broker-dealer, control 

of the broker-dealer of the ATS is 

control of the ATS, and that the brokerdealer operator is legally responsible for 

all operational aspects of the ATS and 

for ensuring that the ATS complies with 

applicable federal securities laws and 

the rules and regulations thereunder, 

including Regulation ATS.663

The disclosures of ATS-related 

activities of the broker-dealer operator’s 

affiliates in Part II of adopted Form 

ATS–N are designed to provide 

subscribers and market participants 

with a comprehensive understanding of 

the conflicts of interest that may arise 

from the broker-dealer operator’s other 

business activities and its operation of 

the NMS Stock ATS. Under the adopted 

definitions of ‘‘affiliate’’ and ‘‘control,’’ 

any affiliate of the broker-dealer 

operator of the NMS Stock ATS would 

be an affiliate of the NMS Stock ATS. 

These definitions are designed to cover 

entities that have a close relationship 

with the broker-dealer operator and 

whose activities could raise conflicts of 

interest concerns, or could otherwise be 

relevant to market participants when 

evaluating an NMS Stock ATS. 

Furthermore, in Part III, Item 1 of 

proposed Form ATS–N, the Commission 

used the term ‘‘non-ATS trading 

center.’’ A commenter requests that the 

Commission define the term ‘‘non-ATS 

trading center’’ so that broker-dealer 

operators can better focus on making 

proper disclosures.664 As further 

explained below, in response to 

comments, the Commission is 

reorganizing and changing Part III, Item 

1 of proposed Form ATS–N to request 

information about the trading activities 

of the broker-dealer operator and its 

affiliates, irrespective of whether the 

broker-dealer operator’s business units 

and/or affiliates are non-ATS trading 

centers.665 Given the revisions the 

Commission is making to Part III, Item 

1, we believe that the defined term is no 

longer necessary, and the Commission 

is, therefore, eliminating the term from 

adopted Form ATS–N. 

Another commenter agrees with the 

goal of highlighting potential conflicts 

of interest faced by broker-dealer 

operators of NMS Stock ATSs and their 

affiliates in connection with the ATS.666

The commenter endorses the proposed 

requirement to identify non-ATS trading 

centers managed by the ATS operator or 

its affiliates that interact with the ATS. 

The commenter also states that 

disclosures related to non-ATS trading 

centers should be limited to non-ATS 

trading centers that interact with or 

exchange information with the ATS.667

The Commission also believes that 

public disclosure of non-ATS trading 

centers managed by the broker-dealer 

operator or its affiliates that interact 

with the ATS furthers the stated goal of 

helping market participants evaluate 

potential conflicts of interest on an NMS 

Stock ATS. The requests in Part II of 

adopted Form ATS–N are tailored to 

elicit such information without 

burdening NMS Stock ATSs with a 

requirement to list the non-ATS trading 

centers of the broker-dealer operator or 

its affiliates that do not interact with the 

NMS Stock ATS. 

(ii) New Defined Terms 

The Commission is adding the term 

‘‘trading center’’ to the definitions set 

forth in the Instructions to adopted 

Form ATS–N to define that term for 

purposes of its use in Part II and Part III 

of adopted Form ATS–N. The term 

‘‘trading center’’ was used in proposed 

Form ATS–N with regard to 

arrangements with other trading 

centers—Part III, Item 4 of proposed 

Form ATS–N—and is used in adopted 

Form ATS–N’s requests regarding the 

routing of orders from the NMS Stock 

ATS to business units or affiliates of the 

broker-dealer operator (adopted Part II, 

Items 1 and 2) and the NMS Stock 

ATS’s arrangements with other trading 

centers (adopted Part II, Item 4). 

The definition of the term ‘‘trading 

center’’ used for purposes of adopted 

Form ATS–N is the same as that 

currently set forth in Regulation NMS 

Rule 600(b)(78).668 The adopted 

definition is ‘‘a national securities 

exchange or national securities 

association that operates an SRO trading 

facility, an alternative trading system, 

an exchange market maker, an OTC 

market maker, or any other broker or 

dealer that executes orders internally by 

trading as principal or crossing orders as 

agent.’’ While we believe that the scope 

of the term ‘‘trading center’’ in Form 

ATS–N would likely be understood by 

NMS Stock ATSs, we believe that 

adding a definition to the Form ATS–N 

will reduce any potential ambiguity 

with regard to those requests in Part II, 

Items 1, 2, and 4 of adopted Form 

ATS–N. 

One commenter states that the 

Commission should add additional 

definitions for certain terms to promote 

consistency throughout Forms ATS–N, 

which the commenter believes could 

ultimately facilitate comparison among 


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669See BIDS Letter at 5. 

670See UBS Letter at 2. 

671See Morgan Stanley Letter at 4. 672See UBS Letter at 5. 

673 17 CFR 242.300(b) (emphasis added). 

Additionally, the definition of the term 

‘‘subscriber’’ under Regulation ATS states that a 

subscriber shall not include a national securities 

exchange or national securities association. See id. 

674See Proposal, supra note 2, at 81041 

(discussing the relationship between the brokerdealer operator’s operation of the NMS Stock ATS 

and its other operations). 

675For example, third-party market participants— 

including, potentially, affiliates and non-affiliates of 

the broker-dealer operator—may enter into 

subscriber agreements or some other form of 

contract with the broker-dealer operator to connect 

directly to the ATS to submit or display orders. We 

note that a determination as to who may be a 

‘‘subscriber’’ to the ATS would depend upon the 

facts and circumstances of the relationship between 

the ATS and the broker-dealer operator, so the 

preceding examples are not exhaustive. 

676See UBS Letter at 5 (noting that market 

participants may maintain a commercial 

relationship with the broker-dealer operator for 

purposes other than accessing the broker-dealer 

operator’s ATS, such as to use the broker-dealer’s 

high touch block trading desk or to use the brokerdealer’s trading algorithms); Morgan Stanley Letter 

at 1–2 (explaining that full service broker-dealers 

may provide clients with a broad, integrated 

electronic offering of trading services, which might 

include ATS services). 

Forms ATS–N.669 Another commenter 

emphasizes that the Commission should 

establish fundamental uniformity in the 

way information is defined and 

disclosed.670 We have structured 

adopted Form ATS–N to allow market 

participants to better compare 

disclosures among NMS Stock ATSs. 

We do not, however, believe that it 

should establish standardized terms to 

be used by NMS Stock ATSs when 

completing their disclosures on Form 

ATS–N. We do not desire to impose 

substantive standards for how 

disclosures should be written by 

adopting and defining terms to be used 

by all NMS Stock ATSs to describe the 

functionalities, operations, or 

procedures of their systems. The 

operations of NMS Stock ATSs vary, 

and, apart from some common terms, 

many NMS Stock ATSs use different 

terminology to describe their operations 

and functionalities. Based on our review 

of Form ATS filings, we believe that 

NMS Stock ATSs may use differing 

terms and definitions to describe 

functionalities, operations, or 

procedures, even if a particular 

function, operation, or procedure on one 

ATS may resemble that on another. We 

do not believe that it would be very 

helpful to define terms for 

functionalities, operations, or 

procedures across NMS Stock ATSs 

because doing so may not result in 

complete or comprehensible disclosures 

due to these substantive and semantical 

differences in the operations of NMS 

Stock ATSs. We believe that adopting 

standardized, substantive terms for 

Form ATS–N disclosures may limit the 

ability of an NMS Stock ATS to 

completely and clearly describe its 

system, which we believe could reduce 

the utility of Form ATS–N disclosures 

for market participants. We also believe 

that such defined terminology would 

limit the flexibility of NMS Stock ATSs 

to name or market new services of the 

ATS. 

b. Comments on the Definition of 

‘‘Subscriber’’ 

When seeking disclosures regarding 

how an NMS Stock ATS operates and 

the ATS-related activities of the brokerdealer operator and its affiliates, 

proposed Form ATS–N used the terms 

‘‘subscriber’’ and ‘‘person(s).’’ One 

commenter believes that Form ATS–N 

should instead focus on the term ‘‘user’’ 

rather than ‘‘subscriber.’’ 671 This 

commenter states that the term 

‘‘subscriber’’ can be disparately 

interpreted and applied by broker-dealer 

operators of ATSs and would inhibit 

uniform application across ATSs in 

terms of disclosure, access, priority, and 

other purposes. This commenter further 

states that the current definition in 

Regulation ATS fails to adequately 

define ‘‘subscriber’’ in the case of an 

ATS that is part of a larger broker-dealer 

operation, leading to inconsistencies in 

the application of the requirements 

applicable to subscribers across ATSs. 

The commenter believes that 

disclosures in Form ATS–N should not 

depend on whether a broker-dealer 

operator has a contractual agreement 

with a user for accessing the ATS, but 

should be consistent for all users that 

access an ATS whether such users are 

internal or external and whether such 

users access the ATS directly or 

indirectly. 

Similarly, another commenter 

believes the phrase ‘‘subscriber orders 

or other trading interest’’ as used in 

proposed Part III, Item 1—which would 

have required the NMS Stock ATS to 

disclose information about the 

interaction and coordination between 

non-ATS trading centers operated by the 

broker-dealer operator or its affiliates 

and the NMS Stock ATS—should be 

read as ‘‘subscriber orders or subscriber 

trading interest.’’ 672 This commenter 

believes that the alternative reading 

would potentially capture all trading 

interest sent to the broker-dealer 

operator of the NMS Stock ATS. 

We agree that responses to questions 

in Form ATS–N should be uniformly 

applied by NMS Stock ATSs regardless 

of the source of orders (e.g., principal 

trading desks of the broker-dealer 

operator, third parties using direct 

connectivity, affiliates of the brokerdealer operator, customers of the brokerdealer operator whose orders are 

submitted to the ATS through a 

functionality of the broker-dealer 

operator, such as a smart order router 

(‘‘SOR’’)). We have revised several 

requests on proposed Form ATS–N to 

help facilitate a uniform application of 

responses by NMS Stock ATSs and, in 

response to commenters’ concerns, are 

providing guidance regarding the 

definition of ‘‘subscriber’’ under 

Regulation ATS and in the context of 

Form ATS–N disclosures. 

First, we believe that the term 

‘‘subscriber’’ sufficiently captures the 

vast majority of market participants 

whose orders or trading interest are 

submitted to and executed in an NMS 

Stock ATS. Regulation ATS defines 

subscriber ‘‘[a]s any person that has 

entered into a contractual agreement 

with an ATS to access such ATS for the 

purpose of effecting transactions in 

securities or submitting, disseminating, 

or displaying orders on such ATS, 

including a customer, member, user, or 

participant in an ATS.’’ 673 In the 

Proposal, as the Commission discussed, 

the broker-dealer operator of an NMS 

Stock ATS is legally responsible for, and 

controls all aspects of, the ATS 

operation, including, among other 

things, providing access to the ATS.674

Based on our experience, persons 

seeking to use an ATS’s services enter 

into agreements with the broker-dealer 

operator, and these agreements could 

cover services in addition to the ATS 

services. These agreements may take a 

variety of forms, and may or may not be 

written.675 If a market participant has an 

agreement—written or unwritten—with 

a broker-dealer that allows the market 

participant to enter orders directly into 

an ATS operated by the broker-dealer, 

that market participant is a subscriber of 

the ATS for purposes of Regulation ATS 

and Form ATS–N. 

Another example of a subscriber 

would include a customer of the brokerdealer operator whose orders are 

submitted to the ATS by the brokerdealer operator. Many NMS Stock ATSs 

are operated by broker-dealers that offer 

their customers a wide range of order 

handling and execution services in 

addition to the execution services of 

their NMS Stock ATSs.676 These 

services typically involve functionality 

such as an SOR or other types of trading 

algorithms. In cases where a customer 

uses this wider range of services of the 

broker-dealer, the customer would not 


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677We do not intend for Form ATS–N to require 

disclosures about aspects of a market participant’s 

other commercial relationships with a broker-dealer 

operator that do not pertain to the NMS Stock ATS. 

We believe that the adopted Form ATS–N 

disclosure requests are tailored so that operations 

of the broker-dealer operator not housed within the 

NMS Stock ATS—and that do not otherwise pertain 

to the functions of the ATS—would not be subject 

to disclosure on Form ATS–N. 

678See Morgan Stanley Letter at 4. 

679Proposed Form ATS–N would have required 

NMS Stock ATSs to check the ‘‘Submission Type.’’ 

Adopted Form ATS–N requires NMS Stock ATSs to 

check the ‘‘Type of Filing.’’ This is a nonsubstantive change. 

680Adopted Form ATS–N’s cover page provides 

that a filing may be an initial Form ATS–N, or a 

Form ATS–N material amendment, updating 

amendment, correcting amendment, or order 

display and fair access amendment. Proposed Form 

ATS–N included a check box above the 

‘‘Submission Type’’ menu, where an NMS Stock 

ATS could indicate if the filing was an ‘‘Initial 

Form Filing.’’ In addition, in the proposed Form 

ATS–N ‘‘Submission Type’’ menu, an NMS Stock 

ATS could check whether its submission was a 

‘‘Form ATS–N.’’ Adopted Form ATS–N does not 

include a check box to indicate whether the filing 

is an ‘‘Initial Form Filing,’’ and revises the 

proposed check box under the ‘‘Type of Filing’’ 

menu to state ‘‘Initial Form ATS–N’’ (emphasis 

added). 

681Proposed Form ATS–N included a check box, 

above the ‘‘Submission Type’’ menu, where an 

NMS Stock ATS could indicate that a filing was a 

‘‘Withdrawal of Initial Form Filing.’’ Adopted Form 

ATS–N relocates this check box to the ‘‘Type of 

Filing’’ menu and revises it to say ‘‘Withdrawal of 

Form ATS–N filing’’ so that such check box can 

accommodate withdrawals of different types of 

filings, and not just a withdrawal of an initial Form 

ATS–N. Adopted Form ATS–N provides a space for 

the EDGAR accession number for the Form ATS– 

N filing to be withdrawn, which will enable market 

participants to identify the prior filing that is being 

withdrawn. 

682An NMS Stock ATS is required to attach a 

document marked to indicate changes for a Form 

ATS–N amendment to Form ATS–N Part, I, Part II, 

and Part III, as applicable, and to highlight changes 

to ‘‘yes’’ or ‘‘no’’ answers or additions or deletions 

from its prior Form ATS–N filing. We believe that 

marked documents will help market participants 

and the Commission review Form ATS–N 

amendments in an efficient manner. We have 

changed the marked document requirement that 

was proposed. In the proposal the marked 

document was referred to a redline. We proposed 

for an NMS Stock ATS to submit two redlines— 

Exhibit 3A to show changes to Part III of proposed 

Form ATS–N and Exhibit 4A to show changes to 

Part IV of proposed Form ATS–N. We are adopting 

a requirement that ATSs provide a single exhibit, 

Exhibit 3, that contains a marked document to 

indicate changes to Parts I, II, and III. We believe 

that only requiring a single document may reduce 

the filing burden on ATSs. We believe that the 

marked documents will be helpful for market 

participants to review changes to Part I. In addition, 

to reflect the use of ‘‘yes’’ or ‘‘no’’ questions in 

adopted Form ATS–N, we are specifying that the 

marked document would be required to indicate 

changes in ‘‘yes’’ or ‘‘no’’ answers. 

send its orders directly to the ATS, but 

rather, send its orders to some 

functionality external to the ATS, which 

could be the SOR or algorithm itself or 

a client service desk that submits the 

customer orders into the broker-dealer’s 

SOR or trading algorithms. A SOR or 

trading algorithm typically has the 

capability to route customer orders to a 

number of execution venues, including 

the broker-dealer operator’s own ATS. 

We note that such commercial 

relationships may be governed by 

formal or informal agreements. To the 

extent a person enters into a contract, 

written or unwritten, to use the brokerdealer operator’s order routing and 

execution services, and those services 

could include routing to and executing 

in the broker-dealer operator’s own 

ATS, that agreement would fall within 

the contractual agreements under the 

definition of ‘‘subscriber’’ under 

Regulation ATS and the person would 

be a subscriber to the ATS. On the other 

hand, a customer’s order routed by the 

broker-dealer operator’s SOR or trading 

algorithm to an external market for 

execution would not be a subscriber 

order because the order was not 

destined or entered into the ATS.677

Second, as noted above, a commenter 

believes that Regulation ATS does not 

adequately define the term ‘‘subscriber’’ 

in the case of an ATS that is part of a 

larger broker-dealer operation, which 

the commenter believes could lead to 

inconsistencies in the application of the 

requirements applicable to subscribers 

across ATSs.678 While we believe that 

the term ‘‘subscriber’’ sufficiently 

captures the vast majority of market 

participants whose orders or trading 

interest are submitted to and executed 

in an NMS Stock ATS, we also 

acknowledge that business units of 

multi-service broker-dealer operators, in 

many cases, participate in the ATS of 

that broker-dealer operator and submit 

principal orders to the ATS. Despite 

participating in the ATS, these business 

units might not always meet the 

definition of ‘‘subscriber’’ because an 

ATS may not have a contractual 

agreement with a business unit that is 

part of the same entity. 

Adopted Form ATS–N uses the term 

‘‘subscriber’’ throughout, and, in certain 

Items, specifically states the type of 

ATS-related activities of, or information 

about, the broker-dealer operator that 

must be disclosed. For example, Part III, 

Item 5(b) of adopted Form ATS–N 

requires the NMS Stock ATS to state 

whether the terms and conditions to 

directly enter orders and trading interest 

into the NMS Stock ATS are the same 

for all subscribers and the broker-dealer 

operator. We believe that drafting the 

Form ATS–N requests in this manner 

will help ensure that the scope of 

information solicited encompasses all 

relevant users of the ATS services (i.e., 

subscribers, and to the extent such users 

do not meet the definition of 

‘‘subscriber,’’ the business units of the 

broker-dealer operator). We believe that 

adopted Form ATS–N is not designed to 

solicit disparate disclosures among 

NMS Stock ATS due to varying 

interpretations of the term ‘‘subscriber’’ 

by individual ATSs. 

B. Cover Page and Part I of Form 

ATS–N: Identifying Information 

1. Cover Page 

In response to concerns from 

commenters that the public may be led 

to believe that the Commission is 

conducting a merit-based review of 

Form ATS–N disclosures filed with the 

Commission, we are including on the 

cover page of Form ATS–N a legend 

stating that the Commission has not 

passed upon the merits or accuracy of 

the disclosures in the filing. 

On the cover page of adopted Form 

ATS–N, the responding entity is 

required to identify the type of filing 679

by marking the appropriate checkbox.680

We are also adopting, as proposed, a 

requirement that NMS Stock ATSs file 

a notice of cessation of operations on 

Form ATS–N and provide the date that 

the NMS Stock ATS will cease to 

operate. We are also adopting a check 

box that allows a Form ATS–N filer to 

withdraw a previously filed Form ATS– 

N filing.681 The Instructions to Form 

ATS–N state that an NMS Stock ATS 

may withdraw an initial Form ATS–N 

or an amendment before the end of the 

applicable Commission review period. 

Because its initial Form ATS–N 

supersedes and replaces a Legacy NMS 

Stock ATS’s Form ATS for purposes of 

the exemption and the initial Form 

ATS–N can be amended, a Legacy NMS 

Stock ATS may not withdraw its initial 

Form ATS–N at any time. Once the 

Commission review period has expired 

or a Legacy NMS Stock ATS has filed 

its initial Form ATS–N, the Legacy NMS 

Stock ATS cannot withdraw the filing 

and must file a notice of cessation 

pursuant to Rule 304(a)(3) if it intends 

to cease to operate or file an amendment 

to its Form ATS–N, as appropriate. In 

addition, an NMS Stock ATS may 

withdraw a notice of cessation of 

operations at any time before the date 

that the NMS Stock ATS had indicated 

it intended to cease operating. 

In the cover page of proposed Form 

ATS–N, the Commission sought a brief 

narrative description for Form ATS–N 

amendments so market participants 

could quickly understand the nature of 

the amendment.682 We are modifying 

this requirement to be more specific as 

to what information is required in this 

narrative. Adopted Form ATS–N 

requires the NMS Stock ATS to indicate 


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683Accordingly, the adopted Instructions have 

been enhanced from the proposed Instructions so 

that they provide more guidance to an NMS Stock 

ATS drafting the narrative. The proposed 

Instructions would have asked an NMS Stock ATS 

to ‘‘[p]rovide a brief narrative description of the 

Amendment.’’ See Proposal, supra note 2, at 81138. 

684See supra Section IV.E.2.c. 

685Proposed Form ATS–N set forth this check 

box in Part I, Item 4, whereas adopted Form ATS– 

N sets forth this check box on the cover page. 

686The subsequent sections of adopted Form 

ATS–N have been renumbered accordingly. The 

disclosures regarding the ATS-related activities of 

the broker-dealer operator and its affiliates on the 

NMS Stock ATS are contained in Part II, the 

manner of operations disclosures are contained in 

Part III, and the contact information, signature 

block, and consent to service are contained in Part 

IV of adopted Form ATS–N. 

687 In some instances, an NMS Stock ATS may 

have several commercial or doing-business-as 

names, such as a name the ATS uses in its filings 

to the Commission, or to FINRA pursuant to FINRA 

Rule 6110. Adopted Form ATS–N requires the ATS 

to list all names under which it conducts business 

in Part I, Item 2. 

688Part I, Item 2 of proposed Form ATS–N would 

have required an NMS Stock ATS to disclose the 

full name of the NMS Stock ATS under which its 

business is conducted, ‘‘if any.’’ Part I, Item 3 of 

adopted Form ATS–N only requires this disclosure 

‘‘if different.’’ 

689The requirements of Part II, Items 2 and 3 of 

proposed Form ATS–N are consolidated into Part 

I, Item 4 of adopted Form ATS–N, and divided into 

two subparts. 

690The mailing address for registered brokerdealers is available to the Commission via EDGAR. 

The mailing address, type of entity, and date when 

established for each broker-dealer is available to the 

public through FINRA. 

691This requirement was previously a stand-alone 

request and has been moved to Part I, Item 5 of 

adopted Form ATS–N, which asks the NMS Stock 

ATS to disclose its national securities association, 

which would issue the MPID to the ATS. An MPID, 

or other mechanism or mnemonic, is used to 

identify a market participant for the purposes of 

electronically accessing a national securities 

exchange or an ATS. See, e.g., Securities Exchange 

Act Release No. 63241 (November 3, 2010), 75 FR 

69792 (November 15, 2010). ATSs are required to 

use a unique MPID when reporting trade 

information to FINRA. See FINRA ATS Reporting 

Approval, supra note 15. 

692See HMA Letter at 10. 

693Contact information of the broker-dealer 

operator’s representative in Part IV of Form ATS– 

N will not be made public. In addition, consistent 

with the requirements of proposed Form ATS–N, 

the signature block in Part IV of adopted Form 

ATS–N requires the NMS Stock ATS to consent that 

the part and item number of the Form 

ATS–N that is the subject of the change, 

provide a brief summary of the changes, 

and state whether or not the changes 

apply to all subscribers and the brokerdealer operator.683 In addition, the NMS 

Stock ATS is required to provide the 

EDGAR accession number for the Form 

ATS–N filing to be amended, which will 

allow market participants to identify the 

filing that is being amended. 

Furthermore, in response to 

comments, we are adopting Rule 

304(b)(2)(iii), which provides that it will 

make public the cover page of a filed 

Form ATS–N material amendment upon 

filing and then make public the entirety 

of the material amendment following 

the expiration of the review period 

pursuant to Rule 304(a)(2)(ii).684 In 

connection with this change, we are 

adopting Instructions that we believe 

will better solicit information that will 

notify market participants of the general 

subject matter of a Form ATS–N 

amendment, as well as the subscribers 

that would be affected by the 

amendment. For updating and 

correcting amendments, which will be 

made public upon filing, we believe that 

the information in the narrative can 

assist market participants in 

understanding the general nature of the 

change that the NMS Stock ATS is 

implementing. 

In addition, we are making a technical 

change to relocate the check box 

indicating whether an initial Form 

ATS–N is being filed by a Legacy NMS 

Stock ATS operating pursuant to a Form 

ATS.685

2. Part I of Form ATS–N: Identifying 

Information 

a. Part I: Identifying Information 

Part I of adopted Form ATS–N 

combines the requests set forth in Parts 

I and II of proposed Form ATS–N, 

which covered, among other things, the 

name of the NMS Stock ATS and the 

NMS Stock ATS’s broker-dealer 

operator’s registration and contact 

information.686 We are adding to Part I, 

Item 1 of adopted Form ATS–N, a new 

requirement, which was not proposed, 

that the filer check a box indicating 

whether the filer is a registered brokerdealer with the Commission to readily 

notify the Commission whether the filer 

is eligible to operate as an NMS Stock 

ATS pursuant to Regulation ATS. 

To assist the Commission in more 

easily assessing whether the NMS Stock 

ATS has registered as a broker-dealer 

pursuant to Rule 301(b)(1) of Regulation 

ATS, we are adopting the proposed 

requirement that the NMS Stock ATS 

provide the name of the registered 

broker-dealer for the NMS Stock ATS 

(i.e., the broker-dealer operator), as it is 

stated on Form BD, in Part I, Item 2 of 

adopted Form ATS–N. To the extent 

that a commercial or ‘‘DBA’’ (doing 

business as) name or names 687 are used 

to identify the NMS Stock ATS to the 

public, the Commission, or its SRO, or 

if a registered broker-dealer operates 

multiple NMS Stock ATSs, adopted 

Form ATS–N would require the full 

name(s) of the NMS Stock ATS under 

which business is conducted, if 

different,688 in Part I, Item 3 of adopted 

Form ATS–N. We are also adopting Part 

II, Items 2 and 3 of proposed Form 

ATS–N as Part I, Item 4 689 of adopted 

Form ATS–N to require the NMS Stock 

ATS to provide the broker-dealer 

operator’s SEC File Number and Central 

Registration Depository (‘‘CRD’’) 

Number. 

We are not, however, including in 

adopted Part I the proposed requests 

that the NMS Stock ATS provide the 

effective date of its broker-dealer 

operator’s registration with the 

Commission, the broker-dealer 

operator’s legal status (e.g., sole 

proprietorship, corporation), 

information about its date and place of 

formation if the broker-dealer operator 

is other than a sole proprietor, and the 

mailing address of the NMS Stock ATS 

(if not the same as the physical address). 

This identifying information is 

disclosed on Form BD or otherwise 

made available to the public and the 

Commission.690 We do not believe that 

it is necessary to require the NMS Stock 

ATS to provide this information on 

Form ATS–N because other information 

requests about the registration status of 

the broker-dealer operator will inform 

the Commission about whether the NMS 

Stock ATS has met the condition of 

Rule 301(b)(1) of Regulation ATS. 

We are adopting Part II, Item 4 of 

proposed Form ATS–N as Part I, Item 5 

of adopted Form ATS–N to require the 

NMS Stock ATS to provide the full 

name of the national securities 

association of the broker-dealer operator 

and the effective date of the brokerdealer operator’s membership with the 

national securities association. We are 

adding to Part I, Item 4 of adopted Form 

ATS–N the proposed requirement for an 

NMS Stock ATS to provide its Market 

Participant Identifier (‘‘MPID’’).691

Providing the name of the NMS Stock 

ATS or DBAs and its MPID would 

identify the ATS to the public and 

Commission. One commenter states that 

the name, identity of the broker-dealer 

operator, any ‘‘doing business as’’ name, 

and the ATS’s MPID are basic 

information critical to market 

participants and should be disclosed.692

Also, as was proposed, adopted Form 

ATS–N requires the NMS Stock ATS to 

provide a URL address for the website 

of the ATS, and in the signature block 

in Part IV of adopted Form ATS–N, the 

representative of the broker-dealer 

operator will also be required to provide 

his or her business contact information, 

including the person’s name and title, 

telephone number, email address, and 

primary street address and mailing 

address (if different) of the NMS Stock 

ATS.693 This information will facilitate 


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service of any civil action brought by, or notice of 

any proceeding before, the Commission or a SRO 

in connection with the ATS’s activities may be 

given by registered or certified mail to the contact 

employee at the primary street address or mailing 

address, if different, of the NMS Stock ATS, or via 

email, at the addresses provided on this Form 

ATS–N. 

694Part IV of adopted Form ATS–N, which will 

not be made public, requires the primary street 

address and mailing address of the NMS Stock ATS 

in order to facilitate the Commission contacting the 

NMS Stock ATS. See supra note 693. 

695See Part II, Item 6 of proposed Form ATS–N. 

696See HMA Letter at 11. 

697Part I, Item 7 of adopted Form ATS–N. 

698See SIFMA Letter at 7; Liquidnet Letter at 8; 

KCG Letter at 6; HMA Letter at 11; STANY Letter 

at 3; UBS Letter at 3; Level ATS Letter at 5. 

699See SIFMA Letter at 7; Liquidnet Letter at 8; 

KCG Letter at 6. 

700See KCG Letter at 6. 

701See SIFMA Letter at 7. 

702See Liquidnet Letter at 8; KCG Letter at 6; 

Level ATS Letter at 5. One of these commenters also 

expresses concern that the proposed requirement 

would require disclosure of subscriber agreements, 

which are individually negotiated and confidential. 

See Level ATS Letter at 5–6. Another one of these 

commenters is concerned that NMS Stock ATS 

operators would limit the amount of information 

shared with subscribers in order to avoid sharing 

that information with the public and its 

competitors. See Liquidnet Letter at 8. 

703See Liquidnet Letter at 8. 

communication with the broker-dealer 

operator during the Commission review 

period of a Form ATS–N and later as 

necessary as part of the Commission’s 

ongoing monitoring of the NMS Stock 

ATS. 

We are modifying the proposed 

request for the physical street address of 

the NMS Stock ATS to also require the 

ATS to provide the physical street 

address, if any, of a secondary location 

for the ATS that may be used in the 

event that the primary physical location 

is not available. The location of an NMS 

Stock ATS, including its matching 

system, may differ from the main 

physical or mailing address of the 

broker-dealer operator. We believe that 

it is important for both the Commission 

and market participants to know where 

the NMS Stock ATS is located in the 

event of, for instance, a natural disaster 

that could impact market participants’ 

ability to trade on the ATS and potential 

latency that could be experienced due to 

the location of the secondary site of the 

NMS Stock ATS. Also, we are 

concerned that market participants 

could be harmed from systems problems 

that necessitate a suspension or halt to 

trading at an NMS Stock ATS. Thus, we 

believe it is important to fully 

understand what, if any, trading 

procedures an NMS Stock ATS would 

follow if trading is suspended or 

stopped, which would be disclosed 

under Part III, Item 20 of adopted Form 

ATS–N. We believe that knowing any 

secondary location(s) for the NMS Stock 

ATS would be relevant to both the 

Commission’s and market participants’ 

understanding of how the ATS handles 

certain contingencies. 

The main physical address and 

mailing address of the broker-dealer 

operator are provided on Form BD, so 

we do not believe it is necessary to 

publicly disclose this information on 

Form ATS–N.694 Part II, Item 6 of 

proposed Form ATS–N provided that 

the NMS Stock ATS could indicate by 

check box that the broker-dealer 

operator is a sole proprietor and that the 

physical street address is a private 

residence, and that in such case, the 

private residential address would not be 

included in the publicly available 

version of the form.695 One commenter 

asserts that Form ATS–N should require 

disclosure of all relevant addresses, and 

states its view that we should eliminate 

the proposed exception for NMS Stock 

ATSs out of a personal residence.696 In 

light of this comment, we are not 

including in adopted Form ATS–N the 

proposed check box noting that the 

physical address of the matching system 

is at a sole proprietor’s private 

residence. We agree that market 

participants should be aware of the 

physical addresses of the matching 

systems for all NMS Stock ATSs, 

regardless of whether they are at a sole 

proprietor’s private residence. In 

addition, based on Commission 

experience, NMS Stock ATSs generally 

do not operate out of a sole proprietor’s 

residence, and the Commission does not 

believe that the exception is necessary. 

We will therefore make the physical 

address of the matching system 

available for every Form ATS–N.697

Also, as was proposed, the Part I, 

Items 8 and 9 require an NMS Stock 

ATS to attach its most recently filed or 

amended Schedule A of the brokerdealer operator’s Form BD disclosing 

information related to direct owners and 

executive officers, and its most recently 

filed or amended Schedule B of the 

broker-dealer operator’s Form BD 

disclosing information related to 

indirect owners as Exhibits 1 and 2, 

respectively. In lieu of attaching those 

schedules, the NMS Stock ATS can 

indicate, via a checkbox, that the 

information under those schedules is 

available on its website and is accurate 

as of the date of the filing of the Form 

ATS–N. We continue to believe that 

these exhibits will help market 

participants identify the persons and 

entities that directly and indirectly own 

the broker-dealer operator and any 

potential associated conflicts of interest. 

We are requiring the NMS Stock ATS to 

provide this information on Form ATS– 

N, even though the same information is 

provided on Form BD, because 

information about ownership of the 

broker-dealer operator will enable 

market participants to better understand 

conflicts of interest that may arise 

therefrom, which is one of the central 

purposes of the form. As such, an NMS 

Stock ATS must file this information on 

Form ATS–N. We also continue to 

believe that it is appropriate for an NMS 

Stock ATS to provide this information 

using a URL address for these 

documents in lieu of attaching the 

actual documents to their Form ATS–N 

filings because the ATS’s disclosures on 

Form ATS–N will provide the public 

with the required information. Part I, 

Item 10 of adopted Form ATS–N 

requires the NMS Stock ATS, for filings 

made pursuant to Rule 304(a)(2)(i) (i.e., 

Form ATS–N amendments), to attach as 

Exhibit 3 a marked document to 

indicate changes to ‘‘yes’’ or ‘‘no’’ 

answers or additions or deletions from 

any item in Part I, Part II, Part III, as 

applicable. 

b. Comments on Proposed Exhibit 1 

We proposed to require that NMS 

Stock ATSs provide, in Exhibit 1 to 

Form ATS–N, a copy of any materials 

currently provided to subscribers or 

other person related to the operations of 

the NMS Stock ATS or the disclosures 

on Form ATS–N (e.g., FIX protocol 

procedures, rules of engagement/ 

manuals, frequently asked questions, 

marketing materials). We received 

several comments regarding Exhibit 

1.698 We are not adopting the proposed 

Exhibit 1 requirements to Form ATS–N. 

Commenters express concerns that the 

requirements of Exhibit 1 are broad,699

not relevant for purposes of facilitating 

ATS comparisons by market 

participants,700 and would require 

unnecessarily cumbersome amount of 

disclosure.701 Three commenters 

express concern about the requirement 

to make subscriber materials attached to 

Form ATS–N as exhibits public on the 

grounds that such documents may 

include confidential information.702

Commenters propose that as an 

alternatives to the Exhibit 1 

requirements, the Commission could 

make exhibits public only when they 

are responsive to certain categories of 

documents made available to users 

(such as FIX protocol procedures, rules 

of engagement, user manuals, frequently 

asked questions, and marketing 

materials) or are required to accurately 

respond to the questions on Form ATS– 

N,703 or not make public certain 


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704See SIFMA Letter at 7–8. 

705See UBS Letter at 3. 

706See HMA Letter at 12 (supporting the adoption 

of a revised Exhibit 1 because it would enhance 

consistency of information to subscribers and the 

public and would be valuable to those seeking to 

evaluate NMS Stock ATSs). See infra note 709. 

707See KCG Letter at 5–6 (supporting a 

requirement that information be made available to 

all market participants, and not selectively 

disclosed, but asserting that as drafted, Exhibit 1 is 

overly broad). 

708See Liquidnet Letter at 9. 

709See HMA Letter at 12. 

710See Proposal, supra note 2, at 81041. 

711See UBS Letter at 4. 

712As discussed further below, several 

commenters suggest how to refine the specific 

requests proposed for Part III of Form ATS–N. 713See, e.g., STA Letter at 4; KCG Letter at 8–9; 

SIFMA Letter at 4–8; Luminex Letter at 2–3; 

Fidelity Letter at 5; STANY Letter at 5; UBS Letter 

at 6; Morgan Stanley Letter at 5. 714See Fidelity Letter at 2 and 4; UBS Letter at 

2–4; SIFMA Letter at 4, 8; Luminex Letter at 3; 

Markit Letter at 7–8. 715See Morgan Stanley Letter at 5. 716See UBS Letter at 2–5. 

information (such as electronic trading 

protocols or other customer agreements) 

and provide other ‘‘proprietary’’ 

information only to regulators upon 

request.704 Another commenter suggests 

that rather than requiring formal 

amendments to Form ATS–N every time 

an ATS wishes to change or enhance 

marketing materials and similar 

disclosures, the Commission should 

allow an NMS Stock ATS to post the 

most recent versions of its marketing 

materials on its website.705

We are not adopting the proposed 

requirement that NMS Stock ATSs 

provide a copy of any materials 

currently provided to subscribers or 

other persons related to the operations 

of the NMS Stock ATS or the 

disclosures on Form ATS–N. We 

recognize that some of such materials 

could contain proprietary or other 

information that NMS Stock ATSs 

would not wish to make public due to 

confidentiality or competitive concerns. 

With respect to the comments in 

support of requiring subscriber 

materials to be made public,706 or in 

support of a limited version of the 

Exhibit 1 requirements,707 we believe 

that Form ATS–N is designed to elicit 

meaningful disclosures about how the 

NMS Stock ATS operates and the ATSrelated activities of the broker-dealer 

operator and its affiliate. We believe that 

the vast amount of information that 

would have been contained in the 

Exhibit 1 materials will be disclosed in 

response to the request in Form ATS– 

N and that no longer requiring NMS 

Stock ATSs to produce these materials 

will reduce their burden and the 

potential disclosure of redundant 

information to the public. 

One commenter states that while it 

does not support a requirement for 

public filing of exhibits, it supports 

requiring these exhibits to be filed with 

the Commission.708 We are not adopting 

this suggestion. As discussed above, the 

purpose of this rulemaking is to expand 

the public transparency of NMS Stock 

ATSs; providing the proposed Exhibit 1 

information to only the Commission 

would not serve this purpose. 

Another commenter states that to the 

extent that ATSs would disclose 

statistics or data that had been requested 

by firms to help with their cost and best 

execution analysis, such an approach 

would be less helpful than a greatly 

enhanced, comprehensive disclosure for 

this information.709 The commenter 

states that this information is essential. 

However, this commenter expresses 

concern that as a consequence of the 

Exhibit 1 requirements, NMS Stock 

ATSs may cease to provide subscribers 

with information and statistics to avoid 

having to make such information public. 

This commenter suggests that Exhibit 1 

be revised to include all marketing 

materials, manuals, and fee information, 

but not customized statistics and 

information, provided that such 

statistics and information are otherwise 

publicly disclosed. We are not 

expanding market statistics that NMS 

Stock ATSs are currently required to 

disclose as part of this rulemaking. 

c. ATS Governance Structure and 

Compliance Programs and Controls 

In the Proposal, we asked if NMS 

Stock ATSs should be required to 

provide disclosure about their 

governance structure and compliance 

programs and controls to comply with 

Regulation ATS.710 In response, we 

received one comment, which states 

that governance structures are likely to 

vary materially among ATSs, and that 

the Commission’s goals in this area 

would best be served through the 

Commission’s Office of Compliance 

Inspections and Examination’s regular 

examination efforts.711 We did not 

receive comments supporting a request 

for such information. We believe that it 

is appropriate to take an incremental 

approach to this topic and intends to 

monitor the effectiveness of the 

disclosures on adopted Form ATS–N. 

Should the Commission decide to take 

further action with regard to Form ATS– 

N’s disclosure requirements, including 

adding requests about NMS Stock ATS 

governance structure and compliance 

programs and controls, the Commission 

would do so in a separate rulemaking in 

the future. 

C. Part II of Form ATS–N: ATS-Related 

Activities of the Broker-Dealer Operator 

and Affiliates 

We believe that the interests of the 

broker-dealer operator or its affiliates 

sometimes compete against the interest 

of those that use the ATS’s services. 

These competing interests, at times, may 

give rise to conflicts of interests for the 

broker-dealer operator and its affiliates 

or the potential for information leakage 

of subscribers’ confidential trading 

information. As such, Part II of Form 

ATS–N is designed to provide 

subscribers and market participants 

with information about these competing 

interests, and in doing so, inform them 

about: (1) The operation of the NMS 

Stock ATS—regardless of the corporate 

structure of the NMS Stock ATS—and of 

its broker-dealer operator, or any 

arrangements the broker-dealer operator 

may have made, whether contractual or 

otherwise, pertaining to the operation of 

its NMS Stock ATS; and (2) ATS-related 

activities of the broker-dealer operator 

and its affiliates that may give rise to 

conflicts of interest for the broker-dealer 

operator and its affiliates or the 

potential for information leakage of 

subscribers’ confidential trading 

information. 

Commenters generally support 

disclosing information about potential 

conflicts of interest and information 

leakage, and we did not receive any 

comments opposing the principle that 

information related to conflicts of 

interest or information leakage on an 

NMS Stock ATS should be publicly 

disclosed.712 Several commenters, 

however, state general concerns that the 

scope of the requests in Part III of 

proposed Form ATS–N is too broad.713

A number of commenters believe that 

the requests regarding affiliates should 

be limited to descriptions of how the 

broker-dealer operator and its affiliates 

or business units directly interact with 

or affect the operations of the NMS 

Stock ATS.714 For example, one 

commenter argues that proposed Form 

ATS–N would have required disclosures 

that are not meaningful to market 

participants and could possibly inhibit 

useful comparison of NMS Stock 

ATSs.715

Furthermore, a commenter argues that 

the proposed conflicts of interest 

requests regarding affiliates of the 

broker-dealer operator would have 

placed a significant burden on multiservice broker-dealers with a large 

number of affiliates, sometimes 

numbering in the hundreds.716

Similarly, another commenter states that 

an NMS Stock ATS’s broker-dealer 

operator may not be privy to certain 


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717See Fidelity Letter at 4. 

718Updating amendments for non-material 

changes may be required, as appropriate. 

719See 17 CFR 242.302. 

720See SIFMA Letter at 6, 9. 

721For example, in the request under Part II, Item 

5 of adopted Form ATS–N, an NMS Stock ATS is 

only required to provide a summary of the terms 

and conditions for the use of products or services 

offered by the ATS. 

722See Investor Advocate Letter at 8. 

723See id. at 9. 724See 15 U.S.C. 78mm(a)(1). 725See Investor Advocate Letter at 9. 

information about its affiliates for valid 

compliance reasons.717

As outlined below in more detail— 

and in response to both these general 

commenter concerns and commenter 

concerns that are more specific to 

particular disclosure requests, which are 

explained below—we are modifying the 

conflicts of interest requests to focus on: 

(1) The ability of business units or 

affiliates of the broker-dealer operator to 

enter, or direct the entry of, orders into 

the NMS Stock ATS and whether such 

business units or affiliates actually trade 

on the NMS Stock ATS; and (2) whether 

those business units and affiliates that 

do trade on the NMS Stock ATS receive 

any preferential treatment with respect 

to the services offered by the NMS Stock 

ATS. 

We continue to believe that 

disclosures regarding the ATS-related 

activities of the broker-dealer operator 

and its affiliates will help enable market 

participants to assess potential conflicts 

of interest that may impact their trading 

on the ATS and assess the potential for 

information leakage. At the same time, 

we also believe that Form ATS–N 

should not require public disclosure of 

activities or affiliate relationships of the 

broker-dealer operator that do not relate 

to the NMS Stock ATS and thus, do not 

present a potential conflict of interest. 

We believe that the revisions to the 

proposed disclosure requests are 

responsive to commenters’ concerns 

about the scope of the form’s affiliate 

disclosures. 

Furthermore, the burden of 

responding to the affiliate requests has 

been reduced from that which was 

proposed. First, the adopted affiliate 

disclosure requests focus on substantive 

information about how affiliated entities 

interact with the ATS and differences in 

how the ATS treats affiliates’ orders. As 

such, frequent updates to Part II for 

ministerial or minor administrative 

changes by the ATS would not normally 

be necessary.718 To the extent a 

ministerial or administrative change 

affects a disclosure on Form ATS–N in 

a non-material way, the NMS Stock ATS 

would, in most instances, only be 

required to file a quarterly updating 

amendment. Additionally, an NMS 

Stock ATS likely already has the 

necessary information about the services 

that it offers affiliates that trade on the 

ATS because of its current 

recordkeeping requirements,719 and we 

believe that maintaining up-to-date Part 

II disclosures is justified by the benefit 

to market participants from public 

disclosure of conflicts of interest 

information. 

Another commenter expresses 

concern that the proposed conflicts of 

interest requests would seek public 

disclosure of proprietary or confidential 

information that would pose 

unintended consequences or security 

risks to ATS operators.720 We are 

sensitive to concerns about the burden 

of providing disclosures of potentially 

commercially sensitive information. In 

response to these commenter concerns, 

we have revised the wording of relevant 

requests to mitigate such concerns or 

provided guidance regarding the scope 

of certain disclosure requests, as further 

explained below.721 We believe that in 

the vast majority of cases, the level of 

detail required by Form ATS–N should 

not require the public disclosure of 

commercially sensitive information. In 

the Proposal, we did not intend to 

require NMS Stock ATSs to publicly 

disclose such information. 

We also note that the disclosure 

requests on Form ATS–N seek 

information that the Commission and 

some commenters believe to be 

important to market participants when 

evaluating an NMS Stock ATS as a 

potential trading venue. We believe that 

the disclosures on adopted Form ATS– 

N will provide market participants with 

information necessary to evaluate 

potential conflicts of interest and 

information leakage while not requiring 

NMS Stock ATSs to provide granular 

details about aspects of the ATS that it 

might consider to be commercially 

sensitive. Accordingly, to the extent an 

NMS Stock ATS believes that Form 

ATS–N requires the disclosure of what 

it believes to be commercially sensitive 

information, we believe that such 

disclosure is justified by the public 

benefit of the information required on 

Form ATS–N becoming publicly 

available. 

On the other hand, one commenter 

expresses a specific concern that 

narrowing the universe of affiliates 

subject to disclosure could result in less 

relevant information being provided to 

the Commission and the public, as NMS 

Stock ATSs could structure their legal 

affiliations and operations to take 

advantage of unanticipated gaps in the 

rule.722 This commenter states that the 

Commission should draw exemptions 

for certain affiliate relationships very 

narrowly and provide ‘‘bright lines’’ to 

help ensure that the requirements are 

clear and unambiguous, so that ATSs 

would not be permitted to determine 

whether to disclose an affiliate. This 

commenter also states that it recognizes 

that information on certain affiliates 

required by Form ATS–N may have 

little relevance to the Commission’s 

review of the broker-dealer operator’s 

Form ATS–N.723 This commenter 

believes that rather than modifying the 

Proposal, this issue could be addressed 

by an NMS Stock ATS seeking relief 

tailored to its unique facts and 

circumstances pursuant to Section 

36(a)(1) of the Exchange Act,724 which 

permits the Commission to grant 

exemptions from any provision of a 

rule, to the extent such exemption is 

necessary or appropriate in the public 

interest and consistent with the 

protection of investors.725

We agree with this commenter that 

Form ATS–N requests regarding the 

ATS-related activities of the brokerdealer operator and its affiliates should 

provide clear and unambiguous 

requirements for NMS Stock ATSs. We 

also agree that Form ATS–N should be 

comprehensive enough to preclude an 

NMS Stock ATS from finding 

‘‘unanticipated gaps’’ in the language to 

avoid disclosing critical aspects of its 

operations. We believe that the 

refinements to adopted Form ATS–N, as 

outlined above and further explained 

below, strike the appropriate balance 

between providing market participants 

with relevant information about 

potential conflicts of interest 

information and information leakage 

and the burden that Form ATS–N will 

place on NMS Stock ATSs. We do not 

believe that it is necessary to adopt all 

of the conflicts of interest requests as 

proposed and require NMS Stock ATSs 

to seek exemptive relief from certain 

disclosure requirements. Furthermore, 

the adopted definitions of ‘‘affiliate’’ 

and ‘‘control’’ are intended to 

encompass all relevant affiliate 

relationships between the broker-dealer 

operator and other entities that we 

believe would help market participants’ 

evaluation of potential conflicts of 

interest. 

1. Broker-Dealer Operator and its 

Affiliate Trading Activities on the NMS 

Stock ATS 

a. Proposed Requests and Response to 

Comments 

Part III, Item 1 of proposed Form 

ATS–N would have required disclosures 


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726See supra notes 712–715 and accompanying 

text. 

727We also note that because Parts I and II of 

proposed Form ATS–N have been consolidated into 

a single section of adopted Form ATS–N, the 

disclosure requests about the ATS-related activities 

of the broker-dealer operator and its affiliates on the 

NMS Stock ATS are set forth in Part II of adopted 

Form ATS–N. 

728See STA Letter at 4–5; UBS Letter at 5; SIFMA 

Letter at 10; LeveL ATS Letter at 4. 

729See UBS Letter at 5. 

730 In the Proposal, the term ‘‘non-ATS trading 

center’’ was a defined term, but as explained above, 

adopted Form ATS–N will not use the term ‘‘nonATS trading center.’’ See supra Section V.A.2.a. 731See UBS Letter at 6. 

regarding non-ATS trading centers 

operated or controlled by the NMS 

Stock ATS’s broker-dealer operator or 

any of its affiliates. Part III, Item 2 of 

proposed Form ATS–N would have 

required disclosures about the operation 

of any other NMS Stock ATSs operated 

by the broker-dealer operator or any of 

its affiliates. Part III, Item 5 of proposed 

Form ATS–N would have required 

disclosures regarding the broker-dealer 

operator’s and its affiliates’ trading 

activity on the NMS Stock ATS. 

As discussed above, we received 

general comments on Part III of 

proposed Form ATS–N.726

Additionally, we received comments 

specifically addressing the requests in 

Part III, Items 1, 2, and 5, of proposed 

Form ATS–N. In this section, we outline 

and address these more specific 

comments not previously outlined 

above. In Section V.C.1.b., we outline 

how we have consolidated much of the 

subject matter set forth in in Part III, 

Items 1, 2, and 5 of proposed Form 

ATS–N into Part II, Items 1 and 2 of 

adopted Form ATS–N.727

First, in addition to the general 

comments regarding the scope of the 

affiliate disclosure requests that are 

explained above, some commenters 

provide comments specific to proposed 

Part III, Item 1 and Part III, Item 5.728

One of these commenters states that the 

scope of the proposed requests in Part 

III, Item 1 with regard to non-ATS 

trading centers of the broker-dealer 

operator or its affiliates could have 

prejudiced commercial strategy.729 We 

believe that a list containing business 

units or affiliates of the broker-dealer 

operator that do not use the trading 

services of the NMS Stock ATS would 

not be as helpful to market participants 

as would a list of only those that trade 

on, or otherwise use the trading services 

of, the ATS.730 Accordingly, we have 

revised these disclosures so that Part II, 

Items 1(a) and 2(a) of adopted Form 

ATS–N ask whether business units of 

the broker-dealer operator or its 

affiliates, respectively, are permitted to 

enter or direct the entry of orders into 

the ATS. This disclosure is designed to 

inform market participants about 

whether the ATS permits the brokerdealer operator or its affiliates to trade 

on the NMS Stock ATS. If the ATS 

permits the broker-dealer operator or its 

affiliates to trade on the ATS, the NMS 

Stock ATS will be required to only list 

the business units or affiliates that 

actually enter or direct the entry of 

orders into the NMS Stock ATS. 

Furthermore, with regard to Part III, 

Item 5 of proposed Form ATS–N, one 

commenter states that affiliates or 

business units that indirectly send 

orders to an NMS Stock ATS through 

another entity or through services 

provided by another entity are not 

‘enter[ing]’ orders ‘‘on the NMS Stock 

ATS.’’ 731 We believe that if a business 

unit or affiliate of the broker-dealer 

operator enters or directs the entry of 

orders into the ATS, market participants 

would find it useful to know that they 

may be trading against those business 

units, affiliates, or client orders entered 

by those entities. For example, if a 

principal trading desk of the brokerdealer operator or an affiliate uses a 

direct connection to the NMS Stock 

ATS or the broker-dealer operator’s SOR 

to submit orders or trading interest into 

the ATS, the NMS Stock ATS must list 

that desk or affiliate on adopted Form 

ATS–N under Part II, Item 1(a) or 2(a), 

respectively. Likewise, if an affiliated 

asset manager of the broker-dealer 

operator uses the services of a thirdparty broker-dealer to route directed 

orders to the NMS Stock ATS (i.e., the 

asset manager instructs the third-party 

broker-dealer to send its orders to the 

NMS Stock ATS), the NMS Stock ATS 

would be required to list that affiliated 

asset manager under Item 2(a). However, 

if that affiliated asset manager submits 

orders to a third-party broker-dealer, 

and that third-party broker-dealer using 

its own discretion, routes the orders of 

the asset manager into the affiliated 

NMS Stock ATS (e.g., the third-party 

broker-dealer’s SOR decides where to 

route the affiliated asset manager’s 

orders using its routing table), the NMS 

Stock ATS would not be required to list 

the affiliated asset manager under Item 

2(a); under such circumstances, the 

affiliate would not be ‘‘directing’’ orders 

to the ATS because the third-party 

broker-dealer is using its discretion to 

route the affiliate’s orders and thus, not 

required to be listed under Item 2(a). 

The adopted requests also specify the 

type of information that must be 

provided with regard to business units 

or affiliates of the broker-dealer 

operator. Specifically, Item 1(a) requires 

the NMS Stock ATS to name and 

describe each type of business unit of 

the broker-dealer operator that enters or 

directs the entry of orders and trading 

interest into the ATS (e.g., NMS Stock 

ATS, type of trading desks, market 

maker, sales or client desk) and, for each 

business unit, to provide the applicable 

MPID and list the capacity of its orders 

and trading interest (e.g., principal, 

agency, riskless principal). Item 2(a) 

requires the NMS Stock ATS to name 

and describe each type of affiliate that 

enters or directs the entry of orders and 

trading interest into the ATS (e.g., 

broker-dealers, NMS Stock ATS, 

investment company, hedge fund, 

market maker, principal trading firm) 

and, for each of those affiliates, provide 

the applicable MPID and list the 

capacity of its orders and trading 

interest (e.g., principal, agency, riskless 

principal). We believe that market 

participants will find it more relevant to 

know both the types of broker-dealer 

operator business units and affiliates 

that can trade in the NMS Stock ATS, 

and their trading activities, rather than, 

as proposed, having a potentially 

voluminous list of entities that might 

include some that cannot send or direct 

orders or trading interest to the ATS. 

We also believe that the revised 

requests will reduce the burden on NMS 

Stock ATSs when completing the form 

because they will only require the NMS 

Stock ATS to list entities that trade on 

the ATS. The narrative responses to 

Items 1(a) and 2(a) could typically be 

kept up-to-date via Updating 

Amendments to Form ATS–N, which 

the ATS could file on a quarterly basis. 

However, we also note that in most 

cases, if the ‘‘yes’’ or ‘‘no’’ response to 

Items 1(a) or 2(a) changes (e.g., the NMS 

Stock ATS changes its operations to 

allow affiliates to trade whereas they 

could not do so prior, or vice versa), the 

NMS Stock ATS would be required to 

file a material amendment. Accordingly, 

we believe that the scope of the requests 

in Part II, Items 1(a) and 2(a) of adopted 

Form ATS–N present a reasonable 

disclosure requirement for NMS Stock 

ATSs, particularly multi-service brokerdealers with many affiliates, without 

eliminating the requirements for the 

NMS Stock ATS to provide information 

about the NMS Stock ATS-related 

trading activities of broker-dealer 

operator and its affiliates, which we 

believe will be helpful for market 

participants. 

Another commenter recommends that 

the Commission take a progressive 

approach of ‘‘yes’’ or ‘‘no’’ questioning 

for disclosures concerning affiliates of 

the broker-dealer operators that initially 

targets whether the affiliate directly 


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732See Fidelity Letter at 5. 

733See id. at 5–6. 

734Specifically, Item 2(a) requires the NMS Stock 

ATS to answer ‘‘yes’’ or ‘‘no’’ as to whether 

affiliates of the broker-dealer operator are permitted 

to enter or direct the entry of orders and trading 

interest into the NMS Stock ATS, and if the answer 

is ‘‘yes’’, the ATS must provide specific information 

about those affiliates and the capacity of the orders 

and trading interest that the affiliates enter onto the 

ATS. Item 2(b) then requires the NMS Stock ATS 

to answer ‘‘yes’’ or ‘‘no’’ as to whether the services 

that the NMS Stock ATS offers and provides to the 

affiliates identified in Item 2(a) are the same for all 

subscribers, and if the NMS Stock ATS answers no, 

it must explain any differences. We also note that 

the requests in Item 1(a) of adopted Form ATS–N 

with regard to trading activity of the broker-dealer 

operator on the NMS Stock ATS follow the same 

format as that in Item 2 of adopted Form ATS–N. 

735See KCG Letter at 8–9; STA Letter at 4; SIFMA 

Letter at 10–11; 14. See also SIFMA Letter at 4, 8. 

736See Morgan Stanley Letter at 5. 

737While the terms ‘‘interaction and 

coordination’’ are no longer used in this disclosure 

request, many, if not all, Form ATS–N requests are 

designed to provide insight into how the brokerdealer operator, its affiliates, or third-parties 

interact or coordinate their activities with the NMS 

Stock ATS. Two examples of this include Part II, 

Items 3 and 5 of adopted Form ATS–N. Part II, Item 

3 of adopted Form ATS–N requests specific 

information about how subscribers can opt out from 

interacting with orders of the broker-dealer operator 

or its affiliates. Likewise, Item 5 of adopted Form 

ATS–N requests specific information about how the 

ATS interacts with affiliates by requiring certain 

disclosures about products and services offered by 

the broker-dealer operator. 

738Because we are replacing the term ‘‘interaction 

and coordination’’ with these enumerated points of 

information, aspects of the requests set forth in Part 

III, Items 1(b)(ii)–(iii) and 2(b)(i), (iii) of proposed 

Form ATS–N—which addressed the transmission of 

subscriber orders to other trading centers operated 

by the broker-dealer operator or its affiliates—are 

being either narrowed or eliminated from adopted 

Part II, Items 1 and 2. As explained further below, 

to the extent information that would have been 

required by Part III, Items 1(b)(ii)–(iii) and 2(b)(i), 

(iii) of proposed Form ATS–N is responsive to Part 

II, Item 4 of adopted Form ATS–N—which requests 

information about the NMS Stock ATS’s 

arrangements with unaffiliated or affiliated trading 

centers—the NMS Stock ATS is required to provide 

that information in response to Item 4. See infra 

Section V.C.3. 

739Another commenter suggests that the 

Commission’s goals would be served more simply 

by requiring ATSs to categorize and disclose to 

their subscribers the nature of a counterparty (i.e., 

agent, principal (including affiliates of the brokerdealer operator)) rather than using the term 

‘‘proprietary’’ in the disclosures regarding trading 

activities of the broker-dealer operator and its 

affiliates. See UBS Letter at 6. The commenter 

believes that this type of disclosure would 

succinctly inform a subscriber about what type of 

counterparty was on the other side of a trade. See 

id. This commenter also notes that in the Proposal, 

the Commission discussed disclosures and 

potential additional regulations related to 

‘‘proprietary trading.’’ See id. The commenter states 

that federal regulators have encountered challenges 

in defining this term as part of the ‘‘Volcker Rule’’ 

under the Dodd Frank Act. See id. In response to 

this comment, the Commission has, in the language 

of Part II, Items 1 and 2, listed several examples of 

the capacity in which the broker-dealer operator 

and its affiliates enter or direct the entry of orders 

(principal, agency, or riskless principal) to provide 

more guidance about the type of information sought 

by Form ATS–N. The Commission has also 

removed references to ‘‘proprietary trading’’ from 

Form ATS–N, and the adopted form’s disclosure 

requirements refer to, when applicable, ‘‘principal 

trading’’ of the broker-dealer operator and its 

affiliates. 

740With regard to the latter two of these items, 

adopted Form ATS–N requests that the description 

be provided in the applicable Part III item to reduce 

redundancy on the Form ATS–N, as further 

explained below. 

741See supra note 717 and accompanying text. 

742See 17 CFR 242.302. 

routes orders to the NMS Stock ATS.732

The commenter recommends that the 

Commission require NMS Stock ATSs to 

state whether the ATS directly receives 

any order flow from an affiliated party, 

and if so, if the affiliated party is treated 

exactly the same as every other party 

with access to the ATS.733 If the ATS 

answers in the affirmative, the 

commenter suggests that the ATS be 

required to identify the affiliated parties 

with access and the procedure for 

treatment of their orders, and if the ATS 

answers in the negative, the ATS would 

be required to identify parties with 

access and specifically articulate 

differences in treatment. The disclosure 

requests in Part II of adopted Form 

ATS–N are all structured in a ‘‘yes’’ or 

‘‘no’’ format with follow-on narrative (as 

necessary), and we believe that the 

information this commenter 

recommends to be included in Form 

ATS–N is presented in a format that 

resembles that recommendation.734

Several commenters also opine that 

terms such as ‘‘describe,’’ ‘‘any 

interaction or coordination,’’ 

‘‘circumstances,’’ and ‘‘otherwise made 

known’’ in the conflicts of interest 

requests might result in overbroad or 

lengthy responses that contain 

information which would not be helpful 

for market participants.735 Another 

commenter cites Part III, Item 5 of 

proposed Form ATS–N as an example of 

a request that should be tailored to elicit 

information based on which ATS users 

can make informed decisions.736 This 

commenter states that full-service 

broker-dealers often have hundreds of 

affiliates and business units that meet 

the definition of entities that may trade 

on the subject ATS, and that keeping 

such information current and accurate 

on an ongoing basis would bring 

additional burden with very little, if 

any, benefit to ATS users; the 

commenter believes that the request 

regarding trading on the ATS by the 

broker-dealer operator or its affiliates 

should be focused on whether they 

receive any preferential or differentiated 

treatment. 

In response to these comments, we are 

eliminating the terms ‘‘interaction and 

coordination,’’ ‘‘circumstances,’’ and 

‘‘otherwise made known’’ from these 

requests to reduce any potential 

ambiguity.737 The adopted requests are 

closely tailored to solicit information 

that market participants find relevant to 

evaluating potential conflicts of interest 

on an NMS Stock ATS.738 Further, both 

Part II, Items 1(a) and 2(a) of adopted 

Form ATS–N enumerate the type of 

information that an NMS Stock ATS 

must provide if it answers in the 

affirmative that the broker-dealer 

operator or its affiliates, respectively, is 

permitted to trade on the NMS Stock 

ATS.739

Furthermore, while the term 

‘‘describe’’ is still used in Items 1(a) and 

2(a), we are adding specific examples to 

each respective request to better explain 

the type of description that would 

necessary, such as ‘‘NMS Stock ATS,’’ 

‘‘trading desks,’’ ‘‘market maker,’’ 

‘‘sales’’ or ‘‘client desk.’’ Also, Items 

1(b)–(d) and 2(b)–(d) specifically state 

that the NMS Stock ATS must explain 

(1) any differences between the 

treatment of those business units or 

affiliates of the broker-dealer operator 

and other subscribers regarding services 

offered and provided by the NMS Stock 

ATS; (2) whether any of those business 

units or affiliates of the broker-dealer 

operator have formal or informal 

arrangements with the NMS Stock ATS 

to provide liquidity to the NMS Stock 

ATS; and (3) how orders and trading 

interest in the NMS Stock ATS can be 

routed to a trading center of the brokerdealer operator or affiliate.740

Additionally, a commenter expresses 

concern that it may not be privy to some 

the information that proposed Form 

ATS–N would have required.741 We 

note that ATSs are currently obligated to 

make and keep records of, among other 

things, subscribers to the ATS and daily 

summaries of trading, including the 

identity of the parties to the 

transactions.742 We believe that the 

specific information sought in these 

requests with regard to affiliate trading 

activity on the ATS in adopted Form 

ATS–N should be maintained as part of 

the ATS’s recordkeeping obligation 

without the ATS having to breach any 

information barriers or other 

compliance protections. To the extent 

that a business unit or affiliate of the 

broker-dealer operator triggers a 

disclosure obligation on Form ATS–N 

by directing the entry of orders into the 

NMS Stock ATS through a third-party 

broker-dealer, we believe that the 

broker-dealer operator should have—or 

be able to obtain—such information 

through appropriate internal 

compliance procedures to be responsive 

to Form ATS–N. 


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743This information would have been required 

under Part III, Item 1(b)(i) and 2(b)(ii) of proposed 

Form ATS–N. 

744This information would have been required 

under Part III, Item 5(c) of proposed Form ATS–N. 

745One commenter also recommends limiting the 

requests related to order routing from proposed Part 

III, Item 2 (Multiple NMS Stock ATS Operations) to 

the functions of ATS operation, as distinguished 

from other algorithmic or routing functions housed 

within the broker-dealer operator or an affiliate, 

which the commenter states appear to be addressed 

in Part III, Item 3 of proposed Form ATS–N, as well 

as asking what it means to ‘‘remove’’ an order. See 

SIFMA Letter at 11. See infra Section V.D.7. for a 

discussion of the required disclosures related to the 

removal of trading interest. Furthermore, this 

commenter recommends that Commission state 

whether the ATS operator should distinguish 

between parent and child orders for the disclosures 

related to Part III, Item 2 of proposed Form ATS– 

N. See id. Adopted Part III, Item 16(b) requires the 

NMS Stock ATS to either describe the affirmative 

instructions from a subscriber that must be obtained 

to route outside of the NMS Stock ATS or, if no 

instructions are required, the ATS must explain 

when orders in the ATS can be routed from the 

NMS Stock ATS. If the NMS Stock ATS breaks up 

a parent order into child orders or otherwise uses 

the fact that an order is a parent order or child order 

to make routing decisions, such information must 

be disclosed under Item 16(b). 

746See SIFMA Letter at 14. 

747See STANY Letter at 5. 

748See Consumer Federation of America Letter at 

7–8; HMA Letter at 13. 

749See HMA Letter at 15–18. Another commenter 

states its support for the goal of a fulsome 

disclosure of circumstances where subscriber orders 

or other trading interest could leave an NMS Stock 

ATS and be made available to other areas of the 

broker-dealer operator. See UBS Letter at 5. The 

commenter states that market participants are 

entitled to know such information, but also states 

that the Commission’s goal could be achieved 

through simplified disclosures. The commenter 

states that the proposed requirement to list the nonATS trading centers controlled by the broker-dealer 

operator or its affiliates should only be required if 

orders are routed to the NMS Stock ATS from such 

trading centers or from the NMS Stock ATS to those 

trading centers. 

750See MFA/AIMA Letter at 5. 

751See HMA Letter at 16. 

752See KCG Letter at 10. 

We have also revised the requests in 

proposed Form ATS–N to reduce 

redundant disclosure requirements. 

First, Part II, Items 1 and 2 of adopted 

Form ATS–N now require the NMS 

Stock ATS to provide any narratives 

about differences in treatment between 

the broker-dealer operator, its affiliates, 

and other subscribers in Part III of the 

adopted form, and only cross reference 

those narratives in Part II (as opposed to 

providing a separate, likely redundant 

narrative in Part II). Second, Part II, 

Items 1 and 2 of adopted Form ATS do 

not require the NMS Stock ATS to 

disclose whether subscriber orders or 

other trading interest sent to the NMS 

Stock ATS are displayed or otherwise 

made known to a non-ATS trading 

center or another NMS Stock ATS 

operated by the broker-dealer operator 

or an affiliate.743 Rather, any narrative 

with regard to order display (including 

a description about differences in 

services) is only required to be set forth 

in Part III, Item 15 of adopted Form 

ATS–N, which contains the order 

display requests of adopted Form 

ATS–N. 

Finally, Part II, Items 1 and 2 of 

adopted Form ATS–N do not require the 

NMS Stock ATS to disclose how the 

business units and affiliates of the 

broker-dealer operator connect to the 

ATS, such as through a Financial 

Information Exchange (‘‘FIX’’) 

protocol.744 Rather, any narrative about 

order entry in the NMS Stock ATS 

(including a description about 

differences in services) is only required 

by Part III, Item 5 of adopted Form 

ATS–N (Means of Entry). Accordingly, 

Part II of adopted Form ATS–N is 

designed to provide market participants 

with information about how the NMS 

Stock ATS interacts with the business 

units and affiliates of the broker-dealer 

operator so they can assess potential 

conflicts of interest, while minimizing 

disclosure requests that would be 

redundant with those contained in Part 

III.745

Another commenter believes that the 

information requested under proposed 

Part III, Item 5 of proposed Form 

ATS–N was too granular, duplicative of 

information required by Form BD, and 

that some of the prompts (e.g., ‘‘business 

unit,’’ ‘‘describe the circumstances’’) 

were too open-ended, which could lead 

to non-standardized responses that 

would not be helpful to market 

participants.746 This commenter 

recommends: (i) Eliminating proposed 

Item 5 and replacing the proposed 

disclosure requirements with yes/no 

prompts or short-answer responses that 

are more focused or narrowly tailored 

and (ii) eliminating or further clarifying 

and limiting the request for information 

of affiliates and business units. 

As explained above, Part II, Items 1(a) 

and 2(a) of adopted Form ATS–N 

provide more specificity about the 

information requested about the ATSrelated activities of business units and 

affiliates of the broker-dealer operator 

by providing examples of what we 

intend to solicit from these requests. To 

the degree that some information 

solicited by adopted Form ATS–N is 

duplicative of information sought on 

Form BD, the duplicative information is 

straightforward for the broker-dealer to 

reproduce on Form ATS–N, and we 

believe that market participants will 

derive greater benefit from this 

information being disclosed on a single 

form (Form ATS–N) as opposed to being 

spread across multiple forms filed with 

the Commission. 

Similarly, another commenter cites 

the proposed requirement to provide the 

names of specific business units and 

algorithms that trade in NMS Stock ATS 

as an example of requested information 

that it believes is unnecessary to risk 

assessment.747 We believe that some 

market participants may find it very 

helpful to know the identities and 

number of the broker-dealer operator’s 

business units or affiliates that trade on 

the NMS Stock ATS. As indicated by 

commenters, some market participants 

may, for example, view trading on an 

ATS by a principal trading desk of the 

broker-dealer operator as presenting a 

potential conflict of interest for the 

broker-dealer operator, even if the ATS 

does not give any preference to the 

orders from that desk.748

We also received comments 

supporting the original requests under 

Part III, Items 1, 2, and 5 of proposed 

Form ATS–N. One commenter believes 

that these proposed disclosure requests 

are essential to alerting market 

participants about potentially 

significant advantages of the brokerdealer operator and its affiliates and to 

allow market participants to obtain a 

reasonable understanding of the 

conflicts of interest posed by the brokerdealer operator’s or its affiliates’ trading 

activities on the ATS.749 In addition, a 

commenter states that the requests 

under Part III, Item 5 of proposed Form 

ATS–N would help investors better 

understand the relationship between the 

NMS Stock ATS, its broker-dealer 

operator, and any affiliates.750 One 

commenter asserts that market 

participants would want to know the 

specific advantages afforded to the ATS 

operator or its affiliate, and urges the 

Commission to adopt proposed Part III, 

Item 5.751 While we have refined the 

scope of certain subject matter in 

response to comment, we still believe 

that the disclosure requests in adopted 

Form ATS–N about the trading activities 

of the broker-dealer operator and its 

affiliates will allow for a high degree of 

transparency by capturing information 

that these commenters believe is 

important to market participants. 

In addition, one commenter states that 

it supports the disclosure of potential 

trading activity on the NMS Stock ATS 

by the broker-dealer operator and its 

affiliates, but asserts that the disclosure 

requirement should be revised to allow 

for a series of progressive ‘‘yes’’ or ‘‘no’’ 

responses.752 The commenter also notes 

that as proposed, it would be difficult 

for NMS Stock ATSs to maintain this 

disclosure on an on-going basis. As is 


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753The subject matter covered in Part III, Item 5.d 

of proposed Form ATS is now addressed in Part II 

Item 3 of adopted Form ATS–N. See infra Section 

V.C.2. 

754These proposed requests would have required 

disclosures regarding the display of subscriber 

orders to a non-ATS trading center operated by the 

broker-dealer operator (proposed Part III, Item 

1(b)(i)) and the execution of subscriber orders in a 

non-ATS trading center operated by the brokerdealer operator (proposed Part III, Item 1(b)(ii)), 

respectively. 

755These proposed requests would have required 

disclosures about sending subscriber orders to 

another NMS Stock ATS operated by the brokerdealer operator in lieu of the NMS Stock ATS filing 

the form (proposed Part III, Item 2(b)(i)) and the 

display of subscriber orders to another NMS Stock 

ATS operated by the broker-dealer operator 

(proposed Part III, Item 2(b)(ii)), respectively. 

756The requirement to disclose liquidity 

providers and the terms and condition of any 

arrangements with liquidity providers was set forth 

under Part IV, Item 1(d) of proposed Form ATS–N. 

757See infra Section V.D.12. 758See id. 

explained above, we do not believe that 

maintaining up-to-date disclosures 

regarding the ATS-related trading 

activities of the broker-dealer operator 

and its affiliates will impose an 

unreasonable administrative burden on 

the NMS Stock ATS. 

b. Adopted Part II, Item 1 and 2 of Form 

ATS–N; ATS-Related Trading Activities 

of the Broker-Dealer Operator and its 

Affiliates 

As noted above, we reorganized and 

relocated the subject matter requested in 

Part III, Items 1, 2, and 5 of proposed 

Form ATS–N to Part II, Items 1 

(‘‘Broker-Dealer Operator ATS Trading 

Activities’’) and 2 (‘‘Affiliates ATS 

Trading Activities’’) of adopted Form 

ATS–N. We have also revised the 

content of the proposed disclosure 

requests in response to public 

comment.753

Part II, Item 1(a) of adopted Form 

ATS–N requires the NMS Stock ATS to 

disclose whether business units of the 

Broker-Dealer Operator are permitted to 

enter or direct the entry of orders and 

trading interest (e.g., quotes, conditional 

orders, or indications of interest) into 

the NMS Stock ATS. This request will 

be in the form of a ‘‘yes’’ or ‘‘no’’ 

question, and if the NMS Stock ATS 

answers ‘‘yes,’’ it will be required to 

name and describe each type of business 

unit of the Broker-Dealer Operator that 

enters or directs the entry of orders and 

trading interest into the ATS (e.g., NMS 

Stock ATS, type of trading desks, 

market maker, sales or client desk) and, 

for each type of business unit, it must 

provide the applicable MPID and list the 

capacity of its orders or trading interest 

(e.g., principal, agency, riskless 

principal). This request is designed to 

encompass the information request in 

Part III, Items 5(a) and (b) of proposed 

Form ATS–N and capture elements of 

Part III Items 1(a) and (b) and Items 2(a) 

and (b) of proposed Form ATS–N. 

The subject matter covered by Part III, 

Item 1(b)(i) and (ii) is no longer 

included in the disclosure request 

contained in Part II, Item 1 of adopted 

Form ATS–N.754 Likewise, the subject 

matter covered by Part III, Item 2(b)(i) 

and (ii) is no longer included in the 

disclosure request contained in Part II, 

Item 1 of adopted Form ATS–N.755 Part 

II, Item 1 of adopted Form ATS–N 

focuses on the trading activity of the 

broker-dealer operator in the NMS Stock 

ATS, so those proposed disclosure 

requests are outside the scope of 

adopted Part II, Item 1. However, to the 

extent that information about the 

subjects in those proposed disclosure 

requests are responsive to other 

disclosure requests in adopted Form 

ATS–N—such as Part II, Item 3 

(‘‘Arrangements With Trading Centers) 

and Part III, Item 15 (‘‘Display’’)—the 

NMS Stock ATS must respond to those 

items accordingly. 

Next, Part II, Item 1(b) of adopted 

Form ATS–N requires an NMS Stock 

ATS to disclose whether the services 

that the NMS Stock ATS offers and 

provides to the business units required 

to be identified in Item 1(a) are the same 

for all subscribers. This request will be 

in the form of a ‘‘yes’’ or ‘‘no’’ question, 

and if the NMS Stock ATS answers 

‘‘no,’’ it will be required to explain any 

differences in response to the applicable 

Item number(s) in Part III of adopted 

Form ATS–N and list the applicable 

Item number(s). If there are differences 

that are not applicable to Part III of 

adopted Form ATS–N, the NMS Stock 

ATS must explain those differences in 

detail under Part II, Item 1. 

Next, Part II, Item 1(c) of adopted 

Form ATS–N requires NMS Stock ATSs 

to disclose the broker-dealer operator’s 

role as a liquidity provider on the NMS 

Stock ATS, if applicable.756 This item 

requires the NMS Stock ATS to 

disclose—in the form of a ‘‘yes’’ or ‘‘no’’ 

question—whether there are any formal 

or informal arrangements with any of 

the sources of orders or trading interest 

of the broker-dealer operator identified 

in Item 1(a) to provide orders or other 

trading interest to the NMS Stock ATS 

(e.g., undertaking to buy or sell 

continuously, or to meet specified 

thresholds of trading or quoting 

activity). If the NMS Stock ATS answers 

‘‘yes,’’ it must identify the business 

unit(s) and respond to the request in 

Part III, Item 12, which sets forth the 

requests for liquidity providers on the 

NMS Stock ATS.757 We believe that 

highlighting, in Part II of adopted Form 

ATS–N, whether the broker-dealer 

operator acts as a liquidity provider on 

the NMS Stock ATS will be helpful to 

market participants when evaluating the 

potential for conflicts of interest or 

information leakage on the trading 

platform. However, to reduce 

duplicative requests on adopted Form 

ATS–N, we are not requiring the NMS 

Stock ATS to provide a narrative in Part 

II of adopted Form ATS–N regarding the 

broker-dealer operator’s liquidity 

provider activities because that 

information will be disclosed under Part 

III, Item 12 of adopted Form ATS–N. 

Finally, Part II, Item 1(d) of adopted 

Form ATS–N requires the NMS Stock 

ATSs to disclose information about the 

routing of orders and trading interest to 

trading centers operated or controlled 

by the broker-dealer operator. This Item 

will require the NMS Stock ATS to 

disclose—in the form of a ‘‘yes’’ or ‘‘no’’ 

question—whether orders and trading 

interest in the NMS Stock ATS can be 

routed to a trading center of the brokerdealer operator. If the NMS Stock ATS 

answers ‘‘yes,’’ it must respond to the 

requests in Part III, Item 16 of adopted 

Form ATS–N, which sets forth the 

requests for disclosures about routing 

orders and trading interest out of the 

NMS Stock ATS. We continue to believe 

that disclosures regarding the routing of 

orders will provide subscribers with 

information about how their orders 

would be handled if they are not 

executed on the ATS and allow them to 

assess whether such routing could result 

in the leakage of confidential 

information, particularly if those orders 

are being routed to a trading center of 

the broker-dealer operator. Similar to 

Part II, Item 1(c) of adopted Form ATS– 

N, the request in Part II, Item 1(d) will 

not require a narrative because Part IV, 

Item 16 of adopted Form ATS–N 

requires disclosures about routing.758

Part II, Item 2(a) of adopted Form 

ATS–N requires an NMS Stock ATS to 

disclose whether affiliates of the brokerdealer operator are permitted to enter or 

direct the entry of orders and trading 

interest into the NMS Stock ATS. This 

request will be in the form of a ‘‘yes’’ 

or ‘‘no’’ question, and if the NMS Stock 

ATS answers ‘‘yes,’’ it must name and 

describe each type of affiliate that enters 

or directs the entry of orders and trading 

interest in the ATS (e.g., broker-dealers, 

NMS Stock ATS, mutual fund, hedge 

fund, market maker) and, for each 

affiliate that trades on the NMS Stock 

ATS, the NMS Stock ATS must provide 

the applicable MPID and list the 

capacity(ies) of its orders and trading 

interest (e.g., principal, agency, riskless 


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759Also like Part II, Item 1(a) of adopted Form 

ATS–N, Item 2(a) does not contain the subject 

matter covered by Part III, Item 1(b)(i) and (ii) and 

Part III, Item 2(b)(i) and (ii) of proposed 

Form ATS–N, but to the extent that information 

about the subjects in those proposed requests are 

responsive to other requests in adopted Form ATS– 

N, the NMS Stock ATS must respond to those items 

accordingly. 

760We have incorporated the requests of 

proposed Part III, Item 9 of proposed Form 

ATS–N into individual Part II requests in adopted 

Form ATS–N, and thus, there is no longer a standalone question addressing differences among the 

services provided to the broker-dealer operator or 

its affiliates and other subscribers. See supra 

Section V.C.7. 

761For example, if a broker-dealer operator uses 

its SOR or algorithms to submit subscriber orders 

into the ATS, any steps that either the broker-dealer 

operator or the subscriber would have to take so 

that those orders are opted-out of trading with the 

broker-dealer operator or its affiliates would be 

required disclosures under Items 3(a) and 3(b), 

respectively. 

762Part III, Item 5(d) of proposed Form ATS–N 

would have required the NMS Stock ATS to 

describe any means by which a subscriber can be 

excluded from interacting or trading with orders or 

other trading interest of the broker-dealer operator 

or its affiliates on the NMS Stock ATS. 

763See UBS Letter at 6. 

764See HMA Letter at 16; UBS Letter at 5; SIFMA 

Letter at 13. 

765See SIFMA Letter at 13. 

766See UBS Letter at 5. 

principal). As with Item 1, these 

requests are designed to encompass the 

information that would have been 

required under Part III, Items 5(a) and 

(b) of proposed Form ATS–N and is 

designed to capture elements of Part III 

Item 1(a) and Item 2(a) of proposed 

Form ATS–N.759

Next, Part II, Item 2(b) of adopted 

Form ATS–N requires an NMS Stock 

ATS to disclose whether the services 

that the NMS Stock ATS offers and 

provides to the affiliates required to be 

identified in Item 2(a) are the same for 

all subscribers. This request is in the 

form of a ‘‘yes’’ or ‘‘no’’ question, and 

if the NMS Stock ATS answers ‘‘no,’’ it 

will be required to explain any 

differences in response to the applicable 

Item number(s) in Part III of adopted 

Form ATS–N, as required, and list the 

applicable Item number(s). If there are 

differences that are not applicable to 

Part III of adopted Form ATS–N, the 

NMS Stock ATS must explain those 

differences in detail under Part II, Item 

2.760

Part II, Item 2(c) of adopted Form 

ATS–N requests information about the 

role of the broker-dealer operator’s 

affiliates as liquidity providers on the 

NMS Stock ATS, if applicable. This 

item requires the NMS Stock ATS to 

disclose—in the form of a ‘‘yes’’ or ‘‘no’’ 

question—whether there are there any 

formal or informal arrangements with 

affiliates of the broker-dealer operator 

identified in Item 2(a) to provide orders 

or other trading interest to the NMS 

Stock ATS (e.g., undertaking to buy or 

sell continuously, or to meet specified 

thresholds of trading or quoting 

activity). If the NMS Stock ATS answers 

‘‘yes,’’ it must identify the affiliates and 

respond to the request in Part III, Item 

12, which sets forth the required 

disclosures for liquidity providers on 

the NMS Stock ATS. 

Finally, Part II, Item 2(d) of adopted 

Form ATS–N requires an NMS Stock 

ATS to disclose information about 

routing orders and trading interest out 

of the NMS Stock ATS to a trading 

center operated and controlled by 

affiliates of the broker-dealer operator. 

This item will require the NMS Stock 

ATS to disclose—in the form of a ‘‘yes’’ 

or ‘‘no’’ question—whether orders and 

trading interest in the NMS Stock ATS 

can be routed to a trading center 

operated or controlled by an affiliate of 

the broker-dealer operator. If the NMS 

Stock ATS answers ‘‘yes,’’ it must 

respond to request in Part III, Item 16, 

which sets forth the required 

disclosures for routing orders and 

trading interest out of the NMS Stock 

ATS. 

2. Order Interaction With Broker-Dealer 

Operator; Affiliates 

Part II, Item 3 of adopted Form ATS– 

N requests information about the 

interaction of orders of between 

unaffiliated subscribers to the ATS and 

orders of the broker-dealer operator and 

its affiliates in the NMS Stock ATS. Part 

II, Item 3(a) of adopted Form ATS–N 

requires an NMS Stock ATS to disclose 

whether a subscriber can opt out of 

interacting with orders and trading 

interest of the broker-dealer operator in 

the NMS Stock ATS, and Part II, Item 

3(b) requires an NMS Stock ATS to 

disclose whether a subscriber can opt 

out of interacting with the orders and 

trading interest of an affiliate of the 

broker-dealer operator in the NMS Stock 

ATS.761 Part II, Item 3(c) of adopted 

Form ATS–N requires the NMS Stock 

ATS to disclose whether the terms and 

conditions of the opt-out processes for 

the broker-dealer operator and affiliates 

required to be identified in Items 3(a) 

and (b) are the same for all subscribers. 

The content of these requests are 

intended to cover the subject matter 

contained in Part III, Item 5(d) of 

proposed Form ATS–N.762

We believe that is helpful to market 

participants for the subject matter 

covered by proposed Part III, Item 5(d) 

to be a stand-alone question in adopted 

Form ATS–N. Such information is 

important to unaffiliated market 

participants trading on an ATS because 

some unaffiliated subscribers may not 

wish to interact with the order flow of 

the broker-dealer operator or its 

affiliates. This disclosure will help 

market participants understand whether 

and how they may avoid trading with 

the broker-dealer operator and its 

affiliates should they elect to use the 

services of the NMS Stock ATS. 

As explained above, we received 

several comments about the proposed 

requests addressing ATS-related 

activities of the broker-dealer operator 

and its affiliates, including the request 

set forth in Part III, Item 5. In addition 

to these comments, one commenter 

opines that if a subscriber desires to opt 

out of trading with the broker-dealer 

operator’s principal orders, the brokerdealer operator should be obliged to 

follow and implement the stated 

instruction.763 This rulemaking 

addresses enhanced disclosure 

requirements for NMS Stock ATSs, and 

not regulations to require certain actions 

by NMS Stock ATSs outside of the 

disclosures and other requirements 

specifically enumerated herein. 

3. Arrangements With Trading Centers 

Part III, Item 4 of proposed Form 

ATS–N requested disclosures about 

arrangements the broker-dealer operator, 

or any of its affiliates, has with 

unaffiliated trading centers. The subject 

matter covered in Part III, Item 4 of 

proposed Form ATS–N is under Part II, 

Item 4 of adopted Form ATS–N. 

The Commission received several 

comments regarding disclosure requests 

about arrangements with unaffiliated 

trading centers. Three commenters 

support the public disclosure of 

preferential arrangements with third 

parties.764 One of these commenters, 

while supporting the disclosure of 

preferential arrangements in principle, 

believes the requests in Part III, Item 4 

of proposed Form ATS–N could be too 

exhaustive and should be narrowed to 

focus on preferential arrangements.765

Similarly, another commenter believes 

the central concern around affiliate 

relationships should focus on whether a 

third-party entity has differentiated or 

unique access to an ATS.766 Another 

commenter believes that the brokerdealer operators of NMS Stock ATSs 

should not be required to provide 

proprietary information to the public 

under this disclosure, stating that in 

instances where SORs operate outside of 

the NMS Stock ATS and make routing 

decisions independent of the NMS 

Stock ATS, the appropriate source of 

information sought by the Commission 


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767See STANY Letter at 4. 

768See UBS Letter at 5. 

769Mutual or reciprocal access arrangements may 

be, for example, an NMS Stock ATS that allows 

another broker-dealer operator to access its ATS for 

liquidity in return for the ability to access the 

liquidity of the other broker-dealer’s ATS. 

770Preferential routing arrangements may be, for 

example, an NMS Stock ATS being the first routing 

destination on the routing table of a third party’s 

algorithm. 

771For example, a potential conflict of interest 

could arise where an NMS Stock ATS has a 

preferred routing arrangement with an affiliated, 

non-ATS trading center wherein all orders sent to 

the NMS Stock ATS would first be routed to the 

affiliated, non-ATS trading center before entering 

the NMS Stock ATS in exchange for monetary 

compensation. Such an arrangement could also 

pose a risk of information leakage because the nonATS trading center would know that any 

unexecuted orders would then be routed to the 

NMS Stock ATS. Alternatively, if an arrangement 

between the NMS Stock ATS and affiliated trading 

center provides that any subscriber orders routed 

out of the NMS Stock ATS would be first routed 

to the affiliated, non-ATS trading center, the NMS 

Stock ATS may have an incentive to remove 

subscribers’ orders from the NMS Stock ATS and 

allow the affiliated non-ATS trading center the 

opportunity to execute those orders. 

is the operator of the SOR, not the 

operator of the NMS Stock ATS.767

We have not limited the disclosures 

required under adopted Part II, Item 4 

of adopted Form ATS–N to preferential 

arrangements or other unique access 

given to unaffiliated third parties, as 

suggested by these commenters. We 

believe that some market participants 

may consider other arrangements with 

third parties relevant to their 

evaluations of an NMS Stock ATS as a 

potential trading venue. For example, if 

an NMS Stock ATS has a mutual access 

agreement with another ATS, a market 

participant may take into account the 

fact that its order may eventually route 

to another ATS, even if orders from the 

other ATS do not receive preferential 

treatment on the ATS. 

The disclosure requests in Part II, 

Item 4 of adopted Form ATS–N will 

provide market participants with 

information necessary to evaluate 

potential conflicts of interest or sources 

of information leakage. For example, 

Part II, Item 4 of adopted Form ATS–N 

requires the disclosure of an 

arrangement between the NMS Stock 

ATS and an unaffiliated NMS Stock 

ATS under which the NMS Stock ATS 

would route orders or other trading 

interest to the unaffiliated NMS Stock 

ATS for possible execution before 

routing to any other destination. By way 

of further example, Item 4 also requires 

disclosure of an arrangement pursuant 

to which any subscriber orders routed 

out of the unaffiliated NMS Stock ATS 

would be routed first to the NMS Stock 

ATS before any other trading center; it 

also requires a summary of the terms 

and conditions of the arrangement such 

as, for example, whether the NMS Stock 

ATS is providing monetary 

compensation or some other brokerage 

service to the unaffiliated NMS Stock 

ATS. 

In response to the above commenter 

concerns, however, Part II, Item 4 of 

adopted Form ATS–N includes some 

modifications. First, the adopted 

disclosure request in Part II, Item 4 

replaces the proposed phrase ‘‘describe 

the terms of the arrangement’’ with the 

phrase ‘‘provide a summary of the terms 

and conditions of the arrangement.’’ We 

believe that replacing the term 

‘‘describe’’ with a requirement to 

‘‘provide a summary’’ will make it clear 

that the scope of the adopted request 

should not typically require the NMS 

Stock ATS to provide granular details 

about its arrangements that the ATS 

might consider to be commercially 

sensitive. 

Second, Part II, Item 4 of adopted 

Form ATS–N does not use the phrase 

‘‘person(s), or affiliate(s) of such 

person(s) that operates a trading center’’ 

when establishing the scope of the 

request, as was proposed. Rather, the 

adopted request focuses on 

arrangements with trading centers 

themselves. One commenter argues that 

to the extent a third-party entity solely 

has access to functionality disclosed 

elsewhere in proposed Form ATS–N, 

proposed Part III, Item 4 would not be 

necessary.768 We did not intend for the 

proposed request to encompass, for 

example, a subscriber agreement 

between a third-party broker-dealer, 

who happens to also operate a trading 

center, and the NMS Stock ATS under 

which the third-party broker-dealer 

submits orders to the ATS in the same 

manner as all other subscribers. Rather, 

the purpose of the request in Part II, 

Item 4 is to publicly disclose any 

arrangement with another trading center 

that may be relevant to a conflicts of 

interest analysis, such as one under 

which the NMS Stock ATS and a thirdparty NMS Stock ATS send their 

respective subscriber orders to one 

another. 

Additionally, we are including in Part 

II, Item 4 of adopted Form ATS–N 

examples of the types of arrangements 

that would be responsive to the 

disclosure request, such as mutual or 

reciprocal access arrangements 769 and 

preferential access arrangements 770 to 

clarify that the disclosures required by 

Part II, Item 4 of adopted Form ATS are 

not so broad as to require the NMS 

Stock ATS to list each unaffiliated 

subscriber that accesses its system. We 

are also revising the request in Part III, 

Item 4 of proposed Form ATS–N to only 

require disclosures about arrangements 

with trading centers to access the NMS 

Stock ATS’s services in adopted Form 

ATS–N. For example, an NMS Stock 

ATS must provide details about how it 

disseminates orders or trading interest 

submitted by a trading center under a 

unique arrangement with that trading 

center such a reciprocal access 

agreement; these types of arrangements 

would typically be different than the 

ATS’s standard contract with 

subscribers to access the services of the 

ATS. We believe that this change will 

better define the scope of information 

responsive to the Part II, Item 4 of 

adopted Form ATS–N while not 

removing any proposed disclosure 

requirements. 

Likewise, the Commission is 

modifying the wording of the proposed 

disclosure requests to require the NMS 

Stock ATS to disclose formal or 

informal arrangements for a trading 

center ‘‘to access the NMS Stock ATS 

services.’’ Adding the word ‘‘services’’ 

clarifies that the disclosure must 

explain the services provided to the 

unaffiliated trading center after it 

connects to the ATS. An NMS Stock 

ATS can provide various types of 

services to subscribers and the request, 

as revised, is tailored for those ATSs 

services that a subscriber may use. 

Next, the scope of Part III, Item 4 of 

proposed Form ATS–N only 

encompassed arrangements with 

unaffiliated trading centers, but Part II, 

Item 4 of adopted Form ATS–N 

encompasses arrangements with both 

unaffiliated and affiliated trading 

centers. As explained above, the 

requests set forth in Part III, Items 

1(b)(ii)–(iii) and 2(b)(i), (iii) of proposed 

Form ATS–N—which addressed the 

transmission of subscriber orders to 

other trading centers operator by the 

broker-dealer operator or its affiliates— 

have either been narrowed or eliminated 

from Part II, Items 1 and 2 of adopted 

Form ATS–N. However, to the extent 

that an NMS Stock ATS has an 

arrangement with a trading center 

operated by the broker-dealer operator 

or an affiliate, we believe that market 

participants are still likely to consider 

information about such arrangements 

relevant to their evaluation of an NMS 

Stock ATS as a potential trading venue 

and such an arrangement may raise 

concerns about conflicts of interest or 

information leakage.771

Additionally, Part III, Item 4 of 

proposed Form ATS–N would also have 

required the disclosure of mutual access 

arrangements between an NMS Stock 


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772See Proposal, supra note 2, at 81049. 

Furthermore, as discussed in the Proposal, an NMS 

Stock ATS would not be prohibited from 

establishing arrangements with other trading 

centers, provided that such arrangements comply 

with other applicable laws and rules, including 

applicable federal securities laws and Regulation 

ATS. A broker-dealer operator may have valid 

business reasons for it or its affiliates to have formal 

or informal arrangements with an unaffiliated 

person(s), or affiliate(s) of such person that operates 

a trading center regarding access to the NMS Stock 

ATS. See id. at 81049, n.401. 

773See ICI Letter at 7. 

774See HMA Letter at 16; KCG Letter at 9; SIFMA 

Letter at 11–13; UBS Letter at 5; STANY Letter at 

4. 

775See HMA Letter at 16. 776See KCG Letter at 9. The commenter states 

that, in many cases, an ATS operator may be 

unaware of products and services separately 

provided by an affiliate to a customer that are 

entirely independent from and may pre-exist the 

client’s ATS subscription. See id. 777See SIFMA Letter at 12. 778See UBS Letter at 5. The commenter also states 

that a forced public listing of a broker-dealer’s 

products and services may be inconsistent with the 

broker-dealer’s traditional approach and 

preferences for marketing. See id. 

779See Proposal, supra note 2 at 81048. For 

example, if a subscriber purchases a service offered 

by the broker-dealer operator of an NMS Stock ATS, 

the broker-dealer operator might also provide that 

subscriber more favorable terms for its use of the 

NMS Stock ATS than other subscribers who do not 

purchase the service. Such favorable terms could 

include fee discounts or access to a faster 

connection to the NMS Stock ATS. 

780See STANY Letter at 4. 781See SIFMA Letter at 12–13. 782For a further discussion about when a brokerdealer operator’s SOR (or similar functionality) or 

algorithm may operate as part of its NMS Stock 

ATS, see Section V.D.5 below. 

ATS and other trading centers whereby, 

for example, a broker-dealer operator, or 

its affiliate, may offer access to the 

broker-dealer operator’s NMS Stock 

ATS in exchange for access to another 

NMS Stock ATS of operated by another 

broker-dealer. Accordingly, Part II, Item 

4 of adopted Form ATS–N is designed 

to inform subscribers about these 

arrangements as such information may 

impact a subscriber’s experience on the 

NMS Stock ATS and allow them to 

evaluate potential conflicts of interest of 

the broker-dealer operator and its 

affiliates.772

Finally, in Part II, Item 4 of adopted 

Form ATS–N, the Commission has 

divided the request into two subparts— 

one subpart addressing the brokerdealer operator’s arrangements, and 

another subpart addressing its affiliates’ 

arrangements. This is a technical edit so 

that the format of Part II, Item 4 of Form 

ATS–N is consistent with the format of 

Part II, Items 1–3 above. 

4. Other Products and Services 

Part III, Item 3 of proposed Form 

ATS–N would have required disclosures 

about products and services offered to 

subscribers used in connection with 

trading on the NMS Stock ATS. We are 

adopting Part III, Item 3 of proposed 

Form ATS–N as Part II, Item 5 of 

adopted Form ATS–N; however, we are 

modifying the proposed disclosure 

request in response to commenter 

concerns. 

One commenter states that the 

proposed requests would have helped 

investment funds assess an NMS Stock 

ATS as a potential execution venue by 

improving their ability to understand all 

functionality offered by the brokerdealer operator and whether the brokerdealer operator makes all services 

available in a fair and impartial 

manner.773 Some commenters, while 

not opposing the general category of 

disclosure requested in proposed Part 

III, Item 3, believe the scope of the 

requests regarding products and services 

should be narrowed.774 One commenter 

agrees with the Commission’s approach, 

but states that the disclosure 

requirement should be refined to cover 

products or services used in connection 

with trading NMS stocks, not just 

trading on the NMS Stock ATS.775

Another commenter believes that 

distinct products and services provided 

by an affiliate of the broker-dealer 

operator to a client—who happens to be 

an ATS subscriber—but which are not 

directly linked to the ATS subscription 

should not be captured by this 

requirement, particularly, when the 

client/subscriber ultimately may or may 

not use those services to trade on the 

ATS.776 Another commenter suggests 

only requiring an ATS to list or outline 

broad categories of products or services 

rather than requiring the NMS Stock 

ATS to ‘‘describe’’ its products or 

services.777 Another commenter states 

that each relationship and customer 

experience is different and free-standing 

in certain respects, and believes that the 

proposed request would potentially 

require the disclosure of a whole array 

of products or services, the enumeration 

of which would add little value and be 

burdensome to maintain/update.778

Broker-dealer operators of NMS Stock 

ATSs may, directly or indirectly 

through an affiliate, offer products or 

services to subscribers for the purpose 

of, for example, submitting orders, or 

receiving information about displayed 

interest, in the ATS.779 We continue to 

believe that subscribers would want to 

know the products or services that the 

broker-dealer operator or its affiliates 

may offer for the purpose of effecting 

transactions, or submitting, 

disseminating, or displaying orders and 

trading interest on the NMS Stock ATS 

because such products or services may 

impact the subscribers’ access to, or 

trading on, the ATS. 

We note that many broker-dealer 

operators are multi-service brokerdealers and provide routing and 

execution services in NMS stocks 

separate from their ATS services. We 

further note that customers of a brokerdealer operator could be both 

subscribers to its ATS and customers of 

the broker-dealer operator that use 

trading products and services outside of 

the ATS. To the extent that a customer 

is a subscriber to the NMS Stock ATS 

and is offered use of products and 

services by the broker-dealer operator or 

its affiliate for the purpose of effecting 

transactions or submitting, 

disseminating, or displaying orders and 

trading interest in the NMS Stock ATS, 

Part II, Item 5 of adopted Form ATS–N 

would require disclosures about those 

products or services. However, the 

adopted requests in Part II, Item 5 

would not encompass trading products 

or services offered by the broker-dealer 

operator to customers that are not for 

the purpose of effecting transactions or 

submitting, disseminating, or displaying 

orders and trading interest in the NMS 

Stock ATS. 

Two commenters express opinions 

about how the scope of the proposed 

requests relate to the scope of an NMS 

Stock ATS’s operations. One commenter 

states that the Proposal does not draw 

sufficient distinction between the 

operations of the NMS Stock ATS and 

other products and services of the 

broker-dealer operator, including agency 

execution services, market making and 

algorithms.780 Another commenter 

states that the Commission should 

clarify the terminology used in this item 

because it appears to conflate the NMS 

Stock ATS itself with routing and 

algorithmic functions.781 Whether a 

product or service is part of the ATS 

requires a facts and circumstances 

analysis. Based on Commission 

experience, broker-dealers generally 

offer various products and services to 

customers, which include execution and 

routing services, such as a SOR. These 

products and services are generally 

independent of each other, and how 

such products and services may be used 

by a subscriber to an NMS Stock ATS 

varies. However, to the extent that a 

SOR (or similar functionality) or 

algorithm performs a function of the 

ATS by bringing together the orders for 

securities of multiple buyers and sellers 

using established nondiscretionary 

methods, the SOR (or similar 

functionality) or algorithm may be part 

of the NMS Stock ATS.782

Another commenter states that Form 

ATS–N should only require disclosure 


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783See STANY Letter at 4. 

784We note that, as part of our review of Form 

ATS–N responses, we intend to monitor the level 

of summary information provided on the form for 

completeness to help ensure that such information 

is responsive to the form and is not designed to 

avoid meaningful disclosure. 

785The revised wording for this request also 

provides examples of the types of services that 

would be encompassed by this question, such as 

algorithmic trading products that send orders to the 

ATS, order management or order execution 

systems, and market data feeds. 

786For example, if a broker-dealer operator offers 

subscribers alternative algorithms to handle orders, 

including sending such order to the NMS Stock 

ATS, and there is a difference in the speed or 

latency in which each of the alternatives transmits 

information, such differences in speed or latency 

would need to be disclosed in Part II, Item 5 of 

adopted Form ATS–N. 

787See SIFMA Letter at 16. 

788See HMA Letter at 17. 

789See ICI Letter at 5–6; STANY Letter at 4. 

790See ICI Letter at 5–6. 

of products or services at a high level 

and that commercially sensitive or 

proprietary information should not be 

required to be publicly disclosed.783 As 

noted above, we are sensitive to 

concerns about the potential disclosure 

of commercially sensitive information. 

The proposed request stated that NMS 

Stock ATSs must ‘‘[d]escribe the 

products or services.’’ To address 

commenter concerns regarding the 

potential disclosure of commercially 

sensitive information in this disclosure 

request, the adopted disclosure request 

requires the NMS Stock ATS to provide 

only a summary of the terms and 

conditions for the products and services 

disclosed and to explain how the 

product or service is used with the ATS 

in the applicable Item number in Part III 

of adopted Form ATS–N. As explained 

above, we believe that requiring only a 

summary narrative would normally not 

require the broker-dealer operator to 

disclose commercially sensitive 

information.784

To reduce redundancy and streamline 

disclosures, we are requiring NMS Stock 

ATSs to provide a narrative explaining 

the use of the product or service 

required to be disclosed in Part II, Item 

5 in the relevant item in Part III of 

adopted Form ATS–N. We are also 

adding to Part II, Item 5 of adopted 

Form ATS–N the language ‘‘for the 

purpose of’’ before effecting 

transactions, or submitting, 

disseminating, or displaying orders and 

trading interest on the NMS Stock ATS 

to make clear that this Item requests 

information about those products or 

services offered by the broker-dealer 

operator or its affiliate that have a nexus 

to the ATS services. We believe that the 

disclosure requests in Part III of adopted 

Form ATS–N are limited to information 

that we believe is necessary for market 

participants to understand the operation 

of the ATS, without requiring a level of 

detail that would normally require the 

disclosure of commercially sensitive 

information. 

In summary, we are modifying the 

proposed requests being adopted as Part 

II, Item 5 of Form ATS–N to clarify that 

the NMS Stock ATS is only required to 

provide information about products and 

services offered to subscribers for the 

purpose of effecting transactions, or 

submitting, disseminating, or displaying 

orders and trading interest on the NMS 

Stock ATS. Specifically, we have 

modified the proposed language to state 

that the broker-dealer operator must 

disclose any products or services offered 

to subscribers for the purpose of 

effecting transactions or for submitting, 

disseminating, or displaying orders and 

trading interest in the NMS Stock ATS 

(e.g., algorithmic trading products that 

send orders to the ATS, order 

management or order execution systems 

and market data feeds). We believe that 

this language makes a sufficient 

distinction between products and 

services that relate to the functions of 

the ATS and those that do not; 

disclosures about the latter would not 

be required.785

In addition, we have divided the 

disclosure requests into four subparts: 

(i) One subpart addresses the products 

or services that the broker-dealer 

operator offers to subscribers for the 

purpose of effecting transactions or for 

submitting, disseminating, or displaying 

orders and trading interest in the NMS 

Stock ATS; (ii) another subpart 

addresses products or services that the 

broker-dealer operator’s affiliates offer 

to subscribers for the purpose of 

effecting transactions or for submitting, 

disseminating, or displaying orders and 

trading interest in the NMS Stock ATS; 

and (iii) the other two subparts address 

any differences between the terms and 

conditions of the services or products 

required to be identified in Item 5 

among the broker-dealer operator, 

affiliates, and unaffiliated 

subscribers.786 This is a technical edit to 

the proposed disclosures so that the 

format of Part II, Item 5 is consistent 

with the format of Part II, Items 1–4 

above. 

5. Activities of Service Providers 

a. Shared Employees 

Part III, Item 7 of proposed Form 

ATS–N would have required disclosures 

about employees of the broker-dealer 

operator that service the operations of 

the NMS Stock ATS and also service 

other business units of the broker-dealer 

operator or any of its affiliates (‘‘shared 

employees’’). We received several 

comments on Part III, Item 7 of 

proposed Form ATS–N. We are 

adopting Part III, Item 7 of proposed 

Form ATS–N with modifications in 

response to commenters’ concerns, as 

further explained below, and we are 

also renumbering Part III, Items 7 of 

proposed Form ATS–N as Part II, Item 

6(a) of adopted Form ATS–N. 

One commenter recommends 

eliminating the requests related to 

shared employees because the 

commenter believes that keeping the 

item up-to-date would be too 

burdensome and unnecessary as 

employee roles and responsibility shift 

periodically.787 Similarly, another 

commenter believes that while 

accountability for the safeguarding of 

customer information is essential, the 

commenter is uncertain as to why the 

disclosures regarding shared employees 

under Part III, Item 7 of proposed Form 

ATS–N need to be public, particularly 

in light of the proposal’s other reforms 

regarding the safeguarding of customers’ 

confidential information.788 We 

continue to believe that disclosures 

about shared employees with access to 

confidential trading information from 

the NMS Stock ATS would help market 

participants evaluate circumstances 

under which a conflict of interest may 

arise for the NMS Stock ATS or when 

there is the potential for information 

leakage involving shared employees. For 

example, we believe that market 

participants would likely want to know 

if an employee of the broker-dealer 

operator that is responsible for the 

operations of a system containing 

confidential subscriber trading 

information from the NMS Stock ATS is 

also responsible for supporting the 

principal trading activity of the brokerdealer operator. As discussed further 

below, however, we are modifying the 

proposed request about shared 

employees on Form ATS–N to more 

narrowly tailor the request in response 

to comments, which should reduce the 

proposed reporting burden. 

Some commenters believe that the 

Commission should narrow the scope of 

the shared employee request to shared 

employees who may have access to or 

knowledge of confidential subscriber 

information or orders.789 One 

commenter states that market 

participants would need to dedicate 

resources to determine which 

employees actually could pose risks of 

information leakage without limiting the 

disclosure in this manner.790 Another 

commenter also opines that it would be 

more useful to limit the information 


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38834 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

791See STANY Letter at 4. 792See ICI Letter at 5–6; STANY Letter at 4–5; 

Liquidnet Letter at 9; STANY Letter at 4–5; UBS 

Letter at 6. 793See ICI Letter at 5–6; STANY Letter at 4–5; 

UBS Letter at 6–7. 

794See UBS Letter at 6. 

795As guidance for this request, the summary of 

the shared employees’ role and responsibilities 

generally should include sufficient detail to provide 

market participants with a comprehensive 

understanding of the full range of the shared 

employee’s responsibilities with the NMS Stock 

ATS and each relevant entity, including 

responsibilities that could enable the employee to 

view confidential trading information of the NMS 

Stock ATS. 

796See Luminex Letter at 2; see also PDQ Letter 

at 1 (agreeing with Luminex’s letter). 

797See ICI Letter at 5–6. 

798See id. 

799See HMA Letter at 17; ICI Letter at 5. 

800See HMA Letter at 17. 

801See Luminex Letter at 2; see also PDQ Letter 

at 1 (agreeing with Luminex’s letter). 

about shared employees to those with 

access to confidential information.791

We acknowledge that for some brokerdealer operators—particularly multiservice broker-dealers for which the 

NMS Stock ATS is one of many 

business units—some employees 

provide purely administrative services 

or other support services to multiple 

business units that would not make 

them privy to confidential subscriber 

trading information of the NMS Stock 

ATS. In response to these comments, 

the adopted request requires disclosures 

only about shared employees with 

access to confidential trading 

information on the ATS. 

Furthermore, some commenters state 

that information about shared 

employees should not contain certain 

personal information about the 

employee, such as the employees name, 

title, or position.792 Several of these 

commenters believe that such public 

disclosures would provide little benefit 

to market participants because, for 

example, titles change frequently, lack 

standard meaning across firms and 

businesses, and do not provide 

meaningful information about potential 

information leakage on the ATS.793 In 

response to these comments, we have 

eliminated the requirement that the 

NMS Stock ATS identify the name and 

position or title of shared employees 

because we agree that any benefit to 

providing personally identifiable 

information about shared employees 

would not be justified by the potential 

negative effects to the individual whose 

personally identifiable information has 

been posted. We also agree that such 

information could become stale or 

change frequently, resulting in an 

increased burden on NMS Stock ATSs 

to keep that information up-to-date. 

One of the above commenters also 

states that, while it supports disclosure 

to the Commission of relevant 

information concerning individuals 

responsible for ATS functions, it 

believes that the request concerning 

shared employees should be limited to 

‘‘categories of service’’ as opposed to 

individual positions and titles.794 As 

explained above, we have removed the 

proposed requirement that the 

disclosures regarding shared employees 

contain the name and position or title of 

all shared employees, and Form ATS–N 

only requires a summary of the role and 

responsibilities of a shared employee 

that has access to confidential trading 

information.795 While these changes 

reduce the proposed burden on filers, 

disclosures responsive to Part II, Item 

6(a) of adopted Form ATS–N should 

also provide market participants with 

sufficient information to evaluate 

whether a shared employee’s role with 

the NMS Stock ATS may create a 

potential for information leakage. We do 

not believe that market participants 

would benefit from even broader, or 

more general, disclosures, such as 

‘‘categories of service’’ for shared 

employees because such information 

would likely not provide market 

participants with relevant information 

to assess the potential for information 

leakage. 

Two commenters express support for 

Part III, Item 7 of proposed Form 

ATS–N by noting that current Form 

ATS Exhibit E calls for the disclosure of 

other entities relevant to the operation 

of the ATS, which the commenters 

believe would be helpful in determining 

whether there are apparent conflicts of 

interest that could come into play in 

terms of how orders are executed in the 

ATS.796

Another commenter recommends that 

the Commission ensure that the requests 

provide meaningful narrative 

information about the role and duties of 

each shared employee, both at the NMS 

Stock ATS and the other business unit 

or affiliate of the broker-dealer 

operator.797 This commenter states that, 

to better equip funds and other market 

participants to assess the roles and 

expertise of shared employees, an NMS 

Stock ATS should also disclose whether 

any shared employees are registered 

with the Commission or the Financial 

Industry Regulatory Authority and 

whether they hold one or more 

securities licenses.798 Because we have 

amended the proposed requests to 

reduce the potential for the public 

disclosure of personally identifiable 

information, we will not incorporate 

this commenter’s recommendation to 

require an NMS Stock ATS to disclose 

whether any shared employees are 

registered with the Commission or 

FINRA and whether they hold one or 

more securities licenses. The details 

solicited in Part II, Item 6(a) of adopted 

Form ATS–N are designed to provide 

market participants with information to 

assess whether an NMS Stock ATS’s use 

of shared employees poses a risk of 

information leakage or other conflicts of 

interest that could affect a market 

participant’s decision of whether or not 

to trade on the ATS. Requiring an NMS 

Stock ATS to disclose information about 

a shared employee’s credentials would 

be contrary to the Commission’s intent 

to limit the amount of personally 

identifiable information that is required 

by Form ATS–N. 

b. Third-Party Service Providers 

Part III, Item 8 of proposed Form 

ATS–N would have required disclosures 

about third-party service providers to 

the NMS Stock ATS. The Commission 

received several comments on Part III, 

Item 8 of proposed Form ATS–N. The 

Commission is adopting Part III, Item 8 

of proposed Form ATS–N with 

modifications in response to 

commenters’ concerns, as further 

explained below, and is renumbering 

Part III, Item 8 of proposed Form 

ATS–N as Part II, Items 6(b), 6(c), and 

6(d) of adopted Form ATS–N. 

Two commenters support the 

Commission’s proposal to require the 

disclosure of information related to 

third-party service providers because 

such disclosures would provide 

information related to potential 

information leakage on the NMS Stock 

ATS.799 One of those commenters 

further opines that while shared 

employees are likely subject to 

increased oversight and it supports the 

proposed requests related to shared 

employees, the oversight of third-parties 

is significantly less formidable and may 

result in greater risk for information 

leakage.800 As they did for Part III, Item 

7 of proposed Form ATS–N, two other 

commenters express support for Part III, 

Item 8 of proposed Form ATS–N by 

noting that current Form ATS Exhibit E 

calls for the disclosure of other entities 

relevant to the operation of the ATS, 

which the commenters believe would be 

helpful in determining whether there 

are apparent conflicts of interest that 

could come into play in terms of how 

orders are executed in the ATS.801

Several commenters believe that 

aspects of the request under Part III, 

Item 8 of proposed Form ATS–N related 

to third-party service providers are 

unnecessary to evaluating an NMS 


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802See Luminex Letter at 4; STANY Letter at 5. 803See Morgan Stanley Letter at 5. 804See Proposal, supra note 2, at 81055. 805See Item 7 of Form ATS (describing the 

requirements for Exhibit E of Form ATS). 806See ICI Letter at 6; UBS Letter at 6; SIFMA 

Letter at 16. 

807See Morgan Stanley Letter at 5. 

808See supra note 742 and accompanying text. 

809See Morgan Stanley Letter at 5. 

810See UBS Letter at 7. 

811As guidance for this request, the Commission 

would view, for example, an NMS Stock ATS 

simply stating that a third-party provides 

technology or hardware to the ATS as insufficient. 

See Proposal, supra note 2, at 81055. In this 

example, the summary generally should provide 

market participants with an understanding of the 

types of technology or hardware provided, and how 

that hardware or technology is used by the NMS 

Stock ATS. This information is meant to provide 

market participants with a better understanding 

about whether the service provider could access 

confidential trading information. 

Stock ATS as a potential trading venue. 

Two commenters state that information 

about certain shared personnel for 

vendors or certain support functions, 

such as back-office or technology 

resources, are not necessary for risk 

assessment of an ATS.802 Similarly, 

another commenter believes that the 

disclosures could, in fact, inhibit useful 

comparison of ATSs and create 

unnecessary and burdensome disclosure 

obligations.803 Specifically, this 

commenter cites the proposed 

requirements to provide detailed 

information regarding persons, 

including natural persons, providing 

services for the ATS, but who are 

unaffiliated with the broker-dealer. 

We disagree that the proposed request 

regarding third party service providers 

to the NMS Stock ATS is unnecessary, 

would not be meaningful to market 

participants, or, when compared to the 

current requirements on Form ATS, 

would be overly burdensome. As noted 

in the Proposal,804 the request related to 

service providers is intended to expand 

on the current disclosure requirement of 

Exhibit E of Form ATS, which requires 

ATSs to disclose the name of any entity 

other than the ATS that will be involved 

in the operation of the ATS, including 

the execution, trading, clearing, and 

settling of transactions on behalf of the 

ATS; and to provide a description of the 

role and responsibilities of each 

entity.805 We continue to believe that 

subscribers and market participants 

would be interested in whether services 

performed by a third-party may or may 

not be under the control of the brokerdealer operator for the purposes of 

evaluating the potential information 

leakage. 

Some commenters recommend 

clarifying or more narrowly tailoring the 

scope of the requests in Part III, Item 8 

of proposed Form ATS–N related to 

service providers so as not to capture 

information about vendors that only 

provide administrative services to the 

ATS or other overhead, such as utility 

companies.806 We believe that the scope 

of the third-party service provider 

requests should not encompass purely 

administrative items—such as human 

resources support—or basic overhead 

items—such as phone services and other 

utilities. The information solicited in 

this disclosure is meant to provide 

information about the extent to which a 

third-party may be able to influence or 

control the operations of the ATS 

through involvement with its operations 

(such as operating the ATS’s proprietary 

data feeds sent to subscribers). As 

indicated by commenters, information 

about the roles and responsibilities of 

service providers to the ATS is 

important because it could inform 

market participants about the potential 

information leakage on the NMS Stock 

ATS. 

A commenter also states that it is very 

difficult for a broker-dealer to know the 

structure of all of its vendors, much less 

whether the vendor has an affiliate that 

may enter orders in the subject ATS.807

This commenter believes that requiring 

an ATS to disclose information 

regarding whether any such persons, or 

any of their affiliates, may enter orders 

or other trading interest on the NMS 

Stock ATS would be unduly 

burdensome. We believe that the benefit 

to market participants from the public 

disclosure of information concerning 

the use of ATS services by third-party 

service providers and their affiliates 

justifies the potential burden on the 

NMS Stock ATS to provide those 

disclosures in Form ATS–N. Service 

providers have business relationships 

outside of simple subscriber-ATS 

arrangements, which may give those 

service providers or their affiliates 

access to confidential trading 

information of other subscribers. As 

such, market participants should be 

aware of how those service providers 

utilize the ATS as a trading venue or for 

any other services. 

Furthermore, the adopted requests 

under Part II, Items 6(c)–(d) require the 

NMS Stock ATS to disclose whether any 

service providers or their affiliates use 

the services of the NMS Stock ATS and 

if they do, the ATS is required to 

identify the service providers, the 

service(s) used, and whether there is 

any disparate treatment between those 

service providers and other subscribers. 

Thus, an NMS Stock ATS would only be 

required to obtain and disclose 

information about third-party vendors 

and their affiliates that actively use the 

services of the ATS; the ATS should be 

aware of all parties the use its services 

under its current recordkeeping 

obligations.808 Additionally, because the 

ATS has already established a 

relationship with its service providers, 

we do not believe that it would impose 

a significant burden on ATSs to require 

its service providers to inform them 

about any affiliates that use the services 

of the ATS. Accordingly, to the extent 

that an affiliate of a service provider 

uses the services of the ATS, we believe 

that the burden to obtain the 

information required by Form ATS–N is 

justified by the above-explained benefits 

to market participants from these 

disclosures. 

This commenter also states that if the 

Commission’s concern is whether a 

service provider is receiving preferential 

treatment from an ATS, the Proposal 

should have mandated disclosure of 

whether there is any preferential and/or 

differentiated treatment.809 We believe 

market participants would find it very 

useful to understand whether potential 

counterparties with whom they are 

trading, and who also service the 

operation of the NMS Stock ATS, have 

access to different or unique ATSrelated services when analyzing 

potential conflicts of interest or 

information leakage on the venue. We 

have added a request to Part II, Item 6 

of adopted Form ATS–N to expressly 

require the ATS to identify and explain 

any differences in ATS services to a 

service provider and all other 

subscribers. 

One commenter questions the 

feasibility of providing ‘‘a detailed 

description of information technology 

services, including both hardware and 

software’’ in Part III, Item 8 of proposed 

Form ATS–N, which the commenter 

opines can be taken to the extreme of 

requiring an ATS operator to 

disassemble a server to enumerate the 

manufacturer of various components. 

The commenter believes that a general— 

but thorough—description of the 

information technology services would 

be more practical.810 We did not intend 

for the adopted disclosures to require 

the level of granular detail to which this 

commenter cites in its comment letter. 

To clarify the scope of the required 

disclosure about services provided by 

third parties, adopted Form ATS–N no 

longer requires the NMS Stock ATS to 

‘‘describe’’ the operation, service, or 

function provided by the third party 

service provider. Instead, it requires an 

NMS Stock ATS to provide a 

‘‘summary’’ of the service provider’s 

role and responsibilities.811


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812See SIFMA Letter at 16. 813See HMA Letter at 18. 

814 If an NMS Stock ATS has disclosed 

information on its Form ATS–N about the written 

safeguards and procedures that it has established to 

protect the confidential trading information of 

subscribers, including oversight procedures to 

ensure that such safeguards and procedures are 

followed, but those disclosures materially differ 

from the actual means by which the NMS Stock 

ATS protected the confidential trading information 

of subscribers, the ATS would be required to file 

an amendment pursuant to Rule 304(a)(2) to revise 

its Form ATS–N to accurately describe such 

safeguards and procedures. 

815See Regulation ATS Adopting Release, supra 

note 3, at 70879. 816See Proposal, supra note 2, at 81058. 

As guidance for this request, we 

would view, for example, an NMS Stock 

ATS simply stating that a third-party 

provides technology or hardware to the 

ATS as not responsive to the required 

summary of the service provider’s role. 

But we would not expect the ATS to 

provide information about the 

manufacturer of certain components of 

its hardware. This request for summary 

information is designed to provide 

market participants with a general 

understanding of the types of 

technology or hardware provided by the 

service provider as part of its 

responsibilities, and how that hardware 

or technology is used by the NMS Stock 

ATS. The purpose of this disclosure is 

to provide market participants with 

information to better understand 

whether the service provider might be 

able to access confidential trading 

information, so NMS Stock ATSs should 

draft its disclosure with the goal of 

conveying such information. 

Furthermore, to reduce redundant 

disclosures on Form ATS–N, adopted 

Form ATS–N will only require this in 

Part III, unless there are no disclosure 

requests in Part III that would 

encompass these types of services. The 

disclosure requests in Part III will likely 

require the NMS Stock ATS to describe 

the services provided by third-parties, 

and we believe that a summary narrative 

about the roles and responsibilities of 

third-party service providers will likely 

be included in that description of the 

services. We do not believe that it is not 

necessary to also provide a redundant 

summary narrative of the roles and 

responsibilities of service providers in 

Part II. 

A commenter also recommends 

eliminating the disclosures of thirdparty service providers from the 

publicly available Form ATS–N and 

requiring that the information requested 

be made available only to the 

Commission on a confidential basis.812

We are not changing the nature of the 

third-party service provider request to 

require the disclosures to be filed on a 

confidential basis with the Commission. 

We have narrowed the scope of the 

request so that the information provided 

is tailored to address the concerns of 

market participants and NMS Stock 

ATSs clarify the level of detail required 

by these disclosures. We believe that 

requiring only a summary description of 

the roles and responsibilities of thirdparty service providers would not 

require the type of details that could be 

subject to confidentiality concerns or 

otherwise put either the NMS Stock 

ATS or the service provider at a 

competitive disadvantage. 

Finally, we are replacing the proposed 

word ‘‘person’’ with the word ‘‘entity’’ 

in Part II, Item 6(b) of adopted Form 

ATS–N. The Commission does not 

believe that an NMS Stock ATS is likely 

to contract with a natural person who is 

not associated with a legal entity (e.g., 

a corporation or an LLC) to provide 

services to the ATS. Furthermore, the 

Commission does not intend for the 

service provider request to disclose 

details about natural persons providing 

services to the ATS when those natural 

persons are employees of, or 

independent contractors hired by, a 

third party. 

6. Protection of Confidential Trading 

Information 

Part III, Item 10 of proposed Form 

ATS–N would have required an NMS 

Stock ATS to provide disclosures about 

its confidential treatment of trading 

information. One commenter states its 

belief that the proposed requests under 

Part III, Item 10 of proposed Form ATS– 

N seemed appropriate given the risk of 

misuse of confidential information.813

This commenter believes the requests fit 

well within the framework of the new 

requirement that all ATSs maintain 

written safeguards and procedures to 

protect confidential trading information. 

We are adopting Part III, Item 10 of 

proposed Form ATS–N with 

modifications in response to commenter 

concerns, as further explained below, 

and renumbering the proposed request 

as Part II, Item 7 of adopted Form 

ATS–N. 

Part II, Item 7(a) of adopted Form 

ATS–N requires an NMS Stock ATS to 

describe its written safeguards and 

written procedures to protect the 

confidential trading information of 

subscribers to the NMS Stock ATS, 

including: (i) Written standards 

controlling employees of the ATS that 

trade for employees’ accounts; and (ii) 

written oversight procedures to ensure 

that the safeguards and procedures 

described above are implemented and 

followed. The protection of confidential 

trading information is a bedrock 

component of the regulation of ATSs 

and is essential to ensuring the integrity 

of ATSs as an execution venue. If such 

information is not protected, many of 

the advantages or purposes for which a 

subscriber may choose to send its orders 

to an ATS (e.g., trade anonymously and/ 

or to mitigate the impact of trading in 

large positions) are eliminated. In cases 

where the confidential trading 

information of a subscriber is 

impermissibly shared with the 

personnel of the broker-dealer operator 

or any of its affiliates (e.g., persons who 

are not responsible for the operation of 

the ATS or compliance with applicable 

rules), such an abuse is also 

compounded by the conflicting interests 

of the broker-dealer operator. That is, in 

such a case, the broker-dealer operator 

has invited subscribers to trade on its 

ATS and may have abused that 

relationship to provide itself or its 

affiliates with a direct competitive 

advantage over that subscriber. 

Accordingly, we believe that disclosures 

informing market participants about 

broker-dealer operators’ written 

safeguards and procedures to protect 

confidential trading information are 

necessary so market participants can 

independently evaluate the robustness 

of the safeguards and procedures that 

are employed by the NMS Stock ATS to 

protect subscriber confidential trading 

information and decide for themselves 

whether they wish to do business with 

a particular NMS Stock ATS.814

We are adopting Part II, Items 7(b) and 

(c) to require an NMS Stock ATS to 

disclose whether a subscriber can 

consent and withdraw consent, 

respectively, to the disclosure of its 

confidential trading information to any 

person (not including those employees 

of the NMS Stock ATS who are 

operating the system or responsible for 

its compliance with applicable rules). 

Subscribers should be able to give 

consent if they so choose to share their 

confidential trading information.815

ATSs that transact in NMS stocks vary 

in terms of what types of orders, 

indications of interests, or other forms 

of trading interest are confidential on 

their systems and what information 

about such trading interest may be 

shared. For example, an ATS might 

provide that no IOIs submitted by 

subscribers will be considered 

confidential, but may provide 

subscribers with the option to restrict 

the information in the IOI message to 

just the symbol and side (i.e., buy or 

sell).816 For this example, Part II, Items 

7(b) and 7(c) of adopted Form ATS–N 


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817See id. We believe that there may be some 

NMS Stock ATSs that might not offer any means by 

which a subscriber could consent to the 

dissemination of its confidential trading 

information. An NMS Stock ATS would be required 

to disclose this fact pursuant to Item 7(a). See id., 

n.437. 

818See Regulation ATS Adopting Release, supra 

note 3, at 70879; 17 CFR 242.301(b)(10)(i)(A). 

819See MFA/AIMA Letter at 6 (expressing 

concern that requiring disclosure of the positions or 

titles of persons who have access to confidential 

trading information would paint a target on such 

persons and could increase their security risks and 

risks of receiving phishing attacks); SIFMA Letter 

at 17–18 (stating that the public disclosure of 

information under Part IV, Item 10 of proposed 

Form ATS–N would have raised privacy, security, 

and proprietary information concerns). 

820See Regulation ATS Adopting Release, supra 

note 3, at 70879; 17 CFR 242.301(b)(10)(i)(A). 

821See SIFMA Letter at 6; Consumer Federation 

of America Letter at 9–10. See also Fidelity Letter 

at 5 (stating it should be disclosed when subscribers 

are not treated the same way); UBS Letter at 7 

(suggesting the Commission request should 

highlight differences among subscribers). 

822See HMA Letter at 17–18. 

823See SIFMA Letter at 17. 

824See id. 

825See Proposal, supra note 2, at 81043. 

would require the NMS Stock ATS to 

describe the means by which a 

subscriber could control some of the 

information contained in the IOI 

message by providing consent or 

withdrawing such consent for the 

sharing of its confidential trading 

information.817

Part II, Items 7(b) and 7(c) contain 

requests similar to those in Part III, Item 

10(a) of proposed Form ATS–N, but we 

are modifying the format of these 

requests so that they are in the form of 

a ‘‘yes’’ or ‘‘no’’ question, and if the 

NMS Stock ATS answers ‘‘yes,’’ the 

NMS Stock ATS must explain how and 

under what conditions consent can be 

given and withdrawn. We are also 

adding the phrase ‘‘not including those 

employees of the NMS Stock ATS who 

are operating the system or responsible 

for its compliance with applicable rule’’ 

to Part II, Item 7(b) of adopted Form 

ATS–N. This change is to clarify that 

the request does not cover such 

employees that may need access to such 

information in the course of their 

responsibilities to service the system. As 

noted above, Regulation ATS requires 

that access to confidential subscriber 

information be available only to those 

employees of the ATS that operate the 

ATS’s system or are responsible for the 

ATS’s compliance with applicable 

rules.818

Finally, we are adopting Part II, Item 

7(d) to require an NMS Stock ATS to 

provide a summary of the roles and 

responsibilities of any persons that have 

access to confidential trading 

information, the confidential trading 

information that is accessible by them, 

and the basis for the access. Part III, 

Item 10(b) of proposed Form ATS–N 

would have required the NMS Stock 

ATS to identify the position or title of 

any person who has access to 

confidential trading information, 

describe the confidential information to 

which the person has access, and 

describe the circumstances under which 

the person can access confidential 

trading information. Some commenters 

express concerns regarding the potential 

disclosure of personally identifiable 

information under proposed Part III, 

Item 10(b).819 We have eliminated the 

proposed requirement to publicly 

disclose the positions or titles of 

persons with access to confidential 

trading information and part II, Item 

7(d) of adopted Form ATS–N requires 

only a summary of the roles and 

responsibilities of any persons that have 

access to confidential trading 

information, the confidential trading 

information that is accessible by them, 

and the basis for the access. We believe 

that any benefit of providing personally 

identifiable information is not justified 

by the potential negative effects of 

publicly posting personally identifiable 

information; a summary of the 

information required under Item 7(d) 

will buttress the existing obligations on 

ATSs to restrict access only to permitted 

personnel (e.g., those responsible for its 

operation or compliance).820

7. Differences in Availability of 

Services, Functionalities, or Procedures 

Part III, Item 9 of proposed Form 

ATS–N would have required an NMS 

Stock ATS to disclose information 

regarding the differences in the 

availability of services, functionalities, 

or procedures of the NMS Stock ATS 

that are available or apply to the brokerdealer operator or its affiliates that are 

not available or do not apply to other 

subscribers. 

In general, several commenters 

support requests for information about 

differences between subscribers and the 

broker-dealer with respect to their use of 

the NMS Stock ATS.821 A commenter 

also states that the proposed requests in 

Part III, Item 9 of proposed Form 

ATS–N are reasonable.822 One 

commenter, however, expresses concern 

that the proposed disclosures that 

would have been required under Part III, 

Item 9 of proposed Form ATS–N were 

too broad and could result in the 

disclosure of either proprietary 

information or other information that 

could pose a cybersecurity risk.823

We continue to believe that the 

disclosure about differences in 

treatment are important to market 

participants and will better allow them 

to decide whether submitting order flow 

to that NMS Stock ATS aligns with their 

trading or investment objectives. To 

more closely tailor the Form ATS–N 

disclosures about differences in 

treatment to the subject matter covered 

in relevant conflicts-of-interest requests, 

we are removing Part III, Item 9 of 

proposed Form ATS–N as a stand-alone 

question and incorporating the request 

into Part II, Items 1, 2, 3, and 6 of 

adopted Form ATS–N. We believe that 

under this format, disclosures regarding 

the differences in the availability of 

services, functionalities, or procedures 

of the NMS Stock ATS will relate to the 

specific subject matter covered by each 

of the aforementioned disclosure 

requests that relate to services, 

functionalities, or procedures that may 

differ among subscribers or the brokerdealer operator and subscribers. 

The requests in Part II of adopted 

Form ATS–N focus on the ATS-related 

activities of the broker-dealer operator 

and its affiliates and are designed to 

inform market participants about the 

competing interests between the brokerdealer operator or its affiliates and other 

subscribers and the potential for 

information leakage of subscribers’ 

confidential trading information. In 

response to a commenter’s concern,824

we note that we did not intend for these 

requests to require descriptions of 

technologies or other aspects of the 

NMS Stock ATS that could pose a 

cybersecurity risk or are otherwise 

disclose commercially sensitive 

information. 

8. Other Recommendations From 

Commenters 

The Commission received comments 

recommending additional regulation or 

disclosures for NMS Stock ATSs related 

to conflicts of interests. In the Proposal, 

the Commission considered alternatives 

to address conflicts of interests between 

the broker-dealer operator and the NMS 

Stock ATS. One alternative the 

Commission considered was to 

eliminate any potential conflicts of 

interest by requiring the NMS Stock 

ATS to operate with a single business 

function—operating the NMS Stock 

ATS—and by eliminating any other 

function of the broker-dealer, such as 

principal trading.825 The Commission 

also considered continuing to allow 

broker-dealer operators to act as a 

broker-dealer operator of an NMS Stock 

ATS and engage in non-ATS functions 

while imposing new requirements 

designed to limit potential conflicts of 


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826See id. 

827See id. 

828See Consumer Federation of America Letter at 

7–8 (asserting that certain conflicts of interest are 

so acute and pernicious that they cannot be 

mitigated or absolved merely by disclosing them; 

the commenter provides principle trading by the 

broker-dealer operator as an example); HMA Letter 

at 13–18 (advocating for: (1) The Commission to 

prohibit what the commenter considers to be the 

deeply troubling conflicts of interest attendant with 

allowing an ATS operator or affiliate to trade in the 

ATS; or (2) alternatively if the Commission would 

not adopt such a prohibition, for the Commission 

to affirmatively restrict how the broker-dealer 

operator or its affiliates interact with the ATS); 

Better Markets Letter at 5–6 (advocating that the 

Commission ban material conflicts of interest rather 

than relying on disclosure alone). 

829See Proposal, supra note 2, at 81043. 

830See Better Markets Letter at 6. 831See ICI Letter at 6, n.14. 

832The topics and examples provided on Form 

ATS–N are designed to help NMS Stock ATS 

consider the scope of the request and information 

potentially responsive to the form requirements. 

While we use the term ‘‘including’’ to denote topics 

responsive to an Item and have provided examples 

in many of the requests, these topics or examples 

are not an exhaustive list of what may be responsive 

to a Form ATS–N request. See, e.g., Items 4, 6, 7, 

9, 10, 11, 13, 19, 21, and 23 of Part III of adopted 

Form ATS–N. 

833See e.g., SSGA Letter at 2; SIFMA Letter at 9; 

STANY Letter at 5; LeveL ATS Letter at 6–7; KCG 

Letter at 10. See also Section V.A.1. (discussing the 

format of items in Part II and III of Form ATS–N). 

834Specifically, this requirement is being added 

to Items 10, 14, 17, 18, and 23 of adopted Form 

ATS–N. In the Proposal, the Commission required 

a description of any differences between subscribers 

and persons in Part IV, Items 1(b), 1(e), 2(b), 3(b)– 

(d), 4, 5(a), 5(b), 6(a), 7, 8, 10(b), 12(b), and 13 of 

proposed Form ATS–N. See Proposal, supra note 2, 

at 81146–81152. 

835See, e.g., SIFMA Letter at 5–6 (stating whether 

all subscribers have access to the same suite of 

products and services is particularly appropriate 

and useful); Fidelity Letter at 5 (calling for 

disclosure when subscribers are not treated the 

same way); UBS Letter at 7 (suggesting the 

Commission request should highlight differences in 

subscriber access that may impact other users of the 

ATS). See also Consumer Federation of America 

Letter at 9–10 (discussing how to address potential 

advantages of the broker-dealer operator and its 

affiliates). 

interest.826 In the Proposal, the 

Commission requested comment about 

whether certain conflicts of interest 

arising out of the broker-dealer’s 

operation of the NMS Stock ATS should 

be prohibited.827

Several commenters recommend that 

the Commission prohibit conflicts of 

interest altogether on NMS Stock ATSs, 

which would include a prohibition on 

trading on the NMS Stock ATS by the 

broker-dealer operator and its affiliates, 

rather than simply increasing the 

disclosure requirements for conflicts of 

interest.828 However, we continue to 

believe that prohibiting conflicts of 

interest for the broker-dealer operator 

related to its operation of an NMS Stock 

ATS would be significantly more 

intrusive relative to requiring additional 

disclosures about the operations of the 

broker-dealer operator and its affiliates, 

and therefor did not propose these 

alternatives.829 We also believe that 

such a prohibition would substantially 

affect or limit the current operations of 

ATSs that trade NMS stocks. Part II of 

adopted Form ATS–N is designed to 

provide disclosures to market 

participants about ATS-related activities 

of a broker-dealer operator and its 

affiliates that might give rise of potential 

conflicts of interest or information 

leakage, and thus, should better enable 

market participants to evaluate whether 

they want to use the services of that 

NMS Stock ATS. 

Also, one commenter recommends 

that, for any conflicts of interest that are 

permitted, at a minimum Form ATS–N 

should include clear disclosures of 

conflicts of interest under a section 

titled ‘‘conflicts of interest.’’ 830 We 

decline the commenter’s request to title 

Part II ‘‘conflicts of interest.’’ We believe 

that it is more helpful to market 

participants for Form ATS–N to provide 

the information market participants 

need to individually evaluate whether 

there is a conflict of interest on a given 

NMS Stock ATS rather than relying on 

the ATS to determine when a conflict 

exits. 

We also received a comment 

requesting the Commission to require 

NMS Stock ATSs to disclose in Part II 

of Form ATS–N any proceeding within 

the last 10 years against the NMS Stock 

ATS, the broker-dealer operator or 

officers or employees of the brokerdealer operator that relates to the 

handling of equity orders or the 

operation of the NMS Stock ATS.831

Form ATS–N is designed to provide 

market participants with public 

disclosures about the current operations 

of an NMS Stock ATS and the current 

ATS-related activities of the brokerdealer operator and its affiliates. We 

believe that this information will help 

market participants assess the NMS 

Stock ATS as potential venue for their 

orders. We believe that disclosures 

about past proceedings, or other 

disciplinary matters, of the NMS Stock 

ATS, its broker-dealer operator, or 

officers and employees of the brokerdealer operator—even those that relate 

to the handling of equity orders or the 

operation of the NMS Stock ATS— 

would not provide additional 

transparency into the current operations 

of the NMS Stock ATS. To the extent 

that such information is publicly 

available, a market participant may 

review details about past and pending 

proceedings involving the NMS Stock 

ATS, its broker-dealer operator, or the 

officers and employees of the brokerdealer operator via, for example, public 

databases maintained by the 

Commission or FINRA. 

D. Part III Form ATS–N: Manner of ATS 

Operations 

Part III of adopted Form ATS–N is 

designed to provide public disclosures 

to help market participants understand, 

among other things, how subscribers’ 

orders and trading interest are handled, 

matched, and executed on the NMS 

Stock ATS. In response to comments, 

we are revising the format of several 

requests in Part IV of proposed Form 

ATS–N (renumbered as Part III in the 

adopted Form) to help NMS Stock ATSs 

provide disclosures that would be 

useful to market participants. For 

example, in response to commenters 

that believe the Commission’s use of the 

term ‘‘describe’’ is vague and would 

lead to discursive disclosures and 

obscure key information, we are revising 

requests to be more explicit, adding 

specificity to clarify the meaning of the 

requests, and providing non-exhaustive 

examples for NMS Stock ATSs to better 

understand what would be responsive 

to the Form ATS–N.832 In addition, we 

have added ‘‘yes’’ or ‘‘no’’ questions, 

and converted proposed Items into 

‘‘yes’’ or ‘‘no’’ questions, throughout 

Part III of Form ATS–N, which we 

believe will allow market participants to 

find information more efficiently and 

facilitate their comparisons across NMS 

Stock ATSs.833 Moreover, we have 

separated the requests for information in 

Part III of adopted Form ATS–N into 

more items (and renumbered the items) 

and discrete topics to help readers more 

easily find information and compare 

that information among NMS Stock 

ATSs. In addition, we are combining or 

removing certain requests to reduce 

redundancy within Part III, and between 

Parts II and III, and separating certain 

requests for information into new items 

or subparts that focus the information 

required in response to commenter 

suggestions and concerns. Finally, we 

are adding a requirement to identify and 

explain any differences in the treatment 

of subscribers and the broker-dealer 

operator to several items that did not 

require this information as proposed.834

We intended that these differences be 

explained for all of the subject matter 

covered by Form ATS–N, and several 

commenters support requests for 

information about differences between 

subscribers and the broker-dealer 

operator with respect to their use of the 

NMS Stock ATS.835 Differences in the 

treatment among subscribers and the 

broker-dealer operator and its affiliates 


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836As also discussed under Section V.D.2., 

commenters state with regard to the entirety of Part 

IV, Item 1 of proposed Form ATS–N that the 

Commission should adopt a ‘‘yes’’ or ‘‘no’’ format 

for the item instead of requests for descriptions. See 

SIFMA Letter at 19; KCG Letter at 11. 

837See SIFMA Letter at 20. 

838See KCG Letter at 12. The proposed Item 

required the NMS Stock ATS to describe the types 

of subscribers and other persons that use the 

services of the NMS Stock ATS. 

839See e.g., SSGA Letter at 2; SIFMA Letter at 9; 

STANY Letter at 5; LeveL ATS Letter at 6–7; KCG 

Letter at 10. 

840See Section V.D.2 for a discussion of changes 

to the requirement under Part IV, Item 1(c) of 

proposed Form ATS–N that NMS Stock ATSs state 

whether they accept non-broker-dealers as 

subscribers to the NMS Stock ATS. 

841As discussed in the Proposal, the eligibility 

process and requirements to access an NMS Stock 

ATS may vary, and the requirements may differ 

depending on whether a potential subscriber is a 

customer of the broker-dealer operator of the ATS. 

For instance, some ATSs may require that a 

potential subscriber be a broker-dealer to submit 

orders in the ATS, while other ATSs may not. Some 

NMS Stock ATSs may require potential subscribers 

to submit financial information as a pre-requisite to 

subscribing to, or maintaining their subscriber 

status on, the NMS Stock ATS. See Proposal, supra 

note 2, at 81060. 

842One commenter supports the proposed 

disclosures stating that funds and other market 

participants would find this information valuable 

because it would facilitate the efficient comparison 

of eligibility processes and requirements across all 

NMS Stock ATSs and describe the types of 

participants that may dominate order flow on a 

particular NMS Stock ATS. See ICI Letter at 8. 

843See SIFMA Letter at 19. 

844 Id. at 20 (stating it cannot distinguish between 

the requested information in proposed Items 1(a) 

and 1(e)); KCG Letter at 11–12 (noting an apparent 

overlap between the information requested under 

proposed Item 1(a) and proposed Item 1(e) and 

recommending that the Commission revisit and 

clarify the request). 

845For example, if an NMS Stock ATS has a 

practice of excluding subscribers that do meet 

certain percentage thresholds for submitting firmup orders in response to receiving a conditional 

order sent to them by the NMS Stock ATS, then this 

practice would be subject to disclosure under Part 

III, Item 3 of adopted Form ATS–N (‘‘Exclusion 

from Services’’) and not Part III, Item 2 (‘‘Eligibility 

Requirements’’). 

846See infra notes 855–857 and accompanying 

text. 

will help market participants discern 

any benefit or disadvantage they may 

receive in comparison to other market 

participants or the broker-dealer 

operator. 

1. Types of ATS Subscribers 

Part IV, Item 1(c) of proposed Form 

ATS–N would have required disclosures 

about types of subscribers to the NMS 

Stock ATS. We are adopting Part IV, 

Item 1(c) of proposed Form ATS–N with 

modifications as Part III Item 1 (‘‘Types 

of Subscribers’’) of adopted Form 

ATS–N.836 Part III, Item 1 of adopted 

Form ATS–N is designed to provide 

market participants with information 

about the type of order flow in the NMS 

Stock ATS. NMS Stock ATSs may 

design their system for trading by retail, 

institutional, or any other type of market 

participant. 

One commenter recommends that the 

Commission consider eliminating or 

consolidating this request because it is 

redundant to the request in Part IV, Item 

5 of proposed Form ATS–N regarding 

segmentation.837 In response to this 

comment, we are removing the 

requirement from Part IV, Item 1(c) of 

proposed Form ATS–N to ‘‘describe any 

criteria for distinguishing among types 

of subscribers, classes of subscriber, or 

other persons.’’ To the extent that an 

NMS Stock ATS distinguishes among 

ATS subscribers, the ATS will be 

required to discuss such information in 

Part III, Item 13 of adopted Form ATS– 

N, which relates to segmentation. 

Another commenter believes that the 

phrase ‘‘types of subscribers’’ should be 

specifically defined.838 In response to 

this comment, we are providing a list of 

market participants in Part III, Item 1 of 

adopted Form ATS–N that, in the 

Commission’s experience, are 

commonly used. The revised list 

includes: Retail investors, issuers, asset 

managers, brokers, dealers, NMS Stock 

ATSs, investment companies, hedge 

funds, market makers, principal trading 

firms, and banks. The list is nonexhaustive and an NMS Stock ATS is 

required to list any type of subscriber 

that can use the NMS Stock ATS 

services. Also, in response to this 

comment, we are revising Part IV, Item 

1(c) of proposed Form ATS–N, by 

removing the request to describe the 

type of subscribers and other persons 

and instead, are only requesting that the 

NMS Stock ATS select the checkbox for 

the types of subscribers that can use the 

NMS Stock ATS services (and identify 

any other types of subscribers not listed 

in a checkbox). We are also revising the 

Item to require the selection of the types 

of subscribers that ‘‘can’’ use the NMS 

Stock ATS services, rather than solely 

those types of subscribers that in fact 

use the NMS Stock ATS as was 

proposed. 

Furthermore, in response to general 

comments that the Form ATS–N should 

be formatted to facilitate comparisons 

across NMS Stock ATSs,839 we are 

relocating Part IV, Item 1(c) of proposed 

Form ATS–N into a separate Item in 

Part III, Item 1 of adopted Form 

ATS–N and naming it ‘‘Types of ATS 

Subscribers.’’ 840

2. Eligibility for ATS Services 

Part IV, Item 1(a) of proposed Form 

ATS–N would have required disclosures 

about eligibility requirements of the 

NMS Stock ATS.841 We are adopting 

Part IV, Item 1(a) of proposed Form 

ATS–N with certain modifications 

described below, naming the Item 

‘‘Eligibility for ATS Services,’’ and 

relocating the request as Part III, Item 2 

of adopted Form ATS–N.842

We also received comment seeking 

modifications to the proposed Item. One 

commenter suggests that the term 

‘‘eligibility requirements’’ under Part IV, 

Item 1(a) of proposed Form ATS–N is 

unclear and suggests using eligibility 

‘‘standards’’ as a more accurate way to 

capture the various subscriber criteria 

an ATS might evaluate.843 In response 

to this comment, we are replacing the 

reference to ‘‘eligibility requirements’’ 

in Part IV, Item 1(a) of proposed Form 

ATS–N with a reference to ‘‘conditions’’ 

the NMS Stock ATS requires a person 

to satisfy before accessing the ATS 

services. We believe that the term 

‘‘conditions’’ provides the NMS Stock 

ATS with more flexibility to describe 

the relevant criteria. 

Also, commenters express confusion 

over the difference between Part IV, 

Item 1(a) and 1(e) (adopted as Part III, 

Items 2 and 3, respectively) of proposed 

Form ATS–N and whether they 

overlapped.844 In response to these 

commenters, we are clarifying the 

request by adding the phrase ‘‘before 

accessing the ATS services’’ in Part III, 

Item 2(b) of adopted Form ATS–N. On 

the other hand, Part III, Item 3 of 

adopted Form ATS–N, as discussed 

infra, requires disclosures about any 

conditions that would exclude a 

subscriber, in whole or in part, from 

using the services of the NMS Stock 

ATS after the person, as a subscriber, is 

permitted to use or submit orders to the 

NMS Stock ATS, such as for certain 

subscriber behavior while actively 

participating in the ATS.845

We are not imposing new 

requirements for NMS Stock ATSs to 

have certain eligibility requirements, 

either by implicating the fair access rule 

under Rule 301(b)(5) (as suggested by a 

commenter), or otherwise.846 The ‘‘yes’’ 

or ‘‘no’’ questions of Part III, Item 2(b) 

of adopted Form ATS–N ask whether 

there are any conditions that the NMS 

Stock ATS requires a person to satisfy 

before accessing the ATS services. If an 

NMS Stock ATS marks ‘‘yes,’’ the ATS 

is indicating that it has such conditions 

and must list and provide a summary of 

the conditions. We believe that these 

revisions make clear that we are not 

requiring any eligibility requirements. 

In Part III, Item 2(a) of adopted Form 

ATS–N, we are requiring the NMS Stock 

ATS to state whether it requires 

subscribers to be registered brokerdealers. This request is similar to the 


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847We are removing the reference to ‘subscriber’ 

from the Item, as proposed, because Part III, Item 

2 of adopted Form ATS–N relates to eligibility 

requirements of persons before they become 

subscribers. 

848See UBS Letter at 7. See infra note 853 and 

accompanying text. 

849See id. 

850See, e.g., SIFMA Letter at 5–6 (stating whether 

all subscribers have access to the same suite of 

products and services is particularly appropriate 

and useful); Fidelity Letter at 5 (stating it should be 

disclosed when subscribers are not treated the same 

way); UBS Letter at 7 (suggesting the Commission 

request should highlight differences in subscriber 

access that may impact other users of the ATS). See 

also Consumer Federation of America Letter at 9– 

10 (discussing how to address potential advantages 

of the broker-dealer operator and its affiliates). 

851See Liquidnet Letter at 12; UBS Letter at 7; 

SIFMA Letter at 19. 

852We are moving the provision in Part IV, Item 

1(b) of proposed Form ATS–N, which would have 

required that the NMS Stock ATS state whether the 

contractual agreements for granting access to the 

NMS Stock ATS were written, to Part III, Item 2(d) 

of adopted Form ATS–N. Part III, Item 2(d) asks a 

‘‘yes’’ or ‘‘no’’ question on whether subscribers are 

required to enter a written agreement to use the 

services of the NMS Stock ATS. 

853See UBS Letter at 7. 

854See SIFMA Letter at 20. 

855 Id. at 19–20. 

856See 17 CFR 242.300(a)(2). 

proposed request in Part IV, Item 1(c) of 

proposed Form ATS–N but asked in a 

‘‘yes’’ or ‘‘no’’ format. Part III, Items 2(c) 

and 2(d) of adopted Form ATS–N are 

requirements proposed in Part IV, Item 

1(a) 847 and 1(b), respectively, of 

proposed Form ATS–N, that the 

Commission is formatting as ‘‘yes’’ or 

‘‘no’’ questions. 

If the NMS Stock ATS indicates that 

it does have conditions that a person 

must satisfy before accessing the ATS 

services, the request, as modified, 

requires an NMS Stock ATS to list and 

provide a ‘‘summary’’ of those 

conditions. We believe a summary of 

those conditions would provide 

sufficient disclosure (in conjunction 

with Part III, Item 1 of adopted Form 

ATS–N) for market participants to 

discern the type of order flow that they 

are likely to interact with on the NMS 

Stock ATS, while at the same time, not 

impairing the ATS’s ability to 

reasonably control the activities and 

quality of flow on its platform.848 One 

commenter acknowledges that it already 

discloses the general requirements for 

becoming a user of its ATS,849 which is 

analogous to the summary of conditions 

we are adopting in this Item. Moreover, 

we believe that requiring additional 

disclosures about differences in 

treatment among persons is important to 

market participants.850

We also received comment 

unfavorable to Part IV, Item 1(b) of 

proposed Form ATS–N.851 The 

proposed Item would have required an 

NMS Stock ATS to describe the terms 

and conditions of any contractual 

agreements for granting access to the 

NMS Stock ATS for the purpose of 

effecting transactions in securities or for 

submitting, disseminating, or displaying 

orders on the NMS Stock ATS, and to 

state whether these contractual 

agreements are written and if the terms 

and conditions of any contractual 

agreements were not the same for all 

subscribers and persons, the NMS Stock 

ATS would be required to describe any 

differences. 

We are not adopting the provision 

requiring the disclosure of the terms and 

conditions of any contractual 

agreements in Part IV, Item 1(b) of 

proposed Form ATS–N.852 We believe 

that the Form ATS–N, as adopted, 

requires comprehensive disclosure on 

the principal aspects of the operations 

of NMS Stock ATSs and any differences 

in the treatment of subscribers and the 

broker-dealer operator. We believe that 

a description of the terms of any 

contractual agreements is unlikely to 

provide much, if any, further 

information about the ATS’s operations 

that is not already required to be 

disclosed in the other items of Form 

ATS–N and would likely impose a 

significant burden. 

3. Exclusion From ATS Services 

Part IV, Item 1(e) of proposed Form 

ATS–N would have required disclosures 

about limitation and denial of ATS 

services. We are adopting Part IV, Item 

1(e) of proposed Form ATS–N, with 

certain modifications discussed below, 

including adopting a ‘‘yes’’ or ‘‘no’’ 

format to questions, as Item 3 of adopted 

Form ATS–N, and naming the request 

‘‘Exclusion from ATS Services.’’ 

One commenter states that requiring 

an NMS Stock ATS to disclose 

additional details about why the ATS 

would limit or deny ATS services could 

affect the ATS’s ability to reasonably 

control the activities and quality of flow 

on its platform; the commenter suggests, 

therefore, that such disclosure remain 

confidential with the Commission.853 In 

response to this comment, we are 

adopting Part III, Item 3(a) of adopted 

Form ATS–N, as modified, to require 

the NMS Stock ATS to provide a list 

and ‘‘summary’’ of the conditions for 

excluding (or limiting) a participant 

from using the ATS, and are removing 

the requirement to describe the 

procedures or standards of the NMS 

Stock ATS that are used to determine 

whether to exclude a subscriber. We 

believe that these changes would protect 

sensitive information and prevent 

participants from using the disclosures 

to potentially misuse or game its system 

while ensuring that participants have 

the information necessary to understand 

when they may be excluded. 

Another commenter suggests that it is 

unclear whether Part IV, Item 1(e) of 

proposed Form ATS–N requests 

disclosure of instances where a 

subscriber requests not to interact with 

certain counterparties.854 We are not 

requiring in Part III, Item 3 of adopted 

Form ATS–N that the NMS Stock ATS 

disclose instances where a subscriber 

requests not to interact with certain 

counterparties. Information regarding 

counter-party selection procedures on 

the NMS Stock ATS, including where a 

subscriber requests not to interact with 

certain counterparties, is required to be 

disclosed, as applicable, in Part III, Item 

14 of adopted Form ATS–N. 

This commenter also expresses 

concern about the implications for fair 

access raised by Part IV, Item 1(e) of 

proposed Form ATS–N.855 The 

commenter assumes that the 

Commission intends that Part IV, Item 

1(e) should apply only to entities 

subject to the fair access threshold, and 

believes that entities not subject to the 

fair access rule can deny access for any 

reason. The commenter further believes 

that it is important to note that unless 

an ATS exceeds the fair access 

threshold, the ATS should be able to 

deny access for any reason (e.g., credit 

risk). This commenter requests 

clarification from the Commission if this 

interpretation is wrong to avoid later 

misunderstanding or interpretive 

conflicts. The commenter also suggests 

that Part IV, Item 1(e) of proposed Form 

ATS–N goes beyond the fair access 

requirements (to keep records of all 

grants, denials, and limitations of 

access, and to report that information), 

and states that if the Commission 

intends to replace the fair access rule 

with a different regulatory and 

disclosure regime, the Commission 

should address this issue directly. 

We are not implicating or changing 

Rule 301(b)(5) of Regulation ATS, the 

so-called fair access rule, by requiring 

NMS Stock ATSs to disclose 

information about when the ATS can 

exclude, in whole or in part, a 

subscriber from the services of the 

ATSs. Pursuant to Rule 300(a)(2) of 

Regulation ATS, an ATS cannot set 

rules governing the conduct of 

subscribers other than the conduct of 

subscribers’ trading on the system and 

cannot discipline subscribers other than 

by exclusion from trading.856 NMS 

Stock ATSs are not required to establish 

rules for excluding subscribers from 


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857See Proposal, supra note 2, at 81063. These 

limitations can result in some subscribers having 

different levels of functionality or more favorable 

terms of access than others. For example, in the 

Commission’s experience, some ATSs exclude 

subscribers that have a high percentage of not 

responding with firm-up orders after receiving an 

IOI or conditional order. 

858See SIFMA Letter at 19–20. 

859 Id. 

860See Proposal, supra note 2, at 81057. 

861 15 U.S.C. 78f(b)(2). 

862See 17 CFR 242.301(b)(5). See also supra notes 

72–75 and accompanying text (discussing the fair 

access requirements of Regulation ATS). For 

example, an ATS with at least 5% of the average 

daily volume for any covered security during four 

of the preceding six months is required to comply 

with fair access requirements under Rule 301(b)(5) 

of Regulation ATS, which, among other things, 

require an ATS to establish written standards for 

granting access to trading on its system and not 

unreasonably prohibit or limit any person with 

respect to access to services offered by the ATS by 

applying the written standards in an unfair or 

discriminatory manner. Thus, for example, an ATS 

that discloses a service to one class of subscribers 

(or makes the associated functionality available to 

only one class of subscribers) could not, if it were 

subject to the fair access requirements, discriminate 

in this manner unless it adopted written standards 

and applied them in a fair and non-discriminatory 

manner. 

863See, e.g., In the Matter of ITG Inc. and Alternet 

Securities Inc., Securities Exchange Act Release No. 

75672 (Aug. 12, 2015), https://www.sec.gov/ 

litigation/admin/2015/33-9887.pdf (order 

instituting administrative and cease-and-desist 

proceedings, making findings, and imposing 

remedial sanctions and a cease-and-desist order); In 

the Matter of UBS Securities LLC, Securities 

Exchange Act Release No. 74060 (Jan. 15, 2015), 

http://www.sec.gov/litigation/admin/2015/33- 

9697.pdf (order instituting administrative and 

cease-and-desist proceedings, making findings, and 

imposing remedial sanctions and a cease-and-desist 

order) (‘‘UBS Settlement’’); In the Matter of 

Liquidnet, Inc., Securities Exchange Act Release No. 

72339 (Jun. 6, 2014), http://www.sec.gov/litigation/ 

admin/2014/33-9596.pdf (order instituting 

administrative and cease-and-desist proceedings, 

making findings, and imposing remedial sanctions 

and a cease-and-desist order); In the Matter of 

Pipeline Trading Systems LLC, Fred J. Federspiel, 

and Alfred R. Berkeley III, Securities Exchange Act 

Release No. 9271 (Oct. 24, 2011) (order instituting 

administrative and cease-and-desist proceedings, 

making findings, and imposing remedial sanctions 

and a cease-and-desist order), https://www.sec.gov/ 

litigation/admin/2011/33-9271.pdf; 48718 (Oct. 30, 

2003), http://www.sec.gov/litigation/admin/34- 

48718.htm (all settling violations of Section 17(a)(2) 

of the Securities Act, which prohibits, directly or 

indirectly, in the offer or sale of securities, 

obtaining money or property by means of any 

untrue statement of a material fact or any omission 

to state a material fact necessary in order to make 

the statements made, in light of the circumstances 

under which they were made, not misleading.) 15 

U.S.C. 77q(a)(2). 

864See, e.g., UBS Settlement, supra note 864 

(noting that UBS did not disclose the existence of 

a sub-penny order type to all ATS subscribers and 

that ‘‘nearly all of the subscribers’’ who received 

notice of the order type ‘‘were market makers and/ 

or HFT firms’’) and at 10 (noting that certain 

orders—those entered on behalf of UBS clients that 

paid to use UBS-developed order-routing 

algorithms—had the ability to avoid executing in 

the ATS against orders entered by subscribers that 

UBS had deemed ‘‘non-natural’’ and no other 

subscribers had the ability to use this natural-only 

crossing restriction) and Crossfinder Settlement 

supra note 96 (noting the ATS did not permit all 

subscribers to receive IOIs from the IOI server). 

using the ATS. Nevertheless, based on 

the Commission’s experience, ATSs that 

trade NMS stocks often have rules 

governing subscribers’ participation on 

the ATS, and if a subscriber fails to 

comply with these rules, the ATS may 

limit or deny access to the ATS.857 Part 

III, Item 3 of adopted Form ATS–N is 

designed to provide subscribers with 

information about when the NMS Stock 

ATS can exclude, in whole or in part, 

a subscriber from the services of the 

ATSs and help them reasonably expect 

the types of activities that may cause 

them to be excluded (or limited) from 

using the services of the NMS Stock 

ATS. 

One commenter requests guidance 

about the ability of an ATS to deny 

access pursuant to Rule 301(b)(5) of 

Regulation ATS when such ATS has not 

exceeded the fair access threshold 

requirements under Rule 301(b)(5)(i).858

This commenter expresses concern that 

Part IV, Item 1(a) (‘‘Eligibility’’) and 

Item 1(e) (‘‘Limitations and Denial of 

Services’’) of proposed Form ATS–N 

raises the specter of fair access and that 

if the Commission is seeking to change 

regulatory expectations relating to fair 

access, the Commission should do so in 

a straight forward manner and not by 

way of requiring disclosures around 

‘‘eligibility requirements.’’ We did not 

propose and are not adopting any 

change to the fair access rule under Rule 

301(b)(5) of Regulation ATS. The 

commenter appears to misconstrue the 

requirements and application of the fair 

access rule in the context of the 

proposed disclosure requirements of 

Part IV, Item 1 of proposed Form ATS– 

N, and we believe it is important, in 

response to the commenter’s request for 

clarification if its interpretation is 

wrong, to further explain the operation 

of the fair access rule ‘‘to avoid later 

misunderstanding or interpretive 

conflicts. ’’859 In the Proposal, we 

discussed that a significant difference 

between national securities exchanges 

and NMS Stock ATSs is the extent to 

which each trading center allows access 

to its services by its users.860 Section 

6(b)(2) of the Exchange Act generally 

requires national securities exchanges to 

allow any qualified and registered 

broker-dealer to become a member of 

the national securities exchange—a key 

element in assuring fair access to 

national securities exchange services.861

In contrast, the access requirements that 

apply to ATSs are much more limited. 

Because NMS Stock ATSs are exempt 

from the definition of an ‘‘exchange’’ so 

long as they comply with Regulation 

ATS, and thus, are not required to 

register as a national securities exchange 

pursuant to Section 6 of the Exchange 

Act, NMS Stock ATSs are not required 

to provide fair access unless they reach 

a 5% trading volume threshold in a 

stock, which almost all NMS Stock 

ATSs currently do not.862 As a result, 

ATSs may treat subscribers differently 

with respect to the services offered by 

the ATS unless prohibited by applicable 

federal securities laws or the rules and 

regulations thereunder. Furthermore, 

even if an ATS is not subject to the fair 

access requirements, inaccurate or 

misleading disclosures about an ATS’s 

operations could result in violations of 

the antifraud provisions of the federal 

securities laws.863

In this rulemaking, we are requiring 

NMS Stock ATSs to identify and 

explain on Form ATS–N any instances 

where the ATS differs in how it treats 

subscribers and the broker-dealer 

operator so market participants can have 

additional information to consider when 

evaluating an ATS. More favorable 

service or pricing for certain ATS 

subscribers necessarily implies less 

favorable service or pricing for 

others.864 We believe that it is 

consistent with the goals of operational 

transparency for subscribers that receive 

less favorable service or pricing than 

other subscribers to know that fact. 

These subscribers will thus have better 

information to assess whether they 

should continue to trade on the ATS 

despite their different treatment or, if 

they do continue to trade on the ATS, 

whether they should alter their behavior 

in any way to better protect their 

interests. Part III, Items 2 and 3 of 

adopted Form ATS–N do not limit an 

NMS Stock ATS’s ability to discriminate 

among different subscribers. To the 

extent that an NMS Stock ATS is subject 

to the fair access rule under Rule 

301(b)(5) and treats subscribers 

differently, the NMS Stock ATS must 

comply with the requirements of Rule 

301(b)(5) with respect to its treatment of 

subscribers. If an NMS Stock ATS elects 

to treat subscribers differently by 

creating types or levels of eligibility and 

exclusion requirements, Part III, Items 2 

and 3 of adopted Form ATS–N require 

an NMS Stock ATS to ‘‘identify and 

explain any differences,’’ which is 

similar to the vast majority of items on 

Form ATS–N. 

We are adopting Part III, Item 3 of 

Form ATS–N with certain language to 

reduce potential confusion with the 

application of Rule 301(b)(5) of 

Regulation ATS. As indicated above, to 

meet the definition of an ATS, a system 


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865See 17 CFR 242.300(a). 

866See supra note 855 and accompanying text. 

Part III, Item 25 of adopted Form ATS–N (‘‘Fair 

Access’’) is specifically designed to require an NMS 

Stock ATS, as applicable, to provide information in 

connection with Rule 301(b)(5) of Regulation ATS. 

See also Section V.D.25. 

867We are also modifying this request to require 

the times when trading interest can be entered on 

the ATS, as opposed to identifying the times trading 

interest is entered, so as to more precisely indicate 

when the ATS is available for the entry of trading 

interest. We are replacing references to pre-opening 

and after-hours with the more general reference to 

hours of operation ‘‘outside of regular trading 

hours.’’ 

868See SIFMA Letter at 15. 

869See id. at 22. 

870See Proposal, supra note 2, at 81068. 

871To the extent that a subscriber connects to the 

NMS Stock ATS by way of a FIX connection and 

an order sent by that subscriber passes through an 

intermediate application or functionality on its way 

to the ATS, the ATS must identify the application 

or functionality and provide a description of its 

purpose. In this example, given that the 

intermediate application or functionality has access 

to a subscriber’s order information, the NMS Stock 

ATS must take appropriate measures to protect the 

confidentiality of such information pursuant to 

Rule 301(b)(10) of Regulation ATS. 

must not discipline subscribers other 

than by exclusion from trading. 865 The 

language in Part III, Item 3 of adopted 

Form ATS–N now uses ‘‘exclude, in 

whole or in part,’’ which is similar to 

language used in the definition of ATS 

in Rule 300(a)(2), rather than using the 

term ‘‘limitations and denials of 

services,’’ as used in Part IV, Item 1(e) 

of proposed Form ATS–N. We recognize 

that exclusions from services, in whole 

or in part, are functionally equivalent to 

limitations and denials of services; 

however, we believe that the 

elimination of these terms from Part III, 

Item 3 of adopted Form ATS–N should 

mitigate any potential confusion that we 

are implicating Rule 301(b)(5) in the 

request.866

4. Hours of Operations 

Part IV, Item 2 of proposed Form 

ATS–N would have required disclosures 

about the hours of operations. We did 

not receive comment on Part IV, Item 2 

of proposed Form ATS–N. We are 

adopting the Item with modifications as 

Part III, Item 4 (‘‘Hours of Operations’’) 

of adopted Form ATS–N, as discussed 

below. We continue to believe that it is 

important for market participants and 

the Commission to understand when an 

NMS Stock ATS operates and when 

orders can be entered, including when 

an NMS Stock ATS will accept orders 

outside of regular trading hours. Making 

such information publicly available 

would enable market participants to 

more easily compare when trading 

interest can be entered on NMS stock 

trading centers. We are modifying the 

example provided in this Item by 

replacing references in the Proposal to 

hours when ‘‘pre-opening or after-hours 

trading occurs’’ (emphasis added) with 

‘‘hours of operation outside of regular 

trading hours.’’ Our intent is to provide 

market participants with information 

about when the NMS Stock ATS is 

operating, whether trading or 

performing another function, such as 

accepting orders, and not simply when 

trading is occurring.867

5. Means of Entry 

In Part III, Item 6 of proposed Form 

ATS–N we proposed a similar request to 

Part IV, Item 4(a) of proposed Form 

ATS–N that focused on the activities of 

the broker-dealer operator and its 

affiliates. Part III, Item 6 of proposed 

Form ATS–N would have required 

disclosures about the broker-dealer 

operator’s, or any of its affiliates’, use of 

a SOR(s) (or similar functionality) or an 

algorithm. Part IV, Item 4(a) of proposed 

Form ATS–N would have required 

disclosures about connectivity and 

order entry to the NMS Stock ATS. We 

are adopting both requests with 

modifications and combining them into 

Part III, Item 5 (‘‘Means of Entry’’) of 

adopted Form ATS–N. 

One commenter asserts that the 

information sought in Part III, Item 6 of 

proposed Form ATS–N is generally 

duplicative of the requests in Part III, 

Item 3 (‘‘Products or Services Offered to 

Subscribers’’) and Part III, Item 5 

(‘‘Trading Activities on the NMS Stock 

ATS’’) of proposed Form ATS–N and 

that the requests in Part III, Item 6 of 

proposed Form ATS–N (‘‘Smart Order 

Router (‘SOR’) (or Similar Functionality 

of Algorithm)’’) should be either 

consolidated into those requests or 

eliminated altogether.868 To reduce 

redundancy, we are combining the 

proposed requests for information as 

explained above. 

With regard to Part IV, Item 4(a) of 

proposed Form ATS–N, one commenter 

states that the requirement to ‘‘describe’’ 

the means of connectivity by ‘‘other 

persons’’ is potentially overbroad— 

particularly for ATSs with affiliated 

broker-dealers or other business units 

that may connect directly or indirectly 

to the ATS.869 This commenter suggests 

that Part IV, Item 4(a) conflates the 

identities of market participants 

(subscribers and other persons) with the 

means of connectivity. The commenter 

submits that end users would be better 

served by a table identifying the various 

means of connectivity without respect 

to the identities of who connects and in 

which fashion. 

In response to this comment, Part III, 

Item 5 of adopted Form ATS–N first 

requires an NMS Stock ATS to identify 

and explain the protocol that can be 

used to directly enter orders and trading 

interest into the ATS. In a separate 

subpart to Part III, Item 5 of adopted 

Form ATS–N, the NMS Stock ATS must 

identify and explain any other means 

for entering orders and trading interest 

into the NMS Stock ATS (e.g., smart 

order router, algorithm, order 

management system, sales desk) and 

indicate whether these means are 

provided by the broker-dealer operator, 

either by itself or through a third-party 

contracting with the broker-dealer 

operator, or any affiliate of the brokerdealer operator. Both of these subparts 

are followed, respectively, by a request 

to identify and explain any differences 

in the terms and conditions for these 

means of entry among subscribers and 

the broker-dealer operator. We believe 

that these changes will better 

distinguish subject matter regarding 

means of entry from subject matter 

regarding the identity of any party 

offering access to such means of entry. 

We note that subscribers may submit 

orders or trading interest to the NMS 

Stock ATS both directly and 

indirectly.870 A direct method of 

sending orders or trading interest to an 

ATS that trades NMS stocks, for 

example, may include the use of the FIX 

Protocol. The FIX Protocol allows 

subscribers to enter orders or trading 

interest into the ATS without an 

intermediary. An example of an indirect 

method of submitting orders or trading 

interest to an NMS Stock ATS would 

include the use of the broker-dealer 

operator’s SOR (or similar functionality) 

or algorithm. SORs (or similar 

functionalities) and algorithms are 

discussed further below. The means of 

order entry into an ATS (e.g., direct or 

indirect) could impact the speed in 

which a subscriber’s order is handled 

and potentially executed and potentially 

increases the risk of information 

leakage.871 We believe that the 

disclosures regarding the direct or 

indirect means of order entry would 

inform subscribers and market 

participants about the functionalities 

that its orders and trading interest pass 

through on their way to the ATS and 

help them assess any potential 

advantages that orders sent through the 

broker-dealer operator may have with 

respect to other subscribers on the NMS 

Stock ATS. 

We also received several other 

comments on the request for 

information in Part III, Item 6 of 

proposed Form ATS–N, which as 


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872See Schneiderman Letter at 1; HMA Letter at 

17; STA Letter at 5; Liquidnet Letter at 9; KCG 

Letter at 10. 873See STA Letter at 5; Liquidnet Letter at 9; 

STANY Letter at 4; SIFMA Letter at 15. 

874See STA Letter at 5; STANY Letter at 4. 

875See Liquidnet Letter at 9. 

876For example, a broker-dealer operator that 

uses its SOR to both enter customer orders into its 

ATS and send customer orders to external trading 

venues would not be required to disclose how its 

SOR is programmed to decide how to route those 

orders. The NMS Stock ATS would be required to 

disclose whether the broker-dealer operator’s SOR 

is a means for entering client orders and, if so, 

indicate whether these means are provided by the 

broker-dealer operator, either by itself or through a 

third-party contracting with the broker-dealer 

operator, or through an affiliate of the broker-dealer 

operator, and list and provide a summary of the 

terms and conditions for entering orders or trading 

interest into the ATS through these means. 

877See Luminex Letter at 3. 

878See id. at 4. 

879The Commission is not requiring a reporting 

regime with precise latencies calculated for each 

means of entry. But see Healthy Markets Letter at 

19–20 (requesting that the Commission adopt 

annual reporting requirements regarding the latency 

of certain data on ATSs). Rather, the response to 

Item 5(b) would provide market participants with 

an appreciation of relative differences in the speed 

of order entry through the alternative means 

offered. 

880See Proposal, supra note 2 at 81052. 

881See id. 

882See id. 

explained above, have been 

incorporated into Part III, Item 5 of 

adopted Form ATS–N. Many 

commenters express general support for 

public disclosures about an NMS Stock 

ATS’s use of the broker-dealer 

operator’s or its affiliates’ SORs or 

algorithms.872

Some commenters, however, express 

concern that Part III, Item 6 of proposed 

Form ATS–N would require the NMS 

Stock ATS to publicly disclose 

proprietary information about its SOR 

and/or algorithms.873 Two commenters 

believe that disclosing the information 

required under proposed Part III, Item 6 

would harm broker-dealers that operate 

an NMS Stock ATS to the benefit of 

broker-dealers that do not, who would 

not be required to disclose what the 

commenter considers to be proprietary 

information.874 Similarly, another 

commenter believes that it is not 

necessary to require disclosure of how 

the SOR or algorithm interacts with any 

ATS operated by third-party operators; 

the commenter states that requiring that 

type of disclosure would impose a 

disclosure obligation on ATS operators 

that is not imposed on competing 

broker-dealers that do not operate an 

ATS.875

We did not intend for the proposed 

requests regarding SORs (or other 

functionalities) and algorithms used by 

the broker-dealer operator or its 

affiliates to enter orders or trading 

interest into an NMS Stock ATS to 

mandate the public disclosure of 

information that could place the brokerdealer operator or its affiliates at a 

competitive disadvantage with other 

broker-dealers. To clarify the scope of 

the adopted disclosure requirements, 

Part III, Item 5(c) of adopted Form 

ATS–N no longer contains the proposed 

language ‘‘[d]escribe the interaction and 

coordination.’’ Rather, Part III, Item 5(c) 

only requires the NMS Stock ATS to 

‘‘list and explain’’ sources of order flow 

other than those used for direct entry 

into the ATS, which could include 

SORs or algorithms offered by the 

broker-dealer operator. Furthermore, the 

adopted disclosure requirements only 

require the NMS Stock ATS to ‘‘list and 

provide a summary description of the 

terms and conditions for entering orders 

or trading interest into the ATS’’ 

through these sources. This revised 

language is intended to clarify that the 

NMS Stock ATS need not provide a 

detailed description of the programming 

for its SOR (or other similar 

functionality), algorithms, or other nondirect means for entering order and 

trading interests that could put the ATS 

at a competitive disadvantage with 

competitors. For example, NMS Stock 

ATSs need not disclose their SORs’ 

routing tables or other information 

about how the SOR may route orders.876

Another commenter states that there 

are numerous questions in the proposed 

Form ATS–N that would require ATS 

operators ‘‘to act as de facto agents of 

the SEC’’ by asking the ATS operators 

to seek information relating to the 

operations of certain trading algorithms 

or SORs that the ATS operators have 

nothing to do with and may be blocked 

via firm information barriers from 

knowing anything about.877 This 

commenter opines that ATS operators 

should properly be asked about how 

their ATSs work, and that information 

should be made available to all market 

participants, but if the Commission 

wants ATS operators to disclose 

whether they give preferential treatment 

to orders from affiliates at the expense 

of other ATS customers, or if they give 

preferential treatment to anyone else 

that isn’t an affiliate over other ATS 

customers, then the Commission should 

pose that specific question and require 

a specific answer.878 This commenter 

continues to state that anything beyond 

that which is of regulatory interest to 

the Commission with respect to how 

trading algorithms or smart order 

routers interact with ATSs generally or 

with other market centers should be 

asked of the firms that own or operate 

those algorithms or smart order routers. 

We agree that it is outside of the scope 

of this rulemaking for us to require NMS 

Stock ATSs to obtain detailed 

information about how the SORs and 

algorithms of third parties operate when 

such information does not pertain to the 

operation of the ATS. However, if an 

affiliate of the broker-dealer operator 

provides a means of entry into the ATS 

for its customers or its principal orders, 

we believe that market participants 

should understand certain details about 

the interaction between that affiliate and 

the ATS, which are solicited in Part III, 

Item 6, to properly evaluate potential 

conflicts of interest and information 

leakage on the ATS. 

For example, among the advantages 

and disadvantages that market 

participants should be able to discern 

from the disclosure of Part III, Item 5(b) 

is any differences in the latency of the 

alternative means for entering orders 

and trading interest into the NMS Stock 

ATS. We understand that alternative 

means of entering orders and trading 

interest may have different latencies 

associated with each alternative. For 

instance, in some cases, a direct 

connection to the NMS Stock ATS may 

have reduced latencies as compared to 

indirect means where orders and trading 

interest pass through an intermediate 

functionality. Alternatively, a brokerdealer operator could, for example, 

configure the NMS Stock ATS to 

provide reduced latencies for certain 

means of order entry used by itself or its 

affiliates, such as through a SOR or 

algorithm.879

We also believe that it is important for 

subscribers and market participants to 

understand a means of entry provided 

by an affiliate, such as the use of an 

affiliate’s SOR, even if it does not 

provide an advantage to a particular 

entity. Specifically, we continue to 

believe that disclosures about a brokerdealer operator’s use of its or an 

affiliate’s SOR (or similar functionality) 

or algorithms to enter orders into the 

NMS Stock ATS are important to market 

participants when evaluating NMS 

Stock ATSs.880 Today, most brokerdealers that operate an NMS Stock ATS 

use some form of SOR (or similar 

functionality) in connection with the 

NMS Stock ATS.881 A SOR (or similar 

functionality) can generally be 

understood as an automated system 

used to route orders or trading interest 

among trading centers, including 

trading centers other than the NMS 

Stock ATS operated by the broker-dealer 

operator, to carry out certain trading 

instructions or strategies of a brokerdealer.882 SORs (or similar 


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883See id. 

884See id. See also Staff of the Division of 

Trading and Markets, Commission, ‘‘Equity Market 

Structure Literature Review, Part II: High Frequency 

Trading,’’ at 5 (March 18, 2014), http://

www.sec.gov/marketstructure/research/hft_lit_

review_march_2014.pdf. 

885See Proposal, supra note 1, at 81052. 

886See id. Broker-dealer operators are likely to 

vary in their organizational structures. Accordingly, 

Part III, Item 5 of adopted Form ATS–N will include 

third parties that contract with the broker-dealer 

operator and affiliates of the broker-dealer operator 

that may operate a SOR(s) (or similar functionality) 

or algorithm to help ensure that SORs (or similar 

functionalities) or algorithms used with the NMS 

Stock ATSs are disclosed regardless of whether the 

SOR(s) (or similar functionality) or algorithm(s) is 

operated by a third-party contracting with the 

broker-dealer operator or an affiliate of the brokerdealer operator. 

887We stated in adopting Regulation ATS that we 

‘‘will attribute the activities of a trading facility to 

a system if that facility is offered by the system 

directly or indirectly’’ and ‘‘if an organization 

arranges for separate entities to provide different 

pieces of a trading system, which together meet the 

definition contained in paragraph (a) of Rule 3b–16, 

the organization responsible for arranging the 

collective efforts will be deemed to have established 

a trading facility.’’ See Regulation ATS Adopting 

Release, supra note 3, at 70852. 

888See Proposal, supra note 2, at 81053. 

889 In this example, if the SOR(s) (or similar 

functionality) or algorithm(s) were operated by an 

affiliate of the NMS Stock ATS or an entity 

unaffiliated with the NMS Stock ATS, the SOR(s) 

(or similar functionality) or algorithm(s) could still 

be considered a part of the NMS Stock ATS 

depending on the facts and circumstances. 

890See STA Letter at 5. 

functionalities) have become an integral 

part of the business of many multiservice broker-dealers, given the 

increase in the speed of trading in 

today’s equity markets and the large 

number of trading centers, including 

national securities exchanges, ATSs, 

and non-ATS trading centers, that have 

emerged since the adoption of 

Regulation ATS 883 In addition to the 

SOR (or similar functionality), orders or 

trading interest may be entered on an 

NMS Stock ATS through the use of a 

trading algorithm, which is a computer 

assisted trading tool that, for instance, 

may be used by or on behalf of 

institutional investors to execute orders 

that are typically too large to be 

executed all at once without excessive 

price impact, and divide the orders into 

many small orders that are fed into the 

marketplace over time.884

As discussed in the Proposal, we 

believe that market participants would 

benefit from increased disclosures about 

the use of a SOR(s) (or similar 

functionality) or algorithm(s) by the 

broker-dealer operator or its affiliates in 

connection with the NMS Stock ATS 

because of the potential for information 

leakage.885 As also discussed in the 

Proposal, broker-dealer operators of 

NMS Stock ATSs or their affiliates may 

use SORs (or similar functionality) or 

algorithms in a variety of ways.886 For 

example, the broker-dealer operator may 

use the SOR (or similar functionality) to 

route their agency and principal orders 

to different trading venues, or the 

broker-dealer operator may use the SOR 

as the primary means of routing 

subscriber orders or trading interest to 

or from the NMS Stock ATS. We 

understand that for some ATSs that 

currently transact in NMS stocks, the 

SOR (or similar functionality) or 

algorithm of the broker-dealer operator 

or its affiliates is the only means of 

access (i.e., all orders or trading interest 

entered on, or removed from, the ATS, 

must pass through the SOR (or similar 

functionality) or algorithm). A brokerdealer operator may also use a SOR (or 

similar functionality) or algorithm to 

handle all order flow received by the 

broker-dealer operator (or its affiliates), 

including both orders that a subscriber 

has specifically directed to the NMS 

Stock ATS and orders that may not be 

sent to the NMS Stock ATS, as well as 

the broker-dealer’s own principal orders 

and those of its affiliates. For many 

orders, the SOR (or similar 

functionality) or algorithm determines 

whether to route the order to the NMS 

Stock ATS, another ATS or a non-ATS 

trading center operated by the brokerdealer operator, another broker-dealer, 

an unaffiliated NMS Stock ATS, or a 

national securities exchange. The SOR 

(or similar functionality) may obtain 

knowledge of subscriber orders or 

trading interest that have been routed to 

the NMS Stock ATS (and may now be 

resting on the NMS Stock ATS) and 

subscriber orders that have been routed 

out of the NMS Stock ATS. Similarly, 

the system operating an algorithm used 

by the broker-dealer operator to enter 

subscriber orders based on the 

algorithm’s trading strategy may obtain 

information about subscriber orders sent 

to the NMS Stock ATS. The brokerdealer operator (or its affiliates) 

programs and operates the SOR (or 

similar functionality) and/or 

algorithm(s), unless the broker-dealer 

operator contracts such functions to a 

third-party vendor, in which case the 

broker-dealer operator or third-party 

vendor may have access to information 

that passes through the SOR(s) (or 

similar functionality), algorithm(s) or 

both. We continue to believe that the 

high likelihood that a SOR (or similar 

functionality) or algorithm could access 

subscribers’ confidential trading 

information necessitates disclosure of 

certain information to subscribers about 

the use of a SOR (or similar 

functionality) or algorithm by the 

broker-dealer operator or its affiliates to 

route subscriber orders to or out of the 

NMS Stock ATS. 

A system may consist of various 

functionalities, mechanisms, or 

protocols that operate collectively to 

bring together the orders for securities of 

multiple buyers and sellers using nondiscretionary methods under the criteria 

of Rule 3b–16(a). In some 

circumstances, the various 

functionalities, mechanisms, or 

protocols may be offered or performed 

by another business unit of the brokerdealer operator or by a separate 

entity.887 As discussed in the Proposal, 

broker-dealer operators that use a SOR 

(or similar functionality) or algorithm 

may operate the SOR (or similar 

functionality) or algorithm separate and 

apart from their ATS.888 However, to the 

extent that a SOR (or similar 

functionality) or algorithm performs a 

function of the NMS Stock ATS to bring 

together the orders for securities of 

multiple buyers and sellers using 

established nondiscretionary methods, 

the SOR (or similar functionality) or 

algorithm may be considered part of the 

NMS Stock ATS.889 We believe that 

information provided on Form ATS–N 

about the use of a SOR (or similar 

functionality) or algorithm in Part III, 

Item 5 of adopted Form ATS–N will 

allow the Commission to better 

understand the operations and scope of 

the NMS Stock ATS. That is, the 

disclosures would assist the 

Commission in determining if a SOR (or 

similar functionality) or algorithm is 

performing a function of the NMS Stock 

ATS to bring together the orders for 

securities of multiple buyers and sellers 

using established nondiscretionary 

methods, and would consequently be 

part of the NMS Stock ATS for the 

purposes of Regulation ATS. 

Finally, some commenters suggest 

reducing the level of detail solicited in 

the proposed disclosures about the use 

of SORs (or other functionalities) or 

algorithms. One commenter suggests 

reframing the proposed requests 

regarding the use of SORs (or other 

functionality) or algorithms to ‘‘yes’’ or 

‘‘no’’ questions or attestations of ‘‘no 

advantage,’’ and in situations where the 

broker-dealer operators or its affiliates 

does have an advantage, the NMS Stock 

ATS should disclose that advantage 

publicly and in similar detail to what 

was proposed in Part III, Item 6.890

Another commenter states that if the 

Commission does not eliminate or 

consolidate Part III, Item 6 of proposed 

Form ATS–N, the commenter 


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891See SIFMA Letter at 15. The commenter also 

states that it would like the Commission to define 

‘‘Person’’ as used in proposed Part III, Item 6(b). See 

id. The term ‘‘Person’’ is defined in Form ATS–N. 

See supra Section V.A.2. 

892See KCG Letter at 10. 

893See id. 

894The commenter suggests the following two 

questions in place of proposed Item 4(b): (i) Do you 

offer co-location to the ATS matching engine, and 

(ii) do all clients have the same access to colocation services? See SIFMA Letter at 22. 

895Question 347 of the Proposal asks if Part IV, 

Item 4(b) of Form ATS–N captures the information 

that is most relevant to understanding the 

operations of the NMS Stock ATS related to colocation services or any other means by which any 

subscriber or other persons may enhance the speed 

by which to send or receive orders, trading interest, 

or messages to or from the NMS Stock ATS. See 

Proposal, supra note 2, at 81069. 

896See supra note 839. Part IV, Item 4(b) of 

proposed Form ATS–N would have required an 

NMS Stock ATS to describe ‘‘any other means by 

which any subscriber or other persons may enhance 

the speed by which to send or receive orders, 

trading interest, or messages to or from the NMS 

Stock ATS.’’ Part III, 6(c) of adopted Form ATS–N 

would require similar information as Part IV, Item 

4(b) of proposed Form ATS–N. The language 

revisions are intended to simplify and improve 

readability of the request. 

897See infra note 1037 and accompanying text. 

898See In the Matter of the Application of 

Investors’ Exchange, LLC for Registration as a 

National Securities Exchange, 81 FR 41142, 41154 

(June 23, 2016) (explaining the use of the IEX coil 

and an additional distance to the IEX trading 

system that results in an equivalent 350 

microseconds of latency) (‘‘IEX Exchange 

Registration’’); Securities Exchange Act Release No. 

Release No. 80700 (May 16, 2017), 82 FR 23381 

(May 22, 2017) (Order Approving Proposed Rule 

Change Amending Rules 7.29E and 1.1E to Provide 

for a Delay Mechanism) (approving rule change on 

NYSE MKT LLC to provide for an intentional delay 

of 350 microseconds of latency to inbound and 

outbound order messages). 

recommends focusing the requests on 

the controls within the ATS (as opposed 

to the attributes of the algorithm or 

SOR) and asking whether the algorithm 

or SOR possesses information about the 

ATS by virtue of its affiliation with the 

ATS that other algorithms or SORs do 

not possess.891 Likewise, a commenter 

states that a more granular requirement 

than progressive ‘‘yes’’ or ‘‘no’’ answers 

for Part III, Item 6 of proposed Form 

ATS would pose challenges to maintain 

up-to-date disclosures.892 This 

commenter recommends that Form 

ATS–N disclosures about potential 

trading activity on the ATS should be 

formatted as progressive ‘‘yes’’ or ‘‘no’’ 

questions and that certain Form ATS–N 

disclosures may be subject to immediate 

change without notice.893

We do not believe that the requests 

about the means for entering orders and 

trading interests on the NMS Stock ATS 

will be overly burdensome to keep upto-date on Form ATS–N because the 

requests do not require a level of detail 

that would mandate an amendment for 

every programming change to these 

services, such as an update to the 

routing table. Furthermore, to the extent 

that an NMS Stock ATS is unable to use 

a means for entering order and trading 

interests due to unexpected 

circumstances, such as a power failure 

or act of nature, the NMS Stock ATS 

could state in its Form ATS–N 

information about the alternative 

procedures that the ATS would use for 

the entry of orders and trading interests 

into the NMS Stock ATS under such 

exigent circumstances; this would 

obviate the need for an amendment 

when such alternative procedures are 

used. Finally, as explained in detail 

above, we believe that the information 

solicited in adopted Form ATS–N about 

the use of SORs (or similar 

functionalities) or algorithms by the 

ATS is very important for market 

participants when evaluating potential 

conflicts of interest on the ATS, so we 

do not think it would be helpful to 

reduce the level of detail required by the 

adopted form as suggested by these 

commenters. 

6. Connectivity and Co-Location 

Part IV, Item 4(b) of proposed Form 

ATS–N would have required disclosures 

about co-location. We are adopting Part 

IV, Item 4(b) of proposed Form ATS–N, 

with modifications, and renumbering 

the request as Part III, Item 6 

(‘‘Connectivity and Co-location’’) of 

adopted Form ATS–N. 

A commenter recommends that the 

Part IV, Item 4(b) co-location request 

could be reworded as two ‘‘yes’’ or ‘‘no’’ 

questions, provides recommended 

questions, and states that any further 

information requested should be as 

simple and direct as possible without 

requiring detailed, idiosyncratic 

information in the form.894 In response 

to this comment, we have circumscribed 

the description of terms and conditions 

of co-location services and are requiring 

‘‘a summary’’ of the terms and 

conditions for co-location and related 

services, including the speed and 

connection (e.g., fiber, copper) options 

offered. We believe a summary would 

provide market participants with the 

necessary information to consider and 

evaluate the co-location and related 

services the NMS Stock ATS is offering 

without requiring overly burdensome 

disclosure. We do not believe that solely 

asking ‘‘yes’’ or ‘‘no’’ questions (with no 

obligation to provide additional detail) 

would provide market participants with 

sufficient information to evaluate the 

co-location services the NMS Stock ATS 

is offering. For example, a pricesensitive market participant may not 

want to participate on an ATS that 

offers co-located subscribers certain, 

more expensive, high-speed 

connectivity options that the market 

participant may perceive as providing 

an advantage to other subscribers that 

are willing to pay for the service. Such 

information would not be disclosed by 

‘‘yes’’ or ‘‘no’’ questions. 

We are reformatting the question 

regarding connectivity and co-location 

in Part III, Item 6 of adopted Form ATS– 

N to provide two sub-items that relate 

to speed of communication with the 

ATS, which were requested in Part IV, 

Item 4(b) of proposed Form ATS–N. As 

adopted, Part III, Item 6(c) of Form 

ATS–N requires an NMS Stock ATS to 

indicate whether it provides any other 

means besides co-location and related 

services described in the Item to 

increase the speed of communication 

with the ATS, and if so, to explain the 

means and offer a summary of the terms 

and conditions for its use.895 We 

separated the proposed request for 

information related to means to increase 

the speed of communication with the 

ATS into its own separate sub-item (i.e., 

Part III, Item 6(c)) to improve 

readability, make the information easier 

to locate, and facilitate comparisons 

across NMS Stock ATSs.896 We believe 

the request is necessary to account for 

advances in technology. 

We also are adopting a request in Part 

III, Item 6(e) for the NMS Stock ATS to 

indicate whether it offers any means to 

reduce the speed of communication 

with the ATS and provide a summary of 

the terms and conditions for its use. As 

indicated by commenters,897 latency is 

an important feature of equity market 

trading, and market participants are 

interested in understanding the 

functionalities employed by NMS Stock 

ATSs to influence it. There have been 

recent developments in equity market 

structure for trading centers to employ 

mechanisms to increase the latency or 

the length of time for orders, trading 

interest, or other information to travel 

from a user to the system.898 Part IV, 

Item 7(a) of proposed Form ATS–N 

required an NMS Stock ATS to disclose 

information about the means or facilities 

used by the ATS to bring together the 

orders of multiple buyers and sellers, as 

well as the established, nondiscretionary methods that dictate the 

terms of trading on the ATS. To the 

extent that an NMS Stock ATS applied 

a functionality or means for the ATS or 

a subscriber to decrease speed of 

communications with the NMS Stock 

ATS, the ATS would have been required 

to disclose that functionality in 

response to Part IV, Item 7(a) of 

proposed Form ATS–N. In adopted 


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899Part IV, Item 3(c) of proposed Form ATS–N 

would have required an NMS Stock ATS to describe 

any requirements and handling procedures for 

minimum order sizes, odd-lot orders, or mixed-lot 

orders. The NMS Stock ATS would also have been 

required to describe any differences if the 

requirements and handling procedures for 

minimum order sizes, odd-lot orders, or mixed-lot 

orders were not the same for all subscribers and 

persons. As discussed further below, minimum 

order sizes, odd-lot orders, and mixed-lot orders are 

addressed in Part III, Item 8 of adopted Form ATS– 

N. 

900See ICI Letter at 7 (stating that disclosure 

would end the practice of some ATSs of disclosing 

the existence of certain order types to only favored 

subscribers and provide long term benefits by 

allowing funds to optimize their order routing 

practices); SIFMA Letter at 6 (suggesting the 

proposed Item requires useful information for 

market participants, whose investments may be 

traded indirectly on ATSs via their third-party 

broker-dealers). See also Citadel Letter at 1; Better 

Markets Letter at 5; Morgan Stanley Letter at 1; 

Markit Letter at 4; KCG Letter at 7. 

901See SIFMA Letter at 20–21. 

902See also Consolidated Audit Trail, Final Rule, 

Securities Exchange Act Release No. 67457 (July 18, 

2012), 77 FR 45722, 45742 (August 1, 2012) 

(declining under Rule 613 to enumerate specific 

order types or prescribing the format or nature of 

how this information would be represented to allow 

flexibility for the future when new order types may 

be introduced and added). 

903See supra note 901. 

904See SIFMA Letter at 20–21. 

905Specifically, we are removing language that 

NMS Stock ATS describe the ‘‘characteristics, 

operations, and how [order types] are handled on 

the NMS Stock ATS.’’ As indicated in the text, we 

do not view this as a substantive change, and the 

information requested using the deleted language is 

captured by the instruction to identify and explain 

each order type. 

Form ATS–N, because of commenters’ 

concerns regarding communication 

latencies with NMS Stock ATSs and the 

impact they may have on how the 

subscriber’s orders and trading interest 

are executed on the NMS Stock ATS, we 

are making this request a separate subpart for market participants to more 

readily find information related to how 

a subscriber communicates with the 

NMS Stock ATS. For Part III, Items 6(c) 

and 6(e), the Item requires a summary 

of the terms and conditions of the 

services offered if applicable. We 

believe a summary would provide 

subscribers and market participants 

with relevant information about the 

NMS Stock ATS to consider and 

evaluate its services without requiring 

overly burdensome disclosure. 

We are also providing examples in 

Part III, Item 6 of adopted Form ATS– 

N to clarify the types of services and 

connection options related to colocation that an NMS Stock ATS may 

offer. We believe that providing these 

examples will help NMS Stock ATSs 

better understand the type of 

information that would be responsive to 

the Form ATS–N requests. 

We are providing further guidance as 

to what is required of NMS Stock ATSs 

when disclosing any differences in the 

terms and conditions among subscribers 

and the broker-dealer operator related to 

co-location and related services. 

Subscribers of co-location services can 

experience faster or slower connection 

speeds to an NMS Stock ATS depending 

on factors such as the distance of the 

customer servers from the matching 

engine, or the use or non-use of 

‘‘coiling’’ to its matching engine to equal 

connection speeds among subscribers, 

among others. Such differences in 

connection speed or latency would be 

required to be disclosed under Part III, 

Item 6(a). 

7. Order Types and Attributes 

Part IV, Item 3(a) of proposed Form 

ATS–N would have required disclosures 

about order types and modifiers.899 We 

received comments on Part IV, Item 3 of 

proposed Form ATS–N expressing 

general support for the Commission’s 

aim to provide disclosure for order 

types that could benefit market 

participants’ understanding how their 

orders may be handled by the NMS 

Stock ATS and that could help optimize 

order routing practices by market 

participants.900

We continue to believe that all market 

participants should have full 

information about the operations of 

order types available on an NMS Stock 

ATS for market participants to 

comprehensively understand how their 

orders and trading interest will be 

handled and executed on the ATS. 

Accordingly, we are adopting Part IV, 

Item 3(a) of proposed Form ATS–N with 

certain modifications described below, 

naming the Item ‘‘Order Types and 

Attributes,’’ and relocating the request 

as Part III, Item 7 of adopted Form ATS– 

N. Order types are a primary means by 

which users of an NMS Stock ATS 

communicate their instructions for 

handling their trading interest to the 

NMS Stock ATS. Moreover, order types 

can be complex and operate in various 

ways. Given the importance of order 

types and their complex nature, we are 

requiring NMS Stock ATSs to disclose 

the information called for by Part III, 

Item 7 on adopted Form ATS–N. 

One commenter suggests that Part IV, 

Item 3 of proposed Form ATS–N would 

require excessive information that 

would be unnecessarily burdensome 

and duplicative, and offers several 

suggestions on how to streamline the 

Item, including defining a set of order 

type terminology for completing the 

form, allowing a table template for 

responses, and suggested ‘‘yes’’ or ‘‘no’’ 

questions.901

We do not believe that it would be 

practical to define or standardize order 

types because the operation and naming 

of order types is not consistent across 

NMS Stock ATSs or trading centers, and 

broadly similar order types can have 

many permutations.902 We believe that 

Part III, Item 7 of adopted Form ATS– 

N provides NMS Stock ATSs with 

necessary flexibility to describe the 

order types that the ATS offers 

subscribers while still providing the 

necessary information for market 

participants to understand how an order 

type will function. 

For similar reasons, we are declining 

to adopt the commenter’s suggestions 

that Part IV, Item 3(a)(vi) of proposed 

Form ATS–N could be simplified to a 

‘‘yes’’ or ‘‘no’’ question asking whether 

each order type is available to all 

subscribers. This Item specifically 

relates to whether every order type is 

available across all forms of 

connectivity, not to all subscribers.903 A 

‘‘yes’’ or ‘‘no’’ format would not allow 

an NMS Stock ATS to explain any 

differences in order types available 

across all forms of connectivity, if any. 

An NMS Stock ATS can choose a 

format that it finds best to provide 

market participants with complete and 

comprehensible information, such as, 

for instance, a table with the relevant 

characteristics of each order type. 

We have made several edits to remove 

duplicative requirements, improve 

readability and specificity, and remove 

unnecessary language.904 We are 

removing references to the ranking of 

order types and time in force 

instructions to avoid duplication. We 

are revising the language of the Item to 

require information on order types that 

‘‘can be’’ entered on the NMS Stock 

ATS, because we intended for NMS 

Stock ATSs to disclose to market 

participants the services that the ATS 

offers. We are also removing 

superfluous language that is already 

captured by the instruction to ‘‘identify 

and explain.’’ 905 We are also removing 

the language from proposed Part IV, 

Item 3(b) requiring the NMS Stock ATS 

to describe any differences among 

subscribers in the ‘‘availability of order 

types’’ because the request to describe 

any differences in the terms and 

conditions of order types among 

subscribers and the broker-dealer 

operator in Part III, Item 7(b) 

encompasses any differences in 

availability. 

We are adding in Part III, Item 7(a)(i) 

of adopted Form ATS–N that the NMS 

Stock ATS provide not only whether an 

order type can receive a new time 

stamp, but also, when, so that market 


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906See supra note 839. 

907As proposed, Part IV, Item 3(b) requested 

information about minimum order size 

requirements. Also, Part IV, Item 7(b) of proposed 

Form ATS–N would have required NMS Stock ATS 

to disclose information about the ‘‘established, nondiscretionary methods that dictate the terms of 

trading . . . on the NMS Stock ATS.’’ To the extent 

that an NMS Stock ATS established a cap or a limit 

on the size of orders or trading interest that the ATS 

would accept from subscribers, this cap or limit 

would be a procedure governing the trading on the 

ATS and would have been responsive to proposed 

Form ATS–N (specifically, proposed Part IV, Item 

7(b)). 

908See SIFMA Letter at 6. 

909See Proposal, supra note 1, at 81067 for 

additional discussion of IOIs, actionable IOIs, 

conditional orders, and similar functionalities. 

910See Proposal, supra note 2, at 81067. 

911See id. 

912See id. 

913See id. 

914See id. 

915See id. 

916See, e.g., SIFMA Letter at 9; BIDS Letter at 4; 

STA Letter at 4. 

participants can better understand how 

their orders or trading interest will be 

handled by the NMS Stock ATS. We are 

also removing the prompt in the 

proposed Item that would have required 

information on whether an order type 

can be used with any routing services 

offered because these services are 

usually provided by the broker-dealer 

operator. 

Finally, the Commission is providing 

further guidance with regard to the 

prompt in Item 7(a)(vii) that the NMS 

Stock ATS describe the circumstances 

under which orders types may be 

removed from the NMS Stock ATS as 

the information required relates to the 

disclosures required under Part III, Item 

16 (Routing). While we are not requiring 

broker-dealers to disclose information 

about their handling of customer orders 

when such orders are not routed to the 

NMS Stock ATS, we believe that market 

participants should be aware of how a 

subscriber order or trading interest that 

has been received by and rests in the 

NMS Stock ATS can be subsequently 

removed from the ATS. Such 

circumstances may be as simple as the 

broker-dealer cancelling a customer 

order that it is handling from the ATS, 

or such circumstances could include the 

broker-dealer operator removing a thirdparty subscriber’s order at its own 

discretion. To the extent that this 

information about removal of orders 

overlaps with the disclosures regarding 

routing of orders under Part III, Item 16, 

the NMS Stock ATS need only provide 

the information in Part III, Item 7 of 

adopted Form ATS–N. Additionally, the 

Part III, Item 7 requests regarding 

removal of orders and trading interest 

from the ATS will not require the 

broker-dealer operator to publicly 

disclose its routing table or other 

information about where the order is 

sent once it is removed from the NMS 

Stock ATS. 

8. Order Sizes 

Part IV, Item 3(c) of proposed Form 

ATS–N would have required disclosures 

about order size requirements and oddlot orders. We did not receive any 

comments directed at Part IV, Item 3(c) 

of proposed Form ATS–N; however, in 

response to commenters’ general request 

for the Commission to use more ‘‘yes’’ 

or ‘‘no’’ questions to navigate 

information and facilitate comparisons, 

we are relocating Part IV, Item 3(c) of 

proposed Form ATS–N to Part III, Item 

8 (‘‘Order Sizes’’) of adopted Form 

ATS–N and adopting a ‘‘yes’’ or ‘‘no’’ 

format.906 In addition, we are requiring 

that the NMS Stock ATS identify and 

explain any differences in the treatment 

of subscribers and the broker-dealer 

operator, as applicable, in separate subitems 8(b), 8(d), and 8(f), respectively. 

In addition, we are adding to Part III, 

Item 8(a) of adopted Form ATS–N a 

request for the NMS Stock ATS to 

provide information about any 

maximum order or trading interest size 

requirements.907 Adding a request 

regarding a cap or maximum limit on an 

order size in the Part III, Item 8 of 

adopted Form ATS–N would help 

streamline an NMS Stock ATS’s 

response to Form ATS–N and help 

market participants understand, the size 

requirements for trading on the ATS. 

Furthermore, we are providing 

examples in a parenthetical indicating 

that ATSs state whether or not odd-lot 

and mix-lot orders and trading interest 

are treated the same as round lot orders 

and trading interest. Information 

regarding the treatment of odd-lot and 

mixed-lot orders and trading interest 

compared to round lot orders and 

trading interest could influence whether 

market participants submit odd-lot or 

mixed-lot orders to the NMS Stock ATS. 

9. Conditional Order and Indications of 

Interest 

Part IV, Item 3(d) of proposed Form 

ATS–N would have required disclosures 

about conditional orders and 

indications of interest. We received one 

comment regarding Part IV, Item 3(d) of 

proposed Form ATS–N contending that 

providing additional disclosure 

regarding order types and handling 

(including the use of IOIs) is useful 

information for subscribers and the 

investing public, whose investments 

may be traded indirectly on ATS 

platforms via their third-party brokerdealers.908

We are adopting Part IV, Item 3(d) of 

proposed Form ATS–N with 

modification and relocating the request 

to Part III, Item 9 (‘‘Conditional Orders 

and Indications of Interest’’) of adopted 

Form ATS–N. Part III, Item 9 of adopted 

Form ATS–N is designed to provide 

specific information about the use of 

messages on the NMS Stock ATS, in 

particular, IOIs, actionable IOIs, 

conditional orders, and similar 

functionalities.909 As stated in the 

Proposal,910 NMS Stock ATSs use IOIs 

to convey trading interest available on 

those trading centers. Some NMS Stock 

ATSs also transmit ‘‘actionable’’ IOIs to 

selected market participants for the 

purpose of attracting contra-side order 

flow to the ATS. In general, an 

actionable IOI is an IOI containing 

enough information to effectively alert 

the recipient about the details of the 

NMS Stock ATS’s trading interest in a 

security.911 While an actionable IOI may 

not specify the price and/or size of the 

trading interest, the practical context in 

which it is submitted implicitly or 

explicitly conveys information about the 

symbol, side (buy or sell), size 

(minimum of a round lot of trading 

interest), and price (at or better than the 

NBBO, depending on the side of the 

order).912

Conditional orders are also messages 

indicating trading interest on a trading 

venue, and conditional orders generally 

function in a similar manner to IOIs. A 

conditional order may contain the same 

attributes as other order types when a 

subscriber enters it onto the trading 

venue (e.g., side, price, and size), but 

NMS Stock ATSs will generally not 

transmit those details to other 

subscribers or market participants.913

Rather, the NMS Stock ATS will 

tentatively match the conditional order 

with contra side interest and then alert 

the subscriber that entered the 

conditional order of the potential match. 

That subscriber may then either accept 

or decline the execution (i.e., ‘‘firm up’’ 

the conditional order).914 As discussed 

in the Proposal, NMS Stock ATSs may 

only permit conditional orders to 

execute against other conditional orders, 

but some ATSs allow conditional orders 

to interact with other order types.915

Understanding the manner in which 

NMS Stock ATSs use messages that 

convey trading interest, such as IOIs, 

actionable IOIs, conditional orders, and 

similar functionalities could be useful to 

market participants in analyzing the 

potential execution of a subscriber’s 

trading interest. 

In response to comment,916 we are 

removing the word ‘‘circumstances’’ 


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917We also believe the more explicit requests 

address commenters’ concerns that prompts like 

‘‘describe the circumstances’’ would not allow NMS 

Stock ATSs to know whether the disclosure ‘‘meets 

the Commission’s expectation until after the Form 

ATS–N itself or an amendment is filed.’’ See, e.g., 

SIFMA Letter at 19. 

918We are requiring the ‘‘type of Persons’’ that 

receives the message in this Item and are not 

requesting the names of individual recipients in the 

case of natural persons. 

919The information required by the prompts to 

disclose the type of recipient and possible 

responses to conditional orders or IOIs would have 

been required in Part III, Item 3(d) of proposed 

Form ATS–N in response to the request for 

‘‘circumstances in which [the messages] may result 

in an execution on the NMS Stock ATS.’’ Because 

commenters requested more specificity, we are 

making more explicit the information required in 

Part III, Item 9(a) of adopted Form ATS–N. See 

supra note 917. 

920See HMA Letter at 18. 

921See supra note 839. 

922See Proposal, supra note 2, at 81077. 

923See Proposal, supra note 2, at 81077 n. 485, 

486 and accompanying text. 

924See supra note 839. 

from the request and adding more detail 

to the request to aid NMS Stock ATSs 

in responding.917 The Commission is 

adding ‘‘price or size minimums’’ as 

examples of information that could be 

contained in the messages and ‘‘order 

management system, smart order router 

and FIX’’ to illustrate the types of 

mechanisms that could transmit 

messages, such as IOIs and conditional 

orders. In the Commission’s experience, 

the information that NMS Stock ATS 

include in IOIs and conditional orders 

can vary, including different 

combinations of symbol, size and/or 

price, and we believe that this 

information would be relevant to market 

participants when understanding what 

information about their orders are 

communicated to others and assessing 

potential information leakage. Second, 

we are adding a requirement that the 

NMS Stock ATS identify the type of 

persons that receive the message 918

(e.g., subscriber, trading center), and the 

possible responses to conditional orders 

or IOIs (e.g., submission to firm-up 

conditional orders). These two factors 

could help market participants 

understand when a message, such as a 

conditional order or IOI, would result in 

an execution and provide market 

participants important information to 

understand how the market participant 

can use the ATS, who will see its 

trading interest, how its trading interest 

will be executed, and the potential for 

information leakage.919 Finally, we are 

including ‘‘response time parameters, 

interaction and matching’’ as examples 

of topics to discuss when disclosing the 

conditions under which the conditional 

order or IOI might result in an execution 

in the ATS. 

10. Opening and Reopening 

Part IV, Item 9(a) of proposed Form 

ATS–N would have required disclosures 

about opening and reopening processes. 

We received one comment on Part IV, 

Item 9(a) of proposed Form ATS–N 

stating that Part IV of proposed Form 

ATS–N, including requests relating to 

the opening and reopening procedures, 

is essential for investors or routing 

brokers who are seeking to understand 

how the ATS works.920 We are adopting 

Part IV, Item 9(a) of proposed Form 

ATS–N with certain modifications, as 

described below in this section, and 

relocating the request as Part III, Item 10 

(‘‘Opening and Reopening’’) of adopted 

Form ATS–N. The Commission is 

separating proposed Part IV, Items 9(b) 

(‘‘Closing Process’’) and 9(c) (‘‘AfterHours Trading’’) of proposed Form 

ATS–N, which were previously part of 

the same Item as Opening and 

Reopening Processes (Part IV, Item 9(a)), 

into separate items on the adopted Form 

ATS–N to facilitate locating information 

and making comparisons across NMS 

Stock ATSs.921

As stated in the Proposal,922 Part III, 

Item 10 of adopted Form ATS–N is 

designed to inform market participants 

about whether an NMS Stock ATS uses 

any special procedures to match orders 

at the opening, or to set a single opening 

or reopening price to, for example, 

maximize liquidity and accurately 

reflect market conditions at the opening 

or reopening of trading. The disclosures 

under this Item would allow for 

comparisons between NMS Stock ATSs 

and national securities exchanges, 

which conduct opening and closing 

auctions and permit members to enter 

orders specially designated to execute 

on the opening. We continue to believe 

that market participants would likely 

want to know about any special opening 

or reopening processes employed by an 

NMS Stock ATS, including if any order 

types participate in an NMS Stock 

ATS’s opening or reopening processes. 

Furthermore, to provide additional 

guidance about what needs to be 

included in the description of the 

opening and reopening process, we are 

adding to Part III, Item 10 of adopted 

Form ATS–N that the ATS describe: 

When and how such orders and trading 

interest are ‘‘priced [and] prioritized’’ 

and ‘‘any order types allowed’’ during 

the opening and reopening processes. 

Specifically requesting information 

about when orders and trading interest 

will be priced and prioritized during the 

opening or reopening of the ATS will 

provide market participants with the 

information they need to plan and 

execute their trading strategies during 

these periods. The Item would also, for 

example, require disclosure of any 

procedures to match orders to set a 

single opening or reopening price to 

maximize liquidity and accurately 

reflect market conditions at the opening 

or reopening of trading.923 We believe 

most participants consider important 

the rules and procedures surrounding 

the pricing and priority of orders and 

trading interest, and the order types 

allowed because these rules and 

procedures can directly impact their 

execution price. 

In the Proposal, we would have 

required the information related to the 

pricing and priority of orders during the 

opening and reopening processes and 

any order types allowed during that 

time period under Part IV, Items 9(a) 

(‘‘Opening and Reopening Process’’), 

7(b) (‘‘Order Interaction Rules’’) and 

Item 3 (‘‘Types of Orders’’). Part IV, Item 

9(a) of proposed Form ATS–N required, 

in part, a description of ‘‘how orders or 

other trading interest are matched and 

executed’’ during an opening or 

reopening. In order to fully describe the 

matching and execution of orders 

during an opening or reopening in 

response to the Item, the NMS Stock 

ATS would necessarily have needed to 

disclose the pricing, priority, and order 

types allowed. Moreover, Part IV, Item 

7(b) of proposed Form ATS requested 

information about the established nondiscretionary methods that dictate terms 

of trading among multiple buyers and 

sellers, which included rules and 

procedures for priority and pricing. In 

addition, Part IV, Item 3 of proposed 

Form ATS–N would have required 

disclosure of ‘‘any types of orders that 

are entered on the NMS Stock,’’ which 

would have included any order types 

during an opening or reopening. 

We are adding a specific question 

about the rules and procedures for the 

opening and reopening process in Part 

III, Item 10 of adopted Form ATS–N to 

help streamline responses to Form 

ATS–N requests and help market 

participants locate and understand 

information about the opening and 

reopening process on the ATS.924 In 

Part III, Item 10, we are formatting the 

information requested, which parallels 

the Item in the Proposal, into three 

subparts (adopted Items 10(a), 10(c) and 

10(e)) and adding a ‘‘yes’’ or ‘‘no’’ 

question to Item 10(e). 

11. Trading Services, Facilities and 

Rules 

Part IV, Item 7 of proposed Form 

ATS–N would have required disclosures 

regarding the trading services of the 


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925See Proposal, supra note 2, at 81073. 

926See Regulation ATS Adopting Release, supra 

note 3, at 70849. 

927See id. 

928See id. 

929See id. In the Regulation ATS Adopting 

Release, systems in which there is only a single 

seller, such as systems that permit issuers to sell 

their own securities to investors, would not be 

included within Rule 3b–16. See Regulation ATS 

Adopting Release, supra note 3, at 70849. The 

Commission emphasized in the Regulation ATS 

Adopting Release that the mere interpositioning of 

a designated counterparty as riskless principal for 

settlement purposes after the purchasing and selling 

counterparties to a trade have been matched would 

not, by itself, mean that the system does not have 

multiple buyers and sellers. See id. 

930See Proposal, supra note 2, at 81073. 

931See Regulation ATS Adopting Release, supra 

note 3, at 70849 n.37. 

932 In the Proposal under Part IV, Item 7(a), we 

proposed that the NMS Stock ATS describe the 

means or facilities used by the NMS Stock ATS to 

bring together the orders of multiple buyers and 

sellers, including ‘‘the structure of the market.’’ 

933See supra note 839. 

934One commenter states that, when discussing 

electronic trading platforms for corporate bonds, 

‘‘as the Commission knows, a bond trading platform 

that utilizes an RFQ [request for quote] trading 

protocol is not an ATS.’’ See MarketAxess Letter at 

2. Whether a platform that trades securities is an 

ATS depends on whether that platform meets the 

definition of an ‘‘exchange’’ pursuant to the criteria 

of Exchange Act Rule 3b–16(a) which requires a 

facts and circumstances analysis. A platform that 

uses an RFQ protocol to trade securities would be 

subject to the Rule 3b–16(a) analysis, and 

depending on its design, activities, and rules, an 

RFQ platform may or may not meet the criteria of 

Rule 3b–16(a). 

935See Regulation ATS Adopting Release, supra 

note 3, at 70851–52. 

936See id. at 70851. 

937See id. at 70852. 

938See Proposal, supra note 2, at 81074. 

NMS Stock ATS, including matching 

methodology, order interaction rules, 

and other trading procedures. We are 

adopting Part IV, Item 7, with 

modifications, as Part III, Item 11 of 

adopted Form ATS–N and renaming it 

‘‘Trading Services, Facilities, and 

Rules.’’ Part III, Item 11 is designed to 

inform market participants and the 

Commission about the type of 

marketplace the NMS Stock ATS 

operates (e.g., crossing system, auction 

market, limit order matching book). In 

addition, Part III, Item 11 is designed to 

solicit disclosures about the facilities, 

functionalities, and mechanisms that 

the NMS Stock ATS uses to match the 

orders and trading interest of 

counterparties and facilitate 

transactions on the ATS. As discussed 

in the Regulation ATS Adopting Release 

and restated in the Proposal,925 we 

explained that an ATS brings together 

orders when orders entered into the 

system for a given security have the 

opportunity to interact with other orders 

entered into the system for the same 

security.926 An ATS can bring together 

orders through various methods. For 

instance, a system brings together orders 

if it displays, or otherwise represents, 

trading interests entered on the system, 

such as a consolidated quote screen, to 

system users.927 A system also brings 

together orders if it receives subscribers’ 

orders centrally for future processing 

and execution, such as part of a limit 

order matching book that allows 

subscribers to display buy and sell 

orders in particular securities and to 

obtain execution against matching 

orders contemporaneously entered or 

stored in the system.928 As explained 

above, to qualify for the Rule 3a1–1(a)(2) 

exemption from the statutory definition 

of ‘‘exchange,’’ an ATS must, among 

other things, bring together the orders of 

multiple buyers and sellers.929

As discussed in the Proposal, ATSs 

that trade NMS stocks may offer 

subscribers various types of trading 

mechanisms.930 For example, many 

ATSs bring together multiple buyers 

and sellers using limit order matching 

systems. Other ATSs use crossing 

mechanisms that allow participants to 

enter unpriced orders to buy and sell 

securities, with the ATS’s system 

crossing orders at specified times at a 

price derived from another market.931

Some ATSs use an auction mechanism 

that matches multiple buyers and sellers 

by first pausing execution in a certain 

security for a set amount of time, during 

which the ATS’s system seeks out and/ 

or concentrates liquidity for the auction; 

after the trading pause, orders will 

execute at either a single auction price 

or according to the priority rules for the 

auction’s execution. Furthermore, some 

ATSs use a blotter scraping 

functionality, which may inform the 

ATS’s system about the orders placed 

on a participant’s order management 

system, but not yet entered into the 

ATS; the ATS or broker-dealer operator 

oftentimes can automatically generate 

those orders and enter them into the 

ATS on behalf of the subscriber, in 

accordance with the relevant terms and 

conditions, when certain contra-side 

trading interest exists in the ATS. 

We continue to believe that it would 

be useful to market participants to be 

availed information about the trading 

facilities, functionalities, and 

mechanisms offered by an NMS Stock 

ATS to evaluate whether the operations 

of the NMS Stock ATS comports with 

their trading and investment strategies. 

Part III, Item 11(a) of adopted Form 

ATS–N is consistent with Part IV, Item 

7(a) of proposed Form ATS–N; however, 

we are limiting the request to require 

NMS Stock ATSs to provide only a 

summary of the structure of the NMS 

Stock ATS marketplace.932 The 

summary is designed to provide market 

participants with a brief overview of the 

type of market the ATS operates, such 

as a limit order book, auction market, or 

crossing system, in a more concise 

manner. This Item requires more 

detailed responses when explaining the 

means and facilities for bringing 

together the orders of multiple buyers 

and sellers on the NMS Stock ATS. We 

also separated the requested information 

on whether the means and facilities are 

the same for all subscribers and the 

broker-dealer operator into subpart Part 

III, 11(b) and formatted the subpart 

request as a ‘‘yes’’ or ‘‘no’’ question in 

response to comment.933

Part III, Item 11(c) is designed to 

inform market participants about the 

rules and procedures used to determine 

how orders and trading interest may 

interact on an NMS Stock ATS upon 

being entered into the system.934 We 

previously explained in the Regulation 

ATS Adopting Release that use of 

established, non-discretionary methods 

could include operation of a trading 

facility or the setting of rules governing 

subscribers’ trading.935 For example, we 

consider the use of an algorithm by an 

electronic trading system, which sets 

trading procedures and priorities, to be 

a trading facility that uses established, 

non-discretionary methods.936

Similarly, the Commission has 

previously stated that rules imposing 

execution priorities, such as time and 

price priority rules, would be 

‘‘established, non-discretionary 

methods.’’ 937

As discussed in the Proposal, NMS 

Stocks ATSs may employ various terms 

and conditions under which orders 

interact and match.938 Some NMS Stock 

ATSs may offer price-time priority to 

determine how to match orders 

(potentially with various exceptions), 

while other NMS Stock ATSs may offer 

midpoint-only matching with time 

priority. Some NMS Stock ATSs might 

also take into account other factors to 

determine priority. For example, an 

NMS Stock ATS may assign either a 

lower or higher priority to an order 

entered by a subscriber in a certain class 

(e.g., orders of proprietary traders or 

retail investors) or routed from a 

particular source (e.g., orders routed by 

the broker-dealer operator’s SOR (or 

similar functionality) or algorithm) 

when compared to an equally priced 

order entered by a different subscriber 

or via a different source. Furthermore, 

in the Commission’s experience, an 

NMS Stock ATS might elect to apply 


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939The Commission recognized the intersection 

of ‘‘established, non-discretionary methods that 

dictate the terms of trading’’ and ‘‘trading 

procedures’’ in the Regulation ATS Adopting 

Release when it stated that the second essential 

element of what constitutes an exchange is that 

trading on the exchange takes place according to 

‘‘established, non-discretionary rules or 

procedures.’’ See Regulation ATS Adopting Release, 

supra note 3, at 70900. The Commission is adopting 

this formulation in Part III, Item 11(c), which we 

believe encompasses the information proposed to 

be required in Part IV, Items 7(b) and 7(c) of 

proposed Form ATS–N. 

940See supra note 839. 

941See SIFMA Letter at 24 (stating item as 

proposed could result in discursive disclosures of 

limited use to market participants). 

942For example, Rule 611 of Regulation NMS, 

which requires a trading center to establish, 

maintain, and enforce written policies and 

procedures that are reasonably designed to prevent 

trade-throughs on that trading center, subject to 

certain exceptions. See 17 CFR 242.611. 

943See Securities Exchange Act Release No. 

Release No. 74892 (May 6, 2015), 80 FR 27513 (May 

13, 2015) (File No. 4–657) (Order Approving the 

National Market System Plan to Implement a Tick 

Size Pilot Program [(‘‘Tick Size Pilot’’)] by BATS 

Exchange, Inc., BATS Y-Exchange, Inc., Chicago 

Stock Exchange, Inc., EDGA Exchange, Inc., EDGX 

Exchange, Inc., Financial Industry Regulatory 

Authority, Inc., NASDAQ OMX BX, Inc., NASDAQ 

OMX PHLX LLC, The Nasdaq Stock Market LLC, 

New York Stock Exchange LLC, NYSE MKT LLC, 

and NYSE Arca, Inc., as Modified by the 

Commission, For a Two-Year Period) (modifying 

the definition of ‘‘block-size’’ for purposes of the 

Tick Size Pilot to an order (1) of at least 5,000 

shares or (2) with a market value of at least 

$100,000). 

944As discussed in the Proposal, NMS Stock 

ATSs apply various trading procedures to 

determine an execution price based on the 

circumstances of the match. See Proposal, supra 

note 2, at 81074. For example, an ATS may price 

an execution of a midpoint pegged order with a 

limit or market order at the midpoint of the NBBO. 

An ATS executing a match of two limit orders, or 

a limit and market order, might price the execution 

at or within the NBBO, with the possibility of 

offering the limit order(s) price improvement. On 

the other hand, an ATS that operates a block 

crossing network, with specialized size discovery 

mechanisms, might calculate a volume-weighted 

average price after the final size of the execution 

has been determined. 

In the Commission’s experience, NMS Stock 

ATSs have trading procedures for executing orders 

that include price protections to re-price orders or 

prevent their execution under certain 

circumstances, such as Limit Up Limit Down price 

bands pursuant to the National Market System Plan 

to Address Extraordinary Market Volatility (‘‘LULD 

Plan’’), or short sales to be executed on its system. 

Thus, an NMS Stock ATS would be required to 

configure its system to comply with federal 

securities laws related to short sales, including 

Regulation SHO, rules and procedures governing 

and/or precluding the execution of orders in a 

locked or crossed market, or procedures governing 

the handling of execution errors, such as the use of 

an error account by the NMS Stock ATS. 

Other trading procedures include protocols for 

time-stamping orders and executions to ensure 

compliance with the Exchange Act and the rules 

and regulations thereunder and any execution 

procedures related to price improvement. For 

example, an NMS Stock ATS may have procedures 

to reprice orders under its price protection 

mechanisms, to reprice short sale orders to ensure 

compliance with Regulation SHO, or to reprice 

orders due to price-sliding order types (such as 

certain pegged order types); it would be required to 

explain when it creates new timestamps for such repriced orders. Trading procedures include any 

functionality or mechanism available on the NMS 

Stock ATS that allows for price improvement. 

945See ICI Letter at 9–10. See also Memorandum 

from the Office of Commissioner Kara Stein 

regarding a July 26, 2016 meeting with 

representatives of Morgan Stanley (including in a 

presentation that whether an ATS has anti-gaming 

controls is among the frequently asked questions by 

clients). 

946See State Street Letter at 2–3. 

different priority rules for matching 

conditional orders than it does for 

matching other order types. Part III, Item 

11 of adopted Form ATS–N will allow 

the Commission to better evaluate 

whether the entity that filed a proposed 

Form ATS–N meets the criteria of 

Exchange Act Rule 3b–16 and the 

definition of an NMS Stock ATS. 

In Part III, Item 11(c) of adopted Form 

ATS–N, we are combining the requests 

in Part IV, Items 7(b) (‘‘Order Interaction 

Rules’’) and 7(c) (‘‘Other Trading 

Procedures’’) of proposed Form ATS–N. 

Part IV, Items 7(b) and 7(c) of proposed 

Form ATS–N were intended to solicit 

information about the ATS’s established 

non-discretionary methods that dictate 

the terms of trading among the multiple 

buyers and sellers entering orders and 

trading interest. In addition to a trading 

facility, non-discretionary methods 

include rules and procedures.939

Adopted Part III, Item 11(c) combines 

the requests in Part IV, Items 7(b) and 

7(c) of proposed Form ATS–N and is 

designed to communicate the rules and 

procedures that govern how their orders 

will be executed on the NMS Stock 

ATS. We are revising the language in 

adopted Item 11(c) to recognize this 

overlap by requiring the NMS Stock 

ATS to ‘‘explain the established, nondiscretionary rules and procedures of 

the NMS Stock ATS, including order 

interaction rules,’’ which requires the 

same information as the proposed 

subparts. As another component of an 

NMS Stock ATS’s non-discretionary 

methods, we are moving the trading 

procedures in proposed Item 7(c) into 

adopted Item 11(c) and including the 

examples of the trading procedures of 

an NMS Stock ATS (e.g., price 

protection mechanisms, shorts sales, 

locked-cross markets) into adopted Item 

11(c) as well. 

A description of the ‘‘established nondiscretionary rules and procedures’’ of 

the NMS Stock ATS is a principal 

requirement of Item 11(c) and we are 

requiring that any differences among 

subscribers and the broker-dealer 

operator related to these methods be 

identified and explained. This request 

was moved to Part III, 11(d) and 

formatted as a ‘‘yes’’ or ‘‘no’’ question in 

response to comment.940

We seek to provide additional 

guidance regarding the procedures that 

need to be discussed in this Item.941

Specifically, in response to various 

initiatives (e.g., pilot programs, national 

market system plans, rules and 

regulations), NMS Stock ATSs have 

designed and/or modified the design of 

their systems and trading procedures to 

comply with these initiatives, including, 

for example, Regulation NMS,942 and 

more recently, the Tick Size Pilot.943 To 

be fully informed about the trading 

procedures of the NMS Stock ATS, we 

believe that market participants would 

need to understand the operations and 

procedures that NMS Stock ATSs adopt 

in response to these initiatives as the 

responses could affect the decision of a 

market participant to use the NMS Stock 

ATS.944 To the extent an NMS Stock 

ATS has designed trading procedures to 

operate consistently with Commission 

initiatives, the NMS Stock ATS would 

need to disclose these procedures in 

response to this Item (Part III, Item 11 

of adopted Form ATS–N). Furthermore, 

this information required on trading 

procedures resulting from Commission 

initiatives was encompassed under Part 

IV, Items 7(b) and 7(c) of proposed Form 

ATS–N, which proposed requiring 

comprehensive information on order 

interaction rules and trading 

procedures, including all of the 

established non-discretionary methods 

that dictate the terms of trading on the 

NMS Stock ATS. 

Another commenter suggests that 

disclosure of certain additional trading 

services should be required, specifically 

whether the NMS Stock ATS employs 

technology designed to detect and deter 

price manipulation and other disruptive 

trading practices, i.e., anti-gaming 

technology, and if so, to include a 

description of this technology in the 

form.945 Another commenter states that 

anti-gaming technology and other 

subscriber-related safeguards are among 

the core attributes of ATSs that are of 

particular importance to buy-side 

institutions.946 We, however, are not 

adopting a request related to antigaming technology and subscriberrelated safeguards because such 

descriptions made in a publicly 

available document could serve to 

undermine those safeguards by 

disclosing information that makes 

evading those safeguards easier. 

One commenter states that Part IV, 

Item 7 of proposed Form ATS–N had 

‘‘the potential to become quite technical 

and granular’’ and thus perhaps of 

limited use to end-readers, and suggests 

the Commission consider ‘‘requesting 


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947See SIFMA Letter at 24. 

948See supra note 941 and accompanying text. 

949See SIFMA Letter at 24–25. 

950See AI Letter at 1–3. 

951We did not propose compliance checks for 

NMS Stock ATSs and the commenter’s 

recommendation is not currently required of other 

trading centers, such as national securities 

exchanges. 

952See Section IV.A.3. 

953The commenter also suggests that we adopt a 

test that would only require NMS Stock ATSs to 

disclose information necessary to write an 

observationally-equivalent simulator of the venue. 

See AI Letter at 2. As we are not adopting the 

commenter’s suggestion to require NMS Stock ATSs 

to disclose operational details in a mathematicallyanalyzable format, we do not believe that such a test 

would be appropriate. 

954See Proposal, supra note 2, at 81062–63. 

955These liquidity providers may quote in a 

particular NMS stock on the ATS during trading 

hours and may receive a benefit for performing this 

function, such as discounts on fees, rebates, or the 

opportunity to execute with a particular type of 

segmented order flow. 

956See KCG Letter at 12. 

957See supra Sections V.C.1 and V.C.2. 

high-level generalized descriptions or 

converting these prompts to a more 

narrow set of focused, ‘‘yes’’ or ‘‘no’’ or 

short-answer questions with more detail 

available to regulators as needed for 

surveillance or other purposes.’’ 947 The 

commenter also indicates that prompts 

to ‘‘describe’’ require extensive 

disclosures that would be difficult to 

maintain current. Part III of adopted 

Form ATS–N requests information 

about common operational attributes of 

NMS Stock ATSs, which are organized 

by subject matter to facilitate market 

participants’ understanding and 

evaluation of an NMS Stock ATS. The 

Commission recognizes that requests in 

Part III, Item 11 could be more 

expansive than other requests in Part III; 

however, Part III, Item 11 of adopted 

Form ATS–N is designed to solicit 

information about the unique rules and 

procedures that are tailored for the 

trading activities and interaction of 

orders of subscribers on the NMS Stock 

ATS. National securities exchanges 

make public similar information in their 

rule books, in detail, which are designed 

to provide their members with 

information about how they should 

expect their orders to be handled by the 

exchange. It would be impractical to 

posit ‘‘yes’’ or ‘‘no’’ to NMS Stock ATSs 

without allowing NMS Stock ATSs to 

explain how their trading mechanisms 

or trading procedures operate. We also 

believe that ‘‘yes’’ or ‘‘no’’ questions, in 

this case, have the potential to quickly 

become outdated as practices in the 

securities industry evolve and new 

developments emerge. As the industry 

and NMS Stock ATS operations change, 

NMS Stock ATS can better provide 

market participants with complete and 

comprehensive disclosures if they are 

able to describe how their system 

operates in their own words. We also 

are not discounting that certain items 

may only require a short answer 

depending on the complexity of the 

trading rules and procedures of the 

NMS Stock ATS. In addition, the 

commenter’s suggestion that more detail 

could be given to regulators as needed 

does not address the need for market 

participants to have full information 

about the ATS’s trading rules, 

procedures, and facilities to determine 

whether to route orders to the system for 

execution. 

We do not believe, as suggested by a 

commenter, that Part III, Item 11 of 

adopted Form ATS–N will require 

‘‘discursive disclosures’’ 948 that would 

make maintaining a current Form 

ATS–N challenging. Although the item 

requires substantial information 

depending on the complexity of the 

NMS Stock ATS, Rule 304(a)(2)(i)(A)– 

(C) of Regulation ATS provides a 

mechanism for an NMS Stock ATS to 

file amendments to Form ATS–N that 

allows for both material changes to the 

operations of an ATS and updating 

amendments. We believe that an NMS 

Stock ATS may keep current its Form 

ATS–N without the obligation to file 

continuous updates for non-material 

changes by filing an updating 

amendment under Rule 304(a)(2)(i)(B). 

Another commenter suggests that both 

Part IV, Item 7 and Item 8 (relating to 

suspensions of trading, system 

disruptions or malfunctions) of 

proposed Form ATS–N would be better 

suited as a required disclosure to 

subscribers that could be included in 

contractual agreements or systematically 

available to subscribers on ATS 

operators’ websites, rather than formally 

filed with the Commission.’’ 949 We, 

however, believe that this information 

could be useful to potential subscribers 

to evaluate an NMS Stock ATS as a 

potential destination for its orders. 

One commenter suggests that the 

Commission require NMS Stock ATSs to 

disclose precise, mathematically 

analyzable specifications of their 

algorithms to enable the Commission 

and financial firms to leverage formal 

verification techniques to automatically 

analyze the specifications for potential 

violations of regulations, and allow 

market participants to automatically test 

their connectivity and verify their 

routing algorithms (for best execution 

principles).950 We believe that requiring 

disclosure of mathematically analyzable 

specifications, which would be used to 

conduct compliance checks by the 

Commission, is outside of the scope of 

this rulemaking.951 While we will 

review Form ATS–N filings, the 

Commission’s review is not designed to 

verify the accuracy of the disclosures 

nor designed as an independent 

investigation of whether all aspects of 

the NMS Stock ATS operations or the 

ATS-related activities of the brokerdealer operator are disclosed on Form 

ATS–N.952 At this time, we believe that 

the Commission’s compliance oversight 

of NMS Stock ATSs would best be 

served through the Commission’s and 

the SRO’s examination and inspection 

efforts.953

12. Liquidity Providers 

Part IV, Item 1(d) of proposed Form 

ATS–N would have required disclosures 

regarding liquidity providers to the 

NMS Stock ATS. The Commission is 

adopting Part IV, Item 1(d) of proposed 

Form ATS–N as Part III, Item 12 

(‘‘Liquidity Providers’’) of adopted Form 

ATS–N with certain modifications, 

which are discussed below. As 

discussed in the Proposal,954 we believe 

that an NMS Stock ATS may want to 

ensure that there is sufficient liquidity 

in a particular NMS stock to incentivize 

market participants to send order flow 

in that NMS stock to the ATS. Some 

ATSs that trade NMS stocks may engage 

certain subscribers to provide liquidity 

to the NMS Stock ATS and perform 

similar functions to that of a market 

maker on a national securities 

exchange.955 The obligations required of 

liquidity providers and the benefits that 

they provide vary across NMS Stock 

ATSs. We believe that information 

about liquidity providers would be 

useful to subscribers and market 

participants who, for example, may 

want their orders to only interact with 

agency orders (and not with those of a 

liquidity provider), or, conversely, may 

themselves want to become liquidity 

providers on the NMS Stock ATS. 

One commenter suggests that the term 

‘‘liquidity provider’’ should be 

specifically defined; however, the 

commenter did not suggest a 

definition.956 While we are not adopting 

a specific definition of liquidity 

provider, the Commission is providing 

examples of the functions a liquidity 

provider could perform on the NMS 

Stock ATS in Part III, Item 12 of adopted 

Form ATS–N. We believe that such 

arrangement could take many forms and 

the function of the liquidity provider on 

an ATS could depend on the structure 

and trading protocols of the ATS. 

Furthermore, as explained above,957 we 


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958See SIFMA Letter at 20. See supra Section 

V.D.1 for discussion of proposed Item 1(c) and 

comments thereto, and comments applicable to Part 

IV, Item 1 of proposed Form ATS–N as a whole. 

959See Section V.D.13 (Segmentation; Notice). 

960See supra Section V.C.1 (discussing the 

requirements of Part II, Items 1(c) and 2(c)). 

961See Proposal, supra note 2, at 81070. 

962See ICI Letter at 9 (stating it would inform 

funds of the possibility of order segmentation and 

allow funds to determine whether to avoid trading 

with certain types of market participants). See also 

UBS Letter at 7; Fidelity Letter at 8; SIFMA Letter 

at 23. 

963See SIFMA Letter at 22–23. 

964See supra Section V.D.1. 

965See UBS Letter at 7; Fidelity Letter at 8. See 

also SIFMA Letter at 23 (stating that disclosing 

proprietary or sensitive information as required by 

this item is not necessary or appropriate). 

966 In the Commission’s experience, NMS Stock 

ATSs can vary the lengths of time that a segmented 

category is in force, such as one day, week, or 

monthly. The NMS Stock ATS must disclose in 

responding to this Item if any such time period 

applies to its segmentation parameters. We 

proposed requiring this information in Part IV, Item 

5 of proposed Form ATS–N by proposing to require 

that the NMS Stock ATS disclose any procedures 

for evaluating and changing segmented categories, 

which may be affected by the length of time a 

subscriber is placed in a category. We are specifying 

here that the length of time that a segmented 

category is in force is responsive to facilitate 

responding to the Item. 

967We note that, as part of our review of Form 

ATS–N responses, we intend to monitor the level 

of summary information provided on the form for 

completeness to help ensure that such information 

is responsive to the form and is not designed to 

avoid meaningful disclosure. 

968See UBS Letter at 7 (stating that if the 

Commission continues to believe the information is 

necessary, then access should be restricted solely to 

the Commission); SIFMA Letter at 23. 

969See Fidelity Letter at 8. 

intend for this Item to cover, for 

example, arrangements or agreements 

between the broker-dealer operator and 

another party to trade on the NMS Stock 

ATS. We do not intend this to cover 

agreements with a subscriber that has no 

obligation to buy or sell NMS stocks on 

the system. 

Another commenter states that the 

Commission should consider 

eliminating or consolidating Part IV, 

Items 1(c) and 1(d) of proposed Form 

ATS–N and suggests these subparts are 

redundant with information about 

segmentation sought in Part III of 

proposed Form ATS–N.958 Part III, Item 

12, however, requests information about 

subscribers or the broker-dealer operator 

or its affiliates that are obligated in some 

way to buy, sell, or both, NMS stocks on 

the ATS; while Part III, Item 13 pertains 

to disclosure about categorization of 

orders and trading interest submitted to 

the NMS Stock ATS.959

After considering whether Part IV, 

Item 1(d) of proposed Form ATS–N may 

overlap with any other items on the 

form, we require ATSs in Part II, Items 

1(c) and 2(c) of adopted Form ATS–N to 

indicate whether there are any formal or 

informal arrangements with the brokerdealer operator and affiliate of the 

broker-dealer operator, respectively. As 

discussed above, if the answer is ‘‘yes’’ 

to any of these items, the NMS Stock 

ATS must identify the broker-dealer 

operator (e.g., business unit) or the 

affiliate in Part II, Items 1(c) and 2(c).960

In addition, the NMS Stock ATS would 

be required to complete Part III, Item 12 

of adopted Form ATS–N regarding the 

arrangements with the broker-dealer 

operator or affiliate. 

13. Segmentation; Notice 

Part IV, Items 5(a) and 5(b) of 

proposed Form ATS–N would have 

required disclosures regarding 

segmentation of order flow and notice of 

segmentation. We are adopting Part IV, 

Item 5 with certain modifications. We 

are also renumbering the request as Part 

III, Item 13 of adopted Form ATS–N and 

renaming it ‘‘Segmentation; Notice.’’ As 

discussed in the Proposal, some NMS 

Stock ATSs elect to segment order flow 

entered in the NMS Stock ATS 

according to various categories.961 An 

NMS Stock ATS could elect to segment 

trading interest by type of participant 

(e.g., buy-side or sell-side firms, 

principal trading firms, agency-only 

firms, firms above or below certain 

assets under management thresholds). 

In addition, buy-side or institutional 

subscribers might seek to trade only 

against other buy-side or institutional 

order flow, or might seek to avoid 

trading against principal trading firms 

or so-called high frequency trading 

firms. When segmenting order flow in 

the system, an NMS Stock ATS might 

elect to look to the underlying source of 

the trading interest such as the trading 

interest of retail customers. Some NMS 

Stock ATSs segment by the nature of the 

trading activity, which could include 

segmenting by patterns of behavior, time 

horizons of traders, or the passivity or 

aggressiveness of trading strategies. 

NMS Stock ATSs might elect to use 

some combination of these criteria or 

other criteria altogether. 

Several commenters express support 

for the Commission requiring 

information about order 

segmentation.962

The Commission also received 

comments recommending changes to 

aspects of Part IV, Item 5 of proposed 

Form ATS–N. One commenter suggests 

that the Item should be converted to a 

series of ‘‘yes’’ or ‘‘no’’ questions and 

that the Item overlaps with Part IV, Item 

1 of proposed Form ATS–N.963 The 

Commission is adding a ‘‘yes’’ or ‘‘no’’ 

question to Part III, Item 13 of adopted 

Form ATS–N for ATSs to convey, and 

so market participants can readily 

understand, whether the NMS Stock 

ATS segments orders and trading 

interest and whether the ATS discloses 

to any Person the designated segmented 

category, classification, tier, or level of 

orders and trading interest of a 

subscriber or person. We believe that a 

response to a request that includes 

solely ‘‘yes’’ or ‘‘no’’ questions would 

not provide the necessary detail for 

market participants to understand and 

evaluate how the NMS Stock ATS 

segments trading interest and against 

whose order flow their trading interest 

could match. Moreover, the Commission 

has revised Part IV, Item 1 of proposed 

Form ATS–N (Part III, Item 1 of adopted 

Form ATS–N) to eliminate overlap.964

Several commenters express concern 

that Part IV, Item 5 of proposed Form 

ATS–N would have required the 

publication of precise metrics used to 

segment trading interest that could 

result in the gaming of those metrics to 

the detriment of order flow on the 

ATS.965 The Commission recognizes the 

concerns of commenters that believe 

describing the precise criteria used to 

segment trading interest could result in 

potential gaming of those criteria and 

thus, the reduction of the effectiveness 

of segmentation as a control. On the 

other hand, we believe that market 

participants are interested in 

understanding how their orders and 

trading interest are categorized on the 

ATS and the types of market 

participants that would interact with 

those orders and trading interest. We 

believe that Part III, Item 13 of adopted 

Form ATS–N appropriately balances 

these competing interests by soliciting a 

summary of the parameters for each 

segmented category and length of time 

each segmented category is in effect.966

Requiring NMS Stock ATSs to provide 

a summary of these parameters on Form 

ATS–N, rather than a detailed analysis 

of those parameters and how they are 

calculated, is designed to avoid 

responses that could allow the gaming 

of segmentation criteria, as suggested by 

commenters.967

Commenters suggest that the 

information requested by Part IV, Item 

5 of proposed Form ATS–N could be 

provided to the Commission 

confidentially,968 or the ATS be allowed 

to redact classification criteria that is 

based upon trading characteristics from 

Form ATS–N prior to its release.969 We 

believe that allowing NMS Stock ATSs 

to provide summary information in 

response to Part III, Item 13 on adopted 

Form ATS–N addresses the concerns 


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970See SIFMA Letter at 23. 

971To the extent that orders or trading interest are 

segmented outside the NMS Stock ATS and then 

sent to the NMS Stock ATS for handling and 

execution, the functionality or entity segmenting 

order or trading interest could be considered part 

of the NMS Stock ATS, and information about its 

activity may be responsive to the Form ATS–N 

requests. See supra note 888 and accompanying 

text. 

972See ICI Letter at 9. 

973Part IV, Item 5(a) of proposed Form ATS–N 

would have required an NMS Stock ATS to describe 

any segmentation of orders and other trading 

interest on the ATS. In the Proposal, we provided 

‘‘classification by type of participant’’ or ‘‘source’’ 

as examples of forms of segmentation. We consider 

identifying the orders of customers of brokerdealers (i.e., the source or type of participant) a 

form of segmentation and providing a separate 

request on the form would facilitate market 

participants’ understanding of the ATS’s 

segmentation categories. 

974See MFA/AIMA Letter at 5. The commenter 

states that a quantitative component would provide 

investors with information on the extent to which 

a broker-dealer operator or its affiliate transacts on 

the NMS Stock ATS. However, Part II, Items 1, 2, 

and 3 of adopted Form ATS are designed to provide 

disclosures about the nature of trading by the 

broker-dealer operator and its affiliates in the ATS. 

975 Duration can refer to segmenting trading 

interest according to how long it has rested on the 

book of a trading system. 

976Thus, if an NMS Stock ATS has established 

automated and empirical tests for segmenting 

subscribers into different categories—which would 

require the ATS to respond ‘‘yes’’ to Item III, 13(a) 

of adopted Form ATS–N and to explain how the 

segmentation procedures are applied—but allows 

any kind of override of those automated and 

empirical tests (such as an ad hoc determination by 

a member of the ATS’s staff), the NMS Stock ATS 

would have to respond ‘‘no’’ to Item III, 13(b) (‘‘Are 

the segmentation procedures the same for all 

subscribers and the broker-dealer operator?’’) and 

explain any differences in how its segmentation 

procedures are applied. 

977One commenter states that it is unclear 

whether Part IV, Item 1(e) of proposed Form 

ATS–N requests disclosure of instances where a 

subscriber requests not to interact with certain 

counterparties. See SIFMA Letter at 20. As 

discussed in Part III, Item 3 of adopted Form 

ATS–N above, any procedures related to counterparty selection would be responsive to this item 

(Part III, Item 14 of adopted Form ATS–N). 

underlying the commenters’ 

suggestions. 

Another commenter suggests that 

information barriers between the ATS 

and other affiliates would ‘‘make it 

challenging or inappropriate for the 

ATS itself to seek some of this 

information.’’ 970 The ATS has no need 

to seek information from affiliates to 

respond to this Item as it relates solely 

to the segmentation of orders and 

trading interest in the NMS Stock ATS 

and how such orders and trading are 

segmented for purposes of order 

interaction and execution in the NMS 

Stock ATS.971

Another commenter recommends that 

an NMS Stock ATS should be required 

to disclose whether it identifies 

customer orders of broker-dealers as 

customer orders (which it views as a 

form of segmentation).972 The 

commenter states disclosing the origin 

of a particular order can contribute to 

information leakage and adverse 

selection of fund orders. We agree with 

the commenter’s concerns and are 

adding a ‘‘yes’’ or ‘‘no’’ question to 

solicit information regarding whether 

the NMS Stock ATS identifies orders or 

trading interest entered by a customer of 

a broker-dealer on the NMS Stock ATS 

as a customer order. We agree with the 

commenter that disclosing the origin of 

a customer order of a broker-dealer is a 

form of segmentation because it can 

facilitate users restricting their trading 

to only certain types of market 

participants, and that it can contribute 

to information leakage and adverse 

selection of fund orders.973

Another commenter states that Part 

IV, Item 5 of proposed Form ATS–N 

would be more meaningful if there was 

a quantitative component, such as the 

percentage of orders and trades per 

segmented class.974 We are not requiring 

that NMS Stock ATSs provide 

quantitative information on each 

segmented class at this time. We believe 

that providing market participants with 

narrative disclosures about the 

operations of the NMS Stock ATS, 

which oftentimes is not publicly 

available, will allow market participants 

to understand the nature of order flow 

in the ATS. Nevertheless, we intend to 

monitor the quality of responses and 

information received through Form 

ATS–N and will continually assess in 

the future whether quantitative 

information would facilitate operational 

transparency for NMS Stock ATSs. 

We also are modifying certain 

components of Part IV, Item 5 proposed 

Form ATS–N (as adopted in Part III, 

Item 13). First, we are adding the terms 

‘‘classifications, tiers, or levels’’ in 

addition to ‘‘categories’’ to describe the 

groupings into which an NMS Stock 

ATS elects to segment subscriber orders 

to better reflect the language used by 

commenters and in existing Form ATS 

disclosures. Second, we are providing 

two additional examples, order size and 

duration,975 of criteria whereby an NMS 

Stock ATS might elect to segment 

subscribers’ orders and trading interest. 

We are providing these examples to 

provide additional guidance on some of 

the types of segmentation that would be 

responsive to the Item and allow NMS 

Stock ATSs to focus their responses 

accordingly. Third, we are providing 

additional specificity around what 

‘‘changing segmented categories’’ means 

by requiring NMS Stock ATSs to 

provide a discussion of procedures for 

overriding a determination of segmented 

category. Subscribers would likely want 

to know of any such procedures, which 

could affect the trading interest against 

which their orders trade.976 Fourth, we 

are requiring a description of how 

segmentation affects order interaction in 

Part III, Item 13 of adopted Form ATS– 

N. We proposed that an NMS Stock ATS 

provide information about its order 

interaction rule in Part IV, Item 7 of 

proposed Form ATS–N, but believe that 

it would be more relevant and efficient 

to request that information here. 

Finally, we are requiring under Part 

III, Item 13(d) of adopted Form ATS–N 

that the NMS Stock ATS describe 

‘‘whether and how [a designated 

segmented category] can be contested’’ 

(if applicable). This request is generally 

consistent with Part IV, Item 5 of 

proposed Form ATS–N which would 

have required information on the 

changing or overriding of segmented 

categories, as well as notice provided to 

subscribers of their segmented category. 

14. Counter-Party Selection 

Part IV, Item 5(c) of proposed Form 

ATS–N would have required disclosures 

regarding order preferencing. The 

Commission did not receive specific 

comment on Part IV, Item 5(c) of 

proposed Form ATS–N.977 We are 

adopting Part IV, Item 5(c) as Part III, 

Item 14 (‘‘Counter-Party Selection’’) of 

adopted Form ATS–N and adding 

examples of counter-party selection in a 

parenthetical in the Item. Market 

participants have an interest in knowing 

whether—and how—they may designate 

their orders or trading interest to 

interact or avoid interacting with 

specific orders, trading interest, or 

persons on an NMS Stock ATS. For 

instance, the disclosures required under 

this Item would allow a market 

participant to know whether it could 

designate an order submitted to the 

NMS Stock ATS to interact with specific 

orders resting in the NMS Stock ATS. 

15. Display 

Part IV, Item 6(a) of proposed Form 

ATS–N would have required disclosures 

about the display of order and trading 

interest, including recipients. We 

received several comments on Part IV, 

Item 6(a) of proposed Form ATS–N. We 

are adopting Part IV, Item 6(a) of 

proposed Form ATS–N with 

modifications, as discussed more fully 

below, and renumbering the request as 

Part III, Item 15 (‘‘Display’’) of adopted 

Form ATS–N. The display of subscriber 

orders and trading interest can occur in 

a number of ways. For instance, as 


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978See Proposal, supra note 2, at 81072. 

979See id. 

980See id. 

981See id. 

982The broker-dealer operator typically controls 

the logic contained in these systems or functionality 

that determines where an order that the brokerdealer receives will be handled or sent. 

983See HMA Letter at 18. 

984See UBS Letter at 8. 

985See SIFMA Letter at 23. 

986See UBS Letter at 8. 

987See supra Section V.A.2.b. 

988See id. 

989See SIFMA Letter at 23. The commenter also 

states the need for frequent filing of amendments 

and the demand for specificity will diminish the 

readability, comparability and ultimately the 

usefulness of the form for subscribers and other end 

readers. See id. at 24. 

990See Fidelity Letter at 8. 

991See Proposal, supra note 2, at 81072. 

992See supra note 850. We proposed to require 

an NMS Stock ATS to disclose differences among 

subscribers regarding the display of orders and 

trading interest in Part IV, Item 6(a) of proposed 

Form ATS–N. 

993See Fidelity Letter at 8. See also SIFMA Letter 

at 23 (suggesting that identifying individuals by 

title or more specific identifying characteristics 

would present security and privacy issues, as well 

as client confidentiality issues). 

discussed in the Proposal,978 when an 

NMS Stock ATS sends electronic 

messages outside of the ATS that expose 

the presence of orders or other trading 

interest on the ATS, it is displaying or 

making known orders or other trading 

interest on the NMS Stock ATS. An 

NMS Stock ATS also might elect to 

display subscriber order and trading 

interest through a direct data feed from 

the NMS Stock ATS that contains realtime information about current quotes, 

orders, or other trading interest in the 

NMS Stock ATS. Also, it would be 

responsive to this adopted Item for the 

NMS Stock ATS to disclose the 

circumstances under which the ATS 

would send these messages, the types of 

market participants that received them, 

and the information contained in the 

messages, including the exact content of 

the information, such as symbol, price, 

size, attribution, or any other 

information made known.979 In 

addition, an NMS Stock ATS would 

need to disclose arrangements, whether 

formal or informal (oral or written) to 

the extent they exist, with third parties 

to display the NMS Stock ATS’s trading 

interest outside of the NMS Stock ATS, 

such as IOIs from the subscribers being 

displayed on vendor systems, or 

arrangements with third parties to 

transmit IOIs between subscribers.980

We continue to believe that subscribers 

that use the services of the NMS Stock 

ATSs, including customers of the 

broker-dealer operator, have limited 

information about the extent to which 

their orders and trading interest sent to 

the NMS Stock ATS could be displayed 

outside the ATS.981 For example, 

subscriber orders or trading interests 

directed to the NMS Stock ATS could 

pass through the broker-dealer 

operator’s systems or functionality 

before entering the ATS. Such systems 

and functionalities, which could 

include a common gateway function, 

algorithm, or smart order router, could 

be used to support the broker-dealer 

operator’s other business units, 

including any trading centers.982

One commenter supports this item.983

Other comments raise certain concerns 

about Part IV, Item 6(a) of proposed 

Form ATS–N. One commenter states 

that the proposed Item would cover 

‘‘order information or other trading 

interest’’ rather than ‘‘subscriber order 

information or other trading interest’’ 

and could entangle the ordinary 

situation where a multi-service brokerdealer that operates an ATS uses a tool 

to manage child orders across multiple 

trading venues.984 Another commenter 

suggests that the Commission draw a 

clearer distinction between the actions 

and operations of an ATS operator and 

those of affiliated broker-dealers, 

technical support teams, or others 

external to the ATS, and instead 

emphasize disclosures relating to the 

ATS operator itself.985

In response to these commenters’ 

suggestions, we are changing the request 

to ‘‘subscriber orders and trading 

interest.’’ We did not intend for the 

Proposal to, in the commenter’s words, 

entangle the ordinary situation where a 

multi-service broker-dealer uses a tool 

to manage child orders across multiple 

trading venues.986 Consistent with the 

discussion above regarding the 

definition of subscriber, a subscriber 

order directed to the ATS would be a 

subscriber order for purposes of display. 

For a subscriber order routed out of the 

NMS Stock ATS to a third-party trading 

venue, for example, that order in the 

third-party venue would not be 

considered a subscriber order for 

purposes of display.987 As explained 

above,988 we do not intend for Form 

ATS–N to require disclosures about 

aspects of a market participant’s 

commercial relationships with a brokerdealer operator that do not pertain to the 

NMS Stock ATS. 

A commenter suggests a better way of 

phrasing Part IV, Item 6(a) of proposed 

Form ATS–N would be to ask whether 

orders or IOIs are ever displayed in 

external venues, with which venues, 

and what information is shared.989

However, the form of this request is 

broader, as just discussed, and limiting 

the request for information to orders and 

trading interest displayed in external 

venues would not capture all of the 

relevant locations where subscriber 

orders and trading interest can be 

displayed. 

One commenter suggests that the 

Commission revise this Item to 

distinguish between orders or other 

trading interest displayed in external 

venues with real-time access to systems 

designed to take advantage of this 

information, such as liquidity providers 

and SORs, and orders or other trading 

interest displayed in external venues 

without real-time access to systems 

designed to take advantage of this 

information, such as vendors (where no 

further information is needed or 

possibly not required).990 The final 

disclosure requirement does not draw a 

distinction between these orders and 

trading interests. Market participants 

can be very sensitive to precisely how 

and when their orders and trading 

interest are displayed or otherwise made 

known, and the Commission remains 

concerned that subscribers to NMS 

Stock ATSs might not know the full 

extent to which their orders and trading 

interest are displayed.991 While the 

display of orders or trading interest at 

venues in real time that have systems 

designed to take advantage of such 

information may raise the most acute 

concerns, we believe that market 

participants should have a full 

understanding about how and when an 

ATS displays their orders or trading 

interest. 

Differences in the latencies associated 

with the NMS Stock ATS displaying 

subscriber orders and trading interest 

due to a functionality of the ATS would 

be responsive to the request in Part III, 

Item 15(c).992 For example, if an NMS 

Stock ATS transmits and displays its 

proprietary data feed to certain 

subscribers faster than other subscribers 

as a result of the alternative means 

offered by the ATS to connect, such 

information would be responsive. 

Part IV, Item 6(b) of proposed Form 

ATS–N, requested the identity of any 

individuals in responding to whom the 

order and trading interest would be 

displayed or made known. One 

commenter raises confidentiality 

concerns with the requirement to 

publicly identify the position and title 

of the natural person to whom orders or 

other trading interest are displayed, 

because it believes that it would be 

relatively easy through social media to 

reverse engineer certain identities, and 

such information would require 

frequent updates with little market 

utility.993


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994See Part III, Item 1 of adopted Form ATS–N 

(providing examples of types of market 

participants). 

995See SIFMA Letter at 23. 

996The NMS Stock ATS would still be subject to 

the requirements of Rule 301(b)(10) and required to 

establish adequate safeguards and procedures to 

protect subscribers’ confidential trading 

information, which must include: Limiting access 

to the confidential trading information of 

subscribers to those employees of the ATS who are 

operating the system or responsible for its 

compliance with these or any other applicable 

rules; and implementing standards controlling 

employees of the ATS trading for their own 

accounts. See 17 CFR 242.301(b)(10). 

997See Proposal, supra note 2, at 81072. 

998See Liquidnet Letter at 12. 

999 Id. We note that adopted Form ATS–N 

requires disclosure on both subjects. Part II, Item 

1(a) of adopted Form ATS–N solicits information 

about the entry of orders and trading interest by the 

broker-dealer operator, including its business 

unit(s), into the NMS Stock ATS. Part II, Item 1(d) 

of adopted Form ATS–N solicits information about 

orders and trading interest in the NMS Stock ATS 

that can be routed to a trading center of the brokerdealer operator, which would include affiliates of 

the NMS Stock ATS, and if so, the NMS Stock ATS 

must provide information that is required in 

response to Part III, Item 16 of adopted Form 

ATS–N. 

1000See supra Section V.D.15. 

1001We have consolidated the discussion of how 

orders can be removed from the NMS Stock ATS 

in Part III, Item 7(a)(vii) of adopted Form ATS–N. 

We have revised the request so that 

Part III, Item 15 of adopted Form 

ATS–N does not require the NMS Stock 

ATS to identify natural persons. We 

understand commenters’ potential 

confidentiality concerns and had 

modified the request to make clear that 

the request does not seek the names of 

natural persons or their identity. 

Instead, it requires the NMS Stock ATS 

to only identify the recipient of 

displayed information, by functionality 

of the broker-dealer operator or the type 

of market participant, or both.994 For 

example, if orders bound for the NMS 

Stock ATS pass through the brokerdealer operator’s common gateway, 

SOR, or algorithm, the NMS Stock ATS 

would need to disclose these 

functionalities as the order was 

displayed to a functionality of the 

broker-dealer operator that would likely 

be outside the NMS Stock ATS. If orders 

resting in the NMS Stock ATS are 

displayed to certain subscribers or one 

or more of the broker-dealer operator 

business units, the NMS Stock ATS 

would need to identify these subscribers 

and business units of the broker-dealer 

operator by type of market participant 

(e.g., institutional investors, principal 

trading firms, market makers, affiliates, 

trading desks at the broker-dealer 

operator, market data vendors, clearing 

entities, and potential subscribers, 

among others). We believe this 

modification addresses commenters’ 

concerns, obviates the need for any 

redaction of information, and reduces 

the frequency of updates necessary as 

compared to responses identifying 

individual persons as proposed. 

We are revising Part III, Item 15 of 

adopted Form ATS–N to address 

another commenter’s concern that 

certain persons at the ATS in technical 

or quality assurance roles would need to 

be disclosed even though they may not 

be involved with trading activity.995

Part III, Item 15 now specifies that the 

request does not include ‘‘employees of 

the NMS Stock ATS who are operating 

the system.’’ so that employees of the 

NMS Stock ATS in non-trading related 

roles, such as technical, quality 

assurance, compliance or accounting 

roles, among others, that support the 

ATS’s operations would not be captured 

under the adopted Item.996

Finally, we are adding a ‘‘yes’’ or 

‘‘no’’ questions in Part III, Item 15(a) 

that asks if the NMS Stock ATS operates 

as an ECN as defined in Rule 600(a)(23) 

of Regulation NMS. In the Proposal, the 

Commission noted that NMS Stock 

ATSs that are also ECNs may differ in 

how and where orders or other trading 

interest are displayed, and that Part IV, 

Item 6 of proposed Form ATS–N was 

designed inform market participants 

about how ECN display orders.997 We 

believe that adding this ‘‘yes’’ or ‘‘no’’ 

question would allow the NMS Stock 

ATS to identify itself to market 

participants as an ECN. An ATS that 

indicates ‘‘yes’’ to Part III, Item 15(a) 

would also be required to provide 

information in response to Part III, Item 

15(b) and 15(c). 

16. Routing 

Part IV, Item 10(a) of proposed Form 

ATS–N would have required disclosures 

about outbound routing. We are 

adopting Part IV, Item 10(a) of proposed 

Form ATS–N with modifications, 

renaming the request as ‘‘Routing,’’ and 

renumbering the request as Part III, Item 

16 of adopted Form ATS–N. 

One commenter sought to understand 

whether the description of outbound 

routing required by the Item was limited 

to outbound routing performed as a 

functionality of the ATS itself rather 

than routing of client orders by the 

broker-dealer operator to third-party 

execution venues.998 The commenter 

believes that if this Item also applies to 

routing performed by the broker-dealer 

operator, all broker-dealers, whether or 

not they operate an ATS, should be 

required to publicly disclose routing 

information. Furthermore, the 

commenter also argues for ‘‘required 

disclosure of routing by a broker-dealer 

to any affiliate ATS’’ and of ‘‘the 

method by which a broker-dealer 

interacts with the ATSs that it 

operates. ’’ 999

As the commenter points out above, 

order handling and the routing of orders 

by the broker-dealer operator in its 

capacity as a broker-dealer may be 

separate from routing of orders in the 

ATS to other execution venues. As 

noted above,1000 we did not intend to 

require broker-dealer operators to 

disclose information about their 

handling of customer orders when such 

orders are not routed to or residing in 

the NMS Stock ATS. In response to the 

commenter’s concerns, the adopted Item 

does not request information about 

routing of orders and trading interest by 

the broker-dealer operator that are not 

routed to or residing in the NMS Stock 

ATS. 

We made several changes to Part IV, 

Item 10(a) of proposed Form ATS–N in 

response to comments (and adopted as 

Part III, Item 16). First, we are requiring 

an NMS Stock ATS to indicate whether 

orders and trading interest in the ATS 

can be routed to a destination outside 

the ATS, and if the answer to that 

question is ‘‘yes,’’ whether affirmative 

instructions from a subscriber must be 

obtained before their orders or trading 

interest is routed from the ATS. If the 

NMS Stock ATS indicates that ‘‘yes’’ 

instructions from a subscriber must first 

be obtained, the NMS Stock ATS will be 

required to describe the affirmative 

instruction and how the affirmative 

instruction is obtained. If instructions 

from a subscriber need not be first 

obtained, the NMS Stock ATS will be 

required to explain when orders in the 

NMS Stock ATS can be routed from the 

NMS Stock ATS (e.g., at the discretion 

of the broker-dealer operator).1001

In Part III, Item 16 of adopted Form 

ATS–N, we are removing the proposed 

requirement to ‘‘describe the 

circumstances’’ of outbound routing 

more broadly, and instead, are now 

requiring, as applicable, that the NMS 

Stock ATS ‘‘describe the affirmative 

instruction’’ of the subscriber and 

‘‘explain how the affirmative instruction 

is obtained.’’ This change is consistent 

with the instruction in the Proposal to 

‘‘describe the circumstances,’’ but 

provides more specific instruction. 

Moreover, if trading interest can be 

routed away from the NMS Stock ATS 

without the affirmative instruction of 

the subscriber, we are no longer limiting 

the alternative to be when it happens at 

the discretion of the broker-dealer, as 

proposed, but instead, are requiring an 

explanation of when orders can be 

routed from the NMS Stock ATS. We 


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1002As discussed in the Proposal, the Item would, 

for example, require disclosure of any procedures 

to match orders to set a single closing price to 

maximize liquidity and accurately reflect market 

conditions at the close of trading. See Proposal, 

supra note 2, at 81077 (discussing closing auctions 

and orders designed to execute at the close of 

trading). 

1003Part IV, Item 9(a) of proposed Form ATS–N 

requested the NMS Stock ATS describe any 

differences between pre-opening executions, 

executions following a stoppage of trading in a 

security during regular trading hours, and 

executions during regular trading hours. 

1004See, e.g., SIFMA Letter at 20. 

1005See UBS Letter at 8; LeveL ATS at 6 (stating 

that ATS subscribers are sophisticated 

counterparties that have a keen sense of the market 

for the services provided and are not in need of the 

fee disclosures proposed). 

1006See STA Letter at 3–4. 

1007See supra Section II.A.1. 

1008See ICI Letter at 10; HMA Letter at 18 

(suggesting that disclosure of the details regarding 

fees (among other topics in part III) is essential for 

investors or routing brokers seeking to understand 

how the ATS works). See also SIFMA Letter at 25 

(stating that a broad description of compensation 

mechanisms is appropriate and a description of the 

mechanisms and categories of fee structure would 

offer an appropriate level of clarity and 

transparency); KCG Letter at 7 (stating the 

Commission should require standard documents, 

including pricing schedules). 

1009See supra note 941 and accompanying text. 

believe that phrasing the request this 

way reflects that trading interest can be 

routed from the NMS Stock ATS in 

different ways and better accommodates 

potential future developments in the 

industry. We believe that the 

information in this Item will provide a 

subscriber with the necessary 

information to authorize routing and 

understand how its orders in the ATS 

can be routed from the ATS, and help 

prevent the subscriber from 

unknowingly agreeing to the routing of 

their trading interest. 

We are not adopting in Part III, Item 

16 of Form ATS–N the proposed 

requirements that the NMS Stock ATS 

explain the means by which routing is 

performed, or that the NMS Stock ATS 

explain any differences among 

subscribers in the means by which 

trading interest is routed, as this could 

expand the scope of Form ATS–N 

beyond ATS activity and into the other 

broker-dealer functions of the brokerdealer operator. 

17. Closing 

Part IV, Item 9(b) of proposed Form 

ATS–N would have required disclosures 

about the NMS Stock ATS’s closing 

process. We did not receive specific 

comment on Part IV, Item 9(b) of 

proposed Form ATS–N. We are 

adopting Part IV, Item 9(b) with certain 

modifications discussed below, and 

renumbering the request as Part III, Item 

17 (‘‘Closing’’) of adopted Form ATS–N. 

Part III, Item 17 is designed to inform 

market participants about whether an 

NMS Stock ATS uses any special 

procedures to match orders at the close 

of regular trading. The Item is designed 

to provide market participants with 

information about any special closing 

processes used by the NMS Stock ATS, 

particularly whether there are any order 

types used during the close. 

The vast majority of requests in Part 

III of adopted Form ATS–N relate to 

trading during regular hours. Therefore, 

when discussing differences between 

trading during the close and during 

regular hours, the NMS Stock ATS must 

discuss differences as compared to 

relevant information disclosed in Part III 

Items, including, among others, order 

types (Item 7), order interaction, 

priority, matching, and execution 

procedures (Item 11), segmentation 

(Item 13), and display (Item 15). We 

believe this information will be 

important for market participants to 

understand in evaluating whether 

participating in the closing process is 

consistent with their trading 

objectives.1002

18. Trading Outside of Regular Trading 

Hours 

Part IV, Item 9(c) of proposed Form 

ATS–N would have required disclosures 

regarding after-hours trading. The 

Commission did not receive any 

comments regarding the substance of 

Part IV, Item 9(c) of proposed Form 

ATS–N. The Commission is adopting 

Part IV, Item 9(c) of proposed Form ATS 

with certain modifications, as discussed 

below, and relocating the request as Part 

III, Item 18 (‘‘Trading Outside of Regular 

Trading Hours’’) of adopted Form 

ATS–N. 

The Commission is merging requests 

from Part IV, Item 9(a), which requested 

information about pre-opening 

executions,1003 and Part IV, Item 9(c), 

which requested information about 

after-hours trading. We believe that the 

potential for redundant disclosures, as 

observed by commenters,1004 would be 

reduced by merging these two requests. 

This Item will require NMS Stock 

ATSs to indicate in Part III, Items 18(a) 

and 18(b) whether the ATS conducts 

trading outside regular trading hours, 

and indicate whether there are any 

differences between trading outside of 

regular trading hours and trading during 

regular hours. To the extent that there 

are differences, the NMS Stock ATS 

must describe those differences. Similar 

to Item 17 (requesting differences 

between the closing and regular trading 

hours), an NMS Stock ATS must discuss 

differences in trading outside of regular 

trading hours as compared to the 

relevant information disclosed in Part III 

Items, including, among others, order 

types (Item 7), order interaction, 

priority, matching, and execution 

procedures (Item 11), segmentation 

(Item 13), and display (Item 15). Many 

of the disclosures discussed elsewhere 

in Form ATS–N will relate to regular 

trading hours so the ATS can simply 

discuss any differences between trading 

during regular hours and trading outside 

regular trading hours in Part III, Item 

18(b). 

19. Fees 

Part IV, Item 12 of proposed Form 

ATS–N would have required disclosures 

about fees. We are adopting Part IV, 

Item 12 of proposed Form ATS–N with 

modifications, which are discussed 

below, and renumbering the request as 

Part III, Item 19 (‘‘Fees’’) of adopted 

Form ATS–N. Some commenters 

suggest that the Commission exercise 

restraint in the area of fees given that 

they are the product of negotiations 

between sophisticated financial 

institutions and leave to market 

competition the setting of appropriate 

fees.1005 Another commenter suggests 

that NMS Stock ATSs be allowed to 

voluntarily report their fee structure.1006

The Commission continues to believe 

that disclosures regarding fees on Form 

ATS–N are necessary and important, 

and should not be voluntary for NMS 

Stock ATSs. Fee disclosures on Form 

ATS–N are designed to allow all market 

participants to analyze the fee structures 

across NMS Stock ATSs in an expedited 

manner and decide which ATS offers 

them the best pricing according to the 

characteristics of their order flow, the 

type of participant they are (if relevant), 

or any other aspects of an ATS’s fee 

structure that serves to provide 

incentives or disincentives for specific 

market participants or trading 

behaviors. As NMS Stock ATSs have 

become a significant source of liquidity 

in NMS Stocks,1007 we believe that 

disclosures about their fees are 

warranted as, in the Commission’s 

experience, fees can be a primary factor 

for market participants in deciding 

where to route their orders and trading 

interest. Several commenters express 

support, on behalf of different types of 

market participants, for fee disclosures 

on Form ATS–N.1008

In addition, given commenters’ 

concerns that the use of the term 

‘‘describe’’ in Form ATS–N is vague and 

would lead to discursive disclosures 

and obscure key information,1009 the 


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1010We are including examples of responsive 

information in parentheticals in the text of the item. 

For instance, for descriptions of the structure of the 

fee, the Commission is providing as examples a 

fixed fee, volume-based and transaction-based fee 

structures. For the description of variables that may 

impact the fee, the Commission is providing as 

examples: The types of securities traded, block 

orders, and the form of connectivity to the ATS. For 

the description of the differentiation among types 

of subscribers for the fee, the Commission is 

providing as examples of the types of subscribers: 

Broker-dealers, institutional investors, and retail. 

1011See ICI Letter at 10. 

1012See Liquidnet Letter at 12 (stating it has in 

place over 1,500 subscriber agreements). 

1013See SIFMA Letter at 25–26 (stating a 

description of the mechanisms and categories of fee 

structures would offer an appropriate level of 

clarity and transparency). 

1014One commenter notes that it agrees with the 

Commission on this point, and states that the 

concept of a fixed fee schedule would not be 

practical or appropriate in this context. See 

Liquidnet Letter at 13. 

1015See SIFMA Letter at 25–26. 

1016See ICI Letter at 10 (recommending NMS 

Stock ATSs explain whether they discriminate 

among different types of subscribers in establishing 

fees, rebates, or other charges). 

1017See id. 

1018See supra Section V.C.4 (discussing any 

formal or informal arrangements between the 

Broker-Dealer Operator and a Trading Center to 

access the NMS Stock ATS services). 

Commission is providing additional 

specificity on the Item’s requirements 

and more examples in the text of the 

Item. The Commission is adding to Part 

III, Item 19 requests that NMS Stock 

ATSs include in their descriptions: The 

structure of the fee, variables that 

impact the fee, and differentiation 

among types of subscribers, along with 

examples of responsive information 

included in a parenthetical in the text 

of each subpart.1010 The Item also 

would still require a range of fees as 

proposed. 

One commenter recommends that the 

Commission require that any 

description of a differential fee structure 

contain enough information for a market 

participant to understand exactly 

which, or which level, of fees/rebates/ 

charges apply to each type of subscriber 

or other person and the criteria that the 

NMS Stock ATS uses to sort subscribers 

into different fee categories so that 

market participants can assess eligibility 

requirements for different fee tiers.1011

The Commission recognizes that the 

fee structures of NMS Stock ATSs can 

vary and that not all NMS Stock ATSs 

apply set tiers or categories of fees for 

subscribers; 1012 however, the 

Commission agrees with the commenter 

that a market participant should have 

sufficient information to understand the 

fees for using the services of the NMS 

Stock ATS. Recognizing the various fees 

that can be charged by NMS Stock 

ATSs, the Commission is specifying in 

the fee request the types of information 

that an NMS Stock ATS must provide in 

response to the Commission’s proposed 

request to describe its fees (e.g., the 

structure of the fees, variables that 

impact each fee, differentiation among 

types of subscribers, and the range of 

fees). These disclosures are designed to 

provide market participants with more 

insight regarding the fees charged so 

that they can better understand how fees 

may apply to them and assess how such 

fees may impact their trading strategies. 

This approach does not require NMS 

Stock ATSs to provide comprehensive 

fee schedules but still gives subscribers 

meaningful information about the fees 

the NMS Stock ATS charges.1013

Although the fees charged for NMS 

Stock ATS services may be individually 

negotiated between the broker-dealer 

operator and the subscriber, the 

disclosures about the type of fees 

charged by the NMS Stock ATS are 

designed to help market participants 

discern how an NMS Stock ATS’s fees 

are organized and compare that 

information across NMS Stock ATSs, 

which could reduce the search costs of 

market participants in deciding where 

to send their orders and trading interest. 

Relatedly, the Commission recognizes 

that a requirement to disclose the 

complete fee schedule for each 

subscriber may provide more 

information, but this would not be 

desirable or preferable given the fees for 

NMS Stock ATSs can be highly bespoke 

and specific to each subscriber.1014

One commenter suggests that a 

description of the mechanisms and 

categories of fee structures would offer 

an appropriate level of clarity and 

transparency, and that the disclosure of 

the existence of rebates or commission 

relating to volume is workable, but a 

high/low range of fees or more clientspecific descriptions affect registrants’ 

ability to negotiate custom agreements 

with subscribers.1015 Part III, Item 19 of 

adopted Form ATS–N does not require 

or reveal customer-specific information 

regarding the fees or terms and 

conditions of fee agreements that result 

in the high or low in the range of fees 

disclosed. Part III, Item 19 of adopted 

Form ATS–N requests the range of fees 

and does not require the NMS Stock 

ATS to disclose the name of the 

customer, or even the types of 

subscriber, who is the highest or lowest 

in the range. 

A commenter states that the 

Commission also should require an 

NMS Stock ATS to explain whether it 

discriminates among different types of 

subscribers in establishing fees, rebates, 

or other charges.1016 In Part IV, Item 

12(b) of proposed Form ATS–N, we 

proposed that NMS Stock ATSs describe 

any differences if the fees, rebates, or 

other charges of the NMS Stock ATS 

were not the same ‘‘for all subscribers 

and persons.’’ We continue to believe 

that NMS Stock ATSs should be 

required to disclose differences in the 

treatment of subscribers; however, the 

Commission is changing Part III, Item 19 

to require a description of any 

differentiation among ‘‘types of 

subscribers’’ because the Commission 

did not intend to require fee differences 

among individual subscribers. Rather, 

we believe that differences in fees, 

rebates and other charges among ‘‘types 

of subscribers’’ would be more 

informative to market participants about 

the fee structure of the ATS than 

disclosures of individual differences 

between subscribers, which could result 

from particular negotiations with 

individual subscribers. This information 

would allow subscribers to observe 

whether an NMS Stock ATS is offering 

preferential treatment among types of 

subscribers with regards to fees, and 

therefore, the information could aid 

them in deciding where to route their 

trading interest. 

Another commenter suggests that the 

Commission should require NMS Stock 

ATSs to provide complete information 

about their sources of revenue, 

including revenue arrangements the 

ATS may have with other trading 

centers.1017 The commenter suggests 

funds and other market participants 

would use these disclosures to evaluate 

the potential for information leakage 

attendant to routing orders to a 

particular NMS Stock ATS or whether 

these arrangements may disadvantage 

subscribers of the ATS, including funds. 

We do not believe that disclosure of all 

of an ATS’s sources of revenue would 

likely contribute more to subscribers’ 

understanding of conflicts of interest 

than the combination of the disclosures 

in this Item and the disclosures in Part 

II of adopted the Form ATS–N, which 

include disclosures regarding ATSrelated activities of the broker-dealer 

operator and its affiliates, such as Part 

II, Item 4.1018

Other commenters express various 

reasons for why they believe the 

Commission should not require some or 

all of the disclosures on fees of Part IV, 

Item 12 of proposed Form ATS–N. 

Commenters state that NMS Stock 

ATSs, and especially NMS Stock ATSs 

of multi-service broker-dealers, may 

establish fees based on a number of 

factors, including the depth and breadth 

of a client relationship, or the full suite 

of brokerage services made available to 


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1019See UBS Letter at 8; Morgan Stanley Letter at 

4; STA Letter at 3–4; LeveL ATS Letter at 6. 

1020See UBS Letter at 8; STA Letter at 3–4; 

Morgan Stanley Letter at 4. 

1021See Proposal, supra note 2, at 81080. 

1022See Liquidnet Letter at 12. 

1023See SIFMA Letter at 26. 

1024The NMS Stock ATS services generally 

include those services used for the purpose of 

effecting transactions in NMS Stock, or for 

submitting, disseminating or displaying orders on 

the ATS. See 17 CFR 242.300(b). 

1025See UBS Letter at 8. We proposed in Part IV, 

Item 12(a) of proposed Form ATS–N that the NMS 

Stock ATS describe ‘‘any fees, rebates, or other 

charges’’ of the NMS Stock ATS. 

the client.1019 The commenters believe 

that because fees are set taking into 

account these other factors, any 

disclosures on the range of fees on the 

NMS Stock ATS would be 

misleading.1020 As discussed in the 

Proposal, the types of fees charged to 

use an NMS Stock ATS’s services could 

influence whether a market participant 

subscribes to, or the extent to which it 

participates on, the NMS Stock ATS.1021

The Commission recognizes, as 

indicated by commenters, that fees 

charged for the use of the NMS Stock 

ATS services can be bundled with nonATS services that the broker-dealer 

operator offers to subscribers of the 

ATS. While Part IV, Item 12 of proposed 

Form ATS–N request did not explicitly 

identify bundled service fees, the 

proposed request did require a 

description of any fees, rebates, or other 

charges of the NMS Stock ATS. As a 

type of fee for use of the services of the 

NMS Stock ATS, bundled service fees 

would have been responsive to Part IV, 

Item 12 of proposed Form ATS–N. 

To avoid potential confusion about 

fees charged by an NMS Stock ATS, and 

to account for bundled service fees 

charged to a subscribers by multiservice broker-dealer operators of NMS 

Stock ATSs, the Commission is adding 

a separate and specific request to Part 

III, Item 19(b) of adopted Form ATS–N. 

Specifically, the Commission is 

requiring that the NMS Stock ATS 

describe any bundled fees, including a 

summary of the bundled services and 

products offered by the broker-dealer 

operator or its affiliates, the structure of 

the fee, variables that impact the fee 

(including, for example, whether the 

particular broker-dealer services 

selected would impact the fee), 

differentiation among types of 

subscribers, and range of fees. Part III, 

Item 19(b) is designed to allow market 

participants to better evaluate fees for 

bundled services that include access to 

the NMS Stock ATS. NMS Stock ATSs 

will be required to provide information, 

including the relevant services and 

products offered by the broker-dealer 

operator and its affiliates for each 

bundled fee offered, that will provide 

context to market participants with 

which to assess how fees could apply to 

them as subscribers. 

Another commenter states its 

understanding that the disclosures 

required would relate only to the fees 

that the ATS charges for its services, 

and not include brokerage services, 

because otherwise, it believes there 

would be unfair discrimination relative 

to broker-dealers that do not operate an 

ATS.1022 To the extent that a brokerdealer operator bundles its services with 

its NMS Stock ATS services, and the 

ATS services do not have an explicit 

fee, then the broker-dealer operator 

would not be required to provide a 

range of fees charged for the bundled 

services. On the other hand, if a brokerdealer operator bundles its services with 

its NMS Stock ATS services and charges 

an explicit fee for the ATS services, then 

the fee for the ATS services should be 

taken into account for determining the 

range of fees under this Item. Further, if 

a broker-dealer operator sometimes 

bundles its services with its NMS Stock 

ATS services for certain subscribers, but 

charges a separate fee for ATS services, 

it would be required to provide the 

information responsive to this Item, 

including the range, for the separate fee 

for ATS services. 

A commenter also suggests the Item 

be expressly limited to fees set by the 

ATS operator and not include fees from 

other affiliates or third parties (e.g., 

related to co-location).1023 Part III, Item 

19(a) of adopted Form ATS–N covers 

charges to subscribers for their ‘‘use of 

the NMS Stock ATS services.’’ 1024 The 

fee information disclosed in Part III, 

Item 19 of adopted Form ATS–N must 

include fees resulting from a 

subscriber’s use of the NMS Stock ATS 

services that are charged by the brokerdealer operator, or a third party, such as 

a service provider to the NMS Stock 

ATS. The Item’s required disclosures 

are not limited by the entity charging 

the fee; rather, if the fee is for use of the 

NMS Stock ATS services, then the 

Item’s requests apply regardless of the 

entity charging the fee. Many brokerdealer operators today outsource some 

or all of the operations of the NMS 

Stock ATS to third parties (e.g., such as 

the matching engine). To the extent that 

subscribers are charged a fee by the 

third-party service provider of the NMS 

Stock ATS, the NMS Stock ATS would 

be required to disclose such fees in Part 

III, Item 19(a) of Form ATS–N. 

On the other hand, Part III, Item 19(a) 

of adopted Form ATS–N does not 

request information on fees charged for 

non-ATS services by a third party not in 

contract with the broker-dealer operator. 

If, for example, the NMS Stock ATS is 

located in a facility owned by a third 

party, and in order to co-locate to the 

NMS Stock ATS a subscriber would be 

required to lease physical space from 

the third-party facility owner, a fee for 

the space rental would not be required 

to be disclosed on Form ATS–N by the 

NMS Stock ATS. On the other hand, if 

an NMS Stock ATS provides co-location 

services for subscribers and charges a 

fee to those subscribers for the colocation services, such fee would be 

responsive to Part III, Item 19 of Form 

ATS–N. In addition, to the extent that 

a broker-dealer operator enters into an 

agreement or arrangement with a third 

party for that third party to provide a 

service of the NMS Stock ATS to 

subscribers and charge a fee that is 

passed back to the broker-dealer 

operator in any form, the broker-dealer 

operator would be required to disclose 

that fee in response to Part III, Item 19 

of Form ATS–N. In such a case, to 

prevent an NMS Stock ATS from 

circumventing disclosure otherwise 

responsive to Part III, Item 19(b) of 

adopted Form ATS–N, the pass-backed 

fee by the third party is a fee ‘‘for the 

use of NMS Stock ATS services.’’ 

Another commenter suggests that 

clients are highly interested in 

understanding whether an ATS offers 

rebates to subscribers and would 

support the inclusion of this 

question.1025 In response to the 

commenter, the disclosure requests 

under Item 19 will contain a stand-alone 

Item—Item 19(c)—which requests 

information about rebates and discounts 

of fees that are identified in subparts (a) 

and (b) of Item 19. Item 19(c) requires 

information about rebates and discounts 

that is similar to that which is required 

for fees (e.g., the structure of the rebate 

or discount, variables that impact the 

rebate or discount, differentiation 

among types of subscribers, and range of 

rebate or discount). 

20. Suspension of Trading 

Part IV, Item 8 of proposed Form 

ATS–N would have required disclosures 

regarding any procedures governing 

trading during a suspension of trading, 

disruption or malfunction. The 

Commission is adopting Part IV, Item 8 

with certain modifications, renaming it 

‘‘Suspension of Trading,’’ and 

renumbering the request to Part III, Item 

20 in adopted Form ATS–N. Part III, 

Item 20 is designed to, for example, 

inform market participants of whether, 

among other things, an NMS Stock ATS 


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1026See Proposal, supra note 2, at 81076. 

1027Based on Commission experience, an NMS 

Stock ATS’s procedures may include the 

suspension of trading in an NMS stock security to 

not trigger the requirements of Rule 301(b)(3) or 

Rule 301(b)(5) of Regulation ATS. See Proposal, 

supra note 2, at 81104. 

1028See SIFMA Letter at 24–25. 

1029See UBS Letter at 8. 

1030See Proposal, supra note 2, at 81076. We are 

removing references to ‘‘system disruptions’’ to 

mitigate any confusion with Regulation SCI. We 

believe this technical change does not change the 

substantive information required. 1031See SIFMA Letter at 26. 

1032See Proposal, supra note 2, at 81081. 

1033 Id. 

1034See SIFMA Letter at 26. 

will continue to accept orders after a 

suspension, whether the NMS Stock 

ATS routes, holds, or continues to 

execute orders resting in the system 

prior to the suspension, and the type of 

notice provided to market participants 

during a suspension. Furthermore, as 

discussed in the Proposal,1026 one of the 

primary concerns of the Commission is 

that given the speed and interconnected 

nature of the U.S. securities markets, a 

seemingly minor systems problem at a 

single entity can quickly create losses 

and liability for market participants, and 

spread rapidly across the national 

market system, potentially creating 

widespread damage and harm to market 

participants and investors. Accordingly, 

it is important to fully understand what, 

if any, trading procedures an NMS Stock 

ATS would follow when trading is 

suspended or stopped. Consistent with 

the Proposal, we are adding the phrase 

‘‘including the suspension of trading in 

individual NMS stocks’’ to Item 20(a) to 

make clear that the procedures to 

suspend trading in an NMS stock by an 

NMS Stock ATS are required by this 

request.1027

We received two comments regarding 

Part IV, Item 8 of proposed Form 

ATS–N. One commenter suggests that 

this information would be better suited 

as a disclosure to subscribers rather than 

formally filed with the Commission and 

publicly disclosed.1028 We do not agree 

and believe that this information would 

allow non-subscribers to better evaluate 

their brokers’ order routing practices 

and whether the routing of their orders 

to an NMS Stock ATS would achieve 

their trading or investment strategies. 

Another commenter requests that the 

Commission consider harmonizing any 

definitions used in the Item with those 

found in Regulation SCI.1029 As 

discussed in the Proposal, the 

Commission does not intend to alter or 

amend the requirements of Regulation 

SCI with this Item, nor does it intend to 

require NMS Stock ATSs to adopt 

specific procedures during a system 

disruption as it did in Regulation 

SCI.1030 Instead, we are requiring an 

NMS Stock ATS to disclose what 

procedures, if any, it follows when 

suspending or stopping trading so that 

market participants can better 

understand how their orders will be 

handled under those circumstances. 

21. Trade Reporting 

Part IV, Item 13(a) of proposed Form 

ATS–N would have required disclosures 

regarding trade reporting. We are 

adopting Part IV, Item 13(a) of proposed 

Form ATS–N with certain modifications 

discussed below, and renumbering the 

request as Part III, Item 21 of adopted 

Form ATS–N. One commenter suggests 

that the prompt to disclose ‘‘any 

arrangements’’ is broad and poses 

challenges to keep current and 

recommends it would be more useful to 

limit the requested arrangements to 

those that are material to or a core 

feature of the operations of the ATS.1031

In response to this comment, we are 

revising the request to focus on 

‘‘material’’ arrangements for reporting 

transactions on the NMS Stock ATS. We 

recognize that there could be 

arrangements relevant to trade 

reporting, such as the specific software 

used to report, that play a minor role in 

the ATS’s trade reporting and need not 

be disclosed. We believe that this 

change clarifies the Form ATS–N 

requirement and reduces potential 

burdens on NMS Stock ATSs while 

providing market participants with 

sufficient information to understand 

how their trade information will be 

reported. 

In addition, we are adding a phrase to 

the Item to make clear that the 

explanation of procedures or material 

arrangements required includes ‘‘where 

an ATS reports transactions and under 

what circumstances.’’ We believe this 

language will help NMS Stock ATSs 

better understand what would be 

responsive to Part III, Item 21 of adopted 

Form ATS–N and focus their responses 

accordingly, and is consistent with the 

request in Part IV, Item 13(a) of 

proposed Form ATS–N. For example, 

the NMS Stock ATS will be required to 

disclose the SRO to which it reports 

transactions, and any alternative trade 

reporting destinations, if applicable. 

Information about where an NMS Stock 

ATS reports transactions and under 

what circumstances would have been 

responsive to Part IV, Item 13(a) of 

proposed Form ATS–N, which required 

the NMS Stock ATS to ‘‘describe any 

arrangements or procedures for 

reporting transactions on the NMS Stock 

ATS.’’ The addition of the phrase to 

Item 21(a) clarifies those procedures 

that would be responsive to the request. 

Finally, we are revising the proposed 

Item to clarify that the NMS Stock ATS 

explain any ‘‘procedures and material 

arrangements’’ (emphasis added), 

instead of ‘‘procedures or material 

arrangements’’ (emphasis added). We 

intended that a description of both 

procedures and material arrangements 

would provide a complete and 

comprehensive disclosure of the most 

important aspects of the NMS Stock 

ATS’s trade reporting. 

22. Clearance and Settlement 

Part IV, Item 13(b) of proposed Form 

ATS–N would have required disclosures 

regarding clearance and settlement. The 

Commission is adopting Part IV, Item 

13(b) of proposed Form ATS–N with 

certain modifications discussed below, 

and renumbering it as Part III, Item 22 

of adopted Form ATS–N. The integrity 

of the trading markets depends on the 

prompt and accurate clearance and 

settlement of securities transactions.1032

Part III, Item 22 is designed to help 

market participants understand the 

measures the NMS Stock ATS takes to 

facilitate clearance and settlement of 

transactions, including the process 

through which an NMS Stock ATS 

clears a trade (e.g., whether the NMS 

Stock ATS becomes a counterparty to a 

transaction, interposing itself between 

two counterparties to a transaction, or 

whether the NMS Stock ATS submits 

trades to a registered clearing agency for 

clearing) and any requirements an NMS 

Stock ATS places on its subscribers, or 

other persons whose orders are routed 

to an NMS Stock ATS, to have clearance 

and settlement systems and/or 

arrangements with a clearing firm.1033

One commenter suggests that the 

prompt to disclose ‘‘any arrangements’’ 

is broad and poses challenges to keep 

current and recommends it would be 

more useful to limit the requested 

arrangements to those that are material 

to or a core feature of the operations of 

the ATS.1034 In response to this 

comment, and for similar reasons to 

those stated above for Part III, Item 21 

(‘‘Trade Reporting’’), we are revising 

this request to focus the Item on 

‘‘material’’ arrangements to facilitate the 

clearance and settlement of transaction 

on the NMS Stock ATS. For example, an 

arrangement under which a third party 

would have a role in clearance and 

settlement on the NMS Stock ATS may 

constitute a material arrangement that 

could trigger the disclosure requirement 

under Part III, Item 22. Limiting the 

explanation required to material 

arrangements will reduce the burden on 


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1035See SIFMA Letter at 25. 

1036See supra note 941. 

1037See HMA Letter at 19. 

1038See Section V.D.13 (discussing why the 

Commission is requiring narrative responses 

instead of a quantitative component, such as the 

percentage of orders and trades per segmented 

class), and V.D.26 (discussing why the Commission 

is requiring narrative responses instead of 

quantitative data from NMS Stock ATSs). 

1039See SIFMA Letter at 27. 

1040See Proposal, supra note 2, at 81082. 

NMS Stock ATSs while at the same time 

still allowing market participants to 

understand and more easily compare 

clearing arrangements required across 

NMS Stock ATSs. 

For similar reasons as stated above for 

Part III, Item 21 (‘‘Trade Reporting’’), we 

are revising this request to state that the 

NMS Stock ATS describe any 

‘‘procedures and material 

arrangements’’ (emphasis added), 

instead of ‘‘procedures or material 

arrangements’’ (emphasis added). In 

addition, we are removing the phrase 

‘‘undertaken by the NMS Stock ATS’’ 

from the proposed requirement. NMS 

Stock ATSs may engage a third party to 

facilitate the clearance and settlement of 

transactions on the NMS Stock ATS, 

and we do not intend to limit the 

procedures and material arrangements 

explained to only those specifically 

performed by the NMS Stock ATS. 

23. Market Data 

Part IV, Item 11 of proposed Form 

ATS–N would have required disclosures 

regarding market data. The Commission 

is adopting Part IV, Item 11 of proposed 

Form ATS–N with certain modifications 

and renumbering the request as Part III, 

Item 23 of adopted Form ATS–N. 

Market data is a critical component to 

understanding the operations of an NMS 

Stock ATS. For instance, the market 

data received by an NMS Stock ATS 

might affect the price at which orders 

and trading interest is prioritized and 

executed in the ATS, including orders 

that are pegged to an outside reference 

price. The source of an NMS Stock 

ATS’s market data could impact the 

execution price received by a 

subscriber. Disclosures about the NMS 

Stock ATS’s sources of market data, and 

how the ATS uses such data, can help 

to inform market participants about how 

their orders would be handled and 

executed by the NMS Stock ATS. 

One commenter recommends the 

elimination of prompts that it suggests 

request proprietary, sensitive, or 

duplicative information. The 

commenter instead recommends a 

general, high-level description regarding 

the determination of NBBO and 

pricing.1035 As routing is a function 

performed by a broker-dealer and 

outside the ATS, the Commission is 

revising the request to make clear that 

an NMS Stock ATS would not be 

required to provide information about 

the market data that the broker-dealer 

operator uses to route orders and trading 

interest from the NMS Stock ATS to 

away destinations. Part III, Item 23 

would require information, however, 

about the ATS’s use of market data to 

determine when resting orders and 

trading interest will be removed from 

inside the NMS Stock ATS because 

these orders and trading interest reside 

inside the ATS and the data used to act 

on them could impact their execution. 

An NMS Stock ATS would also be 

required to provide information about 

how the ATS uses market data to 

provide the services it offers. Among 

other things, for example, the NMS 

Stock ATS would need to disclose in 

response to Part III, Item 23, of adopted 

Form ATS–N, its use of market data to 

display, price, prioritize, execute, and 

remove trading interest. As part of its 

explanation for how the NMS Stock 

ATS uses market data, the ATS would 

be required to specify, if applicable, 

when the ATS may change between its 

use of different sources of market data 

to provide its services. 

Given commenters’ concerns that the 

use of the term ‘‘describe’’ in Form 

ATS–N is vague and would lead to 

discursive disclosures and obscure key 

information,1036 the Commission is 

providing additional examples in the 

text of the Item to give NMS Stock ATSs 

more guidance on the types of 

information that would be responsive to 

the request, including how the ATS 

determines the NBBO and protected 

quotes in the Item. 

One commenter believes that the form 

should require annual disclosures of an 

NMS Stock ATS’s approximate latency 

(in microseconds) to receive market data 

feeds, assemble the NBBO, and deliver 

the updated NBBO to the matching 

engine.1037 As discussed elsewhere in 

relation to comments requesting 

quantitative data,1038 the Commission is 

not adopting ongoing reporting 

requirements for NMS Stock ATSs to 

report performance metrics of their 

system and therefore not requiring NMS 

Stock ATS to disclose this information. 

The information above could be 

important to market participants 

because they could be concerned, for 

example, about price impacts on their 

trading interest if the NMS Stock ATS 

compiles the NBBO slower than other 

trading venues, or that they would trade 

on stale prices, as well as the potential 

for information leakage. To address the 

commenter’s concern, the Commission 

is providing guidance to NMS Stock 

ATSs that, in response to Part III, Item 

23, the NMS Stock ATS should explain 

how market data is received by the ATS, 

compiled, and delivered to the matching 

engine. For example, among other 

possible arrangements, the NMS Stock 

ATS could explain in response to the 

Item that market data is received by the 

broker-dealer operator and assembled 

there, and subsequently delivered to the 

matching engine, or that market data is 

sent directly to the matching engine, 

which normalizes the data for its use. 

24. Order Display and Execution Access 

Part IV, Item 14 of proposed Form 

ATS–N would have required disclosures 

regarding order display and execution 

access pursuant to Rule 301(b)(3). The 

Commission is adopting Part IV, Item 14 

in proposed Form ATS–N, with certain 

modifications, and renumbering this 

Item as Part III, Item 24 in adopted Form 

ATS–N. 

One commenter recommends 

eliminating this request altogether on 

the grounds that it is unclear how 

subscribers would benefit from the 

detailed information under this Item or 

how it would be used.1039 The 

Commission does not agree. As noted in 

the Proposal, under the current 

regulatory regime for ATSs, there is no 

mechanism under which an ATS must 

notify the Commission, its SRO, or 

market participants after it has triggered 

the order display requirements.1040

Thus, the commenter’s suggestion that 

the Item is more appropriate in the 

context of a Commission examination 

would not remedy the current lack of 

notice to the public once the NMS Stock 

ATS triggers the order display 

requirement. This notice would inform 

the Commission and the public whether 

an NMS Stock ATS is subject to Rule 

301(b)(3). Removing Part IV, Item 14 

(adopted as Part III, Item 24) would 

forego the benefit to market participants 

of knowing when an NMS Stock ATS 

has become a significant source of 

liquidity in an NMS stock and how they 

can access applicable quotations of that 

ATS. The commenter maintains, but 

does not describe how, the required 

disclosure would undermine the NMS 

Stock ATS’s subscriber access criteria, 

and we do not agree that the required 

disclosure would do so. 

We recognize that an NMS Stock ATS 

may not be subject to Rule 301(b)(3)(ii) 

of Regulation ATS even if the ATS 

displays subscriber orders in an NMS 

stock to any person (other than 

employees of the ATS) (Rule 

301(b)(3)(i)(A)), and executes 5% or 


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1041See Liquidnet Letter at 13–14 (stating that the 

‘‘order display requirement of [Rule 301(b)(ii)] only 

applies where orders are ‘displayed to more than 

one person in the [ATS]’’ such that the disclosure 

obligation of proposed Part IV, Item 14 would only 

apply where an ATS displays orders to more than 

one subscriber in securities where it has exceeded 

the applicable 5% threshold). 

1042 If the NMS Stock ATS responds ‘‘no’’ to Part 

III, Item 24(a) it will not be required to respond to 

Item 24(b), and if it responds ‘‘yes’’ to Item 24(a) 

but ‘‘no’’ to Item 24(b), it will not be required to 

provide any additional information in response to 

Item 24. 

1043See Liquidnet Letter at 13–14. 1044See SIFMA Letter at 27. 1045See Proposal, supra note 2, at 81082, n.502. 

An ATS that meets any of the trading volume 

thresholds set forth in Rule 301(b)(5)(i), must 

comply with the requirements of Rule 301(b)(5)(ii) 

(including the requirement to disclose to the 

Commission on Form ATS–R the information 

required by Rule 301(b)(5)(ii)(D)), unless it meets 

the exception set forth in Rule 301(b)(5)(iii). 

1046See Proposal, supra note 2, at 81082. 

1047See supra Section V.D.24. 

1048 If the NMS Stock ATS responds ‘‘no’’ to Part 

III, Item 25(a), it will not be required to respond to 

Item 25(b), and if it responds ‘‘yes’’ to Item 25(a) 

but ‘‘no’’ to Item 25(b), it will not be required to 

provide any additional information in response to 

Item 25. 

more of the average daily trading 

volume in that NMS stock as reported 

by an effective transaction reporting 

plan during at least four of the 

preceding six calendar months (Rule 

301(b)(3)(i)(B)).1041 If an NMS Stock 

ATS satisfies the Rule 301(b)(3)(i) 

threshold, the ATS must also meet the 

criteria of Rule 301(b)(3)(ii) to be subject 

to the requirements of Rules 301(b)(3)(ii) 

and (iii). As proposed, Part IV, Item 14 

of Form ATS–N would have required 

that an NMS Stock ATS that meets the 

threshold requirements of Rule 

301(b)(3)(i), but is not subject to Rules 

301(b)(3)(ii) and (iii), to provide 

information about how they display and 

provide execution access. This was not 

the Commission’s intended result. 

Rather, the Commission intended for an 

NMS Stock ATS that is subject to Rule 

301(b)(3)(ii) and (iii) to provide the 

information that the Commission 

proposed in Part IV, Item 14(a)–(c) of 

proposed Form ATS–N. Therefore, the 

Commission is modifying the disclosure 

requirement of this Item and relocating 

it to Part III, Item 24 of Form ATS–N. 

As adopted, Part III, Item 24(a) of Form 

ATS–N asks if the NMS Stock ATS 

meets the threshold requirements of 

Rule 301(b)(3)(i) of Regulation ATS, 

and, if so, whether the NMS Stock ATS 

is required to comply with Rule 

301(b)(3)(ii) of Regulation ATS (i.e., 

does the ATS display to more than one 

person in the system). If the NMS Stock 

ATS is required to comply with Rule 

301(b)(3)(ii), Part III, Item 24(b) requires 

the NMS Stock ATS to provide the 

information that the Commission 

proposed in Part IV, Item 14(a)–(c) of 

proposed Form ATS–N (i.e., the ticker 

symbol of the NMS stocks displayed, 

information about how the ATS 

displays such orders, and information 

about how the ATS provides access to 

such orders).1042

To ensure consistency with Rule 

301(b)(3) of Regulation ATS, the 

Commission is making minor 

modifications to the request to better 

comport with requirements of Rule 

301(b)(3), and in response to the 

commenter’s concerns regarding 

proposed Form ATS–N’s disclosure 

requirements for NMS Stock ATSs that 

meet the threshold requirements of Rule 

301(b)(3)(i), but may not be subject to 

Rules 301(b)(ii) and (iii).1043

25. Fair Access 

Part IV, Item 15 of proposed Form 

ATS–N would have required disclosures 

regarding the fair access requirement of 

Rule 301(b)(5). The Commission is 

adopting Part IV, Item 15 of proposed 

Form ATS–N, with certain 

modifications, and renumbering this 

Item as Part III, Item 25 in adopted Form 

ATS–N. The Commission received 

comment recommending the 

elimination of the request altogether on 

the grounds that it is unclear how 

subscribers would benefit from the 

detailed information under the Item or 

how it would be used.1044

The Commission does not agree for 

the same reason discussed above in 

connection with Part III, Item 24. As 

noted in the Proposal, although 

triggering the fair access provision 

requires the NMS Stock ATSs to provide 

certain information confidentially to the 

Commission under Exhibit C of Form 

ATS–R,1045 there is no mechanism 

under which an ATS must notify market 

participants after it has triggered the fair 

access threshold under the current 

regulatory regime for ATSs.1046

Removing Part IV, Item 15 of proposed 

Form ATS–N (adopted Part III, Item 25) 

as suggested by the commenter, would 

forego the benefit to market participants 

of knowing when an NMS Stock ATS 

has become a significant source of 

liquidity in an NMS stock and must 

comply with fair access requirements of 

Rule 301(b)(5). We believe that the 

information that an NMS Stock ATS 

will be required to disclose pursuant to 

Part III, Item 25 will allow market 

participants to assess whether fair 

access is in fact being granted by NMS 

Stock ATSs that meet the fair access 

threshold of Rule 301(b)(5), in part by 

making publicly available a description 

of the NMS Stock ATS’s written 

standards for granting access. In 

addition, the commenter mentions that, 

but does not describe how, the required 

disclosure would undermine the NMS 

Stock ATS’s subscriber access criteria. 

Similar to Part IV, Item 14 of 

proposed Form ATS–N as discussed 

above,1047 Part IV, Item 15 of proposed 

Form ATS–N would have applied to an 

NMS Stock ATS that meets the 

threshold requirements of Rule 

301(b)(5)(i), but is not required to 

comply with Rule 301(b)(5)(ii). The 

Commission intended for an NMS Stock 

ATS to provide this information only if 

it is required to comply with Rule 

301(b)(5)(ii). Therefore, the Commission 

is modifying the disclosure requirement 

of this Item and relocating it to Part III, 

Item 25 of adopted Form ATS–N. As 

adopted, Part III, Item 25(a) of Form 

ATS–N asks if the NMS Stock ATS 

meets the threshold requirements of 

Rule 301(b)(5)(i)(A) of Regulation ATS 

and if so, whether the NMS Stock ATS 

is required to comply with Rule 

301(b)(5)(ii) of Regulation ATS (i.e., the 

ATS does not meet the exception set 

forth in Rule 301(b)(5)(iii)). If the NMS 

Stock ATS is required to comply with 

Rule 301(b)(5), Part III, Item 25(b) 

requires the NMS Stock ATS to provide 

the information that the Commission 

proposed in Part IV, Item 15(a) and 

15(b) of proposed Form ATS–N (i.e., the 

ticker symbol of each NMS stock and a 

description of the ATS’s written 

standards for granting access to trading 

on the ATS).1048

To ensure consistency with Rule 

301(b)(5) of Regulation ATS, the 

Commission is making minor 

modifications to the request to better 

comport with requirements of Rule 

301(b)(5), and for consistency with the 

modifications the Commission is 

making to Part III, Item 24 described 

above. 

26. Aggregate Platform-Wide Data; 

Trading Statistics 

a. Disseminated Aggregated PlatformWide Data 

Part IV, Item 16 of proposed Form 

ATS–N would have required disclosures 

regarding market quality statistics 

published or provided to subscribers. 

The disclosure requests in Part IV, Item 

16 of proposed Form ATS–N are now 

contained in Part III, Item 26 of adopted 

Form ATS–N. 

We received several comments on 

Part IV, Item 16 of proposed Form 

ATS–N. Some commenters express 

concerns about the potential effects that 

the public disclosure of the information 

under Part IV, Item 16 would have on 

the flow of information to 


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1049See SIFMA Letter at 27; Liquidnet Letter at 

15. 

1050See Liquidnet Letter at 15. 

1051See SIFMA Letter at 27. 

1052See id. 

1053See MFA/AIMA Letter at 5. 

1054See Proposal, supra note 2, at 81084. As also 

explained in the Proposal, if, for example, an NMS 

Stock ATS publishes or provides a particular 

statistic on a daily basis, the NMS Stock ATS would 

include in Exhibit 4 of adopted Form ATS–N the 

statistic that was published or provided to one or 

more subscribers on the last trading day of the 

calendar quarter (e.g., the statistic published or 

provided on June 30th or last trading day prior to 

June 30th). See id. at n.512. If an NMS Stock ATS 

publishes or provides a particular statistic weekly, 

the NMS Stock ATS would be required to include 

in Exhibit 4 of adopted Form ATS–N the statistic 

that was published or provided to one or more 

subscribers at the end of the week prior to the end 

of the calendar quarter (e.g., the statistic published 

for the last full week of June). See id. 

1055See SIFMA Letter at 27. 

1056See id. 

1057See Liquidnet Letter at 16. 

1058See id. 

1059See SIFMA Letter at 28. 

1060See MFA/AIMA Letter at 5; see also 17 CFR 

242.605 (requiring market centers, which include 

ATSs, to make available for each calendar month 

an electronic report on certain categories of order 

execution information). 

subscribers.1049 One commenter 

expresses concern that the proposed 

requirements of Part IV, Item 16 would 

have made the process of providing 

information requested by customers 

more difficult, noting that it receives 

information requests on an ongoing 

basis from traders at more than 800 

firms.1050 Another commenter questions 

the value that the snapshot disclosed 

under Part IV, Item 16 would have for 

the general public, and states that 

adopting Part IV, Item 16 as proposed 

would cause NMS Stock ATSs to stop 

sharing some categories of information 

with clients.1051

We continue to believe that it is 

appropriate to require an NMS Stock 

ATS to make public aggregate, platformwide order flow and execution statistics 

it already otherwise collects and 

publishes or provides to one or more 

subscribers to the NMS Stock ATS. We 

believe that an NMS Stock ATS may 

choose to create and publish or provide 

to one or more subscribers or persons 

information concerning order flow and 

execution quality for different reasons. 

Certain performance metrics and 

statistics may be important factors for 

market participants in comparing and 

selecting an ATS that is most 

appropriate for their investment 

objectives. 

We acknowledge a commenter’s point 

that that these disclosures might limit 

communication between NMS Stock 

ATSs and their participants to the 

extent that an NMS Stock ATS chooses 

to cease providing such statistics to 

subscribers due to the Form ATS–N 

requirements.1052 However, we believe 

that only a few NMS Stock ATSs would 

take this type of action because such 

ATSs would have already chosen to 

distribute such statistics to outside 

persons, thus triggering the 

requirements of Item 26. Furthermore, 

we believe that the benefits of this 

disclosure—requiring that all market 

participants have an equal opportunity 

to analyze aggregate platform-wide 

order flow and execution data that is 

distributed by an NMS Stock ATS— 

justify the potential cost of some ATSs 

choosing to no longer distribute such 

statistics to select subscribers on their 

platforms. 

Another commenter believes this 

request should not require the 

disclosure of ‘‘bespoke’’ statistics for a 

subscriber.1053 The commenter is 

concerned that if an NMS Stock ATS 

has to amend its Form ATS–N each time 

it receives a subscriber’s request for 

additional information, it will not 

provide investors with additional 

information; accordingly, the 

commenter suggests revising Part IV, 

Item 16 in a way that would not 

discourage an NMS Stock ATS from 

providing additional market quality 

information to investors. We share the 

concern that if an NMS Stock ATS is 

compelled to amend its Form ATS–N 

each time it receives a request for 

additional information from a market 

participant, it will not provide investors 

with this information. Item 26, however, 

would not require an NMS Stock ATS 

to amend its Form ATS every time it 

receives a data request. As explained in 

the Proposal, to comply with this 

request, an NMS Stock ATS would only 

be required to file a Form ATS–N 

updating amendment on a quarterly 

basis.1054 We are not modifying the 

language or substantive requirements in 

adopted Form ATS–N. Rather, to 

provide greater clarity regarding when 

and how NMS Stock ATSs are required 

to respond to Item 26(a), we are adding 

an instruction to Form ATS–N to state 

that an NMS Stock ATS shall file a 

Form ATS–N amendment pursuant to 

Rule 304(a)(i)(2)(B) of Regulation ATS to 

provide information in response to Item 

26(a). Furthermore, as explained above, 

the benefits of this disclosure justify the 

potential cost of some ATSs choosing to 

no longer distribute such statistics to 

select subscribers on their platforms. 

In addition, one commenter believes 

that broker-dealer operators and their 

affiliated broker-dealers should be 

permitted to respond to individualized 

questions from subscribers and to 

continue to provide customized reports 

in the course of responding to those 

individualized questions without 

attendant Form ATS–N revisions or 

amendment requirements.1055 This 

commenter states that without 

clarification regarding how 

individualized or custom reports are to 

be treated, this disclosure requirement 

could potentially introduce misleading 

or skewed information into the public 

arena, which could undermine the 

transparency goals of the proposed 

rules.1056 Similarly, one commenter 

states that the Commission should 

clarify that Part IV, Item 16 would not 

apply when an NMS Stock ATS 

provides data to a customer relating to 

that customer’s specific usage of the 

ATS.1057 The commenter states that 

institutions must have access to this 

type of information to fulfill their best 

execution obligations, but making this 

type of information public could 

compromise an institution’s 

anonymity.1058 We note that Part III, 

Item 26 of adopted Form ATS–N 

requires only aggregate platform-wide 

data and, thus, would not apply when 

an NMS Stock ATS provides a 

participant with individualized or 

custom reports containing data relating 

to that participant’s specific usage of the 

ATS. 

Commenters also recommend changes 

and/or other clarifications to the 

requests under Part IV, Item 16 of 

proposed Form ATS–N. One of these 

commenters recommends that the 

Commission eliminate the public 

disclosure requirements under Item 16 

and instead propose a revised report on 

aggregate order flow and execution that 

is to be filed on an annual and 

confidential basis with the Commission 

as an exhibit to Form ATS–N.1059 As 

noted above, we are adopting the 

proposed disclosure requests, as the 

public disclosure of the material 

encompassed by Part IV, Item 16 of 

proposed Form ATS–N will benefit 

market participants. 

Another commenter recommends 

revising Part IV, Item 16 of proposed 

Form ATS–N to only mandate the 

disclosure of the required market 

quality statistics when the NMS Stock 

ATS publishes or otherwise provides 

such statistics to a substantial portion of 

its subscribers (e.g., 10% or more).1060

As explained above, we believe that 

there is a strong policy objective behind 

ensuring that the information 

encompassed by Part III, Item 26 of 

adopted Form ATS–N is available to a 

wide array or market participants. We 

believe that setting a threshold for when 

these disclosure requirements are 


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1061See Liquidnet Letter at 15. We are not 

expanding the regulatory regime of Regulation ATS 

to require the public disclosure of specific, 

standardized statistics for ATSs. See also infra 

Section V.D.26.b. 

1062See Proposal, supra note 2, at 81084–85. 1063See, e.g., T. Rowe Price Letter at 1 

(recommending that ATSs be required to collect 

and disclose statistics about the percentage of 

volume executed in block and demi-block sizes, 

percentage of volume executed relative to national 

best bid/offer (i.e., near, far, midpoint, and intraspread), trade size and market cap distribution, and 

aggregate statistics regarding counterparties); 

Citadel Letter at 4 (advocating for the Commission 

to require the reporting of end-of-day trade 

information that the commenter believes would 

bring greater transparency to market participants); 

HMA Letter at 22 (recommending that ATSs be 

required to collect and disclose statistics about 

Order Trading and Descriptive Statistics, Subscriber 

Characteristics, and ATS Relationship and Trading 

Statistics); Anonymous at 1 (stating that the same 

data produced by national securities exchanges 

should also be provided by ATSs, including 

transactional short sale data); and Liquidnet Letter 

at 16 (recommending that ATSs be required to 

publicly report all individual ATS executions on an 

attributed basis, which could be subject to a 

suitable delay period, such as 30 days). 

1064See 17 CFR 242.605 and 17 CFR 242.606. 

1065See 17 CFR 242.605. Rule 605 generally 

requires a market center that trades NMS stocks to 

make available to the public monthly electronic 

execution reports that include uniform statistical 

measures of execution quality. See HMA Letter at 

20; Consumer Federation of America Letter at 7; 

Markit Letter at 5–6. 

1066 17 CFR 242.606. Rule 606 of Regulation NMS 

requires every broker or dealer to make publicly 

available for each calendar quarter a report on its 

routing of non-directed orders in NMS securities 

during that quarter. See Markit Letter at 6–7; ICI 

Letter at 8. 

1067See Securities Exchange Act Release No. 

78309 (July 13, 2016), 81 FR 49432 (July 27, 2016). 

1068See 17 CFR 242.301(b)(10). 

1069See Regulation ATS Adopting Release, supra 

note 3, at 70879. 

triggered would not advance this policy 

objective because an NMS Stock ATS 

would be able to limit distribution of 

the statistics encompassed by Part II, 

Item 26 of adopted Form ATS–N to a 

select number of participants on the 

ATS. 

As an alternative to the proposed 

requirements for the disclosure of 

aggregate platform-wide statistics on 

Form ATS–N, a commenter 

recommends that the Commission 

designate specific execution statistics 

for all ATSs to provide.1061 However, if 

the Commission were to adopt the 

requests of Part IV, Item 16 as proposed, 

the commenter believes that the 

Commission should clarify that tradespecific data would not be subject to 

this filing requirement, including pretrade and post-trade transaction cost 

analyses. The commenter also requests 

clarification that this disclosure request 

only covers execution quality statistics 

and that other types of statistics are not 

included. By way of example, the 

commenter believes that disclosing the 

percentage of customers that have used 

a specific product or product feature 

would not trigger the requirements of 

Part III, Item 26 because that 

information would not be considered a 

market quality statistic. Finally, the 

commenter believes that NMS Stock 

ATSs should be permitted to file the 

relevant statistics under Part III, Item 26 

without filing any associated 

communication to a specific customer 

(such as the other contents of an email 

containing these statistics or a 

questionnaire submitted by the 

customer), as this could compromise 

customer anonymity. 

We confirm that Part III, Item 26 of 

adopted Form ATS–N only requires the 

disclosure of order flow and execution 

statistics, and that trade-specific data 

that does not include aggregate, 

platform-wide information would not be 

covered by this request. We note, 

however, that whether or not a specific 

type of statistic should be categorized as 

an order and execution statistic or 

considered aggregate, platform-wide 

data will depend on the nature of the 

specific statistics being compiled by the 

NMS Stock ATS. An NMS Stock ATS 

should independently evaluate any 

statistics that it compiles and distributes 

to determine whether they are 

responsive to this disclosure request. 

We also agree that protecting customer 

anonymity should be a priority with any 

public disclosure under this Item, and 

thus, an ATS would not be required to 

publicly file customer communications 

associated with the responsive statistics. 

While we are not changing the 

substance of the proposed data request 

being adopted in Part III, Item 26, we are 

making technical modifications to 

improve the means by which the 

disclosures are filed on Form ATS–N. 

We believe that these modifications will 

make it easier for market participants to 

review and compare the filed 

information. In addition to changing the 

proposed request into a ‘‘yes’’ or ‘‘no’’ 

question in adopted Form ATS–N, Part 

III, Item 26 requires the NMS Stock ATS 

to attach both the responsive statistics 

and its explanation of the categories or 

metrics of those statistics as Exhibits 4 

and 5, respectively, rather than 

including such information as part of 

the form, as was proposed. We believe 

it will be easier for market participants 

to review the disclosures as stand-alone 

documents than it would be if they were 

filed and publicly posted as narratives 

in the form. Also, in lieu of filing 

Exhibits 4 and 5, the NMS Stock ATS 

may certify that the information 

requested under Exhibits 4 and 5 is 

available at the website provided in Part 

I, Item 5 of the form and is accurate as 

of the date of the filing. 

b. Other Standardized Statistical 

Disclosures 

In the Proposal, we solicited comment 

on whether other standardized 

statistical disclosures should be 

required from NMS Stock ATSs and the 

nature and extent of any such metrics or 

statistics that commenters believe 

should be disclosed.1062 Several 

commenters believe that the 

Commission should add additional 

public statistical disclosure 

requirements to the ATS regulatory 

regime.1063 We believe that it is 

appropriate to take an incremental 

approach to the disclosure of additional 

market statistics. At this time, we 

believe it is appropriate to only require 

NMS Stock ATSs to provide to all 

market participants—via public 

disclosure on Form ATS–N—aggregate, 

platform wide order flow and execution 

statistics that they already collect and 

distribute and that would be 

encompassed by adopted Item 26. 

Accordingly, we are not adopting rules 

to require NMS Stock ATSs or national 

securities exchanges to report 

quantitative data above what these 

trading centers are already required to 

report under current federal securities 

laws.1064

We also received comments 

advocating that this rulemaking include 

amendments to Rule 605 of Regulation 

NMS.1065 Other commenters 

recommend enhancing the disclosure 

requirement of Rule 606 of Regulation 

NMS.1066 Should we decide to take 

action with respect to the reporting of 

additional market quality data under 

Rule 605, we would do so in a separate 

rulemaking. Additionally, a separate 

rulemaking has been proposed to amend 

Rule 606 by requiring additional 

disclosures by broker-dealers to 

customers about the routing of their 

institutional orders.1067 We are 

currently considering the proposal and 

comments received. 

VI. Amendments to Rule 301(b)(10) and 

Rule 303(a)(1) for Written Safeguards 

and Written Procedures To Protect 

Confidential Trading Information 

Current Rule 301(b)(10) of Regulation 

ATS 1068 requires every ATS to have in 

place safeguards and procedures to 

protect subscribers’ confidential trading 

information and to separate ATS 

functions from other broker-dealer 

functions, including proprietary and 

customer trading.1069 Rule 301(b)(10), 

however, does not currently require that 

the safeguards and procedures 


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1070See Rule 301(b)(10)(i)(A). 

1071See Rule 301(b)(10)(i)(B). 

1072See Rule 301(b)(10)(ii). 

1073See ICI Letter at 10; MFA/AIMA Letter at 6; 

HMA Letter at 23; STANY Letter at 2; Liquidnet 

Letter at 17. See also Investor Advocate Letter at 2. 

1074See ICI Letter at 10; MFA/AIMA Letter at 6; 

HMA Letter at 23; STANY Letter at 2. 

1075See Liquidnet Letter at 17. In addition, this 

commenter expresses concern that the requirements 

of Regulation ATS relating to protection of 

confidential information could be interpreted in a 

manner that would be harmful to long-term 

investors by prohibiting broker-dealers that operate 

ATSs from providing information to customers that 

the customers can use to evaluate and enhance their 

trading performance, such reports of participants’ 

positive action rates and the positive action rates of 

the contras with which they match. See id. The 

commenter is concerned that if Rule 301(b)(10) is 

interpreted to restrict the distribution of this type 

of information, this would harm long-term 

investors. See id. Proposed and adopted 

amendments to Rule 301(b)(10) to require an ATS 

to maintain written procedures to protect 

confidential trading information neither (i) change 

the standard for what constitutes adequate 

safeguards and procedures to protect subscribers’ 

confidential trading information nor (ii) narrow or 

expand the scope of what is considered to be 

confidential trading information under that rule. In 

general, the determination of what constitutes 

subscribers’ confidential trading information is a 

facts and circumstances analysis, but it is also 

outside of the scope of this rulemaking to provide 

interpretive guidance about the scope of Rule 

301(b)(10). 

1076 In addition, we are requiring public 

disclosure related to such safeguards and 

procedures. See supra Section V.C.6. 

1077See HMA Letter at 23. 

1078See id. 

1079See supra Section V.C.8. 

1080See supra Section III.B.6. 1081See proposed Rule 303(a)(1)(v). 

mandated under Rule 301(b)(10) be 

memorialized in writing. 

We proposed to amend Rule 

301(b)(10)(i) to require that all ATSs 

(including both NMS Stock ATSs and 

non-NMS Stock ATSs) adopt written 

safeguards and written procedures that 

limit access to the confidential trading 

information of subscribers to those 

employees of the ATS who are operating 

the system or are responsible for its 

compliance with Regulation ATS or any 

other applicable rules,1070 and 

implement written standards controlling 

employees of the ATS trading for their 

own accounts.1071 In addition, proposed 

Rule 301(b)(10)(ii) would require that 

the oversight procedures, which an ATS 

adopts and implements to ensure that 

the above safeguards and procedures are 

followed, be in writing.1072

We received five comments on the 

proposed amendment to Rule 

301(b)(10).1073 Four commenters 

indicate that they support the 

requirement that ATSs memorialize 

safeguards and procedures in writing as 

proposed.1074 An additional commenter 

does not object to the Commission’s 

proposal to require that an ATS’s 

procedures to protect confidential 

information be memorialized in 

writing.1075

We are adopting the amendments to 

Rule 301(b)(10) as proposed. We 

continue to believe that safeguards and 

procedures to ensure the confidential 

treatment of ATS subscribers’ trading 

information are important, and that the 

potential for misuse of such information 

continues to exist. We also continue to 

believe that requiring an ATS to reduce 

to writing those safeguards and 

procedures, as well as its oversight 

procedures to ensure that such 

safeguards and procedures are followed, 

will strengthen the effectiveness of the 

ATS’s safeguards and procedures and 

will better enable the ATS to protect 

confidential subscriber trading 

information and implement and monitor 

the adequacy of, and the ATS’s 

compliance with, its safeguards and 

procedures.1076 The proposed revisions 

would aid investors, market 

participants, and regulators by 

consolidating written safeguards and 

procedures into one place for easy 

review and evaluation.1077 Further, we 

agree with the comment that asserts that 

the process of consolidating these 

safeguards and procedures may 

facilitate ATS operators’ identification 

of gaps or opportunities for 

improvement of these measures.1078 In 

addition, we believe that reducing 

ATSs’ safeguards and procedures under 

Rule 301(b)(10) to writing will help the 

Commission and its staff, and the staff 

of the SRO of which an ATS’s brokerdealer operator is a member, evaluate 

whether an ATS has established such 

procedures and safeguards, whether the 

ATS has implemented and is abiding by 

them, and whether they comply with 

the requirements of Rule 301(b)(10). 

This should assist the Commission, and 

the applicable SRO(s), to exercise more 

effective oversight of ATSs regarding the 

ATSs’ compliance with Rule 301(b)(10) 

and other federal securities laws, rules, 

and regulations. Furthermore, we 

believe that the amendments we are 

adopting to Rule 301(b)(1) will benefit 

market participants because they will be 

able to better evaluate the 

implementation of such safeguards and 

procedures, once they are reduced to 

writing. 

We also proposed to amend the record 

preservation requirements of Rule 

303(a)(1) to incorporate the amendments 

to Rule 301(b)(10).1079 We received no 

comments on the proposed change to 

Rule 303(a)(1).1080 We are adopting, as 

proposed, Rule 303(a)(1)(v), which 

requires that an ATS, for a period of not 

less than three years, the first two years 

in an easily accessible place, preserve at 

least one copy of the written safeguards 

and written procedures to protect 

subscribers’ confidential trading 

information and the written oversight 

procedures created in the course of 

complying with Rule 301(b)(10).1081

VII. EDGAR Filing Requirements; 

Structured Data 

Form ATS–N would be filed 

electronically in a structured format 

through EDGAR. By filing in EDGAR, 

NMS Stock ATSs will be given the 

option of filing using a web-fillable 

Form ATS–N which will render into 

XML in EDGAR, or to file directly in 

XML using the XML schema for NMS 

Stock ATSs as published on the 

Commission’s website. With both 

options, the Commission will receive 

the Form ATS–N information in XML 

format. For those NMS Stock ATSs that 

would prefer to manually key in all of 

their Form ATS–N responses, as had 

been originally proposed by us, those 

NMS Stock ATSs can do so using the 

Commission’s web-fillable Form ATS– 

N, which will render into XML in 

EDGAR. For those NMS Stock ATSs that 

would prefer to map the information in 

their existing systems so that filing of 

Form ATS–N can be more automated 

and more efficient for them, those NMS 

Stock ATS can file in XML using the 

XML schema as published on the 

Commission’s website. The 

Commission’s XML schema and the 

Commission’s web-fillable Form ATS–N 

both reflect the same set of custom XML 

tags and XML restrictions designed by 

the Commission to submit the 

disclosures in Form ATS–N. 

As we proposed, all effective Forms 

ATS–N and all properly filed Form 

ATS–N amendments will be made 

publicly available. Because Form ATS– 

N will be filed in an XML format (either 

using the Commission’s web-fillable 

form or as an XML file submitted 

according to the Commission’s XML 

schema) in EDGAR, once effective, all 

Forms ATS–N will be centrally located 

on EDGAR for the public to access in 

the same XML format in which the 

Form ATS–N was received by the 

Commission. 

The XML format is a text-searchable 

format that does not require the use of 

optical character recognition and will 

enhance the Commission’s and the 

public’s abilities to better gather, 

analyze, aggregate, compare, and use the 

Form ATS–N data. Requiring XML 

should result in the Form ATS–N data 

being provided in a consistent, 

structured format. XML is an open 


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1082See infra Section X.D.11. 

1083See Fidelity Letter at 1; Morgan Stanley Letter 

at 2; SIFMA Letter at 3; UBS Letter at 2–3. 

1084See MFA/AIMA Letter at 4; SIFMA Letter at 

32–33. 

1085See Fidelity Letter at 5. 

1086See infra Section X.D.11. 

1087See supra Section V.A.1. 

1088 17 CFR 232.101. 

1089See supra Section VI. 

standard that defines, or ‘‘tags,’’ data 

using standard definitions. The tags 

establish a consistent structure of 

identity and context. This consistent 

structure can be automatically 

recognized and processed by a variety of 

software applications such as databases, 

financial reporting systems, and 

spreadsheets, and then made 

immediately available to the end user to 

search, aggregate, compare, and analyze. 

In addition, XML is an open standard 

that is maintained by a consensus based 

market standards organization, rather 

than the Commission, and undergoes 

constant review. As updates to XML or 

industry practice develop, the 

Commission’s XML schema and webfillable XML architecture may also have 

to be updated to reflect the updates in 

technology. If that occurs, the supported 

version of the XML schema would be 

made available on the Commission’s 

website and the outdated version of the 

schema would be removed in order to 

maintain data quality and consistency 

with the standard, while the webfillable Form ATS–N would be updated 

in EDGAR to reflect the same changes in 

technology as the Commission’s XML 

schema. 

The Commission’s XML schema and 

architecture for the web-fillable Form 

ATS–N would also incorporate certain 

validations to help ensure consistent 

formatting and completeness among all 

Forms ATS–N, in other words, to help 

ensure data quality. Validations are 

restrictions placed on the formatting for 

each data element so that comparable 

data is presented comparably. However, 

these validations would not be designed 

to ensure the underlying accuracy of the 

data. Any Form ATS–N filed in EDGAR 

would have to comply with validations 

that are incorporated within the XML 

schema, otherwise the Form ATS–N 

will not be accepted by EDGAR. 

We believe that requiring Form 

ATS–N be provided in an XML format 

would provide the Commission and the 

public with data about NMS Stock ATSs 

in a format that facilitates search 

capabilities, and comparative analyses 

across NMS Stock ATSs and across 

filings, including more advanced text 

analytics for the more narrative 

responses of Form ATS–N. Absent this 

requirement, users of the Form ATS–N 

data that wanted to aggregate the data or 

search across filings or filers would 

need to spend additional time 

transferring the data into a consistent 

format before it could be analyzed, or 

incur the cost of a service provider that 

specializes in this data aggregation and 

comparison process. Further, 

unrestricted manual entry of data may 

lead to errors, thereby potentially 

reducing data quality and usability. 

We understand that there are costs 

associated with structuring and that 

these costs may vary depending on the 

filer and the type of structuring. By 

offering two options for filers to submit 

Form ATS–N in EDGAR, filers will be 

able to select the method best suited to 

their situation. Overall, the we believe 

that the XML format of Form ATS–N 

will have enhanced benefits for the 

Commission’s and the public’s use of 

Form ATS–N while minimizing costs 

relative to filers having to file Form 

ATS–N using other structured 

formats.1082 Requiring the Commission’s 

XML schema with its incorporated 

validations (whether submitted as XML 

or in the web-fillable form) will help 

ensure that the data that filers submit is 

complete and appropriately formatted 

so that additional time will not have to 

be spent on subsequent Form ATS–N 

filings to correct for those errors. By 

comparison, the EFFS system originally 

proposed does not support the opensource XML format, but rather a 

proprietary XML implementation called 

XFDL. As a result, the EFFS system has 

fewer validation capabilities and cannot 

test for consistency and completeness as 

broadly as the XML format, and in 

particular, at the element level. In 

addition, as proposed, filers would have 

been required to individually upload 

each narrative response as a separate 

exhibit, whereas the XML format 

permits filers to provide all their 

narrative responses in one structured 

XML file, which will slightly diminish 

their time spent in filing in the Form 

ATS–N narrative information. 

End users will be able to download 

the consistently structured information 

directly into databases and analyze it 

using various software. This would 

enhance their ability to conduct largescale analysis and immediate crossfiling comparisons of NMS Stock ATSs, 

as well as comparisons across reporting 

periods within the same and among 

different NMS Stock ATSs. Moreover, as 

an open standard, XML is widely 

available to the public at no cost. By 

comparison, viewing information in the 

current EFFS system requires a license 

of a commercial proprietary viewer, 

which currently is not separately 

available to every member of the public 

without licensing. 

Commenters who supported the 

standardization of Form ATS–N 

information also underscored the 

importance of making the information 

comparable.1083 While the commenters 

did not make specific reference to the 

structured format, having the Form 

ATS–N information submitted using the 

Commission’s XML schema or the webfillable form will enhance the 

comparability of the Form ATS–N data 

by ensuring that the information has 

been submitted completely and 

consistently. Two commenters 

addressed the importance of 

completeness to Form ATS–N 

filings.1084 With the Commission’s XML 

schema, the restrictions incorporated 

into the schema (and consequently, also 

reflected in the web-fillable form) will 

help test for completeness of the data 

before submission and reduce filer 

uncertainty on the completeness and 

consistency of their filing. One 

commenter recommends that we 

consider ways to present information 

that would improve the readability and 

navigability of disclosure through the 

use of technology such as hyperlinks 

and/or XBRL technology.1085 The XML 

format is a technology format that 

presents the data consistently, which 

improves the readability and 

navigability of the data. In fact, XBRL is 

an XML-based technology, but, as 

discussed later, we do not think that 

XBRL is the appropriate format for this 

form.1086 While hyperlinks may be 

useful in some situations to crossreference information, hyperlinks do not 

by themselves enhance the 

comparability of the underlying data, 

but can be incorporated within the XML 

format, as permitted. 

Because Form ATS–N filings will be 

submitted electronically,1087 we are 

revising Rule 101 of Regulation S–T1088

to add paragraph (a)(1)(xxi) to the list of 

mandated electronic submissions. 

Specifically, paragraph (a)(1)(xvii) adds 

to this list Form ATS–N. 

VIII. Effective Date and Compliance 

Date 

We did not receive any comments 

about the effective date for the 

amendments. The rules being adopted 

today will become effective 60 days 

after the date of publication in the 

Federal Register. 

With regard to the adopted 

amendments to Rules 301(b)(10) and 

303(a)(1)(v) of Regulation ATS,1089 we 


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1090See 17 CFR 242.301(b)(10). 

1091See Rule 301(b)(10)(i)(A). 

1092See Rule 301(b)(10)(i)(B). 

1093See supra Section IV.A.4.a. See also Rule 

304(a)(1)(iv)(A). 

1094See supra Section III.B.4. 

1095See supra Section III.B.4; IV.A.1. See also 

supra note 291 and accompanying text. 

1096 44 U.S.C. 3501 et seq. 

1097 44 U.S.C. 3507; 5 CFR 1320.11. 

1098See infra note 1235 and accompanying text. 

1099 17 CFR 242.301(b)(10); 17 CFR 242.303. 

1100 17 CFR 242.303(a)(1). 

1101 Id. 

1102See generally Section IV. 

1103See Section V.B.2. 

1104See Section V.C. 

believe the 60 day effective date 

provides sufficient time for ATSs to 

memorialize in writing their safeguards 

and procedures to protect subscribers’ 

confidential trading information (to the 

extent that those safeguards and 

procedures are not currently maintained 

in written form). Current Rule 

301(b)(10) of Regulation ATS 1090

requires every ATS to have safeguards 

and procedures that limit access to the 

confidential trading information of 

subscribers to those employees of the 

ATS who are operating the system or are 

responsible for its compliance with 

Regulation ATS or any other applicable 

rules,1091 and implement standards 

controlling employees of the ATS 

trading for their own accounts.1092 We 

note that the adopted amendments to 

Rules 301(b)(10) and 303(a)(1)(v) do not 

modify that requirement other than to 

require that those safeguards and 

procedures be written, pursuant to Rule 

301(b)(1) and preserved pursuant to 

Rule 303(a)(1)(v). Accordingly, we 

believe that the 60 days after the final 

rule is published in the Federal Register 

is reasonable for the amendments to 

Rules 301(b)(10) and 303(a)(1)(v) to 

become effective, and for ATSs to 

comply with those rules. 

We believe that the compliance dates 

provided in Rules 304 and 

301(b)(2)(viii) provide sufficient time for 

NMS Stock ATSs to prepare and file 

Form ATS–N disclosures with the 

Commission. Rule 304(a)(1)(iv)(A) 

requires a Legacy NMS Stock ATS to file 

with the Commission an initial Form 

ATS–N, in accordance with Rule 304, 

no earlier than January 7, 2019, and no 

later than February 8, 2019.1093 Rule 

301(b)(2)(viii) provides that a Legacy 

NMS Stock ATS that is operating 

pursuant to an initial operation report 

on Form ATS on file with the 

Commission as of January 7, 2019 shall 

be subject to the requirements of Rule 

301(b)(2)(i) through (vii) until the 

Legacy NMS Stock ATS files an initial 

Form ATS–N with the Commission 

pursuant to Rule 304(a)(1)(iv)(A).1094 In 

addition, pursuant to Rule 

301(b)(2)(viii), as of January 7, 2019, an 

entity seeking to operate as a new NMS 

Stock ATS shall also be subject to Rule 

304 and the rules amended in 

relation.1095

IX. Paperwork Reduction Act 

Certain provisions of the proposal 

contain ‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).1096 The titles of these 

requirements are: 

• Requirements for Alternative 

Trading Systems That Are Not National 

Securities Exchanges—Rule 301, Form 

ATS and Form ATS–R, 17 CFR 242.301 

(OMB Control No. 3235–0509); 

• Rule 303 (17 CFR 242.303) Record 

Preservation Requirements for 

Alternative Trading Systems (OMB 

Control No. 3235–0505); and 

• Rule 304 and Form ATS–N (a new 

collection of information). 

In accordance with 44 U.S.C. 3507(d) 

and 5 CFR 1320.11, we submitted these 

requirements to the Office of 

Management and Budget (‘‘OMB’’) for 

review and approval in accordance with 

the PRA and its implementing 

regulations.1097 The title for the new 

collection of information in Rule 304 

and Form ATS–N is ‘‘Rule 304 and 

Form ATS–N.’’ We have applied for a 

new OMB Control Number for this 

collection in accordance with 44 U.S.C. 

3507(j) and 5 CFR 1320.13. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information requirement 

unless it displays a currently valid OMB 

control number. 

In the Proposal, we solicited 

comments on the proposed collection of 

information burdens and asked whether 

commenters agree with our estimate of 

the number of respondents and burdens 

of the Proposal. We received one 

comment on our estimates of the 

collection of information burden 

included in the Proposal, which is 

addressed below.1098

A. Summary of Collection of 

Information 

The amendments to Regulation ATS 

include two new categories of 

obligations that require a collection of 

information within the meaning of the 

PRA. The first category relates to Rule 

301(b)(10) and Rule 303 of Regulation 

ATS 1099 and applies to all ATSs, while 

the second category relates to Form 

ATS–N and applies only to NMS Stock 

ATSs. 

1. Requirements Relating to Rule 

301(b)(10) and 303(a)(1) of Regulation 

ATS 

The amendments to Regulation ATS 

will require an ATS to place in writing 

the safeguards and procedures required 

by Rule 301(b)(10) to protect 

subscribers’ confidential trading 

information and oversight procedures to 

ensure that the safeguards and 

procedures are followed. In addition, we 

are amending Rule 303(a)(1) 1100 of 

Regulation ATS to require an ATS to 

preserve at least one copy of written 

safeguards and written procedures, and 

written oversight procedures created in 

the course of complying with Rule 

301(b)(10) for a period of not less than 

three years, the first two years in an 

easily accessible place.1101

2. Requirements Relating to Rules 

301(b)(2)(viii) and 304 of Regulation 

ATS, Including Form ATS–N 

Any ATS that meets the definition of 

an NMS Stock ATS is required to 

complete an initial Form ATS–N, file it 

with the Commission via EDGAR, and 

make public via posting on its website 

a direct URL hyperlink to the 

Commission’s website that contains the 

documents enumerated in Rule 

304(b)(2).1102

Form ATS–N requires that the entity 

submitting the filing would indicate 

whether the NMS Stock ATS currently 

operates pursuant to a Form ATS, and 

the type of Form ATS–N filing— 

whether the Form ATS–N is an initial 

Form ATS–N, a Form ATS–N 

amendment (whether a material 

amendment, updating amendment, 

correcting amendment, or order display 

and fair access amendment), a notice of 

cessation, and if it is a notice of 

cessation, the date the NMS Stock ATS 

will cease to operate, or if it is a 

withdrawal. If the filing is a Form 

ATS–N amendment, the NMS Stock 

ATS is also required to provide a brief 

summary of the amendment and the 

EDGAR accession number for the Form 

ATS–N filing to be amended. If the 

filing is a withdrawal, the NMS Stock 

ATS is required to provide the EDGAR 

accession number for the Form ATS–N 

filing to be withdrawn. 

Part I requires information about the 

broker-dealer operator.1103 Part II of 

Form ATS–N requires an NMS Stock 

ATS to disclose information about the 

ATS-related activities of the brokerdealer operator and its affiliates.1104 Part 


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1105See Section V.D. 

1106See Section V.A.1. 

1107See Rule 303(a)(2)(ii). 

1108See supra Section III.A.1.a. 

1109See id. 

1110As of March 31, 2018, 41 ATS have disclosed 

on their Form ATS that they trade or expect to trade 

NMS stock. 

1111We recognize that there may be new entities 

that will seek to become ATSs, or NMS Stock ATSs, 

that would be required to comply with the 

proposed amendments to Rule 301(b)(10). From 

January 2014 through the first half of 2017, an 

average of 12 Form ATS initial operation reports 

were filed each year with us. Similarly, some ATSs 

may cease operations in the normal course of 

business or possibly in response to the proposed 

amendments to Regulation ATS. From January 2014 

through the March 31, 2018, an average of 9 ATSs, 

including those that trade NMS stocks have ceased 

operations. For the purposes of this paperwork 

burden analysis, we assume that 87 respondents 

would be required to comply with the proposed 

amendments to Rule 301(b)(10), if adopted. We are 

estimating that the number of entities that may file 

a Form ATS initial operation report would 

generally offset any ATSs that may file a Form ATS 

cessation of operations report. 

1112 Data compiled from Forms ATS and ATS–R 

submitted to us as of March 31, 2018. These 10 

ATSs are included within the 41 NMS Stock ATSs. 

1113Pursuant to Rule 301(b)(9), all ATSs are 

required to file Form ATS–R within 30 calendar 

days after the end of each calendar quarter in which 

the market has operated, and within 10 calendar 

days after the ATS ceases to operate. An ATS that 

trades both NMS stocks and non-NMS stocks would 

report its transactions in NMS stocks on one Form 

ATS–R, and its transaction volume in other 

securities on a separate Form ATS–R. 

1114 In the Proposal, we cited the average number 

of new ATSs and ATSs that ceased operations from 

2012 through the first half of 2015, which were 2 

and 6, respectively. See Proposal, supra note 2, at 

81092. 

III of Form ATS–N requires an NMS 

Stock ATS to provide certain 

information about the manner of 

operations of the NMS Stock ATS.1105

Part IV of Form ATS–N requires an 

NMS Stock ATS to provide contact 

information. In addition, Form ATS–N 

will require NMS Stock ATSs to file the 

form electronically via EDGAR with a 

typed signature.1106

We are also amending Rule 

303(a)(2)(ii) to require that an NMS 

Stock ATS preserve, for the life of the 

enterprise and of any successor 

enterprise, copies of reports filed 

pursuant to Rule 304.1107

Furthermore, an ATS that trades both 

NMS stocks and non-NMS stocks will 

be required to file both a Form ATS–N 

with respect to its trading of NMS stocks 

and a revised Form ATS that removes 

discussion of those aspects of the ATS 

related to the trading of NMS stocks. 

The ATS will also be required to file 

two Forms ATS–R filings—one to report 

its trading volume in NMS stocks and 

another to report its trading volume in 

non-NMS stocks. 

B. Proposed Use of Information 

1. Amendments to Rule 301(b)(10) and 

303(a)(1) of Regulation ATS 

We continue to believe that both the 

Commission and the SRO of which the 

ATS’s broker-dealer operator is a 

member will use the written safeguards 

and written procedures required by the 

amendments to Rule 301(b)(10) to better 

understand how each ATS protects 

subscribers’ confidential trading 

information from unauthorized 

disclosure and access. We continue to 

believe that the information contained 

in the records required to be preserved 

by Rule 303(a)(1)(v) will be used by 

examiners and other representatives of 

the Commission, state securities 

regulatory authorities, and SROs to 

evaluate whether ATSs are in 

compliance with Regulation ATS as 

well as other applicable rules and 

regulations. We also believe that the 

requirement to memorialize in writing 

the safeguards and procedures to protect 

subscribers’ confidential trading 

information will help assist ATSs in 

more effectively complying with their 

existing legal requirements under 

Regulation ATS; in particular, the 

requirements to protect the 

confidentiality of subscribers’ trading 

information under Rule 301(b)(10) of 

Regulation ATS. 

2. Rules 301(b)(2)(viii), 304 of 

Regulation ATS, Including Form 

ATS–N, and 301(b)(9) 

We believe that market participants 

will use the information publicly 

disclosed on Form ATS–N to compare 

and evaluate NMS Stock ATSs when 

making their routing decisions.1108 In 

addition, we believe we will use the 

information disclosed on Form ATS–N, 

Form ATS, and Form ATS–R to oversee 

the growth and development of NMS 

Stock ATSs.1109 We believe that the 

information contained in the records 

required to be preserved by the 

amendment to Rule 303(a)(2)(ii) will be 

used by examiners and other 

representatives of the Commission, state 

securities regulatory authorities, and 

SROs to evaluate whether ATSs are in 

compliance with Regulation ATS as 

well as other applicable rules and 

regulations. 

C. Respondents 

The ‘‘collection of information’’ 

requirements under the amendments to 

Regulation ATS relating to Rule 

301(b)(10) and Rule 303(a)(1)(v) would 

apply to all ATSs, including NMS Stock 

ATSs. The ‘‘collection of information’’ 

requirements under the amendments to 

Regulation ATS relating to Rule 304, 

Form ATS–N, and the amendments to 

Rule 303(a)(2)(ii) would apply only to 

NMS Stock ATSs, and the ‘‘collection of 

information’’ requirements under the 

amendments to Rule 301(b)(9) would 

apply to NMS Stock ATSs that also 

transact in both NMS stocks and nonNMS stocks. Currently, there are 87 

ATSs that have filed Form ATS with us. 

Of these 87 ATSs, 41 would meet the 

definition of an NMS Stock ATS.1110

Accordingly, the we estimate that 87 

entities would be required to comply 

with the amendments related to Rule 

301(b)(10) of Regulation ATS and 41 

entities would be required to complete 

Form ATS–N.1111

In addition, there are currently 10 

ATSs that trade, or have indicated in 

Exhibit B to their Form ATS that they 

expect to trade, both NMS stocks and 

non-NMS stocks on the ATS.1112 Under 

the amendments to Regulation ATS, 

these 10 entities would be required to 

file a Form ATS–N to disclose 

information about their NMS stock 

activities and file a Form ATS to 

disclose information about their nonNMS stock activities. Consequently, 

these 10 ATSs would have to amend 

their Forms ATS to remove information 

regarding operations related to the 

trading of NMS stocks and on an 

ongoing basis, file separate Forms ATS– 

R to report trading volume in NMS 

stocks and trading volume in non-NMS 

stocks.1113

With respect to Form ATS–N, we 

recognize there may be entities that 

might file a Form ATS–N to operate an 

NMS Stock ATS in the future. From 

January 2014 through March 2018, an 

average of 2 new ATSs per year disclose 

that they trade or expect to trade NMS 

stocks on their Form ATS initial 

operation reports, and would therefore 

fall within the definition of an NMS 

Stock ATS. Similarly, some ATSs that 

currently trade NMS stocks may choose 

to cease operations rather than comply 

with the amendments requiring them to 

file Form ATS–N. Other ATSs may 

choose to cease operations in the normal 

course of business. From January 2014 

through March 2018, an average of 9 

ATSs that trade NMS stocks have ceased 

operations each year.1114

We believe that most ATSs that 

currently trade NMS stocks would 

continue to operate notwithstanding the 

amendments to Regulation ATS. For the 

purposes of this analysis of the 

paperwork burden associated with the 

amendments to Regulation ATS, we 

assume that there will be 41 

respondents. This number assumes that 

most ATSs that currently trade NMS 


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1115See infra Section VI. 

1116Attorney at 2 hours + Compliance Clerk at 2 

hours = 4 burden hours. For ATSs that do not have 

their safeguards and procedures or oversight 

procedures in a written format, these firms would 

incur a one-time initial burden to record their 

safeguards and procedures as well as their oversight 

procedures in a written format as described below. 

1117See FR Doc. 2014–02143, 79 FR 6236 

(February 3, 2014) (Request to OMB for Extension 

of Rule 301 and Forms ATS and ATS–R; SEC File 

No. 270–451; OMB Control No. 3235–0509) 

(hereinafter ‘‘Rule 301 PRA Update’’); FR Doc. 

2013–17474, 78 FR 43943 (July 22, 2013) (Request 

to OMB for Extension of Rule 303; SEC File No. 

270–450; OMB Control No. 3235–0505) (hereinafter 

‘‘Rule 303 PRA Update’’). 

1118See infra note 1125 and accompanying text. 

1119See Proposal, supra note 2, at 81094. 

1120Attorney at 7 hours + Compliance Clerk at 1 

hour = 8 burden hours. 

1121Attorney at 4–9 hours + Compliance Clerk at 

1 hour = 5–10 burden hours. 1122 It is likely that most, if not all, ATSs already 

fulfill their Rule 301(b)(10) obligations in writing, 

given the practical difficulty in ensuring such 

safeguards and procedures, as well as oversight 

procedures, are ‘‘adequate,’’ as required under Rule 

301(b)(10), and contain all necessary components. 

1123 (Attorney at 7 hours + Compliance Clerk at 

1 hour) x (15 ATSs) = 120 burden hours. 

1124See supra note 1116 and accompanying text. 

1125 (Attorney at 2 hours + Compliance Clerk at 

2 hours) × 87 ATSs = 348 burden hours. 

1126 17 CFR 242.301(b)(2)(i). 

1127 17 CFR 242.301(b)(2)(ii). 

stocks would file a Form ATS–N with 

the Commission. We acknowledge that 

some ATSs may cease operations 

altogether and other entities that may 

commence operations as an NMS Stock 

ATS. Based on the current number of 

initial operation reports and cessation of 

operations reports on current Form ATS 

for ATSs that trade NMS stocks 

described above, we estimate that 2 to 

3 new entities will file initial Form 

ATS–N to become an NMS Stock ATS 

and 7 to 9 NMS Stock ATSs will cease 

operations in each of the next three 

years. 

D. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

1. Rules 301(b)(10) and 303(a)(1)(v) of 

Regulation ATS 

a. Baseline Measurements 

We believe that ATSs—in particular, 

ATSs whose broker-dealer operators are 

large, multi-service broker-dealers— 

generally have and maintain in writing 

their safeguards and procedures to 

protect subscribers’ confidential trading 

information, as well as the oversight 

procedures to ensure such safeguards 

and procedures are followed.1115

However, neither Rule 301(b)(10) nor 

Rule 303(a)(1) of Regulation ATS 

currently requires that an ATS have and 

preserve those safeguards and 

procedures in writing. For ATSs that 

currently have and preserve in written 

format the safeguards and procedures to 

protect subscribers’ confidential trading 

information under Rule 301(b)(10) of 

Regulation ATS, we estimate that the 

average annual burden they voluntarily 

undertake to update and preserve those 

written safeguards and written 

procedures is 4 hours.1116 Because 

neither current Rule 301(b)(10) nor 

current Rule 303(a)(1) requires an ATS 

to have and preserve its safeguards and 

procedures to protect subscribers’ 

confidential trading information in 

writing, this burden is not reflected in 

the current PRA baseline burdens for 

Rules 301 and 303.1117 In accordance 

with the below analysis, we are 

modifying the current PRA burdens for 

Rules 301 and 303 to account for the 

new requirement that ATSs have and 

preserve in written format the 

safeguards and procedures to protect 

subscribers’ confidential trading 

information.1118

b. Burdens 

We recognize that Rules 301(b)(10) 

and 303(a)(1)(v) of Regulation ATS 

would impose certain burdens on 

respondents. For ATSs that currently 

have and preserve in written format the 

safeguards and procedures to protect 

subscribers’ confidential trading 

information and written oversight 

procedures to ensure such safeguards 

and procedures are followed, we believe 

that there will be no increased burden 

under the amendments to Rules 

301(b)(10) and 303(a)(1)(v) of Regulation 

ATS. We believe that the current 

practices of those ATSs would already 

be in compliance with the rules and the 

amendments should not require these 

ATSs to take any actions in addition to 

those currently undertaken. 

For ATSs that have not recorded in 

writing their safeguards and procedures 

to protect subscribers’ confidential 

trading information and oversight 

procedures to ensure such safeguards 

and procedures are followed, there will 

be an initial, one-time burden to 

memorialize them in a written 

document(s). In the Proposal, we 

estimated that an ATS’s initial, one-time 

burden to put in writing its safeguards 

and procedures to protect subscribers’ 

confidential trading information and the 

oversight procedures to ensure such 

safeguards and procedures are followed 

would be 8 hours.1119 We did not 

receive any comment on the preliminary 

estimates. Because ATSs are already 

required to have safeguards and 

procedures to protect subscribers’ 

confidential trading information and to 

have oversight procedures to ensure 

such safeguards and procedures are 

followed, we believe that recording 

these items in a written format would 

not impose a substantial burden on 

ATSs and would rely on internal staff to 

record the ATS’s Rule 301(b)(10) 

procedures in writing. Therefore, we 

estimate that an ATS’s initial, one-time 

burden to put in writing its safeguards 

and procedures to protect subscribers’ 

confidential trading information and the 

oversight procedures to ensure such 

safeguards and procedures are followed 

would be approximately 8 hours,1120

but we estimate that the burden could 

range between 5 and 10 hours.1121 We 

estimate that, of the 87 current ATSs, 15 

ATSs might not have their safeguards 

and procedures to protect subscribers’ 

confidential trading information or 

oversight procedures to ensure such 

safeguards and procedures are followed 

in writing, and would therefore be 

subject to this one-time initial 

burden.1122 Accordingly, we estimate 

that the aggregate initial, one-time 

burden on all ATSs would be 120 hours 

based on our highest approximation of 

the additional burden per ATS.1123

We estimate that the average annual, 

ongoing burden per ATS to update and 

preserve written safeguards and written 

procedures to protect subscribers’ 

confidential trading information, as well 

as to update and preserve the written 

standards controlling employees of the 

ATS trading for their own account and 

the written oversight procedures, would 

be 4 hours.1124 As a result, we estimate 

that the total aggregate, ongoing burden 

per year for all ATSs would be 348 

hours,1125 and thus, we are modifying 

the current PRA burden estimates for 

Rules 301 and 303 to account for this 

increased burden on ATSs. 

2. Rules 301(b)(2)(viii) and 304 of 

Regulation ATS, Including Form 

ATS–N 

a. Baseline Measurements 

Currently, Rule 301(b)(2)(i) of 

Regulation ATS 1126 requires an ATS to 

file an initial operation report on 

current Form ATS at least 20 days prior 

to commencing operation as an 

alternative trading system. Current Form 

ATS requires information regarding the 

operation of the ATS, including, among 

other things, classes of subscribers, the 

types of securities traded, the 

outsourcing of operations of the ATS to 

other entities, the procedures governing 

the entry of orders, the means of access 

to the ATS, and procedures governing 

execution and reporting. Regarding 

amendments to an existing Form ATS, 

Rule 301(b)(2)(ii) of Regulation ATS 1127

requires an ATS to file amendments to 

its current Form ATS at least 20 


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1128 17 CFR 242.301(b)(2)(iii). 

1129 In addition, Rule 301(b)(2)(iv) requires an 

ATS to promptly file an amendment on current 

Form ATS after the discovery that any information 

previously filed on current Form ATS was 

inaccurate when filed. 17 CFR 242.301(b)(2)(iv). 

1130 17 CFR 242.301(b)(2)(v). 

1131Attorney at 13 hours + Compliance Clerk at 

7 hours = 20 burden hours. See Rule 301 PRA 

Update, supra note 1117, 79 FR 6237. 

1132See id. 

1133Attorney at 4.5 hours + Compliance Clerk at 

1.5 hours = 6 burden hours. See id. 

1134 2 Form ATS amendments filed annually × 6 

burden hours per Form ATS amendment = 12 

burden hours per ATS. 

1135Attorney at 1.5 hours + Compliance Clerk at 

0.5 hours = 2 burden hours. See PRA Update, supra 

note 1117, 79 FR 6237. 

1136Attorney at 3 hours + Compliance Clerk at 1 

hour = 4 burden hours. See id. 

1137 In establishing the estimates below with 

respect to Form ATS–N, we have considered its 

estimate of the burden for an SRO to amend a Form 

19b–4. Specifically, we estimated that 34 hours is 

the amount of time required to complete an average 

rule filing and 129 hours is the amount of time 

required to complete a complex rule filing, and 

three hours is the amount of time required to 

complete an average amendment to a rule filing. See 

Securities Exchange Act Release No. 50486 (October 

4, 2004), 69 FR 60287, 60294 (October 8, 2004). 

1138These disclosures will be provided on Form 

ATS–N and may have to be amended periodically 

as provided in proposed Rule 304. 

1139See Proposal, supra note 2, at 81095. 

calendar days prior to implementing a 

material change to its operations. Rule 

301(b)(2)(iii) of Regulation ATS 1128

requires an ATS to file amendments to 

its current Form ATS within 30 

calendar days after the end of each 

calendar quarter if any information 

contained in its initial operation report 

becomes inaccurate and has not been 

previously reported to the 

Commission.1129 Regarding shutting 

down an ATS, Rule 301(b)(2)(v) of 

Regulation ATS 1130 requires an ATS to 

promptly file a cessation of operation 

report on current Form ATS upon 

ceasing operations as an ATS. 

Our currently approved estimate for 

an initial operation report on current 

Form ATS is 20 hours to gather the 

necessary information, provide the 

required disclosures in Exhibits A 

through I, and submit the Form ATS to 

the Commission.1131 With respect to 

Form ATS amendments, we understand, 

based on the review of Form ATS 

amendments by the Commission and its 

staff, that ATSs that trade NMS stocks 

typically amend their Form ATS on 

average twice per year.1132 The 

frequency and scope of Form ATS 

amendments vary depending on 

whether the ATS is implementing a 

material change or an updating change. 

Some ATSs may not change how they 

operate or anything else that might 

require an amendment to Form ATS in 

a given year while others may 

implement a number of changes during 

a given year that require Form ATS 

amendments. Our currently approved 

estimated average compliance burden 

for each amendment to Form ATS is 

approximately 6 hours.1133 Accordingly, 

the estimated average annual ongoing 

burden of updating and amending Form 

ATS is approximately 12 hours per 

NMS Stock ATS.1134 With respect to 

ceasing operations, the currently 

approved average estimated compliance 

burden for an ATS to complete a notice 

of cessation is 2 hours to check the 

appropriate box on Form ATS and send 

the notice of cessation to the 

Commission.1135 Our currently 

approved estimate for the average 

compliance burden for each Form 

ATS–R filing is 4 hours.1136

b. Burdens 

We recognize that Rules 301(b)(2)(viii) 

and 304 of Regulation ATS, including 

Form ATS–N, would impose certain 

burdens on respondents.1137 Although 

many of the disclosures required by 

Form ATS–N are currently required by 

Form ATS, Form ATS–N requires an 

NMS Stock ATS to provide significantly 

more detail in those disclosures than 

currently required by Form ATS. Form 

ATS–N also requires additional 

disclosures not currently mandated by 

current Form ATS such as those 

contained in Part II of adopted Form 

ATS–N. Under the amendments to 

Regulation ATS, NMS Stock ATSs will 

be required to complete and file the 

enhanced and additional disclosures on 

Form ATS–N.1138 Section IX.D.2.b.i 

below provides the estimated burden 

above the current Form ATS baseline of 

each item of Form ATS–N. Many of the 

disclosure items on Form ATS–N are 

already required disclosures by 

respondents in whole or in part on 

current Form ATS, while other 

disclosure items on Form ATS–N are 

novel (i.e., current Form ATS does not 

require some form of the disclosure). 

Section IX.D.2.b.ii aggregates these new 

burdens and the additional burdens 

above the current Form ATS baseline 

that will be imposed by Form ATS–N. 

(i) Analysis of Estimated Additional 

Burden for Form ATS–N 

(a) Part I 

In the Proposal, we estimated that 

preparing Parts I and II for a Form 

ATS–N would add 0.5 hours to the 

current baseline for an NMS Stock ATS 

to prepare an initial operation report on 

current Form ATS.1139 Part I of adopted 

Form ATS–N contains substantially the 

same information as Parts I and II of 

proposed Form ATS–N. However, 

adopted Form ATS–N does not include 

several proposed disclosure 

requirements and contains several new 

requests. Overall, we estimate that the 

burden for Part I of adopted Form ATS– 

N will be the same as that which was 

estimated for proposed Form ATS–N. 

Accordingly, we estimate that Part I of 

adopted Form ATS–N will add an 

additional 0.5 hours above the baseline 

of current Form ATS. 

(b) Part II 

As explained above, Part II, Items 1 

and 2 contain disclosure requests about 

the broker-dealer operator’s and 

affiliates’, respectively, trading activity 

on the NMS Stock ATS. For Part II, Item 

1(a), to the extent that the broker-dealer 

operator is not permitted to enter or 

direct orders and trading interest to the 

NMS Stock ATS, the NMS Stock ATS 

would only be required to check ‘‘no.’’ 

In addition, to the extent the brokerdealer operator enters or directs the 

entry of orders and trading interest into 

the NMS Stock ATS, but such orders 

and trading interest is treated the same 

as trading interest from other 

subscribers and persons, Part II, Item 

1(b) would require that the NMS Stock 

ATS check ‘‘no.’’ 

Part II, Item 1(a) of adopted Form 

ATS–N incorporates aspects of several 

proposed disclosures that addressed the 

activity of the broker-dealer operator’s 

trading activity on the NMS Stock ATS. 

First, Part II, Item 1(a) of adopted Form 

ATS–N incorporates requirements of 

Part III, Items 1 and 2 of proposed Form 

ATS–N, which would have requested 

disclosures about the non-ATS trading 

centers and other NMS Stock ATSs 

operated by the broker-dealer operator 

and its affiliates. In the Proposal, we 

estimated that preparing Part III, Item 1 

for proposed Form ATS–N would add 

10 hours to the current baseline of Form 

ATS and Part III, Item 2 would add 4 

hours to the current baseline of Form 

ATS, for a total estimated burden of 14 

hours for Part III, Items 1 and 2. 

Adopted Part II, Item 1(a) more 

narrowly tailors those proposed requests 

by focusing on the actual trading 

activities of the broker-dealer operator 

on the NMS Stock ATS and its use of 

the ATS’s services. Primarily, the 

request under adopted Item 1(a): (i) 

Does not require an NMS Stock ATS to 

list all non-ATS trading centers and 

NMS Stock ATSs operated by the 

broker-dealer operator, regardless of 

whether those entities trade on the NMS 

Stock ATS; and (ii) replaces what some 

commenters perceived as potentially 

broad narrative requests to describe the 

‘‘interaction and coordination’’ between 


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1140See Proposal, supra note 2, at 81097. 

1141The estimated burden hours for proposed 

Part III, Item 5(a) related to affiliate trading on the 

ATS are now allocated to Part II, Item 2(a) of 

adopted Form ATS–N. 

1142As noted below with regard to Part II, Item 

2(a) of adopted Form ATS–N, however, the 

analogous change in scope for affiliate trading 

activity on the NMS Stock ATS will reduce the 

burden on NMS Stock ATSs relative to that which 

was proposed. 

1143 (Attorney at 3.75 + Compliance Manager at 

0.5) × 41 NMS Stock ATSs = 174.25 burden hours. 

1144See Proposal, supra note 2, at 81098. 

1145Attorney at 0.25 hours × 41 NMS Stock ATSs 

= 10.25 burden hours. 

1146Compliance Manager at 1.0 hours × 41 NMS 

Stock ATSs = 41 burden hours. 

the NMS Stock ATS and those non-ATS 

trading centers and other NMS Stock 

ATSs. Instead, the NMS Stock ATS is 

now required to name and describe each 

type of business unit of the brokerdealer operator that enters or directs the 

entry of orders and trading interest into 

the NMS Stock ATS, and we have 

replaced the term ‘‘interaction and 

coordination’’ with specific, enumerated 

data points and narratives that the NMS 

Stock ATS must provide. Furthermore, 

the corresponding affiliate disclosures 

for Part III, Items 1 and 2 of proposed 

Form ATS–N are now encompassed by 

Part II, Item 2(a) of adopted Form ATS– 

N, so Part II, Item 1(a) of adopted Form 

ATS–N will not impose the entire 

burden that was estimated for proposed 

Part III, Items 1 and 2. It will impose the 

burden from those proposed items that 

would have been imposed by the 

disclosure requirements related to the 

broker-dealer operator itself, which we 

believe is a small fraction of the 

proposed estimate relevant to the 

requirements related to affiliates of the 

broker-dealer operator. Accordingly, out 

of the 14-hour estimate for proposed 

Part III, Items 1 and 2, we estimate that 

Part II, Item 1(a) of adopted Form 

ATS–N would add approximately 2.75 

hours to the baseline estimate to 

complete an initial operation report on 

Form ATS. 

Second, the request under Part II, 

Items 1(a) of adopted Form ATS–N also 

incorporates aspects of the disclosures 

proposed under Part III, Item 5(a) of 

proposed Form ATS–N. We estimated 

that preparing proposed Part III, Item 

5(a) would add 5 hours to the current 

baseline.1140 While we did not provide 

estimates for each individual subpart of 

Part III, Item 5 of proposed Form ATS– 

N, the aspects of Part III, Item 5 that are 

incorporated into Part II, Item 1(a) of 

adopted Form ATS–N (i.e., information 

about the broker-dealer operator’s 

trading activity on the ATS, other than 

the information covered by proposed 

Item 5(d)) accounted for approximately 

1.5 hours of the 5 hour estimate. We 

believe that the aspects of proposed Part 

III, Item 5 that are incorporated into Part 

II, Item 1(a) of adopted Form ATS–N 

would still add approximately 1.5 hours 

to the baseline for an initial operation 

report on current Form ATS.1141

Adopted Form ATS–N requires the 

NMS Stock ATS to identify business 

units of the broker-dealer operator that 

enter or direct the entry of orders, 

whereas proposed Form ATS–N would 

have required the NMS Stock ATS to 

identity all business units that may 

enter orders or other trading interest. 

However, we believe that it would 

impose approximately the same burden 

for the broker-dealer operator to compile 

both lists because both would involve 

the collection of information about 

internal units of the broker-dealer 

operator.1142 Accordingly, we estimate 

that the adopted requests under Part II, 

Item 1(a) would add a total of 

approximately 4.25 hours to the current 

baseline for an initial operation report 

on current Form ATS. This would result 

in an aggregate initial burden of 174.25 

hours above the baseline for all NMS 

Stock ATSs to complete Part II, Items 

1(a) and (b) of Form ATS–N.1143

The information sought under Part II, 

Item 1(b) of adopted Form ATS–N 

would have been requested under Part 

III, Item 9 of proposed Form ATS–N. We 

estimated that completing Part III, Item 

9 of proposed Form ATS–N would add 

2 hours to the current baseline of Form 

ATS.1144 In most cases, Part II, Item 1(b) 

of adopted Form ATS–N will require the 

NMS Stock ATS to answer ‘‘yes’’ or 

‘‘no’’ and list applicable item numbers 

in Part III of adopted Form ATS–N. An 

NMS Stock ATS will need to provide a 

narrative under Item 1(b) only if there 

are differences that are not applicable to 

Part III. But we believe that the subject 

matter covered by Part III is very 

comprehensive, and therefore, we do 

not believe that an NMS Stock ATS 

typically will need to provide additional 

narratives about differences in treatment 

that are not otherwise covered by Part 

III. Accordingly, we estimate that Part II, 

Item 1(b) of adopted Form ATS–N 

would add 0.25 hours out of the 

proposed 2-hour estimate for Part III, 

Item 9 to the current baseline for an 

initial operation report on Form ATS 

because in most instances, the NMS 

Stock ATS will be required to check the 

‘‘yes’’ or ‘‘no’’ box and provide a list of 

relevant requests in Part III. This would 

result in an aggregate initial burden of 

10.25 hours above the baseline for all 

NMS Stock ATSs to complete Part II, 

Item 1(b) of Form ATS–N.1145

Similarly, Part II, Items 1(c) and 1(d) 

of adopted Form ATS–N include 

requests for information that are 

intended to highlight disclosures about 

conflicts of interests and potential 

information leakage in Part III, Items 12 

and 16, respectively, of adopted Form 

ATS–N. Part IV, Item 1(d) of proposed 

Form ATS–N set forth the proposed 

disclosure requirements regarding 

liquidity providers on the NMS Stock 

ATS. This request for information is 

now set forth in Part III, Item 12 of 

adopted Form ATS–N. In Part II, Item 

1(c) of adopted Form ATS–N, we have 

now added the additional disclosure 

requirements for the NMS Stock ATS to 

answer a ‘‘yes’’ or ‘‘no’’ question and 

provide a list of any internal business 

units that trade on the NMS Stock ATS 

as liquidity providers in order to 

highlight information about potential 

conflicts of interest that might be 

disclosed in Part III, Item 12 of adopted 

Form ATS–N. We therefore estimate 

that, on average, preparing Part II, Item 

1(c) for a Form ATS–N would add 1 

hour to the current baseline for an 

initial operation report on current Form 

ATS. This would result in an aggregate 

initial burden of 41 hours above the 

baseline for all NMS Stock ATSs to 

complete Part II, Item 1(c) of Form 

ATS–N.1146

Part III, Items 1(b)(iii) and 2(b)(iii) of 

proposed Form ATS–N would have 

required the NMS Stock ATS to explain 

the circumstances under which 

subscriber orders or trading interest 

received by the NMS Stock ATS may be 

removed from the NMS Stock ATS and 

sent to non-ATS trading centers or other 

NMS Stock ATSs operated or controlled 

by the broker-dealer operator, 

respectively. These disclosures are now 

incorporated into Part III, Item 16 of 

adopted Form ATS–N. However, we 

believe that information about the 

routing or removal of orders from the 

NMS Stock ATS to a trading center 

operated or controlled by the brokerdealer operator may include information 

that market participants find necessary 

to evaluate potential conflicts of interest 

or information leakage on the NMS 

Stock ATS, so we have added Part II, 

Item 1(d) to Part II of adopted Form 

ATS–N. Part II, Item 1(d) of adopted 

Form ATS–N requires the NMS Stock 

ATS to answer a ‘‘yes’’ or ‘‘no’’ 

question. The narrative associated with 

this disclosure will be set forth in Part 

III, Item 16. We therefore estimate that, 

on average, preparing Part II, Item 1(d) 

for a Form ATS–N would add 0.5 hour 

to the current baseline for an initial 

operation report on current Form ATS. 

This would result in an aggregate initial 


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1147Compliance Manager at 0.5 hours × 41 NMS 

Stock ATSs = 20.5 burden hours. 

1148See supra Section V.C.1. 

1149See Exhibit A of Form ATS–R. 

1150 (Attorney at 5.75 hours + Compliance 

Manager at 0.5 hours) × 41 NMS Stock ATSs = 

256.25 burden hours. 

1151Attorney at 0.25 hours × 41 NMS Stock ATSs 

= 10.25 burden hours. 

1152 (Compliance Manager at 1.0 hours) × 41 NMS 

Stock ATSs = 41 burden hours. 

1153 (Compliance Manager at 0.5 hours) × 41 NMS 

Stock ATSs = 20.5 burden hours. 

1154Other requirements of Part III, Item 5 of 

proposed Form ATS–N are incorporated in adopted 

Part II, Item 1. 

1155See Proposal, supra note 2, at 81097. 

burden of 20.5 hours above the baseline 

for all NMS Stock ATSs to complete 

Part II, Item 1(d) of Form ATS–N.1147

The requests under Part II, Item 2 of 

adopted Form ATS–N mirror those of 

Part II, Item 2 of adopted Form ATS–N, 

except that the former requires 

disclosures about the trading activity of 

the broker-dealer operator and the latter 

require disclosures about the trading 

activities of affiliates.1148 As with Item 

1, to the extent no affiliate of the brokerdealer operator can enter or direct the 

entry of orders and trading interest into 

the NMS Stock ATS, the NMS Stock 

ATS would be required to check ‘‘no’’ 

under Part II, Item 2(a). In addition, to 

the extent that there are no differences 

between treatment of affiliates that can 

enter or direct the entry of orders and 

trading interest into the ATS and other 

subscribers and persons regarding 

services offered and provided by the 

NMS Stock ATS, the NMS Stock ATS 

would \ be required to check ‘‘no’’ 

under Part II, Item 2(b). 

Likewise, as with Part II, Item 1(a) of 

adopted Form ATS–N, the disclosure 

requests in Part II, Item 2(a) of adopted 

Form ATS–N are more narrowly tailored 

than those which were proposed, and 

the disclosure requests about trading 

activities of the broker-dealer operator 

are no longer contained in the same 

questions as those regarding affiliate 

trading in adopted Form ATS–N. Most 

significantly, we believe that the burden 

for an NMS Stocks ATS to provide 

information about each of its brokerdealer operator’s affiliates that trades on 

the NMS Stock ATS will be less than it 

would have been to provide: (i) A 

comprehensive list of all non-ATS 

trading centers and NMS Stock ATSs 

operated by affiliates, as was proposed 

under Part III, Items 1 and 2, 

respectively; and (ii) a list of each 

affiliate that may enter orders or other 

trading interest on the NMS Stock ATS, 

as was proposed under Part III, Item 

5(a). Under their current disclosure 

requirements pursuant to Regulation 

ATS, ATSs must compile a list of 

subscribers that were participants on the 

ATS for its quarterly reports on current 

Form ATS–R.1149 On the other hand, 

there is no current requirement for an 

ATS to maintain a list of its brokerdealer operator’s affiliates’ non-ATS 

trading centers or NMS Stock ATSs, as 

was proposed. To the extent that an 

NMS Stock ATS must dedicate 

resources to determine whether any of 

its affiliates direct the entry of orders or 

trading interest into the ATS through a 

third-party broker-dealer in order to be 

responsive to Part II, Item 2(a) of 

adopted Form ATS–N, we believe that 

burden will also be less than it would 

have been to compile—and keep up-todate—a list of all non-ATS trading 

centers and NMS Stock ATSs operated 

by its affiliates. 

Additionally, the burden to complete 

Item 2(a) will likely vary significantly 

among NMS Stock ATSs because the 

number of affiliates of each brokerdealer operator—and the number of 

those affiliates that trade on the NMS 

Stock ATS—may vary significantly 

among ATSs. However, even though the 

wording of the disclosure requests are 

almost identical, Part II, Item 2(a) of 

adopted Form ATS–N will likely 

impose a greater burden than that of 

Part II, Item 1(a) because we believe it 

will take an NMS Stock ATS longer to 

compile the necessary information 

about affiliated third-party entities than 

it will to compile that information for 

internal business units of the brokerdealer operator. Accordingly, we 

estimate that, on average, preparing 

adopted Part II, Item 2(a) would add 

approximately 6.25 hours to the current 

baseline for an initial operation report 

on current Form ATS. This will result 

in an aggregate initial burden of 256.25 

hours above the baseline for all NMS 

Stock ATSs to complete Part II, Item 2(a) 

of Form ATS–N.1150

Like Part II, Item 1(b) of adopted Form 

ATS–N, the disclosure request in Part II, 

Item 2(b) will usually require the NMS 

Stock ATS to answer ‘‘yes’’ or ‘‘no’’ and 

list applicable item numbers in Part III 

of adopted Form ATS–N. An NMS Stock 

ATS must provide a narrative under 

Item 2(b) only if there are differences 

that are not applicable to Part III. 

Accordingly, we estimate that Part II, 

Item 2(b) of adopted Form ATS–N 

would add .25 hours out of the 

proposed 2 hours for Part III, Item 9 to 

the current baseline for an initial 

operation report on Form ATS because 

in most instances, the NMS Stock ATS 

will be required to check the ‘‘yes’’ or 

‘‘no’’ box and provide a list of relevant 

requests in Part III. This would result in 

an aggregate initial burden of 10.25 

hours above the baseline for all NMS 

Stock ATSs to complete Part II, Item 

1(b) of Form ATS–N.1151

Furthermore, as is the case with Part 

II, Item 1 of adopted Form ATS–N, Part 

II, Items 2(c) and 2(d) of adopted Form 

ATS–N includes requests for 

information that are intended to 

highlight potential conflicts of interests 

and information leakage that will be 

disclosed in Part III, Items 12 and 16, 

respectively, of adopted Form ATS–N. 

Accordingly, similar to Part II, Item 1(c), 

we estimate that, on average, preparing 

Part II, Item 2(c) for a Form ATS–N 

would add 1 hour to the current 

baseline for an initial operation report 

on current Form ATS. This would result 

in an aggregate initial burden of 41 

hours above the baseline for all NMS 

Stock ATSs to complete Part II, Item 1(c) 

of Form ATS–N.1152 Similar to Part II, 

Item 1(d), we estimate that, on average, 

preparing Part II, Item 2(d) for a Form 

ATS–N would add 0.5 hour to the 

current baseline for an initial operation 

report on current Form ATS. This 

would result in an aggregate initial 

burden of 20.5 hours above the baseline 

for all NMS Stock ATSs to complete 

Part II, Item 2(d) of Form ATS–N.1153

As explained above, Part II, Item 3 of 

adopted Form ATS–N contains 

disclosure requests about order 

interaction with the broker-dealer 

operator and its affiliates. To the extent 

that the NMS Stock ATS does not allow 

subscribers to opt out of interacting with 

the broker-dealer operator, the NMS 

Stock ATS must check ‘‘no’’ to Part II, 

Item 3(a). Similarly, to the extent that 

the NMS Stock ATS does not allow 

subscribers to opt out of interacting with 

the broker-dealer operator, the NMS 

Stock ATS must check ‘‘no’’ to Part II, 

Item 3(b). In addition, to the extent that 

the terms and conditions of the opt out 

processes are the same for all 

subscribers, the NMS Stock ATS must 

check ‘‘no’’ to Part II, Item 3(c). 

The requirements under Part II, Items 

3(a) and (b) of adopted Form ATS–N are 

intended to cover the subject matter 

originally proposed under Part III, Item 

5(d) of proposed Form ATS–N.1154 In 

the Proposal, we estimated that all of 

the items of Part III, Item 5 of proposed 

Form ATS–N would add 5 hours to the 

current baseline for an initial operation 

report on current Form ATS.1155 While 

we did not provide estimates for each 

individual subpart of Part III, Item 5 of 

proposed Form ATS–N, subpart (d) of 

Part III, Item 5 of proposed Form 

ATS–N accounted for approximately 1 

hour of the 5 hour estimate. We believe 

that the requests under Part II, Items 3(a) 


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1156See id. at 81096. 1157 (Attorney at 1 hours + Compliance Manager 

at 0.5 hours) × 41 NMS Stock ATSs = 61.5 burden 

hours. 1158See Proposal, supra note 2, at 81096. 1159See supra Section V.C.3. 1160See Proposal, supra note 2, at 81096. 

1161 (Compliance Manager at 3 hours + Senior 

Marketing Manager at 1 hour) × 164 NMS Stock 

ATSs = 164 burden hours. 

1162See Proposal, supra note 2, at 81096. 

1163See id. 

1164See supra Section V.C.4. 

1165 (Compliance Manager at 2 hours + Senior 

Marketing Manager at 1 hour) × 41 NMS Stock 

ATSs = 123 burden hours. 

1166See Proposal, supra note 2, at 81097. 

and (b) would still add approximately 1 

hour to the baseline for an initial 

operation report on current Form ATS. 

As described in the Proposal, the 

broker-dealer operator should already 

know whether subscribers can opt out of 

interacting with the orders and trading 

interests of the broker-dealer operator 

and its affiliates.1156

In addition, we have incorporated the 

disclosure request from Part III, Item 9 

regarding differentiated and preferential 

treatment into the disclosure request 

under Part II, Item 3(c) of adopted Form 

ATS–N. We estimate that Item 3(c) 

would add approximately .5 hours out 

of the proposed 2 hours for Part III, Item 

9 to the baseline for an initial operation 

report on Form ATS. To the extent there 

are such differences, the NMS Stock 

ATS would be required to provide a 

narrative under Part II, Item 3(c) 

regarding services or functionalities of 

the NMS Stock ATS in addition to the 

narratives about manner of operations 

required under Part III. Accordingly, we 

estimate that, on average, preparing Part 

II, Item 3 for adopted Form ATS–N 

would add 1.5 hours to the baseline for 

an initial operation report on current 

Form ATS. This will result in an 

aggregate initial burden of 61.5 hours 

above the baseline for all NMS Stock 

ATSs to complete Part II, Item 3 of 

adopted Form ATS–N.1157

As explained above, Part II, Item 4 of 

adopted Form ATS–N contains 

disclosure requests about arrangements 

with other trading centers. In the 

Proposal, we estimated that the 

requirements of Part III, Item 4 of 

proposed Form ATS–N—which set forth 

the proposed requests regarding 

arrangements with unaffiliated trading 

centers—would add 4 hours to the 

current baseline for an initial operation 

report on current Form ATS.1158 We 

have revised the proposed disclosure to 

clarify the scope of requested 

information and to add a requirement to 

disclose any arrangements with 

affiliated trading centers.1159 As we 

stated in the Proposal, depending on the 

extent to which the broker-dealer 

operator or any affiliate of the brokerdealer operator has any formal or 

informal arrangement with a trading 

center to access the services of the NMS 

Stock, the hourly burden related to 

completing Part II, Item 4 would likely 

vary.1160 While the scope of Part III, 

Item 4 of proposed Form ATS–N only 

encompassed arrangements with 

unaffiliated trading centers, Part II, Item 

4 of adopted Form ATS–N encompasses 

arrangements with both unaffiliated and 

affiliated trading centers. However, we 

still believe that the hourly burden for 

the adopted disclosure request will vary 

depending on the extent to which a 

broker-dealer operator enters into 

arrangements with its affiliates and on 

the number of the broker-dealer 

operator’s affiliates. We therefore, 

estimate that, on average and consistent 

with the proposed disclosure 

requirement, preparing Part II, Item 4 for 

a Form ATS–N would still add 

approximately 4 hours, on average, to 

the current baseline for an initial 

operation report on current Form ATS. 

This results in an aggregate initial 

burden of 164 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part II, Item 4 of adopted Form 

ATS–N.1161

As explained above, Part II, Item 5 of 

adopted Form ATS–N contains 

disclosure requests about other products 

or services. To the extent that that the 

broker-dealer operator or any of its 

affiliates does not offer subscribers any 

products or services for the purpose of 

effecting transactions or for submitting, 

disseminating, or displaying orders and 

trading interest in the NMS Stock ATS, 

the NMS Stock ATS would need to 

check ‘‘no’’ on Part II, Items 5(a) and 

5(b) and Items 5(c) and 5(d), 

respectively. 

Part II, Item 5 of adopted Form 

ATS–N adopts, with modifications, the 

disclosure requests in Part III, Item 3 of 

proposed Form ATS–N, which would 

have required an NMS Stock ATS to 

disclose whether the broker-dealer 

operator, or any of its affiliates, offers 

subscribers any products or services 

used in connection with trading on the 

NMS Stock ATS (e.g., algorithmic 

trading products, market data feeds). In 

the Proposal, we estimated that it would 

take an average of 3 hours for an NMS 

Stock ATS to disclose this 

information.1162 As noted in the 

Proposal, we believe that depending on 

the extent to which the broker-dealer 

operator or any of its affiliates offers 

subscribers or persons any products or 

services for the purpose of effecting 

transactions or for submitting, 

disseminating, or displaying orders and 

trading interest in the NMS Stock ATS, 

the hourly burden related to completing 

Part II, Item 5 would likely vary.1163 We 

have modified the proposed disclosures 

to require a summary of the terms and 

conditions for use and a cross-reference 

to the applicable Item number(s) in Part 

III of adopted Form ATS–N where the 

use of the product or service is 

explained. Only if there is no applicable 

Item in Part III would the NMS Stock 

ATS be required to include a narrative 

of the use of the product or service with 

the ATS under Part II, Item 5. While we 

have revised the wording of the adopted 

disclosure request to reduce the 

potential of NMS Stock ATSs 

unnecessarily disclosing commercially 

sensitive information,1164 we do not 

believe that the estimated burden of the 

proposed disclosure request should 

change. It was not our intent to require 

NMS Stock ATSs to provide granular 

details that might constitute 

commercially sensitive information in 

response to the proposed disclosure 

requests. We therefore, estimate that, on 

average and consistent with the estimate 

in the Proposal, preparing Part II, Item 

5 for a Form ATS–N would add 3 hour 

to the current baseline for an initial 

operation report on current Form ATS. 

This results in an aggregate initial 

burden of 123 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part II, Item 5 of Form ATS– 

N.1165

As explained above, Part II, Item 6 of 

adopted Form ATS–N contains 

disclosure requests about the activities 

of service providers. Part II, Item 6(a) is 

similar to the request contained in Part 

III, Item 7 of proposed Form ATS–N, 

and Part II, Items 6(b) and (c) of adopted 

Form ATS–N are similar to the requests 

in Part III, Item 8 of proposed Form 

ATS–N. In the Proposal, we estimated 

that, on average, preparing Part III, Item 

7 of proposed Form ATS–N would add 

4 hours to the current baseline for an 

initial operation report on current Form 

ATS.1166 Part II, Item 6(a) of adopted 

Form ATS–N asks for information about 

shared employees like proposed Part III, 

Item 7, but does not require the NMS 

Stock ATS to disclose the identity and 

titles of such employees, as was 

proposed. In addition, Part II, Item 6(a) 

requires a summary of such information, 

which results in a reduced filing burden 

relative to that which was proposed. 

Part III, Item 8 of proposed Form 

ATS–N would have required an NMS 

Stock ATS to disclose information about 

whether any operation, service, or 

function of the NMS Stock ATS is 


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1167See id. 1168Other requirements of Part III, Item 5 of 

proposed Form ATS–N are incorporated in adopted 

Part II, Item 1. 1169 (Attorney at 3 hours + Compliance Manager 

at 2 hours) × 41 NMS Stock ATSs = 205. 

1170Specifically, an NMS Stock ATS would be 

required to: (1) Describe the means by which a 

subscriber may consent or withdraw consent to the 

disclosure of confidential trading information to 

any persons (including the broker-dealer operator 

and any of its affiliates); (2) identify the positions 

or titles of any persons that have access to 

confidential trading information, describe the 

confidential trading information to which the 

persons have access, and describe the 

circumstances under which the persons can access 

confidential trading information; (3) describe the 

written standards controlling employees of the 

NMS Stock ATS that trade for employees’ accounts; 

and (4) describe the written oversight procedures to 

ensure that the safeguards and procedures are 

implemented and followed. 

1171See supra Section VI. 

1172See Proposal, supra note 1 at 81098. 

1173 (Attorney at 1.0 hour + Compliance Manager 

at 0.5 hour) × 41 NMS Stock ATSs = 61.5 burden 

hours. 

1174See supra Section V.D.1. 

1175See Proposal, supra note 2, at 81098–81099. 

1176The requirements related to subparts (a)–(e) 

of Item 1 of proposed Form ATS–N have been 

broken out into separate questions with the 

exception of subpart (b) which is being eliminated. 

We did not provide estimates for each individual 

subpart of Part IV, Item 1 of proposed Form 

ATS–N. 

performed by any person(s) other than 

the broker-dealer operator of the NMS 

Stock ATS. We had estimated that, on 

average, preparing Part III, Item 8 for 

proposed Form ATS–N would add 3 

hours to the current baseline for an 

initial operation report on current Form 

ATS.1167 Like Part II, Item 6(a), Part II, 

Item 6(b) of adopted Form ATS–N only 

requires a summary of the role and 

responsibilities of service providers to 

the ATS. As with Part II, Item 6(a) of 

adopted Form ATS–N, we estimate that 

only requiring a summary narrative for 

the service provider request in adopted 

Form ATS–N would result in a reduced 

filing burden relative to that which was 

proposed. Additionally, Item 6(c) 

requires the NMS Stock ATS to identify 

service providers and their affiliates that 

use the services of the ATS and list the 

services used; Part III, Item 8(c) of 

proposed Form ATS–N would have 

required the NMS Stock ATS to describe 

the circumstances and means by which 

service providers enter orders or trading 

interest on the ATS. Due to the reduced 

filing burden of adopted Part II, Items 

6(a)–(c) relative that which was 

proposed, we estimate that, on average, 

Part II, Items 6(a)–(c) of adopted Form 

ATS–N would add 4.5 hours to the 

current baseline for an initial operating 

report on Form ATS. 

Furthermore, as with Part II, Items 1, 

2, and 3 of adopted Form ATS–N, we 

have incorporated aspects of Part III, 

Item 9 of proposed Form ATS–N 

regarding differentiated and preferential 

treatment into Part II, Item 6(d) of 

adopted Form ATS–N.1168 We estimate 

that Item 3(c) would add approximately 

.5 hours out of the proposed 2-hour 

burden estimate for Part III, Item 9 to the 

current baseline for an initial operation 

report on current Form ATS because the 

NMS Stock ATS would be required to 

provide a narrative in Item 6(d) in 

additional to narratives about the 

manner of operations under Part III of 

adopted Form ATS–N. Accordingly, we 

estimate that on average, Part II, Item 6 

of adopted Form ATS–N will add 

approximately 5 hours to the burden for 

an initial operation report on current 

Form ATS. This results in an aggregate 

initial burden of 205 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part II, Item 6 of Form ATS– 

N.1169

As explained above, Part II, Item 7 of 

adopted Form ATS–N contains 

disclosure requests about the NMS 

Stock ATS’s protection of confidential 

subscriber trading information. Part II, 

Item 7 of adopted Form ATS–N is 

similar to Part III, Item 10 of proposed 

Form ATS–N, which would have 

required certain disclosures related to 

the NMS Stock ATS’s written safeguards 

and written procedures to protect the 

confidential trading information of 

subscribers pursuant to Rule 301(b)(10) 

of Regulation ATS.1170 As previously 

discussed, NMS Stock ATSs will now 

be required to have and maintain 

written policies and procedures under 

Rule 301(b)(10) of Regulation ATS.1171

Part II, Item 7(a) of adopted Form ATS– 

N requires a description of these 

policies and procedures, and the request 

in Item 7(a) will contain the information 

requested in Part III, Items 10(c) and (d) 

of proposed Form ATS–N. Part II, Item 

7(b)–(c) of adopted Form ATS–N 

requests the same information as Part 

III, Item 10(a) of proposed Form 

ATS–N. Lastly, Part II, Item 7(d) is 

similar to Part III, Item 10(b) of 

proposed Form ATS–N, but the adopted 

request only requires a summary of roles 

and responsibilities, rather than 

identification of the positions or titles of 

all persons that have access to 

confidential trading information and a 

description of the circumstances of such 

access as was proposed. We continue to 

believe that NMS Stock ATSs should, 

pursuant to their existing obligations 

under Rule 301(b)(10), be aware of all 

persons that can access the confidential 

trading information of subscribers, the 

circumstances under which such 

persons can access that information, and 

what information they can access. As 

such, we believe that this change to 

proposed Part II, Item 10(b) of adopted 

Form ATS–N does not increase the 

proposed burden estimate. Rather, 

because the adopted request in Part II, 

Item 7(d) reduces the level of detail 

from that which was proposed and the 

other requests from proposed Part III, 

Item 10 are unchanged in adopted Form 

ATS–N, we estimate that the burden for 

Part II, Item 7 of adopted Form ATS–N 

is less than that which was proposed by 

0.5 hours. In the Proposal, we estimated 

that Part III, Item 10 would add 2 hours 

to the baseline for an NMS Stock ATS 

to complete this item.1172 Accordingly, 

we estimate that, on average, preparing 

Part II, Item 7 for a Form ATS–N would 

add 1.5 hours above the current baseline 

for an initial operation report on current 

Form ATS. This would result in an 

aggregate initial burden of 61.5 hours 

above the current baseline for all NMS 

Stock ATSs to complete Item 7 of Part 

II of Form ATS–N.1173

(c) Part III 

Part III, Item 1 of adopted Form 

ATS–N is based on Part IV, Item 1(c) of 

proposed Form ATS–N, although 

certain information from the proposed 

item is not required to be disclosed in 

this item. Specifically, the requirement 

to describe any criteria for 

distinguishing among types of 

subscribers, classes of subscribers, or 

other persons is being removed from the 

item because such information is 

covered under Part III, Item 13 of 

adopted Form ATS–N on 

‘‘Segmentation; Notice.’’ 1174 Moreover, 

the required information on whether the 

NMS Stock ATS accepts non-brokerdealers as subscribers to the ATS is 

being converted to a ‘‘yes’’ or ‘‘no’’ 

question and placed in Part III, Item 2 

of adopted Form ATS–N. 

Part IV, Item 1 of proposed Form 

ATS–N is, in large part, already required 

under current Form ATS.1175 We 

estimated all of Part IV, Item 1 of 

proposed Form ATS–N, which includes 

subparts (a)–(e), would add 6 hours to 

the to the current baseline for an initial 

operation report on current Form 

ATS.1176 We now estimate that Part III, 

Item 1 as adopted would add 0.5 hours 

of burden to the current baseline. The 

current requirement of Exhibit A on 

Form ATS to describe the classes of 

subscribers on the ATS should 

oftentimes have substantial overlap with 

the requirement in Part III, Item 1 to 

select the types of subscribers from a list 

of checkboxes and identify any other 

types of subscribers. The additional 0.5 

hours of burden is meant to account for 

identifying and listing any types of 


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1177Attorney at 0.5 hours × 41 NMS Stock ATSs 

= 20.5 burden hours. 

1178Adopted Part III, Item 2 removed some of the 

provisions in Part IV, Items 1(a) and 1(b) of 

proposed Form ATS–N and formatted the item to 

’’yes’’ or ‘‘no’’ questions. 

1179See Proposal, supra note 2, at 81098–81099. 

1180 (Attorney at 0.7 hours + Compliance Manager 

at 0.3 hours) × 41 NMS Stock ATSs = 41 burden 

hours. 

1181See 17 CFR 242.300(a). 

1182See Proposal, supra note 2, at 81098–81099. 

1183See Proposal, supra note 2, at 81063. 

1184 (Attorney at 0.7 hours + Compliance Manager 

at 0.3 hours) × 41 NMS Stock ATSs = 41 burden 

hours. 

1185See Proposal, supra note 2, at 81099. 

1186Compliance Manager at 0.5 hours × 41 NMS 

Stock ATSs = 20.5 burden hours. 

1187See supra Section V.D.5. 

subscribers that are not already captured 

by the classes of subscribers identified 

in Exhibit A of Form ATS. We therefore 

estimate that, on average, preparing Part 

III, Item 1 for a Form ATS–N would add 

0.5 hours to the current baseline for an 

initial operation report on current Form 

ATS. This would result in an aggregate 

initial burden of 20.5 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part III, Item 1 of adopted 

Form ATS–N.1177

Part III, Item 2 of adopted Form 

ATS–N requires similar information to 

that required under Part IV, Items 1(a) 

and 1(b) of proposed Form ATS–N.1178

In the Proposal, we estimated all of Part 

IV, Item 1 of proposed Form ATS–N, 

which includes subparts (a)–(e), would 

add 6 hours to the to the current 

baseline for an initial operation report 

on current Form ATS.1179 However, a 

number of provisions of Part IV, Item 1 

of proposed Form ATS–N either have 

been eliminated or moved to other Items 

in the adopted Form. Depending on the 

complexity of the NMS Stock ATS, the 

disclosure burden related to Part III, 

Item 2 of Form ATS–N would likely 

vary. For example, an NMS Stock ATS 

with two sets of conditions for different 

persons to satisfy before accessing the 

ATS services would likely have less of 

a burden than an NMS Stock ATS with 

five groups of persons that have to 

satisfy varying conditions. Accordingly, 

we estimate that, on average, preparing 

Part III, Item 2 for a Form ATS–N would 

add 1.0 hour to the current baseline for 

an initial operation report on current 

Form ATS. This would result in an 

aggregate initial burden of 41 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 2 

of adopted Form ATS–N.1180

Part III, Item 3 of adopted Form 

ATS–N requires similar information to 

that required under Part IV, Item 1(e) of 

proposed Form ATS–N, with certain 

clarifications to reduce potential 

confusion with the application of Rule 

301(b)(5) of Regulation ATS. First, Item 

3(a) as adopted asks for a summary 

description of the conditions for 

excluding, in whole or in part, a 

subscriber from the ATS’s services 

rather than the more detailed proposed 

requirement that the NMS Stock ATS 

describe the circumstances by which 

access for a subscriber or other person 

may be limited or denied. Second, we 

are no longer requiring that the NMS 

Stock ATS describe its procedures or 

standards to determine whether to 

exclude. Third, we are changing the 

language in the request to correspond 

closely with the definition of ATS in 

Regulation ATS.1181 In the Proposal, we 

estimated all of Part IV, Item 1 of 

proposed Form ATS–N, which includes 

subparts (a)–(e), would add 6 hours to 

the current baseline for an initial 

operation report on current Form 

ATS.1182 Although ATSs are not 

required to establish conditions for 

excluding subscribers from using the 

ATS, as stated in the Proposal,1183 in 

our experience, ATSs often have rules 

governing subscribers’ participation on 

the ATS, and if a subscriber fails to 

comply with these rules, the ATS may 

limit or deny access to the NMS Stock 

ATS. The burden associated with the 

request would likely vary depending on 

the complexity of the ATS, whether it 

has conditions for excluding 

subscribers, and whether those 

conditions differ among subscribers. For 

some NMS Stock ATSs, the information 

required by Part III, Item 3 would 

require gathering information on its 

practices for excluding subscribers that 

previously may have been ad hoc 

decisions in order to prove the summary 

of conditions for excluding subscribers 

required by the Item. Accordingly, we 

estimate that, on average, preparing Part 

III, Item 3 for a Form ATS–N would add 

1 hour to the current baseline for an 

initial operation report on current Form 

ATS. This would result in an aggregate 

initial burden of 41 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part III, Item 3 of adopted 

Form ATS–N.1184

Part III, Item 4 of adopted Form 

ATS–N is substantially similar to Part 

IV, Item 2 of proposed Form ATS–N, 

except that we are modifying the 

example provided in this item by 

replacing references in the Proposal to 

hours when ‘‘pre-opening or after-hours 

trading occurs’’ (emphasis added) with 

‘‘hours of operation outside of regular 

trading hours’’ and the format of the 

item is being changed to a ‘‘yes’’ or ‘‘no’’ 

question. In the Proposal, we estimated 

that, on average, preparing Part IV, Item 

2 for a Form ATS–N would add 0.5 

hours to the current baseline for an 

initial operation report on current Form 

ATS, and we believe this estimate is 

still accurate for the adopted Item.1185

The NMS Stock ATS is aware of the 

hours during which it operates, 

including any hours of operation 

outside of regular trading hours. Based 

on the experience of the Commission 

and its staff reviewing Form ATS and 

ATS–R filings, we believe that most 

ATSs that currently trade NMS stocks 

do not provide for after-hours or preopening trading of NMS stock. For NMS 

Stock ATSs for which the times when 

orders or trading interest may be sent to 

the NMS Stock ATS are not the same for 

all subscribers and the broker-dealer 

operator, the disclosure burden related 

to Part IV, Item 2 would likely be 

greater. Considering the foregoing, we 

continue to believe that, on average, 

preparing Part III, Item 4 for a Form 

ATS–N would add 0.5 hours to the 

current baseline for an initial operation 

report on current Form ATS. This 

would result in an aggregate initial 

burden of 20.5 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part III, Item 4 of adopted 

Form ATS–N.1186

Part III, Item 5 of adopted Form 

ATS–N is based on Part IV, Item 4(a) of 

proposed Form ATS–N, although we 

have made modifications to the 

proposed item, and also are 

incorporating Part III, Item 6 proposed 

Form ATS–N. First, we are separating 

the requests regarding direct and 

indirect means of entry for orders and 

trading interest into the NMS Stock ATS 

so that information regarding direct 

means of entry will be disclosed in Part 

III, Item 5(a) of adopted Form ATS–N 

and information about other means of 

entry for orders and trading interest will 

be disclosed in adopted Part III, Item 

5(c) of adopted Form ATS–N. Also, the 

information required by Part III, Item 

5(a) on the direct means of order entry 

is being revised from the Proposal to be 

in a ‘‘yes’’ or ‘‘no’’ format. We are also 

moving and revising Part III, Item 6 of 

proposed Form ATS–N to adopted Part 

III, Item 5(c) regarding the means 

available for entering orders other than 

entering orders directly.1187 Part III, 

Item 5(c) of adopted Form ATS–N 

would not require a broker-dealer 

operator to disclose its SOR’s routing 

table or other information about how the 

SOR may route orders. Part III, Item 5(b) 

of adopted Form ATS–N no longer 

contains the proposed language 

‘‘[d]escribe the interaction and 

coordination,’’ which was contained in 


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1188See Proposal, supra note 2, at 81101–02. 1189 (Attorney at 0.5 hours + Compliance Manager 

at 1 hours + Senior Systems Analyst at 1 hours) × 

41 NMS Stock ATSs = 102.5 burden hours. 

1190 (Attorney at 3 hours + Compliance Manager 

at 2 hours + Senior Systems Analyst at 3 hours) × 

41 NMS Stock ATSs = 328 burden hours. 

1191 (Attorney at 3.5 hours + Compliance Manager 

at 3 hours + Senior Systems Analyst at 4 hours) × 

41 NMS Stock ATSs = 430.5 burden hours. 

1192See supra note 839. 

1193See Proposal, supra note 2, at 81101–02. The 

requirements related to subparts (a) and (b) of Item 

4 of proposed Form ATS–N have been broken out 

into separate items in the adopted form. Item 4(a) 

is being adopted as Part III, Item 5, as modified. See 

supra notes 1188- 1191 and accompanying text. 

1194 (Attorney at 1 hour + Compliance Manager at 

1 hour + Senior Systems Analyst at .5) × 41 NMS 

Stock ATSs = 102.5 burden hours. 

1195 Item 3(c) of proposed Form ATS–N is being 

adopted with modifications as Item 8 of adopted 

Form ATS–N. Item 3(d) is being adopted with 

modifications as Item 9 of adopted Form ATS–N. 1196See Proposal, supra note 2, at 81099. 1197 (Attorney at 1.0 hours + Compliance Manager 

at 2 hours + Senior Systems Analyst at 1) × 41 NMS 

Stock ATSs = 164 burden hours. 1198We are relocating Part IV, Item 3(c) of 

proposed Form ATS–N to Part III, Item 8 of adopted 

Form ATS–N and adopting a ‘‘yes’’ or ‘‘no’’ format. 

We are requiring that the NMS Stock ATS identify 

and explain any differences in the treatment of 

subscribers and the broker-dealer operator, as 

applicable, in separate sub-items 8(b), 8(d), and 8(f), 

respectively, which is the same as required in Part 

IV, Item 3(c) of the Proposal. 

Part III, Item 6(b) of proposed Form 

ATS–N. Rather, Part III, Item 5(b) 

requires the NMS Stock ATS to 

‘‘identify and explain’’ sources of order 

flow other than those used for direct 

entry into the ATS. Furthermore, the 

adopted disclosure requirements of Part 

III, Item 5(c) require the NMS Stock ATS 

to ‘‘list and provide a summary 

description of the terms and conditions 

for entering orders or trading interest 

into the ATS’’ through these sources. 

In the Proposal, we estimated that, on 

average, preparing Part IV, Item 4, 

which includes both subparts (a) 

(related to order entry) and (b) (related 

to co-location) would add 5 hours to the 

current baseline for an initial operation 

report on current Form ATS.1188 While 

we did not provide estimates for each 

individual subpart, each subpart of Part 

IV, Item 4 of proposed Form ATS–N 

accounted for half of the 5 hour estimate 

(i.e., 2.5 hours each for subparts (a) and 

(b)). Furthermore, we estimated that, on 

average, preparing Part III, Item 6 of 

proposed Form ATS–N would add 10 

hours to the current baseline for an 

initial operation report on current Form 

ATS. We estimate that the burden hours 

for adopted Part III, Item 5 that 

correspond to the information required 

in Part IV, Item 4(a) of proposed Form 

ATS–N would be substantially similar 

(i.e., 2.5 hours). Therefore, we estimate 

Part III, Item 4 would add 2.5 hours to 

the current baseline for an initial 

operation report on current Form 

ATS.1189 The disclosure requirements 

that were proposed in Part III, Item 6 of 

proposed Form ATS–N have been 

revised and moved to this Item 5(c) as 

adopted. We expect that the associated 

burden would be reduced as we are 

allowing the NMS Stock ATS to ‘‘list 

and provide a summary description of 

the terms and conditions for entering 

orders or trading interest into the ATS,’’ 

as opposed to the ‘‘interaction and 

coordination’’ language used in the 

Proposal. Therefore, we estimate this 

requirement would add 8.0 hours to the 

current baseline for an initial operation 

report on current Form ATS 1190 Thus, 

in total, we estimate that, on average, 

preparing Part III, Item 5 for a Form 

ATS–N would add 10.5 hours to the 

current baseline for an initial operation 

report on current Form ATS. This 

would result in an aggregate initial 

burden of 430.5 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part III, Item 5 of adopted 

Form ATS–N.1191

We have made various revisions to 

the proposed item in adopted Part III, 

Item 6 of adopted Form ATS–N. Part III, 

Item 6(a) is limiting the proposed 

request by allowing for a ‘‘summary’’ of 

the terms and conditions for co-location 

and related services. We are also 

converting the information required by 

Part IV, Item 4(b) of proposed Form 

ATS–N into a series of ‘‘yes’’ or ‘‘no’’ 

questions, with accompanying 

explanations as applicable, in Part III, 

Item 6 of adopted Form ATS–N. 1192 We 

are also separating the requests for 

disclosure into separate sub-parts. 

In the Proposal, the we estimated that, 

on average, preparing Part IV, Item 4 of 

proposed Form ATS–N, which included 

subparts (a) (connectivity and order 

entry) and (b) (co-location), would add 

5 hours to the current baseline for an 

initial operation report on current Form 

ATS.1193 We intended that each subpart 

of Part IV, Item 4 accounted for half of 

the 5 hour estimate (i.e., 2.5 hours each 

for subparts (a) and (b)). We have 

reduced the burden compared to the 

proposed item by allowing for a 

summary of the terms and conditions 

related to co-location and related 

services in Part III, Item 6(a). On the 

other hand, the information required in 

Part III, Item 6(e) of Form ATS–N was 

previously proposed under a different 

item (Part IV, Item 7 of proposed Form 

ATS–N), and therefore, the burden 

related to responding to this item is now 

being added to Item 6(e) as adopted. 

Therefore, as we have revised Part III, 

Item 6 to both reduce the associated 

burden (by allowing for a summary) and 

increase the associated burden (by 

moving information required in 

proposed Part IV, Item 7 of proposed 

Form ATS–N), we believe that the 

burden hours for Part III, Item 6 will 

remain the same as the proposed 

estimate for Part IV, Item 4(b), 2.5 hours 

above the current baseline for an initial 

operation report. This would result in 

the aggregate initial burden of 95 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 6 

of adopted Form ATS–N.1194

The disclosure requirements in Part 

III, Item 7 of adopted Form ATS–N are 

substantially the same as those set forth 

in Part IV, Item 3(a) and(b) of proposed 

Form ATS–N. ATSs that currently trade 

NMS stocks vary in the depth of their 

disclosures related to order types. We 

estimated in the Proposal that, on 

average, preparing Part IV, Item 3 of 

proposed Form ATS–N, which also 

included Items 3(c) and 3(d) that have 

been moved to other items in the 

adopted form,1195 would add 6 hours to 

the current baseline for an initial 

operation report on current Form 

ATS.1196 Because the requirements in 

Part III, Item 7 of adopted Form 

ATS–N are substantially the same as the 

corresponding requirements set forth in 

subparts (a) and (b) of Part IV, Item 3 of 

proposed Form ATS–N, we estimate 

that the burden hours will also be 

substantially similar. While we did not 

provide estimates for each individual 

subpart of Part IV, Item 3 of proposed 

Form ATS–N, subparts (a) and (b) of 

Part IV, Item 3 of proposed Form 

ATS–N, accounted for 4 hours (of the 6 

burden hours estimated for Part IV, Item 

3). Consequently, we estimate that 

adopted Part III, Item 7 will also add 4 

hours above the current baseline for an 

initial operation report on current Form 

ATS, resulting in the aggregate initial 

burden of 164 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part III, Item 7 of adopted 

Form ATS–N.1197

Part III, Item 8 of adopted Form 

ATS–N is based on Part IV, Item 3(c) of 

proposed Form ATS–N. In adopted 

Form ATS–N, Part III, Item 8, we 

separated the requests proposed under 

Item 3(c) into six sub-parts. However, 

the requirements have not changed 

significantly.1198 Additionally, we are 

adding to Part III, Item 8(a) of adopted 

Form ATS–N a request for the NMS 

Stock ATS to provide information about 

any maximum order or trading interest 

size requirements. Because the 

requirements in Part III, Item 8 of 

adopted Form ATS–N are substantially 

the same as the corresponding 


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1199 (Attorney at .25 hours + Compliance Manager 

at .25 hours + Senior Systems Analyst at .5) × 41 

NMS Stock ATSs = 41burden hours. 

1200 (Attorney at .25 hours + Compliance Manager 

at 0.25 hours + Senior Systems Analyst at 0.5) × 41 

NMS Stock ATSs = 41 burden hours. As noted 

above, we estimate the burden for Part III, Item 7 

of adopted Form ATS–N to be 4 hours above the 

baseline and the burden for Part III, Item 8 to be 

1 hour above the baseline. Accordingly, we estimate 

that the total burden hours above the baseline for 

Part III, Items 7, 8, and 9 of adopted Form 

ATS–N is 6 hours, which is the same as that which 

was proposed for Part IV, Item 3. 

1201The words in quotes in this sentence 

represent new text from that proposed in Item 9(a), 

adopted as Item 10(a). The requirement to explain 

when orders and trading interest are priced, 

prioritized, matched and executed when the NMS 

Stock ATS opens or re-opens for trading is not 

expected to change significantly the burden on the 

ATS given that Form ATS–N requires disclosure of 

the hours of operations under Part III, Item 4 of 

adopted Form ATS–N. 

1202Part IV, Item 9(b) of proposed Form ATS–N 

is being adopted with modifications as Item 17 of 

adopted Form ATS–N. Part IV, Item 9(c) of 

proposed Form ATS–N is being adopted with 

modifications as Item 18 of adopted Form ATS–N. 

We are estimating 1.25 burden hours for Item 17 

and 1.25 burden hours for Item 18 of adopted Form 

ATS–N. 

1203 (Attorney at .5 hours + Senior Systems 

Analyst at .75) × 41 NMS Stock ATSs = 51.25 

burden hours. 

requirements set forth in Part IV, Item 

3 of proposed Form ATS–N, we estimate 

that the burden hours in adopted Part 

III, Item 8 that correspond to the 

information required in proposed Part 

IV, Item 3 would be substantially 

similar. While we did not provide 

estimates for each individual subpart of 

Part IV, Item 3 of proposed Form 

ATS–N, subpart (c) of Part IV, Item 3 of 

proposed Form ATS–N, would have 

accounted for 1 hour (of the 6 burden 

hours estimated for Part IV, Item 3). 

Consequently, we estimate that the 

burden hours in adopted Part III, Item 

8 would add 1 hour to the current 

baseline for an initial operation report 

on current Form ATS, resulting in the 

aggregate initial burden of 41 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 8 

of adopted Form ATS–N.1199

Part III, Item 9 of adopted Form 

ATS–N is based on Part IV, Item 3(d) of 

proposed Form ATS–N. We separated 

Part IV, Item 3(d) of proposed Form 

ATS–N into two sub-parts in adopted 

Part III, Item 9. However, the 

requirements have not changed 

substantially. We are adding ‘‘price or 

size minimums’’ as examples of 

information that could be contained in 

the messages and ‘‘order management 

system, smart order router and FIX’’ to 

illustrate the types of mechanisms that 

could transmit messages, such as IOIs 

and conditional orders. Because the 

requirements in Part III, Item 9 of 

adopted Form ATS–N are substantially 

the same as the corresponding 

requirements set forth in Part IV, Item 

3(d) of proposed Form ATS–N, we 

estimate that the burden hours in 

adopted Part III, Item 9 that correspond 

to the information required in Part IV, 

Item 3(d) of proposed Form ATS–N are 

substantially similar. While we did not 

provide estimates for each individual 

subpart of Part IV, Item 3 of proposed 

Form ATS–N, subpart (d) would have 

accounted for 1 hour (of the 6 burden 

hours estimated for Part IV, Item 3). 

Accordingly, we estimate that the 

burden hours in adopted Part III, Item 

9 would add 1 hour to the current 

baseline for an initial operation report 

on current Form ATS, resulting in the 

aggregate initial burden of 41 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 9 

of adopted Form ATS–N.1200

Part III, Item 10 of adopted Form 

ATS–N corresponds with Part IV, Item 

9(a) of proposed Form ATS–N. We 

separated what was proposed in Part IV, 

Item 9(a) into five sub-parts in adopted 

Part III, Item 10. We are adding to Part 

III, Item 10(a) of adopted Form ATS–N 

requirements regarding ‘‘when’’ and 

how such orders and trading interest are 

‘‘priced [and] prioritized’’ and ‘‘any 

order types allowed’’ during the 

opening and reopening processes.1201

Additionally, we are formatting the 

requests that parallel the information 

requested in the Proposal into three subparts (adopted Items 10(a), 10(c) and 

10(e)) and adding a ‘‘yes’’ or ‘‘no’’ 

question to Item 10(e) to improve 

readability and facilitate comparisons of 

the information for market participants. 

Also, we are adding a new requirement 

to identify and explain any differences 

in the treatment of subscribers and the 

broker-dealer operator in the opening 

and reopening processes, if applicable, 

in the form of ‘‘yes’’ or ‘‘no’’ questions 

in adopted Part III, Items 10(b) and 

10(d). We estimate that the overall 

burden hours for adopted Part III, Item 

10 will be slightly more than Part IV, 

Item 9(a) because while the adopted 

subparts that parallel the information 

requested in the proposed item (adopted 

Items 10(a), 10(c) and 10(e)) result in a 

similar burden, we expect that the new 

subparts (adopted Items 10(b) and 10(d)) 

will impose an additional burden on 

some NMS Stock ATSs that treat 

subscribers and the broker-dealer 

operator differently. While we did not 

provide an estimate for each individual 

subpart of Part IV, Item 9 of proposed 

Form ATS–N, subpart (a) would have 

accounted for 1 hour (of the 3 burden 

hours estimated for Part IV, Item 9).1202

Consequently, we estimate that the 

burden hours in adopted Part III, Item 

10 would add 1.25 hours to the current 

baseline for an initial operation report 

on current Form ATS, resulting in the 

aggregate initial burden of 51.25 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 9 

of adopted Form ATS–N.1203

Part III, Item 11 of adopted Form 

ATS–N is substantively similar to Part 

IV, Item 7 of proposed Form ATS–N, but 

we are making various revisions to the 

Item. We are limiting the request to 

require NMS Stock ATSs to provide a 

summary of the structure of the NMS 

Stock ATS marketplace instead of 

describing the means or facilities used 

by the NMS Stock ATS to bring together 

the orders of multiple buyers and 

sellers. In Part III, Item 11(c) of adopted 

Form ATS–N, we are combining the 

requests in the Proposal in Part IV, 

Items 7(b) (‘‘Order Interaction Rules’’) 

and 7(c) (‘‘Other Trading Procedures’’). 

Part IV, Items 7(b) and 7(c) of proposed 

Form ATS–N were intended to solicit 

information about the ATS’s established 

non-discretionary methods that dictate 

the terms of trading among the multiple 

buyers and sellers entering orders and 

trading interest. In addition to a trading 

facility, non-discretionary methods 

include rules and procedures. We are 

revising the language in adopted Item 

11(c) to recognize this overlap by 

requiring the NMS Stock ATS to 

‘‘explain the established, nondiscretionary rules and procedures of 

the NMS Stock ATS, including order 

interaction rules,’’ which requires the 

same information as the proposed 

subparts. As another component of an 

NMS Stock ATS’s non-discretionary 

methods, we are moving the trading 

procedures description required in 

proposed Item 7(c) into adopted Item 

11(c) and including the examples of the 

trading procedures of an NMS Stock 

ATS (e.g., price protection mechanisms, 

shorts sales, locked-cross markets) in 

adopted Item 11(c) as well. Finally, we 

are converting the prompts in Part IV, 

Item 7(a), 7(b) and 7(c) of proposed 

Form ATS–N to identify and explain 

any differences among subscribers and 

persons into ‘‘yes’’ or ‘‘no’’ questions in 

Items 11(b) and 11(d) of adopted Form 

ATS–N. 

Consistent with the estimate in the 

Proposal, we estimate that, on average, 

preparing Part III, Item 11 for a Form 

ATS–N will add 6 hours to the current 

baseline for an initial operation report 

on current Form ATS to provide a 

description of the NMS Stock ATS’s 

trading services. This will result in an 

aggregate initial burden of 246 hours 


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1204Attorney at 1.0 + Compliance Manager at 2.0 

+ Senior Systems Analyst at 3.0) × 41 NMS Stock 

ATSs = 246 burden hours. 

1205Proposed Part IV, Item 1(a) (‘‘eligibility’’) is 

being adopted with modifications as Part III, Item 

2 of adopted Form ATS–N. Proposed Part IV, Item 

1(b) (‘‘terms and conditions’’) is not being adopted, 

except for the request to state whether contractual 

agreements are written, which is being adopted 

with modifications as Part III, Item 2(d) of adopted 

Form ATS–N. Proposed Part IV, Item 1(c) (‘‘Types 

of Subscribers’’) is being adopted with 

modifications as Part III, Item 1 and Item 2(a) of 

adopted Form ATS–N. Proposed Part IV, Item 1(e) 

(‘‘Limitation and Denial of Services’’) is being 

adopted with modifications as Part III, Item 3 of 

adopted Form ATS–N. 

1206 (Attorney at 0.7 hours + Compliance Manager 

at 0.3 hours) × 41 NMS Stock ATSs = 41 burden 

hours. 

1207See supra Section V.D.13. 

1208 (Attorney at 2.0 hours + Compliance Manager 

at 2.25 hours + Senior Systems Analyst at 1.75 

hours) × 41 NMS Stock ATSs = 205 burden hours. 

1209See Proposal, supra note 2, at 81100. 

Proposed Part IV, Items 5(a) and 5(b) are being 

adopted with modifications as Part III, Item 13 of 

adopted Form ATS–N. We are estimating 5 burden 

hours for Part III, Item 13 of adopted Form 

ATS–N. 

1210 (Attorney at 0.5 hours + Compliance Manager 

at 0.75 hours + Senior Systems Analyst at 0.75 

hours) × 41 NMS Stock ATSs = 82 burden hours. 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 11 

of adopted Form ATS–N.1204

The requirements of Part III, Item 12 

were proposed as Part IV, Item 1(d) of 

proposed Form ATS–N. In the Proposal, 

we estimated that the entire Part IV, 

Item 1 (which also would have 

addressed eligibility, terms and 

conditions of use, types of subscribers, 

and liquidity providers) 1205 would add 

6 hours to the current baseline for an 

initial operation report on current Form 

ATS. The requirements related to 

eligibility, terms and conditions of use, 

types of subscribers, and liquidity 

providers have been broken out into 

separate questions, and Part III, Item 12 

of adopted Form ATS–N solely relates 

to formal and informal arrangements 

with subscribers or the broker-dealer 

operator to provide orders or trading 

interest to the NMS Stock ATS. We 

believe that Part III, Item 12 of adopted 

Form ATS–N will add 1 hour to the 

current baseline for an initial operation 

report on current Form ATS. This 

would result in an aggregate initial 

burden of 41 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part III, Item 12 of adopted 

Form ATS–N.1206

Part III, Item 13 of adopted Form 

ATS–N corresponds with Part IV, Item 

5(a) and (b) of proposed Form ATS–N. 

The requirements of Part III, Item 13 of 

adopted Form ATS–N cover the 

requirements proposed under Part IV, 

Items 5(a) and 5(b), although we have 

modified the proposed 

requirements.1207 We are adding ‘‘yes’’ 

or ‘‘no’’ questions to Part III, Item 13(a), 

13(b), 13(d) and 13(e) of adopted Form 

ATS–N to facilitate responses to the 

items and to facilitate market 

participants finding the information. 

We are also modifying certain 

components of Part IV, Item 5 of 

proposed Form ATS–N. First, we are 

adding the terms ‘‘classifications, tiers, 

or levels’’ to adopted Part III, Item 13(a) 

through (e) in addition to ‘‘categories’’ 

to describe the groupings that an NMS 

Stock ATS may segment subscriber 

orders. Second, we are providing two 

additional examples, order size and 

duration, of criteria for segmentation of 

subscribers’ orders and trading interest. 

Third, we are providing additional 

specificity around what ‘‘changing 

segmented categories’’ means by 

requiring NMS Stock ATSs to provide a 

discussion around overriding a 

determination of segmented category. 

Fourth, we are requiring a description of 

how segmentation affects order 

interaction on Part III, Item 13 of 

adopted Form ATS–N. Finally, we are 

requiring under Part III, Item 13(d) of 

adopted Form ATS–N that the NMS 

Stock ATS describe ‘‘whether and how 

such designation can be contested.’’ 

In the Proposal, we estimated that, on 

average, preparing Part IV, Item 5 for a 

Form ATS–N would add 7 hours to the 

current baseline for an initial operation 

report on current Form ATS to provide 

a detailed description of how, if at all, 

the NMS Stock ATS segments order 

flow, provides any notice to those 

trading on the NMS Stock ATS 

regarding segmentation, and allows 

order preferencing. The proposed 

requirement regarding order 

preferencing is broken out into a 

separate item, Part III, Item 14 of 

adopted Form ATS–N, which is 

described below. We also are adding a 

‘‘yes’’ or ‘‘no’’ question in adopted Part 

III, Item 13(b) regarding identifying 

orders by a customer of a broker-dealer 

as a customer order. We believe the 

aforementioned minor modifications to 

the proposed question will slightly 

increase the burden for the adopted 

item. Therefore, we believe that Part III, 

Item 13 of adopted Form ATS–N will 

add 6 hours to the current baseline for 

an initial operation report on current 

Form ATS. This would result in an 

aggregate initial burden of 205 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 13 

of adopted Form ATS–N.1208

Part III, Item 14(a) is substantially 

similar to Part IV, Item 5(c) of proposed 

Form ATS–N. However, we have added 

a requirement in Item 14(b), that if 

counter-party selection functionality is 

not the same for all subscribers and the 

broker-dealer operator, that the NMS 

Stock ATS identify and explain any 

differences. The burden associated with 

this change is likely to vary among NMS 

Stock ATS depending on their 

complexity and the extent to which they 

treat all subscribers and the brokerdealer operator the same or differently. 

We estimated that, on average, 

preparing all of Part IV, Item 5 

(including subparts (a), (b), and (c)) for 

a Form ATS–N would add 7 hours to 

the current baseline for an initial 

operation report on current Form ATS 

to provide a detailed description of 

how, if at all, the NMS Stock ATS 

segments order flow, provides any 

notice to those trading on the NMS 

Stock ATS regarding segmentation, and 

allows counter-party selection.1209 We 

understand that most, but not all, ATSs 

that currently trade NMS stocks allow 

subscribers to enter some type of 

counter-party selection criteria. These 

ATSs vary in the depth of their 

description as to how they allow 

counter-party selection. We believe that 

Part III, Item 14 of adopted Form 

ATS–N, which solely relates to counterparty selection, will add 2 hours to the 

current baseline for an initial Form 

ATS. This will result in an aggregate 

initial burden of 82 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part III, Item 14 of adopted 

Form ATS–N.1210

Part III, Item 15 is modified from a 

similar requirement of Part IV, Item 6 of 

proposed Form ATS–N, which asked 

about order display and the subscribers 

and persons to which orders and trading 

interest are displayed or otherwise made 

known. We are changing the language in 

this item from ‘‘order information or 

other trading interest’’ to ‘‘subscriber 

orders and trading interest.’’ We are also 

revising the proposed requests to make 

clear that it only applies to the display 

of the NMS Stock ATS’s subscriber 

orders and trading interest as opposed 

to non-ATS orders and trading interest 

handled or otherwise displayed to the 

broker-dealer operator. Accordingly, the 

disclosure of non-ATS orders by 

affiliates of the NMS Stock ATS and 

others external to the ATS of non-ATS 

orders would not have to be disclosed. 

However, if for example, an affiliate of 

the NMS Stock ATS is displaying an 

order that is simultaneously bound for 

or resting in the NMS Stock ATS, then 

Item 15 would apply. In addition, we 

have revised the request so that Part III, 

Item 15(b) of adopted Form ATS–N 

makes clear that the request does not 


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1211 (Attorney at 1 hour + Compliance Manager at 

2 hours + Senior Systems Analyst at 2 hours) × 41 

NMS Stock ATSs = 205 burden hours. 

1212 (Attorney at 0.5 hours + Compliance Manager 

at 0.5 hours + Senior Systems Analyst at 1 hours) 

× 41 NMS Stock ATSs = 82 burden hours. 

1213Although we are revising the item text to 

provide more specificity so NMS Stock ATSs better 

understand the requirements and scope of the 

request and provide sufficient information to 

market participants, we believe these revisions 

should not change the burden of the required 

disclosure. 1214Part IV, Items 9(a) and 9(c) of proposed Form 

ATS–N are being adopted with modifications as 

Part III, Items 10 and 18 of adopted Form ATS–N, 

respectively. We are estimating 1.25 burden hours 

for Item 10 and 1.25 burden hours for Item 18 of 

adopted Form ATS–N. 

1215 (Compliance Manager at .75 hours + Senior 

Systems Analyst at 0.50 hour) × 41 NMS Stock 

ATSs = 51.25 burden hours. 

1216Part IV, Items 9(a) and 9(b) of proposed Form 

ATS–N are being adopted with modifications as 

Part III, Items 10 and 17 of adopted Form ATS–N, 

respectively. We are estimating 1.25 burden hours 

for Item 10 and 1.25 burden hours for Item 17 of 

adopted Form ATS–N. 

require the NMS Stock ATS to identify 

employees of the ATS who are operating 

the system. Finally, we are adding a 

‘‘yes’’ or ‘‘no’’ questions in Part III, Item 

15(a) that asks if the NMS Stock ATS is 

an ECN as defined in Rule 600(a)(23) of 

Regulation NMS. 

Depending on the variety of trading 

interest that shares some trading 

information outside of the NMS Stock 

ATS and the complexity of such 

information sharing, the disclosure 

burden in responding to Part III, Item 15 

would likely vary among NMS Stock 

ATSs. In the Proposal, we estimated 

that, on average, preparing Part IV, Item 

6 of proposed Form ATS–N would add 

5 hours to the current baseline for an 

initial operation report on current Form 

ATS, depending on such factors as 

described above. Although we are 

revising the item text to provide more 

specificity so NMS Stock ATSs better 

understand the requirements and scope 

of the request and provide sufficient 

information to market participants in 

Part III, Item 15 of adopted Form ATS– 

N, we are also simplifying responses to 

the item by no longer requiring NMS 

Stock ATSs to identify the subscriber or 

person to whom order and trading 

interest is displayed and instead 

requiring disclosure of the types of 

market participants that receive the 

information. Thus, we believe these 

changes would, in total, provide no 

additional burden from proposed Form 

ATS–N. We therefore believe that 

preparing Part III, Item 15 of adopted 

Form ATS–N will add 5 hours to the 

current baseline for an initial Form 

ATS. This will result in an aggregate 

initial burden of 205 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part III, Item 15 of adopted 

Form ATS–N.1211

Part III, Item 16(a) relates to 

disclosures surrounding orders and 

trading interest in the NMS Stock ATS 

being routed to a destination outside the 

ATS. We understand, based on 

disclosures in Form ATS submissions, 

that some ATSs that currently trade 

NMS stocks do not route orders out of 

the ATS. Consequently, the disclosure 

burden related to Part III, Item 16 of 

adopted Form ATS–N will likely vary 

among NMS Stock ATSs depending on 

whether they route orders at all. In the 

Proposal, we estimated that, on average, 

preparing Part IV, Item 10 for proposed 

Form ATS–N would add 6 hours to the 

current baseline for an initial operation 

report on current Form ATS, depending 

on such factors as described above. We, 

however, are substantially simplifying 

the item as adopted by converting 

subpart (a) into a ‘‘yes’’ or ‘‘no’’ question 

that no longer requires a description of 

the circumstances under which orders 

are routed, and also removes the 

requirement to describe the means by 

which routing is performed and the 

requirement to describe any differences 

among subscribers and persons. We 

therefore estimate that Part III, Item 16 

of adopted Form ATS–N will add 2 

hours to the current baseline for an 

initial operation report, depending on 

the extent to which the ATS routes 

orders and trading interest. This will 

result in an aggregate initial burden of 

82 hours above the current baseline for 

all NMS Stock ATSs to complete Part 

III, Item 16 of adopted Form ATS–N.1212

The requirements of Part III, Item 

17(a) are similar to those proposed in 

Part IV, Item 9(b) of the proposed Form 

ATS–N.1213 We estimated that, on 

average, preparing all of Part IV, Item 9, 

including subparts (a)–(c), for proposed 

Form ATS–N would have added 3 hours 

to the current baseline for an initial 

operation report on current Form ATS 

to describe its opening, reopening, or 

closing processes, and after-hours 

trading procedures.1214 While we did 

not provide an estimate for each 

individual subpart of Part IV, Item 9 of 

proposed Form ATS–N, subpart (b) 

would have accounted for 1 hour (of the 

3 burden hours estimated for Part IV, 

Item 9). As we stated in the Proposal, 

current Form ATS, Exhibit F requires an 

ATS to describe its closing processes. 

Therefore, we continue to believe that 

Part III, Item 17 of adopted Form ATS– 

N will not impose a significant 

additional requirement. We are newly 

requiring, as Part III, Item 17(b) of 

adopted Form ATS–N, that if the 

treatment of orders and trading interest 

during the close is not the same for all 

subscribers and the broker-dealer 

operator, the NMS Stock ATS identify 

and explain such differences. The 

burden associated with this change is 

likely to vary among NMS Stock ATS 

depending on their complexity and the 

extent to which they treat all subscribers 

and the broker-dealer operator the same 

or differently. Therefore, we believe that 

it would add 1.25 hours to the current 

baseline for an initial operation report 

on Form ATS–N. This would result in 

an aggregate initial burden of 51.25 

hours above the current baseline for all 

NMS Stock ATSs to complete Part III, 

Item 17 of adopted Form ATS–N.1215

Subparts (a) and (b) of Part III, Item 18 

of adopted Form ATS–N are 

substantially similar to Part IV, Item 9(c) 

of proposed Form ATS–N. We estimated 

that, on average, preparing all of Part IV, 

Item 9 for a proposed Form ATS–N 

would add 3 hours to the current 

baseline for an initial operation report 

on current Form ATS to describe its 

opening, reopening, or closing 

processes, and after-hours trading 

procedures.1216 While we did not 

provide an estimate for each individual 

subpart of Part IV, Item 9 of proposed 

Form ATS–N, subpart (c) would have 

accounted for 1 hour (of the 3 burden 

hours estimated for Part IV, Item 9). In 

the Proposal, we stated that Exhibit F of 

current Form ATS requires an ATS to 

describe after-hours trading procedures. 

These procedures may vary widely 

across different ATSs. Therefore, we 

continue to estimate that the additional 

requirements will not impose a 

significant additional burden above the 

current baseline for an initial operation 

report on current Form ATS. Unlike Part 

IV, Item 9(c) of proposed Form ATS–N, 

an ATS that has trading outside of 

regular hours that follows the same 

procedures as trading within regular 

trading hours would need to check the 

boxes to indicate it conducts trading 

outside of its regular trading hours and 

to indicate that its trading procedures 

do not differ between regular and 

outside of regular trading hours; it 

would not need to describe any afterhours trading procedures. We, however, 

also added the requirement that the 

NMS Stock ATS describe, as applicable, 

the treatment of orders and trading 

interest outside of regular trading hours 

if it is not the same for all subscribers 

and broker-dealer operator as Item 18(c) 

of adopted Form ATS–N. In light of 

these changes, we believe that Part III, 

Item 18 of adopted Form ATS–N would 

add 1.25 hours to the current baseline 

for an initial operation report on Form 

ATS–N. This would result in an 


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1217 (Compliance Manager at .75 hours + Senior 

Systems Analyst at 0.50 hour) × 41 NMS Stock 

ATSs = 51.25 burden hours. 

1218See id. at 81103. 

1219 (Attorney at 2 hour + Compliance Manager at 

3 hours + Senior Systems Analyst at 1 hour) × 41 

NMS Stock ATSs = 246 burden hours. 

1220 (Attorney at 1 hour + Compliance Manager at 

.5 hours + Senior Systems Analyst at 1 hour) × 41 

NMS Stock ATSs = 102.5 burden hours. 

1221See Proposal, supra note 2, at 81103. 

1222Compliance Manager at 0.50 hours × 41 NMS 

Stock ATSs = 20.5 burden hours. 

aggregate initial burden of 51.25 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Item 18 

of adopted Form ATS–N.1217

Part III, Item 19 of adopted Form 

ATS–N is similar to Part IV, Item 12 of 

proposed Form ATS–N. In the Proposal, 

we estimated that, on average, preparing 

Part IV, Item 12 for a Form ATS–N 

would add 5 hours to the current 

baseline for an initial operation report 

on current Form ATS to describe the 

NMS Stock ATS’s fee structure and any 

differences among subscribers relating 

to fees, rebates, or other charges. As 

discussed in the Proposal,1218 current 

Form ATS does not require an ATS to 

disclose and explain its fee structure, 

and few, if any, do so in their current 

Form ATS filings. We recognize that, 

like national securities exchanges, NMS 

Stock ATSs may adopt a variety of fee 

structures that may include rebates, 

incentives for subscribers to bring 

liquidity to the NMS Stock ATS, more 

traditional transaction-based fee 

structures, and other fees such as a 

monthly subscriber access fee. 

Depending on the complexity and 

variety of an NMS Stock ATS’s fee 

structure and the extent to which these 

fees are not the same for all subscribers, 

the disclosure burden related to Part III, 

Item 19 of adopted Form ATS–N will 

likely vary. 

However, we are requiring additional 

specificity related to the description of 

fees of the NMS Stock ATS that are 

based on or bundled with the use of 

non-ATS services or products offered by 

the broker-dealer operator or its 

affiliates. These were not previously 

explicitly specified by Part IV, Item 12 

of proposed Form ATS–N, and the 

adopted item will likely require 

additional burden hours for NMS Stock 

ATSs that are operated by multi-service 

broker-dealers that bundle their ATS 

fees with other non-ATS services or 

products. In contrast, we are narrowing 

the request for NMS Stock ATSs to 

describe any differences in fees or 

rebates charged to different 

‘‘subscribers,’’ and instead asking for 

NMS Stock ATSs to disclose any 

differentiation between fees and/or 

rebates charged among ‘‘types’’ of 

subscribers, which should reduce the 

burden of responding as differences 

among individual subscribers need not 

be explained. Accordingly, we estimate 

that, on average, preparing Part III, Item 

19 of Form ATS–N would add 6 hours 

to the current baseline for an initial 

operation report on current Form ATS. 

This will result in an aggregate initial 

burden of 246 hours above the current 

baseline for all NMS Stock ATSs to 

complete Part III, Item 19 of Form ATS– 

N.1219

Part III, Item 20 of adopted Form 

ATS–N is substantially similar to Part 

IV, Item 8 of proposed Form ATS–N 

with certain modifications. We are 

renaming the item ‘‘Suspension of 

Trading,’’ converting the prompt in Part 

IV, Item 8(a) of proposed Form ATS–N 

to identify and explain any differences 

among subscribers and persons into a 

‘‘yes’’ or ‘‘no’’ question in Part III, Item 

20(b) of adopted Form ATS–N, revising 

the language to refer to procedures for 

stopping trading, and clarifying that 

suspensions of trading in an NMS stock 

are responsive. In the Proposal, we 

estimated that, on average, preparing 

Part IV, Item 8 for a Form ATS–N would 

add 2.5 hours to the current baseline for 

an initial operation report on current 

Form ATS to provide a detailed 

description of the NMS Stock ATS’s 

procedures for system disruptions, 

malfunctions, or other suspensions. 

We believe that NMS Stock ATSs 

should be able to provide the 

disclosures in Part III, Item 20 of 

adopted Form ATS–N as they should 

already be aware of how the ATS 

operates, handles system disruptions, 

malfunctions or other suspensions 

based on the information required in 

Exhibits G and F of current Form ATS. 

We recognize, however, that Part III, 

Item 20 is significantly more specific 

and detailed in its disclosure 

requirements than current Form ATS. 

Accordingly, we estimate that 

respondents would incur an additional 

burden above the current baseline when 

preparing the disclosures required 

under Part III, Item 20 of Form ATS–N, 

consistent with the estimated burden for 

proposed Item IV, Part 8. We estimate 

that, on average, preparing Part III, Item 

20 for a Form ATS–N would add 2.5 

hours to the current baseline for an 

initial operation report on current Form 

ATS to provide a detailed description of 

the NMS Stock ATS’s procedures for 

suspending or stopping trading on the 

NMS Stock ATS. This would result in 

an aggregate initial burden of 102.5 

hours above the current baseline for all 

NMS Stock ATSs to complete Part III, 

Item 20 of proposed Form ATS–N.1220

Part III, Item 21 is substantially the 

same as Part IV, Item 13(a) of proposed 

Form ATS–N with certain 

modifications. We are limiting the 

description of any arrangements for 

reporting transactions on the NMS Stock 

ATS to only ‘‘material arrangements’’ in 

the adopted item, and converting the 

prompt in the proposed Part IV, Item 

13(a) to describe any differences among 

subscribers and persons into a ‘‘yes’’ or 

‘‘no’’ question in Part III, Item 21(b) of 

adopted Form ATS–N. 

Part III, Item 22 is substantially the 

same as Part IV, Item 13(b) of proposed 

Form ATS–N with certain 

modifications. We are limiting the 

description of any arrangements to 

facilitate the clearance and settlement of 

transactions on the NMS Stock ATS to 

only ‘‘material arrangements’’ in the 

adopted item, and converting the 

prompt in Part IV, Item 13(b) of 

proposed Form ATS–N to describe any 

differences among subscribers and 

persons into a ‘‘yes’’ or ‘‘no’’ question in 

Part III, Item 22(b) of adopted Form 

ATS–N. In addition, we are removing 

the phrase ‘‘undertaken by the NMS 

Stock ATS’’ from the proposed 

requirement to describe any procedures 

or arrangements by the NMS Stock ATS 

to facilitate clearance and settlement on 

the ATS. 

In the Proposal, we estimated that, on 

average, preparing Part IV, Item 13 for 

a Form ATS–N would add 0.5 hours to 

the current baseline for an initial 

operation report on current Form 

ATS.1221 We believe that preparing Part 

III, Items 21 and 22 for a Form ATS–N 

will impose a lesser burden as 

compared to the proposed items because 

the adopted items only require that 

‘‘material’’ arrangements related to 

reporting and clearance and settlement 

of transactions be disclosed (as opposed 

to ‘‘any arrangements’’ in the Proposal). 

Therefore, we estimate that, on average, 

preparing Part III, Item 21 and 22 for a 

Form ATS–N would add 0.5 hours to 

the current baseline for an initial 

operation report on current Form ATS 

to provide a more detailed description 

of the NMS Stock ATS’s trade reporting, 

clearance, and settlement arrangements 

or procedures. This will result in an 

aggregate initial burden of 20.5 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part III, Items 

21 and 22 of adopted Form ATS–N.1222

Part III, Item 23 of adopted Form 

ATS–N is substantially the same as Part 

IV, Item 11 of proposed Form ATS–N 

with certain modifications. We are 

revising the request to make clear that 

an NMS Stock ATS would not be 


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1223See Proposal, supra note 2, at 81103. 

1224 (Compliance Manager at 2.5 hours + Senior 

Systems Analyst at 2.5 hours) × 41 NMS Stock 

ATSs = 205 burden hours. 

1225 (Attorney at 2 hours + Compliance Manager 

at 1 hour + Senior Systems Analyst at 2 hours) × 

3 NMS Stock ATSs = 15 burden hours. 

1226See Proposal, supra note 2, at 81104. 

expected to provide information about 

the market data that the broker-dealer 

operator uses to route orders and trading 

interest from the NMS Stock ATS to 

away destinations by removing from the 

item the prompt to describe how the 

ATS uses market data to determine 

routing destinations. As discussed 

above in Section V.D.23, we believe, 

however, that it would be responsive to 

Part III, Item 23 for the NMS Stock ATS 

to provide information about the ATS’s 

use of market data to determine when 

resting orders and trading interest will 

be removed from inside the NMS Stock 

ATS as such orders and trading interest 

reside inside the ATS. Accordingly, the 

NMS Stock ATS should disclose, in 

response to this request, the market data 

that is used to remove resting orders and 

trading from the NMS Stock ATS. 

Because the adopted Item is removing 

the requirement from the proposed Item 

for information related to using market 

data to determine routing destinations, 

and the adopted Item is adding a 

requirement to explain how market data 

is used to determine when resting 

orders will be removed from the NMS 

Stock ATS, we believe that the resulting 

overall burden for the adopted Item will 

remain the same. In addition, we are 

adding a requirement that if the use of 

market data is not the same for all 

subscribers and the broker-dealer 

operator, that the NMS Stock ATS must 

identify and explain any differences. 

We believe that the disclosures under 

Part III, Item 23 will not impose any 

significant additional burden on NMS 

Stock ATSs, which should already be 

aware of the market data that they use 

and the manner in which they use it. 

The information requested in Part III, 

Item 23 of adopted Form ATS–N is 

similar to that required by Part IV, Item 

11 of proposed Form ATS–N. In the 

Proposal, we estimated that, on average, 

preparing Part IV, Item 11 for a Form 

ATS–N would add 4 hours to the 

current baseline for an initial operation 

report on current Form ATS to describe 

the sources of market data and the 

manner in which the NMS Stock ATS 

uses market data.1223 However, unlike 

Part IV, Item 11 of proposed Form ATS– 

N, Part III, Item 23 also requests 

information regarding differences in 

treatment between subscribers and the 

broker-dealer operator. We believe that 

this requirement would add to the total 

additional burden; however, we believe 

that such information should be readily 

available to the NMS Stock ATS. 

Therefore, we believe that preparing 

Part IV, Item 11 for a Form ATS–N will 

add 5 hours to the current baseline for 

an initial operation report on current 

Form ATS. This would result in an 

aggregate initial burden of 205 hours 

above the current baseline for all NMS 

Stock ATSs to complete Part IV, Item 11 

of adopted Form ATS–N.1224

Part III, Items 24 and 25 of adopted 

Form ATS–N correspond with of Part 

IV, Item 14 and 15 of proposed Form 

ATS–N. Current Form ATS does not 

require an ATS to disclose the 

information that would be required 

under Part III, Items 24 and 25 of Form 

ATS–N. However, based on the 

experience of the Commission and its 

staff, we continue to believe that no 

ATSs currently executed 5% or more of 

the average daily volume in an NMS 

Stock as reported by an effective 

transaction reporting plan for four of the 

preceding six calendar months, and we 

believe that most—if not all—ATSs that 

currently trade NMS stocks already have 

procedures in place to prevent that 

threshold from being crossed on the 

ATS’s system. Historically, ATSs have 

crossed these thresholds very rarely, 

with at most three ATSs that trade NMS 

stocks crossing either of the thresholds 

in any given year. 

If, however, an NMS Stock ATS were 

to cross these 5% thresholds, a 

disclosure burden related to amending a 

Form ATS–N to complete Part III, Items 

24 and 25 of Form ATS–N may result. 

Because Items 24 and 25 of Part III are 

tied to existing obligations that arise 

pursuant to Rule 301(b)(3) and Rule 

301(b)(5) of Regulation ATS, 

respectively, we believe that NMS Stock 

ATSs should already be generally aware 

of the procedures they would follow 

pursuant to those rules, which should 

reduce the burden associated with the 

disclosures that would be required 

under Items 24 and 25. An NMS Stock 

ATS would only have to respond to Part 

III, Items 24 or 25 of a Form ATS–N if 

the NMS Stock ATS previously operated 

as an ATS, triggered the applicable 5% 

thresholds, and was subject to Rules 

301(b)(3) and 301(b)(5). Further, NMS 

Stock ATSs would be less likely to have 

to complete Item 24 as compared to Item 

25 because Item 24 requires as an 

additional precondition that the NMS 

Stock ATS displays orders in an NMS 

stock to more than one person in the 

system (other than employees of the 

NMS Stock ATS). For new NMS Stock 

ATSs (i.e., NMS Stock ATSs that did not 

previously operate as an ATS), the NMS 

Stock ATS would not have been in 

operation for at least four months to 

trigger the applicable thresholds, 

meaning that such NMS Stock ATSs 

would only be required to complete 

Item 24 or 25 (or both) in a Form ATS– 

N Amendment. In the Proposal, we 

estimated that completion of Part IV, 

Item 14 or 15 in a Form ATS–N 

amendment (or in a Form ATS–N in the 

case of an NMS Stock ATS that 

previously operated as an ATS), would 

be 5 hours per item. We believe that the 

requirements in Part III, Items 24 and 25 

remain substantially unchanged, and 

that the burden should remain the same. 

Therefore, we continue to believe that 

completion of Part III, Item 24 or 25 

would be 5 hours per item. 

Triggering the 5% threshold, a 

precondition necessary to require 

completion of Part III, Items 24 and 25 

of Form ATS–N, currently occurs, and 

we estimate would continue to occur, 

very infrequently. Based on the review 

of Form ATS and Form ATS–R 

disclosures by the Commission and its 

staff, we estimate that 1 NMS Stock ATS 

would have to complete Item 24, and 2 

NMS Stock ATSs would have to 

complete Item 25 in any given year. 

Accordingly, we estimate that the 

disclosures that would be required 

under Part III, Items 24 and 25 of 

adopted Form ATS–N would result in 

an aggregate initial burden of 15 hours 

above the current baseline.1225

Part III, Item 26 of adopted Form 

ATS–N corresponds with of Part IV, 

Item 16 of proposed Form ATS–N. An 

NMS Stock ATS will not be required to 

develop or publish any new statistics for 

purposes of making the required 

disclosures under Item 26. It is only be 

required to make the disclosures for 

statistics it already otherwise publishes 

or provides in the course of its 

operations. Thus, NMS Stock ATSs that 

do not publish or otherwise provide 

aggregate platform-wide market quality 

statistics, other than those currently 

required under Rule 605 of Regulation 

NMS, would not incur any additional 

burden due to the adopted disclosure 

request under Item 26. For NMS Stock 

ATSs that do publish or provide such 

statistics, Item 26 imposes an additional 

burden above the baseline because 

current Form ATS does not require the 

disclosure of market quality statistics. In 

the Proposal, we estimated that 

preparing Part IV, Item 16 of proposed 

Form ATS–N would add 7 hours to the 

current baseline for an initial operation 

report on current Form ATS.1226 Part III, 

Item 26 of adopted Form ATS–N is 

substantially the same as Part IV, Item 


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1227 (Attorney at 1 hour + Compliance Manager at 

1 hour + Senior Systems Analyst at 5 hours) × 41 

NMS Stock ATSs = 287 burden hours. Unlike the 

proposed requirement under Part IV, Item 16, the 

adopted requirement will allow the NMS Stock 

ATS to make certifications in lieu of filing Exhibits 

4 and 5, which we believe will significantly reduce 

the burden imposed by this request for information. 

1228 (Current Baseline at 20 hours) + (Part I at 0.5 

hour) + (Part II at an average of 29 hours) + (Part 

III at an average of 77.5 hours) + (Access to EDGAR 

at 0.15 hours, see infra Section IX.D.2.b.iv) = 127.4 

burden hours. The aggregate totals by professional, 

including the baseline, are estimated to be 

approximately 54.1 hours for an Attorney, .5 hours 

for a Chief Compliance Manager, 33.9 hours for a 

Compliance Manager, 30.25 hours for a Senior 

Systems Analyst, 1 hour for a Senior Marketing 

Manager, and 7.65 hours for a Compliance Clerk. 

This estimated burden for a Form ATS–N includes 

the hour burden associated with completing Part III, 

Items 24 and 25 of proposed Form ATS–N. We 

believe that the majority of NMS Stock ATSs would 

not be required to complete those items of the 

proposed form. 

1229See supra note 1132 and accompanying text. 

During the fiscal year of 2017, we received 85 

amendments from ATSs that trade NMS stocks, of 

which there were approximately 38 at any given 

time during 2017. Some ATSs that trade NMS 

stocks filed as many as 7 amendments while others 

did not file any amendments in 2017. 

1230See Proposal, supra note 2, at 81105. 

1231See supra note 1133 and accompanying text. 

1232Attorney at 1 hour + Compliance Manager at 

2 hours = 3 burden hours above the baseline. 

1233See 17 CFR 242.301(b)(2). See also supra 

Section IV.B.1. 

1234See supra note 498 and accompanying text. 

1235See Fidelity Letter at 10. 

1236See supra note 498 and accompanying text. 

1237See supra Section V.C. 

1238See supra Section V.B.2. 

16 of proposed Form ATS–N. Therefore, 

as adopted, we still estimate that 

preparing Part III, Item 26 will add 7 

hours to the current baseline for an 

initial operation report on current Form 

ATS. This will result in an aggregate 

initial burden of 287 hours above the 

current baseline for all NMS Stock ATSs 

to complete Part III, Item 26 of adopted 

Form ATS–N.1227

(ii) Estimated Burden Above the Current 

Baseline for an Initial Form ATS–N, 

Form ATS–N Amendment, and Notice 

of Cessation on Form ATS–N 

(a) Initial Form ATS–N 

Based on the above analysis, we 

estimate that an initial Form ATS–N 

will, on average, require approximately 

107.4 burden hours above the baseline 

for an initial operation report on current 

Form ATS. This results in an estimated 

127.4 hours in total, including the 

current baseline.1228 ATSs that trade 

NMS stocks vary in terms of their 

structure, the manner in which they 

operate, and the depth and extent of 

their disclosures on Form ATS. 

Consequently, we believe that the 

estimated hour burden regarding Form 

ATS–N will likely vary among NMS 

Stock ATSs, depending on such factors 

as the extent of their current disclosures 

on Form ATS, the complexity and 

structure of their system, and the extent 

of their other broker-dealer or affiliate 

activities. 

(b) Form ATS–N Amendments 

As previously noted, we estimate that 

ATSs that trade NMS stocks submit 2 

amendments on Form ATS, on average, 

each year.1229 In the Proposal we 

estimated that the 46 respondents 

would file 3 Form ATS–N amendments 

each year, for an estimated total of 138 

Form ATS–N amendments.1230

We currently estimate that the hourly 

burden related to an amendment to 

Form ATS is 6 hours.1231 In the 

Proposal, we estimated that the average 

hourly burden above this current 

baseline of 6 hours for each Form ATS– 

N amendment would be 3 hours—for a 

total of 9 hours—to accommodate the 

more voluminous and detailed 

disclosures required by Form ATS–N as 

compared to Form ATS.1232

Rule 304(a)(2) of Regulation ATS will 

contain the same three general 

categories of required amendments for 

Form ATS–N as Rule 301(b)(2) of 

Regulation ATS currently requires for 

current Form ATS; 1233 in addition, 

Form ATS–N requires two additional 

types of amendments—order display 

and fair access amendments. However, 

due to the greater detail and number of 

disclosures required by Form ATS–N, 

we believe that respondents will likely 

file more amendments to Form ATS–N 

than NMS Stock ATSs currently do for 

Form ATS. For example, adopted Form 

ATS–N requests information about the 

ATS-related activities of the brokerdealer operator and its affiliates in Part 

III of Form ATS–N, and these requests 

are not contained in current Form ATS. 

To the extent information provided in 

response to these requests changes, an 

NMS Stock ATS must file a Form ATS– 

N amendment. We are mitigating some 

of the additional burden by requiring 

that NMS Stock ATSs file correcting 

amendments only to correct ‘‘material’’ 

information that was inaccurate or 

incomplete when filed.1234 Current 

Form ATS requires ATSs to promptly 

file amendments upon discovery that 

any information was inaccurate when 

filed. As adopted, filers instead would 

correct any immaterial information 

when they file updating amendments, 

which could potentially reduce the 

frequency with which NMS Stock ATSs 

would need to file amendments. 

With respect to Form ATS–N 

amendments, one commenter expresses 

concern that due to the breadth of Form 

ATS–N disclosures, the estimated 

amount of time and resources required 

to keep Form ATS–N ‘‘evergreen’’ is 

‘‘daunting,’’ and asserts that the 

Commission did not fully consider in 

the Proposal the amount of time and 

resources that would be required to 

keep Form ATS–N current.1235 We fully 

considered the burden for each question 

on the Form ATS–N by indicating the 

estimated burden hour for each item. 

After consideration of comments, we 

made changes to adopted Form ATS–N, 

which we believe will alleviate some of 

the potential burdens of Form ATS–N, 

including, among other things, requiring 

correcting amendments only for 

‘‘material’’ information,1236 narrowing 

the scope of the required disclosures 

related to affiliates that can enter or 

direct the entry of orders and trading 

interest into the ATS,1237 and 

eliminating the proposed requirement to 

attach a copy of any materials currently 

provided to subscribers or other persons 

related to the operations of the NMS 

Stock ATS or the disclosures on Form 

ATS–N.1238 However, as with 

amendments to Form ATS, the burden 

on NMS Stock ATSs associated with 

updating Form ATS–N to reflect current 

ATS functionality will vary depending 

on the frequency and scope of changes 

made by the NMS Stock ATSs. Making 

complete and comprehensible 

disclosures of material changes to the 

NMS Stock ATS’s operations, such as 

the introduction of a new order type and 

its attributes or changes to segmentation 

procedures and parameters, would 

likely require more time and resources 

from an NMS Stock ATS than providing 

complete and comprehensible 

disclosures of a simple change to the 

NMS Stock ATS’s physical or website 

address. We believe that the frequency 

with which an NMS Stock ATS files 

Form ATS–N amendments in a given 

year may vary greatly, as some NMS 

Stock ATSs may make infrequent 

changes to their operations and 

functionality, but other NMS Stock 

ATSs, such as those that publish or 

otherwise provide to one or more 

subscribers or person aggregate 

platform-wide market quality statistics, 

may file several Form ATS–N 

amendments annually. 

Therefore, we continue to believe that 

the requirements for Form ATS–N 

amendments will add 3 hours above the 

current baseline of 6 hours for 

amendments to Form ATS, as set forth 

in the Proposal. We estimate that the 41 

respondents will file 3 Form ATS–N 

amendments each year, for a total of 123 


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1239 41 respondents × 3 Form ATS–N 

amendments per year = 123 Form ATS–N 

amendments per year. 

1240See Exhibit 3 to Form ATS–N. 

1241See Proposal, supra note 2, at 81105. 

1242Compliance Clerk at 0.4 hours. Most word 

processing software provides for this functionality. 

1243Attorney at 5.5 hours + Compliance Manager 

at 2 hours + Compliance Clerk at 1.9 hours = 9.4 

burden hours. 

1244 123 amendments per year × 9.4 hours = 

1,156.2 aggregate burden hours. Therefore, the 

aggregate burden hours equals 1,156.2 hours. 

1245See Proposal, supra note 2, at 81023; see also 

proposed Rule 304(a)(1)(i). 

1246See 17 CFR 242.304(a)(1)(iv)(C). 

1247See supra note 1114. 

1248See Proposal, supra note 2, at 81105. 

1249Attorney at 1.5 hours + Compliance Clerk at 

0.5 hours = 2 burden hours. See supra note 1135, 

and accompanying text. 

1250 2 burden hours × 9 NMS Stock ATSs = 18 

aggregate annual burden hours. 

1251See supra Sections IX.D.2.b.ii.A and B. 

1252See supra Section IX.D.2.a and accompanying 

text for the baseline estimates for submitting an IOR 

for Form ATS and amendments to Form ATS. 

1253See supra note 1136 and accompanying text 

for the baseline estimate for submitting a Form 

ATS–R. 

1254The hourly burden related to amendments to 

its Form ATS and Form ATS–N would remain 

unchanged: 6 estimated burden hours for 

amendments to Form ATS, and 9.4 estimated 

burden hours for Form ATS–N amendments. See 

supra notes 1231–1232, 1240–1243 and 

accompanying text. 

Form ATS–N amendments.1239 In 

addition, an NMS Stock ATS must 

provide a brief summary of the 

amendment at the top of Form ATS– 

N.1240 As proposed, an NMS Stock ATS 

would have been required to submit two 

redlines—Exhibit 3A to show changes to 

Part III of proposed Form ATS–N and 

Exhibit 4A to show changes to Part IV 

of proposed Form ATS–N. We estimated 

that the requirement would create an 

additional burden of 0.5 hours to draft 

the summary and create the 

redline(s).1241 Adopted Form ATS–N 

requires NMS Stock ATSs to submit as 

Exhibit 3 one marked document that 

indicates changes to ‘‘yes’’ or ‘‘no’’ 

answers or additions to or deletions to 

both Part I, Parts II, and III. We believe 

that requiring a single marked document 

rather than two separate documents will 

reduce the filing burden on ATSs, and 

that requiring a marked document for 

changes to Part I would impose minimal 

burden, and therefore we estimate that 

this requirement would add an 

additional burden of 0.4 hours to draft 

the summary and prepare the marked 

documents showing the amendments 

the NMS Stock ATS is making.1242 This 

would result in a total estimated hourly 

burden, including the baseline, of 9.4 

hours for a Form ATS–N 

amendment,1243 and an aggregate 

annual burden on all NMS Stock ATSs 

of 1,156.2 hours.1244

Under the Proposal, a Legacy NMS 

Stock ATS would have continued to 

operate pursuant to its existing Form 

ATS initial operation report pending 

our review of the Legacy NMS Stock 

ATS’s filed Form ATS–N and would 

have been required to continue filing 

amendments on Form ATS to provide 

notice of changes to the operations of its 

system.1245 Adopted Rule 

304(a)(1)(iv)(C) requires a Legacy NMS 

Stock ATS to amend its Form ATS–N to 

notify the Commission of operational 

changes during the review period.1246

We believe that if a Legacy NMS Stock 

ATS had been required to file 

amendments to Form ATS during the 

Commission review period, the Legacy 

NMS Stock ATS would have also 

complied with the requirements of Rule 

304 by amending its Form ATS–N to 

reflect such changes disclosed in such 

Form ATS amendments. During the 

Commission review period, the Legacy 

NMS Stock ATS would have, therefore, 

submitted amendments to both Form 

ATS and Form ATS–N. Although we are 

now requiring that a Legacy NMS Stock 

ATS amend its Form ATS–N during the 

review period rather than its Form ATS, 

this requirement does not change our 

estimates of the aggregate burden hours 

for filing amendments. Although a 

Legacy NMS Stock ATS will be required 

to amend Form ATS–N, which requires 

greater detail and a larger number of 

disclosures than Form ATS, the Legacy 

NMS Stock ATS will no longer need to 

file a Form ATS amendment during the 

review period and a Form ATS–N 

amendment to reflect changes disclosed 

in such Form ATS–N amendments. 

(c) Notice of Cessation on Form ATS–N 

From January 2014 through March 

2018, an average of 9 ATSs that trade 

NMS stocks ceased operations each 

year.1247 Although it is unclear how 

many NMS Stock ATSs might cease 

operations each year going forward, for 

purposes of providing a PRA burden 

estimate, we are estimating that this 

average would generally remain the 

same for NMS Stock ATSs using Form 

ATS–N because economic conditions, 

business reasons, and other factors may 

cause some NMS Stock ATSs to cease 

operations. Accordingly, we estimate 

that 9 respondents may file a cessation 

of operation report on Form ATS–N 

each year. In the Proposal, we estimated 

that the average compliance burden for 

each cessation of operations filing 

would be 2 hours.1248 We received no 

comments on this estimate, and 

continue to believe that the burden for 

filing a notice of cessation on Form 

ATS–N will not be significantly greater 

than that for filing a cessation of 

operations report on current Form ATS. 

Both Form ATS and Form ATS–N 

require the ATS to check the 

appropriate box indicating that the ATS 

is ceasing operations; however, Form 

ATS–N also requires that the NMS 

Stock ATS provide the date that the 

NMS Stock ATS expects to cease 

operating. Accordingly, we estimate that 

the average compliance burden for each 

respondent will be 2 hours.1249 This 

will result in an aggregate annual 

burden of 18 hours for all NMS Stock 

ATSs that choose to cease operations 

and submit a cessation of operation 

report on Form ATS–N.1250

(iii) ATSs That Trade Both NMS and 

Non-NMS Stocks 

ATSs that trade both NMS stocks and 

non-NMS stocks would incur: (1) The 

above baseline burdens related to filing 

a Form ATS–N and Form ATS–N 

amendments; 1251 (2) the additional 

burden of filing a new Form ATS to 

only disclose information related to 

non-NMS stock trading activity on the 

ATS; 1252 and (3) the burden of 

completing and filing two Forms ATS– 

R. We received no comment on the 

estimated burden set forth in the 

Proposal for ATSs to separately file a 

Form ATS for its non-NMS stock trading 

activity and Form ATS–N for its NMS 

stock trading activity.1253 We continue 

to believe that the average estimated 

burden set forth in the Proposal is a 

reasonable estimate of the additional 

burden. Accordingly, we estimate that 

the total hourly burden for an ATS to 

separately file a Form ATS for its nonNMS stock trading activity and Form 

ATS–N for its NMS stock trading 

activity will be 20 burden hours to 

amend its initial operation report on 

Form ATS for its non-NMS stock trading 

activity and 127.4 burden hours to file 

its initial Form ATS–N. The estimated 

hour burden related to the initial 

operation report submission on Form 

ATS for non-NMS stock trading activity 

may be less than the estimated 20 

burden hours, as, to the extent the NMS 

Stock ATS in question is currently 

operating, the description of its nonNMS stock trading activity should 

already be contained in its existing 

Form ATS.1254 As previously noted, 

there are currently 10 ATSs that trade, 

or have indicated that they expect to 

trade, in Exhibit B to their Form ATS, 

both NMS stocks and non-NMS stocks 

on the ATS. Consequently, we estimate 

that the aggregate initial burden on 

ATSs to file these separate forms would 

be 1,774 hours, and the aggregate annual 


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1255 (Form ATS initial operation report at 20 

hours + Form ATS–N at 127.4 hours) × 10 

respondents = 1,774 aggregate burden hours. Using 

the estimates of 2 amendments each year to Form 

ATS, see supra Section IX.D.2.a, and 3 amendments 

each year to Form ATS–N, see supra Section 

IX.D.2.b.ii.B, the ongoing aggregate burden for these 

bifurcated ATSs would be ((2 Form ATS 

amendments per year × 6 hours) + (3 Form ATS– 

N amendments per year × 9.4 hours)) × 10 

respondents = 402 aggregate ongoing burden hours 

per year relating to amendments. 

1256Attorney at 0.5 hours = 0.5 burden hours. 

1257See supra note 1136 and accompanying text 

for the baseline estimate for submitting a Form 

ATS–R. 

1258 ((Attorney at 3.5 hours + Compliance Clerk at 

1 hour) × (4 filings annually)) × 10 ATSs = 180 

aggregate burden hours. 

1259All estimated burden hours with regard to 

completing Parts I–V of proposed Form ATS–N, 

which are explained above and herein, include the 

estimated burden associated with the requirement 

that NMS Stock ATSs file Form ATS–N in a 

structured XML format on EDGAR, including 

narrative responses that are block-text tagged, or use 

the web-fillable form. 

1260A broker-dealer that has never used EDGAR 

to make electronic submissions may use its 

assigned CIK number to receive access codes that 

will allow the broker-dealer operator to submit 

Form ATS–N filings on EDGAR without needing to 

apply for a Form ID. 

1261Compliance Manager at 0.15 hours × 41 NMS 

Stock ATSs = 6.15 burden hours. 

1262Senior Systems Analyst at 2 burden hours. 

1263See Proposal, supra note 2, at 81106–07. 

1264Senior Systems Analyst at 2 hours × 41 NMS 

Stock ATSs = 82 burden hours. 

1265To comply with all of the record preservation 

requirements of Rule 303, we currently estimate 

that ATSs spend approximately 1,305 hours per 

year (87 respondents at 15 burden hours per 

respondent). See Rule 303 PRA Update, supra note 

1613, 78 FR 43943. At an average cost per burden 

hour of $111.32, the resultant total related cost of 

compliance is $145,272.60 per year (1,305 burden 

hours × $111.32/hour). See id. The cost per burden 

hour is adjusted for an inflation rate of 6.8% based 

on the Bureau of Labor Statistics data on CPI–U 

between July 2013 and March 2018. 

1266See Proposal, supra note 2, at 81107. 

1267 3 additional burden hours × 10 ATSs = 30 

aggregate burden hours. 

burden for filing amendments to both 

forms would be 402 hours.1255

We estimate that the total burden for 

completing and filing two Forms ATS– 

R would be 4.5 hours, which is 0.5 

hours 1256 above the current baseline 

burden of 4 hours for filing a Form 

ATS–R.1257 We believe that ATSs 

required to file two Forms ATS–R will 

incur an additional burden above the 

baseline because they would be required 

to divide their trading statistics between 

two forms and file each form separately. 

We do not believe that those ATSs will 

incur any additional burden to collect 

the required information because they 

currently assemble that information 

when preparing their current Form 

ATS–R filings. As previously noted, 

there are currently 10 ATSs that trade, 

or have indicated that they expect to 

trade in Exhibit B to their Form ATS, 

both NMS stocks and non-NMS stocks 

on the ATS; those ATSs would be 

required to file a pair of Forms ATS–R 

four times annually. Consequently, we 

estimate that the aggregate annual 

burden of filing two Forms ATS–R for 

those ATS that effect transactions in 

both NMS stocks and non-NMS stocks 

would be 180 hours.1258

(iv) Access to EDGAR 

The Proposal contemplated the use of 

an online filing system, the EFFS, but 

the adopted amendments to Regulation 

ATS will require NMS Stock ATSs to 

submit certain Form ATS–N filings 

through the Commission’s EDGAR 

system. Based on the widespread use 

and availability of the internet, we 

believe that filing Form ATS–N in an 

electronic format will be a less 

burdensome and more efficient filing 

process for NMS Stock ATSs and the 

Commission, as it is likely to be less 

expensive and cumbersome than 

mailing and filing paper forms to the 

Commission.1259

For a Form ATS–N filer to gain access 

to make filings on the EDGAR system, 

the filer must submit a Form ID as 

required by Regulation S–T Rule 11 (B) 

and submit the Form ID following the 

processes detailed in Volume I of the 

EDGAR Filer Manual. Once a Form ID 

has been successfully completed and 

processed, EDGAR will establish a 

Central Index Key (‘‘CIK’’) number 

which enables each authorized user to 

create EDGAR access codes, which will 

enable the NMS Stock ATS to use 

EDGAR. We estimate that the burden 

associated with receiving access to 

EDGAR by submitting a Form ID is 0.15 

burden hours per response. All 

registered broker-dealers have been 

assigned a CIK number and do not need 

to submit a Form ID to access 

EDGAR.1260 Because all ATSs, 

regardless of whether they trade NMS 

stocks, are operated by registered 

broker-dealers, we estimate that there 

will be no burden associated with 

gaining access to EDGAR for Legacy 

NMS Stock ATSs or non-NMS Stock 

ATSs that later decide to trade NMS 

stocks. Based on the number of initial 

filings and cessation of operations 

reports on current Form ATS for ATSs 

that trade NMS stocks, we estimate that, 

2 to 3 new entities will file Form ATS– 

N to become an NMS Stock ATS in each 

of the next three years. We estimate that 

among these new entities, 1 new entity 

per year will be operated by an entity 

that has not previously registered as a 

broker-dealer or that does not otherwise 

already have access to EDGAR. The total 

estimated hourly burden and aggregate 

initial burden for gaining access to 

EDGAR is therefore 0.15 hours.1261

v. Public Posting on NMS Stock ATS’s 

Website 

Rule 304(b)(3) will require each NMS 

Stock ATS to make public via posting 

on the NMS Stock ATS’s website, a 

direct URL hyperlink to the 

Commission’s website that contains the 

documents enumerated in Rule 

304(b)(2). We estimate that each NMS 

Stock ATS will incur an initial, onetime burden to program and configure 

its website to post the required direct 

URL hyperlink pursuant to Rule 

304(b)(3). We estimate that this initial, 

one-time burden would be 

approximately 2 hours, in part because 

many broker-dealer operators currently 

maintain a website for their NMS Stock 

ATSs.1262 This is unchanged from the 

estimate set forth in the Proposal.1263

We estimate that the aggregate initial, 

one-time burden will be approximately 

82 hours.1264

(v) Recordkeeping Requirements 

Because NMS Stock ATSs that solely 

trade NMS stocks will file Form ATS– 

N in lieu of Form ATS, we believe that 

the amendment to Rule 303(a)(2)(ii) will 

not result in any burden for those ATSs 

that are not already accounted for under 

the current baseline burden estimate for 

Rule 303.1265 The estimated burden 

under amended Rule 303(a)(2)(ii) for 

each ATS is the same as in the 

Proposal.1266 For the 10 ATSs that 

transact in, or have indicated in Exhibit 

B to their Forms ATS that they expect 

to trade both NMS stock and non-NMS 

stock on their respective ATSs, we 

estimate that the burden above the 

current baseline estimate for preserving 

records relating to compliance with the 

amendment to Rule 303(a)(ii) will be, 

consistent with the estimate in the 

proposing release, approximately 3 

hours annually per ATS for a total 

annual burden above the current 

baseline burden estimate of 30 hours for 

all respondents.1267 Accordingly, we are 

modifying the PRA burden estimate for 

Rule 303 to account for the increased 

burden on ATSs that trade both NMS 

stock and non-NMS stock. 

E. Collection of Information Is 

Mandatory 

All collections of information 

pursuant to the amended rules and 

Form ATS–N are mandatory for entities 

that meet the definition of NMS Stock 

ATS. 


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1268See supra Section I. See also supra Sections 

II.A and D. 

1269Rule 304 also provides a process for the 

Commission to declare amendments to Form ATS– 

N ineffective. 

1270Current Rule 301(b)(10) requires all ATSs 

establish procedures and safeguards to protect 

subscribers’ confidential trading information, but it 

does not expressly require that such procedures and 

safeguards must be maintained in writing. 

1271Exchange Act Section 3(f) requires the 

Commission, when it is engaged in rulemaking 

pursuant to the Exchange Act and is required to 

consider or determine whether an action is 

necessary or appropriate in the public interest, to 

consider, in addition to the protection of investors, 

whether the action will promote efficiency, 

competition and capital formation. See 15 U.S.C. 

78c(f). In addition, Exchange Act Section 23(a)(2) 

requires the Commission, when making rules 

pursuant to the Exchange Act, to consider among 

other matters the impact that any such rule would 

have on competition and not to adopt any rule that 

would impose a burden on competition that is not 

necessary or appropriate in furtherance of the 

purposes of the Exchange Act. See 15 U.S.C. 

78w(a)(2). 

F. Confidentiality of Responses to 

Collection of Information 

With respect to the amendments to 

Rules 301(b)(2)(viii) and 304 of 

Regulation ATS, including Form ATS– 

N, the Commission will make publicly 

available on its website all effective 

Forms ATS–N, all properly filed Form 

ATS–N amendments to effective Forms 

ATS–N, and notices of cessation on 

Form ATS–N. The Commission will not 

make publicly available on its website 

initial Forms ATS–N that the 

Commission has declared ineffective, 

but these forms will be available for 

examination and inspection by the 

Commission and its staff, state securities 

authorities, and self-regulatory 

organizations. Form ATS–N 

amendments also require each NMS 

Stock ATS that has a website to post on 

the NMS Stock ATS’s website a direct 

URL hyperlink to the Commission’s 

website that contains the documents 

enumerated in Rule 304(b)(2). The 

collection of information required by 

the amendments to Rules 301(b)(10), 

303(a)(1)(v), 301(b)(9), and 303(a)(2)(ii) 

will not be made public, but would be 

used for regulatory purposes by the 

Commission and the SRO(s) of which 

the ATS’s broker-dealer operator is a 

member. In Part II, Item 7 of Form ATS– 

N, however, NMS Stock ATSs must 

describe the written safeguards and 

written procedures to ensure 

confidential treatment of trading 

information that will be required under 

Rule 301(b)(10) as amended. To the 

extent that the Commission receives 

confidential information pursuant to 

this collection of information, such 

information will be kept confidential, 

subject to the provisions of applicable 

law. 

G. Retention Period for Recordkeeping 

Requirements 

All reports required to be made under 

Rules 301(b)(2)(viii), 301(b)(9), and 304 

of Regulation ATS, including Form 

ATS–N, will be required to be preserved 

during the life of the enterprise and any 

successor enterprise, pursuant to the 

amendment to Rule 303(a)(2) of 

Regulation ATS. In addition, ATSs will 

be required to preserve a copy of their 

written safeguards and written 

procedures to protect subscribers’ 

confidential trading information under 

Rule 301(b)(10) of Regulation ATS for 

not less than 3 years, the first 2 years in 

an easily accessible place, pursuant to 

Rule 303(a)(1)(v) of Regulation ATS. 

X. Economic Analysis 

A. Background 

We are concerned that the current 

regulatory requirements relating to 

operational transparency for NMS Stock 

ATSs may no longer fully meet the goals 

of furthering the public interest and 

protecting investors.1268 We are 

concerned that the limited and 

differential level of operational 

transparency around NMS Stock ATSs 

impedes market participants’ ability to 

adequately discern how their orders 

interact, match, and execute on NMS 

Stock ATSs, which impedes their ability 

to evaluate whether submitting order 

flow to a particular NMS Stock ATS 

aligns with their business interests and 

would help them achieve their investing 

or trading objectives. In addition, we are 

concerned that the current lack of 

transparency around the potential 

conflicts of interest that arise from the 

ATS-related activities of the brokerdealer operator and its affiliates hinders 

market participants’ abilities to protect 

their interests when doing business on 

NMS Stock ATSs. 

We are adopting amendments to 

Regulation ATS to require NMS Stock 

ATSs to publicly file Form ATS–N, 

which would require NMS Stock ATSs 

to provide detailed disclosures about 

their trading operations and the ATSrelated activities of their broker-dealer 

operators and their affiliates. In 

addition, we are adopting new Rule 304 

as part of Regulation ATS, which 

provides a process for the Commission 

to review Form ATS–N filings and 

declare an NMS Stock ATS’s initial 

Form ATS–N, after notice and 

opportunity for hearing, ineffective.1269

Finally, we are adopting amendments to 

Rule 301(b)(10) of Regulation ATS to 

require that all ATSs memorialize in 

writing their procedures and safeguards 

to protect subscribers’ confidential 

trading information.1270

The adopted amendments and Form 

ATS–N seek to make information 

regarding the operations of NMS Stock 

ATSs available to market participants, 

which will increase the operational 

transparency for NMS Stock ATSs, 

bringing it more in line with the 

operational transparency for national 

securities exchanges. The amendments 

also seek to improve the quality of 

information regarding different NMS 

Stock ATSs’ operations and the ATSrelated activities of their broker-dealer 

operators and their affiliates. As 

discussed in more detail below, we 

believe that this would help market 

participants make better-informed 

decisions about where to route their 

orders in order to achieve their trading 

or investment objectives, thereby 

improving the efficiency of capital 

allocation and enhancing execution 

quality. Additionally, we believe that 

requiring NMS Stock ATSs to 

memorialize their safeguards and 

written procedures in writing will 

improve Commission oversight by 

helping it better understand, monitor, 

and evaluate how each ATS protects 

subscribers’ confidential trading 

information from unauthorized 

disclosure and access, which in turn 

could increase investor protection. On 

the other hand, creation of responses to 

aid disclosure of Form ATS–N and the 

possibility that we may declare the 

Form ATS–N ineffective would entail 

costs to NMS Stock ATSs, which could 

result in some of them ceasing to 

operate as ATSs. If some NMS Stock 

ATSs cease operating as ATSs, it could 

impact the competitive dynamics 

between NMS Stock ATSs and national 

securities exchanges, as well as the 

competitive dynamics among NMS 

Stock ATSs and between NMS Stock 

ATSs and broker-dealers who trade 

NMS stocks but do not operate an ATS. 

We are sensitive to the economic 

consequences and effects, including the 

costs and benefits, of our rules. The 

following economic analysis identifies 

and considers the costs and benefits— 

including the effects on efficiency, 

competition, and capital formation— 

that would result from new Rule 304, 

Form ATS–N and the amendments to 

Rule 3a1–1(a) and Regulation ATS. 

These costs and benefits are discussed 

below and have informed the policy 

choices described throughout this 

release.1271


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1272See supra note 9 and accompanying text. 

1273See infra Table 1, ‘‘NMS Stock ATSs Ranked 

by Dollar Trading Volume (January 1, 2018–March 

30, 2018)’’ Total dollar trading volume on all 

exchanges and off-exchange trading in the first 

quarter of 2018 was approximately $25.4 trillion 

and approximately 503 billion shares. 

1274See supra Section II.B (discussing the 

conditions to the exemption from the definition of 

‘‘exchange’’ for an ATS). 

1275See supra Section II.C (discussing the Form 

ATS filing requirements). See also supra note 65 

and accompanying text (discussing the Form ATS– 

R filing requirements). 

1276See supra Section II.C (discussing the 

requirements of Regulation ATS); see also 17 CFR 

242.301(b). 

1277See FINRA Rules 6160 and 6170. See also 

supra note 15. 

1278FINRA computes the aggregated statistics 

from trade data reported by ATSs to the FINRA 

equity trade reporting facilities (i.e., the Alternative 

Display Facility, the Trade Reporting Facilities, and 

the OTC Reporting Facility). For trade data prior to 

February 1, 2016, FINRA publishes aggregated trade 

data reported by ATSs pursuant to former FINRA 

Rule 4552. FINRA publishes the information 

regarding NMS stocks in the S&P500 Index or the 

Russell 1000 Index and certain exchange-traded 

products on a two-week delayed basis, and the 

information on all other NMS stocks and OTC 

equity securities on a four-week delayed basis. See 

FINRA OTC Transparency Data at https://

otctransparency.finra.org/. See also supra note 15. 

1279See Proposal, supra note 2, at 81110–11. 

1280See 17 CFR 242.301(b)(2)(vii). 

1281See supra note 56. 

1282On the other hand, some ATSs not only 

provide current Form ATS on their public websites, 

they also provide more information regarding their 

ATS operations. For instance, one commenter asks 

all their subscribers to consent to having their 

names publicly disclosed on their website so that 

all their subscribers know the universe of entities 

that they could be executing against. See Luminex 

Letter at 1. 

1283The level of detail and the format in which 

information is presented on Form ATS varies 

among the NMS Stock ATSs. Several commenters 

agree with us that either there is a lack of disclosure 

about the operations of NMS Stock ATSs or that 

there is a need to standardize disclosures made by 

NMS Stock ATSs. See Fidelity Letter at 1; ICI Letter 

at 1; SIFMA Letter at 3. One commenter specifically 

states that opacity of venue matching logic 

‘‘increases costs for brokers connecting to venues, 

and they in turn pass these costs to clients.’’ See 

AI Letter at 2. 

1284Exchange Act Rule 605(a) requires every 

market center, including ATSs, to make publicly 

available for each calendar month a report 

containing standardized data on the covered orders 

in NMS stocks that it receives for execution from 

any market participant. Data on execution quality 

required under Exchange Act Rule 605(a) includes 

order sizes, execution sizes, effective spreads, price 

improvement, and quarterly volume of shares 

traded. See Rule 605(a)(8) for the definition of a 

covered order. 

B. Baseline 

The numerous parties that would be 

affected by new Rule 304, Form ATS– 

N, and the amendments include: 

Existing NMS Stock ATSs; potential 

new NMS Stock ATSs; current and 

potential subscribers of NMS Stock 

ATSs; broker-dealers that are affiliated 

with NMS Stock ATSs and their 

customers; non-ATS affiliated brokerdealers and their customers; brokerdealers that do not operate NMS Stock 

ATSs but send order flow to NMS Stock 

ATSs; institutional investors that 

periodically transact large trades on 

NMS Stock ATSs; other persons that 

seek to transact in NMS stocks on ATSs; 

and national securities exchanges that 

compete for order flow with NMS Stock 

ATSs and other OTC trading systems. 

We recognize that the economic 

effects of Rule 304, Form ATS–N, and 

the amendments, including costs and 

benefits and effects on efficiency, 

competition and capital formation, 

should be compared to a baseline that 

accounts for the current market and 

regulatory framework for trading NMS 

stocks. The baseline includes: Statistics 

on the number of NMS Stock ATSs; 

current reporting requirements for NMS 

Stock ATSs; the lack of public 

disclosure of NMS Stock ATSs’ 

operations, as well as disparate levels of 

information available to market 

participants about NMS Stock ATSs’ 

operations and the ATS-related 

activities of their broker-dealer 

operators and their affiliates; and the 

competitive environment between 

national securities exchanges and NMS 

Stock ATSs, among NMS Stock ATSs, 

and between broker-dealers that operate 

NMS Stock ATSs and broker-dealers 

that do not operate NMS Stock ATSs. 

1. Current NMS Stock ATSs 

As of March 31, 2018 there are 41 

ATSs that have noticed on their Form 

ATS that they expect to trade NMS 

stocks.1272 During the first quarter in 

2018, 33 ATSs, all of which operated as 

dark pools, traded NMS stocks and 

accounted for approximately 57 billion 

shares traded in NMS stocks 

(approximately $2.9 trillion in dollar 

volume), representing approximately 

11.4% of total share trading volume 

(11.5% of total dollar trading volume) 

on all registered national securities 

exchanges, ATSs, and non-ATS OTC 

trading venues in the first quarter of 

2018.1273 Based on their market share, 

NMS Stock ATSs represent a significant 

source of liquidity in NMS stocks. 

2. Current Reporting Requirements for 

NMS Stock ATSs 

Even though ATSs directly compete 

for order flow in NMS stocks with 

national securities exchanges, ATSs are 

exempt from the definition of 

‘‘exchange’’ and therefore are not 

required to register as national securities 

exchanges with the Commission.1274 A 

system that meets the criteria of Rule 

3b–16(a) may operate as an ATS on the 

condition that the ATS complies with 

Regulation ATS, which requires, among 

other things, that the ATS make filings 

with the Commission on Form ATS and 

Form ATS–R,1275 which are ‘‘deemed 

confidential when filed,’’ as well as 

adhere to other reporting requirements 

under Regulation ATS.1276 Furthermore, 

ATSs must register as broker-dealers 

and become members of an SRO. 

Accordingly, the ATS must comply with 

rules applicable to a broker-dealer and 

the SRO’s rules applicable to brokerdealers. In addition, FINRA Rules 6160 

and 6170 require each NMS Stock ATS 

to use a single, unique MPID for trade 

reporting purposes.1277 FINRA uses the 

trade data reported by ATSs to publish 

aggregated weekly trading volume and 

trade count information on its website 

for each ATS on a security-by-security 

basis.1278

3. Lack of Standardized Public 

Disclosure 

As described in detail in the 

Proposal,1279 the level of information 

about the operations of NMS Stock 

ATSs and the ATS-related activities of 

the NMS Stock ATSs’ broker-dealer 

operators and their affiliates vary across 

NMS Stock ATSs and across 

subscribers. Although Regulation ATS 

states that information on Form ATS is 

‘‘deemed confidential when filed,’’ 1280

some NMS Stock ATSs voluntarily 

make their filings publicly available.1281

NMS Stock ATSs that either voluntarily 

make their Form ATS publicly 

available, or publish summary 

information of their operations, provide 

market participants more information 

about their operations than do NMS 

Stock ATSs that do not make their 

Forms ATS or information about their 

operations publicly available.1282

However, market participants cannot 

always use these voluntary disclosures 

to systematically compare NMS Stock 

ATSs, because the disclosures are not 

standardized.1283 Additionally, 

subscribers might have access to more 

information about the NMS Stock ATSs 

to which they subscribe than they might 

about others, and also might have more 

information about their NMS Stock 

ATSs than might non-subscribers. For 

example, subscribers might have access 

to the NMS Stock ATS’s subscriber 

manual, other subscriber quotes, and, 

potentially, certain market quality 

statistics an NMS Stock ATS may 

publish or otherwise disclose to 

subscribers in addition to what is 

currently publicly disclosed under 

Exchange Act Rule 605.1284

Subscribers to an NMS Stock ATS 

might have varying access to the 

different services of the NMS Stock 


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1285See Proposal, supra note 2, at 81111 

(discussing the differential access of subscribers to 

NMS Stock ATSs). 

1286 17 CFR 242.301(b)(10). 

1287 17 CFR 242.301(b)(10). 

1288See Proposal, supra note 2, at 81087; see also 

supra Section III.B.6 (discussing amendments to 

Exchange Act Rule 303). 

1289See Proposal, supra note 2, at 81111. 

1290See HMA Letter at 23. 

1291See Proposal, supra note 2, 80 FR at 81009. 

1292See id. 1293See Consumer Federation of America Letter 

at 4; ICI Letter at 3. 1294See Proposal, supra note 2, 80 FR at 81009; 

see also ICI Letter at 3. 1295See supra Sections II.B–C (discussing the 

different mix of obligations and benefits applicable 

to ATSs and registered national securities 

exchanges). See also Proposal, supra note 2, at 

81111–12. 1296See supra Section II.B. 1297See Proposal, supra note 2, at 81111–12 1298See, e.g., Section 19(g) of the Exchange Act, 

15 U.S.C. 78s(g), and Section 6(b) of the Exchange 

Act, 15 U.S.C. 78f(b). For further discussion of the 

costs and benefits of registering as a national 

securities exchange, see Proposal, supra note 2, at 

81111–12. 

ATS.1285 Those subscribers with greater 

access might obtain more knowledge 

and information about the operations of 

NMS Stock ATSs than the subscribers 

with less access. With this additional 

information, subscribers with greater 

access can make more nuanced 

decisions about which trading venue 

suits their trading purposes, and thus 

possess an informational advantage over 

other subscribers. 

Even if having greater access to the 

services of an NMS Stock ATS yields 

additional information about the 

operations of the NMS Stock ATS to 

certain subscribers, subscribers that do 

not have full access to services of the 

NMS Stock ATS, and the resulting 

additional information, might still want 

to trade on NMS Stock ATSs in spite of 

their relative informational 

disadvantage. Had these subscribers 

possessed more detailed information 

about the operations of the NMS Stock 

ATS, they might have been able to make 

more informed—and therefore 

potentially different—decisions about 

where to route their orders for 

execution. 

4. NMS Stock ATS Treatment of 

Subscriber Confidential Trading 

Information 

Under current Rule 301(b)(10) of 

Regulation ATS,1286 all ATSs must 

establish adequate safeguards and 

procedures to protect subscribers’ 

confidential trading information, and, to 

ensure that those safeguards and 

procedures are followed, must also 

establish adequate oversight 

procedures.1287 Furthermore, all ATSs 

are required to preserve certain records 

pursuant to Rule 303(a)(1).1288 However, 

neither Rule 301(b)(10) nor Rule 

303(a)(1) of Regulation ATS currently 

requires that an ATS maintain and 

preserve their safeguards and 

procedures to protect subscribers’ 

confidential trading information, or 

their related oversight procedures in 

writing. 

As discussed in the Proposal,1289 we 

believe that ATSs—in particular, ATSs 

whose broker-dealer operators are large, 

multi-service broker-dealers—currently 

have and maintain in writing their 

safeguards and procedures to protect 

subscribers’ confidential trading 

information, as well as the oversight 

procedures to ensure such safeguards 

and procedures are followed. One 

commenter agrees that significant ATSs 

have largely reduced to writing their 

safeguards and procedures to protect 

subscribers’ confidential trading 

information.1290 Additionally, this 

commenter also states these written 

safeguards and procedures are likely to 

occur in multiple formats and in 

different forms within the same brokerdealer. We acknowledge that, to the 

extent an ATS broker-dealer operator 

currently maintains written safeguards 

and written procedures to protect 

subscribers’ confidential trading 

information, the written safeguards and 

written procedures might exist in 

multiple formats or differing forms 

within the same broker-dealer operator. 

Nevertheless, under the current 

regulatory environment for ATSs, absent 

specific questions in an examination by 

the Commission or its staff, we are not 

able to determine whether all ATSs 

currently have written safeguards and 

written procedures to protect 

subscribers’ confidential trading 

information or, if an ATS does possess 

written safeguards and written 

procedures, to what extent they exist in 

multiple formats or differing forms. 

5. Competition 

The current market for trading NMS 

stocks is served by national securities 

exchanges, ATSs, and liquidity 

providers (including broker-dealers who 

internalize), who compete to supply 

investors with execution services at 

efficient prices. These trading venues, 

which compete to match orders, provide 

a framework for price negotiation and 

disseminate trading information. The 

sections below discuss the current state 

of competition between NMS Stock 

ATSs and national securities exchanges; 

competition among NMS Stock ATSs; 

and competition between broker-dealers 

that operate NMS Stock ATSs and 

broker-dealers that do not operate NMS 

Stock ATSs. 

a. Competition Between NMS Stock 

ATSs and Registered National Securities 

Exchanges 

In the market for NMS stock 

execution services, NMS Stock ATSs 

not only compete with other NMS Stock 

ATSs, they also compete with national 

securities exchanges. As discussed in 

the Proposal,1291 NMS Stock ATSs have 

grown in complexity and sophistication. 

Some NMS Stock ATSs now offer 

features similar to those offered by 

national securities exchanges, 

including, among other things, 

anonymous order submission, limit 

order book matching systems, a wide 

range of order types, and high-speed 

connectivity options. However, unlike 

national securities exchanges, most 

NMS Stock ATSs have adopted a dark 

trading model, and do not display any 

quotations in the consolidated quotation 

data.1292 Two commenters state that 

NMS Stock ATSs also compete with 

national securities exchanges for order 

flow by offering features that are not 

readily available on national securities 

exchanges.1293 For example, while most 

national securities exchanges match 

trades via a price/time priority limit 

order book, some NMS Stock ATSs may 

match trades via auctions or block 

crossing mechanisms.1294

As discussed above and explained in 

more detail in the Proposal,1295 NMS 

Stock ATSs and national securities 

exchanges are subject to different 

regulatory regimes, including different 

obligations to disclose information 

about their trading operations and 

activities. This has resulted in 

differences in operational transparency 

between national securities exchanges 

and NMS Stock ATSs, which limits the 

ability of market participants to 

compare the operations and execution 

quality of NMS Stock ATSs and national 

securities exchanges. 

In addition to the burdens discussed 

above,1296 and as discussed in more 

detail in the Proposal,1297 national 

securities exchanges and other SROs 

also have regulatory obligations, such as 

enforcing their rules and the federal 

securities laws with respect to their 

members, which do not apply to 

ATSs.1298 However, national securities 

exchanges also enjoy certain benefits 

that are not afforded to NMS Stock 

ATSs, such as establishing norms 

regarding conduct, trading, and fee 

structures. ATSs, on the other hand, are 

regulated as broker-dealers, and must 

comply with the rules of FINRA. 

Trading venues that elect to register as 

national securities exchanges can gain 


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1299See Regulation ATS Adopting Release, supra 

note 3, at 70880, 70902–70903 (Section discussing 

generally some of the obligations and benefits of 

registering as a national securities exchange). 

1300See Proposal, supra note 2, at 81112. For a 

list of current national securities exchanges, see 

https://www.sec.gov/rules/sro.shtml. 

Although there are 12 national securities 

exchanges that trade NMS stocks, they are currently 

controlled by 5 exchange groups, namely, CBOE 

Global Markets, Inc. (which controls BZX, BYX, 

EDGA, and EDGX), CHX Holdings, Inc. (which 

controls CHX), Intercontinental Exchange, Inc. 

(which controls NYSE American, NYSE, and NYSE 

Arca), IEX Group Inc. (which controls IEX), and 

NASDAQ, Inc. (which controls Nasdaq, BX, and 

PHLX). 

1301For further discussion see Proposal, supra 

note 2, at 81112. 

1302See Regulation of Non-Public Trading Interest 

at 61209 n.9, and accompanying text (proposing 

rules and amendment to joint industry plans 

describing the term dark pool). 

1303See supra notes 11–12 and accompanying 

text. 

1304See supra notes 13–14 and accompanying 

text. 

1305See supra Section X.B.1. 

1306Several commenters also stated that ever 

since the inception of Regulation ATS, the market 

for trading NMS stocks has become more 

fragmented, and the number of NMS Stock ATSs 

and the trading volume executed on these venues 

has increased, but they did not provide quantitative 

estimates of the number of ATSs or the fraction of 

trading volume executed on different venues. See 

CFA Institute Letter at 2; Consumer Federation of 

America Letter at 4; Fidelity Letter at 3; LeveL ATS 

Letter at 2; Schneiderman Letter at 1, SIFMA Letter 

at 2. 

1307See CBOE Letter at 1; CFA Institute Letter at 

2; Consumer Federation of America Letter at 1–2, 

4; ICI Letter at 3. 

1308See Anonymous at 1. 

1309See id. 

1310See Proposal, supra note 2, at 81112. 

1311See supra note 15. 

added prestige by establishing listing 

standards for their securities. 

Additionally, national securities 

exchanges can be direct participants in 

NMS plans, which provide additional 

sources of revenue and input into the 

operation of the national market system 

that is not available to NMS Stock 

ATSs.1299

As discussed in more detail in the 

Proposal, since the adoption of 

Regulation NMS in 2005, the market for 

NMS stock execution services has 

become more fragmented and the 

number of national securities exchanges 

and NMS Stock ATSs has increased.1300

Over the past decade, with the increase 

in fragmentation in the market for 

execution services, there has been a 

shift in the market share of trading 

volume in NMS stocks across trading 

venues.1301 The number of active dark 

pools trading NMS stocks has increased 

from approximately 10 in 2002,1302 to 

33 today.1303 The market share of total 

NMS stock share volume that is 

attributable to dark pools has increased 

from 7.9% in 2009 1304 to 11.4% during 

the first quarter of 2018.1305 Thus, 

greater fragmentation in the market for 

NMS stock execution services over the 

past decade has resulted in trading 

volume being executed on different 

venues, some of which include NMS 

Stock ATSs, particularly NMS Stock 

ATSs that operate as dark pools.1306

Several commenters state that since 

the inception of Regulation ATS, ATSs 

have operated at a competitive 

advantage relative to national securities 

exchanges, because they operate with 

lower transparency and greater opacity 

relative to national securities 

exchanges.1307 Another commenter 

states that ‘‘ATSs are competitors to 

exchanges, but do not have the same 

oversight, transparency requirements or 

responsibilities.’’ 1308 This commenter 

also states that ‘‘It is clearly unfair 

competition for ATSs to be subject to far 

less requirements than exchanges while 

executing a large percentage of the 

market volume.’’ 1309 We agree that 

NMS Stock ATSs face lower regulatory 

burdens than national securities 

exchanges, including differences in the 

obligations to publicly disclose 

information about their trading 

operations and activities. This has 

resulted in differences between the 

operational transparency of NMS Stock 

ATSs and national securities exchanges 

and made it more difficult for market 

participants to evaluate how their orders 

interact, match, and execute on the 

NMS Stocks ATSs than on national 

security exchanges. As discussed in the 

Proposal,1310 the growth in the number 

of NMS Stock ATSs may be driven by 

these less stringent regulatory 

obligations. However, national 

securities exchanges also enjoy certain 

advantages which are not available to 

NMS Stock ATSs, such as the ability to 

list securities and share in market data 

revenue generated by the CTA. 

b. Competition Among NMS Stock ATSs 

NMS Stock ATSs also compete with 

each other in a niche in the market for 

NMS stock execution services. The rise 

in the number of NMS Stock ATSs has 

not only affected competition between 

national securities exchanges and ATSs 

for order flow of NMS stocks, it has also 

impacted competition among NMS 

Stock ATSs. 

Table 1, which is based on aggregated 

trade data reported by ATSs to the 

FINRA equity trade reporting facilities 

for 13 weeks of trading from January 1, 

2018, to March 30, 2018, depicts the 

market share of total dollar volume for 

NMS stocks, and the total share volume 

for NMS stocks for individual ATSs.1311

Even though there are many NMS Stock 

ATSs, much of the NMS stock dollar 

volume on ATSs is transacted by only 

a handful of venues. Table 1 shows that 

the top 7 NMS Stock ATSs ranked by 

dollar volume accounted for 63.4% of 

total dollar volume transacted on ATSs 

and 59.2% of total share volume 

transacted on ATSs from January 1, 

2018, to March 30, 2018. 


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1312Total Consolidated Volume includes all 

trading in NMS stocks on all national securities 

exchanges, ATSs, and non-ATS OTC trading. 

1313See supra note 2 for definition of ‘‘dark 

pool’’. 

1314Table 1 Data Sources: (1) FINRA Alternative 

Trading System (ATS) Transparency Data is 

aggregated trade data reported by ATSs to the 

FINRA equity trade reporting facilities and made 

available on FINRA’s website as part of the OTC 

Transparency Data. The OTC Transparency Data is 

provided via http://www.finra.org/industry/OTCTransparency and is copyrighted by FINRA 2018. 

(2) NYSE Trade and Quote Database (TAQ). 

Table 1: NMS Stock ATSs Ranked by 

Dollar Trading Volume 

(January 1, 2018—March 30, 2018) 1314

This table shows the 33 ATSs that 

effected transactions in NMS stocks 

from January 1, 2018—March 30, 2018, 

ranked in descending order by dollar 

volume transacted. ATS data is reported 

weekly, and these dates approximately 

correspond to the first quarter of 2018. 

Dollar volume transacted on an ATS is 

calculated by multiplying the share 

volume for a given NMS stock on the 

ATS in a given week by the average 

trade price for that week. Dollar volume 

for each NMS stock is then aggregated 

across all NMS stocks that traded on the 

given ATS in that week. Also reported 

in this table is the number of trades, 

share volume, each NMS Stock ATS’s 

market share of all NMS Stock ATS 

dollar volume and NMS Stock ATS 

share volume in that quarter. 

Table 2, which is based on aggregated 

trade data reported by ATSs to the 

FINRA equity trade reporting facilities 


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1315For purposes of this analysis we considered 

block orders as orders of more than 10,000 shares, 

which is the traditional definition for block orders. 

See Proposal, supra note 2, at 81008. See also Rule 

600(b)(9) of Regulation NMS (defining block size 

with respect to an order), 17 CFR 242.600(b)(9). 

1316See Proposal, supra note 2, at 81008 n.126, 

127. 

1317Tuttle (2013) also found that trade sizes on 

‘‘lit’’ national securities exchanges are similar to 

those taking place on ‘‘dark ATSs.’’ However, Tuttle 

(2013) did not include odd lot trades when 

calculating trade sizes for ‘‘lit’’ national securities 

exchanges or ‘‘dark ATSs.’’ See Laura Tuttle, 

Alternative Trading Systems: Description of ATS 

Trading in National Market System Stocks (October 

2013), http://www.sec.gov/marketstructure/ 

research/alternative-trading-systems-march2014.pdf (‘‘Tuttle: ATS Trading in NMS Stocks’’). 

Unlike ‘‘lit’’ national securities exchanges, dark 

ATSs do not publicly disseminate top of the limitorder book information. See id. 

Table 2 in the Proposal reports that between 

March 30, 2015, and June 26, 2015, the average 

trade size on NMS Stock ATSs was 214 shares and 

the average trade size on national securities 

exchanges was 181 shares. Calculations for both of 

the average trade size metrics reported in the 

Proposal include odd lots trades. However, 

calculations for the average trade size on national 

securities exchanges reported in the Proposal also 

include TAQ trade volume reported from bulk 

trades, opening and closing trades, and intraday 

crosses. See Proposal, supra note 2, at 81114. 

1318One commenter conducted similar analysis, 

computing average trade sizes in ‘‘top volume 

ATSs’’ for three time periods: May 12, 2014–May 

16, 2014; March 30–June 26, 2015; and January 11, 

2016–January 15, 2016 and reached similar 

conclusions. See Anonymous Letter at 4. 

for 13 weeks of trading from January 1, 

2018, to March 30, 2018, shows the 

average trade size, which is share 

volume divided by the number of trades 

on each of the NMS Stock ATSs. The 

table reveals marked differences in the 

average trade size of transactions 

executed on the various NMS Stock 

ATSs. Eight NMS Stock ATSs had 

average trade sizes in excess of 10,000 

shares. This suggests that some NMS 

Stock ATSs receive large block orders 

and execute large trades.1315 One of the 

advantages for market participants of 

trading on block crossing networks is 

the ability to execute large block orders 

while minimizing the movement of 

prices against their trading interest.1316

While these NMS Stock ATSs on 

average execute large size trades, the 

combined market share of these NMS 

Stock ATSs is only 12.6% when 

measured in dollar volume, and 6.0% 

when measured in share volume. The 

vast majority of NMS Stock ATSs have 

average trade sizes between 100 and 460 

shares. The average trade size across all 

33 NMS Stock ATSs is 204 shares, while 

the two NMS Stock ATSs with the 

highest market shares (measured either 

in dollar volume or share volume) have 

average trade sizes of 155 and 163 

shares, respectively. These trade sizes 

are not significantly different from the 

average trade size of 146 shares on 

national securities exchanges,1317 which 

suggests that the niche market NMS 

Stock ATSs serve is not very different 

from the market as a whole.1318


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1319National securities exchanges that transacted 

in NMS stocks during the period January 1, 2018 

to March 30, 2018 included NYSE MKT LLC, Cboe 

BZX Exchange, Inc.; Cboe BYX Exchange, Inc.; Cboe 

EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 

Chicago Stock Exchange, Inc.; The Investors 

Exchange LLC; NASDAQ OMX BX, Inc.; NASDAQ 

OMX PHLX, Inc.; The Nasdaq Stock Market LLC; 

New York Stock Exchange LLC; and NYSE Arca, 

Inc. NYSE National, Inc. (f.k.a. National Stock 

Exchange, Inc.) was not trading, but on May 17, 

2018 the Commission approved a proposed rule 

change in connection with its relaunch. See supra 

note 9. 

1320Table 2 Sources: (1) FINRA Alternative 

Trading System (ATS) Transparency Data is 

aggregated trade data reported by ATSs to the 

FINRA equity trade reporting facilities and made 

available on FINRA’s website as part of the OTC 

Transparency Data. The OTC Transparency data is 

provided via http://www.finra.org/industry/OTCTransparency and is copyrighted by FINRA 2018. 

(2) NYSE Trade and Quote Database (TAQ). 

Table 2: NMS Stock ATSs Ranked by 

Average Trade Size 

(January 1, 2018–March 30, 2018) 1320

This table shows 33 ATSs that 

effected transactions in NMS stocks 

from January 1, 2018–March 30, 2018, 

ranked in descending order by average 

trade size. ATS data is reported weekly, 

and these dates correspond 

approximately to the fourth quarter of 

2017. Also reported in this table is the 

raw number of trades, share volume, 

dollar volume, and each NMS Stock 

ATS’s market share of all NMS Stock 

ATS dollar volume and NMS Stock ATS 

share volume. Dollar volume transacted 

on an ATS is calculated by multiplying 

the share volume for a given NMS stock 

on the ATS in a given week by the 

average trade price for that week. Dollar 

volume for each NMS stock is then 


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1321See Anonymous Letter at 3. 

1322Proposal, supra note 2, at 81115. 

1323Two commenters agree with us. These 

commenters mention that some ATSs offer 

subscribers the ability to customize trading 

parameters, including price instructions and 

counterparty selection, while others offer 

subscribers different methods of accessing the ATS, 

such as FIX connections or trading through the 

broker-dealer’s smart order router. See Consumer 

Federation of America Letter at 4; ICI Letter at 2– 

3. 

1324These are discussed in more detail in the 

Proposal. See Proposal, supra note 2, at 81115. 

1325See id. 

1326See id. 

1327A number of commenters state that brokerdealer operators and their affiliates may have access 

to certain features of an ATS that are not available 

to other subscribers. See Better Markets Letter at 4– 

6; Consumer Federation of America Letter at 7–10; 

HMA Letter at 13–15; Liquidnet Letter at 11. One 

of these commenters states that broker-dealer 

operators and their affiliates may receive 

preferential treatment or access to the ATS, such as 

faster or more direct access to the ATS, priority 

status to execute their orders over those of other 

subscribers, or the ability to further customize with 

whom their order flow interacts. See Consumer 

Federation of America Letter at 8. 

1328For further explanation, see Proposal, supra 

note 2, at 81115. 

1329See supra Section X.B.5. 

1330See Proposal, supra note 2, at 81115–16. 

1331Other academic literature has suggested that 

the increase in fragmentation has had a 

counteracting effect and has increased bid-ask 

spreads. This literature, however, has focused on 

small stocks, and fragmentation across exchanges, 

rather than fragmentation across exchanges and 

between exchanges and NMS Stock ATSs. See 

Haslag, Peter and Matthew Ringgenberg, 2016, ‘‘The 

Causal Impact of Market Fragmentation on Market 

Liquidity,’’ working paper, available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=2591715; Baldauf, Markus and Joshua Mollner, 

2017, ‘‘Trading in Fragmented Markets,’’ working 

paper, available at https://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=2782692. 

1332See Proposal, supra note 2, at 81115 

(discussing the impact of NMS Stock ATSs on 

institutional investor trading costs). 

1333One commenter agreed that NMS Stock 

ATSs, specifically dark pools, serve a ‘‘useful 

purpose to those wishing to trade large blocks of 

shares at lower cost without moving the public 

price as a result of other market participants 

identifying and trading ahead of their interest.’’ 

Barnard Letter at 1. 

1334See Fidelity Letter at 3; LeveL ATS Letter at 

2; Morgan Stanley Letter at 4; STANY Letter at 2; 

UBS Letter at 8. 

1335See Proposal, supra note 2, at 81117. 

aggregated across all NMS stocks that 

traded on the given ATS in that week. 

Average trade size on national securities 

exchanges is calculated from TAQ data 

using intraday trades that took place 

between 9:30 a.m. and 4:00 p.m. Bulk 

trades and trades during the opening 

and close and intraday crosses are 

excluded from the calculation. 

One commenter mentions that 

because the difference in average trade 

size between national securities 

exchanges and NMS Stock ATSs is 

small, this is evidence that ‘‘these 

venues are no longer beneficial for 

executing block size trades between 

large traders.’’ 1321 We do not agree with 

the comment that NMS Stock ATSs are 

no longer beneficial for executing block 

size trades. As can be seen in Table 2, 

eight ATSs have average trade sizes in 

excess of 10,000 shares, indicating that 

these ATSs are attractive venues for 

crossing block orders. Based on this, we 

believe that some ATSs—particularly 

ones which have average trade sizes in 

excess of 10,000 shares—are beneficial 

for certain market participants wanting 

to trade large block sizes. 

As discussed in more detail in the 

Proposal,1322 while many NMS Stock 

ATSs operating today are similar with 

respect to the limited transparency they 

provide with respect to their trading 

model, we understand that the services 

offered vary significantly across NMS 

Stock ATSs.1323 Even though NMS 

Stock ATSs may not be privy to detailed 

information about the operations of 

other NMS Stock ATSs, they are able to 

garner information about the differential 

services offered by their competitors 

through various means,1324 enabling 

ATSs to modify their products and 

services to better compete within the 

market for NMS stock execution 

services. Thus, as explained in more 

detail in the Proposal,1325 an NMS Stock 

ATS may not be incented to fully reveal 

how orders interact, match and execute 

on its platform, because revealing such 

information adversely impacts the 

ATS’s position within the market by 

also informing its competitors. 

c. Competition Between Broker-Dealers 

That Operate NMS Stock ATSs And 

Broker-Dealers That Do Not Operate 

NMS Stock ATSs 

As explained in more detail in the 

Proposal, competition for NMS stock 

order flow also exists between the 

broker-dealers that operate NMS Stock 

ATSs and broker-dealers that do not 

operate NMS Stock ATSs but otherwise 

effect transactions in NMS stocks.1326

Some broker-dealers who operate their 

own NMS Stock ATS(s) may provide 

their affiliates with access to certain 

services that are not afforded to brokerdealers that do not have their own ATS 

platform,1327 which may result in 

trading advantages.1328

6. Effect of NMS Stock ATSs on the 

Current Market for NMS Stock 

Execution Services 

As discussed above, the current 

market for NMS stock execution 

services consists of competition for 

order flow among national securities 

exchanges, NMS Stock ATSs, and 

broker-dealers who operate or control 

non-ATS trading centers.1329 This 

section specifically discusses the impact 

that this current market structure for 

NMS stock execution services has on 

trading costs to market participants; the 

process by which the price of NMS 

stocks are determined in the market 

(‘‘price discovery’’); and market 

efficiency. 

a. Trading Costs 

As described in detail in the 

Proposal,1330 some academic research 

has suggested that the decline in trading 

costs since the adoption of Regulation 

ATS in 1998 and Regulation NMS in 

2005 could, in part, be driven by the 

rising fragmentation of trading volume 

and competition for order flow, through 

the proliferation of new trading venues 

such as NMS Stock ATSs.1331 Trading 

on NMS Stock ATSs may also benefit 

institutional investors 1332 by providing 

a useful tool whereby they may be able 

to reduce the ‘‘price impact’’ of their 

trades and obtain enhanced execution 

quality for their orders.1333 Five 

commenters also express the belief that 

the increase in trading on ATSs has 

contributed to a competitive 

marketplace that has led to improved 

costs and liquidity, and that this has 

benefitted both retail and institutional 

investors.1334

Another element that may affect 

trading costs is order internalization by 

broker-dealers. As described detail in 

the Proposal,1335 some academic 

literature has found that internalization 

of order flow increases trading costs and 

reduces market depth and price 

informativeness. In the current 

operational environment of NMS Stock 

ATSs, subscribers’ orders or other 

trading interests could be removed from 

the broker-dealer’s NMS Stock ATS and 

routed to, among other destinations, 

another trading center operated by the 

broker-dealer operator for 

internalization. Thus, the fact that some 

broker-dealers operate their own NMS 

Stock ATSs, and yet internalize some 

order flow rather than executing it on 

their own NMS Stock ATS, may have a 

deleterious effect on market quality. 

The current market for NMS stock 

execution services—which includes 

NMS Stock ATSs—provides value to 

market participants. If all NMS Stock 

ATSs were to cease operating as ATSs, 

market participants might incur costs 

associated with not being able to find an 

adequate trading venue that offers 

benefits similar to those that NMS Stock 

ATSs provide. To the extent that market 

participants value these ATS-specific 

features, the decision of certain NMS 


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1336Several commenters agree with our analysis 

that the differences have resulted in higher search 

costs for market participants. See Better Markets 

Letter at 2; CFA Institute Letter at 2; Consumer 

Federation of America Letter at 2–4. 

1337See Proposal, supra note 2, at 81116–17. 

1338See Boulatov, Alex, and Thomas George, 

2013, ‘‘Hidden and Displayed Liquidity in 

Securities Markets with Informed Liquidity 

Providers,’’ Review of Financial Studies 26, 2095– 

2137; Comerton-Forde, Carole and Talis Putnins, 

2015, ‘‘Dark Trading and Price Discovery,’’ Journal 

of Financial Economics 118, 70–92.; and Zhu, 

Haoxiang, 2014, ‘‘Do Dark Pools Harm Price 

Discovery?’’ Review of Financial Studies 27, 747– 

789. Comerton-Forde and Putnins (2015) and Zhu 

(2014) specifically examine dark pools. 

1339Uninformed market participants trade for 

non-informational reasons. In some cases, they are 

termed ‘‘noise traders,’’ since their trades are based 

on their beliefs and sentiments, and are not 

grounded on fundamental information. See 

Vishwanath, Ramanna and Chandrasekhar 

Krishnamurti, 2009, ‘‘Investment Management: A 

Modern Guide to Security Analysis and Stock 

Selection,’’ Springer Publishing. 

1340See Proposal, supra note2, at 81116 

(discussing the segmentation of trading by informed 

and uninformed market participants between 

national securities exchanges and ATSs). 

1341See Comerton-Forde and Putnins (2015) and 

Zhu (2014), supra note 1338. 

1342See Ye, Mao, 2011, ‘‘A Glimpse into the Dark: 

Price Formation, Transaction Cost and Market 

Share of the Crossing Network,’’ working paper, 

available at http://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=1521494; Degryse, Hans, 

Frank de Jong and Vincent van Kervel, 2015, ‘‘The 

Impact of Dark Trading and Visible Fragmentation 

on Market Quality,’’ Review of Finance 19, 1587– 

1622; Comerton-Forde and Putnins (2015), supra 

note1338. These studies specifically examine dark 

pools. 

1343One commenter agrees with the conclusions 

from these studies and remarked that trading on 

NMS Stock ATSs ‘‘reduces the information that 

could assist the transparent market in determining 

an accurate fair price’’ and that prices quoted on 

transparent markets may no longer be efficient or 

informative. See Barnard Letter at 1–3. 

1344See Ye (2011), supra note1342. 

1345See Comerton-Forde and Putnins (2015), 

supra note 1338. 

1346See id. 

1347A number of academic studies have found 

that increased liquidity can improve market 

efficiency by reducing the limits to arbitrage or 

increasing the incentives to produce costly 

information. See Chordia, Tarun, Richard Roll and 

Avanidhar Subrahmanyam, 2008, ‘‘Liquidity and 

market efficiency,’’ Journal of Financial Economics 

97, 249–268; Kyle, Albert, 1984, ‘‘Market structure, 

information, futures markets, and price formation,’’ 

Gary G. Storey, Andrew Schmitz, and Alexander H. 

Sarris (Editors.), International Agricultural Trade: 

Advanced Readings in Price Formation, Market 

Structure, and Price Instability, Westview Press, 

Boulder and London (1984), pp. 45–64. 

1348See Comerton-Forde and Putnins (2015), 

supra note 1338. 

1349See Barnard Letter at 1–3; Better Markets 

Letter at 2. 

1350See supra Section X.B.6.a. 

1351See Yin, Xiangkang, 2005, ‘‘A Comparison of 

Centralized and Fragmented Markets with Costly 

Search,’’ Journal of Finance, 60, 1567–1590. 

Stock ATSs to cease operating as ATSs 

could increase the trading costs of these 

market participants and impact whether 

and how they affect certain trading 

strategies. 

While the existence of NMS Stock 

ATSs has reduced the trading costs on 

average for market participants, the lack 

of transparency regarding ATS 

operations and the ATS-related 

activities of the ATS broker-dealer 

operator and its affiliates has 

contributed to higher search costs for 

market participants to find a trading 

venue that serves their investing or 

trading objectives. A by-product of these 

higher search costs is uncertainty 

pertaining to how their orders will be 

handled, particularly for subscribers to 

NMS Stock ATSs that have not made 

their Form ATS public.1336

b. Price Discovery 

While the increased fragmentation of 

trading volume associated with the 

current market for NMS stock execution 

services has been a factor in lowering 

trading costs for market participants, the 

academic literature has found that it has 

had a mixed impact on price discovery. 

As described in more detail in the 

Proposal,1337 some academic studies 

have suggested that the market 

segmentation caused by the coexistence 

of national securities exchanges and 

NMS Stock ATSs can improve price 

discovery.1338 They suggest that price 

discovery can improve either as a result 

of more aggressive competition among 

market participants in providing 

liquidity or as a result of the 

segmentation of informed and 

uninformed market participants.1339

These academic studies predict that 

because the orders of informed market 

participants are more likely to execute 

on national securities exchanges, they 

will be more likely to trade on national 

securities exchanges and uninformed 

market participants will be more likely 

to trade on NMS Stock ATSs.1340

Because informed market participants 

have better knowledge about the value 

of a security than uninformed market 

participants, this segmentation can 

improve price discovery on national 

securities exchanges.1341

Other academic studies suggest that 

the presence of NMS Stock ATSs in the 

current trading environment can harm 

price discovery.1342 These studies have 

suggested that because some NMS Stock 

ATSs are crossing networks and often 

derive their prices from national 

securities exchanges, price impact costs 

that result from trading on a national 

securities exchange harm prices on 

NMS Stock ATSs, resulting in less 

trading and harming price 

discovery.1343 When trading, informed 

market participants often balance two 

types of costs, namely price impact 

costs and execution costs. In 

comparison to NMS Stock ATSs, on 

national securities exchanges an 

informed market participant’s order 

experiences lower execution risk but 

higher price impact costs. However, 

since NMS Stock ATSs often match 

orders at prices derived from national 

securities exchanges, and if trading on 

national securities exchanges generates 

worse prices due to price impact, this 

could spill over and affect a market 

participant’s profit on trades executed 

on the NMS Stock ATS. This spillover 

could result in informed market 

participants trading less aggressively, 

which could in turn reduce price 

discovery.1344 One academic study 

finds, while low levels of trading on 

NMS Stock ATSs are not harmful, price 

discovery is harmed when levels of 

trading on NMS Stock ATSs are high 

(i.e., they estimate that this occurs when 

trading on NMS Stock ATSs in a given 

NMS stock exceeds approximately 10% 

of dollar volume).1345

c. Market Efficiency 

Currently, the coexistence of national 

securities exchanges and NMS Stock 

ATSs seems to have beneficial effects on 

market efficiency. One academic study 

suggests that while not all trades that 

execute on NMS Stock ATSs are large 

block trades, those that are have been 

beneficial to market efficiency.1346 If 

NMS Stock ATSs were not a viable 

trading venue for market participants, 

some market participants might not 

execute large orders at all because of the 

price impact costs of executing on a 

national securities exchange. Therefore, 

the ability for market participants to 

execute large trades on NMS Stock 

ATSs generates liquidity, which can 

improve market efficiency.1347 The 

same study also suggests that small 

trades that execute on NMS Stock ATSs 

are beneficial in that they also generate 

market efficiency.1348

Several commenters assert that the 

lack of transparency of NMS Stock ATSs 

has resulted in a decrease in market 

efficiency because more order flow 

executed on NMS Stock ATSs increases 

the difficulty investors face when 

identifying which venues offer them the 

best execution quality.1349 As discussed 

above, increased market fragmentation 

could increase search costs by making it 

more difficult for market participants to 

find liquidity to execute their 

orders.1350 Increased search costs could 

reduce competition between liquidity 

suppliers, which could increase trading 

costs.1351 These increased trading costs 

could reduce the incentives for market 

participants to acquire costly 

information, which could in turn result 


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1352See Kyle, Albert, 1989, ‘‘Information 

speculation with imperfect competition,’’ Review of 

Economic Studies 56, 317–356. 1353See supra Section X.B.6.a. 1354See supra Sections V.C–D. 1355See Proposal, supra note 2, at 81118. 

1356For the purposes of the PRA, we estimate the 

annual average number of NMS Stock ATSs that file 

Cessation of Operation notices on Form ATS–N. See 

supra Section IX.D.2.b.ii.C. This estimate is based 

on the historical number of cessations per year and, 

while recognizing that the amendments may result 

in cessations, does not attempt to predict the effect 

of the amendments on the number of cessations. 

1357See Proposal, supra note 2, at 81109 

(discussing ATSs that previously operated as ECNs 

and subsequently registered as national securities 

exchanges). 

1358See supra Section III.A. See also Rules 3a1– 

1(a)(2) and (3), 300, 301, and 304. 

1359See supra Section V for information disclosed 

on Form ATS–N. 

1360See supra Section IV.E (discussing the public 

posting requirements of Form ATS–N). 

1361See supra Section IV.A.3. 

1362See Proposal, supra note 2, at 81119–20. 

in a reduction in market efficiency.1352

However, as discussed above, the 

increased market fragmentation caused 

by NMS Stock ATSs could also improve 

market efficiency by allowing 

institutional investors a viable way to 

trade and reduce price impact costs.1353

The commenters did not provide any 

analysis to support their claims that the 

increase in order flow executed on NMS 

Stock ATSs has decreased market 

efficiency. As such, we continue to 

believe that the current market for NMS 

stock execution services, consisting of 

national securities exchanges, ATSs and 

other off-exchange venues, has together 

resulted in an improvement to market 

efficiency. 

C. Economic Effects and Effects on 

Efficiency, Competition, and Capital 

Formation 

We have considered the economic 

effects of new Rule 304, Form ATS–N 

and the amendments to Rule 3a1–1(a) 

and Regulation ATS. This section 

provides an overview of the economic 

effects of new Rule 304, Form ATS–N, 

and the amendments to Rule 3a1–1(a) 

and Regulation ATS, including the 

costs, benefits, and the effects on 

efficiency, competition, and capital 

formation. This section also discusses 

additional economic effects, including 

benefits and costs related to specific 

requirements of new Rule 304, Form 

ATS–N and the amendments to Rule 

3a1–1(a) and Regulation ATS. 

We believe that the amendments will 

improve Commission oversight and 

thereby improve investor protection and 

generate greater transparency about the 

operations of NMS Stock ATSs and the 

ATS-related activities of their brokerdealer operators and their affiliates.1354

As explained below, through these 

effects, the adopted amendments may 

promote greater competition for order 

flow, which could result in enhanced 

execution quality, and we believe that 

this could result in improvements to 

efficiency and capital formation. 

We have attempted, where possible, 

to quantify the benefits and costs and 

impacts on efficiency, competition, and 

capital information that may result from 

new Rule 304, Form ATS–N, and the 

amendments to Rule 3a1–1(a) and 

Regulation ATS. However, as we 

discussed in the Proposal and as 

explained more fully below,1355 it is 

difficult to quantify many of the 

economic effects of the new rule and 

amendments due to the complexity of 

the market for NMS execution services 

and our lack of certain relevant 

information. For instance, it is difficult 

to determine what fraction of order flow 

will be internalized or routed to 

national securities exchanges or to nonATS trading centers if NMS Stock ATSs 

are required to publicly disclose 

information about their operations on 

Form ATS–N. Additionally, we do not 

have certain information, such as 

information on market participant 

routing agreements or fee arrangements 

that may influence future order routing 

decisions. 

As we further noted in the Proposal, 

it is similarly difficult to determine 

whether NMS Stock ATSs will continue 

or cease operating as ATSs in light of 

the new rule and amendments,1356 as 

that decision depends on numerous 

factors and we lack information about 

many of those factors. For example, we 

do not have information on the extent 

to which existing NMS Stock ATSs or 

potentially new ATSs rely on a 

competitive advantage, such as a unique 

matching methodology or other 

operational characteristics, to attract 

order flow, or the extent to which the 

new disclosure requirements will 

impact those competitive advantages 

and thus drive decisions on operating 

status. Moreover, we lack information 

on how many NMS Stock ATSs may 

decide to register as national securities 

exchanges, as some ECNs have in 

previous years, as a result of new Rule 

304, Form ATS–N and the amendments 

to Rule 3a1–1(a) and Regulation 

ATS.1357

Commenters did not provide any 

additional information or analysis that 

would allow us to estimate the impacts 

on order flow or the continued 

operation of NMS Stock ATSs under the 

new rule and amendments. In light of 

the complexities of the market and the 

lack of currently available information, 

we are unable to quantify many of the 

economic effects of new Rule 304, Form 

ATS–N, and the amendments to Rule 

3a1–1(a) and Regulation ATS. 

Therefore, much of the discussion 

below is qualitative in nature, although 

we try to describe, where possible, the 

direction of these effects. 

1. Economic Effects of Enhanced Filing 

Requirements of Form ATS–N 

As discussed above, we are amending 

Rule 3a1–1(a) and Regulation ATS to 

require ATSs that transact in NMS 

stocks to comply with the requirements 

of Rule 304 to operate pursuant to the 

exemption from the definition of 

‘‘exchange.’’ 1358 The amendments 

would require an NMS Stock ATS to file 

reports pursuant to Rule 304, which 

includes the requirement to file Form 

ATS–N, in lieu of current Form ATS, to 

disclose information about its 

operations and the ATS-related 

activities of its broker-dealer operator 

and its affiliates.1359 We believe that 

these disclosures will help market 

participants assess whether the ATS’s 

mode of operation is consistent with 

their ability to obtain the best 

executions and also help them assess 

potential conflicts of interest that might 

adversely impact their trading on the 

NMS Stock ATS. 

Rule 304 will also provide a process 

by which the Commission will review 

initial Forms ATS–N and Form ATS–N 

amendments and declare them 

ineffective if it finds that such action is 

necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. We are also 

adopting a process by which the 

Commission could suspend, limit, or 

revoke an NMS Stock ATS’s exemption 

from the definition of an ‘‘exchange’’ 

under Rule 3a1–1(a)(2).1360 An NMS 

Stock ATS could not operate pursuant 

to the exemption from the definition of 

‘‘exchange’’ unless the NMS Stock ATS 

files Form ATS–N with the Commission 

and the Form ATS–N has become 

effective.1361

a. Benefits 

As described in detail in the 

Proposal,1362 we believe that new Rule 

304, Form ATS–N and the amendments 

to Rule 3a1–1(a) and Regulation ATS 

would result in better regulatory 

oversight of NMS Stock ATSs and 

increased investor protection by 

providing the Commission and relevant 

SROs with information about NMS 

Stock ATSs that currently may only be 

available during an examination 

process. In comparison to Form 


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1363See supra Section II.C (discussing the Form 

ATS filing requirements). 

1364See supra Section V for information disclosed 

on ATS–N. 

1365Three commenters agreed with our 

assessment that the enhanced disclosure 

requirements under Form ATS–N would result in 

improved regulatory oversight by the Commission. 

See Fidelity Letter at 1; SIFMA Letter at 3; Virtu 

Letter at 2. 

1366See supra Section IV.A.4 (describing the 

effectiveness process for initial Form ATS–N 

filings). 

1367One commenter agrees that our enhanced 

regulatory oversight can help ensure consistency of 

disclosures provided by ATSs and their brokerdealer operators. See Fidelity Letter at 1. 

1368See CFA Institute Letter at 6. 

1369See Consumer Federation of America Letter 

at 10. 

1370See Fidelity Letter at 4. 

1371See Better Markets Letter at 1, 5–6. 

1372See infra Section X.C.2.a (‘‘Economic Effects 

of Public Disclosure of Form ATS–N—Benefits’’). 

1373See Proposal, supra note 2, at 81120–21. 

1374See infra Section X.C.4.a (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Competition’’). 

ATS,1363 Form ATS–N will contain 

more detailed information about the 

operations of NMS Stock ATSs, 

including information about the ATSrelated activities of the broker-dealer 

operator and its affiliates.1364 The 

Commission and SROs could utilize this 

information to help prioritize 

examinations and possibly help identify 

potential issues. Additionally, the 

enhanced disclosure requirements 

under Form ATS–N will provide market 

participants with significantly more 

detailed information with which to 

analyze and evaluate how orders are 

handled and executed on NMS Stock 

ATSs, which could allow them to better 

assess an NMS Stock ATS as a potential 

trading venue.1365

We are also adopting a requirement 

that Form ATS–N and Form ATS–N 

amendments be filed electronically in a 

XML text-searchable format. We believe 

that requiring Form ATS–N and Form 

ATS–N amendments to be filed in a 

XML text-searchable format, coupled 

with the enhanced disclosure 

requirements, will facilitate a more 

effective and thorough review and 

analysis of NMS Stock ATSs by 

regulators, which should yield greater 

insights into the operations of NMS 

Stock ATSs and the ATS-related 

activities of their broker-dealer 

operators and their affiliates. Such 

benefits could increase investor 

protection by improving the 

effectiveness and efficiency of the 

examination process. 

We believe that the process of 

reviewing an initial Form ATS–N or 

Form ATS–N amendments will allow 

the Commission to evaluate, among 

other things, the completeness and 

comprehensibility of the NMS Stock 

ATSs’ disclosures and, if necessary, 

declare the Form ATS–N ineffective.1366

We believe that the review and public 

disclosure process will improve the 

quality of information the Commission 

receives from NMS Stock ATSs, which 

will allow the Commission to better 

protect investors from potentially 

incomprehensible or incomplete 

disclosures that would misinform 

market participants about the operations 

of an NMS Stock ATS or the ATSrelated activities of its broker-dealer 

operator.1367

We received several comment letters 

regarding whether the proposed 

amendments would adequately protect 

investors. One commenter was 

optimistic, stating the amendments are 

aimed at ‘‘bolstering transparency in 

capital markets, which should enable 

and enhance investor protections.’’ 1368

Three commenters were not as 

optimistic. One commenter states that 

the Commission review process for 

Form ATS–N ‘‘will very quickly devolve 

into an unreasonably burdensome 

exercise for Commission staff while 

providing little benefit to market 

integrity or investor protection.’’ 1369

Another commenter mentions that ‘‘no 

amount of required public disclosure 

can cure the problem presented by an 

ATS that makes inaccurate disclosures 

to subscribers.’’ 1370 A third states that 

no amount of disclosure can provide the 

necessary protection against brokerdealer conflicts of interest, and that 

more needs to be done to protect 

investors.1371 We continue to believe 

that increased regulatory oversight and 

disclosure of NMS Stock ATS 

operations and activities would help 

protect investors. We expect that the 

quality of the information the 

Commission receives from NMS Stock 

ATSs will improve as a result of the 

incentives created by the procedure to 

review their filings and declare them 

ineffective, if necessary, and that the 

incidences of incomplete and 

incomprehensible disclosures would be 

mitigated. As market participants will 

not be able to trade on NMS Stocks 

ATSs that do not comply with Form 

ATS–N requirements, the review 

process will protect investors from 

events that may have transpired if ATSs, 

whose Forms ATS–N have been 

declared ineffective, were allowed to 

trade NMS stocks. Additionally, we 

continue to believe that the disclosure 

of broker-dealer conflicts of interest will 

allow market participants to better 

assess an NMS Stock ATS as a potential 

trading venue and thus better protect 

their interests.1372

b. Costs 

As described in detail in the 

Proposal,1373 we believe that the filing 

requirements of Form ATS–N could 

impose costs on NMS Stock ATSs. We 

recognize that an ineffectiveness 

declaration could impose costs on an 

NMS Stock ATS—such as costs from 

having to cease operations, roll back a 

change in operations, or delay the start 

of operations—and could impose costs 

on individual market participants and 

the overall market for NMS stock 

execution services resulting from a 

potential reduction in competition or 

the removal of a sole provider of a niche 

service within the market.1374 However, 

NMS Stock ATSs and market 

participants would not incur these costs 

unless the Commission declares a Form 

ATS–N or a Form ATS–N amendment 

ineffective. We believe that NMS Stock 

ATSs would be incentivized to comply 

with the requirements of Form ATS–N, 

as well as federal securities laws, 

including the other requirements of 

Regulation ATS, to avoid an 

ineffectiveness declaration, which 

produces benefits to the market. 

Therefore, we believe that NMS Stock 

ATSs would be incentivized to submit 

Form ATS–N disclosures that are 

complete and comprehensive to avoid 

bearing the costs of resubmitting a Form 

ATS–N filing or of having their Form 

ATS–N declared ineffective. 

We also understand that both new 

and existing NMS Stock ATSs will incur 

implementation costs in order to 

comply with the amendments to 

Regulation ATS. NMS Stock ATSs will 

need to develop internal processes to 

ensure correct and complete reporting 

on Form ATS–N, which can be viewed 

as a fixed setup cost, which NMS Stock 

ATSs may have to incur, regardless of 

the amount of trading activity that takes 

place on them. As a result, these 

implementation costs will fall more 

heavily on lower-dollar volume NMS 

Stock ATSs (as opposed to ATSs 

transacting greater dollar volume), 

because these ATSs have a smaller 

revenue base to accommodate the 

largely fixed implementation costs. 

However, smaller NMS Stock ATSs that 

are not operated by multi-service 

broker-dealer operators and do not 

engage in other brokerage or dealing 

activities in addition to their NMS Stock 

ATSs will likely incur lower 

implementation costs because certain 

sections of Form ATS–N (such as 


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1375See supra Section IX (estimating burden 

hours). We estimate the wage rate associated with 

these burden hours based on salary information for 

the securities industry compiled by SIFMA. The 

estimated wage figure for attorneys, for example, is 

based on published rates for attorneys, modified to 

account for a 1,800-hour work-year and multiplied 

by 5.35 to account for bonuses, firm size, employee 

benefits, and overhead, yielding an effective hourly 

rate for 2013 of $380 for attorneys. See Securities 

Industry and Financial Markets Association, 

Management & Professional Earnings in the 

Securities Industry—2013, available at: https://

www.sifma.org/resources/research/managementand-professional-earnings-in-the-securitiesindustry-2013/. These estimates are adjusted for an 

inflation rate of 6.85% based on the Bureau of Labor 

Statistics data on CPI–U between October 2013 and 

March 2018. Therefore, the current inflationadjusted effective hourly wage rates for attorneys 

are estimated at $406 ($380 × 1.0685). We discuss 

other costs of compliance with the proposed rule 

below. 

1376See supra note 1228 and accompanying text. 

1377 (Attorney at $406 × 54.1 hours) + (Chief 

Compliance Manager at $518 × 0.5 hours) + 

(Compliance Manager at $302 × 33.9 hours) + 

(Senior Systems Analyst at $278 × 30.25 hours) + 

(Senior Marketing Manager at $298 × 1 hour) + 

(Compliance Clerk at $68 × 7.65 hours) = 

$41,689.10. This compliance cost estimate for a 

Form ATS–N includes the estimated costs 

associated with completing Part III Items 24 and 25 

of Form ATS–N, but as explained above, we believe 

that the majority of NMS Stock ATSs would not be 

required to complete those items of the form. See 

supra Section IX.D.2.b.i.C. 

1378 127.4 burden hours × 41 NMS Stock ATSs = 

5,223.4 burden hours. $41,689.10 × 41 NMS Stock 

ATSs = $1,709,253.10. This preliminary aggregate 

compliance cost estimate assumes that all NMS 

Stock ATSs would be required to complete Part III 

Items 24 and 25 of Form ATS–N. However, as noted 

above, we estimate that 1 NMS Stock ATS would 

be required to complete Part III, Item 24, see supra 

Section IX.D.2.b.i.C, and 2 NMS Stock ATSs would 

be required to complete Part III, Item 25, see id. 

1379See supra Section IX.D.2.b.ii.B. As explained 

above, we estimate that each NMS Stock ATS 

would file 3 Form ATS–N amendments per year, 

and the hourly burden per amendment would be 

9.4 hours. 

1380 (Attorney at $406 × 16.5 hours) + 

(Compliance Manager at $302 × 6 hours) + 

(Compliance Clerk at $68 × 5.7 hours) = $8,898.60. 

1381 28.2 hours × 41 NMS Stock ATSs = 1,156.2 

hours. $8.898.60 × 41 NMS Stock ATSs = 

$364,842.60. 

1382See supra Section IX.D.2.b.iii. 

1383See supra note 1255 and accompanying text. 

1384 ((Attorney for Form ATS at $406 × 13 hours) 

+ (Attorney for Form ATS–N at $406 × 54.1 hours) 

+ (Chief Compliance Manager for Form ATS–N at 

$518 × 0.5 hours) + (Compliance Manager for Form 

ATS–N at $302 × 33.9 hours) + (Senior Systems 

Analyst for Form ATS–N at $278 × 30.25 hours) + 

(Senior Marketing Manager for Form ATS–N at 

$298 × 1 hour) + (Compliance Clerk for Form ATS 

at $68 × 7 hours) + (Compliance Clerk for Form 

ATS–N at $68 × 7.65 hours)) × 10 ATSs = $474,431. 

This aggregate compliance cost estimate includes 

the estimated costs associated with completing Part 

III, Items 24 and 25 of Form ATS–N, but as 

explained above, we believe that the majority of 

NMS Stock ATSs would not be required to 

complete those items of the form. See supra Section 

IX.D.2.b.i.C. 

1385See supra note 1258 and accompanying text. 

1386 ((Attorney at $406 × 3.5 hours) + (Compliance 

Clerk at $68 × 1 hours) × (4 filings annually)) × 10 

ATSs = $59,560. 

1387At an average cost per burden hour of 

$111.32, see supra note 1265, the resultant total 

related cost of compliance for each ATS would be 

$333.96 ((3 burden hours) × $111.32/hour). 

1388 3 hours × 10 ATSs = 30 burden hours. 

$333.96 × 10 ATSs = $3,339.60. See supra Section 

IX.D.2.b.vi. 

several items of Part II) will not be 

applicable to these NMS Stock ATSs. 

In addition to affecting NMS Stock 

ATSs, the implementation costs could 

also indirectly affect market participants 

by potentially causing some NMS Stock 

ATSs to alter or reduce the services they 

offer to certain subscribers. For 

example, the adopted amendments 

might cause some NMS Stock ATSs to 

reduce or stop offering customized 

reports to certain subscribers in order to 

redirect resources to support the 

standardized reports. 

Relative to the baseline, the 

amendments to Regulation ATS will 

also impose implementation costs for all 

NMS Stock ATSs, including Legacy 

NMS Stock ATSs, in that they will 

require NMS Stock ATSs to adhere to 

heightened disclosure and reporting 

requirements regarding their operations. 

Legacy NMS Stock ATSs should already 

comply with the current requirements of 

Regulation ATS. Therefore, the 

compliance costs of the amendments 

should be incremental relative to the 

costs associated with the existing 

requirements. Specifically, we believe 

that the incremental costs will consist 

largely of providing new disclosures 

and updating records and retention 

policies necessary to comply with the 

amendments. Based on the analysis for 

purposes of the PRA,1375 we estimate 

that the amendments to Regulation ATS 

relating to Rules 301(b)(2)(viii) and 304 

of Regulation ATS, including Form 

ATS–N, will result in a one-time burden 

of 127.4 hours for each NMS Stock 

ATS,1376 which will result in an 

estimated one-time paperwork 

compliance cost to an NMS Stock ATS 

of approximately $41,689.10.1377 This 

will result in an aggregate estimated 

initial hour burden for all NMS Stock 

ATSs to complete Form ATS–N and 

comply with Rules 301(b)(2)(viii) and 

304 of Regulation ATS of 5,223.4 hours 

at an estimated cost of 

$1,709,253.10.1378

In addition to the implementation 

costs mentioned above, there are also 

expected ongoing costs for NMS Stock 

ATSs to comply with the amendments 

to Rule 3a1–1(a) and Regulation ATS. 

For instance, NMS Stock ATSs will 

incur ongoing costs associated with 

amending their Form ATS–N prior to 

material changes in their operations, or 

to correct any material information that 

has become inaccurate. Regardless of 

the reason for filing a Form ATS–N 

amendment, we estimate for the 

purposes of the PRA that it will take an 

NMS Stock ATS approximately 28.2 

hours annually 1379 to prepare and file 

its Form ATS–N amendments at an 

estimated annual cost of $8,898.60 per 

ATS.1380 This will result in an 

estimated aggregate ongoing hour 

burden for all NMS Stock ATSs to 

amend their Forms ATS–N and comply 

with Rules 301(b)(2)(viii) and 304 of 

Regulation ATS of 1,156.2 hours at an 

estimated cost of $364,842.60 

annually.1381

Some existing NMS Stock ATSs that 

also trade non-NMS stocks might incur 

additional costs due to the amendments. 

As discussed above,1382 pursuant to the 

amendments to Regulation ATS, an ATS 

that trades both NMS stocks and nonNMS stocks will be subject to the 

requirements of Rule 304 with respect to 

its NMS stock trading operations and 

Rule 301(b)(2) with respect to its nonNMS stock trading operations. 

Accordingly, NMS Stock ATSs that also 

transact in non-NMS stocks will incur 

additional implementation costs when 

compared to ATSs that only trade NMS 

stocks, because the former group will be 

required to file both Form ATS–N and 

a revised Form ATS that removes 

discussion of those aspects of the ATS 

related to the trading of NMS stocks. 

Those NMS Stock ATSs will also be 

required to file a pair of Forms ATS–R 

four times annually. For the purposes of 

the PRA, we estimate that the aggregate 

initial burden for those ATSs to 

separately file an initial Form ATS–N in 

regard to their NMS stock trading 

activity and a current Form ATS in 

regard to their non-NMS stock trading 

activity will be 1,774 hours 1383 at an 

aggregate estimated cost of $474,431.1384

We also estimate that the aggregate 

annual burden to file separate Forms 

ATS–R for those ATSs that effect 

transactions in both NMS stocks and 

non-NMS stocks will be 180 hours 1385

at an aggregate estimated cost of 

$59,560.1386 Furthermore, we estimate 

that these ATSs that facilitate 

transactions in both NMS stocks and 

non-NMS stocks will incur an 

additional estimated recordkeeping 

burden of 3 hours annually per ATS, 

resulting in an estimated cost of $333.96 

per ATS 1387 and an aggregate estimated 

hour burden of 30 hours at an estimated 

cost of $3,339.60, due to the 

amendments to Rule 303(a)(2)(ii).1388

The amendments to Regulation ATS 

will require Form ATS–N be filed 

electronically in a structured format 


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1389See supra Section VII (Section in the frontend which specifically discusses structured 

disclosure aspects of Form ATS–N). 

1390See supra Section IX.D.2.b.iv. 

1391See id (discussing Central Index Key (‘‘CIK’’) 

numbers). 

1392Compliance Manager at $302 × 0.15 hours = 

$45.30. 

1393Because all ATSs, regardless of whether they 

trade NMS stocks, are operated by registered brokerdealers who have been assigned a CIK number, for 

the purposes of the PRA, we estimate that Legacy 

NMS Stock ATSs or non-NMS Stock ATSs that later 

decide to trade NMS stocks will not incur any costs 

associated with gaining access to EDGAR. See supra 

Section IX.D.2.b.iv. 

1394 0.15 burden hours × 1 NMS Stock ATS = 0.15 

burden hours. $45.30 × 1 NMS Stock ATS = $45.30. 

1395See supra Section IX.D.2.b.v. 

1396Senior Systems Analyst at $278 × 2 hours = 

$556. 

1397 2 hours × 41 NMS Stock ATSs = 82 hours. 

$556 × 41 NMS Stock ATSs = $22,796. 

1398See supra Section III.A. 

1399See Proposal, supra note 2, at 81123–24. 

1400See Proposal, supra note 2, at 81123 

(discussing the effects of the increased public 

disclosures about the operations of NMS Stock 

ATSs on market participant search costs). 

1401See id (discussing the effects of the increased 

public disclosures about the operations of NMS 

Stock ATSs on certain NMS Stock ATSs). 

1402See supra Section X.B.1. 

1403See Markit Letter at 4. 

1404See supra Section X.B.5.a. 

through EDGAR.1389 Based on the 

widespread use and availability of the 

internet, we believe that filing Form 

ATS–N in an electronic format will be 

less burdensome and a more efficient 

filing process than the current paper 

process for NMS Stock ATSs and the 

Commission, as it is likely to be less 

expensive and cumbersome than 

mailing and filing paper forms to the 

Commission. 

In order to electronically file a Form 

ATS–N, a broker-dealer operator of an 

NMS Stock ATS will need to access the 

EDGAR system. As discussed above,1390

a broker-dealer that has not previously 

received access to EDGAR would need 

to submit a Form ID.1391 For the 

purposes of the PRA, we estimate that 

each ATS that needs to submit a Form 

ID to gain access to EDGAR will incur 

a one-time burden of 0.15 hours, which 

would result in each ATS incurring a 

one-time estimated cost of $45.30.1392

Based on analysis in the PRA, we 

estimate that each year 1 new NMS 

Stock ATS will be operated by an entity 

that needs to submit a Form ID to gain 

access to EDGAR.1393 This would result 

in an aggregate estimated initial burden 

of 0.15 hours at an estimated cost of 

$45.30.1394

Rule 304(b)(3) will require each NMS 

Stock ATS to make public via posting 

on the NMS Stock ATS’s website, a 

direct URL hyperlink to the 

Commission’s website that contains the 

documents enumerated in Rule 

304(b)(2). For the purposes of the PRA, 

we estimate that each NMS Stock ATS 

will incur an initial, one-time burden of 

approximately 2 hours to program and 

configure its website in order to post the 

required direct URL hyperlink pursuant 

to Rule 304(b)(3),1395 which will result 

in each NMS Stock ATS incurring an 

estimated one-time cost of 

approximately $556.1396 This will result 

in an aggregate estimated initial, onetime hour burden for all NMS Stock 

ATSs to comply with Rule 304(b)(3) of 

approximately 82 hours at an estimated 

cost of approximately $22,796.1397

2. Economic Effects of Public Disclosure 

of Form ATS–N 

We believe that the amendments 

requiring public disclosure of Form 

ATS–N will improve the information 

available to market participants and 

make that information consistent, which 

would assist market participants in 

evaluating and choosing the NMS Stock 

ATSs to which they may route orders or 

become a subscriber due to the 

enhanced disclosure requirements. 

Requiring such public disclosure will 

increase the operational transparency 

requirements of NMS Stock ATSs to 

bring those requirements more in line 

with the operational transparency 

requirements of national securities 

exchanges.1398

a. Benefits 

We believe that the public disclosure 

of Form ATS–N will generate greater 

transparency about the operations of 

NMS Stock ATSs and the ATS-related 

activities of their broker-dealer 

operators and their affiliates. This will 

aid market participants by reducing 

search costs when evaluating potential 

NMS stock trading venues to decide 

which venue best suits their trading 

purposes. This section discusses 

specific economic benefits of the public 

disclosure of Form ATS–N including: 

The economic benefits of public 

disclosure of standardized information 

about the operations of NMS Stock 

ATSs; the economic benefits of public 

disclosure of the ATS-related activities 

of the broker-dealer operator and its 

affiliates; the economic benefits of 

public disclosure of aggregate platformwide order flow and execution statistics 

regarding the NMS Stock ATS; and the 

economic benefits of filing Form ATS– 

N in a structured format. 

(i) Benefits of Public Disclosure of 

Standardized Information of Operations 

of NMS Stock ATSs 

We believe that requiring detailed, 

public disclosures about the operations 

of NMS Stock ATSs will, among other 

things, better standardize the type of 

information market participants receive 

about those operations. As a result, 

search costs for market participants will 

be lower relative to the baseline, as 

homogenous disclosure requirements 

for all NMS Stock ATSs as part of the 

amendments to Regulation ATS should 

facilitate market participants’ 

comparison of NMS Stock ATSs when 

deciding which venue most suits their 

trading purposes. Accordingly, as 

described in detail in the Proposal,1399

we believe the enhanced operational 

transparency resulting from the public 

disclosures on Form ATS–N should aid 

market participants when evaluating 

potential trading venues, and that the 

requirement for NMS Stock ATSs to 

disclose whether and how they segment 

their order flow, any criteria used to 

assign order flow, and their fee 

structures should provide market 

participants with a better understanding 

of the operating environment for NMS 

Stock ATSs.1400 Beyond providing 

benefits to market participants, the 

enhanced disclosure requirements for 

NMS Stock ATSs could provide benefits 

to certain NMS Stock ATSs or national 

securities exchanges.1401 Since the 

establishment of Regulation ATS, the 

market for order execution services for 

trading NMS stocks—particularly on 

ATSs—has flourished. The number of 

ATSs that trade NMS stocks has 

increased substantially since the 

inception of Regulation ATS, and as of 

the end of the first quarter of 2018, 

trading volume of NMS stocks on ATSs 

accounted for 11.4% of total share 

volume.1402 As they are expected to 

calibrate the level of transparency 

between NMS Stock ATSs and national 

securities exchanges, the amendments 

could foster greater competition for 

order flow of NMS stocks between these 

trading platforms. This greater 

competition for order flow could in turn 

incentivize NMS Stock ATSs to 

innovate—particularly in terms of their 

technology—so that they can attract 

more trading volume to their venue. 

One commenter states that ‘‘[f]ailing 

to extend enhanced transparency 

requirements to Exchanges for activities 

commensurate with those of ATSs 

would result in an incomplete picture of 

market quality, making it difficult for 

investors to conduct meaningful 

comparisons to inform their decisions 

and protect their own interests.’’ 1403 As 

discussed above,1404 national securities 

exchanges are already subject to more 

stringent public disclosure requirements 

than NMS Stock ATSs. For example, 


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1405See Proposal, supra note 2, at 81011. 

1406See id. 

1407See supra Section IV.B.1.a (discussing Form 

ATS–N material amendments). 

1408See Proposal, supra note 2, at 81034. 

1409See supra Section IV.E.2.c. 

1410See id. 

1411See supra Section II.A.2. 

1412Based on information provided on Form ATS, 

a small number of ATSs solely limit their brokerdealer business to the operation of an ATS. 

1413One commenter states that unavoidable 

conflicts of interest arise if an operator (or its 

affiliates) engages in principal trading activities 

within the ATS or if it is informed by others’ 

trading activities within the ATS. See HMA Letter 

at 13. Another commenter states ‘‘conflicts of 

interest arising from the operational complexities of 

ATSs, including the dual roles of the broker-dealer 

as ATS operators and as brokers, proliferated, all 

while remaining invisible to investors.’’ Better 

Markets Letter at 2. 

1414See Proposal, supra note 2, at 81124–25. 

1415A number of commenters generally agree 

with us that increased standardized information 

about the manner of operations of the broker-dealer 

that operates the NMS Stock ATS and potential 

conflicts of interest that may arise with its affiliates 

may better enable market participants to evaluate 

the extent to which individual trading venues align 

with their investment and trading decisions. See 

Fidelity Letter at 1; ICI Letter at 3; KCG Letter at 

1; MFA/AIMA Letter at 2; PDQ Letter at 2; SIFMA 

Letter at 4–8. 

1416See Proposal, supra note 2, at 81124 

(discussing the effects of the public disclosure of 

the ATS-related activities of the broker-dealer 

operator and its affiliates). 

1417See Proposal, supra note 2, at 81043. 

1418See supra Section V.C. 

1419See Proposal, supra note 2, at 81045. 

national securities exchanges are 

required to publicly file proposed rule 

changes with the Commission to 

disclose, among other things, their 

manner of operations and fees.1405

These proposed rules changes are 

subject to notice and comment from the 

public, as well as Commission 

consideration, pursuant to Section 19(b) 

and Rule 19b–4.1406 Therefore, we 

continue to believe that the adopted 

amendments would reduce the 

discrepancy in the level of transparency 

between NMS Stock ATSs and national 

securities exchanges, thereby assisting 

market participants in making more 

informed trading decisions and 

providing them with a clearer 

understanding about where to route 

their orders in order to receive best 

execution. 

The adopted amendments modify the 

process for publicly disclosing a 

material amendment to a Form ATS–N 

from the process originally detailed in 

the Proposal.1407 We proposed in Rule 

304(b)(2)(iv) making all amendments to 

Form ATS–N, including material 

amendments, public upon filing.1408 In 

response to commenters’ concerns that 

making public Form ATS–N material 

amendments before expiration of the 

Commission’s 30-day calendar review 

period could stifle innovation or be 

confusing or misleading to the 

public,1409 we are modifying the 

proposed rules for making Form ATS– 

N material amendments public. Under 

the adopted amendments, the cover 

page of the filed material amendment 

will be made public by the Commission 

upon filing and, unless the Commission 

declares the material amendment 

ineffective, the entirety of the material 

amendment, as amended, will be made 

public by the Commission following the 

expiration of the Commission’s 30- 

calendar day review period.1410 The 

cover page would provide a brief 

narrative about the content of the 

amendment including: The Part and 

Item number of Form ATS–N that is 

subject to the change, whether or not 

such change will apply to all 

subscribers and the broker-dealer 

operator, and a brief summary of the 

change. Although the adopted process 

for material amendments would not 

provide market participants with as 

much transparency about a forthcoming 

material change to the operations of the 

NMS Stock ATS as the proposed 

process, we believe that the adopted 

process will provide increased 

transparency, relative to the baseline, to 

market participants about a material 

change during the Commission review 

period. 

(ii) Benefits of Public Disclosure of the 

ATS-Related Activities of the BrokerDealer Operator and Its Affiliates 

Most NMS Stock ATSs are operated 

by broker-dealers that also engage in 

other brokerage and dealing 

activities.1411 A broker-dealer operator 

of an NMS Stock ATS, or its affiliates, 

could have business interests that 

conflict with the interests of its ATS’s 

subscribers,1412 or customers of its 

subscribers.1413 As described in more 

detail in the Proposal,1414 we believe 

that public disclosure of detailed 

information about the ATS-related 

activities of the broker-dealer operator 

and its affiliates on Form ATS–N will 

allow market participants to better 

evaluate any conflicts of interest that 

may arise from such activities, allowing 

market participants to better determine 

whether submitting order flow to a 

particular NMS Stock ATS aligns with 

their business interests.1415 Further, the 

enhanced disclosure requirements could 

discourage broker-dealer operators from 

trading internally as principal in their 

NMS Stock ATS under circumstances 

where the trading might raise conflict of 

interest concerns, because those 

operations will be subject to public 

scrutiny by market participants.1416

The adopted amendments modify the 

requests for information on Form ATS– 

N regarding the activities of the NMS 

Stock ATS broker-dealer operator and 

its affiliates from those in Proposed 

Form ATS–N.1417 In response to 

commenters’ concerns that the scope of 

the requests in Part III of proposed Form 

ATS–N are too broad (especially for 

large, multiservice broker-dealers) and 

might require information about the 

broker-dealer operator’s and its 

affiliates’ activities that do not directly 

relate to the NMS Stock ATS, we are 

modifying certain requests on proposed 

Form ATS–N to solicit information from 

NMS Stock ATSs that focus on (1) the 

ability of the business units or affiliates 

of the broker-dealer operator to enter, or 

direct the entry of, orders into the NMS 

Stock ATS; and (2) whether those 

business units and affiliates receive any 

preferential treatment with respect to 

the services offered by the NMS Stock 

ATS, including any special access to 

information about trading interest.1418

This differs from the Proposal primarily 

with regard to the proposed requests for 

information about the trading centers of 

the broker-dealer operator and its 

affiliates that did not transact on the 

NMS Stock ATS. For example, Part III, 

Item 1 of proposed Form ATS–N would 

have required an NMS Stock ATS to 

disclose whether the broker-dealer 

operator or any of its affiliates operate 

or control any non-ATS trading center(s) 

that is an OTC market maker or executes 

orders in NMS stocks internally by 

trading as principal or crossing orders as 

agent (‘‘non-ATS trading centers’’), and 

if so, to (1) identify the non-ATS trading 

center(s); and (2) describe any 

interaction or coordination between the 

identified non-ATS trading center(s) 

and the NMS Stock ATS.1419 We have 

modified this disclosure to omit from 

Form ATS–N a list of non-ATS trading 

centers of the broker-dealer operator or 

its affiliates that cannot trade on the 

NMS Stock ATS. 

This modification means that, relative 

to the disclosures on proposed Form 

ATS–N, market participants will receive 

less information concerning the nonATS related operations of the NMS 

Stock ATS broker-dealer operator and 

its affiliates. However, we believe that 

the disclosures in adopted Form ATS– 

N concerning the ATS-related activities 

of the broker-dealer operator or its 

affiliates will still allow market 

participants to better evaluate any 

potential conflicts of interest that may 

arise on the NMS Stock ATS. Therefore, 

we do not believe that the benefits from 

the public disclosure of the ATS-related 


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1420See Proposal, supra note 2, at 81122. 

1421See Proposal, supra note 2, at 81124. 

1422See id (discussing how the disclosure of 

aggregate platform-wide order flow and execution 

statistics might help NMS Stock ATSs attract order 

flow). 

1423See MFA/AIMA Letter at 5; SIFMA Letter at 

27. One of these commenters suggests that these 

NMS Stock ATSs could begin to direct parties 

requesting statistics and analysis to order 

information available on FINRA’s website or 

through third-party vendors. See SIFMA Letter at 

27. 

1424See SIFMA Letter at 27. 

1425See Fidelity Letter at 1; Morgan Stanley Letter 

at 2; SIFMA Letter at 3; UBS Letter at 2–3. 1426See MFA/AIMA Letter at 4; SIFMA Letter at 

32–33. 1427See Fidelity Letter at 5. 1428See infra Section X.D.11. 

activities of the broker-dealer operator 

or its affiliates on adopted Form ATS– 

N will vary significantly from the 

benefits described in the Proposal.1420

(iii) Benefits of Public Disclosure of 

Aggregate Platform-Wide Order Flow 

and Execution Statistics 

Part III, Item 26 of adopted Form 

ATS–N requests that an NMS Stock ATS 

explain and provide the most recent 

disclosure of aggregate platform-wide 

order flow and execution statistics 

regarding the NMS Stock ATS that are 

not otherwise required disclosures 

under Exchange Act Rule 605 of 

Regulation NMS and that the NMS 

Stock ATS provided to one or more 

subscribers by the NMS Stock ATS at 

the end of calendar quarter. As 

described in detail in the Proposal, this 

disclosure request could benefit market 

participants.1421

NMS Stock ATSs that currently 

provide these aggregate platform-wide 

order flow and execution statistics to 

one or more subscribers could continue 

to provide their subscribers with these 

market quality statistics, in which case, 

the NMS Stock ATS will publicly 

disclose these statistics and how they 

are calculated in Form ATS–N, and all 

market participants, not just subscribers, 

would have access to the information. 

We believe this would reduce the 

discrepancy in information that 

subscribers receive and provide the 

opportunity for more market 

participants to benefit from this 

information which may be useful to 

market participants when evaluating an 

NMS Stock ATS as a possible venue to 

which to route orders in order to 

accomplish their investing or trading 

objectives.1422 Further, to the extent that 

subscribers that receive those market 

quality statistics currently do not know 

how the NMS Stock ATS calculates the 

market quality statistics, adopted Form 

ATS–N would help these subscribers 

better understand the statistics. 

Two commenters agree with us that 

the requirement to disclose aggregate 

platform-wide order flow and execution 

statistics on Form ATS–N, if they are 

otherwise disclosed to subscribers, 

could cause NMS Stock ATSs to stop 

providing these statistics to their 

subscribers.1423 If some NMS Stock 

ATSs cease disclosing these market 

quality statistics to subscribers, it could 

reduce transparency to the detriment of 

the subscribers who currently benefit 

from the receipt of certain market 

quality statistics regarding an NMS 

Stock ATS, which could in turn result 

in spill-over effects on the market. One 

commenter agrees and states the 

elimination of this flow of information 

from the NMS Stock ATSs would have 

a deleterious effect on subscriber 

knowledge and understanding of a given 

ATS’s operations, and negatively affect 

the availability of information that some 

subscribers consider important for their 

best execution determinations.1424

(iv) Benefits of Filing Form ATS–N in a 

Structured Format 

We believe that benefits will accrue to 

both the Commission and market 

participants as a result of having a 

structured format for Form ATS–N. 

Specifically, having Form ATS–N filed 

in the XML text-searchable format will 

allow the Commission and its staff and 

market participants to efficiently review 

and analyze information provided on 

Form ATS–N. In particular, the XML 

format will allow the Commission and 

the public to better gather, analyze, 

aggregate, compare, and use the Form 

ATS–N data. Requiring XML should 

result in the Form ATS–N data being 

provided in a consistent, structured 

format. XML is an open standard that 

defines, or ‘‘tags,’’ data using standard 

definitions. The tags establish a 

consistent structure of identity and 

context. This consistent structure can be 

automatically recognized and processed 

by a variety of software applications 

such as databases, financial reporting 

systems, and spreadsheets, and then 

made immediately available to the end 

user to search, aggregate, compare, and 

analyze. 

We believe that requiring Form ATS– 

N be provided in an XML format will 

provide the Commission and the public 

with data about NMS Stock ATSs in a 

format that facilitates search 

capabilities, and comparative analyses 

across NMS Stock ATSs and across 

filings, including more advanced text 

analytics for the more narrative 

responses of Form ATS–N. Absent this 

requirement of a specified format, users 

of the Form ATS–N data that wanted to 

aggregate the data or search across 

filings or filers would need to spend 

additional time transferring the data 

into a consistent format before it could 

be analyzed, or incur the cost of a 

service provider that specializes in this 

data aggregation and comparison 

process. Further, unrestricted manual 

entry of data could lead to errors, 

thereby potentially reducing data 

quality and usability. 

Commenters who supported the 

standardization of Form ATS–N 

information also underscored the 

importance of making the information 

comparable.1425 While the commenters 

did not make specific reference to the 

structured format, having the Form 

ATS–N information submitted using the 

Commission’s XML schema will 

enhance the comparability of the Form 

ATS–N data by ensuring that the 

information has been submitted 

completely and consistently. Two 

commenters addressed the importance 

of completeness to Form ATS–N 

filings.1426 With the Commission’s XML 

schema, the restrictions incorporated 

into the schema (and consequently, also 

reflected in the web-fillable form) will 

help test for completeness of the data 

before submission and reduce filer 

uncertainty on the completeness and 

consistency of their filing. One 

commenter recommended that we 

consider ways to present information 

that would improve the readability and 

navigability of disclosure through the 

use of technology such as hyperlinks 

and/or XBRL technology.1427 The XML 

format selected by us is a technology 

format that presents the data 

consistently, which improves the 

readability and navigability of the data. 

In fact, XBRL is an XML-based 

technology, but, as discussed later, we 

do not think that XBRL is the 

appropriate format for this form.1428

While hyperlinks may be useful in some 

situations to cross-reference 

information, it does not by itself 

enhance the comparability of the 

underlying data, but can be 

incorporated within the XML format, as 

permitted. 

b. Costs 

We recognize that the filing and 

public disclosure of Form ATS–N and 

Form ATS–N amendments could 

impose costs on NMS Stock ATSs as 

well as costs on market participants. 

This section discusses specific costs 

associated with the filing and public 

disclosure of Form ATS–N including: 

the costs to NMS Stock ATSs; the effects 

of public disclosure of Form ATS–N on 


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1429See infra Section X.C.4.a for a discussion of 

the competitive effects of these costs (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Competition’’). 1430See infra Section X.C.4.a.i. 

1431See supra Section X.C and supra note 1356. 

1432See Proposal, supra note 2, at 81118. 

1433See Tuttle: ATS Trading in NMS Stocks, 

supra note 1317. 

1434See supra Section X.B.6.a. 

1435See supra Section X.C and supra note 1356. 

1436See Proposal, supra note 2, at 81127–28. 

1437A deep market is one in which larger orders 

do not have a much greater impact on prices than 

smaller orders. See Foucault, Pagano and Roell, 

2013, ‘‘Market Liquidity,’’ Oxford University Press. 

the price impact costs of market 

participants; and the costs associated 

with filing Form ATS–N and Form 

ATS–N amendments in a structured 

format. 

(i) Costs to NMS Stock ATSs 

We recognize that there would be 

costs that accrue to NMS Stock ATSs as 

a result of the adopted amendments. For 

NMS Stock ATSs, disclosure of 

previously non-public information 

could have some impact on the 

direction of order flow in the market. If 

this previously non-public information 

is valuable to certain NMS Stock 

ATSs—to the extent that it drives its 

revenues—disclosure of this 

information on Form ATS–N could be 

costly for these NMS Stock ATSs. For 

instance, disclosure of an NMS Stock 

ATS’s innovations could potentially 

result in other ATSs implementing 

similar methodologies, which could 

cause the NMS Stock ATS to lose its 

technological advantage. Such an ATS 

may need to engage in costly research in 

order to develop new innovations to 

stay profitable in the market. If an ATS 

cannot innovate fast enough to regain its 

competitive advantage in the market, 

order flow may then potentially migrate 

to other NMS Stock ATSs, brokerdealers that operate non-ATS trading 

centers, or to national securities 

exchanges.1429 Additionally, some order 

flow could be directed away from an 

NMS Stock ATS and towards one of 

these other trading centers if the 

disclosure of previously non-public 

information, such as aggregate platformwide order flow and execution statistics 

or information about the ATS related 

activities of the broker-dealer operator 

and its affiliates, causes some market 

participants to discover that their orders 

would have a greater likelihood of 

receiving lower execution quality on the 

NMS Stock ATS relative to these other 

trading centers. As such, this may result 

in lower revenues for some NMS Stock 

ATSs. These ATSs may then find it 

unprofitable to continue operating as 

ATSs and could exit the market for 

stock execution services or switch their 

business strategies to increase market 

share or profitability, possibly by 

continuing to operate as non-ATS OTC 

execution venues, such as OTC trading 

venues in which the broker-dealer 

operator internalizes order flow.1430

However, as discussed above,1431 we 

lack certain information necessary to 

quantify the extent to which entities 

that operate as ATSs for NMS Stocks 

would be dissuaded from doing so. 

Specifically, as discussed in the 

Proposal,1432 the decision for an NMS 

Stock ATS to continue operating or to 

cease operating as an ATS depends on 

numerous factors and we lack 

information about many of those factors. 

Commenters did not provide any 

additional information or analysis that 

would allow us to quantify the impact 

on Legacy NMS Stocks ATSs or other 

entities that may otherwise seek to 

operate a new NMS Stock ATS. 

Therefore, while we continue to believe 

that the costs of the adopted 

amendments could cause some Legacy 

NMS Stock ATSs to cease operating as 

ATSs and could dissuade some entities 

who would seek to operate as ATSs for 

NMS Stocks from doing so, we remain 

unable to quantify that impact. 

Furthermore, we do not have 

information to make reasonable 

assumptions about the fraction of 

displaced volume—from NMS Stock 

ATSs that would cease operations—that 

would be internalized by broker-dealer 

operator or its affiliates or directed 

towards national securities exchanges, 

NMS Stock ATSs, or non-ATS OTC 

trading centers. 

(ii) Price Impact Costs 

We recognize that heightened 

disclosure requirements pertaining to 

the public disclosure of Form ATS–N 

could increase market participants’ 

trading costs relative to the baseline if 

some ATSs cease operating as ATSs or 

if there is reduced entry of new NMS 

Stock ATSs. Institutional investors can 

elect to use NMS Stock ATSs in an 

attempt to minimize the price impact of 

their trades. Even though the size of the 

average order on NMS Stock ATSs has 

been shown to be roughly equivalent to 

that on national securities exchanges, 

smaller orders on NMS Stock ATSs can 

be the result of shredding larger 

orders.1433 Preventing information 

regarding those orders from becoming 

public can minimize adverse price 

moves that may occur when proprietary 

traders learn that there may be large 

buyers or sellers in the market. Thus, 

NMS Stock ATSs represent a tool for 

institutional investors to help control 

information leakage. 

If there is reduced entry of new NMS 

Stock ATSs or some NMS Stock ATSs 

cease operating as ATSs and shut down 

their ATSs as a result of the 

amendments, there could be a reduction 

in the number of trading platforms that 

allow institutional investors to control 

their price impact costs. Institutional 

investors who would have traded on 

these NMS Stock ATSs, might now have 

to trade on other trading venues, such 

as other NMS Stock ATSs, non-ATS 

OTC execution venues, or national 

securities exchanges. If institutional 

investors execute their orders on a 

national securities exchange, they might 

have to absorb price impact costs, 

because national securities exchanges 

may not offer a means for reducing these 

costs. 

Additionally, if some NMS Stock 

ATSs cease operating as ATSs and begin 

operating as non-ATS OTC execution 

venues, such as an OTC trading venue 

in which the broker-dealer operator 

internalizes order flow, there could be 

an increase in the internalization of 

order flow. Increased internalization 

could reduce market depth and price 

informativeness and increase spreads 

and price impact costs.1434 However, as 

discussed above,1435 we do not know 

the extent to which the adopted 

amendments would affect an NMS 

Stock ATS’s decision to continue 

operations or cease operating as an ATS, 

and, therefore, cannot estimate the 

number of ATSs that would cease 

operating as ATSs. Nor do we have 

information in order for us to make 

reasonable assumptions about the 

fraction of displaced volume—from 

NMS Stock ATSs that would cease 

operations—that would be internalized 

by a broker-dealer operator or its 

affiliates or directed towards national 

securities exchanges, NMS Stock ATSs, 

or non-ATS OTC trading centers. 

Commenters did not provide any 

additional information or analysis that 

would allow us to quantify the number 

of Legacy NMS Stocks ATSs that would 

cease operating as ATSs or estimate the 

impacts on internalization or order flow. 

Therefore, we cannot estimate the 

impact that the adopted amendments 

would have on an NMS Stock ATS’s 

price impact costs. 

As described in detail in the 

Proposal,1436 the price impact cost 

institutional investors face on a national 

securities exchange is related to the 

depth of the market, and the depth of 

the market is often related to the market 

capitalization of a stock and its 

liquidity.1437 Because NMS Stock ATSs 


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1438See supra Section X.C and supra note 1356. 

1439See supra Section VII. 

1440See infra Section X.D.11. 

1441See supra Section VII (discussing structured 

disclosure aspects of Form ATS–N). 

1442 17 CFR 242.301(b)(10). 

1443 17 CFR 242.303(a). 

1444See supra Section VI. 

1445See id. 

1446Three commenters agree with us that 

requiring ATSs to adopt written safeguards and 

written procedures would be beneficial to 

Commission oversight by helping the Commission 

better understand, monitor, and evaluate how each 

ATS protects subscribers’ confidential trading 

information from unauthorized disclosure and 

access. See HMA Letter at 17–18; ICI Letter at 10– 

11; MFA/AIMA Letter at 6. 

1447 17 CFR 242.301(b)(10). 

1448See supra Section VI. 

1449 (Attorney at $406 × 7 hours) + (Compliance 

Clerk at $68 × 1 hour) = $2,910. As explained in 

the PRA, we believe that the majority of ATSs 

already maintain their written safeguards and 

procedures in writing, so most ATSs would not 

incur this initial cost. See supra Section IX.D.1.b. 

For purposes of this economic analysis, however, 

we assume that the initial cost of this new 

requirement would be imposed on all ATSs. 

1450 8 hours × 87 ATSs = 696 hours. $2,910 × 87 

ATSs = $253,170. 

1451See supra note 1116 and accompanying text. 

1452 (Attorney at $406 × 2 hours) + (Compliance 

Clerk at $68 × 2 hours) = $948 annual paperwork 

cost per ATS. 

1453 4 annual burden hours × 87 ATSs = 348 

annual burden hours. $948 annual paperwork cost 

per ATS × 87 NMS Stock ATSs = $82,476 aggregate 

annual paperwork cost. 

1454 17 CFR 242.303(a)(2). 

1455An NMS Stock ATS that had previously 

made filings on Form ATS would be required to 

preserve those filings for the life of the enterprise, 

as well as filings made going forward on Form 

ATS–N. 

1456 17 CFR 242.303(a)(1). 

trade larger dollar volume in small 

capitalization, low-priced stocks, the 

price impact costs for institutional 

investors that trade in such stocks could 

in fact increase significantly if many 

NMS Stock ATSs decide to exit the 

market. However, as discussed 

above,1438 we cannot estimate what 

price market participants would receive 

in these stocks and, thus, we cannot 

estimate the price impact costs 

associated with the adopted 

amendments. 

(iii) Filing in Structured Format 

We understand that there are also 

costs associated with varying degrees of 

structuring Form ATS–N. By offering 

two options for filers to submit Form 

ATS–N in EDGAR, filers will be able to 

select the method best suited to their 

situation.1439 We believe that the XML 

format of Form ATS–N has enhanced 

benefits for the Commission’s and 

market participants’ use of Form ATS– 

N while minimizing costs relative to 

filers having to file Form ATS–N using 

other structured formats.1440 By 

requiring the XML format, the Form 

ATS–N data must be structured to 

conform to incorporated validations. As 

stated previously, the validations will 

not test for the underlying accuracy of 

the data, but it will test for consistency 

and completeness.1441 For the NMS 

Stock ATSs that file Form ATS–N, the 

validations will help ensure that the 

form they submit is complete and 

appropriately formatted so that 

additional time will not have to be spent 

on subsequent Form ATS–N filings to 

correct for those errors. By comparison, 

the EFFS system originally proposed 

does not support the open-source XML 

format, but rather a proprietary XML 

implementation called XFDL. As a 

result, the EFFS system has fewer 

validation capabilities and cannot test 

for consistency and completeness as 

broadly as the XML format, in 

particular, at the element level. In 

addition, as proposed, filers would have 

been required to individually upload 

each narrative response as a separate 

exhibit, whereas EDGAR permits filers 

to provide all of their narrative 

responses within one structured XML 

file, which will slightly diminish their 

time spent in filing in the Form ATS– 

N information. 

3. Economic Effects of Written 

Safeguards and Written Procedures To 

Protect Subscribers’ Confidential 

Trading Information, and 

Recordkeeping Requirements 

a. Benefits 

As explained above, we believe that 

the amendments to Rules 301(b)(10) 1442

and 303(a)(1) 1443 of Regulation ATS 

could increase investor protection by 

strengthening the effectiveness of NMS 

Stock ATSs’ safeguards and procedures 

to better protect confidential subscriber 

trading information and improving 

those ATSs’ ability to implement and 

monitor the adequacy of, and the ATSs’ 

compliance with, their safeguards and 

procedures.1444 Furthermore, as 

discussed above,1445 we believe that 

requiring ATSs to memorialize their 

safeguards and procedures in writing 

will improve Commission oversight by 

helping the Commission better 

understand, monitor, and evaluate how 

each NMS Stock ATS protects 

subscribers’ confidential trading 

information from unauthorized 

disclosure and access, which in turn 

could increase investor protection.1446

We also expect that this requirement 

will help oversight by the SRO of which 

the NMS Stock ATS’s broker-dealer 

operator is a member. 

b. Costs 

We believe that there would be 

implementation costs for NMS Stock 

ATSs that have not preserved in writing 

their safeguards and procedures to 

protect subscribers’ confidential trading 

information and their oversight 

procedures to ensure that those 

safeguards and procedures are followed, 

which are required under Rule 

301(b)(10) of Regulation ATS.1447 Based 

on the analysis for purposes of the PRA, 

we estimate that, in order to comply 

with the amendments to Rules 

301(b)(10) and 303(a)(1)(v) of Regulation 

ATS,1448 it could take up to 87 ATSs an 

estimated one-time burden of up to 8 

hours each, resulting in an estimated 

one-time paperwork cost of $2,910 for 

each ATS.1449 This would result in an 

aggregate estimated initial hour burden 

of 696 hours at an estimated cost of 

$253,170.1450

Furthermore, the amendments to 

Rules 301(b)(10) and 303(a)(1)(v) 

relating to written safeguards and 

written procedures to protect 

subscribers’ confidential trading 

information would impose ongoing 

costs for all NMS Stock ATSs. For the 

purposes of the PRA, we estimate it 

could take approximately 4 hours 

annually for each ATS to update and 

maintain these safeguards and 

procedures,1451 resulting in an 

estimated annual paperwork cost for 

each ATS of $948.1452 This would result 

in an estimated aggregate ongoing hour 

burden for all ATSs to maintain and 

update their safeguards and procedures 

pursuant to Rules 301(b)(10) and 

303(a)(1)(v) of 348 hours at an estimated 

cost of $82,476 annually.1453

We are also amending the 

recordkeeping rules relevant to the 

amendments to Rule 301 and new Rule 

304. NMS Stock ATSs shall preserve 

Form ATS–N, Form ATS–N 

amendments, and a Form ATS–N notice 

of cessation for the life of the enterprise 

and any successor enterprise pursuant 

to Rule 303(a)(2) 1454 of Regulation 

ATS.1455 We are also amending Rule 

303(a)(1) 1456 so that ATSs must 

preserve for a period of not less than 

three years, the first two in an easily 

accessible place, the written safeguards 

and procedures that would be required 

under the amendments to Rule 

301(b)(10). We understand that these 

amendments regarding recordkeeping 

requirements will require NMS Stock 

ATSs to set up systems and procedures, 

and these are expected to account for a 

portion of the implementation costs 


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1457See supra Section X.C.1.b. 

1458See infra Section X.C.4.a (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Competition’’). 

1459See infra Section X.C.4.b (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Efficiency’’). 1460See supra Section X.C.2.a. 

1461Several commenters agreed that the 

disclosure requirements associated with Form 

ATS–N could act as a barrier to entry for new NMS 

Stock ATSs in the market; dissuade some existing 

ATSs from continuing to operate as ATSs; and force 

some smaller NMS Stock ATSs out of business. See 

Fidelity Letter at 10; Luminex Letter at 1–2; STANY 

Letter at 2. 

1462See supra Section X.C.1.b, Section X.C.2.b, 

and Section X.C.3.b. 

1463One commenter said that the disclosure 

obligations that only apply to broker-dealer ATS 

operators may incentivize broker-dealer ATS 

operators to seek alternatives other than operating 

an ATS. See Morgan Stanley Letter at 3. 

1464One commenter said the disclosure 

requirements could result in ATSs closing down 

their NMS Stock ATS operations and increase the 

use of broker-dealer internalized executions. See 

Fidelity Letter at 4, 5, 9, 10–11. 

related to Rules 301(b)(2)(viii) and 304 

of Regulation ATS 1457 and the 

amendments to Rules 301(b)(10) and 

303(a)(1)(v) of Regulation ATS 

discussed above. 

4. Impact on Efficiency, Competition, 

and Capital Formation 

We have considered the effects of the 

amendments on efficiency, competition, 

and capital formation. We believe that 

the amendments will help market 

participants make better informed 

decisions about where to route their 

orders in order to achieve their trading 

or investment objectives, enhance 

execution quality, and improve 

efficiency and capital allocation. 

We understand that the amendments 

to Regulation ATS could affect the 

competitive dynamics in the market for 

NMS stock execution services.1458

These disclosure requirements for NMS 

Stock ATSs could create a disincentive 

for entities to become ATSs in the 

market for NMS stock execution 

services and also result in some standalone ATSs exiting the market and some 

multi-service broker-dealers electing to 

cease operating their NMS Stock ATSs 

and instead initiate or increase 

operations as non-ATS OTC execution 

venues. However, in spite of these costs, 

and as discussed in more detail below, 

we believe that the NMS Stock ATSs 

that remain may propagate greater 

interaction between buyers and sellers 

who trade on these venues, fostering not 

only trading between one and another, 

but also facilitating the price discovery 

process and capital formation. The 

consistent set of information that will be 

disclosed in Form ATS–N will impact 

how market participants react in terms 

of their trading, which could improve 

market efficiency.1459

Moreover, increased transparency 

regarding the operations of NMS Stock 

ATSs could impact competition 

between broker-dealers that operate 

NMS Stock ATSs and broker-dealers 

who trade NMS stocks but do not 

operate an NMS Stock ATS, such as 

internalizers. Because broker-dealers 

who transact in NMS stocks but do not 

operate ATSs are not subject to the 

operational transparency requirements, 

these broker-dealers could obtain a 

competitive advantage and attract and 

internalize order flow that would 

otherwise be entered and executed on 

NMS Stock ATSs. Furthermore, greater 

operational transparency of NMS Stock 

ATSs could also impact competition 

between NMS Stock ATSs and national 

securities exchanges, resulting in a 

larger amount of order flow being 

executed on national securities 

exchanges. 

a. Competition 

The adopted amendments could 

impact the competitive dynamics in the 

market for NMS stock execution 

services, which includes competition 

between national securities exchanges 

and NMS Stock ATSs, among NMS 

Stock ATSs themselves, and between 

broker-dealers that operate NMS Stock 

ATSs and those that do not. 

As discussed above,1460 we believe 

that the public disclosure of Form ATS– 

N could appropriately calibrate the level 

of transparency between NMS Stock 

ATSs and national securities exchanges, 

which could foster even greater 

competition for order flow of NMS 

stocks between those trading platforms. 

However, the increased public 

disclosure requirements associated with 

adopted Form ATS–N along with the 

uncertainty as to whether a Form ATS– 

N will be declared ineffective may raise 

the barriers to entry for new entities 

seeking to act as ATSs in the market for 

NMS stock execution services and may 

cause some existing Legacy NMS Stock 

ATSs to cease operating as ATSs. This 

could affect competition in the market 

for NMS stock execution services, 

which could in turn affect market 

participants. Additionally, the public 

disclosure of some previously nonpublic information about the manner of 

operations of the ATS, such as 

information on certain matching 

methodologies or order types, along 

with the greater competition for order 

flow, could affect the incentives of NMS 

Stock ATSs to innovate. 

The sections below discuss specific 

impacts of the adopted amendments on 

the competitive dynamics in the market 

for NMS stock execution services, 

including: Their impact on the entry of 

new NMS Stock ATSs and the 

continuation of existing Legacy NMS 

Stock ATSs, the impact of changes in 

the number of NMS Stock ATSs on 

market participant trading costs, and 

their impact on the incentives of ATSs 

to innovate. 

(i) Entry of New and Continuation of 

Legacy NMS Stock ATSs 

We believe that the adopted 

amendments could potentially raise the 

barriers to entry for new entities seeking 

to act as ATSs in the market for NMS 

stock execution services and could also 

affect the decision of Legacy NMS Stock 

ATSs to continue operating as ATSs. As 

discussed in more detail below, the 

uncertainty surrounding whether Form 

ATS–N and Form ATS–N amendment 

filings will be declared ineffective, the 

increased implementation and ongoing 

compliance costs associated with the 

adopted amendments, and the effects of 

public disclosure of previously nonpublic information required on Form 

ATS–N might dissuade some potential 

new ATSs from entering the market and 

could cause some Legacy NMS Stock 

ATSs to cease operating as ATSs.1461

If the costs of the adopted 

amendments make it unprofitable for 

the broker-dealer operator of a Legacy 

NMS Stock ATS to continue operating 

the ATS,1462 the broker-dealer operator 

could sell the ATS to another brokerdealer or shut down the ATS. 

Alternatively, a multi-service brokerdealer operator could cease operating 

the Legacy NMS Stock ATS as an ATS 

and instead initiate operations as a nonATS OTC execution venue, such as an 

OTC trading venue in which the brokerdealer operator internalizes order 

flow.1463 If a Legacy NMS Stock ATS 

that ceases operations is operated by a 

multi-service broker-dealer operator that 

also operates, or has affiliates that 

operate, other non-ATS OTC execution 

venues, the multi-service broker-dealer 

operator or its affiliates could increase 

operations at one of these venues 

instead of choosing to operate the 

Legacy NMS Stock ATS as a non-ATS 

OTC execution venue. If a Legacy NMS 

Stock ATS ceases to operate as an ATS, 

the broker-dealer operator or its 

affiliates might internalize the order 

flow that would have typically been 

sent to the ATS or they might send that 

order flow to a third-party broker-dealer 

to internalize.1464 Alternatively, the 

displaced order flow could be sent to 

one of the remaining NMS Stock ATSs 


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1465See infra Section X.C.4.a.ii. 

1466See supra Section X.C and supra note 1356. 

1467See Proposal, supra note 2, at 81118. 

1468See id. 

1469See supra Section X.C.1.b. 

1470See supra Section IV.A.3. 

1471The amendments to Rule 301(a)(5) could, 

under exceptional circumstances such as to prevent 

substantial harm to market participants, allow an 

NMS Stock ATS to implement a material change 

more quickly by seeking an exemption from the 

Commission from the 30-calendar day advance 

notice requirements of Rule 304(a)(2)(i)(A). See 

supra Section III.B.3. 

1472Nothing would preclude the NMS Stock ATS 

from later submitting a new or revised Form ATS– 

N amendment for consideration by the Commission. 

1473See supra Section II.C. 

1474Our review period could last less than 120 

days. Alternatively, we could extend the review 

period an additional 90 calendar days, if the Form 

ATS–N is unusually lengthy or raises novel or 

complex issues that require additional time for 

review. See supra Section IV.A.2. 

or to a national securities exchange for 

execution. 

If increased barriers to entry cause 

fewer ATSs to enter the market or the 

increased costs of the adopted 

amendments cause some unprofitable 

Legacy NMS Stock ATSs to shut down 

operations, there could be fewer trading 

venues in the market for NMS Stock 

execution services. We believe that if 

the adopted amendments result in fewer 

trading venues in the market or cause 

some Legacy NMS Stock ATSs to 

operate as non-ATS OTC execution 

venues, it could affect market 

participants by reducing the number of 

NMS stock trading venues and, thus, 

reducing a market participant’s 

opportunities to minimize its trading 

costs by sending orders to different 

trading platforms.1465

While we believe that the adopted 

amendments could act as a barrier to 

entry or dissuade some existing ATSs 

from continuing to operate as ATSs, we 

reiterate that we lack certain 

information necessary to quantify the 

extent to which entities that otherwise 

would seek to operate as ATSs for NMS 

Stocks would be dissuaded from doing 

so.1466 Specifically, as discussed in the 

Proposal,1467 the decision for an NMS 

Stock ATS to continue operating or to 

cease operating as an ATS depends on 

numerous factors and we lack 

information about many of those factors. 

For example, we do not have 

information on the extent to which 

existing NMS Stock ATSs or potentially 

new ATSs rely on a competitive 

advantage, such as a unique matching 

methodology, to attract order flow or the 

extent to which the new rule and 

amendments would impact that 

competitive advantage. Furthermore, the 

decision to cease operating as an ATS is 

idiosyncratic to the particular NMS 

Stock ATS and we cannot ascertain the 

extent to which small (or in fact large) 

ATSs may be more prone to cease 

operating as ATSs.1468

Commenters did not provide any 

additional information or analysis that 

would allow us to quantify the impact 

on Legacy NMS Stocks ATSs or other 

entities that might otherwise seek to 

operate a new NMS Stock ATS. 

Therefore, while we continue to believe 

that the costs of the adopted 

amendments could cause some Legacy 

NMS Stock ATSs to cease operating as 

ATSs and could dissuade some entities 

who would seek to operate as ATSs for 

NMS Stocks from doing so, we remain 

unable to quantify that impact. 

The subsections below discuss how 

various elements of the adopted 

amendments could potentially affect the 

barriers to entry for new entities seeking 

to act as ATSs and the decision of 

Legacy NMS Stock ATSs to continue or 

cease operating as ATSs in the market 

for NMS stock execution services, 

including: The enhanced filing 

requirements of Form ATS–N, the 

implementation and ongoing 

compliance costs associated with the 

adopted amendments, and the public 

disclosure of previously non-public 

information required on Form ATS–N. 

(a) Enhanced Filing Requirements of 

Form ATS–N 

The filing requirements of Form ATS– 

N will impose costs on NMS Stock 

ATSs. An ineffectiveness declaration 

would impose costs on an NMS Stock 

ATS—such as costs from having to 

cease operations, roll back a change in 

operations, or delay the start of 

operations—and could impose costs on 

the overall market for NMS stock 

execution services resulting from a 

potential reduction in competition or 

the removal of a sole provider of a niche 

service within the market. The adopted 

amendments to Regulation ATS might 

beget uncertainty as to whether an NMS 

Stock ATS’s Form ATS–N will be 

declared ineffective.1469 Greater 

uncertainty surrounding this process 

might act as a deterrent for potential 

ATSs wishing to effect transactions in 

NMS stocks, which could raise barriers 

for potential new entrants to the market 

for NMS stock execution services. 

The amendments we are adopting 

permit a Legacy NMS Stock ATS to 

continue its operations, on a provisional 

basis, pursuant to the filed initial Form 

ATS–N, and any amendments thereto, 

during the Commission’s review of its 

initial Form ATS–N. However, if after 

notice and opportunity for hearing, the 

Commission declares the Form ATS–N 

filed by a legacy NMS Stock ATS 

ineffective, the ATS would be required 

to cease its activities relating to NMS 

stocks. The NMS Stock ATS would then 

have the opportunity to address 

deficiencies in the previously filed form 

by filing a new Form ATS–N.1470

The Commission could also declare 

amendments to an effective Form ATS– 

N ineffective. In particular, the adopted 

amendments require an NMS Stock ATS 

to file amendments on Form ATS–N to 

notice a material change to its 

operations at least 30 days prior to 

implementing that material change.1471

If the Commission declares a material 

amendment ineffective before this 

advance notice period has expired, the 

NMS Stock ATS would be required to 

unwind the material change if it has 

already been implemented on the ATS 

or be precluded from proceeding to 

implement the change if it was not 

already implemented. The NMS Stock 

ATS could, however, continue to 

operate pursuant to a Form ATS–N that 

had become effective.1472 Given the 

additional uncertainty introduced by 

the possibility that the Commission 

could declare a Form ATS–N or a Form 

ATS–N amendment ineffective, coupled 

with the number and complexity of the 

new disclosures that would be required 

under Form ATS–N, some broker-dealer 

operators of Legacy NMS Stock ATSs 

might find that the costs of compliance 

outweigh the benefits of continuing to 

operate their NMS Stock ATS, 

particularly if the operation of the ATS 

does not constitute a significant source 

of profit for a broker-dealer operator. As 

such, some NMS Stock ATSs might 

elect to cease operating as an ATS. 

The adopted amendments might also 

potentially raise the barriers to entry for 

new entities seeking to act as ATSs in 

the market for NMS stock execution 

service by delaying the start of 

operations for new NMS Stock ATSs. 

Currently, to comply with Regulation 

ATS, an entity seeking to operate as an 

ATS must, among other things, file an 

initial operation report with the 

Commission on Form ATS at least 20 

days before commencing operations.1473

Under the adopted amendments, an 

entity seeking to operate as an ATS in 

the market for NMS stock execution 

services could not commence operations 

until its initial Form ATS–N became 

effective, which could occur 120 

calendar days after initially filing Form 

ATS–N with the Commission or at the 

end of the extended Commission review 

period.1474 Additionally, the disclosures 

required by Form ATS–N would be 

more comprehensive and require 


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1475See supra Section X.C.1.b (‘‘Economic Effects 

of Enhanced Filing Requirements of Form ATS–N— 

Costs’’). 

1476See infra Section X.C.4.a.ii. 

1477See supra Section V for information 

contained on Form ATS–N. 

1478See supra Section IV.E. See also Rule 

304(b)(2). 1479See infra X.C.4.a.iii. 

significantly more detail than those 

required on current Form ATS, which in 

turn could also delay the start of 

operations for new NMS Stock ATSs. 

(b) Implementation and Ongoing 

Compliance Costs 

As explained above, NMS Stock ATSs 

will incur both implementation and 

ongoing costs to meet the regulatory 

requirements under Rule 304.1475 On 

the margin, if these costs outweigh the 

benefits of operating an NMS Stock 

ATS, they could act as a deterrent for 

potential ATSs wishing to effect 

transactions in NMS stocks or cause 

some Legacy NMS Stock ATSs to cease 

operating as an ATS. However, we do 

not believe that the implementation and 

ongoing costs are significant enough to 

make this a likely possibility. 

The implementation and ongoing 

costs associated with filing Form ATS– 

N could also differentially affect small 

and large NMS Stock ATSs. As Table 1 

shows, there is a significant degree of 

difference in the size of NMS Stock 

ATSs, when measured by dollar or share 

volume. We believe that the estimated 

implementation cost is a fixed cost that 

would be roughly similar across NMS 

Stock ATSs, regardless of their dollar 

volume size; this implies that 

implementation costs will represent a 

larger fraction of revenue generated on 

a small NMS Stock ATS relative to that 

percentage on a large NMS Stock ATS. 

If the costs associated with filing Form 

ATS–N become disproportionately 

greater for smaller volume NMS Stock 

ATSs, some of these Legacy NMS Stock 

ATSs might be more likely to cease 

operating as ATSs. However, if the NMS 

Stock ATSs that decide to cease 

operating as ATSs due to this fixed 

implementation cost only transact small 

dollar (or share) volume, there may not 

be a large impact on the overall 

competitive structure for remaining 

NMS Stock ATSs. Moreover, the order 

flow that was being traded on these 

small NMS Stock ATSs might be 

absorbed and redistributed amongst 

these larger remaining NMS Stock 

ATSs. On the other hand, if the 

implementation costs cause a small 

NMS Stock ATS that is the sole provider 

of a niche service to cease operating as 

an ATS, it could affect market 

participants by requiring them to seek 

execution on other NMS stock trading 

venues that do not minimize their 

trading costs to the same extent.1476

(c) Public Disclosure of Form ATS–N 

Once an NMS Stock ATS’s initial 

Form ATS–N has become effective, the 

information disclosed on Form ATS–N 

will be made available to the broader 

investing public.1477 Updating and 

correcting amendments to Form ATS–N, 

as well as the cover page of material 

amendments, would be made public 

upon filing and the entirety of material 

amendments to Form ATS–N would be 

made public following the expiration of 

the review period.1478

While the information elicited on 

Form ATS–N is similar to the 

information that national securities 

exchanges are required to publicly 

disclose, we believe that the disclosure 

of this previously non-public 

information could have some impact on 

the competition for order flow in the 

market. For instance, to the extent that 

an NMS Stock ATS’s competitive 

advantage in the market is driven by its 

matching methodology, other 

operational characteristics that are 

currently confidential, or the non-public 

disclosure of certain aggregate platformwide market quality statistics provided 

to subscribers, the disclosure of this 

information could result in other NMS 

Stock ATSs implementing similar 

methodologies, which might cause 

market participants to direct more order 

flow to those other NMS Stock ATSs. In 

addition, some order flow might be 

directed away from NMS Stock ATSs 

and towards national securities 

exchanges or broker-dealers that operate 

non-ATS trading centers if market 

participants discover that their orders 

would have a greater likelihood of 

receiving lower execution quality on an 

NMS Stock ATS relative to these other 

trading centers. As such, this could 

result in lower revenues for some NMS 

Stock ATSs. Those ATSs might then 

find it unprofitable to continue 

operating as ATSs. This might cause the 

broker-dealer operator to sell the ATS to 

another broker-dealer or shut down the 

ATS. It could also cause the brokerdealer operator to switch its business 

strategies to increase market share or 

profitability, possibly by continuing to 

operate as a non-ATS OTC execution 

venue, such as OTC trading venue in 

which the broker-dealer operator 

internalizes order flow. The disclosure 

of previously non-public operational 

information required under initial Form 

ATS–N could erode a new NMS Stock 

ATS’s competitive advantage and 

prevent it from attracting order flow. 

This could potentially raise the barriers 

to entry for new entities seeking to act 

as ATSs in the market for NMS stock 

execution services and dissuade some 

entities that would potentially seek to 

operate as ATSs for NMS stocks from 

doing so. We believe that a reduction in 

the entry of new ATSs or some Legacy 

NMS Stock ATSs electing to cease 

operating as ATSs could affect 

competition in the market for NMS 

Stock execution services, which could 

in turn affect market participants. 

Not only could an NMS Stock ATS’s 

competitive advantage be driven by its 

current matching methodology or other 

operational characteristics, it could also 

be driven by the NMS Stock ATS’s 

ability to improve these methodologies 

through technological innovation or 

enhancements.1479 We believe that the 

disclosure of an NMS Stock ATS’s 

innovations in Form ATS–N 

amendments could potentially result in 

certain NMS Stock ATSs losing their 

technological advantage. If NMS Stock 

ATSs cannot innovate fast enough to 

regain their competitive advantage in 

the market, orders may also flow away 

from those NMS Stock ATSs, and as a 

result, those trading venues may choose 

to cease operating as ATSs if operating 

the ATS becomes unprofitable for the 

broker-dealer operator. 

Both large and small NMS Stock ATSs 

could be affected by the detailed 

disclosures required under Rule 304 and 

Form ATS–N, though, the adopted 

amendments could affect the ability of 

each type of ATS to stay in the market 

differently. As noted above, to the 

extent that an ATS’s dominance in the 

market—in terms of being able to attract 

substantial NMS stock trading volume— 

is driven by its matching methodology 

or other operational characteristics that 

are currently confidential, the public 

disclosure of this information might 

result in lower revenue for the NMS 

Stock ATS. If public disclosure reduces 

revenue for a small NMS Stock ATS, or 

a large ATS without a substantial profit 

margin, the broker-dealer operator might 

no longer view the ATS as being 

profitable and cease operating it as an 

ATS. The broker-dealer operator of a 

large ATS that ceases operating as an 

ATS might be more likely to continue to 

operate the system as a non-ATS OTC 

execution venue. However, the broker 

dealer of a small ATS that ceases to 

operate as an ATS could potentially 

shutdown the ATS altogether. 

Alternatively, if public disclosure 

reduces revenue for a large NMS Stock 

ATS or a smaller NMS Stock ATS with 

large profit margins, such an ATS may 


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1480See Singhvi, Surrendra S. and Harsha B. 

Desai, 1971, ‘‘An Empirical Analysis of the Quality 

of Corporate Financial Disclosure,’’ Accounting 

Review 46, 129–138. 

1481See supra Section X.C.4.a.i.B. 

1482Four commenters assert that the enhanced 

filing requirements under the amendments to 

Regulation ATS would disproportionately impact 

multi-service broker-dealers who operate NMS 

Stock ATSs relative to other broker-dealers. These 

commenters state that these broker-dealers are held 

to a higher disclosure standard than broker-dealers 

that do not operate ATSs. See Fidelity Letter at 4, 

9, 11; Liquidnet Letter at 9; Morgan Stanley Letter 

2; STA Letter at 2. 

1483One commenter agrees that the enhanced 

disclosure requirements may incentivize multiservice broker-dealer ATS operators to seek 

alternatives other than operating an ATS. See 

Morgan Stanley Letter at 3. Another commenter 

states that the enhanced disclosure requirements 

could result in ATSs closing down their NMS Stock 

ATS operations and increase the use of brokerdealer internalized executions. See Fidelity Letter at 

4, 9, 10–11. 

1484See supra Section X.C. 

1485See infra Section X.4.b (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Efficiency’’). 

1486See supra Section IV.E.2.a. 

1487See supra Section V.C. 

1488See Proposal, supra note 2, at 81125. 

1489See supra Section X.A.6.a. 

1490See supra Section X.C and supra note 1356; 

see also Proposal, supra note 2, at 81118. 

continue operating as an ATS but may 

need to engage in costly research in 

order to develop new methodologies or 

enhancements that are less likely to be 

affected by the public disclosure 

requirements in order to stay profitable 

in the market. Further, if revenue and 

earnings margins for operating an NMS 

Stock ATS are below the average for the 

entire market, the NMS Stock ATS risks 

being squeezed out by its competitors 

and could potentially cease operating as 

an ATS.1480 As discussed in detail 

above,1481 the effect on market 

participants if an ATS ceases operating 

as an ATS could vary based on the size 

(dollar volume) of the ATS. If the NMS 

Stock ATSs that cease operating as 

ATSs transact only small dollar (or 

share) volumes, we might not expect to 

see a large impact on the overall 

competitive structure of the NMS Stock 

ATSs that would remain in the market. 

Many smaller NMS Stock ATSs might 

not engage in other brokerage or dealing 

activities in addition to the operation of 

their NMS Stock ATS. Therefore, certain 

aspects of Form ATS–N (such as several 

items of Part II) might not be applicable 

to smaller NMS Stock ATSs, which 

would reduce the burdens and mitigate 

the effects of the disclosure 

requirements on these smaller NMS 

Stock ATSs. 

The increased transparency regarding 

the operations of NMS Stock ATSs 

might impact competition between 

broker-dealers that operate NMS Stock 

ATSs and broker-dealers who trade 

NMS stocks but do not operate an NMS 

Stock ATS, such as internalizers. 

Because broker-dealers who transact in 

NMS stocks but do not operate ATSs are 

not subject to the operational 

transparency requirements, these 

broker-dealers could be at a competitive 

advantage and attract and internalize 

order flow that would otherwise be 

entered and executed on NMS Stock 

ATSs.1482 These disclosure 

requirements could also influence a 

broker-dealer operator’s decisions with 

respect to its operations of the NMS 

Stock ATS. Given the disclosure 

requirements regarding the ATS-related 

activities of broker-dealer operators and 

their affiliates, a multi-service brokerdealer operator of an NMS Stock ATS 

might cease operating its NMS Stock 

ATS as an ATS and instead internalize 

the order flow or send that order flow 

to a third-party broker-dealer that 

executes it.1483 Alternatively, the 

broker-dealer operator might send the 

order flow to a non-affiliated NMS Stock 

ATS that is operated by a non-multiservice broker-dealer, which would 

likely not encounter the same potential 

conflicts of interest as a multi-service 

broker-dealer that operates an NMS 

Stock ATS. Finally, the broker-dealer 

operator could also send its order flow 

to national securities exchanges for 

execution. While we cannot quantify 

how much order flow from these 

displaced multi-services broker-dealers 

that operate NMS Stock ATSs would be 

routed back to national securities 

exchanges,1484 we believe that routing 

order flow to lit venues could 

potentially have some positive effects 

on price discovery and 

transparency.1485

In response to commenters’ concerns 

that proposed Form ATS–N would have 

required the public disclosure of 

proprietary or commercially sensitive 

information, we have revised the 

adopted Form ATS–N requests to not 

seek disclosure of certain information 

that could be proprietary or 

commercially sensitive, such as routing 

tables or numerical order flow 

segmentation metrics.1486 Additionally, 

we have revised the disclosures 

concerning the broker-dealer operator 

and its affiliates to focus on (1) the 

ability of the business units or affiliates 

of the broker-dealer operator to enter, or 

direct the entry of, orders into the NMS 

Stock ATS; and (2) whether those 

business units and affiliates receive any 

preferential treatment with respect to 

the services offered by the NMS Stock 

ATS, including any special access to 

information about trading interest.1487

We believe these changes should reduce 

the costs of the public disclosure of 

Form ATS–N for a NMS Stock ATS 

relative to what they were in the 

Proposal.1488 Additionally, these 

changes, because of the decreased costs 

of public disclosure relative to the 

Proposal, should reduce the barriers to 

entry and also reduce the likelihood that 

a Legacy NMS Stock ATS ceases 

operating as an ATS compared to the 

Proposal. 

(ii) Effects of Changes in Number of 

NMS Stock ATSs on Market Participant 

Trading Costs 

Overall, we believe that the possible 

decision of entities that currently are 

NMS Stock ATSs to cease operating as 

ATSs, or the reduced entry of new NMS 

Stock ATSs, due to the requirements 

under Rule 304 and Form ATS–N could 

affect competition in the market for 

NMS stock execution services and could 

impact market participants by reducing 

the number of entities that are willing 

to act as NMS Stock ATSs and publicly 

disclose how they operate. If there is a 

reduction in the number of trading 

venues, either from some Legacy NMS 

Stock ATSs shutting down their 

operations or reduced entry into the 

market by prospective NMS Stock ATSs, 

it could impact market participants by 

reducing the number of NMS stock 

trading venues and, thus, reducing 

market participants’ opportunities to 

minimize its trading costs by sending 

orders to different trading platforms. 

Additionally, if some Legacy NMS Stock 

ATSs cease operating as ATSs and begin 

to operate as non-ATS OTC execution 

venues, there might be an increase in 

the internalization of order flow. 

Increased internalization could reduce 

market depth and price informativeness 

and increase spreads,1489 which could 

increase market participant trading 

costs. Therefore, the possible decision of 

NMS Stock ATSs to cease operating as 

ATSs and lower rate of entry for new 

NMS Stock ATSs could result in greater 

costs relative to the baseline cost 

savings that NMS Stock ATSs currently 

afford market participants. 

However, as discussed above and in 

the Proposal,1490 we lack information to 

determine the extent to which the 

increased public disclosure 

requirements associated with adopted 

Form ATS–N or the uncertainty as to 

whether a Form ATS–N will be declared 

ineffective would affect a Legacy NMS 

Stock ATS’s decision to continue 

operations or cease operating as an ATS 

or the decision of potential ATSs to 

enter the market. Therefore, we cannot 


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1491See supra Section X.C.2. 

1492See supra Section X.C.4.a.i. 

1493See supra Section IV.E.2.a. 

1494See supra Section IV.E.2.c. 

1495The cover page of the filed material 

amendment will be made public by the Commission 

upon filing. See id. 

1496See Fidelity Letter at 2–3, 8; KCG Letter at 5, 

8; Luminex Letter at 1; STANY Letter at 2. 

1497See Fidelity Letter at 9. 

1498See supra Section X.C.1.b. 

1499See supra Section X.C.4.a.i.A. 

1500See supra Section IV.A.3.b. 

1501See supra Section X.C.4.a (‘‘Impact on 

Efficiency, Competition, and Capital Formation— 

Competition’’). 

estimate the number of ATSs that would 

cease operating as ATSs or the number 

of potential new ATSs that would be 

dissuaded from entering the market. 

Furthermore, we do not have 

information in order for us to make 

reasonable assumptions about the 

fraction of displaced volume—from 

NMS Stock ATSs that would cease 

operating as ATSs—that would be 

internalized by a broker-dealer operator 

or its affiliates or directed towards 

national securities exchanges, NMS 

Stock ATSs, or non-ATS OTC trading 

centers. Commenters did not provide 

any additional information or analysis 

that would allow us to estimate the 

impacts on order flow or the continued 

operation of NMS Stock ATSs under the 

new rule and amendments. Therefore, 

we cannot quantify the ultimate effect 

that this will have on competition and 

market participant trading costs. 

(iii) Innovation 

As discussed above, the public 

availability of effective Form ATS–N 

and Form ATS–N amendments could 

result in the disclosure of an NMS Stock 

ATS’s previously non-public 

operational information.1491 These 

disclosures could potentially affect the 

incentives of NMS Stocks ATSs to 

innovate. 

The disclosure of an NMS Stock 

ATS’s innovations in its Form ATS–N 

or Form ATS–N amendments could 

potentially result in certain NMS Stock 

ATSs losing their technological 

advantage. For example, to the extent 

that an NMS Stock ATS’s competitive 

advantage in the market is driven by its 

matching methodology, the disclosure 

of this information could result in other 

NMS Stock ATSs implementing similar 

methodologies. On the one hand, this 

could potentially reduce the incentives 

for ATSs to innovate. For instance, if 

publicly disclosing an NMS Stock ATS’s 

new technological innovations results in 

the ATS earning less revenue from new 

innovations it develops, relative to the 

baseline, the ATS might lose its 

incentives to innovate. 

On the other hand, the increase in 

transparency resulting from the public 

disclosure of Form ATS–N could foster 

greater competition for order flow in the 

market for NMS Stock ATS execution 

services. This greater competition for 

order flow could in turn incentivize 

NMS Stock ATSs to innovate— 

particularly in terms of their 

technology—so that they can attract 

more trading volume to their venue. For 

example, if the public disclosure of 

technology giving an NMS Stock ATS a 

competitive advantage results in the 

ATS losing that competitive advantage, 

the ATS could be forced to innovate and 

develop new technology or 

enhancements in order to attract more 

trading volume to its venue. However, if 

some NMS Stock ATSs cannot innovate 

fast enough to regain their competitive 

advantage in the market, orders might 

also flow away from these NMS Stock 

ATSs, and as a result, these ATSs may 

choose to cease operating as ATSs.1492

We do not have information on the 

extent to which existing NMS Stock 

ATSs or potentially new ATSs rely on 

a technological advantage, such as a 

unique matching methodology, to attract 

order flow. Nor do we have information 

regarding the ability of NMS Stock ATSs 

to innovate and replace a competitive 

advantage it might lose. Additionally, 

commenters did not provide any further 

information or analysis that would 

allow us to estimate at what rate NMS 

Stock ATSs innovate. Therefore, we 

cannot quantify the ultimate effect the 

adopted amendments will have on 

innovation. 

As discussed above, we have revised 

the adopted Form ATS–N requests to 

not seek disclosure of certain 

information that could be proprietary or 

commercially sensitive, such as routing 

tables or numerical order flow 

segmentation metrics.1493 Additionally, 

in response to commenters’ concerns 

that making Form ATS–N material 

amendments public before the 

expiration of the Commission’s 30-day 

calendar review period, at which point 

material changes could be implemented, 

could reduce the incentives for ATSs to 

innovate or be confusing or misleading 

to the public,1494 we are modifying the 

proposed rules for making Form ATS– 

N material amendments public. Under 

the adopted amendments, the entirety of 

the material amendment, as amended, 

will be made public by the Commission 

following the Commission’s 30-calendar 

day review period.1495 We believe that 

these changes, relative to the Proposal, 

will reduce the likelihood that details 

concerning an NMS Stock ATS’s 

technological innovations are disclosed 

to competitors before the ATS has a 

chance to implement them. Relative to 

the Proposal, the ATS might be able to 

derive greater benefits from new 

innovations, which could increase the 

incentives for NMS Stock ATSs to 

innovate. 

Four commenters state that the 

proposed process for declaring a Form 

ATS–N ineffective would reduce the 

incentives to develop new technological 

innovations.1496 One of these 

commenters expresses concern that the 

process will be used to delay the 

effectiveness of NMS Stock ATSs whose 

features, while meeting regulatory 

requirements, do not meet current 

industry norms.1497 The Commission’s 

review process for declaring a Form 

ATS–N ineffective could affect the 

incentives of an existing or potentially 

new NMS Stock ATS to innovate. As 

discussed above,1498 an ineffectiveness 

declaration could impose costs on an 

NMS Stock ATS—such as costs from 

having to cease operations, roll back a 

change in operations, or delay the start 

of operations. The uncertainty regarding 

whether a Form ATS–N featuring a new 

innovation will be declared ineffective 

could discourage or delay existing and 

potentially new NMS Stock ATSs from 

developing or introducing new 

technological innovations. Additionally, 

the extended review for an initial Form 

ATS–N could raise the barriers to entry 

for new NMS Stock ATSs and reduce 

the incentives for potentially new ATSs 

to bring new innovations to the 

market.1499 However, as discussed in 

detail above,1500 the Commission’s 

review of Form ATS–N disclosures will 

not focus on the merits of the Form 

ATS–N disclosures. Therefore, to the 

extent the disclosures are complete and 

comprehensible, the Commission’s 

review process for a Form ATS–N filing 

that contains innovative features that do 

not meet current industry norms should 

not take longer or result in an increased 

chance of the Form ATS–N being 

declared ineffective. 

b. Efficiency 

As discussed above, the heightened 

disclosure requirements for NMS Stock 

ATSs might cause some NMS Stock 

ATSs to cease operating as ATSs and 

either shut down their operation or 

instead operate as non-ATS OTC 

execution venues, such as an OTC 

trading venue in which the brokerdealer operator internalizes order flow. 

This could affect competition in the 

market for NMS Stock execution 

services.1501 If it is the case that the 

NMS Stock ATSs that cease operating as 


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1502See Proposal, supra note 2, at 81128–29. 

1503See Luminex Letter at 2–5; MFA/AIMA 

Comment Letter at 2; Morgan Stanley Letter at 2; 

PDQ Letter at 2; SIFMA Comment Letter at 3; 

STANY Letter at 3. 

1504See Proposal, supra note 2, at 81129. 

1505See Liquidnet Letter at 8; Luminex Letter at 

2; Morgan Stanley at 2; SSGA Letter at 2; STANY 

Letter at 3; UBS Letter at 7. 

1506See Proposal, supra note 2, at 81129. 

ATSs are the ones that have worse 

execution quality, the surviving NMS 

Stock ATSs might enhance execution 

quality and allow market participants to 

transact at lower prices. If more order 

flow is directed towards these 

remaining NMS Stock ATSs, there could 

be a higher likelihood that the orders of 

buyers and sellers on an NMS Stock 

ATS would interact and execute, which 

could improve liquidity. It is also 

possible that the enhanced disclosure 

from NMS Stock ATSs might result in 

more order flow migrating towards 

national securities exchanges, which 

might foster greater order interaction 

between buyers and sellers on a national 

securities exchange, thereby improving 

price discovery. Moreover, because 

some NMS Stock ATSs operate as 

crossing networks and derive their 

prices from national securities 

exchanges, greater price discovery on a 

national securities exchange could spill 

over to affect the execution prices on the 

surviving NMS Stock ATSs and thereby 

potentially reduce market participants’ 

trading costs. Additionally, given the 

fairly standardized set of information 

that will be publicly disclosed on Form 

ATS–N and that trading in the market 

by NMS Stock ATSs might in fact be 

concentrated on fewer NMS Stock ATSs 

as a result of the amendments, market 

participants might process, and react 

more quickly to, information pertaining 

to changes in an NMS Stock ATS’s 

operations when evaluating potential 

trading venues. As such, the 

amendments to Regulation ATS might 

improve market efficiency. 

c. Capital Formation 

Under the adopted amendments, 

market participants would be aware of 

which NMS Stock ATSs offer better 

execution services or better protection 

against the dissemination of their nonpublic trading information, and as a 

result, these NMS Stock ATSs could 

attract even more order flow. 

Furthermore, to the extent the adopted 

amendments appropriately calibrate the 

level of transparency between NMS 

Stock ATSs and national securities 

exchanges, this would foster greater 

competition for order flow of NMS 

stocks between those trading platforms. 

Even if some NMS Stock ATSs cease 

operating as ATSs, we believe the 

enhanced disclosure requirements of the 

adopted amendments will assist market 

participants in obtaining best execution 

of their orders. This could lead to lower 

spreads and thereby foster greater 

capital formation and increased market 

liquidity relative to the baseline. 

D. Reasonable Alternatives 

1. Require NMS Stock ATSs to Publicly 

Disclose Current Form ATS 

We could allow NMS Stock ATSs to 

continue to describe their operations on 

current Form ATS, but make Form ATS 

public either by posting it on the 

Commission’s website or requiring NMS 

Stock ATSs to publicly disclose their 

initial operation reports, amendments, 

and cessation of operations on Form 

ATS. Non-NMS Stock ATSs’ Form ATS 

filings would continue to remain 

confidential. 

As described in detail in the Proposal, 

this alternative would lower the cost of 

compliance for current and future NMS 

Stock ATSs compared to the adopted 

amendments, but market participants 

would continue to receive limited 

information regarding how orders 

interact, match, and execute on NMS 

Stock ATSs and the ATS-related 

activities of NMS Stock ATSs’ brokerdealer operators and their affiliates.1502

Public disclosure of Form ATS could 

have some harmful effects on the 

competitive dynamics of NMS Stock 

ATSs; however, such effects would 

likely be smaller than those expected 

under the adopted amendments. 

Regulators’ oversight of NMS Stock 

ATSs under this alternative would not 

be improved compared to the baseline, 

as it would under the adopted 

amendments. 

Six commenters disagree with our 

analysis of this alternative.1503 These 

commenters suggest that we could 

achieve our transparency goals by 

requiring all ATS operators to publicly 

disclose Form ATS. For the reasons 

discussed above and in the Proposal, we 

continue to believe that this alternative 

would reduce the benefits that would 

accrue to market participants as 

compared to the adopted amendments. 

2. Require Form ATS–N But Deem 

Information Confidential 

We could require NMS Stock ATSs to 

file Form ATS–N with the Commission, 

but not make it publicly available. Form 

ATS–N would include detailed 

disclosures about the NMS Stock ATS’s 

operations and the ATS-related 

activities of its broker-dealer operator 

and its affiliates, and the Commission 

could declare filings on Form ATS–N 

ineffective. As described in detail in the 

Proposal,1504 we believe that this 

alternative would improve the quality of 

NMS Stock ATSs’ disclosures and 

strengthen the Commission’s oversight 

of NMS Stock ATSs. However, this 

alternative would not make NMS Stock 

ATSs’ operations more transparent for 

market participants. 

No commenters directly remarked on 

this alternative, and we continue to 

believe that this alternative would entail 

fewer benefits to market participants as 

compared to the adopted amendments, 

because it would not make NMS Stock 

ATSs’ operations more transparent for 

market participants. However, a number 

of commenters suggest we take a tiered 

public disclosure approach and not 

publicly disclose certain information on 

Form ATS–N that is potentially 

sensitive and of a proprietary nature.1505

We believe that a tiered public 

disclosure system for Form ATS–N 

would still produce the benefits from 

the improved quality of NMS Stock 

ATSs’ disclosures and the information 

about the ATS-related activities of the 

broker-dealer operator and its affiliates 

described above. Additionally, the 

public disclosure of a portion of Form 

ATS–N could improve transparency and 

provide market participants with more 

information about an NMS Stock ATS’s 

operations, which would lower search 

costs relative to the baseline. Because all 

of the information on Form ATS–N 

would not be made public, the benefits 

of increased transparency could be 

lower under a tiered public disclosure 

approach than they would be under the 

adopted amendments. Therefore, search 

costs may be higher and market 

participants may make less informed 

decisions regarding where to route their 

orders and therefore result in lower 

execution quality under a tiered public 

disclosure approach than they would 

obtain under the adopted amendments. 

However, the public disclosure costs to 

ATSs may be lower under a tiered 

public disclosure approach, which 

could result in lower barriers to entry 

for new NMS Stock ATSs and fewer 

Legacy NMS Stock ATSs ceasing to 

operate at ATSs than under the adopted 

amendments. 

3. Require NMS Stock ATSs to Publicly 

Disclose Form ATS–N But Not Declare 

Form ATS–N Ineffective 

We could require NMS Stock ATSs to 

file Form ATS–N and make it public, 

but continue to use the current notice 

regime instead of the process for 

declaring Form ATS–N ineffective. As 

described in detail in the Proposal,1506


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1507See Consumer Federation of America Letter 

at 2, 10–11; Fidelity Letter at 9. 1508See supra Section IV.A.2 (‘‘Rule 304(a)(1)(ii): 

Commission Review Period’’) 1509See Proposal, supra note 2, at 81129. 1510See id. 

1511See CFA Institute Letter at 3. 

1512See STANY Letter at 2. 

1513See Proposal, supra note 2, at 81129–30. 

1514Newly registered national securities 

exchanges must establish appropriate surveillance 

and disciplinary mechanisms, and as a result incur 

start-up costs associated with such obligations, such 

as writing a rule book. See Regulation ATS 

Adopting Release, supra note 3, at 70907. 

Furthermore, the cost of acquiring the necessary 

assets and the operating funds to carry out the dayto-day functions of a national securities exchange 

are significant. 

1515See Proposal, supra note 2, at 81130. 

1516See supra note 15. 

1517See SIFMA Letter at 8 n.16. 

1518See supra note 259. 

relative to the adopted rule, the 

alternative of maintaining the current 

notice regime would lower demand for 

Commission and staff resources, could 

reduce costs for NMS Stock ATSs, and 

could lower the barriers to entry for new 

NMS Stock ATSs. However, it would be 

more difficult for the Commission to 

exercise its oversight responsibilities 

and the alternative would not provide 

the same level of protection to market 

participants as the adopted 

amendments. 

Two commenters disagree with our 

analysis of this alternative, and 

expressed concerns that the 

effectiveness determination of Form 

ATS–N would be a burdensome process 

for the Commission.1507 They suggest 

that these potential costs outweigh the 

benefits of the review process under the 

adopted amendments. We believe that 

the review process will contribute 

towards costs in terms of Commission 

resources. However, for the reasons 

discussed above, we continue to believe 

that the review process will provide 

benefits in terms of mitigating 

inaccurate and incomplete disclosures, 

which could improve investor 

protection.1508

4. Initiate Differing Levels of Public 

Disclosure Depending on NMS Stock 

ATS Characteristics 

We could require different levels of 

disclosure among NMS Stock ATSs 

based on dollar trading volume. As 

described in detail in the Proposal,1509

this could reduce compliance costs 

relative to the adopted amendments. 

However, because a portion of the 

implementation costs are fixed and 

because certain sections of Form ATS– 

N would not be applicable to smaller 

NMS Stock ATSs that are not operated 

by multi-service broker-dealer operators 

and do not engage in other brokerage or 

dealing activities, any reduction in 

compliance costs smaller NMS Stock 

ATSs might experience under this 

alternative could be small. 

At the same time, this alternative 

could result in a competitive advantage 

for small NMS Stock ATSs, because it 

could give them more time to innovate 

without having to disclose such 

innovation to competitors.1510 This 

could give small NMS Stock ATSs an 

advantage in attracting order flow 

relative to large NMS Stock ATSs, 

which could spill over to market 

participants that execute on these ATSs, 

by increasing the execution quality of 

their trades. Nonetheless, because 

broker-dealer operators could have the 

incentive to allocate order flow to 

multiple NMS Stock ATSs to avoid 

reaching threshold volumes, this 

alternative could create some 

information opacity in the market, 

which could lead to lower execution 

quality for market participants relative 

to the adopted amendments. 

One commenter expressed concerns 

about applying different levels of 

disclosure based on metrics such as 

trading volume, mentioning that Form 

ATS–N is not sufficiently onerous 

relative to Form ATS to justify smallscale exemptions.1511 Contrary to this 

concern, another commenter stated that 

the disclosure requirements should 

apply to larger ATSs with a ‘‘substantial 

market footprint’’ to avoid discouraging 

competitive innovations among NMS 

Stock ATSs.1512 Although compliance 

costs may be lessened if small stock 

ATSs are required to provide less 

disclosure on Form ATS–N, (i.e., ATSs 

with lower trading volume), this 

reduction in compliance costs could be 

small. 

Requiring less disclosure from small 

NMS Stock ATSs might also result in 

greater innovation relative to the 

adopted amendments. However, we 

continue to believe that requiring less 

disclosure from low-volume NMS Stock 

ATSs could reduce the benefits market 

participants receive from the greater 

transparency about the operations of 

NMS Stock ATSs and the ATS-related 

activities of their broker-dealer 

operators and their affiliates. This could 

increase market participant search costs 

when evaluating potential NMS stock 

trading venues, which could result in 

market participants making less 

informed decisions about which trading 

venue aligns with their investing or 

trading objectives. 

5. Require NMS Stock ATSs To Register 

as National Securities Exchanges and 

Become SROs 

We could eliminate the exemption 

from the definition of ‘‘exchange’’ for 

NMS Stock ATSs under Exchange Act 

Rule 3a1–1(a) so that an NMS Stock 

ATS would be required to register as a 

national securities exchange and 

become an SRO. While commenters did 

not remark on this alternative, we 

continue to believe that, as described in 

detail in the Proposal,1513 this 

alternative would provide market 

participants with more information 

about priority, order interaction, 

display, and execution procedures, 

which would help them make better 

informed decisions about where to route 

their orders for best execution. 

Competition among and between 

trading venues could increase, leading 

to greater market liquidity and market 

efficiency. Further, this alternative 

could strengthen Commission oversight, 

thus benefitting market participants. 

However, this alternative would 

create high startup costs and high 

ongoing operational costs for NMS 

Stock ATSs compared to the adopted 

amendments.1514 We continue to 

believe that these costs to NMS Stock 

ATSs would be significant. 

6. Discontinue Quarterly Volume 

Reports on Form ATS–R 

We could amend Regulation ATS so 

that NMS Stock ATSs would no longer 

be required to file quarterly volume 

reports on Form ATS–R. As described in 

detail in the Proposal,1515 we believe 

this alternative could result in reduced 

costs for NMS Stock ATSs, because they 

would no longer be required to prepare 

a quarterly Form ATS–R in addition to 

their Form ATS–N. However, some 

competitively sensitive information 

contained on Form ATS–R, such as the 

ATS’s subscriber list and the list of 

persons granted, denied, or limited 

access during the reporting period— 

which is not solicited under adopted 

Form ATS–N, would be made public on 

Form ATS–N. Making such information 

public could harm the NMS Stock ATS 

as well as persons denied access. 

One commenter suggested that in 

light of information on FINRA’s website 

regarding ATSs,1516 and the detailed 

disclosures in periodic disclosures that 

would be required by proposed Form 

ATS–N, we should no longer require an 

NMS Stock ATS to file Form ATS– 

R.1517 However, this commenter did not 

suggest that the information that is 

contained on Form ATS–R and not 

included on FINRA’s website or Form 

ATS–N,1518 such as the ATS’s 

subscriber list and the list of persons 

granted, denied, or limited access 

during the reporting period, should be 


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1519See supra Section III.B.5 (‘‘Rule 301(b)(9): 

Form ATS–R Quarterly Reports’’). 

1520See Proposal, supra note 2, at 81130. 

1521Alternatively, current broker-dealer operators 

of ATSs that trade NMS stocks may choose to spinoff or sell their ATS rather than cease operations. 

The expected number of broker-dealer operators 

selling their ATSs at once could affect the value the 

broker-dealer operator could receive from the sale 

and, as such, could factor into the decision of 

whether to spin-off, sell, or fold their ATS. 

1522See Better Markets Letter at 5–6; Consumer 

Federation of America Letter at 7–8; HMA Letter at 

1. 

1523See supra Section X.C.4.a.i. 

1524See supra Section II.C. 

1525 17 CFR 242.301(b)(5). 

1526As discussed above in Section II.C, the 

requirements of Rule 301(b)(5) that prohibit or limit 

discriminatory practices of ATSs only apply to 

NMS Stock ATSs that cross the fair access 

threshold, and then, apply only with respect to the 

NMS stocks in which an ATS crosses the threshold. 

1527See Proposal, supra note 2, at 81131. 

1528See Citadel Letter at 2–3. 

1529See supra Section II.C. 

1530See supra Section X.B.6.a. 

included in Form ATS–N. If ATSs were 

no longer required to file Form ATS–R 

and this information was not made 

available in Form ATS–N, then the 

Commission could lose efficient access 

to information available in the form that 

helps it oversee and monitor the trading 

activity of NMS Stock ATSs.1519 This 

loss of efficiency could reduce the 

benefits of Commission oversight, 

which could reduce investor protection 

relative to today. 

7. Require NMS Stock ATSs To Operate 

as Limited Purpose Entities 

We could amend Regulation ATS to 

require an NMS Stock ATS to operate as 

a ‘‘stand-alone’’ entity, which would 

exist only to operate the ATS and have 

no affiliation with any broker-dealer 

that seeks to execute proprietary or 

agency orders on the NMS Stock ATS. 

Under this alternative, NMS Stock ATSs 

would be required to publicly disclose 

Form ATS–N, Form ATS–N 

amendments, and notices of cessation 

on Form ATS–N, and would be limited 

purpose entities that could not engage 

in any activities other than operation of 

the ATS. This alternative would 

prohibit the broker-dealer operator of 

the NMS Stock ATS from engaging in 

any other broker-dealer activity, and 

would consequently prohibit the 

operation of an NMS Stock ATS by a 

multi-service broker-dealer. 

While commenters did not remark on 

this alternative, we continue to believe 

that, as described in detail in the 

Proposal,1520 the benefit of this 

alternative would be to eliminate 

potential conflicts of interest, but that 

this alternative might discourage brokerdealers from creating and operating 

innovative NMS Stock ATS platforms, 

and instead drive them to execute their 

own proprietary trades internally on 

their other broker-dealer systems. In 

addition, many broker-dealers might 

choose to file a cessation of operations 

report and shut down the operations of 

their NMS Stock ATS,1521 resulting in 

similar (though potentially more severe) 

effects on the competitive dynamics of 

the ATS market as under the adopted 

amendments. 

8. Prohibit Broker-Dealer Operators and 

Affiliates From Trading on the NMS 

Stock ATS 

Several commenters believe that the 

increased disclosure requirements on 

Form ATS–N concerning the ATSrelated activities of the broker-dealer 

operator and its affiliates do not do 

enough to reduce conflicts of interest 

and suggested that we prohibit conflicts 

of interest altogether on NMS Stock 

ATSs.1522 Under this alternative, the 

broker-dealer operator could continue to 

act as a broker-dealer operator of an 

NMS Stock ATS and engage in non-ATS 

functions, but would be subject to new 

requirements designed to limit potential 

conflicts of interest. These requirements 

would include a prohibition on trading 

on the NMS Stock ATS by the brokerdealer operator and its affiliates. 

We believe that banning conflicts of 

interest, as opposed to increasing 

disclosure of relationships between the 

ATS and the broker-dealer operator and 

the broker-dealer operator’s affiliates, 

could be potentially harmful. Multiservice broker-dealers, that is, brokerdealers who have operations and 

activities in addition to the ATS may be 

more prone to having conflicts of 

interest, and therefore, banning conflicts 

of interest could result in these brokerdealers ceasing to operate their 

ATSs.1523 Therefore, we believe that 

this approach suggested by these 

commenters could have substantially 

deleterious effects on liquidity 

provision, and for this reason, we are 

maintaining our approach in the 

adopted amendment. 

9. Lower the Fair Access Threshold for 

NMS Stock ATSs 

NMS Stock ATSs are not required to 

provide fair access to the services of the 

NMS Stock ATS unless the ATS reaches 

the 5% trading volume threshold in a 

stock under Rule 301(b)(5) of Regulation 

ATS.1524 We could lower the fair access 

threshold under Rule 301(b)(5) of 

Regulation ATS 1525 for NMS Stock 

ATSs to a level sufficiently low that 

most NMS Stock ATSs would be 

prohibited from engaging in many 

discriminatory practices.1526

As described in detail in the 

Proposal,1527 we believe that there 

would be fewer benefits under this 

alternative because the fair access 

requirements would apply only to the 

NMS stocks for which the NMS Stock 

ATS had crossed the fair access 

threshold. We could address that 

situation by proposing further 

amendments to the fair access 

requirements. However, we believe that 

the disclosures that would be required 

by Form ATS–N requirements would be 

a cost effective and simpler approach 

than proposing fundamental revisions to 

the fair access requirements that would 

achieve the aim of providing market 

participants with information to better 

assess NMS Stock ATSs as potential 

trading venues. 

No commenters directly commented 

on this alternative, and we continue to 

believe it would result in fewer benefits 

than the adopted amendments. 

However, one commenter recommended 

as an alternative that, in addition to the 

adopted amendments, we should also 

eliminate the 5% fair access threshold 

for NMS Stock ATSs, i.e., reduce the fair 

access threshold to zero, because the 

current volume threshold creates a 

competitive imbalance between 

exchanges—which are subject to fair 

access requirements—and NMS Stock 

ATSs.1528 Under the commenter’s 

alternative, if the fair access threshold 

were eliminated, then all NMS Stock 

ATSs would need to meet the 

requirements of Rule 301(b)(5) that 

prohibit or limit discriminatory 

practices of ATSs.1529 Because the 

commenter’s alternative would include 

the adopted amendments and the public 

disclosure of Form ATS–N, the 

operational transparency for NMS Stock 

ATSs would still increase, bringing it 

more in line with the operational 

transparency for national securities 

exchanges. In addition, imposing fair 

access requirements on all NMS Stock 

ATSs could further reduce conflicts of 

interest on ATSs, relative to the adopted 

amendments, because an ATS might not 

be able to offer preferential treatment to 

certain subscribers. However, the 

increased costs of fair access 

compliance could cause more ATSs to 

cease operating as ATSs. More ATSs 

ceasing to operate as ATSs may cause an 

increase in the internalization of order 

flow, which could reduce price 

informativeness and increase trading 

costs.1530


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1531Two commenters agree with our assessment 

under this alternative that eliminating the 

requirement for NMS Stock ATSs to disclose 

aggregate platform-wide order flow and execution 

statistics that the ATS publishes or otherwise 

provides to one or more subscribers that are not 

disclosed pursuant to Rule 605 of Regulation NMS 

could be beneficial to subscribers because it may 

motivate NMS Stock ATSs to continue to provide 

order flow and execution statistics to subscribers. 

See MFA/AIMA Letter at 5; SIFMA Letter at 27. 

The same commenters also suggest that 

eliminating these requirements could result in 

ATSs continuing to send customized reports and 

bespoke statistics to their clients. See MFA/AIMA 

Letter at 5; SIFMA Letter at 27. Under the adopted 

amendments disclosure requirements under Part III, 

Item 26 would not apply when an NMS Stock ATS 

provides a participant with individualized or 

custom reports containing data relating to that 

participant’s specific usage of the ATS. 

1532One commenter recommends that we 

structure Form ATS–N so that it breaks out the 

required information on NMS Stock ATS operations 

in a format that is comparable across ATSs. It also 

suggests we might also consider ways to present 

information that would improve the readability and 

navigability of disclosure through the use of 

technology such as hyperlinks and/or XBRL 

technology. See Fidelity Letter at 5. 

1533 5 U.S.C. 601 et seq. 

1534 5 U.S.C. 605(b). 

1535Although Section 601(b) of the RFA defines 

the term ‘‘small entity,’’ the statute permits agencies 

to formulate their own definitions. We have 

adopted definitions for the term ‘‘small entity’’ for 

the purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this rulemaking, are set forth in Rule 0– 

10 under the Exchange Act, 17 CFR 240.0–10. See 

Exchange Act Release No. 18451 (January 28, 1982), 

47 FR 5215 (February 4, 1982) (File No. AS–305). 

1536 17 CFR 240.17a–5(d). 

1537See 17 CFR 240.0–10(c). See also 17 CFR 

240.0–10(i) (providing that a broker or dealer is 

affiliated with another person if: such broker or 

dealer controls, is controlled by, or is under 

common control with such other person; a person 

shall be deemed to control another person if that 

person has the right to vote 25 percent or more of 

the voting securities of such other person or is 

entitled to receive 25 percent or more of the net 

profits of such other person or is otherwise able to 

direct or cause the direction of the management or 

policies of such other person; or such broker or 

dealer introduces transactions in securities, other 

than registered investment company securities or 

interests or participations in insurance company 

separate accounts, to such other person, or 

introduces accounts of customers or other brokers 

or dealers, other than accounts that hold only 

registered investment company securities or 

interests or participations in insurance company 

separate accounts, to such other person that carries 

such accounts on a fully disclosed basis). 

10. Requirements To Disclose Aggregate 

Platform-Wide Order Flow and 

Execution Statistics to all Subscribers 

We could eliminate the requirement 

for NMS Stock ATSs to disclose 

aggregate platform-wide order flow and 

execution statistics that the ATS 

publishes or otherwise provides to one 

or more subscribers that are not 

disclosed pursuant to Rule 605 of 

Regulation NMS from Form ATS–N. An 

advantage of this approach is that NMS 

Stock ATSs may be motivated to 

continue to provide order flow and 

execution statistics to subscribers under 

this alternative.1531 However, relative to 

the adopted amendments, this approach 

may fail to mitigate the problem of 

differential access to information about 

ATS operations and activities across 

market participants, resulting in some 

market participants making lessinformed decisions about how to obtain 

best execution for themselves and their 

clients. 

11. Specify Alternative Structured 

Formats for Form ATS–N 

We could specify alternative 

structured formats such as Inline XBRL, 

or FIXML.1532 The benefit of Inline 

XBRL is that it provides more 

sophisticated validation, presentation 

and reference features for filers and 

users. However, we do not believe that 

Inline XBRL is yet in common use by all 

entities that would be filing Form ATS– 

N. To use Inline XBRL with Form ATS– 

N, the Commission would have to 

design a new Commission-specific 

taxonomy for the Form ATS–N 

disclosures. While the Inline XBRL, 

FIXML, and XML formats would all 

require the use of an XML-based 

schema, Inline XBRL would require the 

additional familiarity with the 

Commission-specific taxonomy that is 

not necessary for the relatively simple 

disclosure requirements of Form ATS– 

N. FIXML is a format designed and used 

for expressing trading information, and 

while familiar to NMS Stock ATSs, it is 

not widely used by the public. The end 

users of Form ATS–N data will likely 

incur upfront costs to learn and use 

FIXML, unlike the widely used and 

freely available XML format. For these 

reasons, we believe that the XML format 

would minimize costs relative to filers 

having to file Form ATS–N using these 

other structured formats. 

12. Specify Other Filings Methods for 

Form ATS–N 

We could require NMS Stock ATSs to 

use the EFFS/SRTS system currently 

used for other NMS filings instead of 

EDGAR. While commenters did not 

remark on this alternative, the primary 

benefit of this alternative approach 

would be that ATSs would likely be 

familiar with the web fillable forms and 

related filing process on EFFS/SRTS. 

Relative to the adopted amendments, 

learning the EDGAR filing process may 

pose an initial transition burden, 

although the larger NMS Stock ATSs 

may already be familiar with the 

EDGAR filing process, and the 

completion of web fillable forms in 

EDGAR would be very similar to the 

EFFS/SRTS experience without the 

additional burden of an annual digital 

signature certification. Finally, the time 

and effort of filing as proposed would be 

incrementally more costly to NMS Stock 

ATSs because each narrative response 

would have to be individually uploaded 

as a separate exhibit, as opposed to 

providing all of their narrative 

responses within one structured XML 

file or completing all narrative 

responses in one web-fillable form. 

Moreover, because the EFFS system 

does not support the open-source XML 

format, but rather a proprietary XML 

implementation called XFDL, the EFFS 

system has fewer validation capabilities 

than EDGAR, particularly at the element 

level. As a result, some NMS Stock 

ATSs might inadvertently submit 

incomplete or inconsistently formatted 

information that is not discovered until 

after Commission staff review, which 

would then require the NMS Stock ATS 

to spend additional time to refile the 

information. We believe this would 

result in extra costs in filing Form ATS– 

N through EFFS/SRTS relative to 

requiring NMS Stock ATSs to filing 

Form ATS–N through EDGAR. 

XI. Regulatory Flexibility Act 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) 1533 requires Federal agencies, 

in promulgating rules, to consider the 

impact of those rules on small entities. 

We certified in the Proposal, pursuant to 

Section 605(b) of the RFA,1534 that the 

amendments to Regulation ATS would 

not, if adopted, have a significant 

economic impact on a substantial 

number of small entities. We included 

this certification in Section XV of the 

Proposing Release. Although we 

encouraged written comments regarding 

this certification, no commenters 

responded to this request. 

For purposes of Commission 

rulemaking in connection with the 

RFA,1535 a small entity includes a 

broker or dealer that: (1) Had total 

capital (net worth plus subordinated 

liabilities) of less than $500,000 on the 

date in the prior fiscal year as of which 

its audited financial statements were 

prepared pursuant to Rule 17a–5(d) 

under the Exchange Act,1536 or, if not 

required to file such statements, a 

broker-dealer with total capital (net 

worth plus subordinated liabilities) of 

less than $500,000 on the last day of the 

preceding fiscal year (or in the time that 

it has been in business, if shorter); and 

(2) is not affiliated with any person 

(other than a natural person) that is not 

a small business or small 

organization.1537

All ATSs, including NMS Stock 

ATSs, would continue to have to 


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38910 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

1538 17 CFR 242.301(b)(1). 1539As estimated in the PRA, we estimate an 

average total cost of $41,689.10 for the initial hour 

burden of complying with Rules 301(b)(2)(viii) and 

304 of Regulation ATS (including completing Form 

ATS–N). The burden hours associated with Part II 

of Form ATS–N is 29 hours. See supra note 1228. 

We estimate that ATSs that are small entities would 

likely need to complete approximately half of Part 

II. Thus, the reduction of 14.5 burden hours (29 

hours × 0.5 = 14.5 hours) would result in a cost 

savings of $5,155 for each small entity compared to 

the average total cost estimate. (Attorney 7.5 hours 

× $406) + (Compliance Manager 6.0 hours × $302) 

+ (Senior Marketing Manager 1 hour × $298) = 

$5,155. 

1540For example, based on Commission 

experience, less operationally complex ATS may 

not need to respond to all or part of the requests 

in Part III of Form ATS–N, such as Item 5 (Means 

of Entry), Item 6 (Connectivity and Co-location), 

Item 7 (Order Types and Attributes), Item 9 

(Conditional Orders and Indications of Interest), 

Item 13 (Segmentation; Notice), Item 14 (CounterParty Selection), among others. In addition, a 

smaller NMS Stock ATS is unlikely to exceed the 

volume thresholds that would subject the ATS to 

the requirements of Rule 301(b)(3) and 301(b)(5) of 

Regulation ATS, and therefore, Part III, Items 24 

and 25 would be inapplicable. These items 

represent 36 burden hours above the current 

baseline for an initial operation report on current 

Form ATS. These 36 burden hours represent a cost 

of approximately $11,846 for each ATS that would 

likely be substantially reduced for these two small 

entities. (Attorney 12.25 hours × $406) + 

(Compliance Manager 11.25 hours × $302) + (Senior 

Systems Analyst 12.5 hours × $278) = $11,846. As 

noted above, the we estimate an average total cost 

of $41,689.10 for the initial hour burden of 

complying with Rules 301(b)(2)(viii) and 304 of 

Regulation ATS (including completing Form ATS– 

N). 

1541 If the three inactive ATSs discussed above in 

this section (which we expect would not complete 

a Form ATS–N) were to complete a Form ATS–N, 

they would experience a substantially reduced 

burden in completing Form ATS–N given that they 

also are not multi-service broker-dealers, and their 

systems are less complex than other NMS Stock 

ATSs. 

1542 In the Proposal, we estimated that 15 of the 

84 ATS at that time might not have these 

procedures in writing. See Proposal, supra note 2, 

at 81093. We did not receive any comments on this 

estimate. The PRA burden for an ATS to put in 

writing its procedures protect subscribers’ 

confidential trading information, and the oversight 

procedures to ensure such safeguards and 

procedures are followed, would be approximately 8 

hours, which represents $2,910 in costs for each 

ATS. (Attorney 7 hours × $406) + (Compliance 

Clerk 1 hour × $68) = $2,910. 

register as broker-dealers.1538 We 

examined recent FOCUS data for the 41 

broker-dealers that currently operate 

ATSs that trade NMS stocks and 

concluded that no more than 5 of the 

broker-dealer operators of ATSs that 

currently trade NMS stocks had total 

capital of less than $500,000 on the last 

day of the preceding fiscal year (or in 

the time that it has been in business, if 

shorter) and were not affiliated with any 

person that is not a small business or 

small organization. Three of these five 

entities, however, never reported 

transactions in any security, including 

NMS stocks, to the Commission since 

filing an initial operations report on 

Form ATS. Therefore, we believe that it 

is unlikely that these three entities 

would complete a Form ATS–N to 

operate as an NMS Stock ATS pursuant 

to Rule 304. 

The remaining two entities include 

one broker-dealer that operates an ATS 

pursuant to an active Form ATS on file 

with the Commission and has reported 

transactions in NMS stocks to the 

Commission. The other broker-dealer 

has filed an initial operation report on 

Form ATS with the Commission and 

noticed its intention to trade NMS 

stocks; however, this ATS has not yet 

commenced operations. We do not 

believe that Rule 304, including the 

requirement for NMS Stock ATSs to file 

a Form ATS–N, will represent a 

significant economic impact on these 

two entities. Stand-alone broker-dealers 

that operate an ATS, such as these two 

entities, will have less complex ATS 

operations than multi-service brokerdealers that operate an ATS. For 

example, we believe that these two 

entities would not need to respond to all 

requests in Part II of Form ATS–N 

because they are not likely to engage in 

the same ATS-related activities as multiservice broker-dealers that operate an 

ATS. As a result, we expect that the 

burden associated with completing the 

form would be substantially lower for 

these two ATS.1539 In addition, because 

we believe that the two ATSs are 

operationally less complex than ATSs 

operated by multi-service broker-dealer 

operators, the burden to respond to the 

items under Part III of Form ATS–N 

(Manner of ATS Operations) 1540 would 

be lower than for the average NMS 

Stock ATS operated by a multi-service 

broker-dealer operator.1541

We are also amending Rule 301(b)(10) 

to require that all ATSs reduce to 

writing their safeguards and procedures 

to protect subscribers’ confidential 

trading information and their oversight 

procedures to ensure that such 

safeguards and procedures are followed. 

The amendment to Rule 301(b)(10) 

would thus apply to the 15 small 

entities that are ATSs (including NMS 

Stock and non-NMS Stock ATSs), but 

we believe that there would not be 

significant economic impact on these 

entities because, based on our 

experience, most of these ATSs already 

maintain their Rule 301(b)(10) 

safeguards and procedures in writing, 

and to the extent they do not, any 

resulting burden is small.1542

Consequently, for these reasons, for 

purposes of the RFA, we certify that the 

amendments to Regulation ATS would 

not have a significant economic impact 

on a substantial number of small 

entities. 

XII. Statutory Authority and Text of 

Amendments 

Pursuant to Exchange Act, 15 U.S.C. 

78a et seq., and particularly Sections 

[3(b), 5, 6, 11A, 15, 17(a), 17(b), 19, 

23(a), and 36 thereof (15 U.S.C. 78c, 

78k–1, 78o, 78q(a), 78q(b), 78w(a), and 

78mm)], the Commission adopts Form 

ATS–N under the Exchange Act, to 

amend Rule 3a1–1(a) and Regulation 

ATS under the Exchange Act, and to 

amend 17 CFR 200.30–33. 

List of Subjects in 17 CFR Parts 232, 

240, 242 and 249 

Brokers, Confidential business 

information, Fraud, Reporting and 

recordkeeping requirements, Securities. 

For the reasons stated in the 

preamble, title 17, chapter II of the Code 

of Federal Regulations is amended as 

follows: 

PART 232—REGULATION S–T— 

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 1. The general authority citation for 

part 232 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 

77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 

78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 

80a–30, 80a–37, 7201 et seq.; and 18 U.S.C. 

1350, unless otherwise noted. 

* * * * * 

■ 2. Amend § 232.101 by adding 

paragraph (a)(1)(xxi) to read as follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(xxi) Form ATS–N (§ 249.640 of this 

chapter). 

* * * * * 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1934 

■ 3. The general authority citation for 

part 240 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 

78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 

78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 

80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 

4, 80b–11, 7201 et seq.; and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; and Pub. L. 111–203, 939A, 124 Stat. 

1887 (2010); and secs. 503 and 602, Pub. L. 

112–106, 126 Stat. 326 (2012), unless 

otherwise noted. 

* * * * * 


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§ 240.3a1–1 [Amended] 

■ 4. Amend § 240.3a1–1 by removing 

‘‘242.303’’ from paragraphs (a)(2) and (3) 

and adding in its place ‘‘242.304’’. 

PART 242—REGULATIONS M, SHO, 

ATS, AC, NMS, AND SBSR AND 

CUSTOMER MARGIN REQUIREMENTS 

FOR SECURITY FUTURES 

■ 5. The authority citation for part 242 

continues to read as follows: 

Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 

78b, 78c, 78g(c)(2), 78i(a), 78j, 78k–1(c), 78l, 

78m, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 

78q(b), 78q(h), 78w(a), 78dd–1, 78mm, 80a– 

23, 80a–29, and 80a–37. 

■ 6. Amend § 242.300 by: 

■ a. In paragraph (f) introductory text, 

adding the phrase ‘‘the broker-dealer of’’ 

before the phrase ‘‘an alternative trading 

system’’ wherever it occurs; 

■ b. In paragraphs (f)(2) and (3), adding 

the phrase ‘‘the broker-dealer of’’ before 

the phrase ‘‘the alternative trading 

system’’; and 

■ c. Adding paragraph (k) to read as 

follows: 

§ 242.300 Definitions. 

* * * * * 

(k) NMS Stock ATS means an 

alternative trading system, as defined in 

paragraph (a) of this section, that trades 

NMS stocks, as defined in paragraph (g) 

of this section. 

■ 7. Amend § 242.301 by: 

■ a. In paragraph (a)(5), adding the 

phrase ‘‘or § 242.304’’ after the phrase 

‘‘paragraph (b) of this section’’; 

■ b. In paragraph (b)(2)(i), removing the 

phrase ‘‘, or if the alternative trading 

system is operating as of April 21, 1999, 

no later than May 11, 1999’’; 

■ c. In paragraph (b)(2)(vii), removing 

the phrase ‘‘Market Regulation, Stop 10– 

2’’ and in its place adding ‘‘Trading and 

Markets’’; 

■ d. Adding paragraph (b)(2)(viii); 

■ e. In paragraph (b)(9)(i), adding the 

word ‘‘Separately’’ before the word 

‘‘File’’ and changing the first letter of 

the word ‘‘File’’ to lower case and 

adding the phrase ‘‘for transactions in 

NMS stocks, as defined in paragraph (g) 

of this section, and transactions in 

securities other than NMS stocks’’ after 

the phrase ‘‘(§ 249.638 of this chapter)’’; 

■ f. In paragraph (b)(9)(ii), adding the 

word ‘‘Separately’’ before the word 

‘‘File’’ and changing the first letter of 

the word ‘‘File’’ to lower case and 

adding the phrase ‘‘for transactions in 

NMS stocks and transactions in 

securities other than NMS stocks’’ after 

the phrase ‘‘required by Form ATS–R’’; 

■ g. In the heading of paragraph (b)(10), 

adding the word ‘‘Written’’ before the 

phrase ‘‘Procedures to ensure the 

confidential treatment of trading 

information’’ and changing the first 

letter of the word ‘‘Procedures’’ to lower 

case; 

■ h. In paragraph (b)(10)(i) introductory 

text, adding the word ‘‘written’’ before 

the word ‘‘safeguards’’ in both instances 

and adding the word ‘‘written’’ before 

the word ‘‘procedures’’ in both 

instances; and 

■ i. In paragraph (b)(10)(ii), adding the 

word ‘‘written’’ before the word 

‘‘oversight’’ and adding the word 

‘‘written’’ before the word ‘‘safeguards’’. 

The addition reads as follows: 

§ 242.301 Requirements for alternative 

trading systems. 

* * * * * 

(b) * * * 

(2) * * * 

(viii) An NMS Stock ATS that is 

operating pursuant to an initial 

operation report on Form ATS on file 

with the Commission as of January 7, 

2019 (‘‘Legacy NMS Stock ATS’’) shall 

be subject to the requirements of 

paragraphs (b)(2)(i) through (vii) of this 

section until that ATS files an initial 

Form ATS–N with the Commission 

pursuant to § 242.304(a)(1)(iv)(A). 

Thereafter, the Legacy NMS Stock ATS 

shall file reports pursuant to § 242.304. 

An alternative trading system that trades 

NMS stocks and securities other than 

NMS stocks shall be subject to the 

requirements of § 242.304 of this 

chapter with respect to NMS stocks and 

paragraph (b)(2) of this section with 

respect to non-NMS stocks. As of 

January 7, 2019, an entity seeking to 

operate as an NMS Stock ATS shall not 

be subject to the requirements of 

paragraphs (b)(2)(i) through (vii) of this 

section and shall file reports pursuant to 

§ 242.304. 

* * * * * 

■ 8. Amend § 242.303 by: 

■ a. In paragraph (a) introductory text, 

removing ‘‘(b)(9)’’ and adding in its 

place ‘‘(b)(8)’’; 

■ b. Adding paragraph (a)(1)(v); and 

■ c. In paragraph (a)(2)(ii), adding the 

phrase ‘‘or § 242.304’’ after the phrase 

‘‘paragraph (b)(2) of § 242.301’’. 

The addition reads as follows: 

§ 242.303 Record preservation 

requirements for alternative trading 

systems. 

(a) * * * 

(1) * * * 

(v) At least one copy of the written 

safeguards and written procedures to 

protect subscribers’ confidential trading 

information and the written oversight 

procedures created in the course of 

complying with paragraph (b)(10) of 

§ 242.301. 

* * * * * 

■ 9. Add § 242.304 under the 

undesignated center heading Regulation 

ATS—Alternative Trading Systems to 

read as follows: 

§ 242.304 NMS Stock ATSs. 

(a) Conditions to the exemption. 

Unless not required to comply with 

Regulation ATS pursuant to 

§ 242.301(a), an NMS Stock ATS must 

comply with §§ 242.300 through 

242.304 (except § 242.301(b)(2)(i) 

through (vii)) to be exempt pursuant to 

§ 240.3a1–1(a)(2). 

(1) Initial Form ATS–N. (i) Filing and 

effectiveness requirement. No 

exemption is available to an NMS Stock 

ATS pursuant to § 240.3a1–1(a)(2) 

unless the NMS Stock ATS files with 

the Commission an initial Form ATS–N, 

in accordance with the conditions of 

this section, and the initial Form ATS– 

N is effective pursuant to paragraph 

(a)(1)(iii) or (a)(1)(iv)(A) of this section. 

(ii) Commission review period. (A) 

The Commission may, by order, as 

provided in paragraph (a)(1)(iii) of this 

section, declare an initial Form ATS–N 

filed by an NMS Stock ATS ineffective 

no later than 120 calendar days from the 

date of filing with the Commission, or, 

if applicable, the end of the extended 

review period. The Commission may 

extend the initial Form ATS–N review 

period for: 

(1) An additional 90 calendar days, if 

the Form ATS–N is unusually lengthy 

or raises novel or complex issues that 

require additional time for review, in 

which case the Commission will notify 

the NMS Stock ATS in writing within 

the initial 120-calendar day review 

period and will briefly describe the 

reason for the determination for which 

additional time for review is required; 

or 

(2) Any extended review period to 

which a duly authorized representative 

of the NMS Stock ATS agrees in writing. 

(B) During review by the Commission 

of the initial Form ATS–N, the NMS 

Stock ATS shall amend its initial Form 

ATS–N pursuant to the requirements of 

paragraphs (a)(2)(i)(B) and (C) of this 

section. To make material changes to its 

initial Form ATS–N during the 

Commission review period, the NMS 

Stock ATS shall withdraw its filed 

initial Form ATS–N and may refile an 

initial Form ATS–N pursuant to 

paragraph (a)(1) of this section. 

(iii) Effectiveness; Ineffectiveness 

determination. (A) An initial Form 

ATS–N, as amended, filed by an NMS 

Stock ATS will become effective, unless 

declared ineffective, upon the earlier of: 

(1) The completion of review by the 

Commission and publication pursuant 

to paragraph (b)(2)(i) of this section; or 


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(2) The expiration of the review 

period, or, if applicable, the end of the 

extended review period, pursuant to 

paragraph (a)(1)(ii) of this section. 

(B) The Commission will, by order, 

declare an initial Form ATS–N 

ineffective if it finds, after notice and 

opportunity for hearing, that such action 

is necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. If the 

Commission declares an initial Form 

ATS–N ineffective, the NMS Stock ATS 

shall be prohibited from operating as an 

NMS Stock ATS pursuant to § 240.3a1– 

1(a)(2). An initial Form ATS–N declared 

ineffective does not prevent the NMS 

Stock ATS from subsequently filing a 

new Form ATS–N. 

(iv) Transition for Legacy NMS Stock 

ATSs. (A) Initial Form ATS–N filing 

requirements. A Legacy NMS Stock ATS 

shall file with the Commission an initial 

Form ATS–N, in accordance with the 

conditions of this section, no earlier 

than January 7, 2019, and no later than 

February 8, 2019. An initial Form ATS– 

N filed by a Legacy NMS Stock ATS 

shall supersede and replace for 

purposes of the exemption the 

previously filed Form ATS of the Legacy 

NMS Stock ATS. The Legacy NMS 

Stock ATS may operate, on a 

provisional basis, pursuant to the filed 

initial Form ATS–N, and any 

amendments thereto, during the review 

of the initial Form ATS–N by the 

Commission. An initial Form ATS–N 

filed by a Legacy NMS Stock ATS, as 

amended, will become effective, unless 

declared ineffective, upon the earlier of: 

(1) The completion of review by the 

Commission and publication pursuant 

to paragraph (b)(2)(i) of this section; or 

(2) The expiration of the review 

period, or, if applicable, the end of the 

extended review period, pursuant to 

paragraph (a)(1)(iv)(B) of this section. 

(B) Commission review period; 

Ineffectiveness determination. The 

Commission may, by order, as provided 

in paragraph (a)(1)(iii) of this section, 

declare an initial Form ATS–N filed by 

a Legacy NMS Stock ATS ineffective no 

later than 120 calendar days from the 

date of filing with the Commission, or, 

if applicable, the end of the extended 

review period. The Commission may 

extend the initial Form ATS–N review 

period for a Legacy NMS Stock ATS for: 

(1) An additional 120 calendar days if 

the initial Form ATS–N is unusually 

lengthy or raises novel or complex 

issues that require additional time for 

review, in which case the Commission 

will notify the Legacy NMS Stock ATS 

in writing within the initial 120- 

calendar day review period and will 

briefly describe the reason for the 

determination for which additional time 

for review is required; or 

(2) Any extended review period to 

which a duly-authorized representative 

of the Legacy NMS Stock ATS agrees in 

writing. 

(C) Amendments to initial Form ATS– 

N. During review by the Commission of 

the initial Form ATS–N filed by a 

Legacy NMS Stock ATS, the Legacy 

NMS Stock ATS shall amend its initial 

Form ATS–N pursuant to the 

requirements of paragraphs (a)(2)(i)(A) 

through (D) of this section. 

(2) Form ATS–N amendment. (i) 

Filing requirements. An NMS Stock ATS 

shall amend a Form ATS–N, in 

accordance with the conditions of this 

section: 

(A) At least 30 calendar days, except 

as provided by paragraph (a)(2)(i)(D) of 

this section, prior to the date of 

implementation of a material change to 

the operations of the NMS Stock ATS or 

to the activities of the broker-dealer 

operator or its affiliates that are subject 

to disclosure on Form ATS–N 

(‘‘Material Amendment’’); 

(B) No later than 30 calendar days 

after the end of each calendar quarter to 

correct information that has become 

inaccurate or incomplete for any reason 

and was not required to be reported to 

the Commission as a Form ATS–N 

amendment pursuant to paragraphs 

(a)(2)(i)(A), (C), or (D) of this section 

(‘‘Updating Amendment’’); 

(C) Promptly, to correct information 

in any previous disclosure on Form 

ATS–N, after discovery that any 

information previously filed on Form 

ATS–N was materially inaccurate or 

incomplete when filed (‘‘Correcting 

Amendment’’); or 

(D) No later than seven calendar days 

after information required to be 

disclosed in Part III, Items 24 and 25 on 

Form ATS–N has become inaccurate or 

incomplete (‘‘Order Display and Fair 

Access Amendment’’). 

(ii) Commission review period; 

Ineffectiveness determination. The 

Commission will, by order, declare 

ineffective any Form ATS–N 

amendment filed pursuant to 

paragraphs (a)(2)(i)(A) through (D) of 

this section, no later than 30 calendar 

days from filing with the Commission, 

if the Commission finds that such action 

is necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors. A Form ATS–N 

amendment declared ineffective shall 

prohibit the NMS Stock ATS from 

operating pursuant to the ineffective 

Form ATS–N amendment. A Form 

ATS–N amendment declared ineffective 

does not prevent the NMS Stock ATS 

from subsequently filing a new Form 

ATS–N amendment. During review by 

the Commission of a Material 

Amendment, the NMS Stock ATS shall 

amend the Material Amendment 

pursuant to the requirements of 

paragraphs (a)(2)(i)(B) through (C) of 

this section. To make material changes 

to a filed Material Amendment during 

the Commission review period, an NMS 

Stock ATS shall withdraw its filed 

Material Amendment and must file the 

new Material Amendment pursuant to 

(a)(2)(i)(A) of this section. 

(3) Notice of cessation. An NMS Stock 

ATS shall notice its cessation of 

operations on Form ATS–N at least 10 

business days prior to the date the NMS 

Stock ATS will cease to operate as an 

NMS Stock ATS. The notice of cessation 

shall cause the Form ATS–N to become 

ineffective on the date designated by the 

NMS Stock ATS. 

(4) Suspension, limitation, and 

revocation of the exemption from the 

definition of exchange. (i) The 

Commission will, by order, if it finds, 

after notice and opportunity for hearing, 

that such action is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors, suspend for a period not 

exceeding twelve months, limit, or 

revoke the exemption for an NMS Stock 

ATS pursuant to § 240.3a1–1(a)(2) of 

this chapter. 

(ii) If the exemption for an NMS Stock 

ATS is suspended or revoked pursuant 

to paragraph (a)(4)(i) of this section, the 

NMS Stock ATS shall be prohibited 

from operating pursuant to the 

exemption pursuant to § 240.3a1–1(a)(2) 

of this chapter. If the exemption for an 

NMS Stock ATS is limited pursuant to 

paragraph (a)(4)(i) of this section, the 

NMS Stock ATS shall be prohibited 

from operating in a manner otherwise 

inconsistent with the terms and 

conditions of the Commission order. 

(b) Public disclosures. (1) Every Form 

ATS–N filed pursuant to this section 

shall constitute a ‘‘report’’ within the 

meaning of sections 11A, 17(a), 18(a), 

and 32(a) (15 U.S.C. 78k–1, 78q(a), 

78r(a), and 78ff(a)), and any other 

applicable provisions of the Act. 

(2) The Commission will make public 

via posting on the Commission’s 

website, each: 

(i) Effective initial Form ATS–N, as 

amended; 

(ii) Order of ineffective initial Form 

ATS–N; 

(iii) Form ATS–N amendment to an 

effective Form ATS–N: 

(A) Material Amendments: The cover 

page of the Material Amendment will be 

made public by the Commission upon 

filing and, unless the Commission 

declares the Material Amendment 


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Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 38913 

ineffective, the entirety of the Material 

Amendment, as amended, will be made 

public by the Commission following the 

expiration of the review period pursuant 

to paragraph (a)(2)(ii) of this section. 

(B) Updating, Correcting, and Order 

Display and Fair Access Amendments: 

The entirety of Updating, Correcting, 

and Order Display and Fair Access 

Amendments will be made public by 

the Commission upon filing. 

Notwithstanding the foregoing, an 

Updating or Correcting Amendment 

filed to a Material Amendment will be 

made public by the Commission 

following the expiration of the review 

period for such Material Amendment 

pursuant to paragraph (a)(2)(ii) of this 

section. 

(iv) Order of ineffective Form ATS–N 

amendment; 

(v) Notice of cessation; and 

(vi) Order suspending, limiting, or 

revoking the exemption for an NMS 

Stock ATS from the definition of an 

‘‘exchange’’ pursuant to § 240.3a1– 

1(a)(2) of this chapter. 

(3) Each NMS Stock ATS shall make 

public via posting on its website a direct 

URL hyperlink to the Commission’s 

website that contains the documents 

enumerated in paragraph (b)(2) of this 

section. 

(c) Form ATS–N disclosure 

requirements. (1) An NMS Stock ATS 

must file a Form ATS–N in accordance 

with the instructions therein. 

(2) Any report required to be filed 

with the Commission under this section 

shall be filed on Form ATS–N, and 

include all information as prescribed in 

Form ATS–N and the instructions 

thereto. Such document shall be 

executed at, or prior to, the time Form 

ATS–N is filed and shall be retained by 

the NMS Stock ATS in accordance with 

§§ 242.303 and § 232.302 of this chapter, 

and the instructions in Form ATS–N. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 10. The general authority citation for 

part 249 continues to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b), Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3), Pub. L. 112–106, 126 Stat. 309 

(2012); Sec. 107, Pub. L. 112–106, 126 Stat. 

313 (2012), and Sec. 72001, Pub. L. 114–94, 

129 Stat. 1312 (2015), unless otherwise 

noted. 

* * * * * 

■ 11. Add § 249.640 to subpart G to read 

as follows: 

§ 249.640 Form ATS–N, information 

required of NMS Stock ATSs pursuant to 

§ 242.304(a) of this chapter. 

This form shall be used by every NMS 

Stock ATS to file required reports under 

§ 242.304(a) of this chapter. 

Note: The text of Form ATS–N will not 

appear in the Code of Federal Regulations. 

BILLING CODE 8011–01–P 


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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE MERITS OR ACCURACY OF 

THE DISCLOSURES IN THIS FILING. 

United States Securities and Exchange Commission 

Washington, DC 

FORMATS-N 

Intentional Misstatements or Omissions of Facts May Constitute Criminal Violations 

See 18 U.S.C.1001 and 15 U.S.C. 78ff(a) 

File No: 

{NMS Stock A TS} is making this filing pursuant to the 

Rule 304 under the Securities Exchange Act of 1934 

• Does the NMS Stock ATS currently operate pursuant to a FormATS? 

YesD NoD 

Type of Filing (select one) 

D Initial Form ATS-N 

D Material Amendment 

D Updating Amendment 

D Correcting Amendment 

D Order Display and 

Fair Access Amendment 

Rule 304(a)(l)(i) 

Rule 304(a)(2)(i)(A) 

Rule 304(a)(2)(i)(B) 

Rule 304(a)(2)(i)(C) 

Rule 304(a)(2)(i)(D) 

• Statement about the Form ATS-N Amendment pursuant to Instruction A.7(g) of this 

form: 

• Provide the EDGAR accession number for the Form A TS-N filing to be amended: 

D Notice of Cessation Rule 304(a)(3) 

• Date the NMS Stock ATS will cease to operate: mm/ddlyyyy 

D Withdrawal of Form ATS-N filing 

Provide the EDGAR accession number for the Form ATS-N filing to be withdrawn: 
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Part I: Identifying Information 

1. Is the organization, association, Person, group of Persons, or system filing the Form ATS-N a 

broker-dealer registered with the Commission? 

YesD NoD 

2. Full name of registered broker-dealer of the NMS Stock ATS ("Broker-Dealer Operator") as 

stated on Form BD: 

3. Full name(s) ofNMS Stock ATS under which business is conducted, if different: 

4. Provide the SEC file number and CRD number ofthe Broker-Dealer Operator: 

a. SEC File No.: 

b. CRDNo.: 

5. Provide the full name of the national securities association ofthe Broker-Dealer Operator, the 

effective date of the Broker-Dealer Operator's membership with the national securities 

association, and Market Participant Identifier ("MPID") of the NMS Stock ATS: 

a. National Securities Association: 

b. Effective Date of Membership: 

c. MPID ofthe NMS Stock ATS: 

6. Provide, if any, the website URL of the NMS Stock ATS: 

7. Provide the primary, and if any, secondary, physical street address( es) of the NMS Stock 

ATS matching system: 

8. Attach as Exhibit 1, the most recently filed or amended Schedule A of Form BD for the 

Broker-Dealer Operator disclosing information related to direct owners and executive 

officers. 

D Select if, in lieu of filing, {NMS Stock ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 

filing. 

9. Attach as Exhibit 2, the most recently filed or amended Schedule B of Form BD for the 

Broker-Dealer Operator disclosing information related to indirect owners. 

D Select if, in lieu of filing, {NMS Stock ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 

filing. 
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10. For filings made pursuant to Rule 304(a)(2)(i)(A) through (D) (i.e., Form ATS-N 

Amendments), attach as Exhibit 3 a document marked to indicate changes to "yes" or "no" 

answers or additions to or deletions from any Item in Part I, II, and Part III, as applicable. 

Do not include in Exhibit 3 Items that are not changing. 

Part II: Activities of the Broker-Dealer Operator and its Affiliates 

Item 1: Broker-Dealer Operator Trading Activities on the ATS 

a. Are business units ofthe Broker-Dealer Operator permitted to enter or direct the entry of 

orders and trading interest (e.g., quotes, conditional orders, or indications of interest) into 

the NMS Stock ATS? 

YesD NoD 

If yes, name and describe each type of business unit of the Broker-Dealer Operator that 

enters or directs the entry of orders and trading interest into the A TS ~ NMS Stock 

ATS, type of trading desks, market maker, sales or client desk) and, for each business 

unit, provide the applicable MPID and list the capacity of its orders and trading interest 

(e.g., principal, agency, riskless principal). 

b. If yes to Item 1(a), are the services that the NMS Stock ATS offers and provides to the 

business units required to be identified in Item 1(a) the same for all Subscribers? 

YesD NoD 

If no, explain any differences in response to the applicable Item number in Part III of this 

form, as required, and list the applicable Item number here. If there are differences that 

are not applicable to Part III, explain those differences here. 

c. Are there any formal or informal arrangements with any of the business units required to 

be identified in Item 1(a) to provide orders or trading interest to the NMS Stock ATS 

(~ undertaking to buy or sell continuously, or to meet specified thresholds of trading or 

quoting activity)? 

YesD NoD 

If yes, identify the business unit and respond to the request in Part III, Item 12 ofthis 

form. 

d. Can orders and trading interest in the NMS Stock ATS be routed to a Trading Center 

operated or controlled by the Broker-Dealer Operator? 

YesD NoD 

If yes, respond to request in Part III, Item 16 of this form. 
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Item 2: Affiliates Trading Activities on the ATS 

a. Are Affiliates ofthe Broker-Dealer Operator permitted to enter or direct the entry of 

orders and trading interest into the NMS Stock ATS? 

YesD NoD 

If yes, name and describe each type of Affiliate that enters or directs the entry of orders 

and trading interest into the ATS (~broker-dealer, NMS Stock ATS, investment 

company, hedge fund, market maker, principal trading firm), and, for each Affiliate, 

provide the applicable MPID and list the capacity of its orders and trading interest (e.g., 

principal, agency, riskless principal). 

b. If yes, to Item 2(a), are the services that the NMS Stock ATS offers and provides to the 

Affiliates required to be identified in Item 2(a) the same for all Subscribers? 

YesD NoD 

If no, explain any differences in response to the applicable Item number in Part III ofthis 

form, as required, and list the applicable Item number here. Ifthere are differences that 

are not applicable to Part III, explain those differences. 

c. Are there any formal or informal arrangements with an Affiliate required to be identified 

in Item 2(a) to provide orders or trading interest to the NMS Stock ATS ~ 

undertaking to buy or sell continuously, or to meet specified thresholds of trading or 

quoting activity)? 

YesD NoD 

If yes, identify the Affiliate and respond to the request in Part III, Item 12 ofthis form. 

d. Can orders and trading interest in the NMS Stock A TS be routed to a Trading Center 

operated or controlled by an Affiliate of the Broker-Dealer Operator? 

YesD NoD 

If yes, respond to the request in Part III, Item 16 of this form. 

Item 3: Order Interaction with Broker-Dealer Operator; Affiliates 

a. Can any Subscriber opt out from interacting with orders and trading interest of the 

Broker-Dealer Operator in the NMS Stock ATS? 

YesD NoD 

If yes, explain the opt-out process. 

b. Can any Subscriber opt out from interacting with the orders and trading interest of an 

Affiliate of the Broker-Dealer Operator in the NMS Stock ATS? 

YesD NoD 

If yes, explain the opt-out process. 
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c. If yes to Item 3(a) or 3(b), are the terms and conditions ofthe opt-out processes required 

to be identified in Item 3(a), 3(b), or both, the same for all Subscribers? 

YesD NoD 

If no, identify and explain any differences. 

Item 4: Arrangements with Trading Centers 

a. Are there any formal or informal arrangements (~ mutual, reciprocal, or preferential 

access arrangements) between the Broker-Dealer Operator and a Trading Center to access 

the NMS Stock ATS services (~ arrangements to effect transactions or to submit, 

disseminate, or display orders and trading interest in the ATS)? 

YesD NoD 

If yes, identify the Trading Center and the ATS services and provide a summary of the 

terms and conditions of the arrangement. 

b. If yes to Item 4(a), are there any formal or informal arrangements between an Affiliate of 

the Broker-Dealer Operator and a Trading Center to access the NMS Stock ATS 

services? 

Item 5: 

YesD NoD 

If yes, identify the Trading Center and ATS services and provide a summary of the terms 

and conditions of the arrangement. 

Other Products and Services 

a. Does the Broker-Dealer Operator offer Subscribers any products or services for the 

purpose of effecting transactions or submitting, disseminating, or displaying orders and 

trading interest in the NMS Stock A TS (~ algorithmic trading products that send 

orders to the A TS, order management or order execution systems, data feeds regarding 

orders and trading interest in, or executions occurring on, the ATS)? 

YesD NoD 

If yes, identify the products or services offered, provide a summary of the terms and 

conditions for use, and list here the applicable Item number in Part III of this form where 

the use of the product or service is explained. If there is no applicable Item in Part III, 

explain the use of the product or service with the ATS here. 

b. If yes to Item 5(a), are the terms and conditions of the services or products required to be 

identified in Item 5(a) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Does any Affiliate of the Broker-Dealer Operator offer Subscribers, the Broker-Dealer 

Operator, or both, any products or services for the purpose of effecting transactions or 
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submitting, disseminating, or displaying orders or trading interest in the NMS Stock 

ATS? 

YesD NoD 

If yes, identify the products or services offered, provide a summary of the terms and 

conditions for use, and list here the applicable Item number in Part III of this form where 

the use of the product or service is explained. If there is no applicable item in Part III, 

explain the use of the product or service with the A TS here. 

d. If yes to Item 5( c), are the terms and conditions of the services or products required to be 

identified in Item 5(c) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 6: Activities of Service Providers 

a. Does any employee ofthe Broker-Dealer Operator or its Affiliate that services both the 

operations of the NMS Stock ATS and any other business unit or any Affiliate of the 

Broker-Dealer Operator ("shared employee") have access to confidential trading 

information on the NMS Stock ATS? 

YesD NoD 

If yes, identify the business unit, Affiliate, or both that the shared employee services, and 

provide a summary of the role and responsibilities of the shared employee at the ATS and 

the business unit, Affiliate, or both that the shared employee services. 

b. Does any entity, other than the Broker-Dealer Operator, support the services or 

functionalities of the NMS Stock ATS ("service provider") that are required to be 

explained in Part III of this form? 

YesD NoD 

If yes, both identify the service provider and provide a summary of the role and 

responsibilities of the service provider in response to the applicable Item number in Part 

III ofthis form, as required. List the applicable Item number here. If there are services 

or functionalities that are not applicable to Part III, identify the service provider, the 

services and functionalities, and also provide a summary of the role and responsibilities 

of the service provider here. 

c. If yes to Item 6(b), does the service provider, or any of its Affiliates, use the NMS Stock 

ATS services? 

YesD NoD 

If yes, identify the service provider, or the Affiliate as applicable, and the ATS services 

that the service provider or its Affiliates use. 
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d. If yes to Item 6( c), are the services that the NMS Stock A TS offers and provides to the 

entity required to be identified in Item 6( c) the same for all Subscribers? 

YesD NoD 

If no, identify and explain any differences. 

Item 7: Protection of Confidential Trading Information 

a. Describe the written safeguards and written procedures to protect the confidential trading 

information of Subscribers to the NMS Stock ATS, including: 

1. written standards controlling employees of the A TS that trade for employees' 

accounts; and 

11. written oversight procedures to ensure that the safeguards and procedures 

described above are implemented and followed. 

b. Can a Subscriber consent to the disclosure of its confidential trading information to any 

Person (not including those employees of the NMS Stock ATS who are operating the 

system or responsible for its compliance with applicable rules)? 

YesD NoD 

If yes, explain how and under what conditions. 

c. If yes to Item 7(b), can a Subscriber withdraw consent to the disclosure of its confidential 

trading information to any Person (not including those employees of the NMS Stock ATS 

who are operating the system or responsible for its compliance with applicable rules)? 

YesD NoD 

If yes, explain how and under what conditions. 

d. Provide a summary of the roles and responsibilities of any Persons that have access to 

confidential trading information, the confidential trading information that is accessible by 

them, and the basis for the access. 

Part III: Manner of Operations 

Item 1: Types of ATS Subscribers 

Select the type( s) of Subscribers that can use the NMS Stock ATS services: 

D Investment Companies D Retail Investors D Issuers D Brokers 

D NMS Stock ATSs D Asset Managers D Principal Trading Firms 

D Hedge Funds D Market Makers D Banks D Dealers 

D Other 
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If other, identify the type(s) of subscriber. 

Item 2: Eligibility for ATS Services 

a. Does the NMS Stock ATS require Subscribers to be registered broker-dealers? 

YesD NoD 

b. Are there any other conditions that the NMS Stock A TS requires a Person to satisfy 

before accessing the A TS services? 

YesD NoD 

If yes, list and provide a summary of the conditions. 

c. If yes to Item 2(b ), are the conditions required to be identified in Item 2(b) the same for 

all Persons? 

YesD NoD 

If no, identify and describe any differences. 

d. Does the NMS Stock A TS require Subscribers to enter a written agreement to use the 

ATS services? 

YesD NoD 

Item 3: Exclusion from ATS Services 

a. Can the NMS Stock ATS exclude, in whole or in part, any Subscriber from the ATS 

services? 

YesD NoD 

If yes, list and provide a summary of the conditions for excluding, in whole or in part, a 

Subscriber from the ATS services. 

b. If yes to Item 3(a), are the conditions required to be identified in Item 3(a) the same for 

all Subscribers? 

YesD NoD 

If no, identify and explain any differences. 

Item 4: Hours of Operations 

a. Provide the days and hours of operation of the NMS Stock ATS, including the times 

when orders or trading interest can be entered on the ATS, and any hours of operation 

outside of regular trading hours. 

b. Are the hours of operations the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 
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If no, identify and explain any differences. 

Item 5: Means of Entry 

a. Does the NMS Stock A TS permit orders and trading interest to be entered directly into 

the ATS (~via Financial Information eXchange ("FIX") protocol, Binary)? 

YesD NoD 

If yes, explain the protocol that can be used to directly enter orders and trading interest 

into the ATS. 

b. If yes to Item 5(a), are the protocols required to be identified in Item 5(a) the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Are there any other means for entering orders and trading interest into the NMS Stock 

ATS (~smart order router, algorithm, order management system, sales desk)? 

YesD NoD 

If yes, identify and explain the other means for entering orders and trading interest, 

indicate whether the means are provided through the Broker-Dealer Operator, either by 

itself or through a third-party contracting with the Broker-Dealer Operator, or through an 

Affiliate ofthe Broker-Dealer Operator, and list and provide a summary of the terms and 

conditions for entering orders or trading interest into the ATS through these means. 

d. If yes to Item 5(c), are the terms and conditions required to be identified in Item 5(c) the 

same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 6: Connectivity and Co-location 

a. Does the NMS Stock ATS offer co-location and related services (e.g., cabinets and 

equipment, cross-connects)? 

YesD NoD 

If yes, provide a summary of the terms and conditions for co-location and related 

services, including the speed and connection (e.g., fiber, copper) options offered. 

b. If yes to Item (6)(a), are the terms and conditions required to be identified in Item 6(a) the 

same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 
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If no, identify and explain any differences. 

c. Does the NMS Stock ATS offer any other means besides co-location and related services 

required to be explained in this Item 6(a) to increase the speed of communication with the 

ATS? 

YesD NoD 

If yes, explain the means to increase the speed of communication with the A TS and 

provide a summary of the terms and conditions for its use. 

d. If yes to Item 6(c), are the terms and conditions required to be identified in Item 6(c) the 

same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

e. Does the NMS Stock ATS offer any means to reduce the speed of communication with 

the ATS (~speed bumps)? 

YesD NoD 

If yes, explain the methods to reduce the speed of communication with the A TS and 

provide a summary of the terms and conditions for its use. 

f. If yes to Item 6(e), are the terms and conditions required to be identified in Item 6(e) the 

same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 7: Order Types and Attributes 

a. Identify and explain each order type offered by the NMS Stock ATS. In your 

explanation, include the following: 

1. priority, including the order type's priority upon order entry and any subsequent 

change to priority (if applicable); whether and when the order type can receive a 

new time stamp; the order type's priority vis-a-vis other orders on the book due to 

changes in the NBBO or other reference price; and any instance in which the 

order type could lose execution priority to a later arriving order at the same price; 

11. conditions, including any price conditions ~ how price conditions affect the 

rank and price at which it can be executed; conditions on the display or nondisplay of an order; or conditions on executability and routability); 

iii. order types designed not to remove liquidity~ post-only orders), including 

what occurs when such order is marketable against trading interest on the NMS 

Stock ATS when received; 
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IV. order types that adjust their price as changes to the order book occur (e.g., price 

sliding orders or pegged orders) or have a discretionary range, including an 

order's rank and price upon order entry and whether such prices or rank may 

change based on the NBBO or other market conditions when using such order 

type; when the order type is executable and at what price the execution would 

occur; whether the price at which the order type can be executed ever changes; 

and if the order type can operate in different ways, the default operation of the 

order type; 

v. whether an order type is eligible for routing to other Trading Centers; 

v1. the time-in-force instructions that can be used or not used with each order type; 

vii. the circumstances under which order types may be combined with another order 

type, modified, replaced, canceled, rejected, or removed from the NMS Stock 

ATS; and 

vn1. the availability of order types across all forms of connectivity to the NMS 

Stock A TS and differences, if any, in the availability of an order type across those 

forms of connectivity. 

b. Are the terms and conditions for each order type and attribute the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 8: Order Sizes 

a. Does the NMS Stock ATS require minimum or maximum sizes for orders or trading 

interest? 

YesD NoD 

If yes, specify any minimum or maximum order or trading interest size requirements and 

any related handling procedures. 

b. If yes to Item 8(a), are the requirements and procedures required to be identified in Item 

8(a) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Does the NMS Stock ATS accept or execute odd-lot orders? 

YesD NoD 

If yes, specify any odd-lot order requirements and related handling procedures(~ odd 

lot treated the same as round lot). 
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d. If yes to Item 8( c), are the requirements and procedures required to be identified in Item 

8(c) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

e. Does the NMS Stock ATS accept or execute mixed-lot orders? 

YesD NoD 

If yes, specify any mixed lot order requirements and related handling procedures (e.g., 

mixed lot treated the same as round lot). 

f. If yes, to Item 8( e), are the requirements and procedures required to be identified in 8( e) 

the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 9: Conditional Orders and Indications of Interest 

a. Does the NMS Stock ATS send or receive any messages indicating trading interest (e.g., 

lOis, actionable lOis, or conditional orders)? 

YesD NoD 

If yes, identify and explain the use of the messages, including information contained in 

messages(~ price or size minimums), how the message is transmitted(~ order 

management system, smart order router, FIX), when the message is transmitted (~ 

automatically by the ATS, or upon the sender's request), the type of Persons that receive 

the message(~ Subscribers, Trading Centers), responses to conditional orders or lOis 

(~submission to firm-up conditional orders), and the conditions under which the 

message might result in an execution in the ATS (~ response time parameters, 

interaction, and matching). 

b. If yes to Item 9(a), are the terms and conditions governing conditional orders and 

indications of interest the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 10: Opening and Reopening 

a. Explain how the NMS Stock ATS opens or re-opens for trading, including when and how 

orders and trading interest are priced, prioritized, matched, and executed, and identify any 

order types allowed prior to the start of regular trading hours or following a stoppage of 

trading in a security during regular trading hours. 
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b. Are the processes and procedures governing opening and re-opening the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Explain how unexecuted orders and trading interest are handled at the time the NMS 

Stock ATS begins regular trading at the start of regular trading hours or following a 

stoppage of trading in a security during regular trading hours. 

d. Are the processes or procedures governing unexecuted orders and trading at the time the 

NMS Stock A TS begins regular trading at the start of regular trading hours, or following 

a stoppage of trading in a security during regular trading hours, the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

e. Are there any differences between pre-opening executions, executions following a 

stoppage of trading in a security during regular trading hours, and/or executions during 

regular trading hours? 

YesD NoD 

If yes, identify and explain the differences. 

Item 11: Trading Services, Facilities and Rules 

a. Provide a summary of the structure of the NMS Stock ATS marketplace ~ crossing 

system, auction market, limit order matching book) and explain the means and facilities 

for bringing together the orders of multiple buyers and sellers on the NMS Stock ATS. 

b. Are the means and facilities required to be identified in Item 11(a) the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Explain the established, non-discretionary rules and procedures of the NMS Stock ATS, 

including order interaction rules for the priority, pricing methodologies, allocation, 

matching, and execution of orders and trading interest, and other procedures governing 

trading, such as price improvement functionality, price protection mechanisms, short 

sales, locked-crossed markets, the handling of execution errors, and the time-stamping of 

orders and executions. 

d. Are the established, non-discretionary rules and procedures required to be identified in 

Item 11(c) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 
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If no, identify and explain any differences. 

Item 12: Liquidity Providers 

Are there any formal or informal arrangements with any Subscriber or the Broker-Dealer 

Operator to provide orders or trading interest to the NMS Stock A TS ~ undertaking to 

buy or sell continuously, or to meet specified thresholds of trading or quoting activity)? 

YesD NoD 

If yes, describe the arrangement, including the terms and conditions. 

Item 13: Segmentation; Notice 

a. Are orders and trading interest in the NMS Stock A TS segmented into categories, 

classifications, tiers, or levels (~ segmented by type of participant, order size, duration, 

source, or nature of trading activity)? 

YesD NoD 

If yes, explain the segmentation procedures, including (i) a description for how orders 

and trading interest are segmented; (ii) identify and describe any categories, 

classification, tiers, or levels and the types of orders and trading interest that are included 

in each; (iii) provide a summary of the parameters for each segmented category and 

length of time each segmented category is in effect; (iv) any procedures for overriding a 

determination of segmented category; and (v) how segmentation can affect order 

interaction. 

b. If yes to Item 13(a), is the segmentation of orders and trading interest the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

c. Does the NMS Stock A TS identify orders or trading interest entered by a customer of a 

broker-dealer on the NMS Stock A TS as a customer order? 

YesD NoD 

d. If yes to Item 13(a), does the NMS Stock ATS disclose to any Person the designated 

segmented category, classification, tier, or level of orders and trading interest? 

YesD NoD 

If yes, provide a summary of the content of the disclosure, when and how the disclosure 

is communicated, who receives it, and whether and how such designation can be 

contested. 

e. Ifyes to Item 13(d), are the disclosures required to be identified in 13(d) the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 
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If no, identify and explain any differences. 

Item 14: Counter-Party Selection 

a. Can orders or trading interest be designated to interact or not interact with certain orders 

or trading interest in the NMS Stock A TS ~, designated to execute against a specific 

Subscriber's orders or trading interest or prevent a Subscriber's order from executing 

against itself)? 

YesD NoD 

If yes, explain the counter-party selection procedures, including how counter-parties can 

be selected, and whether the designations affect the interaction and priority of trading 

interest in the ATS. 

b. If yes to Item 14(a), are the procedures for counter-party selection required to be 

identified in Item 14(a) the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 15: Display 

a. Does the NMS Stock ATS operate as an Electronic Communication Network as defined 

in Rule 600(a)(23) of Regulation NMS? 

YesD NoD 

b. Are Subscriber orders and trading interest bound for or resting in the NMS Stock ATS 

displayed or made known to any Person (not including those employees ofthe NMS 

Stock A TS who are operating the system)? 

YesD NoD 

If yes, explain the display procedures, including how and when Subscriber orders and 

trading interest are displayed, how long orders and trading interest are displayed, what 

information about orders and trading interest is displayed, and the functionality of the 

Broker-Dealer Operator and types of market participants that receive the displayed 

information. 

c. If yes to Item 15(b ), are the display procedures required to be identified in 15(b) the same 

for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 16: Routing 

a. Can orders and trading interest in the NMS Stock A TS be routed to a destination outside 

the NMS Stock ATS? 
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YesD NoD 

b. If yes to Item 16(a), must affirmative instructions from a Subscriber be obtained before 

its orders or trading interest can be routed from the NMS Stock ATS? 

YesD NoD 

If yes, describe the affirmative instruction and explain how the affirmative instruction is 

obtained. If no, explain when orders in the NMS Stock ATS can be routed from the ATS 

(~at the discretion ofthe Broker-Dealer Operator). 

Item 17: Closing 

a. Are there any differences between how orders and trading interest are treated on the NMS 

Stock A TS during the close and how orders and trading interest are treated during regular 

trading hours? 

YesD NoD 

If yes, identify and explain the differences as compared to the information provided in the 

relevant Part III Items ofthis form. 

b. Is the treatment of orders and trading interest during the close the same for all 

Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 18: Trading Outside of Regular Trading Hours 

a. Does the NMS Stock ATS conduct trading outside of its regular trading hours? 

YesD NoD 

b. If yes to Item 18(a), are there any differences between trading outside of regular trading 

hours and trading during regular trading hours in the NMS Stock ATS? 

YesD NoD 

If yes, identify and explain the differences. 

c. If yes to Item 18(a), is the treatment of orders and trading interest outside of regular 

trading hours the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 19: Fees 
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a. Identify and describe any fees or charges for use of the NMS Stock ATS services, 

including the type of fees~ subscription, connectivity), the structure of the fees(~ 

fixed, volume-based, transaction-based), variables that impact the fees ~ types of 

securities traded, block orders, form of connectivity to the ATS), differentiation among 

types of Subscribers ~ broker-dealers, institutional investors, retail) and range of fees 

~high and low). 

b. Identify and describe any fees or charges for use of the NMS Stock A TS services that are 

bundled with the Subscriber's use ofnon-ATS services or products offered by the 

Broker-Dealer Operator or its Affiliates, including a summary of the bundled services 

and products, the structure of the fee, variables that impact the fee, differentiation among 

types of Subscribers, and range of fees. 

c. Identify and describe any rebate or discount of fees or charges required to be identified in 

Items 19(a) and 19(b), including the type of rebate or discount, structure of the rebate or 

discount, variables that impact the rebate or discount, differentiation among types of 

Subscribers, and range of rebate or discount. 

Item 20: Suspension of Trading 

a. Explain any procedures for suspending or stopping trading on the NMS Stock ATS, 

including the suspension of trading in individual NMS stocks. 

b. Are the procedures for suspending or stopping trading the same for all Subscribers and 

the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 21: Trade Reporting 

a. Explain any procedures and material arrangements for reporting transactions on the NMS 

Stock A TS, including where an ATS reports transactions and under what circumstances. 

b. Are the procedures and material arrangements for reporting transactions on the NMS 

Stock ATS the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 22: Clearance and Settlement 

a. Describe any procedures and material arrangements undertaken to facilitate the clearance 

and settlement of transactions on the NMS Stock A TS (~ whether the A TS becomes a 

counterparty, whether it submits trades to a registered clearing agency, or whether it 

requires Subscribers to have arrangements with a clearing firm). 
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b. Are the procedures and material arrangements undertaken to facilitate the clearance and 

settlement of transactions on the NMS Stock A TS the same for all Subscribers and the 

Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 23: Market Data 

a. Identify the sources of market data used by the NMS Stock A TS (~ proprietary feed 

from a national securities exchange, feed from the securities information processor 

("SIP")), and how the ATS uses market data from these sources to provide the services 

that it offers, including how the ATS uses market data to determine the NBBO and 

protected quotes, and display, price, prioritize, execute, and remove orders and trading 

interest on the ATS. 

b. Are the sources of market data and how the NMS Stock ATS uses market data for the 

services that it offers the same for all Subscribers and the Broker-Dealer Operator? 

YesD NoD 

If no, identify and explain any differences. 

Item 24: Order Display and Execution Access 

a. Has the NMS Stock ATS displayed Subscriber orders to any Person (other than NMS 

Stock ATS employees) and had an average daily share volume of 5% or more in that 

NMS stock as reported by an effective transaction reporting plan or disseminated through 

an automated quotation system during four of the preceding six calendar months? 

YesD NoD 

b. If yes to Item 24(a), is the NMS Stock ATS required to comply with Rule 301(b)(3)(ii) of 

Regulation ATS? 

YesD NoD 

If yes, 

1. Provide the ticker symbol for each such NMS stock displayed during each of the 

last 6 calendar months; 

n. Explain how the ATS displays such orders on a national securities exchange or 

through a national securities association; and 

iii. Explain how the ATS provides access to such orders displayed in the national 

market system equivalent to the access to other orders displayed on that national 

securities exchange or through a national securities association pursuant to Rule 

301(b)(iii) of Regulation ATS. 
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Item 25: Fair Access 

a. Has the NMS Stock A TS executed 5% or more of the average daily trading volume in an 

NMS stock as reported by an effective transaction reporting plan or disseminated through 

an automated quotation system during four of the preceding six calendar months? 

YesD NoD 

b. Ifyes to Item 25(a), is the NMS Stock ATS required to comply with Rule 301(b)(5)(ii) of 

Regulation ATS? 

YesD NoD 

If yes, 

Item 26: 

1. Provide the ticker symbol for each such NMS stock during each of the last 6 

calendar months; and 

11. Describe the written standards for granting access to trading on the A TS pursuant 

to Rule 301(b)(5)(ii)(A) of Regulation ATS. 

Aggregate Platform Data 

Does the NMS Stock ATS publish or otherwise provide to one or more Subscribers 

aggregate platform-wide order flow and execution statistics of the ATS that are not 

otherwise required disclosures under Rule 605 of Regulation NMS? 

YesD NoD 

If yes, 

1. Attach, as Exhibit 4, the most recent disclosure of aggregate platform-wide order 

flow and execution statistics of the ATS that are not otherwise required 

disclosures under Rule 605 of Regulation NMS and that the ATS provided to one 

or more Subscribers as ofthe end of each calendar quarter. 

D Select if, in lieu of filing, {NMS Stock ATS} certifies that the information requested 

under Exhibit 4 is available at the website provided in Part I, Item 6 ofthis form and 

is accurate as of the date of this filing. 

11. Attach, as Exhibit 5, a list and explanation of the categories or metrics for the 

aggregate platform-wide order flow and execution statistics provided as Exhibit 4 

and explain the criteria or methodology used to calculate aggregate platform-wide 

order flow and execution statistics. 
Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 38933 

FORM ATS–N INSTRUCTIONS 

A. FILING FORM ATS–N: 

1. Form ATS–N is a public reporting 

form that is designed to provide market 

participants and the Commission with 

information about the operations of the 

NMS Stock ATS and the ATS-related 

activities of its Broker-Dealer Operator 

and its Affiliates. Among other things, 

an NMS Stock ATS must file Form 

ATS–N to be exempt from the definition 

of ‘‘exchange’’ pursuant to Exchange Act 

Rule 3a1–1(a)(2). 

2. A separate Form ATS–N is required 

for each NMS Stock ATS operated by 

the same Broker-Dealer Operator. 

3. An NMS Stock ATS must provide 

all the information required by Form 

ATS–N, including responses to each 

Item, as applicable, and the Exhibits, 

and disclose information that is 

accurate, current, and complete. 

4. An NMS Stock ATS must respond 

to each request in detail unless 

otherwise provided (i.e., where the 

request indicates that the ATS is 

required to disclose ‘‘summary’’ 

information). 

5. Any report required to be submitted 

pursuant to Rule 304 of Regulation ATS 

shall be prepared, formatted, and 

submitted in accordance with 

Regulation S–T and the EDGAR Filer 

Manual. Filers have the option of 

submitting the information to EDGAR 

using the most recent version of the 

XML schema for Rule 304 as specified 

by the EDGAR Filer Manual, or 

submitting the information using the 

web-fillable form for Rule 304 in 

EDGAR. 

6. Initial Form ATS–N: Prior to 

commencing operations, an NMS Stock 

ATS shall file an initial Form ATS–N 

and the initial Form ATS–N must 

become effective. If an NMS Stock ATS 

is currently operating pursuant to a 

Form ATS it must indicate such on the 

Form ATS–N. If the NMS Stock ATS is 

operating pursuant to a previously filed 

initial operation report on Form ATS as 

of January 7, 2019, such NMS Stock 

ATS shall file with the Commission a 

Form ATS–N no earlier than January 7, 

2019, and no later than February 8, 

2019. 

7. Form ATS–N Amendment 

a. An NMS Stock ATS shall amend a 

Form ATS–N in accordance with the 

conditions of Rule 304. 

b. A Material Amendment, except as 

provided by Rule 304(a)(2)(i)(D) for an 


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38934 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

Order Display and Fair Access 

Amendment, must be filed at least 30 

calendar days prior to the date of 

implementation of a material change to 

the operations of the NMS Stock ATS or 

to the activities of the Broker-Dealer 

Operator or its Affiliates that are subject 

to disclosure on Form ATS–N. 

c. An Updating Amendment must be 

filed no later than 30 calendar days after 

the end of each calendar quarter to 

correct any other information that has 

become inaccurate or incomplete for 

any reason and was not previously 

required to be reported to the 

Commission as a Form ATS–N 

Amendment pursuant to Rule 

304(a)(2)(i)(A), Rule 304(a)(2)(i)(C), or 

Rule 304(a)(2)(i)(D). 

d. A Correcting Amendment must be 

filed promptly to correct information in 

any previous disclosure on Form ATS– 

N, after discovery that any information 

previously filed on Form ATS–N was 

materially inaccurate or incomplete 

when filed. 

e. An Order Display and Fair Access 

Amendment must be filed no later than 

seven calendar days after information 

required to be disclosed in Part III, Items 

24 and 25 on Form ATS–N has become 

inaccurate or incomplete. 

f. An NMS Stock ATS must select 

only one ‘‘Type of Amendment’’ for 

each Form ATS–N Amendment filed 

with the Commission. 

g. For each Amendment, indicate the 

Part and Item number of the Form ATS– 

N that is the subject of the change, 

provide a brief summary of the changes, 

and state whether or not the changes 

apply to all Subscribers and the BrokerDealer Operator. 

h. For each Amendment, provide the 

EDGAR accession number for the filing 

that is being amended. 

8. Notice of Cessation: An NMS Stock 

ATS shall notice its cessation of 

operations on Form ATS–N at least 10 

business days prior to the date the NMS 

Stock ATS will cease to operate as an 

NMS Stock ATS. 

9. Withdrawal: If an NMS Stock ATS 

determines to withdraw a filing, it must 

check the ‘‘Withdrawal of Form ATS–N 

filing’’ check box for the type of filing 

and provide the EDGAR accession 

number of the Form ATS–N filing that 

is being withdrawn. An NMS Stock ATS 

may withdraw an initial Form ATS–N 

or an Amendment before the end of the 

applicable Commission review period. 

An NMS Stock ATS may withdraw a 

notice of cessation of operations at any 

time before the date that the NMS Stock 

ATS had indicated it intended to cease 

operating. A Legacy NMS Stock ATS 

may not withdraw its initial Form ATS– 

N at any time. 

10. A filing that is defective may be 

rejected and not be accepted by the 

EDGAR system. Any filing so rejected 

shall be deemed not to have been filed. 

See generally Regulation S–T (17 CFR 

part 232). 

B. CONTACT INFORMATION 

• The individual listed on the NMS 

Stock ATS’s response to Part IV of Form 

ATS–N as the contact representative 

must be authorized to receive all 

incoming communications and be 

responsible for disseminating that 

information, as necessary, within the 

NMS Stock ATS. The contact 

information provided in Part IV of Form 

ATS–N will not be made public. 

C. RECORDKEEPING 

• A copy of this Form ATS–N must 

be retained by the NMS Stock ATS in 

accordance with the EDGAR Filer 

Manual and Rule 303 of Regulation ATS 

and must be made available for 

inspection upon a regulatory request. 

D. PAPERWORK REDUCTION ACT 

DISCLOSURE 

• Form ATS–N requires an NMS 

Stock ATS to provide the Commission 

with certain information regarding: (1) 

the operation of the NMS Stock ATS 

and the ATS-related activities of the 

Broker-Dealer Operator and its 

Affiliates; (2) material and other changes 

to the operations and disclosures of the 

NMS Stock ATS; and (3) notice upon 

ceasing operation of the NMS Stock 

ATS. Form ATS–N is designed to 

provide the public with information to, 

among other things, help them make 

informed decisions about whether to 

participate on the NMS Stock ATS. In 

addition, the Form ATS–N is designed 

to provide the Commission with 

information to permit it to carry out its 

market oversight and investor protection 

functions. 

• The information provided on Form 

ATS–N will help the Commission to 

determine whether an NMS Stock ATS 

is in compliance with the federal 

securities laws and the rules or 

regulations thereunder, including 

Regulation ATS. An NMS Stock ATS 

must: 

Æ File an initial Form ATS–N prior to 

commencing operations. 

Æ File a Form ATS Amendment: (1) 

At least 30 calendar days prior to the 

date of implementation of a material 

change to the operations of the NMS 

Stock ATS or to the activities of the 

Broker-Dealer Operator or its Affiliates 

that are subject to disclosure on Form 

ATS–N (Material Amendment); (2) no 

later than 30 calendar days after the end 

of each calendar quarter to correct any 

other information that has become 

inaccurate or incomplete for any reason 

and was not previously required to be 

reported to the Commission as a Form 

ATS–N amendment pursuant to Rule 

304(a)(2)(i)(A), Rule 304(a)(2)(i)(C), or 

Rule 304(a)(2)(i)(D) (Updating 

Amendment); (3) promptly, to correct 

information in any previous disclosure 

on Form ATS–N, after discovery that 

any information previously filed on 

Form ATS–N was materially inaccurate 

or incomplete when filed (Correcting 

Amendment); or (4) no later than seven 

calendar days after information required 

to be disclosed in Part III, Items 24 and 

25 on Form ATS–N has become 

inaccurate or incomplete (Order Display 

and Fair Access Amendment). During 

the Commission review period of an 

initial Form ATS–N filing, an NMS 

Stock ATS that is operating as of 

January 7, 2019 shall amend its filed 

Form ATS–N pursuant to these 

requirements, and an NMS Stock ATS 

that was not operating as of January 7, 

2019 shall amend its filed Form ATS– 

N pursuant to the requirements for 

Updating and Correcting Amendments. 

During the Commission review period 

of an initial Form ATS–N filing, an 

NMS Stock ATS shall amend a filed 

Material Amendment pursuant to the 

requirements for Updating and 

Correcting Amendments. 

Æ Notice its cessation of operations at 

least 10 business days before the date 

the NMS Stock ATS ceases to operate as 

an NMS Stock ATS. 

• This collection of information will 

be reviewed by the Office of 

Management and Budget in accordance 

with the clearance requirements of 44 

U.S.C. 3507. An agency may not 

conduct or sponsor, and a Person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid control number. We 

estimate that an NMS Stock ATS will 

spend approximately 127.4 hours 

completing the Form ATS–N, 

approximately 9 hours preparing each 

amendment to Form ATS–N, and 

approximately 2 hours preparing a 

notice of cessation on Form ATS–N. 

Any member of the public may direct to 

the Commission any comments 

concerning the accuracy of this burden 

estimate and any suggestions for 

reducing this burden. 

E. EXPLANATION OF TERMS 

The following terms are defined for 

purposes of Form ATS–N. 

• AFFILIATE: Shall mean, with 

respect to a specified Person, any Person 

that, directly or indirectly, controls, is 

under common control with, or is 

controlled by, the specified Person. 


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• ALTERNATIVE TRADING 

SYSTEM: Shall mean any organization, 

association, Person, group of Persons, or 

system: (1) that constitutes, maintains, 

or provides a market place or facilities 

for bringing together purchasers and 

sellers of securities or for otherwise 

performing with respect to securities the 

functions commonly performed by a 

stock exchange within the meaning of 

Rule 3b-16 under the Exchange Act; and 

(2) that does not (i) set rules governing 

the conduct of subscribers other than 

the conduct of such subscribers’ trading 

on such organization, association, 

Person, group of Persons, or system, or 

(ii) discipline subscribers other than by 

exclusion from trading. 17 CFR 

242.300(a). 

• BROKER-DEALER OPERATOR: 

Shall mean the registered broker-dealer 

of the NMS Stock ATS pursuant to 17 

CFR 242.301(b)(1). 

• CONTROL: Shall mean the power, 

directly or indirectly, to direct the 

management or policies of the brokerdealer of an alternative trading system, 

whether through ownership of 

securities, by contract, or otherwise. A 

Person is presumed to control the 

broker-dealer of an alternative trading 

system if that Person: (1) is a director, 

general partner, or officer exercising 

executive responsibility (or having 

similar status or performing similar 

functions); (2) directly or indirectly has 

the right to vote 25 percent or more of 

a class of voting securities or has the 

power to sell or direct the sale of 25 

percent or more of a class of voting 

securities of the broker-dealer of the 

alternative trading system; or (3) in the 

case of a partnership, has contributed, 

or has the right to receive upon 

dissolution, 25 percent or more of the 

capital of the broker-dealer of the 

alternative trading system. 17 CFR 

242.300(f). 

• NMS SECURITY: Shall mean any 

security or class of securities for which 

transaction reports are collected, 

processed, and made available pursuant 

to an effective transaction reporting 

plan, or an effective national market 

system plan for reporting transactions in 

listed options. 17 CFR 242.600(b)(46). 

• NMS STOCK: Shall mean any NMS 

security other than an option. 17 CFR 

242.600(b)(47). 

• NMS STOCK ATS: Shall mean an 

alternative trading system, as defined in 

Rule 300(a) under the Exchange Act, 

that trades NMS stocks, as defined in 

Rule 300(g) under the Exchange Act. 17 

CFR 242.300(k). 

• ORDER: Shall mean any firm 

indication of a willingness to buy or sell 

a security as either principal or agent, 

including any bid or offer quotation, 

market order, limit order, or other 

priced order. 17 CFR 242.300(e). 

• PERSON: Shall mean a natural 

person or a company. 15 U.S.C. 80a2(a)(28). 

• SUBSCRIBER: Shall mean any 

Person that has entered into a 

contractual agreement with an 

alternative trading system to access an 

alternative trading system for the 

purpose of effecting transactions in 

securities, or for submitting, 

disseminating or displaying orders on 

such alternative trading system, 

including a customer, member, user, or 

participant in an alternative trading 

system. A subscriber, however, shall not 

include a national securities exchange 

or association. 17 CFR 242.300(b). 

• TRADING CENTER: Shall mean a 

national securities exchange or national 

securities association that operates an 

SRO trading facility, an alternative 

trading system, an exchange market 

maker, an OTC market maker, or any 

other broker or dealer that executes 

orders internally by trading as principal 

or crossing orders as agent. 17 CFR 

242.600(b)(78). 

By the Commission. 

Dated: July 18, 2018 

Brent J. Fields, 

Secretary. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix A 

Key to Comment Letters Cited in Regulation 

of NMS Stock Alternative Trading Systems 

(File No. S7–23–15 

Letter from Venu Palaparthi, Senior Vice 

President, Virtu Financial to Brent J. 

Fields, Secretary, Commission, dated 

December 2, 2015 (‘‘Virtu Letter’’) 

Letter from Clive Williams, Head of Global 

Equity Trading, Thea N. Williams, Head of 

Global Fixed Income Trading, and 

Jonathan D. Siegel, Senior Legal Counsel, 

T. Rowe Price Associates, Inc. to Brent J. 

Fields, Secretary, Commission, dated 

February 23, 2016 (‘‘T. Rowe Price Letter’’) 

Letter from Jonathan A. Clark, Chief 

Executive Officer, and James C. Dolan, 

Chief Compliance Office, Luminex Trading 

& Analytics LLC to Brent J. Fields, 

Secretary, Commission, dated February 23, 

2016 (‘‘Luminex Letter’’) 

Letter from Eric T. Schneiderman, Attorney 

General, State of New York, to the 

Honorable Mary Jo White, Chair, and Brent 

J. Fields, Secretary, Commission, dated 

February 23, 2016 (‘‘Schneiderman Letter’’) 

Letter from Scott Pintoff, General Counsel, 

MarketAxess Corporation, to Secretary, 

Commission, dated February 24, 2016 

(‘‘MarketAxess Letter’’) 

Letter from David W. Blass, General Counsel, 

Investment Company Institute, to Brent J. 

Fields, Secretary, Commission, dated 

February 25, 2016 (‘‘ICI Letter’’) 

Letter from Chris Barnard, to the 

Commission, dated February 25, 2016 

(‘‘Barnard Letter’’). 

Letter from Stuart J. Kaswell, Executive Vice 

President & Managing Director, General 

Counsel, Managed Funds Association and 

Jirˇı ́ Kro ́l, Deputy Chief Executive Officer, 

Global Head of Government Affairs, 

Alternative Investment Management 

Association, to Brent J. Fields, Secretary, 

Commission, dated February 26, 2016 

(‘‘MFA/AIMA Letter’’) 

Letter from Marcia E. Asquith, Senior Vice 

President and Corporate Secretary, 

Financial Industry Regulatory Authority, 

Inc., to Brent J. Fields, Secretary, 

Commission, dated February 26, 2016 

(‘‘FINRA Letter’’) 

Letter from Phillip S. Gillespie, General 

Counsel and Executive Vice President, 

State Street Global Advisors, to Brent J. 

Fields, Secretary, Commission, dated 

February 26, 2016 (‘‘SSGA Letter’’) 

Letter from John Russell, Chairman of the 

Board and James Toes, President and Chief 

Executive Office, Securities Traders 

Association, to Brent J. Fields, Secretary, 

Commission, dated February 26, 2016 

(‘‘STA Letter’’) 

Letter from D. Keith Ross, Chief Executive 

Officer, PDQ Enterprises, LLC and 

Christopher Meade, Chief Compliance 

Officer, PDQ ATS, Inc., to Brent J. Fields, 

Secretary, Commission, dated February 26, 

2016 (‘‘PDQ Letter’’) 

Letter from Howard Meyerson, General 

Counsel, Liquidnet, Inc., to Brent J. Fields, 

Secretary, Commission, dated February 26, 

2016 (‘‘Liquidnet Letter’’) 

Letter from Denis Ignatovich, Co-Founder, 

and Grant Passmore, Ph.D., Co-Founder, 

Aesthetic Integration Ltd. (‘‘AI Letter’’) 

Letter from Dave Lauer, Chairman, Healthy 

Markets Association, to Brent J. Fields, 

Secretary, Commission, dated February 26, 

2016 (‘‘HMA Letter’’) 

Letter from Kurt N. Schacht, CFA, Managing 

Director, Standards & Advocacy, CFA 

Institute, and James C. Allen, CFA, Head, 

Capital Markets Policy, CFA Institute, to 

Brent J. Fields, Secretary, Commission, 

dated February 26, 2016 (‘‘CFA Institute 

Letter’’) 

Letter from Micah Hauptman, Financial 

Services Counsel, Consumer Federation of 

America, to Brent J. Fields, Secretary, 

Commission, dated February 26, 2016 

(‘‘Consumer Federation of American 

Letter’’) 

Letter from Timothy J. Mahoney, Chief 

Executive Office, BIDS Trading L.P., to 

Brent J. Fields, Secretary, Commission, 

dated February 26, 2016 (‘‘BIDS Letter’’) 

Letter from Marc B. Bryant, Senior Vice 

President, Deputy General Counsel, 

Fidelity Investments, to Brent J. Fields, 

Secretary, Commission, dated February 26, 

2016 (‘‘Fidelity Letter’’) 

Letter from Angelo Evangelou, Deputy 

General Counsel, Legal Division, Chicago 

Board Options Exchange, Incorporated, to 

Brent J. Fields, Secretary, Commission, 

dated March 1, 2016 (‘‘CBOE Letter’’) 

Letter from Adam C. Cooper, Senior 

Managing Director and Chief Legal Officer, 

Citadel LLC, to Brent J. Fields, Secretary, 


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38936 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Rules and Regulations 

Commission, dated March 1, 2016 

(‘‘Citadel Letter’’) 

Letter from Theodore R. Lazo, Managing 

Director and Associate General Counsel, 

Securities Industry and Financial Markets 

Association, to Brent J. Fields, Secretary, 

Commission, dated March 7, 2016 

(‘‘SIFMA Letter’’) 

Letter from Kimberly Unger, Chief Executive 

Officer & Executive Director, The Security 

Traders Association of New York, Inc., to 

Brent J. Fields, Secretary, Commission, 

dated March 4, 2016 (‘‘STANY Letter’’) 

Letter from Mark Holder, Managing Director, 

UBS Securities LLC, to Brent J. Fields, 

Secretary, Commission, dated March 21, 

2016 (‘‘UBS Letter’’) 

Letter from Anonymous to Commission, 

dated February 26, 2016 (‘‘Anonymous 

Letter’’) 

Letter from Dennis M. Kelleher, President 

and Chief Executive Officer, Stephen W. 

Hall, Legal Director & Securities Specialist, 

and Allen Dreschel, Attorney, Better 

Markets, Inc., to Brent J. Fields, Secretary, 

Commission, dated February 26, 2016 

(‘‘Better Markets Letter’’) 

Letter from John A. McCarthy, General 

Counsel, KCG Holdings, Inc., to Brent J. 

Fields, Secretary, Commission, dated 

March 15, 2016 (‘‘KCG Letter’’) 

Letter from David Weisberger, Managing 

Director, Markit, to Brent J. Fields, 

Secretary, Commission, dated April 15, 

2016 (‘‘Markit Letter’’) 

Letter from William Neuberger and Andrew 

F. Silverman, Managing Directors and 

Global Co-Heads, Morgan Stanley 

Electronic Trading, to Brent J. Fields, 

Secretary, Commission, dated May 19, 

2016 (‘‘Morgan Stanley Letter’’) 

Letter from John F. Linares, General Counsel, 

LeveL ATS, to Brent J. Fields, Secretary, 

Commission, dated September 7, 2016 

(‘‘LeveL ATS Letter’’). 

Letter from Rick A. Fleming, Investor 

Advocate, Office of the Investor Advocate, 

Commission, to Brent J. Fields, Secretary, 

Commission, dated September 9, 2016 

(‘‘Investor Advocate Letter’’) 

Letter from Stuart J. Kaswell, Executive Vice 

President & Managing Director, General 

Counsel, Managed Funds Association, to 

the Honorable Walter J. Clayton, Chairman, 

Commission, dated May 18, 2017 (‘‘MFA 

Letter 2’’) 

[FR Doc. 2018–15896 Filed 8–6–18; 8:45 am] 

BILLING CODE 8011–01–P 


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