15496 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 

1 ‘‘Regulation ATS’’ consists of 17 CFR 242.300 

through 242.304 (Rules 300 through 304 under the 

Exchange Act). See also Regulation ATS Adopting 

Release, infra note 31. 

2The Commission adopted Rule 304 on July 18, 

2018. See Securities Exchange Act Release No. 

83663 (July 18, 2018), 83 FR 38768 (August 7, 2018) 

(‘‘NMS Stock ATS Adopting Release’’). 

3The Commission adopted 12 CFR 242.1000 

through 242.1007 (Regulation SCI) on November 19, 

2014. See Securities Exchange Act Release No. 

73639 (November 19, 2014), 79 FR 72252 

(December 5, 2014) (‘‘Regulation SCI Adopting 

Release’’). 

4See Securities Exchange Act Release No. 90019 

(September 28, 2020), 85 FR 87106 (December 31, 

2020). 

5For the purposes of this re-proposal, the term 

‘‘Government Securities ATS’’ refers to an ATS that 

trades government securities or repos and includes 

ATSs that would be subject to Regulation ATS after 

the effective date of any final rule. This term 

includes three categories of ATSs. First, a 

‘‘Currently Exempted Government Securities ATS’’ 

means an ATS that trades government securities or 

repos, is operating as of the effective date of any 

final rule, and was formerly not required to comply 

with Regulation ATS under 17 CFR 240.3a1–1(a)(3) 

(Exchange Act Rule 3a1–1(a)(3)) exemption prior to 

the effective date of any final rule. Second, a 

‘‘Current Government Securities ATS’’ means an 

ATS that trades government securities or repos and 

is operating pursuant to an initial operation report 

on Form ATS on file with the Commission as of the 

effective date of any final rule. Finally, when 

referring to regulatory requirements after the 

effective date of any final rule, the term 

‘‘Government Securities ATS’’ also includes a 

Communication Protocol System that trades U.S. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 232, 240, 242, and 249 

[Release No. 34–94062; File No. S7–02–22] 

RIN 3235–AM45 

Amendments Regarding the Definition 

of ‘‘Exchange’’ and Alternative Trading 

Systems (ATSs) That Trade U.S. 

Treasury and Agency Securities, 

National Market System (NMS) Stocks, 

and Other Securities 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

proposing to amend Rule 3b–16 under 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’), which defines certain 

terms used in the statutory definition of 

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

Exchange Act to include systems that 

offer the use of non-firm trading interest 

and communication protocols to bring 

together buyers and sellers of securities. 

In addition, the Commission is reproposing amendments to its 

regulations under the Exchange Act that 

were initially proposed in September 

2020 for ATSs to take into consideration 

systems that may fall within the 

definition of exchange because of the 

proposed amendments and operate as 

an ATS. The Commission is reproposing, with certain revisions, 

amendments to its regulations for ATSs 

that trade government securities as 

defined under Section 3(a)(42) of the 

Exchange Act (‘‘government securities’’) 

or repurchase and reverse repurchase 

agreements on government securities 

(‘‘Government Securities ATSs’’). The 

Commission is also proposing to amend 

Form ATS–N for NMS Stock ATSs, 

which would require existing NMS 

Stock ATSs to amend their existing 

disclosures. In addition, the 

Commission is proposing to amend the 

fair access rule for ATSs. The 

Commission is also proposing to require 

electronic filing of and to modernize 

Form ATS–R and Form ATS, which 

would require existing Form ATS filers 

to amend their existing disclosures. 

Further, the Commission is re-proposing 

amendments to its regulations regarding 

systems compliance and integrity to 

apply to ATSs that meet certain volume 

thresholds in U.S. Treasury Securities or 

in a debt security issued or guaranteed 

by a U.S. executive agency, or 

government-sponsored enterprise 

(‘‘Agency Securities’’). 

DATES: Comments should be received on 

or before April 18, 2022. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

regulatory-actions/how-to-submitcomments); or 

• Send an email to rule-comments@

sec.gov. Please include File Number S7– 

02–22 on the subject line. 

Paper Comments 

• Send paper comments to Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–02–22. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/proposed.shtml). Comments are 

also available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Operating conditions 

may limit access to the Commission’s 

public reference room. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. 

Studies, memoranda, or other 

substantive items may be added by the 

Commission or staff to the comment file 

during this rulemaking. A notification of 

the inclusion in the comment file of any 

materials will be made available on the 

Commission’s website. To ensure direct 

electronic receipt of such notifications, 

sign up through the ‘‘Stay Connected’’ 

option at www.sec.gov to receive 

notifications by email. 

FOR FURTHER INFORMATION CONTACT: 

Regulation ATS: Tyler Raimo, Assistant 

Director, at (202) 551–6227; Matthew 

Cursio, Special Counsel, at (202) 551– 

5748; David Garcia, Special Counsel, at 

(202) 551–5681; Megan Mitchell, 

Special Counsel, at (202) 551–4887; 

Amir Katz, Special Counsel, at (202) 

551–7653; and Joanne Kim, Attorney 

Advisor, at (202) 551–4393, and for 

Regulation SCI: David Liu, Special 

Counsel, at (312) 353–6265 and Sara 

Hawkins, Special Counsel, at (202) 551– 

5523, Office of Market Supervision, 

Division of Trading and Markets, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The 

Commission is proposing amendments 

to the following rules under the 

Exchange Act: (1) 17 CFR 232.101 (Rule 

101 of Regulation S–T); (2) 17 CFR 

240.3b–16 (Rule 3b–16); (3) 17 CFR 

242.300 (Rule 300 of Regulation ATS); 1

(4) 17 CFR 242.301 (Rule 301 of 

Regulation ATS); (5) 17 CFR 242.302 

(Rule 302 of Regulation ATS); (6) 17 

CFR 242.304 (Rule 304 of Regulation 

ATS); 2 and (7) 17 CFR 242.1000 (Rule 

1000 of Regulation SCI).3

I. Introduction 

In September 2020, the Commission 

issued a proposal to amend Regulation 

ATS and Regulation SCI for Government 

Securities ATSs (‘‘2020 Proposal’’).4 The 

Commission recognized the critical role 

of government securities in the U.S. and 

global economy, the significant volume 

in government securities transacted on 

systems currently operating as ATSs, 

and these ATSs’ growing importance to 

investors and overall securities market 

structure. Notwithstanding their 

importance for government securities, 

the investor protection and fair and 

orderly market principles of Regulation 

ATS have limited application to 

Government Securities ATSs.5 For 


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Government securities or repos on U.S. Government 

securities and that chooses to operate as an ATS 

after the effective date of any final rule. A 

‘‘Communication Protocol System’’ would include 

a system that offers protocols and the use of nonfirm trading interest to bring together buyers and 

sellers of securities. The re-proposal also uses the 

term ‘‘Legacy Government Securities ATS,’’ which 

includes all ATSs that trade government securities 

or repos and are operating as of the effective date 

of any final rule, regardless of whether the ATSs are 

operating pursuant to an initial operation report on 

Form ATS on file with the Commission (i.e., all 

Current Government Securities ATSs and Currently 

Exempted Government Securities ATSs). 

6The Commission also had proposed to amend 

Regulation ATS to: Require that Form ATS and 

Form ATS–R be filed with the Commission 

electronically through the Electronic Data 

Gathering, Analysis and Retrieval (EDGAR) system 

and modernize both forms; eliminate confidential 

treatment of the types of securities that an ATS 

trades as disclosed on the ATS’s Form ATS and 

Form ATS–R; update and correct Form ATS–N; 

change the reasons for which the Commission could 

extend the initial Form ATS–N review period; 

require NMS Stock ATSs to post on their websites 

the most recently disseminated Form ATS–N, 

except for any amendment that the Commission has 

declared ineffective or that has been withdrawn; 

and remove the exclusion from compliance with the 

Fair Access Rule and Rule 301(b)(6) under 

Regulation ATS for an ATS that matches nondisplayed customer orders using prices 

disseminated by an effective transaction reporting 

plan. 

7See 2020 Proposal, supra note 4. 

8These comment letters are available at https:// 

www.sec.gov/comments/s7-12-20/s71220.htm and 

discussed throughout this proposal. 

9See, e.g., letter from Marcia E. Asquith, 

Executive Vice President & Corporate Secretary, 

Financial Industry Regulatory Authority, Inc., dated 

March 1, 2021 (‘‘FINRA Letter’’) at 2; letter from 

Rob Toomey, Managing Director & Associate 

General Counsel, Securities Industry and Financial 

Markets Association, Chris Killian, Managing 

Director, Securitization and Credit, Securities 

Industry and Financial Markets Association, and 

Leslie Norwood, Managing Director, Associate 

General Counsel, Securities Industry and Financial 

Markets Association, dated March 1, 2021 (‘‘SIFMA 

Letter’’) at 2; letter from Elisabeth Kirby, Head of 

U.S. Market Structure, Tradeweb Markets Inc., 

dated March 1, 2021 (‘‘Tradeweb Letter’’) at 2; letter 

from Jennifer W. Han, Chief Counsel & Head of 

Regulatory Affairs, Managed Funds Association, 

dated March 1, 2021 (‘‘MFA Letter’’) at 2–3; and 

Tyler Gellasch, Executive Director, Healthy Markets 

Association, dated March 22, 2021 (‘‘Healthy 

Markets Letter’’) at 7. 

10See letter from Robert Laorno, General Counsel, 

ICE Bonds Securities Corporation, dated March 8, 

2021 (‘‘ICE Bonds Letter I’’) at 5. 

11See letter from Kathleen M. Cronin, Senior 

Managing Director, General Counsel and Corporate 

Secretary, CME Group Inc., dated February 26, 2021 

(‘‘BrokerTec Letter’’) at 3–4. 

12See, e.g., SIFMA Letter at 5 (supporting the 

proposed volume thresholds); Americans for 

Financial Reform Education Fund, dated March 1, 

2021 (‘‘AFREF Letter’’) at 3 (supporting the 

proposed threshold with respect to Regulation SCI 

and stating that they believe the proposed threshold 

for the Fair Access Rule is too low); Healthy 

Markets Letter at 10–11 (recommending a lower 

threshold for Regulation SCI); letter from Gregory 

Babyak, Global Head of Regulatory Affairs, 

Bloomberg L.P., dated March 1, 2021 (‘‘Bloomberg 

Letter’’) at 5–6 (stating that the proposed thresholds 

are too high); ICE Bonds Letter I at 5 (suggesting a 

20 percent threshold for application of Regulation 

SCI); Tradeweb Letter at 3, 11 (recommending a 

‘‘more material’’ threshold for applying Regulation 

SCI). See also infra Sections III.B.4 and III.C. 

13See, e.g., letter from Stephen John Berger, 

Managing Director, Global Head of Government and 

Regulatory Policy, Citadel, dated March 1, 2021 

(‘‘Citadel Letter’’); letter from Joanna Mallers, 

Secretary, FIA Principal Traders Group, dated 

March 1, 2021 (‘‘FIA PTG Letter’’) at 2; letter from 

Robert Laorno, General Counsel, ICE Bonds 

Securities Corporation, dated March 15, 2021 (‘‘ICE 

Bonds Letter II’’) at 2–4; FINRA Letter at 6; MFA 

Letter at 8; Tradeweb Letter at 4. 

14See, e.g., Citadel Letter; FIA PTG Letter; ICE 

Bonds Letter II. 

15See, e.g., letter from Sarah A. Bessin, Associate 

General Counsel, Investment Company Institute and 

Nhan Nguyen, Counsel, Investment Company 

Institute, dated March 1, 2021 (‘‘ICI Letter’’) at 2, 

7; letter from Scott Pintoff, General Counsel, 

MarketAxess, dated March 1, 2021 (‘‘MarketAxess 

Letter’’) at 2–4; Bloomberg Letter at 17–20. 

16See Regulation ATS Adopting Release, infra 

note 31. 

example, an ATS that limits its 

securities activities to government 

securities or reverse repurchase 

agreements on government securities 

(‘‘repos’’) and registers as a brokerdealer or is a bank (i.e., a Currently 

Exempted Government Securities ATS) 

is exempt from exchange registration 

and is not required to comply with 

Regulation ATS. Further, ATSs that 

trade both government securities and 

non-government securities (e.g., 

corporate bonds) are subject to 

Regulation ATS but are not required to 

comply with many of its investor 

protection and fair and orderly markets 

provisions, including public 

transparency rules and the obligation to 

provide fair access to investors if the 

ATS has significant trading volume. In 

addition, ATSs that trade government 

securities are not subject to the systems 

integrity provisions of Regulation SCI. 

To promote operational transparency, 

investor protection, system integrity, 

fair and orderly markets, and regulatory 

oversight for Government Securities 

ATSs, the Commission proposed in the 

2020 Proposal to: Eliminate the 

exemption from compliance with 

Regulation ATS for Currently Exempted 

Government Securities ATSs; require all 

Government Securities ATSs to publicly 

file Form ATS–G, on which they would 

disclose information about their 

operations and potential conflicts of 

interest; provide a process for the 

Commission to review Form ATS–G 

disclosures for clarity, completeness, 

and potential violations of law and, if 

necessary, declare ineffective Form 

ATS–G filings; and require an ATS that 

has significant volume for U.S. Treasury 

Securities or Agency Securities to: (1) 

Establish reasonable standards for 

access to the ATS and apply those 

standards to all prospective and current 

subscribers in a fair and nondiscriminatory manner pursuant Rule 

301(b)(5) of Regulation ATS (‘‘Fair 

Access Rule’’); and (2) comply with the 

operational capability, security, 

business continuity planning, incident 

reporting, and related requirements 

under Regulation SCI.6 The Commission 

issued a concept release (‘‘Concept 

Release’’) in addition to the 2020 

Proposal on the regulation of fixed 

income electronic trading platforms.7

The Concept Release requested 

comments on a wide range of topics, 

including the different regulatory 

treatment among fixed income 

electronic trading platforms that use 

diverse trading protocols or business 

models and various aspects of 

government securities, corporate bonds, 

and municipal securities trading, 

including their operations, services, 

fees, market data, and participants. 

The Commission received comments 

in response to the 2020 Proposal and 

Concept Release.8 Commenters 

expressed broad support for the 2020 

Proposal. In general, commenters 

supported the proposed requirements to 

remove the exemption for Currently 

Exempted Government Securities ATSs 

and to require public disclosures on 

Form ATS–G.9 However, some 

commenters expressed concern 

regarding aspects of the 2020 Proposal, 

including the proposed enhanced 

disclosure requirements and 

effectiveness regime 10 and the proposal 

to require Government Securities ATSs 

that meet certain volume thresholds to 

register as national securities 

exchanges.11 In addition, commenters 

who opined on the Fair Access Rule and 

Regulation SCI had differing views 

about whether and how to apply them 

to Government Securities ATSs.12

In addition, the Commission received 

substantial comment on the Concept 

Release, in particular concerning the 

regulatory framework for fixed income 

electronic trading platforms. Many 

commenters recognized that certain 

electronic trading platforms for fixed 

income securities are not regulated as 

registered exchanges or ATSs despite 

performing the same market function as 

those regulated markets.13 Several 

commenters expressed support for the 

Commission to expand the scope of its 

exchange regulation to encompass more 

fixed income platforms,14 while several 

other commenters believed that such 

action is not necessary or appropriate.15

Advances in technology and 

innovation since Regulation ATS was 

adopted in 1998 16 have changed the 

methods by which securities markets 

bring together buyers and sellers of 


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17See infra Section VIII.C.3.a. 

18 17 CFR 240.3b–16(a). 

19U.S. Treasury Securities and Agency Securities 

are not classes of securities for purposes of 

Exchange Act Rule 3a1–1(b). 

20The Commission is re-proposing to amend 

Regulation ATS to require that Form ATS and Form 

ATS–R be filed with the Commission electronically 

through EDGAR and to modernize both forms; 

eliminate confidential treatment of the types of 

securities that an ATS trades as disclosed on the 

ATS’s Form ATS and Form ATS–R; and remove the 

exclusion from compliance with the Fair Access 

Rule and Rule 301(b)(6) under Regulation ATS for 

an ATS that matches non-displayed customer 

orders using prices disseminated by an effective 

transaction reporting plan. Covered ATSs would 

not be required to post on their websites the most 

recently disseminated Form ATS–N, but would be 

required to provide pursuant to Rule 304(b)(3)(i) a 

direct URL hyperlink to the Commission’s website 

that contains the documents made public by the 

Commission under Rule 304(b)(2). 

21 In the 2020 Proposal, the Commission 

proposed that Government Securities ATSs file 

proposed Form ATS–G. Given the significant 

overlap between proposed Form ATS–G and 

existing Form ATS–N, the Commission is now 

proposing that Government Securities ATSs file 

Form ATS–N, which is currently filed by NMS 

Stock ATSs, and proposing to revise Form ATS–N 

to apply disclosures for Government Securities 

ATSs that would fall under the proposed definition 

of ‘‘exchange.’’ See Appendix A for the proposed 

revisions to Form ATS–N. The Commission 

believes that this would limit the number of unique 

forms and simplify filing requirements. 

22The Commission is also re-proposing to change 

the reasons for which the Commission could extend 

the initial Form ATS–N review period. See infra 

Section IV.A. 

23See infra Section V.A. 

24See infra Section V.B. 

25See 15 U.S.C. 78c(a)(1). 

26 15 U.S.C. 78e. 

securities. As discussed further below, 

innovations in trading protocols have 

increased efficiencies and access to 

discover liquidity and prices, search for 

a counterparty, and agree upon the 

terms of a trade. Instead of using 

exchange markets that offer only the use 

of firm orders and provide matching 

algorithms, market participants are able 

to connect to numerous Communication 

Protocol Systems, which offer the use of 

protocols and non-firm trading interest 

to bring together buyers and sellers of 

securities. Communication Protocol 

Systems today perform similar market 

place functions of bringing together 

buyers and sellers as registered 

exchanges and ATSs and have become 

an increasingly preferred choice of 

trading venue, particularly for fixed 

income securities. However, as a 

function of how Exchange Act Rule 3b– 

16 currently defines the terms in 

Section 3(a)(1) of the Exchange Act, 

Communication Protocol Systems do 

not fall within the definition of 

exchange. As a result, Communication 

Protocol Systems are not subject to the 

same regulatory requirements as 

registered exchanges and ATSs and the 

investors using them do not receive the 

investor protection, fair and orderly 

markets, transparency, and oversight 

benefits stemming from exchange 

regulation. Further, by Communication 

Protocol Systems falling outside the 

definition of exchange, a disparity has 

developed among similar markets that 

bring together buyers and sellers of 

securities, in which some are regulated 

as exchanges and others are not. This 

regulatory disparity can create a 

competitive imbalance and a lack of 

investor protections.17

Given the changing conditions among 

markets to bring together buyers and 

sellers of securities, and taking into 

consideration comment letters 

submitted in response to the 2020 

Proposal and the Concept Release, the 

Commission is proposing to amend 

Exchange Act Rule 3b–16 regarding 

what ‘‘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’ as those 

terms are used’’ in the statutory 

definition of ‘‘exchange’’ under 

Exchange Act Section 3(a)(1).18 The 

proposed amendments to Exchange Act 

Rule 3b–16(a) would include 

Communication Protocol Systems that 

make available for trading any type of 

security, including, among others, 

government securities, corporate bonds, 

municipal securities, NMS stocks, 

equity securities that are not NMS 

stocks, private restricted securities, 

repurchase agreements and reverse 

repurchase agreements, foreign 

sovereign debt, and options. Including 

Communication Protocol Systems 

within the definition of ‘‘exchange’’ 

would appropriately regulate a market 

place that brings together buyers and 

sellers of securities, extend the benefits 

of the exchange regulatory framework to 

investors that use such systems, and 

reduce regulatory disparities among like 

markets. 

In addition, because the Commission 

is proposing to amend Exchange Act 

Rule 3b–16 to include Communication 

Protocol Systems within the definition 

of exchange and taking into 

consideration comments received in 

response to the 2020 Proposal and the 

Concept Release, the Commission is reproposing and revising previously 

proposed amendments to Regulation 

ATS and Regulation SCI for Government 

Securities ATSs that include the 

following: 19 (1) Re-proposing to 

eliminate the exemption from 

compliance with Regulation ATS for an 

ATS that trades only government 

securities or repos and is operated by a 

broker-dealer or is a bank; (2) reproposing, with certain revisions, to 

require a Government Securities ATS 

that has significant volume for U.S. 

Treasury Securities or Agency Securities 

to comply with the Fair Access Rule 

under Regulation ATS and Regulation 

SCI; 20 (3) re-proposing to apply the 

enhanced disclosure and filing 

requirements of Rule 304 of Regulation 

ATS, which are currently applicable to 

NMS Stock ATSs, to all Government 

Securities ATSs; (4) proposing to 

require Government Securities ATSs to 

file Form ATS–N, as revised, instead of 

previously proposed Form ATS–G; 21 (5) 

proposing several changes to Form 

ATS–N that would be applicable to both 

Government Securities ATSs and NMS 

Stock ATSs, including questions about 

the ATS’s interaction with related 

markets, liquidity providers, and 

activities the ATS undertakes to surveil 

and monitor its market; (6) proposing 

amendments to Form ATS–N that 

would require existing NMS Stock ATSs 

to file an amendment to their existing 

disclosures on Form ATS–N; (7) 

proposing to add a new type of 

amendment to Form ATS–N to report 

changes to fee disclosures; (8) proposing 

to amend the Form ATS–N review and 

effectiveness process to permit the 

Commission to extend the review period 

for Form ATS–N amendments; 22 (9) 

proposing to make certain changes to 

the Fair Access Rule that would apply 

to all ATSs that are subject to the rule; 23

and (10) re-proposing electronic filing of 

Form ATS–R and Form ATS and 

proposing certain changes to the 

categories of securities reported on 

Form ATS–R.24

II. Proposed Amendments Regarding 

the Definition of Exchange 

A. Exchange Regulatory Framework 

Exchange Act Section 3(a)(1) states 

that the term ‘‘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 as that 

term is generally understood, and 

includes the market place and the 

market facilities maintained by such 

exchange.25

Section 5 of the Exchange Act 26

requires an organization, association, or 


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27See infra note 31. 

28 15 U.S.C. 78f. A ‘‘national securities exchange’’ 

is an exchange registered as such under Section 6 

of the Exchange Act. 

29Section 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 (‘‘MSRB’’). See 15 U.S.C. 78c(a)(26). See also 

Securities Exchange Act Release No. 76474 

(November 18, 2015), 80 FR 80998, 81025 

(December 28, 2015) (‘‘NMS Stock ATS Proposing 

Release’’) at 81000–01 nn.20–26 and accompanying 

text (discussing certain differences between certain 

obligations and benefits applicable to national 

securities exchanges and those applicable to ATSs). 

30See, e.g., 15 U.S.C. 78f and 78s. 

31See Securities Exchange Act Release No. 40760 

(December 8, 1998), 63 FR 70844, 70850 and 70898 

(December 22, 1998) (‘‘Regulation ATS Adopting 

Release’’). See also 15 U.S.C. 78e and 78f. The 

Commission noted that it was recognized at the 

time the Exchange Act was enacted that a regulatory 

structure for securities exchanges would ‘‘be of 

little value tomorrow if it is not flexible enough to 

meet new conditions immediately as they arise and 

demand attention in the public interest.’’ See 

Regulation ATS Adopting Release at 70898, n.520 

(citing Commission, Report of the Special Study of 

the Securities Markets of the Securities and 

Exchange Commission, H.R. Doc. No. 95, 88th 

Cong., 1st Sess. Pt. 1 (1963) at 6 and S. Rep. No. 

792, 73rd Cong., 2d Sess. (1934) at 5 (noting that 

‘‘exchanges cannot be regulated efficiently under a 

rigid statutory program,’’ and that ‘‘considerable 

latitude is allowed for the exercise of administrative 

discretion in the regulation of both’’)). 

32See Regulation ATS Adopting Release, supra 

note 31, at 70850. 

33See id. at 70847. 

34See id. 

35The Commission adopted Exchange Act Rule 

3b–16 under Section 3(b) of the Exchange Act 

(power to define terms). 15 U.S.C. 78c(b). 36See 17 CFR 240.3b–16(a). 37See Regulation ATS Adopting Release, supra 

note 31, at 70852. Specifically, Rule 3b–16(b) 

excludes from the definition of exchange systems 

that perform only traditional broker-dealer 

activities, including: Systems that route orders to a 

national securities exchange, a market operated by 

a national securities association, a broker-dealer for 

execution, or systems that allow persons to enter 

orders for execution against the bids and offers of 

a single dealer if certain additional conditions are 

met. 

38See 17 CFR 240.3b–16(e). 

39See 17 CFR 240.3a1–1(a)(2). 

40See 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 31, at 70857–58. 

41See 17 CFR 242.300(a); 17 CFR 242.301(a); and 

17 CFR 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.’’ 

42See 17 CFR 242.300(a). 

43See Regulation ATS Adopting Release, supra 

note 31, at 70859. 

44See id. 

45See generally Sections 5, 6, and 19 of the 

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

46See 15 U.S.C. 78e. 

group of persons that meets the 

definition of ‘‘exchange’’ under Section 

3(a)(1) of the Exchange Act,27 unless 

otherwise exempt, to register with the 

Commission as a national securities 

exchange pursuant to Section 6 of the 

Exchange Act.28 As discussed further 

below, registered national securities 

exchanges are self-regulatory 

organizations (‘‘SROs’’),29 and must 

comply with regulatory requirements 

applicable to both national securities 

exchanges and SROs.30

In the Exchange Act, Congress 

provided a broad definition of the term 

‘‘exchange,’’ permitting the Commission 

to apply the definition flexibly as the 

securities markets evolve over time.31 In 

1998, the Commission adopted 

Regulation ATS.32 At that time, the 

Commission recognized that advances 

in technology had increasingly blurred 

the line between exchange and brokerdealer activities 33 and that ATSs that 

existed then were used by market 

participants as functional equivalents of 

exchanges.34 To more accurately 

describe the range of markets that 

performed exchange functions at that 

time, the Commission concurrently 

adopted Exchange Act Rule 3b–16 to 

define terms 35 used in the statutory 

definition of ‘‘exchange’’ under 

Exchange Act Section 3(a)(1). 

In Exchange Act Rule 3b–16(a), the 

Commission defined these terms, in 

light of the markets that existed at that 

time, to include any organization, 

association, or group of persons that: (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.36 Rule 3b–16(b) explicitly 

excluded certain systems that the 

Commission believed were not 

exchanges.37 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 38 the system from the 

definition. 

When the Commission adopted 

Exchange Act Rule 3b–16, the 

Commission also adopted Exchange Act 

Rule 3a1–1(a) to exempt ATSs from the 

definition of ‘‘exchange’’ under Section 

3(a)(1) of the Exchange Act. Exchange 

Act Rule 3a1–1(a)(2) 39 exempts from the 

Exchange Act Section 3(a)(1) definition 

of ‘‘exchange’’ an organization, 

association, or group of persons that 

complies with Regulation ATS,40 which 

requires, among other things, meeting 

the definition of an ATS and registering 

as a broker-dealer.41 Rule 300(a) of 

Regulation ATS defines an ATS as 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; 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.42 Governing the conduct 

of or disciplining subscribers are 

functions performed by an SRO that the 

Commission believed should be 

regulated as such.43 Accordingly, 

pursuant to Rule 300(a), a trading 

system that performs SRO functions or 

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, be operated by a 

national securities association, or seek 

another exemption.44

As a result of the exemption, an ATS 

that complies with Regulation ATS is 

not required by Section 5 of the 

Exchange Act to register as a national 

securities exchange, is not an SRO, and, 

therefore, is not required to comply with 

regulatory requirements applicable to 

national securities exchanges and 

SROs.45 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.46


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47See Regulation ATS Adopting Release, supra 

note 31, at 70900. 

48See id. at 70848. 

49See id. at 70900. 

50For example, the Commission stated in the 

Regulation ATS Adopting Release that ‘‘an 

alternative trading system that posts firm orders to 

buy and sell a security does raise a certain 

expectation of execution at those quoted prices’’ 

and that ‘‘[t]he expectation is based on the life of 

the outstanding orders in the system, rather than 

continuous two sided quotations published by 

specialist and market makers.’’ See id. at 70899, 

n.532. 

51See id. at 70900. 

52See id. at 70899–900, n.536. 

53See id. at 70899, n.525. 

54See id. at 70850. In the Regulation ATS 

Adopting Release, the Commission stated, 

‘‘[g]enerally, however, a system that displays bona 

fide, non-firm indications of interest—including, 

but not limited to indications of interest to buy or 

sell a particular security without either prices or 

quantities associated with those indications—will 

not be displaying ‘‘orders’’ and, therefore, not fall 

within Rule 3b–16.’’ See id. 

55See id. The Commission also stated that 

‘‘[u]nless a system also establishes rules or operates 

a trading facility under which subscribers can agree 

to the terms of their trades, the system will not be 

included within Rule 3b–16, even if it brings 

together ‘orders.’ ’’ See id. 

56See id. at 70848. 

57Communication Protocol Systems also may 

offer a workup functionality or blotter scraping 

functionality to gather non-firm trading interest and 

facilitate the negotiation and execution of trades. In 

a workup, a system may have a private phase, 

where the two original contra-parties submitting 

orders can negotiate, and a public phase where all 

subscribers can submit orders at the workup price. 

58An RFQ List may be referred to as a Bid 

Wanted in Competition (‘‘BWIC’’) or Offer Wanted 

in Competition (‘‘OWIC’’) in the corporate bond 

market. Both serve a similar purpose to the RFQ 

List in allowing the submitter to solicit bids and 

offers on a number of securities at one time. 

B. Adopting the Definition of Exchange 

for Evolving Market Places 

1. Orders-Focused Markets Under 

Current Rule 3b–16 

When the Commission adopted 

Exchange Act Rule 3b–16(a), the 

Commission sought to more accurately 

describe the range of markets that 

performed exchange functions as those 

were understood at that time.47 In the 

Regulation ATS Adopting Release, the 

Commission observed that ATSs at that 

time provided services more akin to 

exchange functions than broker-dealer 

functions, such as matching 

counterparties’ orders, executing trades, 

operating limit order books, and 

facilitating active price discovery.48

In the Regulation ATS Adopting 

Release, the Commission identified two 

elements of Exchange Act Rule 3b–16 

that most accurately reflected the 

functions and uses of exchange markets 

at that time. These elements were the 

bringing together of orders of multiple 

buyers and sellers of securities and that 

trading takes place according to 

established, non-discretionary rules or 

procedures.49 When considering what 

constituted an exchange at that time, the 

Commission focused on the 

expectations of the participants 

regarding how an execution would 

occur without the discretion of the 

operator. Because orders instruct a 

trading system to carry out the intention 

of participants in accordance with 

programmed trading procedures, orders, 

along with established, nondiscretionary methods, contribute to 

how trading system participants could 

understand and expect to receive an 

execution.50 In addition, the 

Commission stated that ‘‘an essential 

indication of the non-discretionary 

status of rules and procedures is that 

those rules and procedures are 

communicated to the systems users’’ 

and ‘‘[t]hus, participants have an 

expectation regarding the manner of 

execution—that is, if an order is 

entered, it will be executed in 

accordance with those procedures and 

not at the discretion of a counterparty or 

intermediary.’’ 51

Further, at the time Exchange Act 

Rule 3b–16(a) was adopted, most ATSs 

operating met the criteria of the rule in 

that they offered the use of orders and 

algorithms that matched orders.52 ATSs 

at that time allowed broker-dealers to 

place and execute orders on the system 

and the systems functioned as limit 

order books where orders are executed 

according to time, price, and size 

priority.53 Accordingly, orders and 

established, non-discretionary methods 

undergirded Exchange Act Rule 3b–16 

to reflect functions of exchange markets 

at that time. When discussing orders in 

the Regulation ATS Adopting Release, 

however, the Commission stated that 

systems that displayed bona fide, nonfirm trading interest 54 or did not 

establish rules or operate a trading 

facility 55 would not fall within Rule 3b– 

16(a). 

2. Prevalence of Systems Offering NonFirm Trading Interest and Structured 

Protocols 

Advances in technology have 

facilitated innovations and more 

efficient or diverse methods to bring 

together buyers and sellers of 

securities.56 In the Commission’s 

experience, Communication Protocol 

Systems, which can use various 

technologies and connectivity, generally 

offer the use of non-firm trading interest 

and establish protocols to prompt and 

guide buyers and sellers to 

communicate, negotiate, and agree to 

the terms of the trade without relying 

solely on the use of orders. Below is a 

non-exhaustive list of some 

Communication Protocol Systems. 

One example of a Communication 

Protocol System is a ‘‘Request-forQuote’’ (‘‘RFQ’’) system. RFQ systems 

are designed to allow market 

participants to obtain quotes for a 

particular security by sending messages 

to one or multiple potential respondents 

on the system simultaneously. RFQ 

systems may be ‘‘disclosed,’’ in which 

case the participants with established 

relationships interact only with each 

other, or anonymous, in which case the 

parties may not have established 

relationships. The system provider 

requires a participant to enter 

information in a message, which may 

include the name of the initiator, 

Committee on Uniform Securities 

ldentificalion Procedures (CUSIP) 

number, side, and size. The system 

provider also provides protocols for 

participants to communicate with each 

other and negotiate a price or size of a 

trade. For example, participants 

receiving an RFQ message can choose to 

interact with the initiator by responding 

within a time period designated by the 

system provider with a priced quote. 

These methods can serve the same 

function as auctions where the 

respondents compete to offer the best 

price. The initiator can then select 

among the quote responses that it 

wishes to interact with through the 

system by either accepting one of 

multiple responses or rejecting all 

responses within a period of time set by 

the system provider. The match of the 

request and response results in an 

agreement to the terms of the trade 

between a buyer and a seller, which 

then proceeds to post-trade 

processing.57 An RFQ list protocol 

(‘‘RFQ List’’), which is a form of RFQ 

protocol used commonly to trade U.S. 

Treasury Securities, may include a 

collection of RFQ inquiries that are 

submitted as a group but priced as 

individual items.58 The RFQ List 

(defined by each system provider but 

generally more than two listed items) 

may be executed in its entirety, in 

pieces, or not at all. A liquidity provider 

that is responding to the list request 

may apply a ‘‘good for’’ time that is 

associated with the executable prices 

provided. 

A Communication Protocol System 

could also include a system that 

electronically displays continuous firm 

or non-firm trading interest, or ‘‘stream 

axes,’’ in a security or type of security 

to participants on the system. Axes 

typically represent an indication of 


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59Based on Commission staff experience, some 

NMS Stock ATSs disclose protocols to allow 

conditional orders to interact with the ATS’s limit 

order book, thereby increasing the interaction 

among potential buyers and sellers and access to 

liquidity. 

60An order resting on an ATS limit order book 

that can interact with a conditional order does not 

receive a firm-up invite and therefore does not send 

firm-up responses. 

61Many conditional order and RFQ systems 

monitor their participants’ firm-up rates and may 

limit or deny the use of the system by a participant 

if the participant’s firm-up rate falls below a certain 

percentage. While the system provider typically 

monitors these firm-up rates to help ensure that 

participants do not abuse the system, such 

monitoring and actions taken against participants 

for not firming-up may incentivize participants to 

not back away. Thus, conditional orders or RFQs 

can be firm in practice and in this way may meet 

the definition of order under current Regulation 

ATS. See 17 CFR 242.300(e) (‘‘any firm indication 

of a willingness to buy or sell a security’’). 

62See Citadel Letter at 1–2. 

63See id. This commenter noted that multilateral 

RFQ trading venues are formally registered in other 

asset classes and jurisdictions, and that there are 

‘‘well-established precedents’’ to delineate the 

scope of multilateral trading venues subject to 

regulation. 

64Tradeweb Investor Presentation, July 2021, 

available at: https://investors.tradeweb.com/staticfiles/e63caabf-d71d-46c0-9589-353fb8b93388. 

interest to sell or buy a bond (but can 

include firm quotes), and can either 

serve as a starting point for negotiation 

between participants or be executed 

immediately. Systems that stream axes 

take many forms. Some system 

providers provide connectivity and 

protocols for participants to 

electronically communicate and 

negotiate the terms of a trade. Other 

system providers offer participants more 

automated processes, whereby 

participants auto-execute against a 

streamed quote and agree upon the 

terms of a trade without negotiation. 

Typically, the system is programmed 

with permission options to allow 

participants to decide who can or 

cannot receive their axes. In such a case, 

the trading interest exchanged between 

the parties is typically firm and 

functions as orders. 

Conditional order systems may be 

Communication Protocol Systems that 

offer the use of trading interest that may 

not be executable until after a user takes 

subsequent action. For example, a 

system provider may require 

conditional orders to contain a symbol, 

side, and size and provide protocols for 

participants to send and receive 

invitation messages to trade. The system 

would be designed for conditional 

orders to match with other trading 

interest, which can either be a firm 

order or another non-firm conditional 

order.59 Upon a match, the system may 

send a firm-up invitation messages to 

both participants. The system protocols 

may permit a participant using a 

conditional order to either decline the 

firm-up invite, accept the firm-up invite, 

or counter the response to firm up.60

During the time that the parties’ trading 

interest is matched until the invitation 

to firm-up expires, is canceled, is 

executed, or is declined, the system 

protocols may require that the non-firm 

trading interest be committed and the 

shares cannot trade elsewhere.61 Using 

the system protocols, the matched 

parties can modify the attributes of the 

non-firm trading interest (i.e., price, 

size) before accepting the firm-up 

invitation. To the extent either a seller 

or buyer changes the attributes, an 

execution will only occur if each contraparty’s corresponding attributes will 

still be met. If both matching parties 

accept the firm-up invite, the parties 

would agree upon the terms of the trade 

and an execution would occur. 

Other systems have developed to 

bring together buyers and sellers of 

securities through the use of bilateral 

negotiation protocols and non-firm 

trading interest. Negotiation systems 

focus on providing a forum for buyers 

and sellers to see displayed non-firm 

trading interest, access liquidity, find a 

counterparty, and negotiate a trade 

through the use of their communication 

technology. The system may allow 

participants to select certain preapproved participants and then 

exchange messages for purposes of 

agreeing to the terms of a trade. 

Negotiation systems may have fewer 

parameters for communicating trading 

interest than RFQ protocols; for 

example, negotiation systems provide 

features that are designed to prompt 

participants to interact with each other 

and provide parameters around that 

interaction, such as time for responses 

or requirements on the content of the 

message. A system may ‘‘scrape’’ or 

obtain the symbol of trading interest 

that a participant is seeking from the 

participant’s order management or 

execution management system and use 

that to alert other participants on its 

system about potential contra-side 

interest in seeking to initiate a 

negotiation. The market participants 

using negotiation systems may complete 

a transaction outside of the system. 

As trading in securities has become 

more electronic, Communication 

Protocol Systems perform the function 

of a market place and have become a 

preferred method for market 

participants to discover prices, find a 

counterparty, and execute a trade, 

particularly for government securities 

and other fixed income markets. One 

commenter on the 2020 Proposal and 

Concept Release, for example, stated 

that multilateral trading venues using 

RFQ protocols are some of the most 

significant multilateral trading venues 

operating in fixed income markets 

regulated by the Commission, including 

the U.S. Treasury market.62 This 

commenter stated that RFQ trading 

venues dominate the dealer-to-customer 

segment of the U.S. Treasury market and 

in the aggregate account for 

approximately 50 percent of total 

electronic trading volume on 

multilateral U.S. Treasury trading 

venues.63 Another large electronic 

trading venue for fixed income products 

estimated that its average daily volume 

using an RFQ protocol increased from 

$223 million in the second quarter of 

2017 to $1.17 billion in the second 

quarter of 2021.64 Systems offering 

conditional order protocols have 

increased over the past several years, 

particularly for trading NMS stocks. 

Today, 26 NMS Stock ATSs have 

disclosed on their public Form ATS–N 

that they send or receive messages 

indicating trading interest, such as 

conditional orders. 

Communication Protocol Systems, 

like registered exchanges and ATSs, 

offer their participants several benefits, 

including reducing counterparty search 

costs, bringing together diverse market 

participants, and making it efficient and 

simple to find a counterparty and agree 

upon the terms of a trade. These systems 

improve price discovery from the voice 

protocols that were used more widely in 

the fixed income market in the past by 

offering participants systems and 

protocols that are specifically designed 

to allow participants to contact, and 

receive responses from, multiple 

potential counterparties at one time, as 

opposed to the more time-consuming 

process of calling each potential 

counterparty individually. RFQ 

protocols, for example, allow an 

initiator to share and attempt to trade its 

entire trading interest all at once. In 

contrast, under a limit order book 

model, for example, the seeker of 

liquidity may find it can only execute 

its trading interest in a piecemeal 

fashion. RFQs also allow initiators to 

more easily demonstrate that they 

attempted to achieve best execution by 

showing that the initiator sent requests 

for quotes to multiple dealers for a 

security. In addition, participants may 

find conditional orders attractive when 

seeking to trade at size or to avoid 

information leakage. 

While Communication Protocol 

Systems may bring together buyers and 

sellers for all types of securities and 

allow participants to negotiate a trade, 


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65For example, a market participant that rests the 

same non-firm trading interest on two trading 

venues has the ability to back away from one if both 

are lifted (i.e., preliminarily matched). In such case, 

the market participant is able to complete one trade 

and cancel or back away from the other. 

66See U.S. Securities and Exchange Commission 

Fixed Income Market Structure Advisory 

Committee (‘‘FIMSAC’’), Recommendation for the 

SEC to Review the Framework for the Oversight of 

Electronic Trading Platforms for Corporate and 

Municipal Bonds (July 16, 2018), available at 

https://www.sec.gov/spotlight/fixed-incomeadvisory-committee/fimsac-electronic-tradingplatforms-recommendation.pdf (expressing concern 

about regulatory harmonization among fixed 

income trading platforms, recognizing that some 

firms were regulated as ATSs, while some were 

regulated as broker-dealers or not regulated at all). 

67See infra Section II.D.1. 

68See infra Section II.D.2. 

69See infra Section II.D. 

70See infra Section VIII.C.3.a. 

71See supra Section II.A. 

72The Commission is not proposing to amend 

Exchange Act Rule 3b–16(b), which excludes from 

the definition of ‘‘exchange’’ systems that perform 

only traditional broker-dealer activities, including: 

Systems that route orders to a national securities 

exchange, a market operated by a national securities 

association, a broker-dealer for execution, or 

systems that allow persons to enter orders for 

execution against the bids and offers of a single 

dealer if certain additional conditions are met. 

These systems would continue to not fall within the 

definition of ‘‘exchange.’’ As discussed below, and 

consistent with the Commission’s views expressed 

in the Regulation ATS Adopting Release, a brokerdealer’s exercise of discretion and judgment over its 

customers’ orders or trading interest does not make 

the broker-dealer an exchange. See Regulation ATS 

Adopting Release, supra note 31, at 70851. See also 

infra Section II.C.3. The Commission is proposing 

to add an exclusion to Rule 3b–16(a) for systems 

that allow issuers to sell their own securities to 

investors. See infra Section II.C.2. Further, as 

explained below, the Commission is not proposing 

to include within the definition of ‘‘exchange’’ a 

system that unilaterally displays trading interest 

without offering a trading facility or communication 

protocols to bring together buyers and sellers. Also, 

systems that provide general connectivity for 

persons to communicate without protocols, such as 

utilities or electronic web chat providers, would not 

fall within the definition of exchange. See id. 

73See infra Section II.D. 

74See infra Section II.D.1. 

75See infra Section II.D.2. 

76See infra note 170 and accompanying text. 

77See infra notes 139–142 and accompanying 

text. A Communication Protocol System that 

operates as an ATS but trades securities other than 

NMS stocks or government securities would file 

Form ATS. 

78See infra notes 154–155 and accompanying 

text. 

79See infra notes 131–133 and accompanying 

text. 

80See infra Section VIII.C.3.a. 

they are particularly useful to market 

participants to trade less liquid 

securities, find counterparties for large 

size trades, and minimize information 

leakage and adverse impact of large size 

trades. For example, market participants 

can use Communication Protocol 

Systems to post and see non-firm 

trading interest on several trading 

venues simultaneously, thereby 

increasing their ability to find a 

counterparty and reduce search costs. 

When resting non-firm trading interest 

on a trading venue, market participants 

can use non-firm trading interest as a 

tool to avoid the risk of doubleexecution.65 Participants that use 

conditional orders, for example, may 

place the same trading interest at 

various trading centers in search of 

liquidity because it would allow them to 

accept or decline responses if they 

receive more than one. Participants may 

find locating a counterparty on a limit 

order book system for less liquid 

securities more difficult and choose 

instead to use a Communication 

Protocol System, such as an RFQ 

system, because such system allows the 

initiating participant to use non-firm 

trading interest to solicit quotes from 

multiple market participants for less 

liquid securities and negotiate a size or 

price for such securities. 

3. Lack of Investor Protections and 

Disparate Regulation Among Market 

Places 

Given the changes in methods for 

bringing buyers and sellers together over 

the past couple of decades, the contrast 

between market place functions of 

exchanges that offer the use of orders 

and trading facilities and systems that 

offer the use of trading interest and 

protocols has become increasingly 

blurred. Both types of systems share the 

same business objectives and engage in 

similar market activities; however, one 

type of system is subject to the exchange 

regulatory framework while the other is 

not.66 Today, Communication Protocol 

Systems perform similar market place 

functions as registered exchanges and 

ATSs and have become venues for 

investors to discover prices, find a 

counterparty, and agree upon the terms 

of a trade. Because Communication 

Protocol Systems do not fall within the 

definition of ‘‘exchange’’ and are thus 

not required to register as national 

securities exchanges, they are not 

required to comply with the same 

Federal securities laws and regulations 

applicable to registered exchanges 67 or 

ATSs.68 Market participants use 

Communication Protocol Systems for 

certain advantages that these market 

places offer for trading securities; 

however, when doing so, market 

participants cannot avail themselves of 

the same investor protections, fair and 

orderly market principles, and 

Commission oversight that apply to 

today’s registered exchanges or ATSs.69

This regulatory gap also creates 

disparities that affect competitive 

balances among like market places for 

securities.70 Consistent with the 

statutory definition of ‘‘exchange’’ in 

Exchange Act Section 3(a)(1), and as 

discussed above, today Communication 

Protocol Systems provide a ‘‘market 

place’’ for bringing together purchasers 

and sellers of securities.71 The current 

proposal will use the flexibility granted 

to the Commission by Congress to 

update Exchange Act Rule 3b–16 to 

address these developments in the 

markets for securities, the 

corresponding lack of investor 

protections, and disparate regulation 

among these markets.72

Including Communication Protocol 

Systems within the definition of 

‘‘exchange’’ would provide market 

participants that use these market places 

with the investor protections, fair and 

orderly market principles, and 

Commission oversight provided by the 

exchange regulatory framework.73 A 

Communication Protocol System that 

chooses to register as an exchange 

would be an SRO and be subject to the 

requirements of Section 6 of the 

Exchange Act, as discussed further 

below.74 However, the Commission 

expects that many Communication 

Protocol Systems would choose instead 

to comply with the conditions of the 

Regulation ATS exemption, which 

includes registering as a broker-dealer.75

As discussed further below, 

Communication Protocol Systems 

complying with Regulation ATS would 

also be subject to the Regulation ATS 

investor protection provisions, 

including the requirement to establish 

written safeguards and procedures to 

protect confidential subscriber trading 

information 76 and operational 

transparency requirements of Form 

ATS–N for ATSs that trade NMS stocks 

or government securities or repos.77

They would also be subject to fair and 

orderly markets provisions under the 

Fair Access Rule.78 Registering as a 

broker-dealer would subject a 

Communication Protocol System to 

Commission and Financial Industry 

Regulatory Authority (‘‘FINRA’’) 

oversight.79 As a FINRA member, the 

Communication Protocol System would 

be subject to FINRA’s investor 

protection and examination and market 

surveillance programs and would be 

required to comply with FINRA’s trade 

reporting rules. 

The proposal to include 

Communication Protocol Systems 

within the definition of exchange would 

promote competition by reducing cost 

disparities and creating a more level 

competitive landscape.80 Several 

commenters in response to the Concept 


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81See, e.g., ICE Bonds Letter II at 2–4; Citadel 

Letter at 2; MFA Letter at 6 (suggesting that to 

ensure that similarly situated entities are treated 

similarly in the trading of government securities, 

the Commission should review the appropriateness 

of similar regulation on multiple-to-multiple 

trading venues with significant volume); 

MarketAxess Letter at 1 (stating that there should 

be a common regulatory framework for all 

multilateral fixed income electronic trading 

platforms that requires minimum standards of 

conduct and oversight in areas such as trade 

reporting, resiliency, cyber-security, operational 

reporting, financial standards, examination, 

surveillance, and confidentiality). 

82See supra note 66. The FIMSAC concerns were 

highlighted by the Commission in the Concept 

Release. 

83See ICE Bonds Letter II at 4 (stating that the 

benefits of subjecting non-ATS trading platforms to 

the same regulatory obligations as current ATSs 

will be substantial). 

84See FIA PTG Letter at 2. See also Citadel Letter 

at 2 (stating that excluding multilateral RFQ 

platforms from the current regulatory framework 

creates an unlevel regulatory field). 

85See letter from Michael Decker, Senior Vice 

President for Public Policy, Bond Dealers of 

America, dated March 1, 2021 (‘‘BDA Letter’’) at 2. 

See also FINRA Letter at 6–10 (noting inconsistent 

regulatory treatment among electronic and hybrid 

fixed income trading platforms, as well as potential 

regulatory gaps, flowing in part from the definitions 

and guidance adopted in 1998 in Regulation ATS). 

The commenter stated its belief that it would be 

beneficial for the Commission to provide guidance 

that specifically addresses the characteristics of 

RFQ trading systems and evaluate whether they 

meet the ‘‘exchange’’ definition for purposes of 

Regulation ATS. 

86See infra Section VIII.C.3.a.i. 

87See Regulation ATS Adopting Release, supra 

note 31, at 70850. 

88See supra Section II.B.2. 

89See Bloomberg Letter at 17–20. This 

commenter specifically cited RFQs as a new 

protocol that has helped in discovering less liquid 

instruments. 

90See SIFMA Letter at 11. The commenter stated 

its belief that systems that merely act as 

informational conduits should remain outside the 

scope of Regulation ATS. 

Release expressed concerns regarding 

the disparity in regulatory treatment 

between exchanges, ATSs, and other 

fixed income platforms.81 In addition, 

FIMSAC expressed concern about the 

lack of regulatory harmonization among 

fixed income electronic trading 

platforms, recognizing that some firms 

are regulated as ATSs, while others are 

regulated as broker-dealers or not at all, 

and stated that these distinctions in 

regulatory oversight complicate efforts 

to improve the efficiency and resiliency 

of the fixed income electronic trading 

markets.82 In response to the Concept 

Release, one commenter stated that the 

current regulatory framework puts ATSs 

at a competitive disadvantage to nonATS trading platforms, which are not 

subject to the same regulatory 

obligations designed to protect investors 

and the integrity of the fixed income 

markets.83 Another commenter stated its 

belief that disparate regulatory 

treatment across trading platforms 

impacts market efficiency and 

competition and introduces potential 

resiliency risks.84 Another commenter 

stated that electronic platforms for 

bringing together buyers and sellers of 

fixed income securities for the purpose 

of effecting transactions should 

generally be regulated the same 

regardless of how they are structured 

internally.85 The Commission 

recognizes that the regulatory costs 

associated with registering and 

operating as a registered exchange are 

higher than the regulatory costs 

associated with registering as a brokerdealer and complying with Regulation 

ATS. However, Communication 

Protocol Systems operating outside the 

exchange regulatory framework are 

subject to neither national securities 

exchange nor ATS regulatory costs and 

therefore have an advantage when 

competing against other markets that 

also bring together buyers and sellers of 

securities.86 As discussed further in 

Section VIII, a trading system that 

performs an exchange market function 

but is not subject to the exchange 

regulatory regime could receive a 

competitive advantage because such 

systems are not subject to the 

compliance costs to which regulated 

exchanges are subject. 

Amending Exchange Act Rule 3b– 

16(a) to include non-firm trading 

interest would eliminate the possibility 

that systems may offer the use of nonfirm trading interest that, in practice, 

functions as firm orders, so as to avoid 

exchange registration or complying with 

Regulation ATS. In the Regulation ATS 

Adopting Release, the Commission 

expressed concern that system providers 

may label trading interest that is firm in 

practice as non-firm.87 The providers of 

such systems may take the position that 

their systems arguably do not use 

‘‘orders’’ and thus do not fall within the 

criteria of Rule 3b–16. For example, 

systems that offer the use of non-firm 

trading interest may monitor 

participants’ firm-up rates in response 

to a quote they received and may 

penalize a participant with a low firmup rate either economically or by 

limiting its ability to use features of its 

system. Such activities could cause 

participants on the systems to believe 

that trading interest that they submit or 

receive is effectively firm and affect 

their behavior on the system. The 

difference between what is a firm order 

and what is not requires careful scrutiny 

of the design of the system, the trading 

interest offered, and what actually takes 

place among buyers and sellers 

interacting on the systems. The 

Commission believes, however, that the 

use of firm or non-firm trading interest 

by a system should no longer be a factor 

in determining whether a system 

performs the function of a market place 

because both firm and non-firm trading 

interest can be used by a system with 

the same purpose and effect to bring 

together buyers and sellers of 

securities.88

Finally, for clarity, Exchange Act Rule 

3b–16(a) would continue to encompass 

systems that make available for trading 

any type of security. The definition of 

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

Exchange Act and current Exchange Act 

Rule 3b–16(a) applies to all securities, 

including government securities, 

corporate bonds, municipal securities, 

NMS stocks, equity securities that are 

not NMS stocks, private restricted 

securities, repurchase agreements and 

reverse repurchase agreements, foreign 

sovereign debt, and options, and does 

not exempt or exclude any security or 

type of securities. The Commission 

believes that it is important for any 

system that falls within the criteria of 

Rule 3b–16(a) to be subject to the 

exchange regulatory framework, 

notwithstanding how thinly traded or 

novel a security may be, and 

participants on such systems should be 

able to avail themselves of the same 

benefits that participants on registered 

exchanges or ATSs receive. 

Accordingly, the proposed amendments 

to Rule 3b–16(a) do not change the 

Commission’s interpretation of the 

statutory definition of ‘‘exchange’’—that 

is, it applies to all securities. 

The Commission received several 

comments in response to the Concept 

Release expressing reservations about 

revising Exchange Act Rule 3b–16 to 

include certain fixed income markets 

within the definition of exchange. One 

commenter stated that doing so would 

insert unnecessary intermediation 

between dealers and their customers 

and threaten to distort the market 

structure by creating a one-size-fits-all 

approach that is biased against the 

trading of less-liquid instruments, 

damaging liquidity formation.89

Another commenter expressed concern 

about the Commission creating 

additional regulatory obligations in the 

fixed income space and believed the 

Commission should undertake a more 

in-depth review of fixed income trading, 

engage in discussion with the industry, 

and outline the problems that any 

proposed regulations are intended to 

solve before moving forward with any 

such regulatory proposal.90 Likewise, 

another commenter stated its belief that 

the Commission should not impose 


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91See ICI Letter at 2, 7. This commenter stated 

that, for example, tools that facilitate trade-related 

communications between market participants 

should not be subject to rules that are better-suited 

for order book protocols. 

92See id. at 8. 

93See MarketAxess Letter at 2–4. 

94See id. 

95See Bloomberg Letter at 17–20. 

96See ICI Letter at 8. 

97See Regulation ATS Adopting Release, supra 

note 31, at 70846. 

98 In conjunction with adding the defined term 

‘‘trading interest’’ to Rule 3b–16, the Commission 

is proposing to add the definition of ‘‘trading 

interest’’ to Rule 300 of Regulation ATS. See 

proposed Rule 300(q). In addition, to encompass 

persons who transact in trading interest, and not 

only orders, the Commission is also proposing to 

change the definition of ‘‘Subscriber’’ in Rule 300(b) 

to include any person submitting, disseminating, or 

displaying ‘‘trading interest.’’ See Rule 300(b), as 

proposed to be revised. 

Regulation ATS and the current 

exchange framework on existing and 

emerging electronic trading protocols 

and functionalities that do not meet the 

existing definition of an ATS or an 

exchange 91 because such rules are 

better suited for regulating systems and 

trading practices in the equity 

markets.92 In addition, one commenter 

stated that there are a variety of trading 

protocols that have developed within 

the fixed income market—such as those 

that are primarily order-driven (such as 

retail-focused order books) and others 

that are driven by price requests (such 

as RFQs)—and that the market 

continues to innovate.93 This 

commenter stated its belief that the 

Commission should take into account 

these distinctions and apply a lighter 

regulatory approach in order to avoid 

stifling innovation.94

The Commission notes that these 

comments focused on the fixed income 

market exclusively. However, these 

comments have aided in the formulation 

of this proposal for revising the 

Commission interpretation of the 

definition of ‘‘exchange,’’ and the 

Commission looks forward to receiving 

more comments to aid in its 

deliberations. As a preliminary response 

to the comment letters summarized in 

this section, the Commission does not 

believe that the proposed amendments 

to Exchange Act Rule 3b–16 would 

create a one-size-fits-all model, 

imposing unnecessary intermediation 

between dealers and their customers,95

or import concepts from the equity 

markets onto emerging electronic 

trading protocols that would damage the 

market structure in the fixed income 

markets.96 Form ATS and Form ATS–N 

do not impose or favor any specific 

market structure or manner of trading, 

and the Commission is proposing to 

amend Form ATS–N to accommodate 

the operations of Communication 

Protocol Systems. Further, the 

Commission preliminarily does not 

believe that regulating fixed income 

systems, or systems for other asset 

classes of securities, under the exchange 

regulatory framework, particularly 

Regulation ATS, would stifle innovation 

or be biased against less-liquid 

instruments using an RFQ protocol. 

Regulation ATS is designed to be 

flexible enough to accommodate the 

evolving technology of ATSs and allow 

for systems to continue to innovate 

without the regulatory obligations of 

registered exchanges, which are SROs.97

In the years since its adoption in 1998, 

many systems that chose to operate 

under the Regulation ATS exemption 

have had varied business models, 

including offering RFQ protocols as part 

of their overall ATS services, for trading 

different types of securities, including, 

among others, government securities, 

corporate bonds, municipal securities, 

NMS stocks, equity securities that are 

not NMS stocks, private restricted 

securities, repurchase agreements and 

reverse repurchase agreements, foreign 

sovereign debt, and options. 

The Commission seeks public 

comment on all aspects its proposal to 

amend Exchange Act Rule 3b–16(a), the 

Communication Protocol Systems that 

would fall within the definition of 

‘‘exchange,’’ and the existing exchange 

regulatory requirements that would 

apply to a Communication Protocol 

System. 

C. Proposed Amendments to Exchange 

Act Rule 3b–16 

Today, Exchange Act Rule 3b–16 

provides that an organization, 

association, or group of persons meets 

the definition of ‘‘exchange’’ if it doesn’t 

meet one of the exceptions of the rule 

and it: (1) Brings together the orders for 

securities of multiple buyers and sellers; 

and (2) uses established, nondiscretionary 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 the trade. 

The Commission is proposing to 

amend Exchange Act Rule 3b–16 to, 

among other things, include non-firm 

indications of a willingness to buy or 

sell a security, in addition to orders, 

within the interpretation, define 

‘‘trading interest,’’ add ‘‘communication 

protocols’’ as an established method 

that an organization, association, or 

group of persons can provide to bring 

together buyers and sellers of securities, 

simplify and align the rule text with the 

statutory definition of exchange under 

Section 3(a)(1) of the Exchange Act, and 

add an exclusion under Exchange Act 

Rule 3b–16(b). Accordingly, the 

Commission is proposing to amend 

Exchange Act Rule 3b–16 to provide 

that an organization, association, or 

group of persons would be considered 

to constitute, maintain, or provide an 

exchange if it is not subject to an 

exception under Rule 3b–16(b) and it: 

(1) Brings together buyers and sellers of 

securities using trading interest; and (2) 

makes available established, nondiscretionary methods (whether by 

providing a trading facility or 

communication protocols, or by setting 

rules) under which buyers and sellers 

can interact and agree to the terms of a 

trade. 

1. Trading Interest; Brings Together 

Buyers and Sellers 

The Commission is proposing to add 

a definition of the term ‘‘trading 

interest’’ to Exchange Act Rule 3b–16 

and amend the rule to replace ‘‘orders’’ 

with ‘‘trading interest.’’ The definition 

of trading interest would allow for clear 

and consistent application of the revised 

functional test for ‘‘exchange’’ under 

Rule 3b–16. 

Under the proposal, Exchange Act 

Rule 3b–16(a) would continue to apply 

to systems that use orders, as that term 

is currently defined and applied in Rule 

3b–16(c), to bring together buyers and 

sellers because the term ‘‘orders’’ would 

be included in the definition of ‘‘trading 

interest.’’ ‘‘Trading interest,’’ as 

proposed, would include ‘‘orders,’’ as 

the term is defined under Rule 3b–16(c), 

or any non-firm indication of a 

willingness to buy or sell a security that 

identifies at least the security and either 

quantity, direction (buy or sell), or 

price.98 Based on Commission staff 

experience, generally, trading systems 

have offered non-firm trading interest 

that included the symbol and one of the 

following: Quantity, direction, or price. 

For example, a message that is sent to 

system participants for an NMS stock 

that only identifies the NMS stock 

symbol and quantity that the participant 

seeks to trade would be considered 

trading interest. A message sent by a 

participant of a corporate bond system 

to five potential counterparties that only 

identifies the CUSIP for a bond and an 

instruction to buy would be considered 

trading interest, as proposed, because it 

contains the symbol and direction. If the 

same initiating participant only 

provided the symbol and requested a 

two-sided quote in response, the 

response would constitute trading 

interest as it would identify the symbol 


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99See Regulation ATS Adopting Release, supra 

note 31, at 70850. 100A system that uses trading interest to bring 

together buyers and sellers would not meet the 

definition of ‘‘exchange,’’ however, unless it also 

met all the elements of Rule 3b–16(a), including the 

element ‘‘makes available established, nondiscretionary methods (whether by providing a 

trading facility or communication protocols, or by 

setting rules) under which buyers and sellers can 

interact and agree to the terms of a trade.’’ 101See id. at 70849. 

102See id. 

103One commenter on the 2020 Proposal and 

Concept Release stated its belief that RFQ platforms 

do not meet the criteria of Rule 3b–16 because such 

platforms do not offer ‘‘multiple-to-multiple’’ order 

interaction among participants and that the RFQ 

platforms instead facilitate trading between an 

individual market participant (requester) and 

potential liquidity providers (responders). See ICI 

Letter at 2, 7. 

104The mere interpositioning of a designated 

counterparty to provide for the anonymity of 

counterparties to a trade or for settlement purposes 

after the purchasing and selling counterparties to a 

trade have been matched would not, by itself, mean 

the system does not have multiple buyers and 

sellers. See Regulation ATS Adopting Release, 

supra note 31, at 70849. 

and a price. Indeed, Commission staff 

has observed that ATSs that offer a 

negotiation functionality to bring 

together buyers and sellers offer the use 

of non-firm trading interest that 

includes the symbol and one of the 

following: Quantity, direction, or price. 

In addition, there are instances where 

systems offer the use of non-firm trading 

interest, such as an indication of 

interest, that includes the symbol and 

direction but does not explicitly include 

a quantity or price, which can be 

inferred from the facts and 

circumstances accompanying the 

trading interest.99 The Commission 

believes that a system that offers the use 

of a message that identifies the security 

and either the quantity, direction, or 

price would provide sufficient 

information to bring together buyers and 

sellers of securities because it allows a 

market participant to communicate its 

intent to trade and a reasonable person 

receiving the information to decide 

whether to trade or engage in further 

communications with the sender.100

On the other hand, the Commission 

preliminarily believes that a message 

that only indicates the security to be 

traded without more information would 

not be trading interest and a system that 

only offers the use of such messages 

would be unlikely to bring together 

buyers and sellers and does not warrant 

the regulatory oversight accompanying 

classification as an exchange. 

Nevertheless, if a system is designed to 

permit an initiating participant to 

submit a message that only contains a 

symbol, yet a responding participant 

can submit a message that contains a 

symbol and either quantity, direction, or 

price that the initiator can accept, the 

message by the responding participant 

and acceptance by the initiator would 

be trading interest because each of these 

contain the symbol and at least 

direction, size, or price. As proposed, 

the revised criteria of Exchange Act 

Rule 3b–16(a) that include ‘‘trading 

interest,’’ as defined herein, would 

capture the vast majority of systems that 

bring together buyers and sellers to 

agree to the terms of a trade despite not 

including systems where solely the 

security is identified. If adopted, 

however, the Commission would 

continue to monitor market 

developments to ascertain whether such 

systems may warrant further regulation 

in the future. 

The Commission is also proposing to 

amend Rule 3b–16(a)(1) to change the 

reference to a system that ‘‘brings 

together the orders’’ to ‘‘brings together 

buyers and sellers of securities using 

trading interest.’’ Systems that use nonfirm trading interest allow participants 

to communicate their trading intentions, 

either on a bilateral or multilateral basis, 

to negotiate a trade. Unlike orders, nonfirm trading interest typically does not 

interact with other non-firm trading 

interest without further action by the 

potential counterparties. Rather, the 

potential counterparties submitting nonfirm trading interest interact with each 

other through the use of communication 

protocols. To provide for the use of both 

firm order interaction and participants’ 

interaction through non-firm trading 

interest, the Commission is proposing to 

amend Rule 3b–16(a) to replace ‘‘brings 

together orders’’ with ‘‘brings together 

buyers and sellers of securities using 

trading interest.’’ The phrase ‘‘brings 

together buyers and sellers of securities 

using trading interest’’ still captures 

systems that use orders. The 

Commission is not proposing to change 

the meaning of ‘‘to bring together’’ as 

defined in the Regulation ATS Adopting 

Release 101 nor is the Commission 

proposing to exclude from Rule 3b– 

16(a) systems that use orders to bring 

together buyers and sellers of 

securities—such systems would still be 

subject to Rule 3b–16. 

The Commission is proposing to 

amend Exchange Act Rule 3b–16(a)(2) to 

simplify the rule text and align the rule 

text with the proposed changes to Rule 

3b–16(a)(1). Specifically, the 

Commission is proposing to replace 

‘‘under which such orders interact with 

each other and the buyers and sellers 

entering such orders agree to the terms 

of a trade’’ with ‘‘under which buyers 

and sellers can interact and agree to the 

terms of a trade.’’ As explained above, 

because the Commission is proposing to 

amend Rule 3b–16(a) to include trading 

interest, and is no longer limiting the 

application of the rule to orders, the 

focus on ‘‘interaction’’ should be 

between buyers and sellers rather than 

orders. For similar reasons, the 

Commission is proposing to delete from 

the rule text the phrase ‘‘the buyers and 

sellers entering such orders.’’ This 

proposed change is designed to simplify 

the rule text and remove the reference 

to orders because the proposed 

amendments to Rule 3b–16(a) also 

include non-firm trading interest in 

addition to orders. 

2. Multiple; Exclusion for Issuer 

Systems 

The Commission is proposing to 

remove the reference to securities of 

‘‘multiple’’ buyers and sellers from 

Exchange Act Rule 3b–16(a)(1) and is 

proposing to codify in Rule 3b–16(b)(3) 

an example the Commission provided in 

the Regulation ATS Adopting Release 

for systems that allow issuers to sell 

their own securities to investors. These 

proposed changes are not intended to 

change the existing scope of Rule 3b– 

16(a) but only to clarify its application. 

The term ‘‘multiple’’ was added to 

Rule 3b–16(a) to help reinforce that 

single counterparty systems were not 

included in the definition of 

‘‘exchange.’’ 102 These systems primarily 

included systems used by issuers to sell 

their own securities and systems used 

by market makers registered with an 

SRO, which are currently specifically 

excluded from Rule 3b–16(a) under Rule 

3b–16(b)(2). The Commission believes 

that the term ‘‘multiple’’ could be 

misconstrued to mean that RFQ 

systems, for example, do not meet the 

criteria of Rule 3b–16(a) because a 

transaction request typically involves 

one buyer and multiple sellers or one 

seller and multiple buyers.103

Under current Rule 3b–16(a), whether 

a system meets the ‘‘multiple’’ prong 

depends on whether the system, when 

viewed in its entirety, includes more 

than one buyer and more than one seller 

and is not determined on a transactionby-transaction basis. A system, such as 

an RFQ system, that is designed to 

provide the ability of more than one 

buyer to request quotes from more than 

one seller in securities at the same or 

different times would meet the 

‘‘multiple’’ prong of Rule 3b–16(a) 

because such systems do not include a 

single counterparty.104 Because RFQ 

systems have more than one buyer and 

more than one seller, such systems do 

not have a single counterparty and thus 


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105The use of plural terms in ‘‘buyers and sellers’’ 

in Rule 3b–16(a) and ‘‘purchasers and sellers’’ 

(emphasis added) in the statutory definition of 

‘‘exchange’’ makes sufficiently clear that an 

exchange need only have more than one buyer and 

more than one seller participating on the system to 

meet this prong. 

106See supra note 102 and accompanying text. 

107See Regulation ATS Adopting Release, supra 

note 31, at 70852. 

108See NMS Stock ATS Adopting Release, supra 

note 2, at 38844 (citing Regulation ATS Adopting 

Release, 63 FR 70852). 

109 Depending on the activities of the persons 

involved with the market place, a group of persons, 

who may each perform a part of the 3b–16 system, 

can together provide, constitute, or maintain a 

market place or facilities for bringing together 

purchasers and sellers of securities and together 

meet the definition of exchange. In such a case, the 

group of persons would have the regulatory 

responsibility for the exchange. 

110See Regulation ATS Adopting Release, supra 

note 31, at 70863. 

111See id. at 70851. 

112See id. at 70850. 

113 If a system meets the criteria of Exchange Act 

Rule 3b–16(a) but includes in that system the ability 

of the system operator to apply its discretion for 

handling trading interest, these activities employing 

discretion by the system operator would be 

included in the system that meets the criteria of 

Rule 3b–16(a) and be subject to Federal securities 

laws and rules applicable to a registered exchange 

or ATS (including, for example, requirements to 

provide disclosures about the system operator’s 

activities on Form ATS or ATS–N and, if the ATS 

is subject to the Fair Access Rule, include in its 

written standards why the activities of the system 

operator that result in the different treatment of 

subscribers are fair and not unreasonably 

discriminatory). 

114One commenter on the 2020 Proposal and 

Concept Release stated their belief that ‘‘unlike an 

ATS on which trading takes place on a nondiscretionary basis, trading discretion is a defining 

feature of these protocols; a requesting participant 

can choose the number and identity of participants 

that will receive the RFQ, while participants who 

receive an RFQ can choose whether to respond.’’ 

See ICI Letter at 7. See also Bloomberg Letter at 23 

(describing that an RFQ ‘‘consists of discretionary 

directed order communication network messaging’’ 

and stating its belief that such messaging is not an 

ATS function because RFQs lack a nondiscretionary commitment to trade) and 

MarketAxess Letter at n.2 (stating its belief that an 

RFQ trading requestor’s trading discretion puts the 

protocol outside the requirement that the platform 

use ‘‘established, non-discretionary methods under 

which such orders interact with each other’’). The 

‘‘established, non-discretionary methods’’ element 

would meet the standard of ‘‘multiple 

buyers and sellers’’ under Rule 3b– 

16(a)(1). Nevertheless, removing the 

term ‘‘multiple’’ would mitigate 

confusion and the potential to 

misconstrue the application of Rule 3b– 

16(a) to systems with non-firm trading 

interest, including RFQ systems, and 

aligns the rule with the statutory 

definition of ‘‘exchange.’’ 105

The Commission is proposing to 

amend Rule 3b–16(b) to add an 

exclusion from Rule 3b–16(a) for 

systems that allow an issuer to sell its 

securities to investors. The Commission 

stated in the Regulation ATS Adopting 

Release that systems for issuers to sell 

their own securities would not fall 

within Rule 3b–16(a) because such 

systems have a single counterparty that 

is selling its securities.106 The 

Commission continues to believe that 

such systems do not meet the criteria of 

Rule 3b–16(a) because the systems do 

not bring together multiple buyers and 

multiple sellers. Given the proposal to 

remove the term ‘‘multiple’’ from Rule 

3b–16(a)(1), adding the exclusion for 

issuer systems would clarify that such 

systems do not fall within the criteria of 

Rule 3b–16(a). 

3. Established Methods; Communication 

Protocols 

The Commission is proposing to 

amend Rule 3b–16(a)(2) to replace ‘‘uses 

established, non-discretionary methods’’ 

with the phrase ‘‘makes available 

established, non-discretionary 

methods.’’ The proposed change to use 

the word ‘‘makes available’’ rather than 

‘‘uses’’ is designed to capture 

established, non-discretionary methods 

that an organization, association, or 

group of persons may provide, whether 

directly or indirectly, for buyers and 

sellers to interact and agree upon terms 

of a trade. In contrast to the term ‘‘uses,’’ 

the Commission believes the term 

‘‘makes available’’ would be applicable 

to Communication Protocol Systems 

because such systems take a more 

passive role in providing to their 

participants the means and protocols to 

interact, negotiate, and come to an 

agreement. 

The term ‘‘makes available’’ is also 

intended to make clear that, in the event 

that a party other than the organization, 

association, or group of persons 

performs a function of the exchange, the 

function performed by that party would 

still be captured for purposes of 

determining the scope of the exchange 

under Exchange Act Rule 3b–16. In the 

Regulation ATS Adopting Release, the 

Commission stated that it will attribute 

the activities of a trading facility to a 

system if that facility is offered by the 

system directly or indirectly (such as 

where a system arranges for a third 

party or parties to offer the trading 

facility).107 The Commission has further 

recognized how 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), and how, in some 

circumstances, these various 

functionalities, mechanisms, or 

protocols may be offered or performed 

by another business unit of the 

registered broker-dealer or government 

securities broker or government 

securities dealer that operates the ATS 

(‘‘broker-dealer operator’’) or by a 

separate entity.108 These principles 

equally apply to an organization, 

association, or group of persons that 

arranges with another party to provide, 

for example, a trading facility or 

communication protocols, or parts 

thereof, to bring together buyers and 

sellers and perform a function of a 

system under Rule 3b–16. Using the 

term ‘‘makes available’’ will help ensure 

that the investor protection and fair and 

orderly markets provisions of the 

exchange regulatory framework apply to 

all the activities that consist of the 

system that meets the criteria of Rule 

3b–16(a), notwithstanding whether 

those activities are performed by a party 

other than the organization that is 

providing the market place.109

The Commission is not proposing to 

delete the term ‘‘non-discretionary’’ 

from Rule 3b–16(a)(2). The term ‘‘nondiscretionary’’ was added to Rule 3b– 

16(a)(2) to modify ‘‘methods’’ to 

distinguish the activities of an exchange 

from the activities of a broker-dealer.110

As discussed in the Regulation ATS 

Adopting Release, broker-dealers 

exercise control, judgement, or 

discretion over their customers’ orders 

or trading interests 111 while an 

exchange operates pursuant to 

programmed procedures or set rules and 

does not exercise discretion over orders 

or trading interest entered into the 

system.112 The Commission continues 

to believe that the distinction between 

an exchange and a broker-dealer 

explained in the Regulation ATS 

Adopting Release is appropriate and the 

Commission is not proposing to amend 

Exchange Act Rule 3b–16(a) to include 

activities of broker-dealers within the 

definition of ‘‘exchange.’’ 113

The term ‘‘non-discretionary’’ should 

not be misconstrued to mean that a 

system does not meet the definition of 

exchange if it permits buyers or sellers 

using the system to exercise discretion 

with regard to the use of the system. 

Under current Rule 3b–16(a)(2), the 

phrase ‘‘uses established, nondiscretionary methods’’ applies to the 

organization, association, or group of 

persons that provides the means—the 

trading facility or rules—under which 

orders interact. Thus, an organization 

that meets the definition of ‘‘exchange’’ 

does not exercise any discretion in the 

matching of buyers and sellers or their 

orders and buyers and sellers 

participating on an exchange can use 

their own discretion in finding and 

selecting a counterparty.114 The phrase 


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of Rule 3b–16(a)(2) pertains to the discretion 

applied by the system provider to bring together 

buyers and sellers and not discretion that 

participants may apply. For example, a system 

provider that matches buyers and sellers using its 

judgement or discretion would not be using 

established, non-discretionary methods. As the 

Commission stated in the Regulation ATS Adopting 

Release, where customers of a broker-dealer 

exercise control over their own orders in a trading 

system operated by the broker-dealer, that brokerdealer is unlikely to be viewed as using 

discretionary methods in handling the order. See 

Regulation ATS Adopting Release, supra note 31, 

at 70851. 

115See id. (describing that, for example, the 

Commission does not believe that block trading 

desks, which generally retain some discretion in 

determining how to execute a customer’s order, and 

frequently commit capital to satisfy their customers’ 

needs, use established, non-discretionary methods). 

116One commenter suggested a litmus test to 

assist the Commission in determining whether a 

fixed-income trading platform for corporate bonds 

and municipal securities meets the criteria that 

warrant registration as an exchange or ATS. 

According to the commenter, the most relevant 

criteria were: Whether the system provides 

multilateral trading, whether the technology 

provider has any influence on picking the 

counterparties, whether the system enables any 

sharing of real-time information across multiple 

counterparties, whether the system provider has 

any access to real-time information, and whether 

the transactions happen on the technology platform. 

See letter from Vijay Kedia, President and CEO, 

FlexTrade Systems, dated March 1, 2021 

(‘‘FlexTrade Systems Letter’’) at 2. As discussed 

above, the Commission believes that conditions 

have changed whereby systems that offer the use 

trading interest and protocols to bring together 

buyers and sellers of securities perform an exchange 

market place function similar to systems that offer 

the use of orders and trading facilities. As proposed, 

a Communication Protocol System can still meet 

the criteria of Exchange Act Rule 3b–16 even if it 

has no role in matching counterparties nor displays 

trading interest. In addition, neither the current rule 

nor the proposed amendments require that, for a 

system to be an exchange, an execution occur on 

the system; rather, that the buyers and sellers agree 

to the terms of the trade on the system is sufficient. 

See Regulation ATS Adopting Release, supra note 

31, at 70852 (stating ‘‘whether or not the actual 

execution of the order takes place on the system is 

not a determining factor of whether the system falls 

under Rule 3b–16’’). Also, applying some of the 

criteria that the commenter suggested (whether 

system provider have any access to real-time 

information; whether the transactions happen on 

the technology platform) could result in the 

exclusion of certain RFQ platforms from the 

definition of exchange. 

117To the extent that a system is currently 

operating consistently with the circumstances 

described in a staff no-action letter, a system that 

falls within the scope of Rule 3b–16(a) and seeks 

to rely on the ATS exemption would need to 

register as a broker-dealer to comply with the 

broker-dealer registration requirement under 

Regulation ATS, regardless of any prior staff 

statement. Upon the adoption of any final rule, 

some letters and other staff statements, or portions 

thereof, may be moot, superseded, or otherwise 

inconsistent with the final rule and, therefore, 

would be withdrawn or modified. 

118See Regulation ATS Adopting Release, supra 

note 31, at 70850. See also FINRA Letter at 9–10 

(requesting the Commission provide additional 

guidance on the regulatory classification of bulletin 

boards). 

119See SIFMA Letter at 11 (stating that systems 

that merely act as informational conduits should 

remain outside the scope of Regulation ATS); 

FlexTrade Systems Letter at 2–4 (stating that 

software vendors that provide functionality for 

displaying prices do not meet the definition of an 

exchange). 

120See Regulation ATS Adopting Release, supra 

note 31, at 70850. 

‘‘established, non-discretionary 

methods’’ continues to convey that the 

system provider is providing the trading 

facility or communication protocols or 

setting rules and is not applying its 

discretion in matching counterparties 

on the system.115

The Commission is proposing to 

amend Rule 3b–16(a)(2) to add 

‘‘communication protocols’’ as an 

established method that an organization, 

association, or group of persons can 

provide to bring together buyers and 

sellers of securities. Systems that bring 

together buyers and sellers of securities 

may function as exchange market places 

of securities without orders or a trading 

facility for orders to interact. In the 

Commission’s experience, 

communication protocols, which can be 

applied to various technologies and 

connectivity, generally use non-firm 

trading interest as opposed to orders to 

prompt and guide buyers and sellers to 

communicate, negotiate, and agree to 

the terms of the trade. For example, if 

an entity makes available a chat feature, 

which requires certain information to be 

included in a chat message (e.g., price, 

quantity) and sets parameters and 

structure designed for participants to 

communicate about buying or selling 

securities, the system would have 

established communication protocols. 

While Communication Protocol 

Systems may not match counterparties’ 

trading interest, buyers and sellers using 

these can be brought together to interact, 

either on a bilateral or multilateral basis, 

and agree upon the terms of the trade. 

Protocols that a system offers may take 

many forms and could include: Setting 

minimum criteria for what messages 

must contain; setting time periods under 

which buyers and sellers must respond 

to messages; restricting the number of 

persons a message can be sent to; 

limiting the types of securities about 

which buyers and sellers can 

communicate; setting minimums on the 

size of the trading interest to be 

negotiated; or organizing the 

presentation of trading interest, whether 

firm or non-firm, to participants. These 

examples are not exhaustive, and the 

determination of whether the system 

meets Rule 3b–16(a)(2) would depend 

on the particular facts and 

circumstances of each system. 

Nevertheless, as proposed, the 

Commission would take an expansive 

view of what would constitute 

‘‘communication protocols’’ under this 

prong of Rule 3b–16(a).116

The Commission preliminarily 

believes that certain systems would not 

fall within the criteria of Exchange Act 

Rule 3b–16(a), as proposed to be 

amended, because the organization, 

association, or group of persons would 

not be considered to be providing a 

trading facility or communication 

protocol and therefore would not be 

considered to be making available 

established, non-discretionary methods 

under Rule 3b–16(a)(2).117 The 

Commission continues to believe that 

systems that passively display trading 

interest, such as systems referred to in 

the industry as bulletin boards, but do 

not provide means for buyers and sellers 

to contact each other and agree to the 

terms of the trade on the system would 

not be encompassed by Rule 3b–16(a) as 

proposed to be amended.118 For 

example, the Commission does not 

believe that a system that unilaterally 

displays trading interest without 

offering a trading facility or 

communication protocols to bring 

together buyers and sellers would be 

considered to be making available 

established, non-discretionary 

methods.119 In the Regulation ATS 

Adopting Release, the Commission 

stated that ‘‘[u]nless a system also 

establishes rules and operates a trading 

facility under which subscribers can 

agree to the terms of their trades, the 

system will not be included within Rule 

3b–16 even if it brings together 

‘orders.’ ’’ 120 These systems may display 

trading interest to potential buyers and 

sellers, but the system provider is not 

making available established methods 

for buyers and sellers to interact and 

agree upon terms of a trade. If adopted, 

however, the Commission would 

continue to monitor market 

developments to ascertain whether such 

systems may warrant further regulation 

in the future. 

Similarly, a system that displays 

trading interest and provides only 

connectivity among participants 

without providing a trading facility to 

match orders or providing protocols for 

participants to communicate and 

interact would not meet the criteria of 

Rule 3b–16(a) because such system 

would not be considered to be making 

available established, non-discretionary 

methods. For example, systems that 

only provide general connectivity for 

persons to communicate without 

protocols, such as utilities or electronic 

web chat providers, would not fall 

within the communication protocols 

prong of the proposed rule because such 

providers are not specifically designed 


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121ATSs have more flexibility in the operation of 

their business than exchanges insofar as ATSs are 

not subject to Section 6 of the Exchange Act and 

are not required to comply with the statutory 

standards with respect to unfair discrimination, 

burdens on competition, and the equitable 

allocation of reasonable fees. 

122Section 12(a) of the Exchange Act makes it 

unlawful for any member, broker, or dealer to effect 

any transaction in any security (other than an 

exempted security) on a national securities 

exchange unless a registration statement has been 

filed with the Commission and is in effect as to 

such security for such exchange in accordance with 

the provisions of the Exchange Act and the rules 

and regulations thereunder. 15 U.S.C. 78l(a). 

Section 12(b) of the Exchange Act, 15 U.S.C. 78l(b), 

contains procedures for the registration of securities 

on a national securities exchange. Section 12(a) 

does not apply to an exchange that the Commission 

has exempted from registration as a national 

securities exchange. See, e.g., Securities Exchange 

Act Release No. 28899 (February 20, 1991), 56 FR 

8377 (February 29, 1991). See also Regulation ATS 

Adopting Release, supra note 31, at 70886. 123See, e.g., Securities Exchange Act Release No. 

54767 (November 16, 2006), 71 FR 67680 

(November 22, 2006) (SR–NYSE–2004–69) (issuing 

exemption permitting NYSE to trade unregistered 

debt securities on its bonds platform, now known 

as NYSE Bonds). 124See infra Section III.B.2 (discussing proposed 

changes to Rule 301(b)(1) of Regulation ATS), 

Section IV (discussing proposed changes to Rule 

304 and Form ATS–N), Section V.A (discussing 

proposed changes to Rule 301(b)(5) and 301(b)(6)), 

and Section V.C (discussing proposed changes to 

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

125See 15 U.S.C. 78f. 

126See 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). 

127See Section 6(b) of the Exchange Act. 128See generally Section 19(b) of the Exchange 

Act, 15 U.S.C. 78s(b). 129 Details and the history of each plan can be 

found at https://www.ctaplan.com/plans; and 

https://www.utpplan.com. 

to bring together buyers and seller of 

securities or provide procedures or 

parameters for buyers and sellers for 

securities to interact. To the extent that 

such systems are designed for securities 

and provide communication protocols 

for buyers and sellers to interact and 

agree to the terms of a trade, such 

systems would fall within the criteria of 

Exchange Act Rule 3b–16(a) as proposed 

to be revised. 

D. Exchange Registration or ATS 

Exemption for Communication Protocol 

Systems Under the Proposed Rules 

The proposed amendments to 

Exchange Act Rule 3b–16(a) would 

scope Communication Protocol Systems 

into the definition of ‘‘exchange,’’ in 

which case, the systems may decide 

between registering as a national 

securities exchange or registering as a 

broker-dealer and complying with 

Regulation ATS. The Commission 

believes that many Communication 

Protocol Systems would likely choose to 

be regulated as an ATS because of the 

lighter regulatory requirements imposed 

on them, as compared to the regulatory 

requirements of registered exchanges, 

which are SROs. Unlike a national 

securities exchange, an ATS can trade 

any type of security and its users are not 

limited to broker-dealers. In addition, an 

ATS is not an SRO, is not subject to 

Section 6 of the Exchange Act, and does 

not require Commission approval for its 

activities. Complying with Regulation 

ATS would therefore allow 

Communication Protocol Systems more 

flexibility in the operation of their 

business than registering as an 

exchange.121

Further, many Communication 

Protocol Systems make available for 

trading fixed income securities that are 

only traded over-the-counter and are not 

typically registered and approved for 

listing on an exchange.122 Unless a 

national securities exchange receives an 

exemption to trade unregistered debt 

securities,123 it may only list and trade 

registered debt securities, whereas 

Communication Protocol Systems need 

not receive such an exemption to trade 

unregistered debt securities. 

Notwithstanding, the Commission 

discusses the regulatory requirements 

for both regulatory alternatives below. 

The Commission is not proposing to 

make changes to the regulatory structure 

for exchanges or the requirements for 

national securities exchanges. The 

proposed changes to the regulatory 

requirements under Regulation ATS are 

discussed in more detail below.124

1. National Securities Exchange 

Registration 

A Communication Protocol System 

that chooses to register as a national 

securities exchange would be required 

to do so pursuant to Sections 5 and 6 

of the Exchange Act. A national 

securities exchange is an SRO and must 

set standards of conduct for its 

members, administer examinations for 

compliance with these standards, 

coordinate with other SROs with respect 

to the dissemination of consolidated 

market data, and generally take 

responsibility for enforcing its own 

rules and the provisions of the Exchange 

Act and the rules and regulations 

thereunder. Before a national securities 

exchange may commence operations, 

the Commission must approve its 

application for registration filed on 

Form 1.125 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.126 Pursuant to Section 6 of 

the Exchange Act, national securities 

exchanges must establish rules that 

generally: (1) Are designed to prevent 

fraud and manipulation, promote just 

and equitable principles of trade, and 

protect investors and the public interest; 

(2) provide for the equitable allocation 

of reasonable fees; (3) do not permit 

unfair discrimination; (4) do not impose 

any unnecessary or inappropriate 

burden on competition; and (5) with 

limited exceptions, allow any brokerdealer to become a member.127

After approval of its application for 

registration, a national securities 

exchange must file with the 

Commission any proposed changes to 

its rules.128 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 trading 

services and fees. The Commission’s 

order approving the application is also 

public. The Commission oversees the 

exchanges under the Exchange Act 

through, among other things, its 

examination authority under Section 17, 

its enforcement authority under 

Sections 19(h)(1) and 21C, its authority 

to approve and disapprove rules under 

Section 19(b), and its rulemaking 

authority under various Exchange Act 

provisions. Under the Exchange Act, 

securities traded on a national securities 

exchange must be registered with the 

Commission and approved for listing on 

an exchange. National securities 

exchanges can only have broker-dealer 

members. As an SRO, a national 

securities exchange enjoys certain 

unique benefits, such as limited 

immunity from private liability with 

respect to its regulatory functions and 

the ability to receive consolidated 

revenue under the national market 

system plans for equity market data (i.e., 

Consolidated Tape Association (CTA)/ 

Consolidated Quotation (CQ) and 

Unlisted Trading Privilege (UTP)),129

among others. 

2. Regulation ATS Exemption; BrokerDealer Registration 

A Communication Protocol System 

may choose to operate as an ATS 

pursuant to Regulation ATS, which 

exempts an ATS from the definition of 

‘‘exchange’’ on the condition that the 

ATS is in compliance with the 

requirements of Regulation ATS. An 

ATS that fails to comply with the 

requirements of Regulation ATS would 


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130The Commission is proposing to amend Rule 

301(b)(1) to allow an ATS to register as a 

government securities broker or government 

securities dealer under Exchange Act Section 

15C(a)(1)(A). See infra notes 272–278 and 

accompanying text. 

131See Section 15(b)(8) of the Exchange Act; 15 

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

132See Regulation ATS Adopting Release, supra 

note 31, at 70903. 

133Form ATS and the Form ATS Instructions are 

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

formats.pdf. Form ATS would require, among other 

things, that the ATS (other than a Government 

Securities ATS or NMS Stock 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 

entry of trading interest and execution; and trade 

reporting, clearance and settlement of trades on the 

ATS. See infra Section V.B (describing proposed 

changes to Form ATS). Regulation ATS provides 

that a report on Form ATS or Form ATS–R shall 

be considered filed upon receipt by the Division of 

Trading and Markets, at the Commission’s principal 

office in Washington, DC (i.e., in paper form), and 

that information filed by an ATS on Form ATS is 

deemed confidential when filed. See 17 CFR 

242.301(b)(2)(vii). See also infra Section V.C. 

134 ‘‘Newly Designated ATSs’’ would be defined 

as ATSs operating as of the effective date of any 

final rule that meet the criteria under Rule 3b–16(a) 

as of the effective date of any final rule but did not 

meet the criteria under Rule 3b–16(a) in effect prior 

to the effective date of any final rule. See Rule 

300(r). 

135See infra note 180 and accompanying text. 

The Commission is also proposing changes to Rule 

301(b)(2)(i) to clarify that the requirement to file 

Form ATS does not apply to Covered ATSs or 

Covered Newly Designated ATSs. See proposed 

Rule 301(b)(2)(i). See also proposed Rule 300(s) 

(defining ‘‘Covered Newly Designated ATS’’). 

136See Regulation ATS Adopting Release, supra 

note 31, at 70864. 

137Form ATS provides the Commission with 

notice about an ATS’s operations prior to 

commencing operations. An ATS is also required to 

notify the Commission of any changes in its 

operations by filing an amendment to its initial 

operation report. There are three types of 

amendments to an initial operation report. 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. 

See 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 31, at 70864. 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. See 17 CFR 242.301(b)(2)(iii). 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. See 17 CFR 

242.301(b)(2)(iv). An ATS is required to promptly 

file a cessation of operations on Form ATS. See 17 

CFR 242.301(b)(2)(v). 

138See 17 CFR 242.301(b)(2)(vii); Form ATS at 3, 

General Instructions A.7. 

139See proposed changes to 17 CFR 242.304. 

140See infra Section IV.A. 

141See Rule 304(a)(1)(i). 

142See infra Section IV.A. 

143See infra Section IV. 

144See 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. See 

also Section V.B (describing proposed changes to 

Form ATS–R). 

145See Form ATS–R at 4, Items 1 and 2 

(describing the requirements for Exhibit A and 

Exhibit B of Form ATS–R). 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. 

no longer qualify for the ATS exemption 

and thus risks operating as an 

unregistered exchange in violation of 

Section 5 of the Exchange Act. 

To operate under the exemption, an 

ATS must register as a broker-dealer 

under Exchange Act Section 15 or as a 

government securities broker or 

government securities dealer under 

Exchange Act Section 15C(a)(1)(A),130

and comply with the filing and conduct 

obligations associated with being a 

registered broker-dealer, including 

membership in an SRO, such as 

FINRA,131 and compliance with the 

SRO’s rules.132 Requiring 

Communication Protocol Systems to 

register as broker-dealers and be a 

member of an SRO would ensure that 

they are subject to SRO examination and 

market surveillance, trade reporting 

obligations, and certain investor 

protection rules. Broker-dealer 

registration provides important investor 

protections under the Federal securities 

laws and FINRA rules, such as: (1) 

Various disclosure and supervision 

obligations; (2) anti-money laundering 

obligations (including suspicious 

activity reporting); (3) FINRA over-thecounter (OTC) trade reporting 

requirements, including requirements to 

maintain membership in, or maintain an 

effective clearing arrangement with a 

participant of, a clearing agency 

registered under the Exchange Act; and 

(4) Commission examinations and 

FINRA examinations and surveillance of 

members and markets that its members 

operate. 

In addition, ATSs are subject to 

certain reporting and disclosure 

requirements, as applicable. ATSs other 

than NMS Stock ATSs or, as proposed, 

Government Securities ATSs, would be 

required, pursuant to Rule 301(b)(2) of 

Regulation ATS, to file an initial 

operation report with the Commission 

on Form ATS 133 at least 20 days before 

commencing operations or, in the case 

of Newly Designated ATSs,134 no later 

than 30 calendar days after the effective 

date of any final rule.135 Form ATS 

provides the Commission with the 

opportunity to identify problems that 

might impact investors before the 

system begins to operate.136 Unlike a 

Form 1 filed by a national securities 

exchange, a Form ATS is not approved 

by the Commission.137 Also unlike a 

Form 1 application, a Form ATS is 

deemed confidential when filed.138

Requiring Communication Protocol 

Systems to file Form ATS and 

amendments thereto will help the 

Commission monitor and oversee such 

ATSs’ operations. 

NMS Stock ATSs and, as proposed, 

Government Securities ATSs, would be 

subject to enhanced filing and 

disclosure requirements under Rule 304 

of Regulation ATS. NMS Stock ATSs or 

Government Securities ATSs would, in 

lieu of Form ATS, be required to file 

public Form ATS–N in EDGAR, in 

which they must disclose detailed 

information about the manner in which 

their trading systems operate and the 

potential for conflicts of interest and 

information leakage.139 Form ATS–N is 

subject to a Commission review and 

effectiveness process.140 An NMS Stock 

ATS or Government Securities ATS 

would not be permitted to operate 

pursuant to the Rule 3a1–1(a)(2) 

exemption until its Form ATS–N has 

become effective.141 In addition, the 

ATS would be required to file 

amendments on Form ATS–N to 

provide notice of changes to its 

operations and broker-dealer and 

affiliate relationships.142 Form ATS–N 

and the Commission review and 

effectiveness process, which is 

described in detail below,143 would 

provide operational transparency and 

regulatory oversight of Communication 

Protocol Systems that are NMS Stock 

ATSs or Government Securities ATSs. 

In addition, all ATSs are required to 

periodically, by paper submission, 

report certain information about 

transactions in 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 has operated, pursuant to Rule 

301(b)(9).144 Form ATS–R requires 

quarterly volume information for 

specified categories of securities, as well 

as a list of all securities traded in the 

ATS during the quarter and a list of all 

subscribers that were participants 

during the quarter,145 and for ATSs 

subject to the Fair Access Rule to 

provide certain additional 


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146Form ATS–R also requires an ATS that is 

subject to the fair access obligations under Rule 

301(b)(5) of Regulation ATS to provide a list of all 

persons granted, denied, or limited access to the 

ATS during the period covered by the ATS–R and 

designate for each person each of the following: 

Whether the person was granted, denied, or limited 

access; the date the ATS took such action; the 

effective date of such action; and the nature of any 

denial or limitation of access. See Form ATS–R at 

6, Item 7 (explaining requirements for Exhibit C). 

147See 17 CFR 242.301(b)(2)(vii); Form ATS–R at 

2, General Instruction A.7. 

148See Regulation ATS Adopting Release, supra 

note 31, at 70874 and 70878. 

149An ATS that displays orders and meets the 

volume requirements must provide to a national 

securities exchange or national securities 

association the prices and sizes of the orders at the 

highest buy price and the lowest sell price for such 

NMS stock, displayed to more than one person in 

the ATS, for inclusion in the quotation data made 

available by the national securities exchange or 

national securities association pursuant to Rule 602 

under Regulation NMS. See 17 CFR 

242.301(b)(3)(ii). With respect to any such 

displayed order, the ATS must provide to any 

broker-dealer that has access to the national 

securities exchange or national securities 

association to which the ATS provides the prices 

and sizes of displayed orders pursuant to Rule 

301(b)(3)(ii), the ability to effect a transaction with 

such orders that is equivalent to the ability of such 

broker-dealer to effect a transaction with other 

orders displayed on the exchange or by the 

association; and at the price of the highest priced 

buy order or lowest priced sell order displayed for 

the lesser of the cumulative size of such priced 

orders entered therein at such price, or the size of 

the execution sought by such broker-dealer. See 17 

CFR 242.301(b)(3)(iii). 

150An ATS that displays subscriber orders in an 

NMS stock must comply with Rule 301(b)(3) if, 

during at least four of the preceding six calendar 

months, it 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. See 17 CFR 

242.301(b)(3)(i). 

151See Regulation ATS Adopting Release, supra 

note 31, at 70867. 

152See 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 

(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. 

153See infra Section III.B.4 and Section V.A. 

154An ATS subject to the Fair Access Rule, as 

proposed to be revised, must: Establish and apply 

reasonable written standards for granting, limiting, 

and denying access to the services of the ATS; make 

and keep records of all grants of access including, 

for all participants, the reasons for granting such 

access, and all denials or limitations of access and 

reasons, for each applicant and participant, for 

denying or limiting access; and report on Form 

ATS–R a list of persons granted, denied, and 

limited access to the ATS. See infra Section V.A. 

155See 17 CFR 242.301(b)(5). 

156See infra Section III.B.4. 

157An ATS that meets the volume requirements 

must, with respect to those systems that support 

order entry, order routing, order execution, 

transaction reporting, and trade comparison, 

establish reasonable current and future capacity 

estimates; conduct periodic capacity stress tests of 

critical systems to determine such system’s ability 

to process transactions in an accurate, timely, and 

efficient manner; develop and implement 

reasonable procedures to review and keep current 

its system development and testing methodology; 

review the vulnerability of its systems and data 

center computer operations to internal and external 

threats, physical hazards, and natural disasters; 

establish adequate contingency and disaster 

recovery plans; on an annual basis, perform an 

independent review, in accordance with established 

audit procedures and standards, of the ATS’s 

controls for ensuring that the above requirements 

are met, and conduct a review by senior 

management of a report containing the 

recommendations and conclusions of the 

independent review; and promptly notify the 

Commission and its staff of material systems 

outages and significant systems changes. See 17 

CFR 242.301(b)(6)(ii). 

158See 17 CFR 242.301(b)(6)(i). 159Regulation SCI does not apply to ATSs that 

trade only municipal securities or corporate debt 

securities. See infra notes 351–356 and 

accompanying text. See also Regulation SCI 

Adopting Release, supra note 3, at 72262. 160See infra Section III.C. 161See 17 CFR 242.301(b)(7). 162See 17 CFR 242.301(b)(8). 163See 17 CFR 242.302. Rule 302 requires all 

ATSs to make and keep current certain records, 

information.146 Like Form ATS, Rule 

301(b)(2)(vii) and the instructions to 

Form ATS–R provide that Form ATS–R 

is deemed confidential when filed.147

The information reported on Form 

ATS–R by Communication Protocol 

Systems would permit the Commission 

to monitor the trading on these ATSs for 

compliance with the Exchange Act and 

applicable rules thereunder and enforce 

the Fair Access Rule.148

NMS Stock ATSs must comply with 

certain order display and execution 

access obligations 149 under Rule 

301(b)(3) if the ATS displays subscriber 

orders in an NMS stock to any person 

(other than an employee of the ATS) 

and meets certain volume 

requirements.150 These order display 

and execution access obligations were 

adopted by the Commission with the 

expectation they would promote 

additional market integration and 

further discourage two-tier markets 

when trading in an NMS stock on an 

ATS reaches a certain level.151 In 

addition, an NMS Stock 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 NMS Stock ATS that is required 

under Rule 301(b)(3)(iii).152 This 

requirement is designed to promote 

equal access to ATSs. 

As discussed in more detail below,153

ATSs are required to comply with the 

Fair Access Rule 154 under Rule 

301(b)(5) if the ATS meets volume 

thresholds in NMS stocks, equity 

securities that are not NMS stocks and 

for which transactions are reported to an 

SRO, municipal securities, or corporate 

debt securities.155 The Commission is 

proposing to apply the requirements of 

the Fair Access Rule to trading of U.S. 

Treasury Securities and Agency 

Securities on ATSs.156

Additionally, under Rule 301(b)(6) 

(‘‘Capacity, Integrity, and Security 

Rule’’), an ATS that trades only 

municipal securities or corporate fixed 

income debt with 20% or more of the 

average daily volume traded in the U.S. 

during at least four of the preceding six 

calendar months would be required to 

comply with capacity, integrity, and 

security standards 157 with respect to 

those systems that support order entry, 

order routing, order execution, 

transaction reporting, and trade 

comparison.158 Information provided 

under the Capacity, Integrity, and 

Security Rule would enable the 

Commission staff to better understand 

the operation of certain Communication 

Protocol Systems and to identify 

potential problems and trends that may 

require attention. 

NMS Stock ATSs, ATSs that trade 

non-NMS equity securities that are 

reported to an SRO, and Government 

Securities ATSs that meet certain 

trading thresholds would be subject to 

Regulation SCI. Regulation SCI 

superseded and replaced Rule 301(b)(6) 

requirements with regard to ATSs that 

trade NMS stocks and non-NMS 

stocks.159 The Commission is proposing 

to apply Regulation SCI to Government 

Securities ATSs, as discussed below.160

Regulation SCI is designed to help 

address the technological 

vulnerabilities, and improve the 

Commission’s oversight of the core 

technology of key entities. 

All ATSs, regardless of the volume 

traded on their systems, are required, 

pursuant to Rule 301(b)(7),161 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 the Commission 

or by an SRO of which such subscriber 

is a member. Because an ATS subscriber 

to whom the Commission’s inspection 

authority may not extend could use the 

ATS to manipulate the market in a 

security, the requirement is designed to 

require that ATSs cooperate in all 

inspections, examinations, and 

investigations. 

ATSs are also required, pursuant to 

Rule 301(b)(8),162 to make and keep 

current the records specified in Rule 

302 of Regulation ATS 163 and preserve 


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including: A record of subscribers to the ATS; daily 

summaries of trading in the ATS; and timesequenced records of order information in the ATS. 

See 17 CFR 242.302. 

164See Rule 303 of Regulation ATS. 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 31, at 70877–78. 165See supra note 98 and accompanying text. 166Specifically, the Commission is proposing to 

revise Rule 302(c)(1) (date and time (expressed in 

terms of hours, minutes, and seconds) that the 

trading interest was received); (c)(3) (the number of 

shares, or principal amount of bonds, to which the 

trading interest applies); (c)(5) (the designation of 

the trading interest as buy or sell trading interest); 

(c)(8) (any limit or stop price prescribed by the 

trading interest); (c)(9) (the date on which the 

trading interest expires and, if the time in force is 

less than one day, the time when the trading 

interest expires); (c)(10) (the time limit during 

which the trading interest is in force); (c)(11) (any 

instructions to modify or cancel the trading 

interest); (c)(12) (the type of account for which the 

trading interest is submitted); (c)(13) (date and time 

that the trading interest was executed); (c)(14) (price 

at which the trading interest is executed); and 

(c)(15) (size of the trading interest executed). 

167See Regulation ATS Adopting Release, supra 

note 31, at 70878. 

168These written safeguards and written 

procedures 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. 

169See 17 CFR 242.301(b)(10); NMS Stock ATS 

Adopting Release, supra note 2, Section VI. 

170See 17 CFR 242.301(b)(10)(ii). 

171See NMS Stock ATS Adopting Release, supra 

note 2, at 38864. 

172See 17 CFR 242.301(b)(11); Regulation ATS 

Adopting Release, supra note 31, Section II.C. 

173See Securities Exchange Act Release No. 

39884 (April 17, 1998), 63 FR 23504, 23523 (April 

29, 1998) (‘‘Regulation ATS Proposing Release’’). 

174For purposes of the rule text, the Commission 

is proposing to apply the transitional rules to 

‘‘Newly Designated ATSs.’’ 

175A registered broker-dealer that operates a 

Communication Protocol System and is currently a 

FINRA member may, under FINRA rules, be 

required to file a Continuing Membership 

Application with FINRA noticing material changes 

to business operations in connection with its 

operation of an ATS. 

176After receiving a substantially complete 

application package, FINRA must review and 

process it within 180 calendar days. See ‘‘How to 

Become a Member—Member Application Time 

Frames’’ available at https://www.finra.org/ 

registration-exams-ce/broker-dealers/how-becomemember-membership-application-time-frames. See 

also FINRA Rule 1014. 

177See proposed revisions to Rule 301(b)(1). This 

transition period for the proposed rule, if adopted, 

would also apply to Currently Exempted 

Government Securities ATSs (i.e., Legacy 

Government Securities ATSs formerly not required 

to comply with Regulation ATS pursuant to the 

exemption under § 240.3a1–1(a)(3) prior to effective 

date of any final rule) not registered as a brokerdealer. See infra note 283. 

178 ‘‘Covered ATS’’ is defined infra note 257. The 

Commission is proposing changes to Rule 

301(b)(2)(i) to clarify that the requirement to file 

Form ATS does not apply to ATSs other than 

Covered ATSs. See proposed Rule 301(b)(2)(i). 

179The rule text uses the term ‘‘Covered Newly 

Designated ATS.’’ 

180See proposed changes to Rule 301(b)(2)(i). 

181See infra note 300 and Section IV.A. 

the records specified in 17 CFR 

242.303.164 The Commission is 

proposing to amend Rule 302 of 

Regulation ATS to require 

recordkeeping related to ‘‘trading 

interest.’’ Rule 302 requires that an ATS 

shall make and keep certain records, 

which the rule enumerates. 

Communication Protocol Systems that 

choose to comply with Regulation ATS 

would be required to keep the records 

enumerated in Rule 302. The 

Commission is proposing to revise 

certain of these enumerated records that 

relate to ‘‘orders’’ to require such 

records related to ‘‘trading interest,’’ 

which would include both firm orders 

and non-firm trading interest.165 This 

would include time-sequenced records 

of trading interest information in the 

ATS.166 The recordkeeping 

requirements would require 

Communication Protocol Systems to 

make and keep certain records for an 

audit trail of trading activity that would 

allow the Commission to detect and 

investigate potential market 

irregularities, examine whether the ATS 

is in compliance with Federal securities 

laws, and ensure investor 

protections.167

In addition, ATSs are required to 

establish adequate written safeguards 

and written procedures 168 to protect 

confidential trading information and to 

separate ATS functions from other 

broker-dealer functions, including 

principal and customer trading pursuant 

to Rule 301(b)(10).169 Furthermore, all 

ATSs must adopt and implement 

adequate written oversight procedures 

to ensure that the above written 

safeguards and procedures are 

followed.170 These requirements are 

designed to help prevent the potential 

for abuse of subscriber confidential 

trading information.171

In addition, an ATS must not use in 

its name the word ‘‘exchange,’’ or any 

derivation of the word ‘‘exchange’’ 

pursuant to Rule 301(b)(11).172 The 

Commission believes that the use of the 

word ‘‘exchange’’ by an ATS would be 

deceptive and could lead investors to 

believe incorrectly that such ATS is 

registered as a national securities 

exchange.173

The Commission is proposing 

amendments to facilitate an orderly 

transition for Communication Protocol 

Systems to comply with the applicable 

conditions of the Regulation ATS 

exemption.174 The Commission 

understands that some Communication 

Protocol Systems are not currently 

registered as broker-dealers.175 To 

become a registered broker-dealer, these 

Communication Protocol Systems 

would be required to file Form BD with 

the Commission and complete FINRA’s 

processes for new members.176 The 

Commission is proposing to allow 

Communication Protocol Systems that 

are not registered as broker-dealers at 

the time the proposed rule would be 

effective, if adopted, to provisionally 

operate pursuant to the Rule 3a1–1(a)(2) 

exemption while their broker-dealer 

registration is pending until the earlier 

of (1) the date the ATS registers as a 

broker-dealer under Section 15 of the 

Exchange Act or Section 15C(a)(1)(A) of 

the Exchange Act and becomes a 

member of a national securities 

association or (2) the date 210 calendar 

days after the effective date of any final 

rule.177 The 210 calendar day period is 

designed to provide time for a 

Communication Protocol System to 

submit its broker-dealer registration 

application, or continuing membership 

application, as applicable, and for 

FINRA to conduct its review of new 

member application and continuing 

member application. The proposed 

transition period is designed to provide 

a Communication Protocol System that 

is not a registered broker-dealer 

adequate time to comply with the 

necessary broker-dealer registration 

requirements under Regulation ATS 

without disrupting its market or its 

participants. 

Proposed Rule 301(b)(2)(i) requires 

ATSs (other than Covered ATSs) 178 to 

file an initial operation report on Form 

ATS at least 20 days before commencing 

operations; however, Communication 

Protocol Systems that seek to operate as 

ATSs already will be operating when 

the proposed rule, if adopted, becomes 

effective. To avoid disruption of the 

services of the ATS, the Commission is 

proposing to amend Rule 301(b)(2)(i) to 

require Communication Protocol 

Systems (other than those that are 

Covered ATSs) 179 to file an initial 

operation report on Form ATS no later 

than 30 calendar days after the effective 

date of any final rule.180 The 

Commission is also proposing changes, 

as discussed below, to Rule 

301(b)(2)(viii) and Rule 304 to facilitate 

the transition for Communication 

Protocol Systems that are Covered ATSs 

to file Form ATS–N.181 Requiring 

Communication Protocol Systems to file 

a Form ATS with the Commission at the 

proposed time would provide the 

Commission with information about its 


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182Under the Exchange Act, government 

securities are defined as, among other things, 

securities which are direct obligations of, or 

obligations guaranteed as to principal or interest by, 

the United States. See 15 U.S.C. 78c(42)(A). 

Government securities include U.S. Treasury 

securities, debt securities issued or guaranteed by 

a U.S. executive agency, as defined in 5 U.S.C. 105, 

or government-sponsored enterprise, as defined in 

2 U.S.C. 622(8), and Agency Mortgage-Backed 

Securities (‘‘MBSs’’). Government securities also 

include securities which are issued or guaranteed 

by the Tennessee Valley Authority or by 

corporations in which the United States has a direct 

or indirect interest and which are designated by the 

Secretary of the Treasury for exemption as 

necessary or appropriate in the public interest or for 

the protection of investors; securities issued or 

guaranteed as to principal or interest by any 

corporation the securities of which are designated, 

by statute specifically naming such corporation, to 

constitute exempt securities within the meaning of 

the laws administered by the Commission; and any 

put, call, straddle, option, or privilege on one of the 

aforementioned (subject to limited exceptions). 15 

U.S.C. 78c(42)(B)–(C). 

183See Group of Thirty Working Group on 

Treasury Market Liquidity, U.S. Treasury Markets: 

Steps Toward Increased Resilience. Group of Thirty 

at 1 (2021) (‘‘G30 Report’’), available at https://

group30.org/publications/detail/4950. 

184See Recent Disruptions and Potential Reforms 

in the U.S. Treasury Market: A Staff Progress 

Report, at 32, available at https://

home.treasury.gov/system/files/136/IAWGTreasury-Report.pdf (‘‘November 2021 IAWG 

Report’’). The November 2021 IAWG Report is a 

joint report issued by the Inter-Agency Working 

Group for Treasury Market Surveillance (‘‘IAWG’’), 

which consists of staff from the U.S. Department of 

the Treasury, the Board of Governors of the Federal 

Reserve System, the Federal Reserve Bank of New 

York, the Commission, and the Commodity Futures 

Trading Commission. Among other things, the 

November 2021 IAWG report provides an overview 

of the current structure of the Treasury market and 

a detailed analysis of the recent disruptions to the 

Treasury market at the onset of the COVID–19 

pandemic in March 2020 as well as other recent 

disruptions to the Treasury market. The report also 

sets forth what the IAWG believes are the six 

guiding principles for the Treasury market and 

provides an update about the work streams for 

specific policy analysis being undertaken by the 

members of the IAWG. 

operations and facilitate oversight of the 

systems. 

Request for Comment 

1. Should the Commission amend 

Exchange Act Rule 3b–16 as proposed? 

Should the Commission adopt a more 

expansive or limited interpretation of 

the definition of ‘‘exchange’’? Do 

commenters agree that, in the current 

market, Communication Protocol 

Systems function as market places that 

conduct similar activities as exchanges 

do? Would any systems that conduct 

similar activities as exchanges that 

should be included in proposed Rule 

3b–16 be excluded? Are there any asset 

classes or types of securities that should 

be excluded from the definition of 

exchange? If so, why? 

2. What are commenters’ views on the 

potential consequences of expanding or 

limiting the definition of ‘‘exchange’’ 

under Exchange Act Rule 3b–16? What 

are commenters’ views on how changing 

Rule 3b–16 could benefit or harm 

investors and market participants? Are 

new systems that meet the definition of 

exchange likely to choose to operate as 

ATSs instead of national securities 

exchanges? 

3. Should the Commission adopt the 

proposed definition of ‘‘trading interest’’ 

under Exchange Act Rule 3b–16? 

Should the definition of ‘‘trading 

interest’’ require attributes to be 

identified in addition to at least the 

security and either quantity, direction 

(buy or sell), or price? Alternatively, 

would only one of the security, 

quantity, direction (buy or sell), or price 

be adequate to indicate trading interest? 

Should the definition of ‘‘exchange’’ 

continue to be limited to systems that 

use orders? If so, why? 

4. Should the Commission revise 

Exchange Act Rule 3b–16 to focus on 

bringing together buyers and sellers, 

rather than bringing together orders (or 

trading interest)? Would the proposed 

revisions to the rule appropriately 

describe systems that use non-firm 

trading interest to allow participants to 

communicate their trading interest? 

5. Should the Commission revise 

Exchange Act Rule 3b–16(a)(2) to 

describe a system that ‘‘makes available 

established, non-discretionary methods’’ 

under which buyers and sellers interact? 

Should the Commission revise the 

language further to clarify that a system 

provider that makes available a trading 

facility or communication protocol by 

way of a third party or affiliate would 

fall within the criteria of Rule 3b– 

16(a)(2)? Should there be any minimum 

or baseline to the established methods a 

system must have to qualify as an 

exchange? If so, what are they? Do 

commenters agree that making available 

communication protocols, as discussed 

herein, is sufficient to be an established, 

non-discretionary method under which 

buyers and sellers can interact? 

6. Should the Commission remove the 

reference to ‘‘multiple’’ in Rule 3b– 

16(a)(1))? If so, why? If not, why not? 

7. Should Communication Protocol 

Systems that choose to comply with 

Regulation ATS be subject to all of the 

requirements of Regulation ATS? Are 

there certain requirements of Regulation 

ATS that should or should not be 

applicable to Communication Protocol 

Systems, or certain Communication 

Protocol Systems? For example, are the 

current Regulation ATS recordkeeping 

requirements appropriate for 

Communication Protocol Systems? 

Should the Commission require a 

Communication Protocol System that 

chooses to operate as an ATS to create 

and maintain records that are not 

otherwise required by Rule 301(b)(8) of 

Regulation ATS? Is there anything that 

is not currently among the conditions to 

the Regulation ATS exemption that a 

Communication Protocol System and/or 

an existing ATS should comply with as 

part of Regulation ATS? And if so, why? 

8. Should the Commission amend 

Regulation ATS, Form ATS, Form ATS– 

R, or Form ATS–N in any way to be 

more tailored to Communication 

Protocol Systems? If so, how? 

9. Are the proposed transition periods 

for Communication Protocol Systems 

appropriate? Should the Commission 

provide Communication Protocol 

Systems more or less time to comply 

with any of the requirements of 

Regulation ATS? Please explain. 

10. Is the Commission’s proposal that 

a Newly Designated ATS must file an 

initial operation report on Form ATS no 

later than 30 calendar days after the 

effective date of any final rule, if 

adopted, appropriate? If not, should the 

Commission provide more time or less 

time for a Newly Designated ATS to file 

an initial Form ATS? 

11. Should the Commission allow a 

Newly Designated ATS that is not 

registered as a broker-dealer to operate 

pursuant to the Rule 3a1–1(a)(2) 

exemption on a provisional basis? Does 

the proposal to allow such ATSs a 

maximum 210 calendar days to comply 

with the broker-dealer registration 

requirement provide an appropriate 

amount of time to register as a brokerdealer? If not, what, if any, transition 

period would be appropriate and why? 

III. Proposed Changes Applicable to 

Government Securities ATSs 

A. ATS Markets for Government 

Securities 

Government securities 182 play a 

critical role in the U.S. and global 

economies. Among other things, for 

example, Treasury rates are a 

fundamental benchmark for pricing 

virtually all other financial assets.183

Systems currently operating as ATSs, 

particularly those that operate in the 

secondary interdealer markets for the 

most-recently issued (‘‘on-the-run’’) U.S. 

Treasury Securities, have become a 

significant location of trading interest 

for government securities.184

Specifically, most interdealer trading 

takes place on electronic platforms 

provided by interdealer brokers that 

operate limit order books, with 

electronic interdealer trading being 


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185See id. at 3. 186See SIFMA Fixed Income Trading Volume, 

available at https://www.sifma.org/resources/ 

research/us-fixed-income-trading-volume/. This 

includes U.S. Treasury Securities, Agency 

Mortgage-Backed Securities, and Federal Agency 

Securities. 

187See November 2021 IAWG Report, supra note 

184, at 31. See also NMS Stock ATS Adopting 

Release, supra note 2, at 38771 for a discussion 

about the current operational complexities of NMS 

Stock ATSs. 

188See also November 2021 IAWG Report, supra 

note 184, at 31; Joint Staff Report: The U.S. 

Treasury Market on October 15, 2014, at 11, 35–36, 

available at https://www.sec.gov/files/treasurymarket-volatility-10-14-2014-joint-report.pdf 

(‘‘October 15 Staff Report’’); Department of the 

Treasury Release No. 2015–0013 (January 22, 2016), 

Notice Seeking Public Comment on the Evolution 

of the Treasury Market Structure, 81 FR 3928 

(January 22, 2016) (‘‘Treasury Request for 

Information’’). This evolution in the interdealer 

secondary cash markets for U.S. Treasury Securities 

was also highlighted in the October 15 Staff Report, 

the Treasury Request for Information, and public 

comment received by the Commission. The October 

15 Staff Report is a joint report about the unusually 

high level of volatility and rapid round-trip in 

prices that occurred in the U.S. Treasuries market 

on October 15, 2014. Among other things, the 

October 15 Staff Report provides an overview of the 

market structure, liquidity, and applicable 

regulations of the U.S. Treasury market, as well as 

the broad changes to the structure of the U.S. 

Treasury market that have occurred over the past 

two decades. 

189See infra note 193 for a description of ‘‘off-therun’’ securities. 

190See James Collin Harkrader and Michael 

Puglia, Fixed Income Market Structure: Treasuries 

vs. Agency MBS, Board of Governors of the Federal 

Reserve System: FEDS NOTES (August 25, 2020), 

available at https://www.federalreserve.gov/ 

econres/notes/feds-notes/fixed-income-marketstructure-treasuries-vs-agency-mbs-20200825.htm 

(‘‘August 25th FEDS Notes’’) (explaining the recent 

evolution of the government securities market 

structure). 

191STRIPS is the acronym for Separate Trading of 

Registered Interest and Principal of Securities. 

STRIPS let investors hold and trade the individual 

interest and principal components of eligible 

Treasury notes and bonds as separate securities. 

STRIPS are Treasury securities that don’t make 

periodic interest payments. Market participants 

create STRIPS by separating the interest and 

principal parts of a Treasury note or bond. STRIPS 

can only be bought and sold through a financial 

institution, broker, or dealer and held in the 

commercial book-entry system. See TreasuryDirect, 

STRIPS, available at https://

www.treasurydirect.gov/instit/marketables/strips/ 

strips.htm. 

192On-the-run U.S. Treasury Securities are the 

most recently issued nominal coupon securities. 

Nominal coupon securities pay a fixed semi-annual 

coupon and are currently issued at original 

maturities of 2, 3, 5, 7, 10, 20, and 30 years. These 

standard maturities are commonly referred to as 

‘‘benchmark’’ securities because the yields for these 

securities are used as references to price a number 

of private market transactions. 

193Off-the-run or ‘‘seasoned’’ U.S. Treasury 

Securities are the issues that preceded the current 

on-the-run securities. The U.S. Treasury Securities 

market also comprises futures and options on U.S. 

Treasury Securities, and securities financing 

transactions in which U.S. Treasury Securities are 

used as collateral. See Treasury Request for 

Information, supra note 188, at 3928. For the 

purpose of this proposal, the Commission focuses 

on the secondary cash market. 

194See id. 

195See id. 

196See id. For the purposes of this proposal, 

internalization refers to a broker filling a customer 

order either from the firm’s own inventory or by 

matching the order with other customer order flow, 

instead of sending the order to an interdealer 

market for execution. See id. at 3928 n.5. 

197See October 15 Staff Report, supra note 188, 

at 11, 35–36. See also Bloomberg Letter at 5, stating 

that liquid on-the-run government securities are 

mostly traded on limit order books. 

198The growth of electronic trading has 

contributed to a marked shift in the composition of 

the interdealer cash market for U.S. Treasury 

Securities over time. Traditionally, interdealer 

brokers only allowed primary dealers to access their 

trading venues. After 1992, however, interdealer 

brokers expanded access to all entities that were 

netting members of the Government Securities 

Clearing Corporation (which is now the Fixed 

Income Clearing Corporation’s Government 

Securities Division). Thereafter, other entities 

gained access to these trading venues through their 

Continued 

concentrated in on-the-run Treasury 

securities.185 In July 2021, average daily 

trading in government securities totaled 

$978 billion, or roughly 95 percent of all 

fixed income trading volume in the 

U.S.186

Legacy Government Securities ATSs 

now operate with complexity similar to 

that of markets that trade NMS stocks in 

terms of use of technology and speed of 

trading, the use of limit order books, 

order types, algorithms, connectivity, 

data feeds, and the active participation 

of principal trading firms (‘‘PTFs’’).187

For example, based on the 

Commission’s review of Form ATS 

filings by ATSs that trade government 

securities and discussions with market 

participants, the Commission believes 

that Legacy Government Securities 

ATSs often offer subscribers a variety of 

order types to pursue both aggressive 

and passive trading strategies and low 

latency, high-speed connectivity to the 

ATS. These ATSs frequently use 

automated systems to match orders 

anonymously on a price/time priority 

basis. Some Legacy Government 

Securities ATSs also segment orders 

into categories by participants or allow 

participants the ability to interact with 

specific counterparty groups in the ATS 

and facilitate order interaction and 

execution.188 Likewise, Communication 

Protocol Systems are increasingly used 

as electronic means to bring together 

buyers and sellers for government 

securities and are particularly prevalent 

in the dealer-to-customer market for 

U.S. Treasury and markets for off-therun 189 U.S. Treasury Securities, Agency 

Securities,190 and repos. 

The most liquid and commonly 

traded government securities are U.S. 

Treasury Securities, which are direct 

obligations of the U.S. Government 

issued by the U.S. Department of the 

Treasury (‘‘Treasury Department’’). The 

Treasury Department issues several 

different types of securities, including 

Treasury bills, nominal coupons notes 

and bonds, Floating Rate Notes, and 

Treasury Inflation Protected Securities. 

Treasury nominal coupon notes and 

bonds, as well as Treasury Inflation 

Protected Securities, may also be 

separated into principal and interest 

payments and traded as STRIPS.191 For 

each security type, the on-the-run 

securities are generally considered the 

most liquid in the secondary market.192

Market participants commonly refer to 

securities issued prior to ‘‘on-the-run’’ 

securities as ‘‘off-the-run’’ securities.193

Market participants use U.S. Treasury 

Securities as an investment instrument, 

hedging vehicle, and to source orders 

and trading interest, among other things. 

U.S. banks commonly own U.S. 

Treasury Securities due to their low risk 

and strong liquidity characteristics. 

Additionally, U.S. Treasury Securities 

are often used as collateral in lending 

arrangements or as margin on other 

financial transactions. 

For U.S. Treasury Securities, the 

secondary market is bifurcated between 

the dealer-to-customer market, in which 

dealers trade with their customers (e.g., 

investment companies, pension funds, 

insurance companies, corporations, or 

retail), and the interdealer market, in 

which dealers and specialty firms trade 

with one another.194 Customers, also 

referred to as ‘‘end users,’’ have not 

traditionally traded directly with other 

end users.195 Rather, end users 

primarily trade with dealers, and 

dealers use the interdealer market as a 

source of liquidity to help facilitate their 

trading with clients in the dealer-tocustomer market. Trading in the U.S. 

Treasury Securities dealer-to-customer 

market is generally—and has 

historically been—conducted bilaterally 

using voice, and more recently, 

electronically through the use of 

Communication Protocol Systems, most 

commonly using an RFQ protocol. 

Broker-dealers also internalize a portion 

of their customer flow, although the 

extent to which broker-dealers 

internalize is unclear.196

In the interdealer market, the majority 

of trading in on-the-run U.S. Treasury 

Securities currently occurs on ATSs 

using limit order books supported by 

advanced electronic trading 

technology.197 Furthermore, interdealer 

trading for on-the-run U.S. Treasury 

Securities is generally concentrated 

within a very small number of ATSs, 

especially when compared to the market 

for NMS stocks, which is dispersed 

among many trading venues.198 While 


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prime brokers, who themselves had access, and in 

recent years the trading venues granted direct 

access to an even wider range of participants, 

including non-dealers, which account for more than 

half of the trading activity in the futures and 

electronically brokered interdealer cash markets. 

See October 15 Staff Report, supra note 188, at 36. 

See also Treasury Request for Information, supra 

note 188, at 3928. 

199See infra Table VIII.2 and accompanying text. 

200For an additional discussion of trading volume 

in the U.S. bond market as a whole and U.S. 

Treasury Securities, see infra Section VIII.B.2. 

201Also, as noted in the October 15 Staff Report 

issued by the Treasury Department, Board of 

Governors of the Federal Reserve System, Federal 

Reserve Bank of New York, the Commission, and 

U.S. Commodity Futures Trading Commission, 

trading in off-the-run U.S. Treasury Securities has 

always been less active than trading in on-the-run 

U.S. Treasury Securities, and price discovery in the 

cash markets primarily occurs in on-the-run 

securities. See October 15 Staff Report, supra note 

188 at n.7. 

202See November 2021 IAWG Report, supra note 

184, at 3. See also Bloomberg Letter at 5, stating that 

less liquid off-the-run government securities are 

mostly traded using methods other than limit order 

books. 

203While trading in on-the-run securities likely 

accounts for more than half of total daily trading 

volumes, off-the-run U.S. Treasury Securities make 

up over 95 percent of the outstanding marketable 

U.S. Treasury Securities. See G30 Report, supra 

note 183, at 1, n.2. 

204See U.S. Department of the Treasury Resource 

Center, ‘‘Fixed Income: Agency Securities,’’ 

available at https://www.treasury.gov/resourcecenter/faqs/Markets/Pages/fixedfederal.aspx. For 

example, the Government National Mortgage 

Association (‘‘Ginnie Mae’’) is a U.S. Government 

corporation that issues mortgage-backed securities 

guaranteed by the full faith and credit of the U.S. 

Government. The assets collateralized into the 

securities issued by Ginnie Mae are federally 

insured and guaranteed mortgage loans. Agency 

Securities issued by GSEs include those issued by 

the Federal Home Loan Banks (‘‘FHLBs’’), the 

Federal National Mortgage Association (‘‘Fannie 

Mae’’), the Federal Home Loan Mortgage 

Corporation (‘‘Freddie Mac’’), and the Student Loan 

Marketing Association (‘‘Sallie Mae’’). Agency 

Securities issued by GSEs are not normally backed 

by the full faith and credit of the U.S. Government 

and therefore, may present some default and credit 

risk. 

205Additionally, repos on government securities 

are also traded on some ATSs. 

206PTFs are not, however, very active in the 

electronic markets for Agency Securities. See 

August 25th FEDS Notes, supra note 190 (‘‘Though 

parts of the agency MBS market have moved from 

voice-based to screen-based trading since the early 

2000s, algorithmic high-frequency electronic 

trading still does not comprise a meaningful share 

of average daily volume and the market remains 

devoid of PTF participation.’’). 

207See November 2021 IAWG Report, supra note 

184, at 5. See also October 15 Staff Report, supra 

note 188, at 36; Remarks of Deputy Secretary Justin 

Muzinich at the 2019 U.S. Treasury Market 

Structure Conference (September 23, 2019), 

available at https://home.treasury.gov/news/pressreleases/sm782. 

208See infra Table VIII.2. (ATS PTF volume/ATS 

volume) × 100 = PTF share of ATS volume (%). 

209See October 15 Staff Report, supra note 188, 

at 32, 35–36, 39. 

210See November 2021 IAWG Report, supra note 

184, at 5; October 15 Staff Report, supra note 188, 

at 38. 

211See October 15 Staff Report, supra note 188, 

at 37. 

212See, e.g., BrokerTec Letter, SIFMA Letter, 

AFREF Letter. 

213See FINRA Letter. 

trading in the most liquid NMS stocks 

occur on a variety of trading venues 

(e.g., exchanges, ATSs, single-dealer 

broker platforms), the majority of overall 

trading in the interdealer secondary 

market for on-the-run U.S. Treasury 

Securities occurs on ATSs.199 For 

example, during the first nine months of 

2021, one ATS accounted for $14.9 

trillion in total dollar volume in all 

government securities, the majority of 

which were on-the-run U.S. Treasury 

Securities.200 For off-the-run U.S. 

Treasury Securities,201 the majority of 

interdealer trading occurs via 

transactions through traditional voiceassisted interdealer broker platforms 

and Communication Protocol Systems 

that offer various trading protocols to 

bring together buyers and sellers,202

though some interdealer trading of offthe-run U.S. Treasury Securities does 

occur on ATSs.203

Another type of government securities 

is Agency Securities. Agency Securities 

include securities issued by or 

guaranteed by U.S. Government 

corporations or U.S. Government 

sponsored enterprises (‘‘GSEs’’).204

Agency Securities, which may not be 

backed by the full faith and credit of the 

U.S. Government, are generally 

considered to be very liquid and offer 

state and local tax advantages to the 

holder. Market participants can use 

ATSs to buy and sell Agency Securities, 

although, based on the Commission’s 

review of Form ATS–R filings, 

transaction volume of Agency Securities 

is not as large as that of U.S. Treasury 

Securities on ATSs.205 Investors, banks, 

and other market participants often 

acquire Agency Securities in the 

secondary market to support various 

investing strategies, such as hedging 

against other more risky investments in 

a given portfolio. Agency Securities also 

trade on Communication Protocol 

Systems where buyers and sellers can 

use RFQ protocols, for example, to 

engage in price discovery, find a 

counterparty, and negotiate and execute 

a transaction. 

Repos provide short-term financing 

(often overnight) to help fund the 

borrower’s (usually a broker-dealer) 

trading or lending activities. However, 

the collateral is sold to the lender, and 

the repo obligates the borrower to 

repurchase the collateral. U.S. Treasury 

Securities are frequently used as the 

underlying collateral of a repo. Several 

ATSs have provided notice on their 

Form ATS disclosures that they 

facilitate the trading of repos. Much like 

the markets for U.S. Treasury Securities 

and Agency Securities, repo trading has 

historically been conducted bi-laterally 

by voice; however, over the past decade, 

electronic trading of repos on 

Communication Protocol Systems has 

increased significantly. Electronic 

trading of repos is primarily conducted 

via RFQ protocols, and many systems 

for trading in repos now offer electronic 

trading options. 

With regard to the interdealer 

secondary markets for on-the-run U.S. 

Treasury Securities, the continued 

growth of electronic trading has 

contributed to an increased presence of 

PTFs in the market place.206 Currently, 

PTFs account for the majority of trading 

and provide top-of-the-book liquidity 

for on-the-run U.S. Treasury Securities 

on electronic interdealer trading 

venues.207 From January 1, 2021 to June 

30, 2021, PTFs traded on 13 

Government Securities ATSs accounting 

for approximately 48.6 percent of total 

on-the-run Government Securities ATS 

trading volume.208 PTFs usually have 

direct access to electronic interdealer 

trading venues for U.S. Treasury 

Securities, and as is the case with the 

equity markets, PTFs trading on the 

electronic interdealer trading venues for 

on-the-run U.S. Treasury Securities 

often employ automated algorithmic 

trading strategies that rely on speed and 

allow the PTFs to cancel or modify 

quotes in response to perceived market 

events.209 Furthermore, most PTFs 

trading U.S. Treasury Securities on 

these trading venues for on-the-run U.S. 

Treasury Securities also restrict their 

activities to principal trading and do not 

hold positions long term, while dealers 

use the interdealer market as a source of 

orders and trading interest to help 

facilitate their trading with clients in the 

dealer-to-customer market.210 As 

explained in the October 15 Staff 

Report, the increase in trading by PTFs 

in the interdealer market may affect the 

amount of liquidity available to end 

users in the dealer-to-customer 

market.211

In response to the 2020 Proposal, the 

Commission received several comments 

that broadly supported expanding the 

regulatory framework under Regulation 

ATS with respect to Government 

Securities ATSs.212 Commenters stated 

that ATSs have become increasingly 

important in the government securities 

market.213 One commenter stated that, 

given that Government Securities ATSs 

closely resemble NMS Stock ATSs, it 

would be appropriate to impose similar 

regulatory oversight, including 

regulatory oversight by the Commission 


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214See SIFMA Letter at 2. 

215See also MFA Letter at 4. 

216See AFREF Letter at 1. 

217See id. 

218See id. at 2 (stating that the growing role of 

PTFs means that much trading activity is not 

coming from long-term investors but rather 

proprietary trading firms who may trade in-and-out 

of their positions several times in a day and are 

likely to react sharply to market volatility). 

219 17 CFR 240.3a1–1(a)(3). 

220 17 CFR 242.301(a)(4)(ii)(A). 

221 17 CFR 242.301(b). 

222See 15 U.S.C. 78o(b) (pertaining to the 

registration and regulation of brokers and dealers). 

223See 15 U.S.C. 78o–5 (pertaining to the 

registration and regulation of government securities 

brokers and dealers). 

224See 15 U.S.C. 78c(a)(42). The definition of 

‘‘government securities’’ in Section 3(a)(42) of the 

Exchange Act (and, therefore, references to 

‘‘government securities’’ throughout this proposal) 

includes certain puts, calls, straddles, options, or 

privileges on government securities, other than 

puts, straddles, options, or privileges that: Are 

traded on one or more national securities 

exchanges; or for which quotations are 

disseminated through an automated quotation 

system operated by a registered securities 

association. See supra note 182. 

225See 17 CFR 242.301(a)(4)(i) and (a)(4)(ii)(A). 

Although not required to register as a national 

securities exchange or comply with Regulation 

ATS, a Currently Exempted Government Securities 

ATS may need to register as a broker-dealer under 

Section 15(b) or as a government securities broker 

or government securities dealer pursuant to 

Exchange Act Section 15C, and comply with the 

associated regulatory requirements. See, e.g., 17 

CFR chapter IV, subchapter A—Regulations under 

Section 15C of the Securities Exchange Act of 1934. 

226Some ATSs that are eligible for the exemption 

voluntarily comply with Regulation ATS, even 

though ATSs that trade only government securities 

are not required to comply with Regulation ATS at 

all. 

227See supra notes 130–131 and accompanying 

text. 

228See FINRA Rule 6730(a)(1) requires FINRA 

members to report transactions in TRACE-Eligible 

Securities, which FINRA Rule 6710 defines to 

include U.S. Treasury Securities and Agency 

Securities. For each transaction in U.S. Treasury 

Securities and Agency Securities, a FINRA member 

would be required to report the CUSIP number or 

similar numeric identifier or FINRA symbol; size 

(volume) of the transaction; price of the transaction 

(or elements necessary to calculate price); symbol 

indicating whether transaction is a buy or sell; date 

of trade execution (‘‘as/of’’ trades only); contraparty’s identifier; capacity (principal or agent); time 

of execution; reporting side executing broker as 

‘‘give-up’’ (if any); contra side introducing broker 

(in case of ‘‘give-up’’ trade); the commission (total 

dollar amount), if applicable; date of settlement; if 

the member is reporting a transaction that occurred 

on an ATS pursuant to FINRA Rule 6732, the ATS’s 

separate Market Participant Identifier (‘‘MPID’’); 

and trade modifiers as required. For when-issued 

transactions in U.S. Treasury Securities, a FINRA 

member would be required to report the yield in 

lieu of price. See FINRA Rule 6730(c). 

229FINRA Rule 6750(a) requires FINRA to 

disseminate information on all transactions on 

certain securities, including Agency Securities (but 

excluding U.S. Treasury Securities), immediately 

upon receipt of the transaction report. FINRA is 

permitted to publish or distribute weekly 

aggregated transaction information and statistics on 

U.S. Treasury Securities, and has stated that it 

intends to publish weekly volume information 

aggregated by U.S. Treasury subtype (e.g., Bills, 

Floating Rate Notes, Treasury Inflation-Protected 

Securities, and Nominal Coupons). See Securities 

Exchange Release No. 87837 (December 20, 2019), 

84 FR 71986 (December 30, 2019) (approving a 

proposed rule change to allow FINRA to publish or 

distribute aggregated transaction information and 

statistics on U.S. Treasury Securities). 

230See 17 CFR 242.301(b)(1), (2), and (7) through 

(11). The order display and execution access 

provisions under Rule 301(b)(3) and the related fee 

restrictions of Rule 301(b)(4) of Regulation ATS 

only apply to an ATS’s NMS stock activities. See 

17 CFR 242.301(b)(3) and (4). See also supra 

Section II.D.2 (discussing the requirements for 

compliance with the Regulation ATS exemption). 

231 17 CFR 242.301(b)(5). See also supra notes 

153–157 and accompanying text. 

232See 17 CFR 242.301(b)(5). 

and FINRA.214 Likewise, another 

commenter stated that many of the 

concerns surrounding potential conflicts 

of interest that arise between an ATS 

and the activities of its bank/brokerdealer operator and affiliates—and the 

transparency of an ATS’s operations— 

are equally relevant with respect to 

ATSs that transact in government 

securities as to NMS Stock ATSs.215 In 

addition, one commenter stated that 

critical intermediaries in the U.S. 

Treasury market are ‘‘effectively 

unregulated’’ as trading venues or 

dealers, and this hampers availability of 

information concerning trading in these 

critical markets, and that oversight of 

the core ‘‘plumbing’’ of these critical 

markets, which determines their 

resiliency, is lacking.216 This 

commenter stated that several ATSs 

now dominate the trading of U.S. 

Treasury Securities and agency 

mortgage backed securities, and that 

ensuring that Regulation ATS and 

Regulation SCI apply to these entities 

will provide for additional data and 

create more transparency into the 

trading around those critical markets.217

This commenter also stated that 

expanding Regulation ATS with respect 

to ATSs that trade U.S. Treasuries has 

also become important as the role of 

PTFs has become more significant in the 

U.S. Treasury markets and related repo 

markets.218

B. Heightened Regulatory Requirements 

Under Regulation ATS for Government 

Securities ATSs 

The vast majority of ATSs that operate 

today do so pursuant to the exemption 

provided by Exchange Act Rule 3a1– 

1(a)(2), which requires the ATSs to be 

in compliance with Regulation ATS, 

which includes, among other things, 

registering as broker-dealers. Currently 

Exempted Government Securities ATSs, 

however, operate pursuant to Exchange 

Act Rule 3a1–1(a)(3) 219 and Rule 

301(a)(4)(ii)(A).220 These provisions 

currently exempt an ATS from 

compliance with the requirements in 

Rule 301(b) of Regulation ATS 221 if, in 

relevant part, the ATS (1) is registered 

as a broker-dealer under Sections 

15(b) 222 or 15C223 of the Exchange Act, 

or is a bank, and (2) limits its securities 

activities to government securities (as 

defined in Section 3(a)(42) of the 

Exchange Act), repos, any puts, calls, 

straddles, options, or privileges on 

government securities, other than puts, 

calls, straddles, options, or privileges 

that: (i) Are traded on one or more 

national securities exchanges; or (ii) for 

which quotations are disseminated 

through an automated quotation system 

operated by a registered securities 

association, and commercial paper.224

Accordingly, such Currently Exempted 

Government Securities ATSs are not 

required to register as a national 

securities exchange or comply with 

Regulation ATS.225 To the 

Commission’s knowledge, most 

Currently Exempted Government 

Securities ATSs operating pursuant to 

this exemption register as broker-dealers 

with the Commission.226

ATSs that do not limit their securities 

activities solely to government 

securities or repos, trading for example 

corporate bonds or municipal securities, 

cannot use this exemption. Such ATSs 

must either register as an exchange or 

comply with Regulation ATS pursuant 

to Exchange Act Rule 3a1–1(a)(2), which 

includes, among other things, 

registering as a broker-dealer under 

Section 15 of the Exchange Act.227

Government Securities ATSs that are 

currently subject to Regulation ATS 

must report transactions in U.S. 

Treasury Securities and Agency 

Securities to the Trade Reporting and 

Compliance Engine (‘‘TRACE’’),228 and 

FINRA publicly disseminates data about 

these transactions. Currently, FINRA 

publishes weekly aggregated transaction 

information on U.S. Treasury Securities 

and disseminates certain transaction 

information on Agency Securities 

immediately upon receipt of a 

transaction report.229 Today, Legacy 

Government Securities ATSs are subject 

only to certain provisions of Regulation 

ATS because not all the provisions are 

applicable to trading in government 

securities.230 In particular, government 

securities are not included in any 

category of securities under the Fair 

Access Rule.231 Today, the categories of 

securities under the Fair Access Rule 

only include NMS stocks, equity 

securities that are not NMS stocks and 

for which transactions are reported to an 

SRO, municipal securities, and 

corporate debt securities.232 In addition, 

Regulation SCI does not apply to ATSs 

with respect to their trading in 


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233See infra Section III.C (describing the types of 

entities that are currently subject to the 

requirements of Regulation SCI). 234 17 CFR 242.301(b)(6). 

235See supra notes 157–158 and accompanying 

text. 

236 17 CFR 242.304. See also supra notes 139–143 

and accompanying text. 

237See supra notes 149–151 and accompanying 

text. 

238See supra note 152 and accompanying text. 

239See supra Section II.A. 

240See, e.g., 2020 Proposal, supra note 4, at 

87125. 

241See id. at Section III.B.4 (discussing the Fair 

Access Rule) and III.C (discussing Regulation SCI). 

242See proposed Rule 300(l). 

243 17 CFR 242.300(a). See Regulation ATS 

Adopting Release, supra note 31, at 70851–52. 

244See proposed Rule 300(l). 

245An ATS that does not trade NMS stocks or 

government securities, as proposed, must file Form 

ATS. If the broker-dealer operates an ATS that 

trades NMS stocks and an ATS that trades 

government securities, it would be required to file 

a separate Form ATS–N for each of the NMS Stock 

ATS and Government Securities ATS. 

246Broker-dealers that operate Government 

Securities ATSs that are currently subject to 

Regulation ATS already must have established 

written safeguards and written procedures to 

protect subscribers’ confidential trading 

information, pursuant to Rule 301(b)(10), and 

already must make and keep records pursuant to 

Rule 301(b)(8) that are tailored to the types of 

securities the ATS trades and the subscribers that 

trade those securities on the ATS. The Commission 

believes the proposal is broadly consistent with the 

manner in which broker-dealers that operate NMS 

Stock ATSs and non-NMS Stock ATSs currently 

comply with Regulation ATS. For further 

discussion, see infra Section III.B.3. 

247See ICE Bonds Letter I at 5. 

248See id. The commenter stated that the initial 

set-up of a new Government Securities ATS would 

require, among other things, the development of a 

matching engine, separate connectivity for 

subscribers, new clearing connectivity, additional 

personnel to support trading operations of the 

Government Securities ATS, and regulatory 

controls (e.g., Rule 15c3–5). The commenter further 

stated that these requirements would ultimately 

lead to fewer venues for subscribers to trade and 

hedge and concentrate trading among a few large 

Government Securities ATSs, as smaller Legacy 

Government Securities ATSs may determine that 

this separation requirement is cost prohibitive. In 

addition, the commenter stated that if a subscriber 

has to execute a corporate bond on one ATS and 

sell the treasury on a different ATS, there is an 

administrative and operational burden placed on 

the subscriber, as well as additional economic and 

market risk to the subscriber as the price on the 

other venue may move by the time the hedge trade 

is initiated. 

249See id. 

250See id. 

government securities.233 The Capacity, 

Integrity, and Security Rule under Rule 

301(b)(6) 234 also does not apply to the 

government securities activities of an 

ATS.235

Finally, Government Securities ATSs 

are not required to comply with rules 

applicable to ATSs that trade NMS 

stocks, including the obligation to file a 

public Form ATS–N pursuant to Rule 

304 of Regulation ATS.236 ATSs that 

transact in government securities or 

repos are also not required to comply 

with the order display and execution 

access provisions under Rule 

301(b)(3) 237 and the related fee 

restrictions of Rule 301(b)(4),238 both of 

which only apply to an ATS’s NMS 

stock activities. 

Despite the critical role of government 

securities in the U.S. and global 

economy, the significant volume in 

government securities transacted on 

ATSs, and these ATSs’ growing 

importance to investors and overall 

securities market structure, Currently 

Exempted Government Securities ATSs 

are exempt from exchange registration 

and are not required to comply with 

Regulation ATS. In addition, 

Communication Protocol Systems that 

transact in government securities and/or 

repos, but do not currently meet the 

definition of ‘‘exchange,’’ are not subject 

to exchange registration requirements 

and are likewise not required to comply 

with Regulation ATS.239 Furthermore, 

ATSs that trade both government 

securities and non-government debt 

securities (e.g., corporate bonds) are not 

subject to all the provisions of 

Regulation ATS. Market participants 

today have limited access to information 

that permits them to adequately 

compare and contrast how they can use 

a Government Securities ATS or how 

their trading interest would be handled 

by Government Securities ATSs.240 In 

addition, Government Securities ATSs 

are not currently subject to the Fair 

Access Rule and Regulation SCI, which 

would help ensure the fair treatment of 

subscribers and address technological 

vulnerabilities, and improve the 

Commission’s oversight, of the core 

technology of key entities in the markets 

for government securities.241 Given 

these concerns, and comments received 

on the 2020 Proposal, the Commission 

is re-proposing and revising the 

amendments described below. 

1. Proposed Definition of Government 

Securities ATS 

The Commission is re-proposing to 

amend Rule 300 of Regulation ATS to 

define ‘‘Government Securities ATS’’ to 

mean an alternative trading system, as 

defined in Rule 300(a), that trades 

government securities, as defined in 

section 3(a)(42) of the Exchange Act (15 

U.S.C. 78c(a)(42)), or repurchase and 

reverse repurchase agreements on 

government securities.242 To meet the 

definition of a Government Securities 

ATS, the organization, association, 

person, group of persons, or system 

must meet the definition of an 

alternative trading system under Rule 

300(a) of Regulation ATS.243 The 

Commission is also re-proposing that a 

Government Securities ATS shall not 

trade securities other than government 

securities or repos 244 and that trading of 

securities other than government 

securities or repos would require the 

separate filing of a Form ATS or a Form 

ATS–N, depending on the types of 

securities traded.245 Other than 

complying with Rule 304 and filing 

Form ATS–N, this amendment would 

not, however, impose new compliance 

requirements on ATSs that currently 

trade government securities in addition 

to non-government securities.246 Under 

the proposal, if a broker-dealer operator 

currently operates an ATS for 

government securities and nongovernment securities (for example, 

corporate bonds), the broker-dealer 

operator would separately be required to 

comply with Regulation ATS for: (1) A 

Government Securities ATS that would 

trade government securities, which 

would be subject to Rule 304, and file 

disclosures on Form ATS–N, as 

proposed to be revised and (2) a nonGovernment Securities ATS (that, for 

example, would trade corporate bonds), 

which would not be subject to Rule 304, 

and file disclosures on its existing Form 

ATS, as amended to remove references 

to government securities. 

In response to the 2020 Proposal, the 

Commission received one comment 

letter opposing the proposed definition 

of Government Securities ATS.247 This 

commenter stated that separating 

trading activity in government securities 

and repos from non-NMS stock trading 

activity could impose administrative 

and operational burdens on both 

Government Securities ATSs and 

subscribers.248 The commenter stated 

that the Commission did not explain 

why requiring a Government Securities 

ATS to separate its operations from 

other non-NMS Stock ATS trading 

activity would improve Commission 

oversight or other regulatory goals.249

The proposed definition of 

Government Securities ATS, however, 

would not require operational 

separation by a Government Securities 

ATS, and the operational costs that the 

commenter described would therefore 

not apply.250 The proposed definition 

would not, for example, require the 

Government Securities ATS to develop 

a new matching engine nor require 

changes with regard to how subscribers 

enter trading interest into the ATS. 

Other than requiring the Government 

Securities ATS to separately comply 

with the requirements of Regulation 

ATS (and, as applicable, Regulation 

SCI), the proposed definition does not 

create new compliance requirements on 


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251See supra note 246. 

252See infra Section IV.D.4.f. 

253See infra Section IV.D.5.k. 

254See proposed Rule 300(k). 

255See current Rule 301(b)(2)(viii). 

256See proposed Rule 300(n). See also supra note 

5. See infra notes 433–439 and accompanying text 

for a description of the filing and effectiveness rules 

applicable to Legacy Government Securities ATSs. 

257See proposed Rule 300(m). 

258See proposed Rule 300(s). 

259See proposed Rule 300(o)–(p). 

260See infra Section III.B.4. The proposed 

definitions are similar to those in FINRA’s rules. 

See FINRA Rules 6710(l) and 6710(p). 

Government Securities ATSs.251 Under 

the proposed rule, a broker-dealer 

operator for an ATS that currently 

trades both government securities and 

corporate debt securities, for example, 

would be required to file a Form ATS– 

N for the trading of government 

securities on a Government Securities 

ATS and a separate Form ATS for 

trading of corporate debt securities on 

an ATS. In this example, the brokerdealer operator for a Government 

Securities ATS and non-Government 

Securities ATS may be required to 

disclose certain information on Form 

ATS–N about the non-Government 

Securities ATS. For example, to the 

extent that any persons support both the 

operation of the Government Securities 

ATS and the ATS that trades corporate 

debt securities and have access to 

subscriber confidential trading 

information for the Government 

Securities ATS, the Government 

Securities ATS would need to disclose 

that on Part II, Item 7 of Form ATS– 

N.252 In addition, the Government 

Securities ATS would be required to 

provide under Part III, Item 11 

information about interaction with nongovernment securities markets (e.g., 

futures, currencies, swaps, corporate 

bonds).253

Further, the Commission believes that 

by stating that a Government Securities 

ATS trades only government securities, 

the definition of Government Securities 

ATS clarifies which regulatory 

requirements are applicable for trading 

activity in government securities and 

non-government securities. For 

example, a Government Securities ATS 

would file a Form ATS–N specifically 

disclosing information regarding its 

trading in government securities, which 

would enable market participants to 

understand the ATS’s government 

securities operations and readily 

compare the ATS against other 

Government Securities ATSs. 

To provide that the same approach 

applies to broker-dealers that operate 

NMS Stock ATSs and non-NMS Stock 

ATSs, and to clarify requirements 

applicable to NMS Stock ATSs, the 

Commission is proposing to amend the 

definition of ‘‘NMS Stock ATS’’ to state 

that an NMS Stock ATS shall not trade 

securities other than NMS stocks.254

Today, securities other than NMS stocks 

are not traded in any NMS Stock ATS 

and the proposed amendment to the 

definition of NMS Stock ATS would 

have no impact on any existing ATS nor 

on the requirements applicable to 

existing NMS Stock ATSs. Broker-dealer 

operators of NMS Stock ATSs are 

currently required to file a Form ATS– 

N for NMS Stock ATS operations and a 

separate Form ATS for any non-NMS 

Stock ATS operations.255 This would 

not change under this proposal. In 

addition, to facilitate the orderly 

transition to the heightened 

requirements for Government Securities 

ATSs that are currently operating, the 

Commission is defining such ATSs as 

Legacy Government Securities ATSs.256

To help specify which ATSs are 

subject to Rule 304 requirements, the 

Commission is proposing to define 

‘‘Covered ATS’’ as an NMS Stock ATS 

or Government Securities ATS, as 

applicable.257 The Commission is also 

proposing to define ‘‘Covered Newly 

Designated ATS’’ to mean a Newly 

Designated ATS that is a Government 

Securities ATS or NMS Stock ATS, 

which the Commission believes would 

facilitate the transition of 

Communication Protocol Systems that 

are NMS Stock ATSs or Government 

Securities ATSs to the regulatory 

requirements of Regulation ATS.258

The Commission is also proposing to 

add definitions of ‘‘U.S. Treasury 

Security’’ and ‘‘Agency Security’’ for 

purposes of Regulation ATS.259 ‘‘U.S. 

Treasury Security’’ would mean a 

security issued by the U.S. Department 

of the Treasury. ‘‘Agency Security’’ 

would mean a debt security issued or 

guaranteed by a U.S. executive agency, 

as defined in 5 U.S.C. 105, or 

government-sponsored enterprise, as 

defined in 2 U.S.C. 622(8). The 

proposed definitions are designed to 

provide the scope of securities a 

Government Securities ATS must 

include when calculating whether the 

fair access requirements set forth in 

Rule 301(b)(5) are applicable and to 

facilitate compliance with the Fair 

Access Rule.260

Request for Comment 

12. Should the Commission adopt a 

more limited or expansive definition of 

Government Securities ATS than the 

definition that is being proposed? Given 

that, unlike the 2020 Proposal, the 

definition of Government Securities 

ATS would now include 

Communication Protocol Systems that 

transact in government securities and/or 

repos, do commenters believe that the 

definition of Government Securities 

ATS should be limited or expanded? 

13. Should the Commission cite to the 

section 3(a)(42) (15 U.S.C. 78c(a)(42)) 

definition of government securities for 

purposes of defining Government 

Securities ATS? Should the securities 

encompassed by the definition (e.g., 

certain options on government 

securities) be considered ‘‘government 

securities’’ for purposes of this 

regulation? 

14. Should the Commission modify 

the proposed definitions of U.S. 

Treasury Securities and Agency 

Securities in any way? For example, 

should the proposed definitions of U.S. 

Treasury Securities and Agency 

Securities be based on definitions in any 

other existing rules? 

15. The proposed amendments to the 

definitions of NMS Stock ATS and 

Government Securities ATS are not 

designed to limit a broker-dealer 

operator for an NMS Stock ATS or 

Government Securities ATS with 

respect to other types of securities that 

the broker-dealer operator may make 

available for trading in an ATS that is 

subject to Rule 301(b)(2) of Regulation 

ATS or how the broker-dealer operator 

may structure the operations of its ATS 

businesses. Would the proposed 

amendments to the definitions of NMS 

Stock ATS and Government Securities 

ATS impose any operational or other 

burdens on the broker-dealer operator, 

other than those related to filing Form 

ATS, Form ATS–R, or Form ATS–N, as 

applicable? 

16. Should the Commission require an 

ATS that currently trades government 

securities and non-government 

securities, such as corporate bonds, to 

comply with Rule 304, including filing 

a Form ATS–N, with respect to the 

ATS’s corporate bond activities as well 

as its government securities activities? 

2. Proposed Elimination of the 

Exemption for ATSs That Limit 

Securities Activities to Government 

Securities and Repos 

The Commission is re-proposing 

amendments to Regulation ATS that 

would require a Currently Exempted 

Government Securities ATS that seeks 

to operate pursuant to the exemption 

from the definition of an ‘‘exchange’’ 

under Exchange Act Rule 3a1–1(a)(2), 

and thus not be required to be registered 

as a national securities exchange, to 

comply with Regulation ATS. The 

Commission is proposing to eliminate 

the exemption under Rule 301(a)(4) of 


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261See 17 CFR 240.3a1–1(a)(3) and 17 CFR 

242.301(a)(4). 

262The Commission is proposing to delete the 

text of Rule 301(a)(4)(ii)(A)–(C) and replace each 

paragraph with the term ‘‘Reserved.’’ Based on 

Commission staff experience, ATSs generally do not 

trade commercial paper, and the Commission is not 

proposing to eliminate Rule 301(a)(4)(ii)(D), which 

exempts an ATS from compliance with Regulation 

ATS if the ATS limits its securities activities to 

commercial paper. Accordingly, the only ATSs that 

would continue to be exempt under Rule 301(a)(4) 

would be ATSs that are registered broker-dealers or 

are banks and limit their securities activities to 

commercial paper. 

263See Regulation ATS Adopting Release, supra 

note 31, at 70878. See also infra notes 287–297 and 

accompanying text. 

264See, e.g., SIFMA Letter at 2 (stating that given 

that Government Securities ATSs closely resemble 

ATSs that trade NMS stocks, it would be 

appropriate to impose similar regulatory oversight 

over such trading venues); FINRA Letter at 2; 

BrokerTec Letter at 2; ICE Bonds Letter I at 2. 

265See SIFMA Letter at 2; FINRA Letter at 2; MFA 

Letter at 3; ICE Bonds Letter I at 2; and AFREF 

Letter at 2–3 (stating that the regulatory extension 

would help to discourage some of the deceptive and 

manipulative trading practices that occur in 

government securities markets). 

266See Citadel Letter. 

267See MFA Letter at 3. 268See SIFMA Letter at 2. 269See Bloomberg Letter at 4. 270See id. 

271See, e.g., supra note 197 and accompanying 

text (describing that, on the interdealer market, the 

majority of trading currently occurs on ATSs). See 

also infra note 840 and accompanying text 

(describing that Communication Protocol Systems 

account for approximately 30 to 40 percent of total 

electronic trading volume on multilateral U.S. 

Treasury trading venues). 

272 15 U.S.C. 78o. 

273See 15 U.S.C. 78o–5. Exchange Act Section 

15C(a)(1)(A) makes it unlawful for a government 

securities broker or government securities dealer 

(other than a registered broker or dealer or a 

financial institution) to make use of the mails or 

any means or instrumentality of interstate 

commerce to effect a transaction in any government 

securities unless the government securities broker 

or government securities dealer is registered with 

Commission pursuant to Exchange Act Section 

15C(a)(2). See 15 U.S.C. 78o–5(a)(1)(A). Section 

15C(e) in turn generally requires that a government 

securities broker or government securities dealer 

that is registered or required to be registered under 

Section 15C(a)(1)(A) must be a member of a 

registered national securities exchange or registered 

securities association such as FINRA. 

274Broker-dealers that limit their activity to 

government securities require specialized 

registration under Section 15C of the Exchange Act 

and do not have to register as general-purpose 

broker-dealers under Section 15(b). See 15 U.S.C. 

78o–5. 

275See Regulation ATS Adopting Release, supra 

note 31, at 70863 (discussing the importance of an 

ATS being a member of an SRO because ATSs 

registered as broker-dealers will not have selfregulatory responsibilities). As noted above, Section 

15C(e) generally requires SRO membership for a 

government securities broker or government 

securities dealer that is registered or required to be 

registered under Section 15C(a)(1)(A). Similarly, 

Section 15(b)(8) generally requires a registered 

broker-dealer to be a member of a registered 

securities association such as FINRA. 

276See, e.g., FINRA Rule 1000 Series, FINRA 

Rules 4140, 4510, 4520, 4530, and 8210. 

277See, e.g., FINRA Rule 6730. 

278See, e.g., FINRA Rules 3110, 4370, 5210, 5220, 

5230, 5310, and 5340. 

279See Regulation ATS Adopting Release, supra 

note 31, at 70863. 

Regulation ATS, which exempts from 

the definition of an ‘‘exchange’’ under 

Section 3(a)(1) of the Exchange Act an 

ATS that is operated by a registered 

broker-dealer or a bank that solely 

trades government securities or 

repos.261 As a result, Currently 

Exempted Government Securities ATSs 

would either have to register as an 

exchange or operate pursuant to an 

exemption to such registration, such as 

the exemption under Regulation 

ATS.262 A Currently Exempted 

Government Securities ATS that opts to 

comply with Regulation ATS would 

then be subject to the conditions to the 

exemption from exchange registration 

that are designed to provide its 

subscribers with investor protections 

and enable Commission oversight, 

including the surveillance and 

examination of ATSs, and to help assure 

fair and orderly markets.263 The 

Commission is also proposing to subject 

Currently Exempted Government 

Securities ATSs to the enhanced public 

transparency requirements of Rule 304 

and Form ATS–N. 

In response to the 2020 Proposal, 

several commenters expressed support 

for eliminating the exemption for ATSs 

that both (1) limit their securities 

activities to government securities or 

repos and (2) either register as brokerdealers or are banks.264 Commenters 

stated such requirements would help 

impose regulatory oversight,265 and one 

commenter stated that the requirements 

could promote market transparency, 

resiliency, and integrity.266 One 

commenter stated that requiring 

Currently Exempted Government 

Securities ATSs to adopt written 

safeguards and procedures to protect 

subscriber confidential trading 

information could help protect the 

integrity of a subscriber’s confidential 

trading information that could 

otherwise be at risk of unauthorized 

disclosure and subject to potential 

misuse.267 In addition, commenters 

specifically expressed support for the 

requirement that all Government 

Securities ATSs register as brokerdealers, stating that such requirement 

would provide regulatory oversight with 

regard to risk management and 

regulatory controls.268

One commenter suggested the 

Commission consider subjecting ATSs 

for a class of securities to an enhanced 

regime if the ATSs trading in that asset 

class are ‘‘significant’’; the commenter 

suggested that the Commission may 

recognize 30 percent as the threshold for 

‘‘significant’’ threshold, and noted that 

equity-NMS Stock ATSs were matching 

about 30 percent of the total share 

volume when Regulation ATS was 

implemented.269 The commenter 

suggested that the Commission apply 

this test when considering removing the 

exemption for Currently Exempted 

Government Securities ATSs and that 

the Commission make proposed Form 

ATS–G public when the ATSs are 

‘‘significant’’ with respect to trading 

volume.270 The Commission is not, 

however, proposing a specific trading 

volume test to determine whether to 

remove the exemption for Currently 

Exempted Government Securities ATSs. 

In addition to the significant volume in 

government securities transacted on 

ATSs (as well as Communication 

Protocol Systems),271 the Commission 

also recognizes that government 

securities have a critical role in the U.S. 

and global economy and ATSs have 

grown in importance to investors and 

overall securities market structure for 

purposes of the execution and pricing of 

government securities. 

The Commission is also proposing to 

amend Rule 301(b)(1) of Regulation 

ATS, which currently requires an ATS 

to register as a broker-dealer under 

Section 15 of the Exchange Act,272 to 

allow an ATS to register either as a 

broker-dealer under Exchange Act 

Section 15 or a government securities 

broker or government securities dealer 

under Exchange Act Section 

15C(a)(1)(A).273 Registration pursuant to 

Section 15C(a)(1)(A) specifically applies 

to government securities brokers and 

dealers other than registered brokerdealers or financial institutions.274

Registration as a broker-dealer under 

Section 15 or government securities 

broker or government securities dealer 

under Section 15C(a)(1)(A) of the 

Exchange Act is important because, 

among other things, it requires 

membership in an SRO, such as 

FINRA.275 Because ATSs that register as 

broker-dealers or government securities 

brokers or dealers do not have selfregulatory responsibilities, the 

Commission believes it is important for 

these ATSs to be members of an SRO 

and thus subject to SRO examination 

and market surveillance,276 trade 

reporting obligations,277 and certain 

investor protection rules.278 Like ATSs 

registered as broker-dealers under 

Section 15, an ATS registered as a 

government securities broker or 

government securities dealer under 

Section 15C(a)(1)(A) would be subject to 

oversight and market surveillance by an 

SRO.279


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280Unlike registered broker-dealers (Section 

15(b)(8)) and government securities brokers or 

government securities dealers that are registered or 

required to be registered under Section 15C(a)(1)(A) 

(Section 15C(e)), there is no statutory requirement 

of SRO membership for banks. Because banks 

typically operate in reliance on exceptions from 

broker or dealer status, they are not required to 

become a member of an SRO, such as FINRA. In 

this regard, Exchange Act Section 3(a)(4)(B)(iii)(II) 

excludes from the definition of ‘‘broker’’ a bank that 

effects transactions in ‘‘exempted securities’’ such 

as government securities. 15 U.S.C. 

78c(a)(4)(B)(iii)(II). See Exchange Act Section 

3(a)(12) (defining ‘‘exempted securities’’ to include 

‘‘government securities’’ as defined in Section 

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

3(a)(5)(C)(i)(II) similarly excepts from the definition 

of ‘‘dealer’’ a bank that buys or sells exempted 

securities. 15 U.S.C. 78c(a)(5)(C)(i)(II). 

281Exchange Act Section 15C(a)(1)(B) makes it 

unlawful for any government securities broker or 

government securities dealer that is a registered 

broker or dealer or a financial institution to make 

use of the mails or any means or instrumentality of 

interstate commerce to effect any transaction in, or 

to induce or attempt to induce the purchase or sale 

of, any government security unless such 

government securities broker or government 

securities dealer has filed with the appropriate 

regulatory agency written notice that it is a 

government securities broker or government 

securities dealer. 15 U.S.C. 78o–5(a)(1)(B)(i). 

282See Exchange Act Sections 3(a)(6) (defining 

‘‘bank’’) and 3(a)(46) (defining ‘‘financial 

institution’’). 

283See supra text accompanying note 226 (stating 

that most Currently Exempted Government 

Securities ATSs register as broker-dealers with the 

Commission). For those Currently Exempted 

Government Securities ATSs that are operating as 

banks and not registered broker-dealers, the 

Commission is proposing to amend Rule 301(b)(1) 

to provide a transition period to allow them to 

operate without interruption while their brokerdealer registration is pending until the earlier of the 

date the alternative trading system registers as a 

broker-dealer under section 15 of the Act or section 

15C(a)(1)(A) of the Act and becomes a member of 

a national securities association; or the date 210 

calendar days after effective date of any final rule. 

See supra note 177. 

284See 17 CFR 242.301(b)(3)–(4). 

285See infra Section III.B.4. 

286See infra Section III.C. 

287See 17 CFR 242.301(b)(7). See also Regulation 

ATS Adopting Release, supra note 31, Section 

IV.A.2.f. 

288See Regulation ATS Adopting Release, supra 

note 31, at 70877. 

289See supra note 163. 

290See supra notes 164 and 166. 

291See 17 CFR 242.301(b)(8). See also Regulation 

ATS Adopting Release, supra note 31, Section 

IV.A.2.g. 

292See Regulation ATS Adopting Release, supra 

note 31, at 70878. 

293See 17 CFR 242.301(b)(9). See also supra notes 

144–148 and infra Section III.B.4. 

294See Regulation ATS Adopting Release, supra 

note 31, at 70874 and 70878. 

295See 17 CFR 242.301(b)(10); infra note 168; 

NMS Stock ATS Adopting Release, supra note 2, 

Section VI. 

In contrast, SRO membership is not 

required for a bank or other financial 

institution that registers as a 

government securities broker or 

dealer.280 Accordingly, the amendment 

to Regulation ATS would not permit a 

bank or other financial institution to 

satisfy the broker-dealer registration 

requirement by registering as a 

government securities broker or 

government securities dealer under 

Section 15C(a)(1)(B) of the Exchange 

Act.281 The Commission believes it is 

important for an ATS to be a member of 

an SRO, and unlike registrants under 

Sections 15 and 15C(a)(1)(A), a bank or 

other financial institution that registers 

under Section 15C(a)(1)(B) is not 

required to be a member of an SRO.282

As a result, a bank-operated ATS that 

trades only government securities or 

repos would be unable to rely on the 

exemption provided by Regulation ATS, 

as proposed to be amended, and could 

not otherwise operate unless registered 

as a national securities exchange as 

required by Section 5 of the Exchange 

Act. However, this is the case currently 

with respect to bank-operated ATSs that 

trade securities other than government 

securities, and it is the Commission’s 

understanding that these ATSs often are 

operated by bank affiliates that are 

themselves registered broker-dealers, 

rather than by the banks themselves. 

The Commission believes that a bank 

that operates an ATS that trades only 

government securities might adopt a 

similar registered affiliate structure for 

its government securities operations, 

such as by moving its ATS operations 

into a new or existing broker-dealer 

affiliate of the bank. 

In addition to Rule 301(b)(1) of 

Regulation ATS, which most Currently 

Exempted Government Securities ATSs 

already satisfy,283 a Currently Exempted 

Government Securities ATS would be 

required to comply with other 

conditions of the Regulation ATS 

exemption, as proposed to be amended. 

This includes Rule 304, which would 

require that Government Securities 

ATSs file Form ATS–N. Government 

Securities ATSs would not, however, be 

subject to the order display and 

execution access provisions under Rule 

301(b)(3) or the fees provision of Rule 

301(b)(4) that are applicable only to 

NMS Stock ATSs.284 The Commission is 

proposing to require Government 

Securities ATSs that meet a certain 

volume threshold to comply with the 

Fair Access Rule with respect to trading 

in U.S. Treasury Securities and Agency 

Securities.285 Because the Commission 

is proposing to apply Regulation SCI to 

certain Government Securities ATSs 

that trade U.S. Treasury Securities and/ 

or Agency Securities, the Capacity, 

Integrity, and Security Rule under Rule 

301(b)(6) would not apply to the trading 

of government securities on ATSs.286

The Commission believes that it is 

important that all Government 

Securities ATSs, including Currently 

Exempted Government Securities ATSs, 

be subject to the conditions of the 

Regulation ATS exemption, which are 

designed to protect investors and to 

facilitate Commission oversight. 

Accordingly, the Commission is reproposing that a Currently Exempted 

Government Securities ATS must: 

• Permit the examination and 

inspection of its premises, systems, and 

records, and cooperate with the 

examination, inspection, or 

investigation of subscribers, whether 

such examination is being conducted by 

the Commission or by an SRO of which 

such subscriber is a member, pursuant 

to Rule 301(b)(7).287 The Commission 

believes that because subscribers to 

whom the Commission’s inspection 

authority may not extend could use a 

Currently Exempted Government 

Securities ATS to manipulate the 

market in a security, it is important that 

these ATSs cooperate in all inspections, 

examinations, and investigations.288

• Make and keep certain records 

specified in Rule 302 289 and preserve 

records specified in Rule 303,290

pursuant to Rule 301(b)(8).291 The 

recordkeeping requirements would 

require the Currently Exempted 

Government Securities ATSs to make 

and keep certain records for an audit 

trail of trading activity that would allow 

the Commission to examine whether the 

ATS is in compliance with Federal 

securities laws.292

• Periodically report certain 

information about transactions in 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 

has operated pursuant to Rule 

301(b)(9).293 The information reported 

on Form ATS–R by Currently Exempted 

Government Securities ATSs will 

permit the Commission to monitor the 

trading on these ATSs for compliance 

with the Exchange Act and applicable 

rules thereunder and enforce the Fair 

Access Rule.294

• Adopt written safeguards and 

written procedures to protect 

confidential trading information and to 

separate ATS functions from other 

broker-dealer functions, including 

principal and customer trading pursuant 

to Rule 301(b)(10).295 The Commission 

believes that applying the requirements 

of Rule 301(b)(10) to Currently 

Exempted Government Securities ATSs 

will help prevent the potential for abuse 


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296See NMS Stock ATS Adopting Release, supra 

note 2, at 38864. 

297See 17 CFR 242.301(b)(11); Regulation ATS 

Adopting Release, supra note 31, Section II.C. 

298See Regulation ATS Proposing Release, supra 

note 173. 

299 17 CFR 242.301(b)(2)(viii). Current Rule 

301(b)(2)(viii) provides that NMS Stock ATSs must 

file with the Commission the reports and 

amendments required by Rule 304 and that NMS 

Stock ATSs are not subject to Rule 301(b)(2). NMS 

Stock ATSs or entities seeking to operate as NMS 

Stock ATSs would continue to file reports pursuant 

to Rule 304. Because the Commission review period 

for all Forms ATS–N filed by Legacy NMS Stock 

ATSs ended in October 2019, the Commission is 

proposing to delete references in Rule 301(b)(2)(viii) 

to Legacy NMS Stock ATSs. The Commission is 

also proposing to consolidate the current provisions 

of Rule 301(b)(2)(viii) applicable to NMS Stock 

ATSs to state that NMS Stock ATSs or entities 

seeking to operate as an NMS Stock ATS shall not 

be subject to the requirements of Rule 301(b)(2)(i) 

through (vii) and would be subject to Rule 304. 

300The Commission is also proposing to amend 

Rule 301(b)(2)(viii) to state that Covered Newly 

Designated ATSs will be subject to Rule 304. 

301The Commission is proposing that, for the 

purposes of calculating volume thresholds for the 

Fair Access Rule, the average trading volume of 

ATSs that are operated by a common broker-dealer, 

or ATSs operated by affiliated broker-dealers, will 

be aggregated. See infra Section V.A.2. 

302See Rule 3a1–1(a)(2) (providing that an 

organization, association, or group of persons shall 

be exempt from the definition of ‘‘exchange’’ if it 

is in compliance with Regulation ATS) and Rule 

301(a) (providing that an ATS shall comply with 

the requirements of Rule 301(b)). 

of subscriber confidential trading 

information.296

• Not use in its name the word 

‘‘exchange,’’ or any derivation of the 

word ‘‘exchange’’ pursuant to Rule 

301(b)(11).297 The Commission believes 

that the use of the word ‘‘exchange’’ by 

an ATS, including a Currently 

Exempted Government Securities ATS, 

would be deceptive and could lead 

investors to believe incorrectly that such 

ATS is registered as a national securities 

exchange.298

Request for Comment 

17. Should the Commission amend 

Regulation ATS to eliminate the 

exemption from compliance with 

Regulation ATS under Rule 

301(a)(4)(ii)(A) for all Currently 

Exempted Government Securities ATS, 

including those operated by banks? 

18. Should the proposed elimination 

of the exemption from compliance with 

Regulation ATS only apply to 

Government Securities ATSs that trade 

a certain type of government security 

(e.g., only U.S. Treasury Securities or 

only Agency Securities)? Should the 

proposed elimination of the exemption 

from compliance with Regulation ATS 

only apply to Government Securities 

ATSs that trade government securities 

(and not repos)? If so, for which type of 

Government Securities ATS should the 

exemption be eliminated? 

19. Should Government Securities 

ATSs seeking to operate pursuant to the 

exemption provided by Regulation ATS 

have the alternative option to satisfy 

broker-dealer registration with the 

Commission pursuant to Section 

15C(a)(1)(A)? 

20. Should the Commission adopt any 

alternatives to requiring Government 

Securities ATSs to register with the 

Commission as broker-dealers under 

Section 15 or Section 15C(a)(1)(A)? For 

example, should the Commission 

amend Rule 301(b)(1) of Regulation ATS 

to include an alternative for a bank to 

register as a government securities 

broker or dealer pursuant to Section 

15C(a)(1)(B), which would not require 

the bank to become a member of an 

SRO? 

21. Should there be a transition 

period for Currently Exempted 

Government Securities ATSs that are 

currently operated by banks to comply 

with the proposed amendments to Rule 

301(b)(1), including ATSs provided and 

operated by an affiliate of the bank? 

Should the Commission allow a 

Currently Exempted Government 

Securities ATS that is not registered as 

a broker-dealer to operate pursuant to 

the Rule 3a1–1(a)(2) exemption on a 

provisional basis? Does the proposal to 

allow such ATSs a maximum 210 

calendar days from the effective date to 

comply with the broker-dealer 

registration requirement provide an 

appropriate amount of time to register as 

a broker-dealer? If not, what, if any, 

transition period would be appropriate? 

For Currently Exempted Securities 

ATSs that are currently operated by 

banks, should there be a different 

transition period? If so, why? 

22. Should there be a transition 

period for Currently Exempted 

Government Securities ATSs or Covered 

Newly Designated ATSs to comply with 

all or some of the requirements of 

Regulation ATS? If so, which 

requirements would require such a 

transition period, and how long should 

such transition period be? 

23 Should the Commission amend 

Regulation ATS to remove the 

exemption from Regulation ATS for 

ATSs that limit their securities activities 

to commercial paper? Do market 

participants use ATSs to trade 

commercial paper? If so, how is 

commercial paper traded on an ATS? 

Should the Commission remove any 

other exemption from Regulation ATS 

available under Rule 301? 

24. Should the Commission require 

Currently Exempted Government 

Securities ATSs to comply with all of 

the requirements of Regulation ATS 

applicable to all ATSs that are currently 

required to comply with Regulation 

ATS? If not, which requirements should 

a Currently Exempted Government 

Securities ATS not be required to 

comply with and why? 

3. Filing Requirements for BrokerDealers That Operate ATSs That Trade 

Government Securities and NonGovernment Securities 

The Commission is re-proposing to 

revise Rule 301(b)(2)(viii) 299 of 

Regulation ATS to provide that a Legacy 

Government Securities ATS that is 

operating pursuant to a Form ATS as of 

the effective date of any final rule will 

continue to be subject to the Rule 

301(b)(2) requirements to file a Form 

ATS. However, once the ATS files a 

Form ATS–N, it will no longer be 

subject to Rule 301(b)(2)(i) through (vii) 

and will instead be subject to the 

reporting requirements under Rule 304, 

which provides the rules for filing of 

Form ATS–N. The Commission is also 

proposing to provide that as of the 

effective date of any final rule, an entity 

seeking to operate as a Government 

Securities ATS will not be subject to the 

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

through (vii) and will instead be 

required to file reports under Rule 304. 

In addition, the Commission is 

proposing rules to make clear that a 

Currently Exempted Government 

Securities ATS would be subject to Rule 

304 and would not be subject to Rule 

301(b)(2)(i) through (viii). These rules 

are designed to prevent Government 

Securities ATSs from being subject to 

potentially duplicative requirements in 

Rule 304 and Rule 301(b)(2). 

The Commission is proposing to 

amend Rule 301(b)(2)(viii) to make clear 

that Covered ATSs are required to file 

reports pursuant to § 242.304 and ATSs 

that are not Covered ATSs are subject to 

Rule 301(b)(2).300 Today, there are some 

broker-dealers that operate multiple 

types of ATSs that trade different types 

of securities (e.g., NMS Stock ATS and 

non-NMS Stock ATS) or operate 

multiple ATSs that trade the same type 

of securities but are separate and 

distinct from each other (e.g., a brokerdealer registered for, and operates, two 

NMS Stock ATSs, each of which 

maintains a separate book of orders that 

is governed by distinct priority and 

order interaction rules for one type of 

security).301 In both instances, each of 

the ATSs must comply with Regulation 

ATS.302 The Commission is proposing 

to add to Rule 301(b)(2)(viii) to provide 

that each NMS Stock ATS or 

Government Securities ATS that is 

operated by a broker-dealer that is the 


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303Under the proposed rules, a broker-dealer 

operator for an ATS that currently trades 

government securities and corporate bonds, for 

example, would file a Form ATS–N to disclose its 

government securities activities for the Government 

Securities ATS. The broker-dealer operator would 

disclose the corporate bond activities of its existing 

ATS by filing with the Commission a material 

amendment to its Form ATS pursuant to Rule 

301(b)(2)(ii) of Regulation ATS to remove 

information regarding government securities 

activities. See Regulation ATS Adopting Release, 

supra note 31, at 70864 (discussing circumstances 

under which an ATS would file a material 

amendment to Form ATS pursuant to Rule 

301(b)(2), which, among other things, includes 

changes to the operating platform, the types of 

securities traded, or types of subscribers). 

304See supra note 246 and accompanying text. 

305See 17 CFR 242.301(b)(9). 

306The information filed on Form ATS–R permits 

the Commission to monitor trading on an ATS. See 

Regulation ATS Adopting Release, supra note 31, 

at 70878. 

307See supra notes 244 and 254 and 

accompanying text. 

308See NMS Stock ATS Adopting Release, supra 

note 2, Section III.B.5. 

309See infra Section V.A. See also proposed Rule 

301(b)(5)(iii). 310See 17 CFR 242.301(b)(5)(i). 311See Regulation ATS Adopting Release, supra 

note 31, at 70872. 312See id. 

registered broker-dealer for more than 

one ATS must comply with Regulation 

ATS, including the filing requirements 

of Rule 304. The Commission believes 

that the proposed language makes clear 

that the proposal would not require 

compliance with the heightened 

transparency requirements of Regulation 

ATS for ATSs that are not NMS Stock 

ATSs or Government Securities ATSs. 

Under the proposal, a broker-dealer 

operator, for example, for an ATS that 

noticed on its initial operation report on 

Form ATS that the ATS trades 

government securities and corporate 

debt securities would be the brokerdealer operator for two types of ATSs 

that would be separate from each other 

with regard to trading these types of 

securities and each would comply with 

Regulation ATS. These two types of 

ATSs would be (1) a Government 

Securities ATS that would file a Form 

ATS–N with respect to government 

securities and (2) a non-Government 

Securities ATS that would file a Form 

ATS with respect to corporate debt.303

In addition, each of the two ATSs would 

be required to comply with the 

conditions to Regulation ATS, 

including, among other things, adopting 

written safeguards and written 

procedures to protect subscriber 

confidential trading information for the 

ATS pursuant to Rule 301(b)(10) and 

making and keeping records for the ATS 

pursuant to Rule 301(b)(8).304

The Commission also is proposing to 

amend Rule 301(b)(9) of Regulation 

ATS.305 This rule requires an ATS to 

report transaction volume in various 

types of securities, including 

government securities and repos, on 

Form ATS–R on a quarterly basis and 

within 10 calendar days after it ceases 

operation.306 As discussed above, the 

Commission is proposing to define 

‘‘Government Securities ATS’’ and to 

clarify the definition of ‘‘NMS Stock 

ATS’’ to make clear that a Government 

Securities ATS cannot trade securities 

other than government securities or 

repos and that an NMS Stock ATS 

cannot trade securities other than NMS 

stocks.307 For example, a Government 

Securities ATS operated by a brokerdealer that is also the registered brokerdealer for a non-Government Securities 

ATS would be required to file a Form 

ATS–R for the Government Securities 

ATS and a separate Form ATS–R for the 

non-Government Securities ATS. The 

Commission is proposing to amend Rule 

301(b)(9) by removing language stating 

that an ATS must ‘‘separately file’’ a 

Form ATS–R for transactions in NMS 

stocks and for transactions in securities 

other than NMS stocks to simplify the 

text and convey that each ATS, even if 

operated by a broker-dealer that 

operates other ATSs, must file a Form 

ATS–R. This is consistent with the 

current Form ATS–R filing process for 

a broker-dealer that operates an NMS 

Stock ATS and non-NMS Stock ATS.308

Request for Comment 

25. Should an NMS Stock ATS or 

Government Securities ATS that is 

operated by a broker-dealer that is a 

registered broker-dealer for more than 

one ATS be subject to Rule 304 

independent of any other ATS operated 

by its broker-dealer? 

26. Should a broker-dealer that is the 

registered broker-dealer for more than 

one ATS be required to file separate 

Forms ATS–R for each of the ATSs it 

operates? 

27. Should a broker-dealer that is the 

registered broker-dealer for an ATS that 

trades government securities or repos 

and an ATS that trades NMS stocks be 

required to file separate Forms ATS–N 

for each of the ATSs it operates? 

28. Should the Commission allow a 

broker-dealer operator of an NMS Stock 

ATS or a Government Securities ATS to 

disclose on its Form ATS–N its nongovernment securities or non-NMS 

stock activities, in addition to its 

government securities or NMS stock 

activities, on a voluntary basis? 

29. Do commenters believe that 

additional changes or requirements to 

the ATS framework are needed? For 

example, should the Commission 

propose amendments to Regulation ATS 

to require ATSs that trade equity 

securities other than NMS stocks, 

corporate debt securities, municipal 

securities, or any other category of 

securities to comply with Rule 304, 

including filing with the Commission 

public Form ATS–N and requiring their 

Forms ATS–N to be subject to 

Commission review and effectiveness 

processes? 

4. Application of Fair Access to 

Government Securities ATSs 

The Fair Access Rule, as proposed to 

be amended and as described in detail 

below,309 requires an ATS to, among 

other things, establish and apply 

reasonable written standards for 

granting access on its system. Today, the 

Fair Access Rule only applies if an 

ATS’s trading volume for certain 

securities or a certain type of securities 

exceeds an average daily volume 

threshold during a period time set forth 

in the rule. Currently, the Fair Access 

Rule only applies to the trading of NMS 

stocks, equity securities that are not 

NMS stocks and for which transactions 

are reported to an SRO, municipal 

securities, and corporate debt securities, 

but not to trading in government 

securities.310

The Fair Access Rule was designed to 

ensure that qualified market 

participants have fair access to the 

significant sources of liquidity in the 

U.S. securities markets. When 

Regulation ATS was adopted, the 

Commission explained that the fair 

treatment by ATSs of potential and 

current subscribers is particularly 

important when an ATS captures a large 

percentage of trading volume in a 

security, because viable alternatives to 

trading on such a system are limited.311

The Commission further explained that 

if an ATS has a significantly large 

percentage of the volume of trading in 

a security or type of security, unfairly 

discriminatory actions can hurt 

investors lacking access to that ATS.312

Currently, however, Regulation ATS 

does not provide a mechanism to 

prevent unfair denials or limitations of 

access by ATSs that trade U.S. Treasury 

Securities or Agency Securities or 

regulatory oversight of such denials or 

limitations of access. Today, the 

principles undergirding the Fair Access 

Rule are equally relevant to a 

Government Securities ATS, and 

amending the Fair Access Rule to 

include the trading of U.S. Treasury 

Securities and Agency Securities would 

help ensure the fair treatment of 

potential and current subscribers to 

ATSs that consist of a large percentage 


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313Under the proposal, the Fair Access Rule 

would not apply to trading of repos, including 

repos on U.S. Treasury Securities and Agency 

Securities. The Commission notes FINRA does not 

require ATSs to report transactions for repos. The 

Commission is requesting comment on its 

preliminary assessment and on whether the 

Commission should amend Regulation ATS to 

require Government Securities ATSs that meet 

certain volume thresholds for the trading of repos, 

including repos on U.S. Treasury Securities and 

Agency Securities, to be subject to the requirements 

of the Fair Access Rule. 

314See, e.g., SIFMA Letter; MFA Letter; ICE 

Bonds Letter I; and Healthy Markets Letter. 

315See SIFMA Letter at 4. See also ICI Letter at 

4 (stating that funds generally are not able to 

directly access liquidity on most of these platforms, 

and that applying the fair access requirements 

would enhance the ability of funds to onboard and 

participate on these platforms directly and would 

generally enhance market structure for U.S. 

Treasury Securities and benefit fund shareholders); 

FIA PTG Letter at 2 (stating that the requirements 

will ensure qualified market participants have 

access to the government securities market). 

316See MFA Letter at 4. See also ICI Letter at 4 

(stating that the fair access requirements would 

enable the Commission to evaluate ATS standards 

and determine whether they are being applied in an 

unfair or discriminatory manner). 

317See Tradeweb Letter at 3 (stating that the 

Commission should not, for example, distinguish 

between on-the-run and off-the-run U.S. Treasury 

Securities, and that a broader measure of market 

significance is preferable in order to provide for 

more stable application of the Fair Access Rule); 

ICE Bonds Letter I at 5. 

318See Bloomberg Letter at 5 (noting that FINRA’s 

aggregated weekly data report currently segments 

the data into on-the-run/off-the-run and dealer-todealer and dealer-to-customer transactions). 

319See supra note 229. 

320The Commission believes that the vast 

majority—and likely, all—broker-dealer operators of 

Legacy Government Securities ATSs that trade 

Agency Securities currently subscribe to TRACE. 

Communication Protocol Systems that are not 

currently FINRA members, however, are not 

required to report to TRACE. The Commission is 

requesting public comment on the extent to which 

Government Securities ATSs (which may include 

Legacy Government Securities ATSs and 

Communication Protocol Systems) have access to 

TRACE trade reports for Agency Securities. 

321 In response to the 2020 Proposal, one 

commenter stated that the proposal would need to 

be based on ‘‘weekly par value traded’’ because 

FINRA publishes volume data on a weekly basis. 

See Bloomberg Letter at 6. The Commission 

believes that data to calculate the proposed 

threshold, which is based on dollar volume 

published by FINRA on a weekly basis, would be 

readily available. 

322 In response to the 2020 Proposal, one 

commenter stated that it supports applying the Fair 

Access Rule to all types of U.S. Treasury Securities 

and all types of Agency Securities, each on an 

aggregate basis. See Tradeweb Letter at 3. 

323For example, suppose a Government 

Securities ATS has significant trading volume in 

U.S. Treasury Securities but not Agency Securities. 

In this example, the proposed rule would help 

ensure that investors receive fair access to the 

ATS’s services with respect to U.S. Treasury 

Securities, but it would not require the ATS to 

provide fair access for its Agency Securities 

services. 

324 In response to the 2020 Proposal, some 

commenters stated that they support applying the 

thresholds on an aggregate basis. See ICE Bonds 

Letter at 6 and Tradeweb Letter at 3. One 

of trading volume in these two types of 

securities.313

In the 2020 Proposal, the Commission 

proposed that a Government Securities 

ATS would be subject to the Fair Access 

Rule if during at least four of the 

preceding six calendar months, the 

Government Securities ATS had: (1) 

With respect to U.S. Treasury Securities, 

five percent or more of the average 

weekly dollar volume traded in the 

United States as provided by the SRO to 

which such transactions are reported; or 

(2) with respect to Agency Securities, 

five percent or more of the average daily 

dollar volume traded in the United 

States as provided by the SRO to which 

such transactions are reported. 

In response to the 2020 Proposal, 

commenters generally supported 

amending Regulation ATS to apply the 

Fair Access Rule for Government 

Securities ATSs that meet certain 

trading thresholds.314 Some commenters 

stated that the proposed amendments 

would ensure that market participants 

are not unreasonably denied access from 

important sources of liquidity for a 

particular security,315 and prevent 

discriminatory actions that could hurt 

investors, and potentially result in 

higher trading costs and a reduction in 

trading efficiency.316 One commenter 

stated that the Commission should, as 

was proposed in the 2020 Proposal, 

apply the thresholds to all types of U.S. 

Treasury Securities and Agency 

Securities, each on an aggregate basis.317

One commenter, however, suggested 

that the Commission may apply the fair 

access thresholds to on-the-run 

securities that are ‘‘likely’’ to trade on 

an ATS as off-the-run securities are less 

liquid and tend to trade using other 

methods.318

The Commission is re-proposing to 

apply the Fair Access Rule to the 

trading of government securities on an 

ATS with certain revisions. After 

considering comments received, 

proposed changes to Exchange Act Rule 

3b–16, and further analysis of the U.S. 

Treasury Securities markets, as 

explained further below, the 

Commission is proposing to revise the 

average weekly trading volume 

percentage for ATSs trading U.S. 

Treasury Securities from the threshold 

proposed in the 2020 Proposal. 

Accordingly, the Commission is 

proposing that a Government Securities 

ATS will be subject to the Fair Access 

Rule if, during at least four of the 

preceding six calendar months: (1) It 

had three percent or more of the U.S. 

Treasury Securities average weekly 

dollar volume traded in the United 

States as provided by the SRO to which 

such transactions are reported; or (2) it 

had five percent or more of the Agency 

Securities average daily dollar volume 

traded in the United States as provided 

by the SRO to which such transactions 

are reported. 

First, the Commission is re-proposing 

that the thresholds include only 

securities for which transactions are 

reported to an SRO, and the volume 

thresholds are based on how the SRO 

subsequently reports that volume to the 

public. FINRA publishes weekly 

aggregate data on U.S. Treasury 

Securities based on the mandatory 

transaction reports of its members to 

TRACE, and disseminates transaction 

data about Agency Securities 

immediately upon receipt of a 

transaction report.319 Currently, FINRA 

neither provides individual trade 

reports nor aggregates daily volume data 

for U.S. Treasury Securities transactions 

to TRACE subscribers (or to the public). 

FINRA, however, provides individual 

trade reports for all Agency Securities 

transactions to TRACE subscribers.320

Accordingly, because weekly dollar 

volume data about transactions in U.S. 

Treasury Securities and daily dollar 

volume data about transactions in 

Agency Securities are publicly available 

via TRACE, Government Securities 

ATSs will be able to readily calculate 

whether they meet the applicable 

thresholds.321

Second, the Commission continues to 

believe that separate volume thresholds 

for U.S. Treasury Securities and Agency 

Securities would best advance the 

investor protection goals of the Fair 

Access Rule.322 The proposed volume 

thresholds would help ensure that the 

Fair Access Rule is appropriately 

tailored so that it only applies to the 

category of security for which an ATS 

has significant trading volume.323 The 

Commission believes that it would be 

unnecessary and overly burdensome to 

require a Government Securities ATS to 

comply with the Fair Access Rule for a 

category of government security for 

which that ATS does not have 

significant volume. Furthermore, the 

Commission now proposes different 

trading volume thresholds for U.S. 

Treasury Securities and Agency 

Securities. As such, the Commission 

believes it would be impractical for the 

Fair Access Rule to combine trading 

volume in these two types of securities 

to determine whether a Government 

Securities ATS has triggered its 

requirements. 

Third, the Commission believes that it 

is appropriate to determine these 

volume thresholds on a category 

basis.324 Given that U.S. Treasury 


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commenter stated that Commission should not, for 

example, distinguish between on-the-run and offthe-run Treasuries in applying the Fair Access Rule 

because a broader measure of market significance is 

preferable in order to provide for a more stable 

application of the Fair Access Rule. See Tradeweb 

Letter at 3. 

325However, if, for example, during the six month 

period from January to June, the Government 

Securities ATS met the threshold for U.S. Treasury 

Securities only during January and April and met 

the threshold for Agency Securities only during 

February and May, the Government Securities ATS 

would not be subject to the Fair Access Rule in July 

because the ATS would not have met the threshold 

for either type of security during at least four of the 

preceding six months in either U.S. Treasury 

Securities or Agency Securities. 

326See AFREF Letter at 3. 

327See Bloomberg Letter at 6. 

328See SIFMA Letter at 5. 

329See Treasury Market Practices Group (TMPG), 

White Paper on Clearing and Settlement in the 

Secondary Market for U.S. Treasury Securities (July 

2019), available at https://www.newyorkfed.org/ 

medialibrary/Microsites/tmpg/files/CS_FinalPaper_

071119.pdf. 

330See infra Section V.A. See also infra Table 

VIII.1. For purposes of estimating the number of 

unique affiliated ATSs that would meet the 

proposed three percent threshold, the data in Table 

VIII.1 (stating a total of nine ‘‘grouped-affiliated 

ATSs’’ would be affected) has been adjusted based 

on the Commission’s knowledge of current ATS 

operations. 

331Based on Coalition Greenwich’s Greenwich 

MarketView data from April 2021 through 

September 2021, approximately two currently 

operating Communication Protocol Systems would 

be subject to the Fair Access Rule using a three 

percent threshold in U.S. Treasury Securities. This 

would remain unchanged if the Commission used 

the previously-proposed five percent threshold. 

332See infra Table VIII.1. For purposes of 

estimating the number of unique affiliated ATSs 

that would meet a five percent threshold, the data 

in Table VIII.1 (stating a total of five ‘‘groupedaffiliated ATSs’’ would be affected) has been 

adjusted based on the Commission’s knowledge of 

current ATS operations. 

333See id. 

334 Data is based on the regulatory version of 

TRACE for U.S. Treasury Securities from April 1, 

2021 through September 30, 2021. 

Securities and Agency Securities are 

types of debt securities, doing so would 

be consistent with the Fair Access 

Rule’s application to other categories of 

fixed income securities (i.e., corporate 

bonds and municipal securities). The 

Fair Access Rule applies on a securityby-security basis for NMS stocks and 

equity securities that are not NMS 

stocks, and on a category basis for 

corporate bonds and municipal 

securities. 

Fourth, the Commission is proposing 

that a Government Securities ATS 

would be required to comply with the 

Fair Access Rule only if it has met at 

least one of the applicable volume 

thresholds during at least four of the 

preceding six calendar months.325 For 

ATSs that trade Agency Securities, this 

is the same time period for evaluating 

the applicability of the Fair Access Rule 

that is currently applied to ATSs that 

trade NMS stocks, equity securities that 

are not NMS stocks and for which 

transactions are reported to an SRO, 

municipal securities, and corporate debt 

securities. 

Fifth, the Commission is proposing a 

three percent threshold to apply the Fair 

Access Rule for Government Securities 

ATSs that trade U.S. Treasury 

Securities. The Commission received 

several comments on the threshold 

proposed in the 2020 Proposal, which 

expressed differing opinions. One 

commenter stated that it would support 

a threshold of three percent of daily 

market volume, observing that such a 

threshold would apply the Fair Access 

Rule to only four ATSs for U.S. Treasury 

Securities and one for Agency 

Securities, and stating that these ATSs 

are ‘‘leading exchanges’’ whose 

customers deserve fair access.326 On the 

other hand, one commenter stated that 

an ATS should be subject to the Fair 

Access Rule only if it is a ‘‘significant’’ 

source of liquidity and that it believed 

that most market participants view 10 

percent of the par value traded in the 

asset class as the market share threshold 

where an ATS’s liquidity is 

significant.327 Another commenter 

supported the previously-proposed five 

percent thresholds.328

While public comment on what 

constitutes a significant market center 

for U.S. Treasury Securities is split, the 

Commission believes that a three 

percent average weekly trading volume 

threshold would encompass the 

significant markets for and advance the 

policy goals of the Fair Access Rule. The 

Commission believes that the policy 

goals behind the Fair Access Rule are of 

particular importance in the U.S. 

Treasury Securities market. Market 

participants must have reasonable 

access to significant sources of liquidity 

in the secondary markets for U.S. 

Treasury Securities because, among 

other things, U.S. Treasury Securities 

play a vital and irreplaceable role in 

both the U.S. and global economies. In 

addition, ATSs that operate in the 

secondary interdealer markets for onthe-run U.S. Treasury Securities have 

become a significant source of trading 

interest for government securities. Also, 

under this proposal, RFQ systems will 

now be subject to Regulation ATS. 

Given that RFQ systems make up over 

half of secondary trading in the U.S. 

Treasury market,329 the Fair Access 

Rule’s policy goals would be advanced 

by requiring RFQs that facilitate a 

significant percentage of U.S. Treasury 

trading to provide fair access to market 

participants. Additionally, when 

compared to the application of the Fair 

Access Rule to NMS Stock ATSs, 

denying fair access to services of an 

ATS for U.S. Treasury Securities under 

this proposal would be particularly 

impactful. The Fair Access Rule would 

be applied categorically for government 

securities rather than on a security-bysecurity basis like in the NMS equities 

market. Thus, a market participant being 

denied access to a significant U.S. 

Treasury Securities ATS could be 

denied access to the system’s entire 

portfolio of U.S. Treasury Securities 

operations. 

Based on the current market, a three 

percent volume threshold would help 

ensure appropriate access for market 

participants, particularly retail and 

other non-broker-dealer investors who 

rely on liquidity in the government 

securities markets. Specifically, under 

the proposed three percent threshold, 

based on volume currently required to 

be reported to TRACE, the Commission 

estimates that seven Legacy Government 

Securities ATSs that trade U.S. Treasury 

Securities (including four Legacy 

Government Securities ATSs with 

greater than three percent market share 

and three affiliated ATSs with which 

their volume would be aggregated under 

the proposed changes to the Fair Access 

Rule) 330 would be subject to the Fair 

Access Rule.331 Under the previously 

proposed five percent threshold, an 

estimated three ATSs trading U.S. 

Treasury Securities (including two 

Legacy Government Securities ATSs 

with greater than five percent market 

share and one affiliated ATS) would be 

subject to the Fair Access Rule.332 As 

such, a three percent threshold would 

result in market participants having fair 

access to an estimated nearly eight 

percent more of the U.S. Treasury 

Securities market than they would 

under a five percent threshold, based on 

volume currently reported to TRACE.333

Furthermore, applying the Fair Access 

Rule to ATSs that meet a three percent 

threshold in U.S. Treasury Securities 

would result in the Fair Access Rule 

applying to Legacy Government 

Securities ATSs transacting in 

approximately 32 percent of market 

volume currently reported to FINRA in 

U.S. Treasury Securities. ATSs that 

trade U.S. Treasury Securities that 

would be subject to the Fair Access Rule 

under the proposed three percent 

threshold would comprise 

approximately 94 percent of U.S. 

Treasury Securities volume traded on 

ATSs.334 Accordingly, the Commission 

believes that the three percent threshold 

would provide investors with access to 


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335See Rule 301(b)(5)(i)(A)–(D). 

336This ATS would also meet the proposed 

threshold for trading in U.S. Treasury Securities. 

337See proposed Rule 301(b)(5)(i)(G). The rule 

text uses the term ‘‘Newly Designated ATS’’ to refer 

to a Communication Protocol System. See supra 

note 134. Under this proposal, an ATS that triggers 

the fair access threshold for a security (for NMS 

stocks or equity securities that are not NMS stocks) 

or a category of security (for municipal securities, 

corporate debt securities, U.S. Treasury Securities, 

or Agency Securities) would not be able to avail 

itself to the one-month compliance period for 

triggering the fair access threshold for another 

security or another category of securities. 338See infra Section V.A.3. 

markets that are important venues for 

trading in U.S. Treasury Securities. 

Sixth, the five percent threshold set 

forth in the 2020 Proposal for Agency 

Securities is being re-proposed 

unchanged. Because the U.S. Treasury 

Securities market is one of the deepest 

and most liquid in the world, and 

because of the vital role that U.S. 

Treasury Securities play in the U.S. and 

global economies, it is particularly 

important to ensure that investors have 

access to ATSs with significant volume 

in U.S. Treasury Securities. The Agency 

Securities market, however, does not 

share the unique qualities of the U.S. 

Treasury Securities market, and 

accordingly, the Commission is reproposing for Agency Securities a five 

percent threshold that is consistent with 

the current volume threshold applicable 

to corporate bonds and municipal 

securities.335 Furthermore, based on 

volume currently reported to TRACE, 

the estimated one Legacy Government 

Securities ATS that would exceed the 

proposed five percent threshold for 

Agency Securities accounts for nearly 

12 percent of volume reported in 

TRACE in Agency Securities.336

The Commission is proposing a 

compliance period for Communication 

Protocol Systems, which seek to operate 

as ATSs, and Legacy Government 

Securities ATSs that become subject to 

the Fair Access Rule. Under the 

proposal, a Communication Protocol 

System or a Legacy Government 

Securities ATS that becomes subject to 

the Fair Access Rule would be required 

to comply with the Fair Access Rule one 

month from the date that the 

Communication Protocol System or the 

Legacy Government Securities ATS 

initially triggers any of the fair access 

thresholds.337 The Commission believes 

that it is appropriate to provide the onemonth compliance period to allow the 

Communication Protocol System or the 

Legacy Government Securities ATS to 

establish and apply reasonable written 

standards for granting, limiting, and 

denying access to the ATS services, as 

proposed, and, for those that would be 

NMS Stock ATSs and Government 

Securities ATSs, to prepare responses to 

Item 24 of Form ATS–N.338 The 

additional compliance period is 

designed to provide the Communication 

Protocol Systems and the Legacy 

Government Securities ATSs sufficient 

time to transition into the new ATS 

regulatory regime and prevent any 

disruptions to the operation of these 

systems and their participants. 

Request for Comment 

30. Should any other type of 

government securities be included as a 

category of securities under Rule 

301(b)(5)? Should the Commission 

apply Rule 301(b)(5) to all Government 

Securities ATSs? What would be the 

costs and benefits associated with such 

a requirement? 

31. Should the proposed three percent 

fair access threshold for U.S. Treasury 

Securities be applied to all types of U.S. 

Treasury Securities or to subset 

categories of U.S. Treasury Securities? 

For example, should the three percent 

fair access threshold be applied to 

transaction volume in only on-the-run 

U.S. Treasury Securities? Should the 

five percent fair access threshold be 

applied to all Agency Securities or to 

subset categories? If so, why or why not? 

32. Should the proposed three percent 

fair access threshold for U.S. Treasury 

Securities be set higher or lower than 

three percent? Should the proposed five 

percent fair access threshold for Agency 

Securities be set higher or lower than 

five percent? If so, what should the 

percentage thresholds be? Should there 

be no thresholds so that the Fair Access 

Rule would apply to all Government 

Securities ATSs that trade U.S. Treasury 

Securities or Agency Securities 

regardless of volume transacted on the 

ATS? Please support your views. Are 

the five percent and three percent 

thresholds appropriate thresholds to 

capture ATSs that are significant 

markets for trading in U.S. Treasury 

Securities and Agency Securities, 

respectively? Would the proposed 

thresholds capture ATSs that are not 

significant markets for U.S. Treasury 

Securities and Agency Securities? If 

there should be a percent threshold for 

a category finer than all U.S. Treasury 

Securities, for example on-the-run U.S. 

Treasury Securities or off-the-run U.S. 

Treasury Securities, what should that 

threshold should be? 

33. Should the fair access threshold 

be based on average weekly dollar 

volume traded in the United States for 

U.S. Treasury Securities and daily 

dollar volume traded in the United 

States for Agency Securities? 

34. Would the proposed four out of 

six month period be an appropriate 

period to measure the volume 

thresholds for U.S. Treasury Securities 

and Agency Securities? With respect to 

calculating the appropriate thresholds, 

would Government Securities ATSs 

have available appropriate data with 

which to determine whether the 

proposed thresholds have been met? 

Would ATSs that trade U.S. Treasury 

Securities be able to readily calculate 

whether they meet the volume 

thresholds in at least four out of the 

preceding six months, given that U.S. 

Treasury Securities are disseminated on 

a weekly, rather than daily basis? Would 

it be appropriate for the Commission to 

change the proposed four out of six 

month period to a time period measured 

in weeks (e.g., at least 16 out of the 

preceding 24 weeks) with respect to 

U.S. Treasury Securities? What effect 

would any such change have on the 

likelihood that ATSs trading U.S. 

Treasury Securities would meet the 

volume thresholds? 

35. If the average weekly dollar 

volumes were to include transactions 

for U.S Treasury Securities by nonFINRA members, which currently are 

not reported to, or collected by, the SRO 

that makes public average weekly dollar 

volume statistics, should the fair access 

threshold change? If so, what should be 

the appropriate threshold? 

36. Would it be appropriate to use five 

percent of average daily dollar volume 

traded in the United States as a fair 

access threshold for Agency Securities? 

Do ATSs that trade Agency Securities 

currently subscribe to TRACE and, 

therefore, receive TRACE trade reports 

for Agency Securities? If not, what 

percentage of these ATSs do not 

currently subscribe to TRACE? 

37. Should the requirements under 

the Fair Access Rule be amended 

specifically for Government Securities 

ATS? If so, how? 

38. Are there any unique challenges 

for ATSs that would be required to 

comply with the requirements under the 

Fair Access Rule for the first time? If so, 

please explain. 

39. Do commenters believe that it is 

appropriate to provide to 

Communication Protocol Systems and 

Legacy Government Securities ATSs a 

one-month compliance period to 

comply with the Fair Access Rule? 

Should the proposed compliance period 

be longer or shorter? Should the 

eligibility for the compliance period be 

expanded to ATSs that are currently 

operating or limited in any way? Please 

explain. 


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339See supra Section II. 

340A Communication Protocol System that 

chooses to register as a national securities exchange 

would also be subject to Regulation SCI under the 

definition of ‘‘SCI entity’’ which includes SROs 

such as national securities exchanges. As discussed 

above, Communication Protocol Systems, such as 

RFQ systems, that use trading interest and protocols 

to bring together buyers and sellers perform an 

exchange market place function similar to systems 

that offer the use of orders and trading facilities. 

These systems allow market participants to use 

non-firm trading interest to seek and negotiate a 

trade. Accordingly, the Commission preliminarily 

believes that such systems, whether they are 

systems of a registered national securities exchange 

or an ATS that is an SCI entity, would be covered 

by the definition of ‘‘SCI systems’’ under Regulation 

SCI because they directly support trading. See 17 

CFR 242.1000 and infra note 348 and 

accompanying text. As detailed further below, the 

Commission is requesting comment on whether 

Communication Protocol Systems of SCI entities 

would meet the definition of ‘‘SCI systems’’ under 

Regulation SCI. 

341See Regulation SCI Adopting Release, supra 

note 3, at 72252–56 for a discussion of the 

background of Regulation SCI. 342See id. at 72253–56. 343See id. at 72277–79. 344 Id. at 72253, 72256. 345See 17 CFR 242.1000. 

346See 17 CFR 242.1001; infra notes 397–398. 

347See 17 CFR 242.1002–1007; infra notes 400– 

411. 

348See 17 CFR 242.1000. 

349 Id. 

350 Id. See also Regulation SCI Adopting Release, 

supra note 3, at 72277. Paragraph (1) of the 

definition of ‘‘critical SCI systems’’ in Rule 1000 of 

Regulation SCI specifically enumerates certain 

systems to be within its scope, including those that 

directly support functionality relating to: Clearance 

and settlement systems of clearing agencies; 

openings, reopenings, and closings on the primary 

listing market; trading halts; initial public offerings; 

the provision of consolidated market data; or 

exclusively-listed securities. The second prong of 

the definition provides a broader catch-all for 

systems that ‘‘[p]rovide functionality to the 

securities markets for which the availability of 

alternatives is significantly limited or nonexistent 

and without which there would be a material 

impact on fair and orderly markets.’’ 17 CFR 

242.1000 (definition of ‘‘critical SCI system’’). 

351See Regulation SCI Proposing Release, 

Securities Exchange Act Release No. 69077 (Mar. 8, 

2013), 78 FR 18084, 18093–95 (Mar. 25, 2013). 

C. Application of Regulation SCI to 

Government Securities ATS 

The Commission is re-proposing to 

amend Regulation SCI to expand the 

definition of ‘‘SCI alternative trading 

system’’ to include Government 

Securities ATSs that meet a specified 

volume threshold. A Government 

Securities ATS that meets the proposed 

amended definition of ‘‘SCI alternative 

trading system’’ would fall within the 

definition of ‘‘SCI entity’’ and, as a 

result, would be subject to the 

requirements of Regulation SCI. 

Because the proposed amendments to 

Exchange Act Rule 3b–16(a) would 

cause Communication Protocol Systems 

to fall within the definition of 

‘‘exchange,’’ 339 Communication 

Protocol Systems that transact in U.S. 

Treasuries or Agency Securities that 

choose to register as a broker-dealer and 

comply with Regulation ATS would, if 

they meet the proposed volume 

threshold, also meet the proposed 

amended definition of ‘‘SCI alternative 

trading system’’ and become subject to 

the requirements of Regulation SCI. The 

proposed amendments to Exchange Rule 

3b–16(a) likewise would cause 

Communication Protocol Systems that 

transact in NMS stocks and equity 

securities that are not NMS stocks to fall 

within the current definition of SCI 

alternative trading system if they 

reached the current volume thresholds 

within the definition, and become 

subject to the requirements of 

Regulation SCI.340 As discussed in 

detail below, the Commission believes 

that extending the requirements of 

Regulation SCI to Government 

Securities ATSs that trade a significant 

volume in U.S. Treasury Securities or 

Agency Securities would help to 

address any technological 

vulnerabilities, and improve the 

Commission’s oversight, of the core 

technology of key entities in the markets 

for government securities. 

The Commission adopted Regulation 

SCI in November 2014 to strengthen the 

technology infrastructure of the U.S. 

securities markets.341 As discussed in 

the Regulation SCI Adopting Release, a 

number of factors contributed to the 

Commission’s proposal and adoption of 

Regulation SCI. These factors included: 

The evolution of the markets becoming 

significantly more dependent upon 

sophisticated, complex, and 

interconnected technology; the 

successes and limitations of the 

Automation Review Policy (‘‘ARP’’) 

Inspection Program; a significant 

number of, and lessons learned from, 

systems issues at exchanges and other 

trading venues; 342 and increased 

concerns over the potential for ‘‘single 

points of failure’’ in the securities 

markets.343 Regulation SCI is designed 

to strengthen the infrastructure of the 

U.S. securities markets, reduce the 

occurrence of systems issues in those 

markets, improve their resiliency when 

technological issues arise, and 

implement an updated and formalized 

regulatory framework, thereby helping 

to ensure more effective Commission 

oversight of such systems.344

The key market participants that are 

currently subject to Regulation SCI are 

called ‘‘SCI entities’’ and include certain 

SROs (including stock and options 

exchanges, registered clearing agencies, 

FINRA and the MSRB) (‘‘SCI SROs’’), 

alternative trading systems that trade 

NMS and non-NMS stocks exceeding 

specified volume thresholds (‘‘SCI 

ATSs’’), the exclusive SIPs (‘‘plan 

processors’’), certain exempt clearing 

agencies, and SCI competing 

consolidators.345 ATSs trading NMS or 

non-NMS stocks that are currently 

subject to Regulation SCI are heavily 

reliant on trading technology and 

represent a significant pool of liquidity 

for NMS and non-NMS stocks. As 

discussed in further detail below, 

Regulation SCI requires these SCI 

entities to, among other things, 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to ensure that their key 

automated 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 such 

systems operate in accordance with the 

Exchange Act and the rules and 

regulations thereunder and the entities’ 

rules and governing documents, as 

applicable.346 Broadly speaking, 

Regulation SCI also requires SCI entities 

to take appropriate corrective action 

when systems issues occur, provide 

certain notifications and reports to the 

Commission regarding systems 

problems and systems changes, inform 

members and participants about systems 

issues, conduct business continuity and 

disaster recovery testing, conduct 

annual reviews of their automated 

systems, including penetration testing, 

and make and keep certain books and 

records.347

Regulation SCI applies primarily to 

the systems of SCI entities, whether 

operated by SCI entities or on their 

behalf, that directly support any one of 

six key securities market functions— 

trading, clearance and settlement, order 

routing, market data, market regulation, 

and market surveillance (‘‘SCI 

systems’’).348 With respect to security, 

Regulation SCI also applies to systems 

that, if breached, would be reasonably 

likely to pose a security threat to SCI 

systems (‘‘indirect SCI systems’’).349 In 

addition, certain systems whose 

functions are critical to the operation of 

the markets, including those that 

represent single points of failure 

(defined as ‘‘critical SCI systems’’), are 

subject to certain heightened 

requirements.350

When the Commission adopted 

Regulation SCI, the Commission 

departed from its proposal to apply 

Regulation SCI to fixed income ATSs 

that trade municipal and corporate 

debt.351 Explaining this departure, the 

Commission differentiated ATSs trading 


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352See Regulation SCI Adopting Release, supra 

note 3, at 72270. 

353See id. 

354See id. 

355See 2020 Proposal, supra note 4, at 87152. See 

also supra Section II.B; Regulation SCI Adopting 

Release, supra note 3, at 72253. 

356See 2020 Proposal, supra note 4, at 87152. 

357See SIFMA Letter at 5; MFA Letter at 5; 

AFREF Letter at 2, 4; Healthy Markets Letter at 9– 

11; and ICE Bonds Letter II at 5 (stating that it 

would support application of Regulation SCI to 

fixed income ATSs if the threshold was set at the 

20% volume threshold test currently used under 

Rule 301(b)(6)). Commenters on the 2020 Proposal 

that generally supported the application of 

Regulation SCI expressed varying views as to the 

appropriate threshold level that the Commission 

should adopt. See discussion infra regarding 

comments pertaining to threshold levels. 

358See SIFMA Letter at 5; MFA Letter at 5; 

AFREF Letter at 2, 4; and Healthy Markets Letter 

at 10–11. 

359See MFA Letter at n.13. 

360See MFA Letter at 5; and Healthy Markets 

Letter at 9. 

361See Healthy Markets Letter at 10. See also 

infra note 367 and accompanying text (discussing 

MarketAxess’s comment with respect to stock 

market ATSs and fixed income ATSs). 

362See AFREF Letter at 2. 

363See Tradeweb Letter at 3, 11; BrokerTec Letter 

at 5–9; and MarketAxess Letter at 11. The 

Commission notes that MarketAxess focused its 

comments specifically on corporate and municipal 

bonds, rather than government securities, but we 

have included such comments here for 

completeness. 

364See Tradeweb Letter at 11; BrokerTec Letter at 

5–9; and MarketAxess Letter at 11. 

365See Tradeweb Letter at 3, 11; and BrokerTec 

Letter at 8–9. 

366See Tradeweb Letter at 3, 11. 367See MarketAxess Letter at 11. 368Some commenters on the 2020 Proposal also 

provided views on whether the Commission should 

extend application of Regulation SCI to additional 

entities beyond Government Securities ATSs. See, 

e.g., Healthy Markets Letter at 9 (stating that the 

Commission should expand the scope of Regulation 

SCI to include not just government securities ATSs, 

but other essential market participants in equities, 

futures, and fixed income markets); and SIFMA 

Letter at 5 (arguing that the Commission should not 

extend Regulation SCI to broker-dealers more 

generally at this time). As the Commission stated 

in the Regulation SCI Adopting Release, the 

Commission will continue to monitor and evaluate 

the risks posed by the systems of other market 

participants and the continued evolution of the 

securities markets to determine whether it would be 

appropriate to extend the requirements of 

Regulation SCI to additional categories of entities in 

the future. See Regulation SCI Adopting Release, 

supra note 3, at 72259. 

369As discussed in detail above and as 

commenters have stated, the structure of the U.S. 

Treasury market has evolved in recent years and 

electronic trading has become an increasingly 

important feature of the interdealer market for U.S. 

Treasury Securities. See supra Section II.B and 

notes 62–63, 187 and accompanying text. 

municipal and corporate debt securities 

from those trading equity securities, 

stating generally that fixed income 

markets rely much less on automation 

and electronic trading than markets that 

trade NMS stocks or non-NMS stocks.352

The Commission also stated that the 

municipal and corporate debt markets 

tend to be less liquid than the equity 

markets, with slower execution times 

and less complex routing strategies.353

At the same time, the Commission 

stated that it would ‘‘monitor and 

evaluate the implementation of 

Regulation SCI, the risks posed by the 

systems of other market participants, 

and the continued evolution of the 

securities markets, such that it may 

consider, in the future, extending the 

types of requirements in Regulation SCI 

to additional categories of market 

participants.’’ 354

In the 2020 Proposal, where the 

Commission was addressing 

Government Securities ATSs 

specifically, the Commission stated that, 

in light of the increasing automation of 

the government securities market and 

the operational similarities between 

many Government Securities ATSs and 

NMS Stock ATSs, it believed that it was 

appropriate to propose to apply the 

requirements of Regulation SCI to 

Government Securities ATSs that meet 

certain volume thresholds, and noted 

again that while technological 

developments provide many benefits to 

the U.S. securities markets, they also 

have increased the risk of operational 

problems that have the potential to 

cause a widespread impact on the 

securities market and its participants.355

Therefore, the Commission stated in the 

2020 Proposal that application of 

Regulation SCI to Government 

Securities ATSs that trade a significant 

volume of U.S. Treasury Securities or 

Agency Securities would further help to 

address those technological 

vulnerabilities, and improve the 

Commission’s oversight, of the core 

technology used by key U.S. securities 

markets participants.356

A number of commenters on the 2020 

Proposal supported applying the 

requirements of Regulation SCI to 

Government Securities ATSs above a 

specified volume threshold.357 These 

commenters stated that such 

requirements could promote the 

integrity and resiliency of the key 

automated systems of Government 

Securities ATSs and ensure Commission 

oversight.358 One commenter added that 

extending Regulation SCI to 

Government Securities ATSs could 

reduce the potential for systems issues, 

as well as reduce the frequency, 

severity, and duration of any systems 

issues that may occur.359 As support for 

the 2020 Proposal, some commenters 

cited the increased automation in the 

government securities markets and/or 

operational similarities with NMS stock 

ATSs,360 with one commenter stating 

that the distinctions that the 

Commission made between stock 

market ATSs and fixed income ATSs in 

its adoption of Regulation SCI have not 

‘‘stood up well against the rapid 

evolution of the markets.’’ 361 One 

commenter asserted that the government 

securities markets are more systemically 

significant than the equity markets, to 

which Regulation SCI already 

applies.362

Other commenters on the 2020 

Proposal opposed requiring Government 

Securities ATSs above a volume 

threshold to comply with Regulation 

SCI.363 These commenters advocated for 

applying the narrower technology and 

resiliency requirements of Rule 

301(b)(6), rather than Regulation SCI.364

Some of these commenters expressed 

concerns regarding the costs and 

burdens of complying with Regulation 

SCI.365 One commenter distinguished 

the equities markets from the market for 

government securities, asserting that the 

government securities markets do not 

have the same type of linkages among 

trading venues that increase the risk of 

a systems issue in one market spreading 

to another and causing significant 

market impact.366 As such, this 

commenter argued that applying 

Regulation SCI would only increase 

costs without materially increasing the 

integrity or security of the government 

securities markets. Another commenter, 

while focusing its comments on the 

corporate and municipal bond markets, 

argued that, when the Commission 

adopted Regulation SCI, it did not 

include fixed-income ATSs within the 

scope of the regulation out of a concern 

that it could discourage greater 

automation in the fixed-income markets 

and that this concern still exists 

today.367

Acknowledging comment letters on 

the 2020 Proposal, the Commission 

continues to believe that the inclusion 

of Government Securities ATSs meeting 

specified volume thresholds in 

Regulation SCI would be appropriate 

because such Government Securities 

ATSs (inclusive of Communication 

Protocol Systems, as proposed), are 

heavily reliant on technology and 

represent significant pools of liquidity, 

as the Commission has determined to be 

the case for current SCI ATSs.368 The 

Commission believes that, particularly 

in light of the evolution of the 

government securities markets, it is 

important to impose the requirements of 

Regulation SCI to help ensure that the 

technology systems of such Government 

Securities ATSs are reliable and 

resilient.369

The focus of the Commission’s 

discussion in the Regulation SCI 


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370See Regulation SCI Adopting Release, supra 

note 3, at 72270. 

371See generally SIFMA Letter at 5, MFA Letter 

at 5, and AFREF Letter at 2. 

372See Regulation SCI Adopting Release, supra 

note 3, at 72264. 

373See 17 CFR 242.301(b)(6). At the same time, 

as specified below, the Commission continues to 

request comment on whether Government 

Securities ATSs that meet the proposed volume 

thresholds for SCI ATSs should be governed by 

Rule 301(b)(6) instead of being defined as SCI 

entities. The requirements of Rule 301(b)(6) are less 

rigorous than the requirements of Regulation SCI. 

Among other things, Rule 301(b)(6) requires an ATS 

to notify the Commission staff of material systems 

outages and significant systems changes and that 

the ATS establish adequate contingency and 

disaster recovery plans. See id. Regulation SCI 

expanded upon these requirements, by, for 

example, expanding the requirements to a broader 

set of systems, imposing new requirements for 

information dissemination regarding SCI events, 

and requiring Commission notification for 

additional types of events, among others. Rule 

301(b)(6) currently applies to an ATS that trades 

only municipal securities or corporate debt 

securities with 20 percent or more of the average 

daily volume traded in the United States during at 

least four of the preceding six calendar months. 

Currently, there are no ATSs that are subject to 

requirements of Rule 301(b)(6) of Regulation ATS. 

374See BrokerTec Letter at 6. 

375Specifically, 17 CFR 242.1001(a)(4) (Rule 

1001(a)(4)) provides that the policies and 

procedures required under Rule 1001(a) shall be 

deemed to be reasonably designed if they are 

consistent with current SCI industry standards. See 

Rule 1001(a)(4) of Regulation SCI. ‘‘SCI industry 

standards’’ are those standards comprising 

information technology practices that are widely 

available to information technology professionals in 

the financial sector and issued by an authoritative 

body that is a U.S. governmental entity or agency, 

association of U.S. governmental entities or 

agencies, or widely recognized organization. 

376See Regulation SCI Adopting Release, supra 

note 3, at 72259–60, 72290–91. 

377See paragraphs (3) and (4) of the definition of 

‘‘SCI ATS’’ under Rule 1000 of Regulation SCI. 

378See AFREF Letter at 2 and 4. 

379Specifically, this commenter stated that 

Regulation SCI should apply to any family of 

related trading venues for government or agency 

securities with combined notional average daily 

values over the lesser of one percent of the overall 

market share on an appropriate dollar threshold, 

e.g., $25 billion. See Healthy Markets Letter at 10– 

11. In contrast, two commenters advocated for the 

application of Rule 301(b)(6) rather than Regulation 

SCI to Government Securities ATSs, but stated that 

the current 20 percent threshold in Rule 301(b)(6) 

is too high. See MarketAxess Letter at 10 (noting 

that 20 percent is not an appropriate threshold to 

capture ATSs with a significant percentage of 

trading volume in corporate or municipal debt); and 

BrokerTec Letter at 8 (recommending that Rule 

301(b)(6) should apply to all Government Trading 

Securities regardless of trading volume). 

380See ICE Bonds Letter II at 5. 

381See Tradeweb Letter at 3, 11. This commenter 

stated that the threshold should be raised to a 

‘‘more material percentage’’ such as 25 percent. 

382See Bloomberg Letter at 5. 

Adopting Release regarding the fixed 

income markets was on the corporate 

and municipal bond markets, not the 

government securities markets.370 As 

discussed in detail below, given the 

evolution of the government securities 

markets, the Commission now believes 

that there are Government Securities 

ATSs that operate with similar 

complexity as SCI ATSs that are 

currently subject to Regulation SCI, and 

that Government Securities ATSs with 

significant trading volume play an 

important role in the government 

securities markets and face similar 

technological vulnerabilities as existing 

SCI entities. Several commenters on the 

2020 Proposal stated that 371 the 

application of Regulation SCI would 

help the Commission improve its 

oversight of the market for government 

securities, thereby continuing its efforts 

to address technological vulnerabilities 

of the core technology systems of key 

U.S. securities markets entities. 

The Commission explained in the 

Regulation SCI Adopting Release that it 

adopted Regulation SCI to expand upon, 

update, and modernize the requirements 

of Rule 301(b)(6) for those ATSs trading 

NMS stocks and non-NMS stocks that it 

had identified as playing a significant 

role in the securities markets.372 As 

stated above, because Government 

Securities ATSs with significant trading 

volume play an important role in the 

government securities markets and 

present similar risks to the market as 

SCI ATSs, the re-proposal of the broader 

set of requirements and safeguards of 

Regulation SCI is more appropriate for 

such entities than proposing to amend 

the older and more limited requirements 

of Rule 301(b)(6).373

In discussing the costs and burdens of 

Regulation SCI, one commenter on the 

2020 Proposal characterized the 

requirements of Regulation SCI as being 

prescriptive and ‘‘one size fits all.’’ 374

This commenter argued that many 

Government Securities ATSs already 

align with industry standards that are 

more flexible and achieve many of the 

same goals of Regulation SCI without 

additional compliance costs. Regulation 

SCI specifically incorporates, and 

provides that SCI entities can look to, 

industry standards to comply with the 

policies and procedures requirement 

under Regulation SCI.375 As the 

Commission emphasized at the time of 

adoption, Regulation SCI is not 

intended to be a ‘‘one-size-fits-all’’ 

regulation, but rather takes a risk-based 

approach pursuant to which an SCI 

entity’s policies and procedures could 

be tailored to a particular system’s 

criticality and risk, and includes other 

rules and definitions that similarly 

incorporated risk-based 

considerations.376

Accordingly, the Commission is reproposing to expand the definition of 

‘‘SCI ATSs’’ to include Government 

Securities ATSs that meet certain 

volume thresholds with respect to U.S. 

Treasury Securities and/or Agency 

Securities.377 Specifically, the definition 

of ‘‘SCI ATS’’ would be revised to 

include those ATSs which, during at 

least four of the preceding six calendar 

months, had, with respect to U.S. 

Treasury Securities, five percent or 

more of the average weekly dollar 

volume traded in the United States as 

provided by the SRO to which such 

transactions are reported; or had, with 

respect to Agency Securities, five 

percent or more of the average daily 

dollar volume traded in the United 

States as provided by the SRO to which 

such transactions are reported. 

Several commenters on the 2020 

Proposal discussed the specific 

proposed volume thresholds for 

Government Securities ATSs to become 

subject to Regulation SCI. One 

commenter stated that the five percent 

threshold level represents a reasonable 

level for the systemic integrity issues 

targeted by Regulation SCI,378 while 

other commenters expressed support for 

the application of Regulation SCI as 

proposed without specifically 

commenting on the threshold level. 

Other commenters offered alternative 

standards for determining which 

Government Securities ATSs should be 

included within the scope of Regulation 

SCI. For example, one commenter 

recommended that the Commission 

adopt a lower (i.e., more stringent) 

threshold level and incorporate a 

threshold based on a dollar amount.379

Other commenters on the 2020 

Proposal suggested adoption of a higher 

threshold level for the application of 

Regulation SCI to Government 

Securities ATSs. For example, one 

commenter stated that it would support 

the application of Regulation SCI 

instead of Rule 301(b)(6) to fixed 

income ATSs if the Commission 

adopted the 20 percent volume 

threshold test currently used under Rule 

301(b)(6).380 One commenter who 

generally opposed the 2020 Proposal 

also urged the Commission to adopt a 

higher threshold if it, in fact, extended 

application of Regulation SCI to 

Government Securities ATSs.381

Another commenter suggested that 

application of Regulation SCI should 

depend on whether the ATS itself is a 

‘‘significant’’ source of liquidity, 

recommending that this determination 

could, for example, be based on whether 

the ATS’s par value traded in the asset 

class, for four months over the prior six 

months, averaged at least 10 percent of 

par value traded in the asset class.382


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383Regulation SCI would not apply to 

Government Securities ATSs that trade repos, 

including repos on U.S. Treasury Securities and 

Agency Securities. The Commission notes FINRA 

does not require ATSs to report transactions for 

repos. See supra note 313. Based on information 

available to the Commission, the Commission does 

not believe that ATSs today capture a significant 

market share for trading repos nor do they rely on 

the same use of technology as ATSs that trade U.S. 

Treasury Securities or Agency Securities, but below 

requests comment on whether Government 

Securities ATSs that trade repos, including repos on 

U.S. Treasury Securities and Agency Securities 

should be subject to Regulation SCI. 

384See supra Section II.D and infra Section 

X.B.1a. As discussed above with regard to the Fair 

Access Rule, the ATS with the largest market 

volume in U.S. Treasury Securities has 

approximately 14 percent of market volume, while 

the second largest has approximately six percent of 

market share, and the third and fourth largest both 

have a little less than four percent market share. 

The one Legacy Government Securities ATS that 

would also exceed the threshold for Agency 

Securities accounts for roughly 11 percent of 

volume in Agency Securities. See infra Table VIII.1. 

If the proposed volume thresholds were ten percent, 

only one Legacy Government Securities ATS would 

be subject to Regulation SCI, meeting the threshold 

levels for both U.S. Treasury Securities and Agency 

Securities. However, the Commission believes that 

there would still be approximately two currently 

operating Communication Protocol Systems subject 

to Regulation SCI using a ten percent threshold in 

U.S. Treasury Securities. See id. 

385See Regulation SCI Adopting Release, supra 

note 3, at 72270. 

386See id. 

387See supra notes 187–190 and accompanying 

text. 

388See supra notes 182–186 and accompanying 

text. One commenter, while arguing that 

Government Securities ATSs should be subject to 

Rule 301(b)(6) in lieu of expanding Regulation SCI, 

in fact similarly emphasized the fundamental 

importance of the U.S. Treasury market and the 

need to take appropriate steps to enhance the 

resilience of the market, arguing that all 

Government Securities ATSs should be subject to 

technology and resiliency requirements regardless 

of volume. See BrokerTec Letter at 8. 

389The Commission also recognizes that ATSs for 

corporate bonds and municipal securities are 

becoming increasingly electronic and as part of the 

2020 Proposal, the Commission requested comment 

on, among other things, whether the 20 percent 

volume threshold under Rule 301(b)(6) of 

Regulation ATS should be amended to capture 

ATSs that might be critical markets for those 

securities. 

390See Tradeweb Letter at 3, 11. 

The Commission is re-proposing the 

five percent thresholds for Government 

Securities ATSs, consistent with the 

2020 Proposal. Although some 

commenters provided suggestions for 

different thresholds or recommended 

applying Rule 301(b)(6) instead, the 

Commission believes that the proposed 

five percent thresholds for applying 

Regulation SCI to Government 

Securities ATSs (inclusive of 

Communication Protocol Systems, as 

now proposed) would be appropriate 

measures to identify those ATSs that 

have the potential to significantly 

impact investors and the market should 

a systems issue occur and thus warrant 

the protections and requirements of 

Regulation SCI.383 At the same time, as 

detailed further below, the Commission 

is requesting additional comment on 

whether these proposed volume 

thresholds should be set higher or lower 

for ATSs trading government securities. 

The Commission has analyzed the 

number of entities it believes are likely 

to be covered by the thresholds it is 

proposing and believes that, currently, 

approximately two Legacy Government 

Securities ATSs trading U.S. Treasury 

Securities would be subject to 

Regulation SCI under the five percent 

volume thresholds, one of which would 

also meet the volume thresholds for 

trading Agency Securities.384 In 

addition, the Commission believes that 

approximately two currently operating 

Communication Protocol Systems 

would likely be subject to Regulation 

SCI under the proposed five percent 

threshold in U.S. Treasury Securities. 

The Commission believes that the 

proposed volume thresholds to apply 

Regulation SCI to a Government 

Securities ATS that trades U.S. Treasury 

Securities and Agency Securities are 

reasonable compared to volume 

thresholds that would subject an ATS to 

Rule 301(b)(6) under Regulation ATS for 

the ATS’s trading of corporate bonds 

and municipal securities. Currently, an 

ATS that trades corporate bonds or 

municipal securities is subject to Rule 

301(b)(6) if its trading volume reaches 

20 percent or more of the average daily 

volume traded in the United States for 

either corporate bonds or municipal 

securities. As discussed in detail above, 

when the Commission adopted 

Regulation SCI, it decided not to apply 

Regulation SCI and its lower volume 

thresholds to the fixed income markets, 

concluding that a systems issue in fixed 

income markets would not have had as 

significant or widespread an impact as 

in the equities market.385 Among other 

things, the Commission reasoned that 

the fixed income markets at the time 

relied much less on electronic trading 

than the equities markets, and that the 

municipal securities and corporate bond 

fixed income markets tended to be less 

liquid than the equity markets, with 

slower execution times and less 

complex routing strategies.386 As 

explained above, however, ATSs for 

government securities now operate with 

complexity similar to that of markets 

that trade NMS stocks in terms of use of 

technology and speed of trading, the use 

of limit order books, order types, 

algorithms, connectivity, data feeds, and 

the active participation of PTFs, and 

Communication Protocol Systems are 

increasingly used as electronic means to 

bring together buyers and sellers using 

non-firm trading interest for government 

securities, being particularly prevalent 

in the dealer-to-customer market for offthe-run U.S. Treasury securities, Agency 

Securities, and repos.387 Given the 

critical role government securities play 

in the U.S. and global economies,388 the 

Commission believes that, due to their 

increased reliance on electronic trading 

and the important role played by 

Government Securities ATSs in today’s 

markets, an ATS whose government 

securities volume falls between five 

percent and 20 percent of trading 

volume could significantly impact 

investors and the market should a 

systems issue occur. By proposing to 

apply Regulation SCI to Government 

Securities ATSs with a threshold of five 

percent, the Commission seeks to 

impose the protections of Regulation 

SCI to these ATSs because of their 

importance and potential technological 

risks to the U.S. securities markets.389

While the Commission acknowledges 

that, as one commenter on the 2020 

Proposal suggested,390 the government 

securities markets may not have the 

same type of linkages between trading 

venues as exists in the equities markets 

today, as described above, Government 

Securities ATSs with significant trading 

volume have the potential to 

significantly impact investors, the 

overall market, and the trading of 

individual securities should an SCI 

event occur, similar to SCI ATSs 

currently subject to Regulation SCI. In 

addition, a system outage at a significant 

Government Securities ATS could 

disrupt trading at another significant 

Government Securities ATS even if 

these Government Securities ATSs are 

not connected. For example, if a 

significant Government Securities ATS 

is experiencing a system outage, there 

could be a sudden surge in message 

traffic (e.g., quoting activities) and 

trading at another significant 

Government Securities ATS, which 

could exceed the system capacity of 

such Government Securities ATS and 

potentially result in a systems issue 

and/or a disruption of trading on that 

ATS as well. Further, the Commission 

did not base its determination regarding 

which entities played a significant role 

in the market and should be included 

within the scope of the regulation on the 

linkages that exist in the equities 

markets. In adopting Regulation SCI, the 

Commission acknowledged that a 

temporary outage at an ATS might not 

lead to a widespread systemic 

disruption and stated that ‘‘Regulation 

SCI is not designed to solely address 


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391See Regulation SCI Adopting Release, supra 

note 3, at 72263. 

392See supra note 379. 

393See BrokerTec Letter at 9–10. 

394As in the 2020 Proposal, the Commission is 

proposing to amend the last paragraph in the 

definition of ‘‘SCI alternative trading system or SCI 

ATS’’ (newly redesignated paragraph (5)), which 

provides for the 6-month deferred compliance 

period, to apply it to Government Securities ATSs. 

395See Rule 1000 of Regulation SCI. 

396 In the 2020 Proposal, the Commission 

requested comment on whether all of the 

obligations in Regulation SCI should apply to 

Government Securities ATSs that would be SCI 

ATSs, or whether only certain requirements should 

be imposed, such as those requiring written policies 

and procedures, notification of systems problems, 

business continuity and disaster recovery testing 

(including testing with subscribers of ATSs), and 

penetration testing. While, as discussed above, 

some commenters argue that Rule 301(b)(6) would 

be more appropriate framework for Government 

Securities ATSs (see supra note 364), no 

commenters advocate for applying only a subset of 

the requirements of Regulation SCI to Government 

Securities ATSs. 

397 17 CFR 242.1001(a) (Rule 1001(a) of 

Regulation SCI). 

398 17 CFR 242.1001(b)(1)–(2). 

399 17 CFR 242.1001(c). 

systems issues that cause widespread 

systemic disruption, but also to address 

more limited systems malfunctions that 

can harm market participants.’’ 391 The 

Commission believes that, without 

appropriate safeguards in place for these 

Government Securities ATSs, 

technological vulnerabilities could lead 

to the potential for failures, disruptions, 

delays, and intrusions, which could 

place government securities market 

participants at risk and interfere with 

the maintenance of fair and orderly 

markets. 

The Commission believes that the 

proposed volume thresholds to apply 

Regulation SCI to a Government 

Securities ATS that trades U.S. Treasury 

Securities and Agency Securities are 

reasonable as compared to the volume 

thresholds for applying Regulation SCI 

to ATSs that trade NMS stocks and 

ATSs that trade equities that are not 

NMS stocks. First, an ATS that trades 

NMS stocks is subject to Regulation SCI 

if its trading volume reaches: (i) Five 

percent or more in any single NMS 

stock and one-quarter percent or more 

in all NMS stocks of the average daily 

dollar volume reported by applicable 

transaction reporting plans; or (ii) one 

percent or more in all NMS stocks of the 

average daily dollar volume reported by 

applicable transaction reporting plans. 

With respect to non-NMS equity 

securities, an ATS is subject to 

Regulation SCI if its trading volume is 

five percent or more of the average daily 

dollar volume (across all non-NMS 

equity securities) as calculated by the 

SRO to which such transactions are 

reported. These thresholds reflect the 

Commission’s determination as to what 

constitutes a material pool of liquidity 

traded by ATSs in the respective asset 

classes: One percent for NMS stocks and 

five percent for non-NMS equity 

securities. The proposed five percent 

SCI volume thresholds for Government 

Securities ATSs would be similar to 

those for ATSs that trade non-NMS 

equity securities. Basing the thresholds 

on volume as provided to the SRO to 

which such transactions are reported is 

reasonable given that there is no 

transaction reporting plan for 

government securities and thus, the 

trading figures are based on dollar 

volume traded in the United States as 

provided by the SRO to which such 

transactions are reported. 

With regard to one commenter’s 

suggestion that the threshold should be 

based on combined notional average 

daily values of any family of related 

trading venues, the Commission 

requests comment, as set forth below, on 

whether it would be appropriate to 

aggregate the volumes of ATSs that 

trade the same security or category of 

securities and are operated by a 

common broker-dealer, or operated by 

affiliated broker-dealers, and treat the 

ATSs market places as a single ATS for 

purposes of determining whether the 

ATSs meet the threshold levels in the 

definition of SCI ATS.392

One commenter on the 2020 Proposal 

urged the Commission to apply the 

deferred compliance period in the 

current definition of ‘‘SCI ATS’’ to 

Government Securities ATSs and asked 

for clarification as to whether this 

provision would be applicable.393

Specifically, the definition of SCI ATS 

currently provides that an SCI ATS shall 

not be required to comply with the 

requirements of Regulation SCI until six 

months after satisfying the thresholds 

for NMS or non-NMS stocks for the first 

time. The Commission believes that it is 

appropriate to provide Government 

Securities ATS that meet the volume 

threshold in the definition of ‘‘SCI ATS’’ 

for the first time a period of time before 

they are required to comply with the 

requirements of Regulation SCI. Thus, 

the Commission is providing 

clarification that the deferred 

compliance period would be applicable 

to Government Securities ATSs.394

Accordingly, Rule 1000 would provide 

that, like ATSs trading NMS stocks and 

non-NMS stocks, a Government 

Securities ATS would not be required to 

comply with the requirements of 

Regulation SCI until six months after 

satisfying the U.S. Treasury Securities 

or Agency Securities thresholds in the 

definition for the first time.395 The 

Commission believes that this sixmonth additional compliance period is 

appropriate to allow a Government 

Securities ATS the time needed to take 

steps to meet the requirements of the 

rules, rather than requiring compliance 

immediately upon meeting the 

threshold level. 

Government Securities ATSs trading 

U.S. Treasury Securities and/or Agency 

Securities that meet the volume 

thresholds under the proposed revised 

definition of SCI ATS would be subject 

to the requirements of Regulation SCI, 

as broadly described below.396 The 

provision at 17 CFR 242.1001(a) 

requires SCI entities to establish, 

maintain, enforce and periodically 

update policies and procedures 

reasonably designed to ensure that their 

SCI systems and, for purposes of 

security standards, indirect SCI 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 

includes certain minimum requirements 

for those policies and procedures 

relating to capacity planning, stress 

tests, systems development and testing 

methodology, the identification of 

vulnerabilities, business continuity and 

disaster recovery plans (including 

geographic diversity and resumption 

goals), market data, and monitoring.397

Rule 1001(b) of Regulation SCI 

requires that each SCI entity establish, 

maintain, enforce and periodically 

update written policies and procedures 

reasonably designed to ensure that its 

SCI systems operate in a manner that 

complies with the Exchange Act and the 

rules and regulations thereunder and 

the entity’s rules and governing 

documents, as applicable, and specifies 

certain minimum requirements for such 

policies and procedures.398

Rule 1001(c) of Regulation SCI 

requires SCI entities to establish, 

maintain, enforce periodically update 

reasonably designed written policies 

and procedures that include the criteria 

for identifying responsible SCI 

personnel, the designation and 

documentation of responsible SCI 

personnel, and escalation procedures to 

quickly inform ‘‘responsible SCI 

personnel’’ of potential SCI events.399

Under 17 CFR 242.1002, SCI entities 

have certain obligations related to SCI 

events. Specifically, when any 

responsible SCI personnel has a 

reasonable basis to conclude that an SCI 

event has occurred, the SCI entity must 


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400See 17 CFR 242.1002(a) (Rule 1002(a) of 

Regulation SCI). 

401See 17 CFR 242.1002(b). For any SCI event 

that ‘‘has had, or the SCI entity reasonably estimates 

would have, no or a de minimis impact on the SCI 

entity’s operations or on market participants,’’ Rule 

1002(b)(5) provides an exception to the general 

Commission notification requirements under Rule 

1002(b). Instead, an SCI entity must make, keep, 

and preserve records relating to all such SCI events, 

and submit a quarterly report to the Commission 

regarding any such events that are systems 

disruptions or systems intrusions. 

402See 17 CFR 242.1002(c). 

403See id. 

404See 17 CFR 242.1003(a) (Rule 1003(a) of 

Regulation SCI). 

405See 17 CFR 242.1003(b). 

406See 17 CFR 242.1000. Rule 1003(b)(1) of 

Regulation SCI also states that penetration test 

reviews of an SCI entity’s network, firewalls, and 

production systems must be conducted at a 

frequency of not less than once every three years, 

and assessments of SCI systems directly supporting 

market regulation or market surveillance must be 

conducted at a frequency based upon the risk 

assessment conducted as part of the SCI review, but 

in no case less than once every three years. See 17 

CFR 242.1003(b)(1)(i)–(ii). 

407See 17 CFR 242.1003(b)(2)–(3). 

408See 17 CFR 242.1004 (Rule 1004 of Regulation 

SCI). 

409See 17 CFR 242.1005 (Rule 1005 of Regulation 

SCI). Rule 1005(a) of Regulation SCI relates to 

recordkeeping provisions for SCI SROs, whereas 

Rule 1005(b) relates to the recordkeeping provision 

for SCI entities other than SCI SROs. 

410See 17 CFR 242.1006 (Rule 1006 of Regulation 

SCI). 

411See 17 CFR 242.1007 (Rule 1007 of Regulation 

SCI). 

begin to take appropriate corrective 

action which must include, at a 

minimum, mitigating potential harm to 

investors and market integrity resulting 

from the SCI event and devoting 

adequate resources to remedy the SCI 

event as soon as reasonably 

practicable.400 Rule 1002(b) provides 

the framework for notifying the 

Commission of SCI events including, 

among other things, to: Immediately 

notify the Commission of the event; 

provide a written notification within 24 

hours that includes a description of the 

SCI event and the system(s) affected, 

with other information required to the 

extent available at the time; provide 

regular updates regarding the SCI event 

until the event is resolved; and submit 

a final detailed written report regarding 

the SCI event.401 Rule 1002(c) of 

Regulation SCI also requires that SCI 

entities disseminate information to their 

members or participants regarding SCI 

events.402 These information 

dissemination requirements are scaled 

based on the nature and severity of an 

event. 403

The provison at 17 CFR 242.1003(a) 

requires SCI entities to provide 

quarterly reports to the Commission 

relating to system changes.404 Rule 

1003(b) of Regulation SCI also requires 

that an SCI entity conduct an ‘‘SCI 

review’’ not less than once each 

calendar year.405 ‘‘SCI review’’ is 

defined in Rule 1000 of Regulation SCI 

to mean a review, following established 

procedures and standards, that is 

performed by objective personnel 

having appropriate experience to 

conduct reviews of SCI systems and 

indirect SCI systems, and which review 

contains: A risk assessment with respect 

to such systems of an SCI entity; and an 

assessment of internal control design 

and effectiveness of its SCI systems and 

indirect SCI systems to include logical 

and physical security controls, 

development processes, and information 

technology governance, consistent with 

industry standards.406 Under Rule 

1003(b)(2)–(3), SCI entities are also 

required to submit a report of the SCI 

review to their senior management, and 

must also submit the report and any 

response by senior management to the 

report, to their board of directors as well 

as to the Commission.407

The provision at 17 CFR 242.1004 sets 

forth the requirements for testing an SCI 

entity’s business continuity and disaster 

recovery plans with its members or 

participants.408

SCI entities are required by 17 CFR 

242.1005 to make, keep, and preserve 

certain records related to their 

compliance with Regulation SCI 409 and 

by 17 CFR 242.1006 to make required 

filings electronically, on Form SCI.410

Finally, 17 CFR 242.1007 contains 

requirements relating to a written 

undertaking when records required to 

be filed or kept by an SCI entity under 

Regulation SCI are prepared or 

maintained by a service bureau or other 

recordkeeping service on behalf of the 

SCI entity.411

Request for Comment 

40. Should Regulation SCI apply to 

Government Securities ATSs that meet 

the proposed definition of SCI ATS? If 

so, are the proposed revisions to the 

definition of SCI ATS appropriate? If 

not, please specifically explain how the 

policy goals of Regulation SCI would be 

achieved for such systems without 

application of the regulation. 

41. What are the risks associated with 

systems issues at a significant 

Government Securities ATS? What 

impact would a systems issue have on 

the trading of government securities and 

the maintenance of fair and orderly 

markets? Do the government securities 

markets have the same types of linkages 

between trading venues as the equities 

markets? If not, what kind of linkages 

between trading venues exist in the 

government securities markets? How 

does this impact the risk of an SCI event 

at a Government Securities ATS on the 

market and/or market participants? 

Should all of the requirements set forth 

in Regulation SCI apply to Government 

Securities ATSs that meet the proposed 

definition of SCI ATS? 

42. Should Government Securities 

ATSs that meet the proposed volume 

thresholds for SCI ATSs be governed by 

the Capacity, Integrity, and Security 

Rule instead of being defined as SCI 

entities? Are there Government 

Securities ATSs that play a significant 

role in the secondary market for U.S. 

Treasury Securities but do not meet the 

proposed volume thresholds for SCI 

ATSs for which a different threshold 

should be established to mandate 

compliance with the Capacity, Integrity, 

and Security Rule? If yes, what 

additional regulatory requirements, if 

any, should be imposed on such ATSs? 

What would be the costs and benefits 

associated with applying Rule 301(b)(6) 

to Government Securities ATSs that are 

not SCI ATSs? 

43. Should the Commission amend 

Regulation ATS to require Government 

Securities ATSs to comply with Rule 

301(b)(6) but adopt a threshold that is 

lower or higher than 20 percent? For 

example, should the Commission 

amend Rule 301(b)(6) to subject 

Government Securities ATSs, or certain 

Government Securities ATSs, to the 

requirements of the rule if the 

Government Securities ATS reaches a 5 

percent, 7.5 percent, 10 percent, or 15 

percent volume threshold? 

44. Should the volume threshold to 

meet the definition of SCI ATS include 

trading in U.S. Treasury Securities and 

Agency Securities? Should Regulation 

SCI be applied to ATSs for any other 

type of government securities? Should 

Regulation SCI be applied to ATSs that 

trade repos or reverse repos on 

government securities, including repos 

or reverse repos on U.S. Treasury 

Securities, Agency Securities, or both? 

45. Should the proposed five percent 

threshold test for U.S. Treasury 

Securities be applied to all types of U.S. 

Treasury Securities or to a subset of U.S. 

Treasury Securities? For example, 

should the five percent volume test only 

be applied to transaction volume in onthe-run U.S. Treasury Securities? 

Should the five percent threshold be 

applied to transaction volume in all 

Agency Securities or to a subset of 

Agency Securities? If so, why or why 

not? 

46. Is the proposed five percent 

threshold an appropriate threshold to 

apply Regulation SCI to Government 

Securities ATSs (inclusive of 


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412See Section V.A.2, infra, discussing the 

proposed aggregation of volume of affiliated ATSs 

for purposes of application of the Fair Access Rule. 

Communication Protocol Systems, as 

proposed), as significant markets for 

trading in U.S. Treasury Securities or 

Agency Securities? If commenters 

believe that there should be a percent 

threshold for a subset of U.S. Treasury 

Securities, such as on-the-run U.S. 

Treasury Securities or off-the-run U.S. 

Treasury Securities, what should that 

threshold be? 

47. Should the Commission adopt a 

percent volume threshold that is lower 

than five percent for U.S. Treasury 

Securities, Agency Securities, or both? If 

so, what percent threshold should the 

Commission adopt for U.S. Treasury 

Securities and Agency Securities? For 

example, should the Commission adopt 

a threshold that is four percent, three 

percent, two percent, or one percent for 

U.S. Treasury Securities? Should the 

Commission adopt a threshold that is 

four percent, three percent, two percent, 

or one percent for Agency Securities? 

Should there be no threshold for U.S. 

Treasury Securities? Should there be no 

threshold for Agency Securities? Please 

support your views. 

48. Should the Commission adopt a 

percent volume threshold that is higher 

than five percent for U.S. Treasury 

Securities, Agency Securities, or both? 

For example, should the Commission 

adopt a threshold that is 7.5 percent, 10 

percent, 15 percent, or 20 percent for 

U.S. Treasury Securities? Should the 

Commission adopt a threshold that is 

7.5 percent, 10 percent, 15 percent, or 

20 percent for Agency Securities? 

49. Is it appropriate to use five 

percent of average weekly dollar volume 

traded in the United States as a 

threshold for application of Regulation 

SCI requirements to U.S. Treasury 

Securities? If the average weekly dollar 

volumes were to include transactions in 

the secondary cash market for U.S 

Treasury Securities by non-FINRA 

members, which currently are not 

reported to, or collected by, the SRO 

that makes public average weekly dollar 

volume statistics, should the Regulation 

SCI threshold change? If so, what 

should be the appropriate threshold? 

Please support your views. 

50. Is it appropriate to use five 

percent of average daily dollar volume 

traded in the United States as a 

threshold for the application of 

Regulation SCI requirements to Agency 

Securities? 

51. Would the proposed four out of 

six month period be an appropriate 

period to measure the volume 

thresholds for U.S. Treasury Securities 

and Agency Securities for purposes of 

Regulation SCI? With respect to 

calculating the appropriate thresholds, 

would Government Securities ATSs 

have available appropriate data with 

which to determine whether the 

proposed thresholds have been met? 

Would ATSs that trade U.S. Treasury 

Securities be able to readily calculate 

whether they meet the volume 

thresholds in at least four out of the 

preceding six months, given that U.S. 

Treasury Securities are disseminated on 

a weekly, rather than daily basis? If not, 

what data or information is missing? 

Would it be appropriate for the 

Commission to change the proposed 

four out of six month period to a time 

period measured in weeks (e.g., at least 

16 out of the preceding 24 weeks) with 

respect to U.S. Treasury Securities? 

What effect would any such change 

have on the likelihood that ATSs 

trading U.S. Treasury Securities would 

meet the volume thresholds? 

52. Should the proposed Regulation 

SCI volume threshold measurement for 

Government Securities ATSs take into 

account whether Government Securities 

ATSs are operated by a common brokerdealer, or operated by affiliated brokerdealers? 412 For example, should the 

Commission aggregate the Treasury 

volume of two Government Securities 

ATSs that are each operated by a 

common broker-dealer, or operated by 

affiliated broker-dealers, for purposes of 

determining whether the threshold test 

has been satisfied and, if it has, apply 

Regulation SCI to each ATS? Why or 

why not? 

53. Should only certain provisions of 

Regulation SCI apply to Government 

Securities ATSs that meet the proposed 

definition of SCI ATS? For example, 

should they only be subject to certain 

aspects of Regulation SCI? If so, which 

provisions should apply? Do 

commenters believe that different or 

unique requirements should apply to 

the systems of such Government 

Securities ATSs? What should they be 

and why? 

54. In what instances, if at all, should 

the systems of Government Securities 

ATSs that meet the proposed definition 

of SCI ATS be defined as ‘‘critical SCI 

systems’’? Please describe. 

55. Which subscribers or types of 

subscribers should Government 

Securities ATSs that meet the proposed 

definition of SCI ATS consider as 

‘‘designated members or participants’’ 

that should be required to participate in 

the annual mandatory business 

continuity and disaster recovery testing? 

Please describe. 

56. Should Government Securities 

ATSs that meet the proposed definition 

of SCI ATS not be defined as SCI 

entities but instead be required to 

comply with provisions comparable to 

provisions of Regulation SCI? 

57. What are the current practices of 

Government Securities ATSs with 

respect to the subject matter covered by 

Regulation SCI? To what extent do 

Government Securities ATSs have 

practices that are consistent or 

inconsistent with the requirements 

under Regulation SCI? Please describe 

and be specific. Would the application 

of Regulation SCI or the Capacity, 

Integrity, and Security Rule weaken 

ATSs’ existing capacity, integrity, and 

security programs? 

58. Are there characteristics specific 

to the government securities market that 

would make applying Regulation SCI 

broadly or any specific provision of 

Regulation SCI to Government 

Securities ATSs unduly burdensome or 

inappropriate? 

59. As commenters think about 

whether and how to apply Regulation 

SCI to Government Securities ATSs, are 

there any lessons commenters can draw 

from the market stress during Spring 

2020, including, for example, lessons 

learned regarding business continuity or 

capacity planning? 

60. Are there characteristics specific 

to Communication Protocol Systems 

that would make applying Regulation 

SCI broadly or any specific provision of 

Regulation SCI to such systems unduly 

burdensome or inappropriate? For these 

entities, do commenters believe that 

Communication Protocol Systems 

would have systems that meet the 

definition of ‘‘SCI systems’’? Why or 

why not? Are there certain types of 

Communication Protocol Systems that 

would have systems that meet the 

definition while others would not, for 

example, RFQ, BWIC, or conditional 

order systems? Please describe. Are 

there certain features or systems 

functionalities of Communication 

Protocol Systems that would not meet 

the definition of SCI systems, but that 

should be subject to Regulation SCI as 

SCI systems? Please describe. Should 

only certain provisions of Regulation 

SCI apply to Communication Protocol 

Systems? If so, which provisions should 

apply? Do commenters believe that 

different or unique requirements should 

apply to Communication Protocol 

Systems? What should they be and 

why? 


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413As proposed, references to ‘‘NMS Stock ATSs’’ 

throughout Rule 304 would be changed to refer to 

‘‘Covered ATSs,’’ which would encompass 

Government Securities ATSs. See supra Section 

III.B. 

414See infra Section IV.D. 

415See infra Section IV.D.1. 

416 In the NMS Stock ATS Adopting Release, the 

Commission stated that, while it will review Form 

ATS–N filings, its 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 broker-dealer operator are disclosed 

on Form ATS–N.’’ See NMS Stock ATS Adopting 

Release, supra note 2, at 38851. This would equally 

apply to the Commission’s review of Forms ATS– 

N filed by Government Securities ATSs, as 

proposed. 

417See, e.g., MFA Letter at 5; AFREF Letter, at 3; 

BrokerTec Letter at 2. One commenter, which 

expressed general support for the enhanced filing 

requirements and urged the Commission to move 

forward with finalization and implementation of 

the proposal, stated that applying Regulation ATS 

to Government Securities ATSs that meet certain 

volume thresholds would increase public 

operational transparency. See FIA PTG Letter at 2. 

418See ICE Bonds Letter I at 4–5. 

419See MFA Letter at 5. 

420See infra notes 430–432 and accompanying 

text. The proposed amendment to Rule 304(a) 

would also apply to the review of initial Form 

ATS–N filed by NMS Stock ATSs. 

421See NMS Stock ATS Adopting Release, supra 

note 2, at 38782. 

422The Commission staff may reject a Form ATS– 

N filing that is defective because, for example, it is 

missing sections or missing responses to any subquestions, or does not comply with the electronic 

filing requirements. This is a separate process from 

the determination to declare a Form ATS–N 

ineffective. See NMS Stock ATS Adopting Release, 

supra note 2, at 38791. 

423See Rule 304(a)(1)(i). 

424See proposed Rule 304(a)(1)(ii). See also infra 

note 430. 

425See infra note 451. 

426As proposed, to make material changes to its 

initial Form ATS–N during the Commission review 

period, the Government Securities ATS shall 

withdraw its filed initial Form ATS–N and may 

refile an initial Form ATS–N pursuant to Rule 

304(a)(1). See Rule 304(a)(1)(ii)(B). 

427See proposed Rule 304(a)(1)(iii)(A). 

IV. Revised Form ATS–N: Changes 

Applicable to Government Securities 

ATSs and NMS Stock ATSs 

A. Proposed Filing and Effectiveness 

Requirements for Government Securities 

ATSs and NMS Stock ATSs 

The Commission is re-proposing to 

amend Rule 304(a) to require that a 

Covered ATS, which would include a 

Government Securities ATS, must 

comply with Rules 300 through 304 of 

Regulation ATS, as applicable, to be 

exempt from the definition of 

‘‘exchange’’ pursuant to Rule 3a1– 

1(a)(2).413 Rule 304, as proposed to be 

amended, would require all Government 

Securities ATSs to file Form ATS–N, as 

revised. In addition, Communication 

Protocol Systems that choose to comply 

with Regulation ATS would be required 

to meet all applicable requirements of 

Regulation ATS, including filing a Form 

ATS–N if they trade NMS stocks, 

government securities, or repos. The 

Commission is proposing to make 

changes to current Form ATS–N, 

including by adding questions about 

interaction with related markets, 

liquidity providers, and surveillance 

and monitoring, and by making 

organizational and other changes that 

would make the form more relevant for 

Government Securities ATSs inclusive 

of Communication Protocol Systems, as 

proposed.414 These changes would be 

applicable to both Government 

Securities ATSs and NMS Stock ATSs 

and would require NMS Stock ATSs to 

file amendments to their existing 

form.415

Each Form ATS–N would be subject 

to an effectiveness process, which 

would allow the Commission to review 

disclosures on Form ATS–N and declare 

the Form ATS–N ineffective if the 

Commission finds, after notice and 

opportunity for hearing, that such action 

is necessary and appropriate in the 

public interest and the protection of 

investors. The effectiveness process is 

not merit-based, but is designed to 

facilitate the Commission’s oversight of 

Covered ATSs, and address, for 

example, material deficiencies with 

respect to the accuracy, currency, and 

completeness of disclosures on Form 

ATS–N.416 The Commission is 

proposing to apply the same filing and 

effectiveness process to Government 

Securities ATSs that is applicable to 

NMS Stock ATSs filing Form ATS–N. 

However, the Commission is proposing 

changes, as described below, to the 

processes that would apply to both NMS 

Stock ATSs and Government Securities 

ATSs, including with regard to 

extensions of the Commission review 

period for initial Form ATS–N and 

Form ATS–N amendments and the 

filing of amendments related to fees. 

Commenters on the 2020 Proposal 

generally supported the requirement 

that Government Securities ATSs file 

Form ATS–G.417 Although one 

commenter stated that the requirement 

to file Form ATS–G is unnecessarily 

burdensome for Government Securities 

ATSs with limited volume,418 another 

commenter stated it does not support 

requiring different levels of public 

disclosure by Government Securities 

ATSs depending on their trading 

volume, as it could result in a complex 

and confusing system of disclosure for 

market participants.419 The Commission 

is proposing the requirement to file a 

public Form ATS–N, as revised, for all 

Government Securities ATSs, regardless 

of their volume, as this requirement is 

designed to allow market participants to 

compare Government Securities ATSs, 

and excluding low volume Government 

Securities ATSs from this requirement 

would undermine the goal of 

transparency and the ability of market 

participants to use Form ATS–N to 

assess Government Securities ATSs to 

select the most appropriate trading 

venue for their needs. 

The Commission is proposing to 

apply to Government Securities ATSs 

the existing provisions of current Rule 

304(a) for the filing and Commission 

review of an initial Form ATS–N with 

a modification to the circumstances 

under which the Commission can 

extend the review period for an initial 

Form ATS–N.420 The Commission 

believes that the review process is 

appropriate for the same reasons stated 

in the NMS Stock ATS Adopting 

Release,421 will facilitate the 

Commission’s oversight of Government 

Securities ATSs, and will help ensure 

that information is disclosed in a 

complete and comprehensible manner. 

The differences between Form ATS–N 

filed by Government Securities ATSs 

and Form ATS–N filed by NMS Stock 

ATSs should not warrant a different 

review and effectiveness process and 

hence the Commission is proposing to 

apply the same provisions that are 

applicable to NMS Stock ATSs to 

Government Securities ATSs, which 

include the following: 

• No exemption is available to a 

Government Securities ATS pursuant to 

Exchange Act Rule 3a1–1(a)(2) unless 

the Government Securities ATS files 

with the Commission an initial Form 

ATS–N,422 and the initial Form ATS–N 

is effective.423

• The Commission will, by order, 

declare ineffective an initial Form ATS– 

N no later than 120 calendar days from 

the date of filing with the Commission, 

or, if applicable, the end of the extended 

Commission review period.424 During 

the Commission review period, the 

Government Securities ATS shall 

amend its initial Form ATS–N by filing 

updating amendments, correcting 

amendments, and fee amendments 425 as 

applicable.426

• An initial Form ATS–N 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 Commission review period, or, if 

applicable, the end of the extended 

review period.427

• The Commission will, by order, 

declare an initial Form ATS–N 


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428Like the review process for Form ATS–N for 

NMS Stock ATSs, the Commission’s review of Form 

ATS–N for Government Securities ATSs would not 

be merit-based; instead it would focus on the 

completeness and comprehensibility of the 

disclosures. See NMS Stock ATS Adopting Release, 

supra note 2, at 38790. In the NMS Stock ATS 

Adopting Release, the Commission discussed the 

circumstances under which the Commission would 

declare a Form ATS–N amendment ineffective. 

Such circumstances would also apply to the 

Commission’s review of an amendment to Form 

ATS–N filed by a Government Securities ATS. For 

example, the Commission believes 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 a hearing, the Form ATS–N was filed by an 

entity that does not meet the definition of a 

Government Securities 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. For further discussion, see infra 

Section IV.B.2. 

429See Rule 304(a)(1)(iii)(B). 

430See Rule 304(a)(1)(ii)(A)(1). The rule provides 

that the Commission extends the review period, it 

will notify the Government Securities 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. The Commission may also extend the 

initial Form ATS–N review period for any extended 

review period to which a duly authorized 

representative of the Form ATS–N agrees in writing. 

See Rule 304(a)(1)(ii)(A)(2). 

431See 15 U.S.C. 78s(b)(2)(A)(ii). 

432 In the Commission staff’s experience 

reviewing Form ATS–N filed by NMS Stock ATSs, 

the Commission review period was extended (either 

by the Commission or by the agreement of a duly 

authorized representative of the ATS) for 33 of the 

43 Forms ATS–N that the Commission has 

reviewed and published. In its review of each Form 

ATS–N, the Commission staff engaged in extensive 

conversations with the NMS Stock ATS with regard 

to the NMS Stock ATS’s disclosures on its initial 

Form ATS–N. 

433See proposed Rule 304(a)(1)(iv). Other than 

the differences discussed below, the proposed 

process is similar to the process currently provided 

under Rule 304(a)(1)(iv) for Legacy NMS Stock 

ATSs. ‘‘Legacy NMS Stock ATSs’’ are NMS Stock 

ATSs that were operating pursuant to an initial 

operation report on Form ATS on file with the 

Commission as of January 7, 2019. The Commission 

is proposing to delete references to Legacy NMS 

Stock ATSs throughout the rule text, as the 

transition period for such ATSs has ended. 434See supra note 424 and accompanying text. 

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.428 If the 

Commission declares an initial Form 

ATS–N ineffective, the Government 

Securities ATS shall be prohibited from 

operating as a Government Securities 

ATS pursuant to Exchange Act Rule 

3a1–1(a)(2). An initial Form ATS–N 

declared ineffective does not prevent 

the Government Securities ATS from 

subsequently filing a new Form ATS– 

N.429

The Commission is re-proposing to 

amend Rule 304(a)(1)(ii)(A)(1), which 

currently provides that the Commission 

may extend the initial Form ATS–N 

review period for 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, to provide that the 

Commission may extend the review 

period if it finds that an extension is 

appropriate.430 The proposed standard 

is the same standard for extending the 

Commission review period for SRO rule 

filings under Section 19 of the Exchange 

Act.431 This would apply to Form ATS– 

N filed by Government Securities ATSs 

as well as NMS Stock ATSs. The 

Commission believes that extending the 

Commission review period for Form 

ATS–N if it finds that an extension is 

appropriate would facilitate an effective 

review process.432 For example, if an 

ATS’s disclosures on an initial Form 

ATS–N are difficult to understand or 

appear to be incomplete, the 

Commission may need additional time 

to discuss the disclosures with the ATS 

to ascertain whether to declare the Form 

ATS–N ineffective, even if the form is 

not unusually lengthy or does not raise 

novel or complex issues. Rather than 

moving to declare an initial Form ATS– 

N ineffective because of material 

deficiencies with respect to 

completeness and comprehensibility, 

the Commission could extend the 

review period to allow the filer to 

resolve the deficiencies. As under 

current Rule 304(a)(1)(ii)(A)(1), in such 

case, the Commission will notify the 

Covered 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. 

The Commission is also re-proposing 

a process for Legacy Government 

Securities ATSs that have a Form ATS 

on file with the Commission as of the 

effective date of any final rule to 

continue to operate during the 

Commission’s review period.433 In 

addition, to allow a Currently Exempted 

Government Securities ATS or Covered 

Newly Designated ATS to continue to 

operate without disruption while its 

initial Form ATS–N is under 

Commission review, the Commission is 

proposing to amend Rule 304(a)(1)(i) to 

provide that a Currently Exempted 

Government Securities ATS or Covered 

Newly Designated ATS may continue to 

operate pursuant to Regulation ATS 

until its initial Form ATS–N becomes 

effective. The Commission believes that 

all Legacy Government Securities 

ATSs—whether they are operating 

pursuant to a Form ATS or whether they 

have operated as a Currently Exempted 

Government Securities ATS—should be 

permitted to continue to operate during 

the Commission review period. The 

Commission further believes Covered 

Newly Designated ATSs should be 

permitted to operate without disruption 

to their participants and the market. A 

Government Securities ATS or Covered 

Newly Designated ATS would file with 

the Commission an initial Form ATS–N 

no later than the date 90 calendar days 

after the effective date of any final rule. 

An initial Form ATS–N filed by a 

Legacy Government Securities ATS 

would supersede and replace a 

previously filed Form ATS of the Legacy 

Government Securities ATS. A Legacy 

Government Securities ATS that fails to 

comply with the requirements of 

Regulation ATS by filing Form ATS–N 

by the 90th calendar day from the 

effective date of any final rule and 

continues operating as a Government 

Securities 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. If a 

Legacy Government Securities ATS that 

has a Form ATS on file with the 

Commission seeks to trade, for example, 

government securities and corporate 

bonds fails to file a Form ATS–N by the 

90th calendar day, the ATS must either 

file a cessation of operations report on 

Form ATS or file a material amendment 

on Form ATS to remove information 

related to government securities. A 

Legacy Government Securities ATS or 

Newly Designated Covered ATS would 

be permitted to operate, on a provisional 

basis, pursuant to the filed initial Form 

ATS–N, and any amendments thereto, 

while the Commission reviews the 

initial Form ATS–N. 

The Commission is proposing the 

initial Commission review period (not 

including any extension) for an initial 

Form ATS–N filed by a Legacy 

Government Securities ATS or Newly 

Designated Covered ATS to be 180 

calendar days. Based on Commission 

staff experience reviewing initial Form 

ATS–N filings during the transition 

period for Form ATS–N, the 

Commission believes it would be 

appropriate to provide a 180 calendar 

day review period rather than the 120 

calendar day review period that was 

applicable to initial filings by Legacy 

NMS Stock ATSs and that would be 

applicable to a new Covered ATSs 

under Rule 304(a)(1)(ii)(A).434 The 180 

calendar day review period is designed 

to provide Commission staff with 

adequate time to review filings, discuss 


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435See supra notes 430–432 and accompanying 

text. 

436Consistent with the process for Legacy NMS 

Stock ATSs today, Rule 304(a)(1)(iv) would permit 

the Commission to extend the initial Form ATS–N 

review period for Legacy Government Securities 

ATSs for an additional 120-calendar days. See infra 

note 437. 

437See Rule 301(b)(2)(viii). Rule 304(a)(1)(iv)(B), 

as proposed, would provide that the Commission 

may, by order, as provided in Rule 304(a)(1)(iii), 

declare an initial Form ATS–N filed by a Legacy 

Government Securities ATS or Covered Newly 

Designated ATS ineffective no later than 180 

calendar days from the date of filing with the 

Commission, or, if applicable, the end of the 

extended review period. As proposed, the 

Commission may extend the initial Form ATS–N 

review period for a Legacy Government Securities 

ATS or Covered Newly Designated ATS for: An 

additional 120 calendar days if the Commission 

determines that a longer period is appropriate, in 

which case the Commission will notify the Legacy 

Government Securities ATS or Covered Newly 

Designated ATS in writing within the initial 180- 

calendar day review period and will briefly 

describe the reason for the determination for which 

additional time for review is required; or any 

extended review period to which a duly-authorized 

representative of the Legacy Government Securities 

ATS agrees in writing. 

438See NMS Stock ATS Proposing Release, supra 

note 29 (discussing the proposed process for 

amendments to, and Commission review of, Form 

ATS–N filed by NMS Stock ATSs). 

439See NMS Stock ATS Adopting Release, supra 

note 2, Section IV.A.3. 

440See Rule 304(a)(2)(i)(A). The Commission is 

proposing revisions to Rule 304(a)(2)(i)(A) to 

reference fee amendments and to clarify the 

language of the provision. See also infra note 451. 

441See Rule 304(a)(2)(i)(B). See also infra note 

451. 

442See Rule 304(a)(2)(i)(C). For a discussion of 

when an ATS should file a correcting amendment, 

see NMS Stock ATS Adopting Release, supra note 

2, at 38806. 

443The Commission is re-proposing to revise Rule 

304 to replace references to ‘‘Order Display and Fair 

Access Amendments’’ with ‘‘Contingent 

Amendments.’’ The term ‘‘Contingent Amendment’’ 

would apply to amendments related to Form ATS– 

N disclosures regarding order display and fair 

access, as applicable, under Rule 304(a)(2)(i)(D) to 

Form ATS–N filed by both NMS Stock ATSs and 

Government Securities ATSs. 

444See NMS Stock ATS Adopting Release, supra 

note 2, at 38803. 

445 In the Commission’s experience, a change in 

ownership of the broker-dealer operator that does 

not result in the change in the registered entity 

nevertheless may be likely to implicate a material 

change, in that, among other things, it may result 

in a change to the persons who have access to 

confidential trading information. A change in the 

broker-dealer operator, however, would require the 

Covered ATS to cease operations and file a new 

Form ATS–N. See infra notes 527–528 and 

accompanying text. 

disclosures with Covered ATSs, and 

address any deficiencies. 

For the same reasons discussed 

above,435 the Commission is proposing 

to amend Rule 304(a)(1)(iv)(B) to 

provide that the Commission can extend 

the initial Form ATS–N review period 

for Legacy Government Securities ATSs 

by an additional 120 calendar days 436 if 

it determines that a longer period is 

appropriate. 

Other than the proposed changes to 

the circumstances under which the 

Commission may extend the 

Commission review period, the 

Commission is also proposing that the 

process for the Commission to review 

and declare ineffective, if necessary, an 

initial Form ATS–N filed by a Legacy 

Government Securities ATS would be 

the same as the process for an initial 

Form ATS–N filed by a Legacy NMS 

Stock ATS.437 Given the proposed 

intended uses of Form ATS–N to allow 

the Commission to monitor 

developments and carry out its 

oversight functions over Government 

Securities ATSs and to enable market 

participants to make more informed 

decisions about how their trading 

interest will be handled by the ATSs, 

the Commission believes that it is 

important for a Government Securities 

ATS to maintain an accurate, current, 

and complete Form ATS–N.438

Providing the Commission with the 

opportunity to review Form ATS–N 

disclosures helps ensure that 

information is disclosed in a complete 

and comprehensible manner.439

As the intended uses of Form ATS– 

N filed by Government Securities ATS 

and Form ATS–N disclosures filed by 

NMS Stock ATSs are similar, the 

Commission is proposing the same 

filing requirements that are currently 

applicable to Form ATS–N amendments 

filed by NMS Stock ATSs to Form ATS– 

N amendments filed by Government 

Securities ATSs. Like an NMS Stock 

ATS, a Government Securities ATS 

would be required to amend Form ATS– 

N: 

• At least 30 calendar days, or the 

length of any extended review period, 

prior to the date of implementation of a 

material change to the operations of the 

Government Securities ATS or to the 

activities of the broker-dealer operator 

or its affiliates that are subject to 

disclosure on the Form ATS–N, other 

than changes related to order display or 

fair access, which will be contingent 

amendments reported pursuant to Rule 

304(a)(2)(i)(D), or fees, which will be fee 

amendments reported pursuant to Rule 

304(a)(2)(E) (‘‘material amendment’’).440

• 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 material 

amendment, correcting amendment, 

contingent amendment, or fee 

amendment (‘‘updating 

amendment’’).441

• Promptly to correct information in 

any previous disclosure on the Form 

ATS–N, after discovery that any 

information previously filed on a Form 

ATS–N was materially inaccurate or 

incomplete when filed (‘‘correcting 

amendment’’).442

• No later than the date that 

information required to be disclosed in 

Part III, Item 23 on Form ATS–N, which 

addresses fair access, has become 

inaccurate or incomplete (‘‘contingent 

amendment’’). Because the order 

display and execution access rule under 

Rule 301(b)(3) does not apply to 

Government Securities ATSs, 

Government Securities ATSs would not 

be required to disclose information 

pertaining to order display and 

execution access. Accordingly, for 

Government Securities ATSs, Rule 

304(a)(2)(i)(D) would only apply to the 

fair access disclosure on Form ATS– 

N.443

• No later than after the date that 

information required to be disclosed in 

Part III, Item 18 on Form ATS–N has 

become inaccurate or incomplete (‘‘fee 

amendment’’). 

In the NMS Stock ATS Adopting 

Release, the Commission provided 

examples of scenarios that are 

particularly likely to implicate a 

material change.444 In consideration of 

Commission staff’s experience with 

Form ATS–N, the proposed change to 

include Communication Protocol 

Systems in the definition of ‘‘exchange,’’ 

and the proposed changes to Form 

ATS–N, the Commission is reiterating 

and adding to the list of scenarios 

particularly likely to implicate a 

material change, which would include, 

but are not limited to: (1) A brokerdealer operator or its affiliates beginning 

to trade on the Covered 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, including types of 

persons that have access to confidential 

trading information; 445 (3) a change to 

the types of participants on the Covered 

ATS or the eligibility to participate in 

the ATS; (4) the introduction or removal 

of, or change to, an order type or type 

of message that subscribers can receive 

or send; (5) the introduction of, or 

change to, requirements, conditions, or 

restrictions to send, receive, or view 

trading interest; (6) a change to the 

interaction of trading interest 

(including, for example, procedures 

related to how participants send, 

receive, respond to, counter, and firmup trading interest) and priority 


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446For further discussion, see NMS Stock ATS 

Adopting Release, supra note 2, Section IV.B.1.a. In 

the NMS Stock ATS Adopting Release, the 

Commission stated that in determining whether a 

change is material, an ATS should generally 

consider whether such change would affect ‘‘the 

fees that any subscriber or category of subscribers 

would pay to access and/or use the ATS.’’ See id. 

at 38803. As discussed below, the Commission is 

proposing a new amendment type for fee 

amendments, and as a result, changes to 

information in the fee disclosure in Part III, Item 18 

would not be material changes for purposes of Rule 

304(a)(2). 447 If the Covered ATS files a fee amendment in 

advance to notice a change of a fee, for example, 

the Covered ATS should provide the effective date 

for the fee so that subscribers can understand when 

the fee will be effective and thus impact them. The 

Covered ATS must subsequently file an updating 

amendment on Form ATS–N to remove the 

outdated effective date and any fees no longer in 

effect to ensure that the disclosures on Form ATS– 

N are current and accurate. 

448See infra Section IV.D.5.r. 449 15 U.S.C. 78s(b). 

450 17 CFR 240.19b–4(f)(2). 

451See proposed changes to Rule 304(a)(1)(ii)(B) 

and Rule 304(a)(1)(iv)(C). In addition, the 

Commission is proposing to revise the definition of 

‘‘Material Amendment’’ to state that it would not 

include a fee amendment required to be filed 

pursuant to Rule 304(a)(2)(i)(E) and to reorder the 

language in Rule 304(a)(1)(ii)(A) to improve the 

readability of the provision. See Rule 

304(a)(2)(i)(A). The Commission is also proposing 

to revise the definition of ‘‘Updating Amendment’’ 

to state that it would not include a fee amendment. 

See Rule 304(a)(2)(i)(B). 

452See Rule 304(a)(2)(ii). 

procedures; (7) any change to ATS 

functionalities or procedures that affect 

pricing of trading interest; (8) a change 

that would impact a subscriber’s ability 

to send or interact with trading interest, 

including a change to the segmentation 

of orders and participants; (9) a change 

to the manner in which the Covered 

ATS displays or makes known trading 

interest, including to limit or expand 

the trading interest that subscribers can 

view or interact with; (10) a change of 

a service provider to the operations of 

the Covered ATS that has access to 

subscribers’ confidential trading 

information; and (11) a change to 

introduce or stop routing or sending 

away trading interest. A Covered ATS 

that notifies subscribers, or certain 

subscribers, about potential changes to 

ATS operations or ATS activities of the 

broker-dealer operator or its affiliates in 

advance of filing a Form ATS–N 

amendment demonstrates that the ATS 

determines such information to be 

important to subscribers and may likely 

be material. In addition, from the 

Commission staff’s experience, if a 

Covered ATS removes an important 

functionality or no longer makes a 

functionality available to subscribers or 

certain groups of subscribers, the 

removal of such functionality could be 

a material change. 

This list is not intended to be 

exhaustive, and does not mean to imply 

that other changes to the operations of 

a Covered ATS or the activities of the 

broker-dealer operator or its affiliates 

would not constitute material changes. 

Further, the Covered ATS should 

generally consider whether the 

cumulative effect of a series of changes 

to the operations of the Covered ATS or 

the activities of the broker-dealer 

operator or its affiliates with regard to 

the Covered 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 nature or 

composition of counterparties with 

which any subscriber or category of 

subscribers interact; and (4) the relative 

speed of access or execution of any 

subscriber or group of subscribers.446

The Commission is proposing a new 

amendment type—fee amendments— 

that is not currently provided for under 

Rule 304(a)(2), but would be filed by 

both NMS Stock ATSs and Government 

Securities ATSs. The Covered ATS 

would be required to file a fee 

amendment no later than the date it 

makes a change that makes information 

reported on Part III, Item 18, inaccurate 

or incomplete.447 Part III, Item 18 of 

Form ATS–N would require disclosure 

of fee-related information, including, 

among other things, a description of the 

types of fees, structure of fees, variables 

that impact fees, differentiation among 

fees among types of subscribers, the 

range of fees, and rebates or discounts, 

for use of ATS services or services that 

are bundled with the subscriber’s use of 

non-ATS services or products offered by 

the broker-dealer operator or its 

affiliates.448 Changes that would trigger 

a fee amendment would include, among 

other things, a change to the range of 

fees, a change to the factors that affect 

the fees that the ATS charges, or any 

other change to the fee disclosure in 

Part III, Item 18. In the Commission 

staff’s experience reviewing Form ATS– 

N amendments, NMS Stock ATSs have 

taken varied approaches to the reporting 

of fees. In some cases, NMS Stock ATSs 

have treated fee changes as material 

changes, and filed amendments on Form 

ATS–N at least 30 calendar days before 

implementing the changes. In other 

cases, NMS Stock ATSs have filed 

updating amendments no later than 30 

days from the end of the calendar 

quarter in which the ATS implemented 

the fee change. The Commission 

believes that fee changes should be 

transparent and that both potential and 

current subscribers and customers of 

subscribers, generally, should be timely 

informed of a change to a Covered 

ATS’s fees, as required to be reported on 

Form ATS–N. The Commission notes 

that today, pursuant to Section 19(b) of 

the Exchange Act,449 national securities 

exchanges file proposed rule changes 

with the Commission that may take 

effect upon filing with the Commission 

if the rule change is ‘‘establishing or 

changing a due, fee, or other charge 

applicable only to a member,’’ no matter 

the materiality of the rule change.450

NMS Stock ATSs, which compete with 

national securities exchanges, are not 

subject to this provision to the Exchange 

Act, and are required to file a material 

amendment to Form ATS–N, and thus 

wait 30 calendar days before 

implementing a fee change, if the fee 

change is material. Given this difference 

between national securities exchanges 

and NMS Stock ATSs, the Commission 

believes that requiring Covered ATSs to 

file a fee amendment no later than the 

date it makes a change to a fee or fee 

disclosure would provide the public 

with sufficient notice about a fee change 

while allowing the ATS to act nimbly to 

make fee changes to respond to, for 

example, competitive pressures from 

other trading venues. The Commission 

is also making conforming changes in 

Rule 304 that would, among other 

things, allow Covered ATSs to file fee 

amendments to initial Form ATS–N 

while the initial Form ATS–N is under 

Commission review.451

Like Form ATS–N filed by NMS Stock 

ATSs, the Commission would, by order, 

declare ineffective any Form ATS–N 

amendment filed by Government 

Securities ATSs pursuant to Rule 

304(a)(2)(i)(A) through (E) if it finds that 

such action is necessary or appropriate 

in the public interest and is consistent 

with the protection of investors.452

However, the Commission is proposing 

to amend Rule 304(a)(2)(ii), which 

currently provides that the Commission 

would declare any Form ATS–N 

amendment ineffective no later than 30 

calendar days from filing with the 

Commission, to permit the Commission 

to extend the Form ATS–N amendment 

review period by an additional 30 

calendar days if the Commission finds 

that a longer period is appropriate. The 

ability to extend the review period for 

amendments to Form ATS–N by an 

additional 30 calendar days would 

allow the Commission additional time 

to review and discuss the amendment 

with the filer, and, if necessary, declare 

the Form ATS–N amendment 


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453See proposed Rule 304(a)(2)(i)(A) (stating that 

a Covered ATS shall amend a Form ATS–N at least 

30 calendar days, or the length of any extended 

review period pursuant to Rule 304(a)(2)(ii)(A), 

prior to the date of implementation of a material 

change (other than a correcting amendment) to the 

operations of the Covered ATS or to the activities 

of the broker-dealer operator or its affiliates that are 

subject to disclosure on the Form ATS–N). 

454See infra note 463 and accompanying text. 

455See Rule 304(a)(3). 

456The proposed limitation on the time frame for 

suspension is consistent with Federal securities law 

provisions pursuant to which the Commission may 

suspend the activities or registration of a regulated 

entity. See, e.g., Exchange Act Section 15(b)(4) (15 

U.S.C. 78o(b)(4)) and 15B(c)(2) (15 U.S.C. 78o– 

4(c)(2)). See NMS Stock ATS Proposing Release, 

supra note 29, at 81031 n.322. 

457See proposed Rule 304(a)(4)(i). 

458See Rule 304(a)(4). In making a determination 

as to whether suspension, limitation, or revocation 

of a Government Securities ATS’s exemption is 

necessary or appropriate in the public interest, and 

is consistent with the protection of investors, the 

Commission would, for example, take into account 

whether the entity no longer meets the definition 

of Government Securities ATS under Rule 300(l), 

does not comply with the conditions to the 

exemption (in that it fails to comply with any part 

of Regulation ATS, including Rule 304), or 

otherwise violates any provision of Federal 

securities laws. For further discussion of such 

examples as applied to NMS Stock ATSs, see NMS 

Stock ATS Proposing Release, supra note 29, at 

81032. 

459Pursuant to the Commission’s current 

information sharing practices with the Department 

of the Treasury, the Commission expects to provide 

the Department of the Treasury with prompt notice 

in certain cases, such as when the Commission is 

declaring a Form ATS–N ineffective under Rule 

304(a)(1)(iii)(b), or suspending, limiting, or revoking 

the exemption of a Government Securities ATS 

under Rule 304(a)(4). 

ineffective. Based on the Commission 

staff’s experience reviewing Form ATS– 

N amendments, amendments on Form 

ATS–N vary in length, complexity, as 

well as comprehensibility and clarity. 

The Commission staff frequently 

engages in extensive discussions with 

NMS Stock ATSs about their disclosures 

in an amendment, and as a result of 

these discussions, ATSs often amend a 

filed amendment to address deficiencies 

within the Commission review period. 

To date, NMS Stock ATSs have resolved 

such deficiencies within the 

Commission review period, and the 

Commission has not declared a Form 

ATS–N amendment ineffective. 

However, in several circumstances, 

NMS Stock ATSs have submitted draft 

amendments to the Commission staff, 

which has provided the staff and NMS 

Stock ATSs with additional time to 

resolve potential deficiencies. NMS 

Stock ATSs, however, have no 

obligation to provide such a draft to the 

Commission, nor does the Commission 

staff have any obligation to review such 

a draft. 

In the event a Covered ATS is unable 

to address deficiencies within the initial 

30-day review period, the Commission 

believes that, rather than moving to 

declare a Form ATS–N amendment 

ineffective, it would be appropriate to 

extend the review period and allow the 

filer more time to address such 

deficiencies. The Commission believes 

that 30 additional calendar days will 

give the Covered ATS sufficient time to 

address any such concerns. If the 

Covered ATS is unable to resolve the 

deficiencies within the extended review 

period, the Commission will declare the 

Form ATS–N amendment ineffective if 

it finds that such action is necessary or 

appropriate in the public interest, and is 

consistent with the protection of 

investors. The Commission is therefore 

proposing that the Commission may 

extend the Form ATS–N amendment 

review period by an additional 30 

calendar days if the Commission finds 

that a longer period is appropriate, or to 

any extended review period to which a 

duly-authorized representative of the 

ATS agrees in writing. The Commission 

is also proposing to amend Rule 

304(a)(2)(i)(A) to provide that a Covered 

ATS may not implement a material 

change before the end of the 30 calendar 

day review period or the length of any 

extended review period under proposed 

Rule 301(a)(2)(ii)(A).453 Today, an NMS 

Stock ATS may not implement a 

material change until the expiration of 

the 30-calendar day Commission review 

period. Likewise, as a result of the 

proposed change, in the event of an 

extension of the Commission review 

period, the Covered ATS would 

therefore not implement the material 

change until the review period has 

expired. As discussed below, the 

Commission would disseminate the 

material amendment following the 

expiration of the review period or any 

extended review period.454

The Commission is also re-proposing 

to apply current Rule 304(a)(3) to 

require a Government Securities ATS to 

notice its cessation of operations on a 

Form ATS–N at least 10 business days 

prior to the date it will cease to operate 

as a Government Securities ATS.455

Filing such a notice would cause the 

Form ATS–N to become ineffective on 

the date designated by the Government 

Securities ATS. In addition, the 

Commission is re-proposing to apply 

Rule 304(a)(4) to Government Securities 

ATSs, which would allow the 

Commission to order to suspend (for a 

period not exceeding twelve months),456

limit, or revoke a Covered ATS’s 

exemption pursuant to Rule 3a1–1(a)(2) 

if the Commission finds, after notice 

and opportunity for hearing, that such 

action is necessary or appropriate in the 

public interest.457 Rule 304(a)(4)(ii) 

would provide that if the exemption for 

a Government Securities ATS is 

suspended or revoked pursuant to Rule 

304(a)(4)(i), the Government Securities 

ATS would be prohibited from 

operating pursuant to the Rule 3a1– 

1(a)(2) exemption.458 If the exemption 

for a Government Securities ATS is 

limited pursuant to Rule 304(a)(4)(i), the 

Government Securities ATS shall be 

prohibited from operating in a manner 

otherwise inconsistent with the terms 

and conditions of the Commission 

order. 

In addition, Rule 304(a)(4) would 

provide that prior to issuing an order 

suspending, limiting, or revoking a 

Government Securities ATS’s 

exemption pursuant to Rule 304(a)(4)(i), 

the Commission will provide notice and 

opportunity for hearing to the 

Government Securities ATS, and make 

the findings specified in Rule 

304(a)(4)(i) described above, 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.459

Request for Comment 

61. Should Government Securities 

ATSs be required to file Form ATS–N, 

as revised, instead of Form ATS? 

Should Government Securities ATSs be 

required to file a form different from 

Form ATS–N? 

62. As an alternative to requiring 

Government Securities ATSs to file 

Form ATS–N, should Form ATS, or 

parts thereof, for Government Securities 

ATSs be made available to the public? 

If made available to the public, is 

current Form ATS sufficient to provide 

information to the public about the 

operations of Government Securities 

ATSs? 

63. Do commenters believe that 

broker-dealers operators of ATS that 

trade only government securities or 

repos might choose to modify their 

business models so that they would not 

be required to comply with enhanced 

regulatory or operational transparency 

requirements for Government Securities 

ATSs? 

64. Should Government Securities 

ATSs be subject to Rule 304(a), in whole 

or in part? 

65. Should Rule 304(a) be amended to 

provide that an initial Form ATS–N be 

made effective by Commission order or 

any other means instead of upon 

publication by the Commission? 

66. Should Rule 304(a) only apply to 

Government Securities ATSs that trade 

a certain type of government security 


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460See Rule 304(b)(1) (providing 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). 

461See Rule 304(b)(1). 

462See Rule 304(b)(2). 

463See proposed Rule 304(b)(2)(iii). 

464See, e.g., SIFMA Letter at 3–4; BrokerTec 

Letter at 2; AFREF Letter at 3; Bloomberg Letter at 

7; Healthy Markets Association Letter at 7; MFA 

Letter at 5 (stating that any alternative that would 

limit disclosure requirements would be detrimental 

to achieving the Commission’s transparency goals 

and that requiring different levels of disclosure 

among Government Securities ATSs based on their 

trading volume could result in a complex and 

confusing system of disclosure). 

465See FINRA Letter at 2. 

(e.g., U.S. Treasury Securities, Agency 

Securities)? If so, to which type of 

Government Securities ATS should Rule 

304 apply (e.g., Government Securities 

ATSs that trade U.S. Treasury Securities 

or Government Securities ATSs that 

trade Agency Securities)? 

67. Should the Commission require a 

Currently Exempted Government 

Securities ATS to file Form ATS–N and 

comply with the requirements of Rule 

304 to qualify for the exemption from 

the definition of exchange? 

68. Would the proposal to require a 

Currently Exempted Government 

Securities ATS or Covered Newly 

Designated ATS to file Form ATS–N by 

the date 90 calendar days after the 

effective date of any final rule provide 

the ATS sufficient time to transition to 

compliance with Regulation ATS and 

the proposed requirements under Rule 

304? If the Commission were to provide 

more time for a Covered Newly 

Designated ATS and/or Currently 

Exempted Government Securities ATS 

to file Form ATS–N, should the 

Commission require the Covered Newly 

Designated ATS and/or Currently 

Exempted Government Securities ATS 

to file an initial operation report on 

Form ATS to provide notice of its 

operations to the Commission before it 

is required to file a Form ATS–N? 

Would the proposal to require a Current 

Government Securities ATS to file a 

Form ATS–N by the date 90 calendar 

days after the effective date of any final 

rule provide the ATS sufficient time to 

transition to compliance with Rule 304? 

69. Should the Commission be 

permitted to extend the initial Form 

ATS–N review period if it finds that it 

is appropriate to extend such review 

period? 

70. Should a Legacy Government 

Securities ATS or Covered Newly 

Designated ATS be allowed to continue 

operations during the Commission’s 

review of its initial Form ATS–N? 

71. Should the Commission require 

amendments to Part III, Item 18 of Form 

ATS–N to be filed no later than the date 

that the information on such item 

becomes inaccurate or incomplete? Or 

should the Commission require 

amendments to Part III, Item 18, or any 

specific required disclosure on such 

Item to be required in advance of 

implementation of the change? And if 

so, how far in advance of 

implementation and why? Alternatively, 

should the Commission allow Covered 

ATSs more or less time to file a fee 

amendment? 

72. Should the rule provide that the 

Commission may extend the Form ATS– 

N amendment review period by an 

additional 30 calendar days if the 

Commission finds that a longer period 

is appropriate? Should such extended 

review period be longer or shorter? 

Should the Commission only extend 

such review period under certain 

circumstances? If so, under what 

circumstances should the Commission 

extend the review period for a Form 

ATS–N amendment? 

73. Are there any aspects of Rule 

304(a)(2) relating to the filing and 

review of amendments that should be 

modified specifically for Form ATS–N 

amendments filed by Government 

Securities ATSs? 

74. What changes or types of changes 

to a Covered ATS’s operations or the 

activities of the broker-dealer operator 

or its affiliates do commenters believe 

are particularly likely to be material so 

as to require a material amendment to 

Form ATS–N? 

75. Should the Commission consider 

any other factors in determining 

whether a Form ATS–N filed by a 

Government Securities ATS should 

become effective or ineffective? If so, 

what are they and why? 

76. Should the Commission adopt the 

current process for the Commission to 

suspend, limit, or revoke an NMS Stock 

ATS’s exemption from the definition of 

‘‘exchange’’ for Government Securities 

ATSs? 

B. Public Disclosure of Form ATS–N for 

Government Securities ATSs and 

Related Commission Orders 

The Commission would make public 

certain Form ATS–N reports filed by 

Government Securities ATSs pursuant 

to Rule 304(b).460 Commission orders 

related to the effectiveness of revised 

Form ATS–N would also be publicly 

posted on the Commission’s website. 

The Commission would apply to 

Government Securities ATSs the same 

rules regarding public disclosure that 

are currently applicable to NMS Stock 

ATSs. Applying existing Rule 304(b) to 

Government Securities ATSs would 

mandate greater public disclosure of the 

operations of these ATSs through the 

publication of Form ATS–N and related 

filings available on the Commission’s 

website. Accordingly, the Commission 

is proposing that Form ATS–N filed by 

Government Securities ATSs would be 

subject to the following: 

• 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.461

• The Commission will make public 

via posting on the Commission’s 

website, each: (1) Effective initial Form 

ATS–N, as amended; (2) order of 

ineffective initial Form ATS–N; (3) 

Form ATS–N amendment to an effective 

Form ATS–N; (4) order of ineffective 

Form ATS–N amendment; (5) notice of 

cessation; and (6) order suspending, 

limiting, or revoking the exemption for 

a Government Securities ATS from the 

definition of an ‘‘exchange’’ pursuant to 

Exchange Act Rule 3a1–1(a)(2).462

The Commission is proposing to make 

amendments to current Rule 304(b), 

which would apply to all Covered 

ATSs. As the Commission is proposing 

to amend Rule 304(a)(2)(i)(A) to allow 

extensions of the Commission review 

period, the Commission is proposing to 

amend Rule 304(b)(2)(iii) to state that 

material amendments would be made 

public following the expiration of the 

review period ‘‘or any extended review 

period.’’ 463 As a result, the entire Form 

ATS–N amendment would not be made 

public until the review period has 

expired, at which time the ATS may 

implement the change described in the 

amendment. The Commission is also 

proposing to amend Rule 

304(b)(2)(iii)(B) to provide that fee 

amendments would be made public by 

the Commission upon filing, consistent 

with the treatment of updating, 

correcting, and contingent amendments, 

all of which are intended to describe the 

ATS as it currently operates. 

The Commission received several 

comments on the 2020 Proposal 

supporting public disclosure of Form 

ATS–G and amendments thereto.464 For 

example, one commenter stated that 

public disclosure could improve 

investors’ ability to select trading 

venues and as a result, lower trading 

costs and increase execution quality.465

Another commenter, however, stated 

that Government Securities ATSs 

should not be required to make public 

commercially sensitive information on 

Form ATS–G, and that similar investor 

protection benefits can be achieved 

without negative impact by requiring a 


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466See Tradeweb Letter at 11. 467 In the Commission staff’s experience 

reviewing disclosures on current Form ATS–N for 

NMS Stock ATSs and discussing ATS operations 

and the requirements of the form with NMS Stock 

ATSs, the Commission staff has observed that the 

information responsive to the form is not 

proprietary or commercially sensitive. In the NMS 

Stock ATS Adopting Release, the Commission 

stated that it designed Form ATS–N to not seek 

disclosure of certain information that could be 

proprietary or commercially sensitive. See NMS 

Stock ATS Adopting Release, supra note 2, at 

38812. In response to commenter concerns 

regarding disclosure of proprietary or commercially 

sensitive information, the Commission revised the 

wording of relevant requests in originally proposed 

Form ATS–N to mitigate such concerns or provided 

guidance regarding the scope of certain disclosure 

requests and to require ‘‘summary’’ information. 

See id. at 38825. The Commission stated that, in a 

vast majority of cases, the level of detail required 

by Form ATS–N should not require the public 

disclosure of commercially sensitive information. 

See id. at 38825. See also, e.g., infra Section 

IV.D.4.d (describing that Form ATS–N requires a 

‘‘summary’’ narrative of products and services to 

avoid disclosure of commercially sensitive 

information). 

468See 17 CFR 240.301(b)(2)(vii). 

469See Alternative Trading System List, https:// 

www.sec.gov/foia/docs/atslist.htm. 

470Unlike the 2020 Proposal, the Commission is 

not proposing to amend Rule 304(b)(3) to require 

each Covered ATS to post on its website the most 

recently disseminated Form ATS–N within one 

business day after publication on the Commission’s 

website. 

471See Item A.3 of the Instructions to Form ATS– 

N (as revised). 

472See NMS Stock ATS Adopting Release, supra 

note 2, Section VII. 

473See Regulation ATS Adopting Release, supra 

note 31, at 70877–78. 

Government Securities ATS to make 

such information available upon request 

to subscribers, potential subscribers, 

and the Commission.466 The 

Commission believes that the vast 

majority of information responsive to 

Form ATS–N would not be proprietary 

or commercially sensitive for ATSs to 

disclose.467

The Commission is re-proposing to 

make Form ATS–N publicly available 

for all Government Securities ATSs, 

regardless of their volume. The 

Commission believes that most market 

participants have limited access to 

information to adequately assess ATSs 

that trade government securities and 

understand how different ATSs operate. 

Today, Government Securities ATSs 

that are currently subject to Regulation 

ATS file a Form ATS that is deemed 

confidential when filed under Rule 

301(b)(2)(vii) of Regulation ATS,468 and 

Currently Exempted Government 

Securities ATSs are not subject to 

Regulation ATS and not required to file 

a Form ATS. The only information the 

Commission currently makes publicly 

available regarding Government 

Securities ATSs that are currently 

subject to Regulation ATS is a monthly 

list of the names and locations of ATSs 

with a Form ATS on file with the 

Commission.469 In the case Government 

Securities ATSs make information about 

their operations voluntarily available, 

such information is limited, and the 

lack of uniformity or standardization 

makes it difficult to compare disclosures 

across ATSs. Accordingly, through 

Form ATS–N, the Commission is 

proposing disclosures that will provide 

information that market participants can 

use to evaluate an ATS as a potential 

trading venue. Requiring public 

disclosure, rather than Government 

Securities ATSs responding to 

individual disclosure requests from 

subscribers or potential subscribers, will 

help to ensure uniformity and 

standardization of the information 

Government Securities ATSs make 

available. 

As proposed, Government Securities 

ATSs would also be subject to Rule 

304(b)(3), which would require each 

Government Securities ATS that has a 

website to post a direct URL hyperlink 

to the Commission’s website that 

contains the documents enumerated in 

Rule 304(b)(2), which would include the 

Government Securities ATS’s Form 

ATS–N filings.470

Request for Comment 

77. Should the requirements of Rule 

304(b) apply to Form ATS–N reports 

filed by Government Securities ATSs, in 

whole or in part? Should the 

Commission modify Rule 304(b) in any 

way for all Covered ATSs? 

78. Should Rule 304(b) only apply to 

Government Securities ATSs that trade 

a type of government securities (e.g., 

U.S. Treasury Securities, Agency 

Securities)? If so, to which type of 

Government Securities ATS should Rule 

304 apply? 

79. Are there any other requirements 

that should apply to making public a 

Form ATS–N report filed by a 

Government Securities ATS? Please 

support your arguments, and if so, 

please list and explain such procedures 

in detail. 

80. Should Rule 304(b) apply to Form 

ATS–N reports filed by a Currently 

Exempted Government Securities ATS? 

If not, which aspects of Rule 304(b) 

should not apply and why? 

C. Form ATS–N Requirements 

The Commission is not re-proposing 

the use of Form ATS–G for Government 

Securities ATSs but is proposing that all 

Covered ATSs file Form ATS–N as 

revised. The Commission believes that, 

instead of proposing Form ATS–G for 

Government Securities ATSs, given the 

significant overlap between proposed 

Form ATS–G and existing Form ATS–N, 

it is appropriate to require all Covered 

ATSs to file Form ATS–N, and thus 

limit the number of unique forms and 

simplify filing requirements. 

Accordingly, the Commission is 

proposing to apply existing Rule 304(c) 

to Government Securities ATSs, which 

would require Government Securities 

ATSs to file a Form ATS–N, as revised, 

in accordance with the form’s 

instructions. The Commission is 

proposing to revise the current Form 

ATS–N instructions by including 

references to Government Securities 

ATSs or Covered ATSs, as applicable, 

replacing references to order display 

and fair access amendments with 

references to contingent amendments, 

revising the relevant compliance dates, 

adding instructions related to fee 

amendments, and revising the 

instructions regarding describing the 

applicability of amendments. The 

instructions require, among other 

things, that a Covered ATS 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.471 Given that the 

Commission expects market participants 

to use Form ATS–N to decide which 

trading venue is best for them, it is 

important that Form ATS–N filings 

comply with the instructions and that 

the information provided on Form ATS– 

N is accurate, current, and complete. As 

it is today, Form ATS–N 472 would be 

required to be filed electronically 

through EDGAR. 

The Commission is proposing to 

apply Rule 304(c)(2) to Government 

Securities ATSs, which provides that 

any report required under Rule 304 

shall be filed on a Form ATS–N, and 

include all information as prescribed in 

the Form ATS–N and the instructions to 

Form ATS–N. Rule 304(c)(2) would 

provide that a Form ATS–N be executed 

at, or prior to, the time the Form ATS– 

N is filed and shall be retained by the 

Government Securities ATS in 

accordance with Rules 302 and 303, and 

the instructions in Form ATS–N. In the 

Regulation ATS Adopting Release, the 

Commission stated that the 

requirements to make and preserve 

records set forth in Regulation ATS are 

necessary to make and keep certain 

records for an audit trail of trading 

activity and permit surveillance and 

examination to help ensure fair and 

orderly markets.473 Expanding Rule 

304(c) to encompass Government 

Securities ATSs would further these 

goals. 


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474See 2020 Proposal, supra note 4. 

475See infra Section IV.D.5.k. 

476See infra Section IV.D.5.i. 

477See FINRA Letter at 4. 

478The Form ATS–N Cover Page (Type of 

Covered ATS), Part I, Item 8.a, and Part III, Items 

23, 24(a), and 24(d)(i) will refer to ‘‘NMS Stock 

ATSs’’ because such requests are applicable only to 

NMS Stock ATSs. 

479See infra note 496 and accompanying text. See 

proposed revisions to Form ATS–N, Part II, Items 

1(a), 1(c), 2(a), 2(c), 3(a), 3(b), 4(a), 5(a), and 5(c); 

Part III, Items 4, 5(a), 5(b), 10(a), 12, 13(a), 13(c), 

13(d), 14(a), 15, 16(a), 16(b), 17, and 22. 

480See supra notes 563–564 and accompanying 

text. 

481See infra note 565. 

482See infra note 497 and accompanying text. See 

proposed revisions to Form ATS–N Part II, Item 4 

and Part III, Item 7. 

483See proposed changes to Part II, Items 1 and 

2 and Part III, Items 4(a), Item 22(a), Item 24(d)(ii). 

484See infra Section IV. See also supra note 467. 

485See Instruction A.3 of Form ATS–N (requiring 

that a Form ATS–N filing is accurate, current, and 

complete). 

Request for Comment 

81. Should Rule 304(c) be applied, in 

whole or in part, to Government 

Securities ATSs? 

82. Should Rule 304(c) only apply to 

Government Securities ATSs that trade 

a certain type of government security 

(e.g., U.S. Treasury Securities, Agency 

Securities)? If so, to which type of 

Government Securities ATS should it 

apply and why? 

D. Form ATS–N Disclosures 

Form ATS–N is a public report that 

provides detailed information about the 

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

manner of operations of the ATS. 

Because the Commission is proposing to 

require Government Securities ATSs to 

file a Form ATS–N instead of previously 

proposed Form ATS–G,474 the 

Commission is proposing amendments 

to Form ATS–N to solicit disclosures 

that may be most relevant to market 

participants that trade government 

securities on these markets. In addition, 

because the Commission is amending 

Exchange Act Rule 3b–16 to include 

Communication Protocol Systems, the 

Commission is proposing to amend 

Form ATS–N to solicit disclosures about 

unique operational aspects to those 

systems. The Commission believes that 

it is important to revise Form ATS–N to 

provide investors with important 

information about the operations of all 

ATSs that trade NMS stocks and, as 

proposed, government securities. 

The Commission is proposing that the 

amendments to Form ATS–N be 

applicable to both NMS Stock ATSs and 

Government Securities ATSs, and any 

differences between how the form 

requirements would apply to these 

ATSs are noted below. Given the similar 

level of complexity/sophistication 

between NMS Stock ATSs and 

Government Securities ATSs, the 

Commission believes that requiring both 

types of ATSs to file Form ATS–N is 

appropriate; however, as described 

below, certain requests have been 

tailored for the differences between 

NMS Stock ATSs and Government 

Securities ATSs. The Commission is 

proposing to revise Form ATS–N to 

include information it previously 

proposed on Form ATS–G, including a 

question requiring information about 

interaction with related markets.475 The 

Commission is also proposing to 

reorganize certain questions on Form 

ATS–N and to require disclosure about 

any surveillance and monitoring that is 

conducted with respect to the ATS.476

In response to the 2020 Proposal, one 

commenter stated that the proposed 

Form ATS–G disclosures were similar to 

those on Form ATS–N, in that they 

would be categorized in a more 

standardized manner than Form ATS, 

which would allow for better 

comparisons between ATSs, and 

enhance the Commission’s and SRO’s 

regulatory oversight of Government 

Securities ATSs.477 The proposed 

revisions to Form ATS–N would 

continue to allow such comparisons, 

and applying Form ATS–N to 

Government Securities ATSs would 

better help enable market participants to 

compare Government Securities ATSs. 

The Commission is proposing certain 

amendments to Form ATS–N that 

would apply globally to Form ATS–N 

unless otherwise noted below. First, as 

Form ATS–N would be applicable to 

both Government Securities ATSs and 

NMS Stock ATSs, the Commission is 

proposing to replace references to ‘‘NMS 

Stock ATSs’’ throughout the form to 

‘‘Covered ATSs’’ or ‘‘ATSs.’’ 478 Second, 

the Commission is proposing to replace 

references to ‘‘orders’’ throughout Form 

ATS–N to reference ‘‘trading interest,’’ 

which would encompass non-firm 

trading interest.479 Third, Form ATS–N 

would include an instruction at the 

beginning of Part III to require that the 

Covered ATS identify and explain any 

differences among and between 

subscribers, persons whose trading 

interest is entered into the ATS by a 

subscriber or the broker-dealer operator, 

the broker-dealer operator, and any 

affiliates of the broker-dealer.480

Because this disclosure would be 

integrated in each Item, the Commission 

is proposing to delete the separate subquestions in Part III that ask about 

whether services and functionalities and 

conditions or requirements related to 

such services and functionalities are the 

same for all subscribers and the brokerdealer operator.481 Fourth, the 

Commission is proposing to change 

references to ‘‘Trading Centers’’ to 

‘‘trading venues,’’ which would include 

trading centers, but also include venues 

relevant to the trading of government 

securities and repos and 

Communication Protocol Systems.482

The term ‘‘trading venue’’ encompasses 

a broader group of entities that could, 

for example, result in an execution or 

affect the handling of a subscriber’s 

trading interest. The Commission 

explains below each requirement of 

Form ATS–N and why the Commission 

is proposing to apply that requirement 

to Government Securities ATSs. To the 

extent that the Commission is proposing 

a change to the requirement of Form 

ATS–N that would affect the reporting 

obligation of an NMS Stock ATS, the 

Commission identifies that change and 

the information the NMS Stock ATS 

would be required to disclose. In 

addition, to use consistent terminology 

throughout Form ATS–N, the 

Commission is proposing to change 

certain references to activity ‘‘in’’ the 

ATS to activity ‘‘on’’ the ATS.483

The Commission believes that Form 

ATS–N’s public disclosures would 

provide important information to 

market participants that would help 

them better understand these 

operational facets of Covered ATSs and 

select the best trading venue based on 

their needs. The Commission believes 

that the vast majority of responsive 

information in Form ATS–N, as 

proposed to be revised, would not be 

proprietary or commercially 

sensitive.484

1. Amendments to Form ATS–N for 

NMS Stock ATSs 

If the revisions to Form ATS–N were 

adopted and become effective, an NMS 

Stock ATS with an effective Form ATS– 

N or a Form ATS–N that is under 

Commission review would be required 

to file an amendment to its Form ATS– 

N so that its disclosures, as amended, 

meet all the requirements of Form ATS– 

N, as revised. If the proposed revisions 

to Form ATS–N become effective, a 

NMS Stock ATS would be required, in 

accordance with the instructions of the 

form, to amend its Form ATS–N so that 

it is complete.485 An NMS Stock ATS is 

required, pursuant to Rule 304(a)(2)(B), 

to file an updating amendment no later 

than 30 days after the end of each 

calendar quarter to correct information 

that has become inaccurate or 

incomplete for any reason. Specifically, 


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486 15 U.S.C. 80a–2(a)(28) (defining ‘‘person’’ as 

‘‘a natural person or a company’’). 

487 15 U.S.C. 78c(a)(9) (defining the term 

‘‘person’’ as a natural person, company, 

government, or political subdivision, agency, or 

instrumentality of a government). 

488The Exchange Act’s inclusion of a 

‘‘government, or political subdivision, agency or 

instrumentality of a government’’ under the 

definition of ‘‘person’’ is unlikely to result in any 

changes to the disclosures required by the items in 

Form ATS–N that use the word ‘‘Person’’ as, in the 

Commission’s experience, these entities are 

generally not involved in the operations of ATSs as 

subscribers or otherwise. 

489See supra note 254 and accompanying text. 

490See supra note 242 and accompanying text. 

491See supra note 259 and accompanying text. 

492See id. 

493See supra note 256 and accompanying text. 

494See supra Section II.C.1. 

495See supra note 273 and accompanying text. 

496See proposed Rule 3b–16(e) and Rule 300(q). 

497See revised Form ATS–N, Explanation of 

Terms. 

498This is broader than the definition of ‘‘trading 

center’’ under Rule 600(b)(78), which includes ‘‘any 

other broker or dealer than executes orders 

internally by trading as principal orders as agent.’’ 

499See Rule 304(a)(1)(iv), as proposed to be 

revised. 

500The Commission is proposing to delete the 

checkbox on the cover page of Form ATS–N that 

requires an NMS Stock ATS to select whether the 

NMS Stock ATS currently operates pursuant to a 

Form ATS. Rules 304 and 301(b)(2)(viii) required an 

NMS Stock ATS to file a Form ATS–N no later than 

January 7, 2019. After January 7, 2019, this 

checkbox became obsolete. 

501The proposed cover page for Form ATS–N 

would provide that a filing may be an initial Form 

ATS–N, or a Form ATS–N material amendment, 

updating amendment, correcting amendment, 

contingent amendment, or fee amendment. The 

Commission is proposing to rename ‘‘order display 

and fair access amendments’’ to ‘‘contingent 

amendments’’ throughout the form. In addition, the 

Commission is proposing a new fee amendment 

type. See supra Section IV.A. 

an NMS Stock ATS with an effective 

Form ATS–N, or an NMS Stock ATS 

whose Form ATS–N is under 

Commission review, would be required 

to, among other things, amend its Form 

ATS–N to disclose new identifying 

information and types of securities 

traded required by Part I, and to provide 

information responsive to new requests 

regarding new categories of types of 

subscribers (Part III, Item 1), monitoring 

and surveillance (proposed Part III, Item 

9), interaction with related markets 

(proposed Part III, Item 11), the identity 

of liquidity providers (Part III, Item 12), 

and post-trade processing (proposed 

Part III, Item 21). 

In addition, the NMS Stock ATS 

would be required to amend its Form 

ATS–N to reorganize responses, 

including, among others, to move 

disclosures related to the activities of 

employees of the broker-dealer operator 

or its affiliates that service the 

operations of the ATS and another 

business unit of the broker-dealer 

operator or affiliate to proposed Part II, 

Item 7(a), and move discussion of afterhours use of orders from current Part III, 

Item 18 to proposed Part III, Item 4(b)– 

(c). In addition, the NMS Stock ATS 

would be required to separately discuss 

information relevant to trading facilities 

or rules for bringing together orders of 

buyers and sellers in proposed Part III, 

Item 7 and information related to use of 

non-firm trading interest in proposed 

Part III, Item 8. The NMS Stock ATS 

would also be required to amend its 

responses to disclose any differences in 

treatment among subscribers, persons 

whose trading interest is entered into 

the ATS by a subscriber or the brokerdealer operator, the broker-dealer 

operator, and any affiliates of the 

broker-dealer operator as relevant 

throughout the responses to Part III 

rather than disclosing differences in 

treatment between any subscribers and 

the broker-dealer in specific sub-parts of 

Part III, as required by current Form 

ATS–N. 

2. Definitions 

The Commission is proposing to 

amend certain definitions in the 

instructions to Form ATS–N. The 

Commission is re-proposing to replace 

the current definition of ‘‘person’’ in 

Form ATS–N, which is provided by the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’) 486 with the different 

definition of ‘‘person’’ as defined under 

the Exchange Act.487 Because 

Regulation ATS is a Commission 

regulation under the Exchange Act, the 

Commission believes that it is more 

appropriate to apply the definition of 

‘‘person’’ under the Exchange Act than 

the Advisers Act, which is not 

applicable to ATSs. Although the 

definitions are not identical, the 

Commission believes the differences 

between the definitions are unlikely to 

result in differences to the disclosures 

required by Form ATS–N.488 To the 

extent ATSs might have found 

ambiguous the Commission’s use of the 

Advisers Act definition in the context of 

an Exchange Act rule, the Commission 

believes that this proposed change will 

mitigate any such concerns. 

The Commission is also proposing to 

change the definition of ‘‘NMS Stock 

ATS’’ in the instructions to the form to 

conform to the proposed changes to the 

definition in Rule 300 and state that 

NMS Stock ATSs shall not trade 

securities other than NMS stocks.489

The Commission is also proposing to 

add definitions of ‘‘Agency 

Security,’’ 490 ‘‘Government 

Security,’’ 491 ‘‘Government Securities 

ATS,’’ 492 ‘‘Legacy Government 

Securities ATS,’’ 493 and ‘‘Trading 

Interest’’ 494 and conform the definition 

of ‘‘Broker-Dealer Operator’’ to the 

proposed revisions in Rule 301(b)(1).495

As proposed, the term ‘‘Trading 

Interest’’ would be the same definition 

provided in proposed Rule 300(q) and 

Rule 3b–16(e), which would include 

both orders as defined under Rule 3b– 

16(c) and non-firm trading interest.496 In 

addition, the Commission is proposing 

to replace the term ‘‘Trading Center’’ 

with ‘‘trading venue.’’ A ‘‘trading 

venue’’ would mean a national 

securities exchange or national 

securities association that operates an 

SRO trading facility, an ATS, an 

exchange market maker, an OTC market 

maker, a futures or options market, or 

any other broker- or dealer-operated 

platform for executing trading interest 

internally by trading as principal or 

crossing orders as agent.497 The 

proposed definition of ‘‘trading venue’’ 

would encompass ‘‘trading centers’’ as 

defined under 17 CFR 242.600(b)(78) 

(Rule 600(b)(78) of Regulation NMS), 

futures and options markets, which the 

Commission believes may be relevant to 

the trading of government securities and 

repos, and also would encompass 

broker- or dealer-operated platforms for 

executing trading interest by trading as 

a principal or crossing orders as an 

agent.498

3. Cover Page and Part I; Information 

About the Broker-Dealer Operator 

To make clear that the Commission 

would not be conducting a merit-based 

review of Form ATS–N disclosures filed 

with the Commission, the Form ATS–N 

cover page states that the Commission 

has not passed upon the merits or 

accuracy of the disclosures in the filing. 

On the cover page of Form ATS–N, the 

Covered ATS would be required to 

identify whether it is an NMS Stock 

ATS or a Government Securities ATS. 

To indicate whether the ATS is subject 

to the transitional rules for Legacy 

Government Securities ATSs and Newly 

Designated ATSs,499 the ATS would be 

required to disclose whether it is a 

Legacy Government Securities ATS or 

Newly Designated ATS.500 In addition, 

the Covered ATS would indicate the 

type of filing by marking the appropriate 

checkbox.501

If the Covered ATS is filing an 

amendment, the ATS would be required 

to indicate the Part and Item number of 

the Form ATS–N that is the subject of 

the change(s), provide a brief summary 

of the substance of the change(s), and 

state whether or not the change(s) 

applies to (1) all subscribers and the 


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502See Instruction A.7.h of Form ATS–N. If a 

change subject to the amendment would equally 

apply to all subscribers and the broker-dealer 

operator, the Covered ATS would indicate that the 

change applies to all subscribers and the brokerdealer operator equally. If a change would apply 

differently among subscribers or types of 

subscribers, between subscribers and the brokerdealer operator, or between the broker-dealer 

operator and its affiliates (which may be subscribers 

to the ATS), the Covered ATS would state so and 

describe the differences in treatment. This is the 

same as how NMS Stock ATSs currently describe 

in Form ATS–N and would be required to describe 

in Form ATS–N whether or not a change applies to 

all subscribers and the broker-dealer operator in 

amendments on Form ATS–N. As required by the 

instruction, a filer must provide a brief summary of 

all changes to the form. Such summary should 

enable market participants to understand the nature 

of the changes being made. For example, if the ATS 

is adding a new order type, the ATS should state 

that it is adding a new order type and provide a 

brief description of unique aspects of the order 

type. The Commission is proposing to clarify in 

Instruction A.7.h that changes made in Part IV of 

Form ATS–N should not be described, as Part IV 

is non-public. See infra Section IV.D.6. 

503See Instruction A.9 of Form ATS–N. 

504See 15 U.S.C. 78o(b)(8). See also NMS Stock 

ATS Adopting Release, supra note 2, at 38773. 

505As discussed above, Rule 301(b)(1) currently 

requires that the ATS register as a broker-dealer 

under Section 15 of the Exchange Act. As proposed, 

Rule 301(b)(1) would require an ATS to register as 

a broker-dealer under Exchange Act Section 15 or 

a government securities broker or government 

securities dealer under Exchange Act Section 

15C(a)(1)(A). See supra note 273 and accompanying 

text. 

506Current Form ATS–N does not include this 

Item, and as proposed, NMS Stock ATSs would also 

be subject to this proposed requirement. An LEI is 

a 20-character reference code that uniquely 

identifies legally distinct entities that engage in 

financial transactions and is used by numerous 

domestic and international regulatory regimes. See 

Securities Act Release No. 10425, 82 FR 50988, 

51005 (November 2, 2017) (stating that LEIs are 

intended to improve market transparency by 

providing clear identification of participants). 

Although several existing ATS broker-dealer 

operators currently have an LEI, not all brokerdealer operators have an LEI. In the 2020 Proposal, 

the Commission asked commenters whether they 

believe a Government Securities ATS should be 

required to disclose the broker-dealer operator’s 

LEI. One commenter supported requiring disclosure 

of the LEI on Form ATS, Form ATS–R, Form ATS– 

N, and previously proposed Form ATS–G, stating, 

among other things, that it is a global standard for 

legal entity identification and that it enables 

publicly accessible information about an entity’s 

ownership structure. This commenter stated that 

LEI should not replace the CRD, which serves a 

purpose in identifying broker-dealers and their 

affiliates, but should serve as a complimentary 

identifier. See letter from Stephan Wolf, CEO, 

Global Legal Entity Identifier Foundation, dated 

March 1, 2021 (‘‘GLEIF Letter’’). Another 

commenter stated that the utility of asking brokers 

to obtain another identification number is unclear 

if the LEI does not replace FINRA assigned 

identification numbers. See Bloomberg Letter at 7. 

507The Commission understands that, in certain 

instances, a broker-dealer operator for an ATS may 

use the ATS MPID in connection with its routing 

activities when the routing functionality is within 

the ATS. See FINRA Trade Reporting Guidance, 

Example 7, available at https://www.finra.org/sites/ 

default/files/ATS%20OATS%20and%20Trade 

%20Reporting%20Guidance%209-2-14_0_0_0_

0.pdf. To the extent that the broker-dealer uses the 

ATS MPID in connection with its routing activities, 

or its routing functionality is inside the ATS, such 

activities and functionality would be subject to 

Regulation ATS, including the disclosure 

requirements of Form ATS–N. 

broker-dealer operator; (2) only the 

broker-dealer operator; (3) only 

subscribers; (4) only certain subscribers, 

subsets of subscribers, or customers of 

subscribers and the broker-dealer 

operator; or (5) only certain subscribers, 

subsets of subscribers, or customers of 

subscribers.502 In addition, the Covered 

ATS would be required to provide the 

EDGAR accession number for the Form 

ATS–N filing to be amended so that 

market participants can identify the 

filing that is being amended. Pursuant to 

Rule 304(b)(2)(iii), the Commission 

would 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). 

For updating, correcting, contingent, 

and fee amendments, which would be 

made public upon filing, the 

Commission believes that the 

information in the narrative could assist 

market participants in understanding 

the general nature of the change that the 

Covered ATS is implementing. 

If the filing is a cessation of 

operations, the cover page of Form 

ATS–N would require the Covered ATS 

to provide the date that the ATS will 

cease to operate. The cover page 

includes a checkbox where the ATS 

could indicate whether it wishes to 

withdraw a previously-filed Form ATS– 

N filing and provide the EDGAR 

accession number for the filing to be 

withdrawn. The instructions to Form 

ATS–N state that an ATS may withdraw 

an initial Form ATS–N or an 

amendment before the end of the 

applicable Commission review period. 

In addition, a Covered ATS could 

withdraw a notice of cessation of 

operations at any time before the date 

that the ATS indicated it intended to 

cease operating.503

Part I of revised Form ATS–N would 

be substantively the same as that for 

current Form ATS–N with certain 

exceptions, as described below. Form 

ATS–N would require a Covered ATS to 

identify the registered broker-dealer that 

operates the ATS and state whether the 

filer is a broker-dealer registered with 

the Commission. The Commission is 

proposing new Part I, Item 1(b) of Form 

ATS–N to require the Covered ATS to 

indicate whether the registered brokerdealer is authorized by a national 

securities association to operate an ATS 

under the rules of the national securities 

association. Proposed Part I, Item 1(b) 

would facilitate compliance with and 

Commission oversight of the 

requirement that an ATS must register 

as a broker-dealer and become a member 

of an SRO.504 The Commission is also 

proposing that the Covered ATS provide 

the name of the registered broker-dealer 

or government securities broker or 

government securities dealer for the 

ATS (i.e., the broker-dealer operator), as 

it is stated on Form BD, in Part I, Item 

2 of Form ATS–N.505

To the extent that a commercial or 

‘‘DBA’’ (doing business as) name or 

names are used to identify the Covered 

ATS to the public, the Commission, or 

its SRO, or if a registered broker-dealer 

operates multiple Covered ATSs, Form 

ATS–N would require the full name(s) 

of the Covered ATS under which 

business is conducted, if different, in 

Part I, Item 3 of Form ATS–N. Part I, 

Item 4 of Form ATS–N would require 

the Covered ATS to provide the brokerdealer operator’s SEC File Number and 

Central Registration Depository (‘‘CRD’’) 

Number. 

In addition, the Commission is 

proposing to require Covered ATSs to 

provide the broker-dealer operator’s 

Legal Entity Identifier (‘‘LEI’’) in Part I, 

Item 4, if the broker-dealer operator has 

an LEI.506 If a broker-dealer operator of 

the ATS has an LEI, the information 

may be useful to market participants as 

a globally standardized identifier. The 

Commission, however, is not proposing 

to require broker-dealer operators that 

do not have an LEI to obtain such an 

identifier. In addition, the Commission 

is proposing to add a question to Part I, 

Item 4(d) that would require the ATS to 

provide the MPID of its broker-dealer 

operator. Although Part I, Item 5(c) of 

Form ATS–N requires the ATS to 

disclose the MPID of the ATS, the 

Commission is also requiring the ATS to 

provide the MPID of the broker-dealer 

operator because a broker-dealer 

operator may have a unique MPID. 

Because the broker-dealer operator 

could potentially use such a unique 

MPID to conduct trading and routing 

activity that affects the ATS, it would be 

useful to market participants and 

regulators to require the ATS to state the 

broker-dealer operator’s MPID as it will 

help them identify the broker-dealer 

operator and better understand the 

scope of activities of the broker-dealer 

operator.507

Part I, Item 5 of Form ATS–N would 

require the Covered ATS to provide the 

full name of the national securities 

association of which the broker-dealer 

operator is a member, the effective date 

of the broker-dealer operator’s 

membership with the national securities 


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508See FINRA Rules 6160, 6170, 6480, and 6720. 

509 If the NMS Stock ATS suspends trading in 

securities under certain circumstances, the ATS 

should indicate so under Part III, Item 19. See infra 

Section IV.D.5.r. 

510The Commission notes that most, if not all, 

NMS Stock ATSs currently disclose whether they 

trade all NMS stocks in Part III, Item 11(a) of Form 

ATS–N. 

511The types of securities traded would be 

limited to government securities (15 U.S.C. 

78c(a)(42)) and repos. See proposed Rule 300(l). 

512Treasury bills are short-term securities that 

mature in one year or less from their issue date. 

Bills are purchased for a price less than or equal 

to their par (face) value, and when they mature, 

Treasury Department pays their par value. See 

TreasuryDirect, The Basics of Treasury Securities, 

available at https://www.treasurydirect.gov/instit/ 

research/faqs/faqs_basics.htm#tbills (last visited 

September 15, 2021). 

513Treasury notes are securities that pay a fixed 

rate of interest every six months until the security 

matures, which is when Treasury Department pays 

the par value. Treasury notes mature in more than 

a year, but not more than 10 years from their issue 

date. See id. 

514Treasury bonds are securities that pay a fixed 

rate of interest every six months until the security 

matures, which is when Treasury Department pays 

the par value. Bonds mature in more than 10 years 

from their issue date. See id. 

515Treasury Inflation-Protected Securities 

(‘‘TIPS’’) pay interest every six months and the 

principal value of TIPS is adjusted to reflect 

inflation or deflation as measured by the Consumer 

Price Index. The semi-annual interest payments and 

maturity payment are calculated based on the 

inflation-adjusted principal value of the security. 

See id. 

516See supra 191. 

517A floating rate note security that has an 

interest payment that can change over time. As 

interest rates rise, the security’s interest payments 

will increase. Similarly, as interest rates fall, the 

security’s interest payments will decrease. This 

security makes use of an index (or reference) rate 

(in this case, tied to the most recent 13-week bill 

rate, prior to the lockout period) and spread 

(determined at auction) to calculate an interest rate. 

The index rate changes periodically, in this 

instance every week, causing the interest rate to 

change or ‘‘float.’’ The notes may be of varying 

original maturities. See TreasuryDirect, Frequently 

Asked Questions, available at https://

www.treasurydirect.gov/indiv/help/TDHelp/ 

faq.htm. 

518A ‘‘when-issued’’ transaction is a transaction 

in a U.S. Treasury Security that is executed before 

the issuance of the security. 

519Agency Mortgage-Backed Securities include (i) 

a type of securitized product issued in conformity 

with a program of a U.S. executive agency, as 

defined in 5 U.S.C. 105 or a government-sponsored 

enterprise, as defined in 2 U.S.C. 622(8), for which 

the timely payment of principal and interest is 

guaranteed by the executive agency or GSE, 

representing ownership interest in a pool (or pools) 

of mortgage loans structured to ‘‘pass through’’ the 

principal and interest payments to the holders of 

the security on a pro rata basis; and (ii) a type of 

securitized product backed by a securitized product 

described in (i). See also FINRA Rules 6710(m), 

6710(v), 6710(dd). 

520Federal Agency Securities include all Agency 

Securities except Agency Mortgage-Backed 

Securities. See supra note 519. 

521A triparty repo involves a third party, which 

is a clearing bank that provides support to both 

parties in the trade by settling the repo on its books 

and ensuring that the details of the repo agreement 

are met. See Viktoria Baklanova, Adam Copeland & 

Rebecca McCaughrin, Federal Reserve Bank of New 

York Staff Reports, Reference Guide to U.S. Repo 

and Securities Lending Markets (September 2015) at 

5–6, 8–10, available at https://

www.newyorkfed.org/medialibrary/media/research/ 

staff_reports/sr740.pdf (‘‘New York Fed Staff 

Report’’). 

522A bilateral repo involves two parties agreeing 

on the terms of trade, including the principal 

amount of the repo, the interest rate paid by the 

collateral provider, the type of securities delivered, 

the haircut to be applied for the collateral pledged, 

and the maturity of the repo, and each 

counterparty’s custodian bank clears and settles the 

trade. See New York Fed Staff Report, supra note 

521, at 5–7. 

523Centrally cleared would mean any transaction 

that uses a central counterparty, as defined in 17 

CFR 240.17Ad–22(a)(2) (Rule 17Ad–22(a)(2) under 

the Exchange Act). 

524Non-centrally cleared would mean any 

transaction that does not use a central counterparty, 

as defined in Rule 17Ad–22(a)(2) under the 

Exchange Act. See id. 

525These items are numbered as Part I, Items 8 

and 9 in current Form ATS–N, but would be 

renumbered as Items 9 and 10. 

association, and the MPID of the ATS. 

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 or trading desks operated by 

the broker-dealer operator.508 The 

broker-dealer operator would provide 

the unique MPID for the Covered ATS 

and assess the functionalities related to 

trading under that MPID and describe 

them, as applicable, in response to the 

information requests on Form ATS–N. 

Providing the name of the Covered ATS 

or DBAs and its MPID would identify 

the ATS to the public and the 

Commission. The name, identity of the 

broker-dealer operator, any ‘‘DBA’’ 

name, and the ATS’s MPID are basic 

information critical to market 

participants for identifying the ATS and 

should be disclosed. 

Proposed Part I, Item 6 of Form ATS– 

N would require the Covered ATS to 

provide a URL address for the website 

of the ATS. Proposed Part I, Item 7 of 

Form ATS–N would require the ATS to 

provide the primary physical street 

address of the ATS matching system 

and indicate whether the ATS has a 

secondary matching system that may be 

used in the event that the primary 

matching system is not available. If yes, 

the ATS would be required to provide 

the secondary address of the matching 

system. 

To inform market participants about 

the types of securities that a Covered 

ATS makes available for trading, the 

Commission is proposing to require a 

Covered ATS to disclose in Part I, Item 

8 of Form ATS–N the types of securities 

it trades. Part I, Item 8(a) would require 

an NMS Stock ATS, but not a 

Government Securities ATS, to indicate 

whether the ATS makes available for 

trading all NMS stocks.509 If not, the 

ATS would identify the securities or 

types of securities that it does not make 

available for trading.510 Part I, Item 8(b) 

would require a Government Securities 

ATS, but not an NMS Stock ATS, to 

select the categorical types of 

government securities the ATS trades 

(i.e., U.S. Treasury Securities, Agency 

Securities, repos, or other).511 If the 

Government Securities ATS trades U.S. 

Treasury Securities, it would be 

required to select whether it trades 

bills,512 notes,513 bonds,514 TIPS,515

STRIPS,516 and/or floating rate notes 517

and indicate whether each type of 

security traded is on-the-run, off-therun, and/or when-issued.518 If the 

Government Securities ATS trades 

Agency Securities, it would be required 

to indicate whether it trades Agency 

Mortgage-Backed Securities 519 and/or 

Federal Agency Securities.520 In 

addition, if the Government Securities 

ATS trades repos, the ATS would 

indicate whether it trades triparty 521

and/or bilateral repos,522 and whether 

such securities are repurchase 

agreements or reverse repurchase 

agreements and are centrally cleared 523

or non-centrally cleared.524 If the 

Government Securities ATS trades any 

other government securities, it would be 

required to mark ‘‘other’’ via checkbox 

and identify the types of government 

securities that the ATS makes available 

for trading. Requiring a Covered ATS to 

publicly disclose the types of securities 

that it trades would identify to potential 

subscribers and regulators the securities 

that the ATS offers for trading and help 

potential subscribers decide whether 

they would want to engage the ATS. 

Proposed Part I, Items 9 and 10 525

would require a Covered ATS to attach 

the most recently filed or amended 

Schedule A of the broker-dealer 

operator’s Form BD disclosing 

information related to direct owners and 

executive officers, and the 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 Covered 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 


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526Part I, Items 9 and 10 and Part III, Item 25 (see 

infra Section IV.D.5.y) are the only requests for 

information that would allow a Covered ATS to 

cross-reference to information on the ATS’s website 

instead of providing it in the form disclosures. 

Form ATS–N disclosures would be the vehicle for 

disseminating to the public information about the 

operations of the ATS and the ATS-related 

activities of the broker-dealer operator and its 

affiliates under Rule 304, which are required to be 

kept current, accurate, and complete by the ATS. 

Accordingly, ATSs would be required to provide 

information required by the form in the Form ATS– 

N disclosures and not cross-reference to other 

sources. 

527See supra note 455 and accompanying text. 

528See supra Section IV.A. To facilitate the 

review of the initial Form ATS–N for the new 

Covered ATS, the broker-dealer operator for the 

new ATS may provide a draft initial Form ATS–N 

to the staff for consideration. 

529This Item is currently numbered as Part I, Item 

10, but would be renumbered as Item 11. The 

Commission proposes to make a minor change to 

this Item to clarify that ‘‘II’’ refers to Part II. 

530See infra Section IV.D.4. 

531See NMS Stock ATS Proposing Release, supra 

note 29, at 81010, 81041. 

532See id. at 81010. 

ATS–N.526 The Commission is 

proposing to include in Part I, Items 9 

and 10 that, if the ATS selects to make 

the information available on its website 

in lieu of attaching it to its filing, the 

ATS will maintain its website in 

accordance with the rules for amending 

Form ATS–N pursuant to Rule 

304(a)(2)(i) to reflect any changes to 

Schedule A or Schedule B, as 

applicable, to the Form BD of the 

broker-dealer operator. This would 

require an ATS checking the box to 

update its website as if it were Form 

ATS–N, and therefore, to update the 

information no later than 30 calendar 

days after the end of any calendar 

quarter in which its broker-dealer 

operator’s Schedule A or Schedule B of 

Form BD becomes inaccurate or 

incomplete. 

When an ATS is purchased by 

another entity and operated by a brokerdealer that is not the ATS’s current 

broker-dealer operator, the new brokerdealer typically commences operating 

the ATS using its personnel, processes, 

and procedures. To avoid disruptions to 

operations of the ATS or its subscribers, 

the existing Covered ATS would file a 

Notice of Cessation at least 10 business 

days prior to the official change of 

broker-dealer operator (e.g., the date of 

closing for an acquisition) pursuant to 

Rule 304(a)(3) 527 and the new brokerdealer operator would file an initial 

Form ATS–N in advance of the Notice 

of Cessation, which must become 

effective before it may operate the 

Covered ATS pursuant to Rule 

304(a)(1)(i).528

In addition, Part I, Item 11 of Form 

ATS–N would require the Covered 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 and additions or 

deletions from any Item in Part I, Part 

II, and Part III, as applicable.529 The 

Commission is proposing to revise Part 

I, Item 11 to state that the ATS must 

include in such marked document any 

changes to Exhibits 1, 2, and 5. The 

requirement for the ATS to provide a 

marked document or ‘‘redline’’ showing 

changes helps market participants and 

regulators easily review changes the 

ATS is making in an amendment. The 

Commission is not proposing Form 

ATS–N to require a marked document 

showing changes to Exhibit 4, which 

includes aggregate platform-wide order 

flow and execution statistics of the ATS, 

because such statistics may frequently 

change, and showing such changes 

could be burdensome for ATSs and 

would not be particularly useful for 

market participants or regulators. 

However, the ATS should be required to 

provide a marked document to show 

changes to the list and explanation of 

categories or metrics for such aggregate 

platform-wide order flow and execution 

statistics on Exhibit 5, as highlighting 

such changes would be useful for 

market participants in understanding 

any aggregate platform-wide order flow 

and execution statistics the ATS 

provides. In addition, to ensure the 

changes in the marked document are 

clear and readily identifiable, the 

Commission is proposing to clarify that 

the ATS must indicate the Part and Item 

number for all Items that are changing. 

Request for Comment 

83. Should Covered ATSs be required 

to provide any additional identifying 

information on Part I of Form ATS–N? 

Are the proposed information requests 

on Part I of Form ATS–N necessary, or 

are certain information requests not 

necessary and why? 

84. Should the Commission require 

Covered ATSs to provide types of 

securities that they trade (or do not 

trade) in Part I, Item 8 of Form ATS–N? 

Would the proposed categories and 

classifications of government securities 

in Part III, Item 8(b) be helpful to market 

participants? What, if any, additional or 

alternative categories or classifications 

would commenters suggest? Is there any 

other information about types of 

securities an ATS trades that should be 

required by Form ATS–N? 

4. Part II: Broker-Dealer Operator and Its 

Affiliates Activities 

The Commission believes that the 

disclosures on Form ATS–N about the 

conflicts of interest that might arise 

from the business structures of the 

Covered ATS and the ATS-related 

activities of the broker-dealer operator 

and its affiliates are designed to help 

participants protect their interests when 

using the services of the ATS.530 As the 

Commission has previously stated, the 

broker-dealer operator controls all 

aspects of the ATS’s operations and the 

broker-dealer operator’s non-ATS and 

ATS functions may overlap.531

Currently, market participants have 

limited information about conflicts of 

interest that might arise from the nonATS activities of the broker-dealer 

operator of a Government Securities 

ATS or a Communication Protocol 

System, and different classes of 

participants may have different levels of 

information about the operations of the 

ATS or the Communication Protocol 

System.532 Because of potential 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. The Commission believes that 

some market participants would want to 

consider the trading activity of the 

broker-dealer operator, or its affiliates, 

when evaluating potential conflicts of 

interest on a Covered ATS and may also 

want to be aware of the range of services 

and products that the broker-dealer 

operator or its affiliates offer for use in 

the ATS because such services or 

products may have an impact on access 

to, or trading on, the ATS. In addition, 

disclosures on Form ATS–N would 

better inform the Commission and other 

regulators about the activities of 

Covered ATSs and their role in the 

government securities and NMS stock 

markets, which would facilitate better 

oversight of these ATSs to the benefit of 

investors. 

The Commission continues to believe 

that the interests of the broker-dealer 

operator or its affiliates can sometimes 

compete against the interests of those 

that use the Covered ATS’s services. 

These competing interests, at times, 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. For example, trading by the 

broker-dealer operator or its affiliates on 

a Covered ATS controlled and operated 

by the broker-dealer operator presents a 

conflict of interest whereby the brokerdealer operator has the opportunity to 

place its interest ahead of participants 


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533Form ATS–N would define ‘‘affiliate’’ as, 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. ‘‘Control’’ would be defined to mean the 

power, directly or indirectly, to direct the 

management or policies of the broker-dealer 

operator of an alternative trading system, whether 

through ownership of securities, by contract, or 

otherwise. In this proposal, the Commission is 

proposing to update the definition of ‘‘person’’ for 

the purposes of Form ATS–N. A ‘‘person’’ is 

presumed to control the broker-dealer operator of 

an alternative trading system if that person: Is a 

director, general partner, or officer exercising 

executive responsibility (or having similar status or 

performing similar functions); 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 operator of the 

alternative trading system; or 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 operator of the 

alternative trading system. See infra Section V.D. 

534See NMS Stock ATS Adopting Release, supra 

note 2, at 38818–19. 

535 In Part II, Item 1(a), the Commission is 

proposing to delete examples of trading interest— 

quotes, conditional orders, and indications of 

interest—as the proposed definition of trading 

interest would encompass these examples. 

536For a further discussion about how a conflict 

of interest related to trading by the broker-dealer 

operator on its own ATS could be harmful to other 

subscribers, see NMS Stock ATS Adopting Release, 

supra note 2, at 38771, 38824–29. 

537As explained above, Form ATS–N will remove 

references to ‘‘orders,’’ and its disclosures will 

focus on ‘‘trading interest.’’ 

trading in the ATS that the brokerdealer controls and operates. Part II of 

Form ATS–N is designed to provide 

market participants with information 

about these competing interests, and 

inform them about: (1) The operation of 

the Covered ATS—regardless of the 

corporate structure of the 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 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. The 

public disclosure about potential 

conflicts of interest on Covered ATSs 

would advance the same policy and 

investor protection objectives. 

Furthermore, Part II of Form ATS–N 

does not require public disclosure of 

activities or affiliate relationships of the 

broker-dealer operator that do not relate 

to the Covered ATS. Many broker-dealer 

operators of NMS Stock ATSs, and, to 

a lesser extent, Government Securities 

ATSs, engage in broker-dealer or other 

activities that are unrelated to their 

operations of the ATS. The Commission 

believes that Form ATS–N should 

exclude requests that would solicit 

information about a broker-dealer 

operator’s activities unrelated to its ATS 

operations. 

The Commission is proposing to use 

the same definitions of ‘‘affiliate’’ and 

‘‘control’’ in revised Form ATS–N as are 

used in current Form ATS–N.533 These 

terms are intended to encompass all 

relevant affiliate relationships between 

the broker-dealer operator and other 

entities that the Commission believes 

would help market participants’ 

evaluation of potential conflicts of 

interest.534

a. Items 1 and 2: Broker-Dealer Operator 

and Its Affiliate Trading Activities in 

the Covered ATS 

Part II, Items 1(a) and 2(a) of Form 

ATS–N are designed to disclose 

information about whether business 

units of the broker-dealer operator or its 

affiliates,535 respectively, are permitted 

to enter or direct the entry of trading 

interest into the Covered ATS. If the 

person that operates and controls a 

Covered ATS is also able to trade on 

that ATS, there may be an incentive to 

design the operations of the ATS to 

favor the trading activity of the operator 

of the ATS or affiliates of the operator. 

An operator of a Covered ATS that also 

trades in the ATS it operates would 

likely have informational advantages 

over others trading in the ATS, such as 

a better understanding of the manner in 

which the system operates or who is 

trading in the ATS. In the most 

egregious case, the operator of the ATS 

might use the confidential trading 

information of other traders to 

advantage its own trading on or off of 

the ATS.536

If a Covered ATS permits the brokerdealer operator or its affiliates to enter 

trading interest in the ATS, whether on 

an agency, principal, or riskless 

principal basis, the ATS would be 

required to only list the business units 

or affiliates that actually enter or direct 

the entry of trading interest into the 

ATS. Part II, Items 1(a) and 2(a) of Form 

ATS–N would require the ATS to list 

the business unit or affiliate if, for 

example, a trading desk of the brokerdealer operator or an affiliate uses a 

direct connection to the ATS or 

algorithm to submit trading interest into 

the ATS. Likewise, if an affiliated asset 

manager of the broker-dealer operator 

uses the services of a third-party brokerdealer to direct trading interest to the 

ATS (i.e., the asset manager instructs the 

third-party broker-dealer to send its 

trading interest to the ATS), the ATS 

would be required to list that affiliated 

asset manager under Item 2(a). However, 

if that affiliated asset manager submits 

trading interest to a third-party brokerdealer, and that third-party brokerdealer, using its own discretion, directs 

the trading interest of the asset manager 

into the affiliated ATS, the ATS would 

not be required to list the affiliated asset 

manager under Item 2(a); under such 

circumstances, the affiliate would not be 

‘‘directing’’ trading interest to the ATS 

because the third-party broker-dealer is 

using its discretion to direct the 

affiliate’s trading interest. 

Currently, Part II, Items 1(a) and 2(a) 

only require an NMS Stock ATS to list 

business units or affiliates, respectively, 

that enter or direct the entry of orders 

and trading interest into the ATS.537

Based on the Commission staff’s 

experience, some NMS Stock ATSs have 

opted to list all of the internal business 

units and affiliates that could trade in 

the ATS and not only the internal 

business units and affiliates that 

actively enter orders and trading interest 

into the ATS. This additional 

information can also help market 

participants evaluate the types of 

potential conflicts of interest on an NMS 

Stock ATS by providing the entire 

universe of potential contra-side trading 

interest that users of the ATS might 

view as a conflict of interest. 

Accordingly, while not required to do 

so, a Covered ATS would meet the 

respective requirements of Part II, Items 

1(a) and 2(a) by listing all of the internal 

business units and affiliates that could 

trade in the ATS. 

The Commission is proposing that 

Form ATS–N specify the types of 

information that a Covered ATS must 

provide with regard to business units or 

affiliates of the broker-dealer operator. 

Specifically, Item 1(a) would require the 

ATS to name and describe each type of 

business unit of the broker-dealer 

operator that enters or directs the entry 

of trading interest into the ATS (e.g., 

another Covered 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 trading interest (e.g., 

principal, agency, riskless principal). 

Item 2(a) would require the Covered 

ATS to name and describe each type of 

affiliate that enters or directs the entry 

of trading interest into the ATS (e.g., 

broker-dealers, another Covered ATS, 

investment companies, hedge funds, 

market makers, PTFs) and, for each of 

those affiliates, provide the applicable 

MPID and list the capacity of its trading 

interest (e.g., principal, agency, riskless 

principal). The disclosures in Items 1(a) 

and 2(a) would help market participants 

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538Although the narrative responses to Items 1(a) 

and 2(a) could typically be kept up-to-date via 

updating amendments to Form ATS–N, the 

Commission also notes that in most cases, if the 

‘‘yes’’ or ‘‘no’’ response to Items 1(a) or 2(a) changes 

(e.g., the Covered ATS changes its operations to 

allow affiliates to trade whereas they could not do 

so prior, or vice versa), the ATS would be required 

to file a material amendment. See NMS Stock ATS 

Adopting Release, supra note 2, at 38826. 

539 Depending on how the Covered ATS operates, 

it is possible that disclosures about the brokerdealer operator’s (or its affiliate’s) role as an 

intermediary between two other counterparties 

would be required disclosures elsewhere on the 

Form ATS–N (e.g., Part III, Item 7 (Order Types and 

Sizes; Trading Facilities), Part III, Item 21 (PostTrade Processing, Clearance, and Settlement)). 

Accordingly, the Commission is proposing that this 

information would be required to be publicly 

disclosed in Part II. However, to decrease 

redundancy in the form, the ATS could note in Part 

II, Item 1(a) and/or 2(a) disclosures that the brokerdealer operator or its affiliates could be 

counterparties to a trade, state the capacity in 

which broker-dealer operator or its affiliate is a 

counterparty to the trade, and provide a more 

detailed responses to other requests for information 

as required in the form. 

540The Commission is proposing to revise Part II, 

Items 1(b) and 2(b) to specifically ask about 

treatment of persons whose trading interest is 

entered into the ATS by a subscriber or the brokerdealer operator. In the Commission’s experience, 

ATS services could vary among not only 

subscribers, but also non-subscriber participants to 

the ATS. The Commission is therefore proposing to 

broaden the scope of these questions to apply to 

differing treatment among non-subscriber 

participants whose trading interest is entered into 

the ATS by a subscriber or the broker-dealer 

operator. 

541This request is contained in Part III, Item 12. 

See infra Section V.D.5.l. 

dealer operator business units and 

affiliates that can trade in a Covered 

ATS, and their trading activities.538

In addition to what is required under 

current Form ATS–N, the Commission 

proposes to add an additional disclosure 

request to Part II, Items 1(a) and 2(a) of 

Form ATS–N that would require a 

Covered ATS to explain any 

circumstance when the broker-dealer 

operator or an affiliate, respectively, 

would be a counterparty to an ATS 

trade. Based on Commission experience, 

the broker-dealer operator may act as a 

counterparty to both sides of a trade to 

maintain the anonymity of each 

counterparty or to facilitate clearance 

and settlement of the trade. To the 

extent the broker-dealer operator or 

affiliate of the broker-dealer operator of 

a Covered ATS intermediates between 

two counterparties, the ATS should 

publicly disclose to its subscribers when 

and how it does so and the capacity of 

the broker-dealer operator or its 

affiliates.539

Part II, Items 1(b) and 2(b) of Form 

ATS–N would require a Covered ATS to 

disclose whether the services that the 

ATS offers and provides to the business 

units or affiliates required to be 

identified in Item 1(a) and 2(a), 

respectively, are the same for all 

subscribers and persons whose trading 

interest is entered into the ATS by a 

subscriber.540 This request would be in 

the form of a ‘‘yes’’ or ‘‘no’’ question, 

and if the ATS answers ‘‘no,’’ it would 

be required to explain any differences in 

response to the applicable Item 

number(s) in Part III of Form ATS–N 

and list the applicable Item number(s). 

If there are differences that are not 

applicable to Part III of Form ATS–N, 

the ATS must explain those differences 

in detail under Part II, Items 1 and 2. 

Part II, Items 1(c) and 2(c) would 

require a Covered ATS to disclose the 

broker-dealer operator’s or any of its 

affiliates’ role as a liquidity provider in 

the ATS, if applicable. These Items 

would require the ATS to disclose—in 

the form of a ‘‘yes’’ or ‘‘no’’ response— 

whether there are any formal or 

informal arrangements with any of the 

sources of trading interest of the brokerdealer operator or affiliates identified in 

Item 1(a) and Item 2(a), respectively, to 

provide trading interest to the ATS (e.g., 

undertaking to buy or sell continuously, 

or to meet specified thresholds of 

trading or quoting activity). If the ATS 

answers ‘‘yes,’’ it must identify the 

business unit(s) or affiliate(s) and 

respond to the Item with information 

about liquidity providers in the ATS.541

Based on the Commission staff’s 

experience with Form ATS–N filed by 

NMS Stock ATSs, highlighting whether 

the broker-dealer operator or affiliate 

acts as a liquidity provider on a Covered 

ATS would help market participants 

evaluate the potential for conflicts of 

interest or information leakage on the 

trading platform. 

Finally, the Commission proposes to 

relocate the Part II, Items 1(d) and 2(d) 

disclosure requests to proposed Part III, 

Item 16(c). Currently, these request an 

NMS Stock ATS to disclose information 

about sending orders and trading 

interest to a trading center operated or 

controlled by the broker-dealer operator 

or any of its affiliates, respectively in 

the form of a ‘‘yes’’ or ‘‘no’’ question. 

The related narrative is currently 

required to be provided in Part III, Item 

16, which requires disclosures about 

external routing from the NMS Stock 

ATS. The Commission continues to 

believe that this disclosure is important 

when evaluating potential conflicts of 

interest and how trading interest may be 

handled in the ATS. The Commission 

originally included subpart (d) in Part II, 

Items 1 and 2 to highlight conflicts of 

interest related to routing. The 

Commission believes that it would be 

more efficient for market participants 

and filers to consolidate this disclosure 

with the responses to the request 

soliciting information about the routing 

or sending of trading interest from the 

ATS. As such, the Commission is 

proposing to delete Items 1(d) and 2(d) 

from Part II, and relocate the disclosure 

requirements therein to Part III, Item 

16(c). 

Request for Comment 

85. What information about trading by 

the broker-dealer operator and its 

affiliates related to Government 

Securities ATSs is important to market 

participants? Are there any additional 

relevant points of information about 

NMS Stock ATSs that Form ATS–N 

does not solicit and should be asked? 

86. Are there potential conflicts of 

interest for broker-dealer operators of 

Government Securities ATSs or their 

affiliates that may justify greater 

operational transparency for 

Government Securities ATSs than for 

NMS Stock ATSs, or vice versa? 

87. Should the Commission require 

separate disclosures for different types 

of trading by the broker-dealer operator 

on the Covered ATS, such as trading by 

the broker-dealer operator for the 

purpose of correcting error trades 

executed in the ATS, as compared to 

other types of principal trading? If so, 

what types of principal trading should 

be addressed separately and why? What 

disclosures should the Commission 

require about principal trading and 

why? 

88. Should the Commission limit or 

expand in any way the proposed 

disclosure requirements to require 

disclosure of arrangements regarding 

access by the broker-dealer operator or 

its affiliates to both other trading venues 

and affiliates of those other trading 

venues? 

89. Should the Commission require 

ATSs to provide information about 

when the broker-dealer or affiliate of the 

broker-dealer would be a counterparty 

to an ATS trade? What type of 

information about such arrangements 

would be useful to market participants? 

90. Form ATS–N currently requires 

that an NMS Stock ATS name the 

affiliate(s) of the broker-dealer operator 

permitted to enter or direct the entry of 

trading interest into the ATS. A 

Government Securities ATS would also 

be required to describe the type of 

affiliates on Form ATS–N. Should the 

Commission continue to require NMS 

Stock ATSs, but not Government 

Securities ATSs, to disclose the name(s) 

of affiliate(s) in Form ATS–N? 

91. Should the Commission require 

Covered ATSs to disclose the percentage 

of trading in the ATS attributable to 


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542For example, if a broker-dealer operator uses 

algorithms to submit subscriber orders into the 

Covered ATS, any steps that either the brokerdealer operator or the subscriber needs to take so 

that the ATS prevents those orders from trading 

with the broker-dealer operator or its affiliates 

would be required disclosures under Items 3(a) and 

3(b), respectively. 

543The Commission is proposing to replace the 

phrase ‘‘terms and conditions’’ with 

‘‘requirements.’’ In the Commission staff’s 

experience reviewing Form ATS–N and discussing 

the requirements of the form with NMS Stock ATSs, 

the Commission has observed that some NMS Stock 

ATSs have read ‘‘terms and conditions’’ to mean all 

legal or contractual terms, rather than terms 

relevant to the scope of the question (i.e., what is 

required for a subscriber to opt out). Using the term 

‘‘requirements’’ will clarify that the Item is 

soliciting information specifically related to 

requirements related to the opt-out process. 

Substantively, the Commission does not believe 

that the proposed change would change information 

that is being solicited in this Item. 

544See supra Section IV.D.3.a. 

545See NMS Stock ATS Adopting Release, supra 

note 2, at 38831 nn.769–70 and accompanying text. 

As the Commission discussed in the NMS Stock 

ATS Adopting Release, the disclosures required by 

Part II, Item 4 of revised Form ATS–N are not so 

broad as to require the Covered ATS to list each 

unaffiliated subscriber that accesses its system. See 

id. at 38831. 

546 In addition, in Part II, Item 4(b) of Form ATS– 

N, the Commission is proposing to delete the phrase 

‘‘if yes to Item 4(a).’’ This phrase was included in 

Form ATS–N in error. The NMS Stock ATS would 

be required to respond to Part II, Item 4(b) 

regardless of its response to Part II, Item 4(a). 

547 In the NMS Stock ATS Adopting Release, the 

Commission provided examples of when potential 

conflicts of interest and information leakage could 

occur as a result of preferential routing 

arrangements (e.g., an affiliate is contractually 

obligated to route all unexecuted orders to ATS) or 

routing arrangements with affiliates (e.g., all orders 

routed by the NMS Stock ATS must first be routed 

to an the affiliate(s)). Specifically, the former might 

result in information leakage should the 

arrangement provide that all orders not executed by 

the affiliate are to be sent to the NMS Stock ATS 

and the latter could provide incentive for the NMS 

Stock ATS to route orders to an affiliate instead of 

trying to execute the order in the ATS. These issues 

could arise in the government securities markets, as 

well, so those examples are also applicable to both 

NMS Stock ATSs and Government Securities ATSs. 

See id. at 38831 n.771. 

548 In Part II, Item 5, the Commission is proposing 

to add ‘‘order hedging or aggregation functionality’’ 

and ‘‘post-trade processing’’ as examples of 

each or all of the broker-dealer 

operator’s business units, affiliates or 

both? Should Form ATS–N require a 

Covered ATS to disclose specific trade 

volume data for its trading with 

business units of the broker-dealer 

operator or its affiliates? If so, how 

should that volume be measured (e.g., 

executed trades, dollar volume)? 

92. Would the disclosure of 

information about trading by the brokerdealer operator and its affiliates in the 

Covered ATS be sufficient to address 

potential conflicts of interest? If 

disclosure alone is insufficient, are there 

other measures the Commission could 

take to mitigate potential conflicts of 

interest regarding trading? Should the 

Commission prohibit some or all trading 

by the broker-dealer operator and its 

affiliates in the ATS to address potential 

conflicts of interest? 

b. Item 3: Interaction of Trading Interest 

With Broker-Dealer Operator; Affiliates 

Proposed Part II, Item 3 of Form ATS– 

N is designed to solicit information 

about the interaction of trading interest 

between unaffiliated subscribers to a 

Covered ATS and trading interest of the 

broker-dealer operator and its affiliates 

in the ATS. As proposed, Part II, Item 

3(a) of Form ATS–N would require a 

Covered ATS to disclose whether a 

subscriber can opt out of interacting 

with trading interest of the broker-dealer 

operator in the ATS, and Part II, Item 

3(b) would require the ATS to disclose 

whether a subscriber can opt out of 

interacting with the trading interest of 

an affiliate of the broker-dealer operator 

in the ATS.542 Part II, Item 3(c) of Form 

ATS–N would require the ATS to 

disclose whether the requirements 543 of 

the opt-out processes for the brokerdealer operator and affiliates required to 

be identified in Items 3(a) and (b) are 

the same for all subscribers. Proposed 

Part II, Item 3 would be important to 

unaffiliated market participants trading 

on an ATS because, given the potential 

for informational advantages by the 

broker-dealer operator or its affiliates,544

some unaffiliated subscribers may not 

wish to interact with the order flow of 

the broker-dealer operator or its 

affiliates. This disclosure could also 

help subscribers 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 Covered ATS. 

Request for Comment 

93. Should Form ATS–N request more 

or less information about how a market 

participant can limit its interaction on a 

Covered ATS with the broker-dealer 

operator or its affiliates? If commenters 

believe Form ATS–N should request 

more information, please provide 

specific information that would be 

useful along with an explanation of its 

utility. 

c. Item 4: Arrangements With Other 

Trading Venues 

Part II, Item 4 of Form ATS–N is 

designed to disclose information about 

formal or informal arrangements (e.g., 

mutual, reciprocal, or preferential 

access arrangements) 545 between the 

broker-dealer operator or an affiliate of 

the broker-dealer operator and a trading 

venue (e.g., ATS, broker-dealer, 

exchange, OTC market maker, futures or 

options market) to access the ATS 

services (e.g., arrangements to effect 

transactions or to submit, disseminate, 

or display orders and trading interest in 

the ATS). 

Part II, Item 4 would require a 

Covered ATS to disclose an arrangement 

between the broker-dealer operator for 

the ATS or affiliate of the broker-dealer 

operator and a broker-dealer operator of 

an unaffiliated ATS under which the 

broker-dealer operator would send 

trading interest to the unaffiliated ATS 

for possible execution before sending it 

to any other destination. Item 4 would 

also require disclosure of the inverse 

arrangement pursuant to which any 

subscriber trading interest sent out of 

the unaffiliated Covered ATS would be 

sent first to the ATS before any other 

trading venue. In addition, Item 4 would 

require a summary of the terms and 

conditions of the arrangement such as, 

for example, whether the broker-dealer 

operator of the Covered ATS is 

providing monetary compensation or 

some other brokerage service to the 

unaffiliated ATS.546 If a broker-dealer 

operator has an arrangement with 

another trading venue operated by the 

broker-dealer operator or an affiliate, or 

an unaffiliated trading venue, market 

participants are likely to consider 

information about such arrangements 

relevant to their evaluation of an ATS as 

a potential trading venue and such an 

arrangement may raise concerns about 

conflicts of interest or information 

leakage. The Commission is therefore 

proposing disclosure of such 

arrangements in Part II, Item 4 of Form 

ATS–N.547

Request for Comment 

94. What type of arrangements might 

a broker-dealer operator of a Covered 

ATS have with a trading venue for 

government securities or repos? Please 

explain and describe what information, 

if any, market participants may wish to 

know about such an arrangement. 

d. Item 5: Other Products and Services 

Part II, Item 5(a) is designed to 

disclose whether the broker-dealer 

operator offers any products or services 

for the purpose of effecting transactions 

or submitting, disseminating, or 

displaying trading interest in the 

Covered ATS (e.g., algorithmic trading 

products that send orders to the ATS, 

order management or order execution 

systems, data feeds regarding orders and 

trading interest in, or executions 

occurring on, the ATS, order hedging or 

aggregation functionality, post-trade 

processing),548 and if applicable, to 


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products or services for the purpose of effecting 

transactions or submitting, disseminating, or 

displaying trading interest in a Covered ATS, and 

which could be particularly relevant to Government 

Securities ATSs. ‘‘Order hedging or aggregation 

functionality’’ would include any aggregation 

functionality that, for example, could be used by 

subscribers to interface with the ATS to send or 

receive orders and trading interest to and from other 

markets, including U.S. Treasury Securities 

markets, over-the-counter spot markets, or futures 

markets. ‘‘Post-trade processing’’ would include any 

functionality that could be used by subscribers in 

connection with post-trade processing to manage 

routing, enrichment, allocations, matching, 

confirmation, affirmation, or notification of ATS 

trades. 

549The Commission is proposing to replace the 

phrase ‘‘terms and conditions’’ with the phrase 

‘‘requirements’’ throughout this Item. See note 543 

and accompanying text. The Commission is also 

proposing to require the Covered ATS to disclose 

any differences in treatment as they apply to 

persons whose trading interest is entered into the 

ATS by a subscriber or the broker-dealer operator. 

In the Commission staff’s experience, broker-dealer 

operators and their affiliates may, for example, 

disclose products and services offered to customers 

of subscribers. See proposed revisions to Part II, 

Items 5(b) and 5(d). 

550For example, if a broker-dealer operator offers 

subscribers alternative algorithms to handle orders, 

including sending such orders to the Covered ATS, 

and there is a difference in the latency in which 

each of the alternatives transmits information, such 

differences in latency would need to be disclosed 

in Part II, Item 5 of revised Form ATS–N. 

551See NMS Stock ATS Proposing Release, supra 

note 29, at 81048. See also NMS Stock ATS 

Adopting Release, supra note 2, at 38832 n.779. For 

example, order hedging functionalities could 

encompass a product or service offered by the 

broker-dealer operator to a customer that the 

customer may use as a subscriber to the brokerdealer operator’s ATS to hedge exposures of trading 

interest in or outside the ATS. A broker-dealer 

operator that offers such a functionality for use with 

the ATS would describe the requirements for a 

subscriber to use the functionality in Part II, Item 

5 and explain its use with regard to the ATS in Part 

III of Form ATS–N. For example, if the order 

hedging functionality affects order interaction in 

the ATS, the ATS would explain the functionality 

in proposed Part III, Item 7. If the order hedging 

functionality involves futures and trading interest 

in the ATS, the ATS would explain the related 

procedures under proposed Part III, Item 11. 

552See infra Section IV.D.5.l. 

553Services for the purpose of effecting 

transactions, or submitting, disseminating, or 

displaying trading interest in the ATS that are 

offered by a person other than the broker-dealer 

operator would also be responsive to this Item. 

indicate whether the requirements of 

use 549 for these services or products 

required to be identified in Part II, Item 

5(a) are the same for all subscribers, 

persons whose trading interest is 

entered into the ATS by a subscriber or 

the broker-dealer operator, and the 

broker-dealer operator.550

Customers of a broker-dealer operator 

could be both subscribers to its ATS and 

customers of the broker-dealer operator 

and the broker-dealer operator may offer 

its customers trading products and 

services in addition to its ATS services. 

In certain cases, the product or service 

offered might be used by the customer 

in conjunction with the customer’s use 

of the ATS. Broker-dealer operators 

may, directly or indirectly through an 

affiliate, offer products or services for 

the purpose of, for example, submitting 

trading interest, or receiving 

information about displayed interest, in 

the ATS.551 The Commission is 

proposing to delete the term 

‘‘Subscribers’’ from Items 5(a) and 5(c) 

so that all products and services that the 

broker-dealer operator or affiliate of the 

broker-dealer operator offers for the 

purpose of effecting transactions or 

submitting, disseminating, or displaying 

trading interest in the ATS, would be 

required to be disclosed on Form ATS– 

N, regardless of whether they are offered 

to subscribers or non-subscribers (e.g., 

customers of ATS subscribers). For 

example, a Government Securities ATS 

would be required to disclose any 

aggregation functionality that the 

broker-dealer operator or its affiliate(s) 

offers, which, for example, could be 

used by subscribers to interface with the 

ATS to send or receive trading interest 

to and from other markets, including 

U.S. Treasury Securities markets, overthe-counter spot markets, or futures 

markets. The Commission believes that 

participants would be interested in 

understanding the use of an aggregation 

functionality with the ATS and how it 

can help achieve their trading strategies. 

If the broker-dealer operator or its 

affiliate offered a product for effecting 

transactions or submitting, 

disseminating, or displaying trading 

interest in the Government Securities 

ATS using related financial markets for 

non-government securities (e.g., futures, 

currencies, swaps, corporate bonds), the 

ATS could summarize the requirements 

for use of such a product in this Item 

and explain the product’s use under 

proposed Part III, Item 11.552

The Commission believes the 

information required by Part II, Item 5 

of revised Form ATS–N is important 

because participants want to know the 

products or services that the brokerdealer operator or its affiliates may offer 

for the purpose of effecting transactions, 

or submitting, disseminating, or 

displaying trading interest in the ATS 

because such products or services may 

impact the participants’ access to, or 

trading on, the ATS.553 In some cases, 

if subscribers also use other products or 

services that the broker-dealer operator 

offers, they could receive more favorable 

terms from the broker-dealer operator 

with respect to their use of the ATS. For 

example, if a participant purchases a 

service offered by the broker-dealer 

operator of a Covered ATS, the brokerdealer operator might also provide that 

subscriber more favorable terms for its 

use of the ATS than other participants 

who do not purchase the service. Such 

favorable terms could include fee 

discounts or access to a faster 

connection line to the ATS. 

Additionally, a broker-dealer operator of 

a Covered ATS may offer certain 

products and services only to certain 

participants or may offer products and 

services on different terms to different 

categories of participants. The 

Commission believes that participants 

would want to know, when assessing a 

Covered ATS as a potential trading 

venue, the range of services or products 

that the broker-dealer operator or its 

affiliates offers participants of the ATS, 

and any differences in treatment among 

participants, because such services or 

products may impact the participants’ 

access to, or trading on, the ATS. 

To the extent that a participant on a 

Covered ATS 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 trading 

interest in the ATS, Part II, Item 5 of 

Form ATS–N would require disclosures 

about those products or services. For 

example, if a broker-dealer operator 

offers its customers an order 

management system that can also be 

used by participants to the ATS to 

manage orders in the ATS (e.g., adjust 

the pricing or size of trading interest in 

relation to trading interest resting in or 

outside the ATS, or modify order 

instructions to execute or cancel at a 

specified time or under certain market 

conditions), the ATS would be required 

to identify the order management 

system, provide a summary of the 

requirements for its use, and identify 

the Part and Item number in Form ATS– 

N where the order management system 

is explained. In addition, any services 

offered by the broker-dealer operator for 

subscribers to mitigate risk, such as 

limits on gross or net notional exposures 

by a subscriber, identification of 

duplicative orders in the ATS, or other 

checks offered related to order entry or 

authorizations to trade in the ATS, 

would be identified in this Item and 

explained further in proposed Part III, 

Items 7(b) and 8(b), as applicable. 

However, the 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 

trading interest in the ATS. 

To alleviate any concerns regarding 

the potential disclosure of commercially 

sensitive information in this disclosure 

request, the proposed disclosure request 


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554As explained further below, the Commission 

is relocating the disclosure request about shared 

employees in Part II, Item 6(a) of current Form 

ATS–N to Part II, Item 7(a) of revised Form ATS– 

N. Accordingly, Part II, Item 6(a) of revised Form 

ATS–N corresponds to Part II, Item 6(b) of current 

Form ATS–N. 

555Legacy Government Securities ATSs that 

operate pursuant to a Form ATS on file with the 

Commission are currently subject to the 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. See Item 

7 of Form ATS (describing the requirements for 

Exhibit E of Form ATS). Proposed Part II, Item 6(b) 

would expand upon this requirement. 

556See Bloomberg Letter at 8 (stating, in response 

to the 2020 Proposal, that disclosure of outsourced 

technology provider relationships is appropriate for 

the Commission and FINRA to determine that the 

regulated entity, the broker-dealer operator, is 

monitoring its third-party service provider(s)). 

557 If a summary of the role and responsibilities 

of the service provider is disclosed in response to 

Part III of Form ATS–N, the ATS need only list the 

applicable Item number in response to this Item. If 

there are services or functionalities that are not 

applicable to Part III, the ATS would identify the 

service provider, the services and functionalities, 

and also provide a summary of the role and 

responsibilities of the service provider in proposed 

Part II, Item 6(a). 

558See Regulation ATS Adopting Release, supra 

note 31, 63 FR 70873 n.252. See also infra Section 

V.A. 

559 In such a case, a description of the written 

safeguards and procedures to protect subscribers’ 

confidential trading information of the ATS and 

service provider would be required to be disclosed 

in Part II, Item 7 of Form ATS–N. See infra Section 

IV.D.4.f. 

560See supra note 109. 

would require only a summary of the 

requirements for the products and 

services disclosed and an explanation of 

how the product or service is used with 

the ATS in the applicable Item number 

in Part III of Form ATS–N. The 

Commission believes that requiring only 

a summary narrative would normally 

not require the broker-dealer operator to 

disclose commercially sensitive 

information. 

Request for Comment 

95. What types of products and 

services do broker-dealer operators of 

Covered ATSs or affiliates of brokerdealer operators offer to subscribers and 

how are such products and services 

used in connection with the ATSs? 

96. What information about the 

products and services offered by brokerdealer operators would be helpful to 

market participants? 

97. Should the Commission expand 

Part II, Item 5 of Form ATS–N to require 

disclosure of products or services 

offered by the broker-dealer operator or 

its affiliates to subscribers, but not 

necessarily offered in connection with 

transacting on the Covered ATS? 

98. Would the information required 

by Part II, Item 5 require disclosure of 

commercially sensitive information? If 

so, how could the Commission revise 

the information request to limit the 

disclosure of commercially sensitive 

information? 

e. Item 6: Activities of Service Providers 

Part II, Item 6(a) of Form ATS–N is 

designed to provide disclosures relating 

to any entity, other than the brokerdealer operator, that supports the 

services or functionalities of the 

Covered ATS.554 Information about the 

roles and responsibilities of service 

providers to the ATS is important 

because it could inform market 

participants about the potential for 

information leakage on the ATS.555 The 

Commission is not proposing that the 

third-party service provider requests 

encompass purely administrative items, 

such as human resources support, or 

basic overhead items, such as phone 

services and other utilities. As it is with 

Part II, Item 6(b) in current Form ATS– 

N, 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) and allow 

the Commission to monitor the third 

party’s role and operations in the 

ATS.556 For example, any service 

provider for clearance and settlement of 

transactions in the ATS, consulting 

relating to the trading systems or 

functionality, regulatory compliance, 

and recordkeeping for the ATS would 

be responsive to this request.557

The Commission recognizes that an 

ATS may engage an entity other than 

the broker-dealer operator to perform an 

operation or function of the ATS or a 

subscriber may be directed to use an 

entity to access a service of the ATS, 

such as order entry, disseminating 

market data, or display, for example. In 

such instances, the ATS must ensure 

that the entity performing the ATS 

function complies with Regulation ATS 

with respect to the ATS activities 

performed. For example, with respect to 

an ATS that is subject to the Fair Access 

Rule, if participants are required to 

enter orders in the ATS through an 

order entry firm or to access displayed 

orders from another entity, the ATS 

must ensure that its written fair access 

standards address these entities’ 

activities because of the affect these 

entities’ activities can have on 

participants’ ability to access the ATS 

services.558 Likewise, to the extent an 

entity, such as a service provider, 

performs a function of the ATS, and as 

a result has access to subscriber 

confidential trading information, the 

ATS’s written safeguards and 

procedures to protect its subscribers’ 

confidential trading information would 

also include the service provider’s 

safeguards and procedures to protect the 

ATS’s subscriber confidential trading 

information that is accessible to the 

service provider.559 In addition, as part 

of the ATS’s oversight procedures, the 

ATS must ensure that the service 

provider, for example, follows the 

service provider’s safeguards and 

procedures to protect the ATS’s 

subscriber confidential trading 

information. 

Disclosures about the activities of 

service providers, for example, would 

inform the Commission about the scope 

of the ATS’s operations and therefore 

the extent to which the ATS’s 

Regulation ATS obligations would 

apply to the service provider’s activities. 

In addition, as discussed above, the 

Commission will consider as part of its 

review of the Form ATS–N whether the 

entity filing Form ATS–N, or entities 

involved in the operations of the ATS, 

meets the definition of a Covered ATS, 

including whether the Covered ATS 

meets the criteria of Exchange Act Rule 

3b–16.560 The information provided on 

Form ATS–N about the role of service 

providers with regard to the ATS’s 

operations would help inform the 

Commission’s review. 

Furthermore, the requests under Part 

II, Items 6(b) through (c) would require 

disclosure about whether any service 

providers or their affiliates use the 

services of the ATS. If they do, the 

Covered ATS would be 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, for example, a Covered 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 that use 

its services under its current 

recordkeeping obligations. The 

Commission believes that market 

participants, when analyzing potential 

conflicts of interest or information 

leakage, would find it very useful to 

understand whether potential 

counterparties with whom they are 

trading, and who also service the 

operation of the ATS, have access to 

different or unique ATS-related 

services. Part II, Item 6(c) of Form ATS– 

N would require the Covered ATS to 


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561The Commission is also proposing to require 

the Covered ATS to disclose any differences in 

services as they apply to persons whose trading 

interest is entered into the ATS by a subscriber or 

the broker-dealer operator (e.g., customers of 

subscribers). See proposed revisions to Part II, Item 

6(c). 

identify and explain any differences in 

ATS services to a service provider and 

all other subscribers and persons whose 

trading interest is entered into the ATS 

by a subscriber or the broker-dealer 

operator.561 Additionally, depending on 

the role and responsibilities of the 

service provider, market participants 

may wish to consider evaluating the 

robustness of the ATS’s safeguards and 

procedures to protect confidential 

subscriber information. 

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 ATS. The 

purpose of this disclosure is to provide 

information that subscribers can use to 

better understand whether the service 

provider might be able to access 

subscriber confidential trading 

information, so ATSs should draft their 

disclosure with the goal of conveying 

such information. Simply stating that a 

third party provides technology or 

hardware to the ATS would not be 

responsive to the required summary of 

the service provider’s role, but, on the 

other hand, the ATS would not have to 

provide information about the 

manufacturer of its hardware 

components. 

Request for Comment 

99. Are there any critical services or 

functionalities (e.g., matching engine, 

market data) that, if provided by a third 

party, should be required to be 

described in a higher level of detail than 

the proposed ‘‘summary’’ level? If so, 

which services and functionalities? 

f. Item 7: Protection of Confidential 

Trading Information 

Part II, Item 7(a) of Form ATS–N is 

designed to provide information about a 

Covered ATS’s written safeguards and 

written procedures to protect the 

confidential trading information of 

subscribers to the ATS, including, (1) 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, 

the basis for the access, and whether 

any shared employees (defined below) 

have access to confidential trading 

information; (2) written standards 

controlling employees of the ATS that 

trade for employees’ accounts; and (3) 

written oversight procedures to ensure 

that the safeguards and procedures 

described above are implemented and 

followed. 

The protection of confidential trading 

information is an important component 

of the regulation of ATSs and is 

essential to ensuring the integrity of 

ATSs as execution venues. The 

Commission believes that disclosures 

about any employee of the ATS’s 

broker-dealer operator or employee of 

its affiliate that provides services for 

both the operations of the ATS and any 

other business unit or any affiliate of the 

broker-dealer operator (‘‘shared 

employee’’) with access to subscriber 

confidential trading information would 

help market participants evaluate 

circumstances when there is the 

potential for information leakage. For 

example, the Commission believes that 

market participants would likely want 

to know if an employee of the brokerdealer operator (or employee of an 

affiliate of the broker-dealer operator) 

that is responsible for the operations of 

a system containing subscriber 

confidential trading information from 

the ATS is also responsible for 

supporting, for instance, the principal 

trading activity of the broker-dealer 

operator, or another trading venue 

operated by the broker-dealer, or a 

trading venue that is an affiliate of the 

broker-dealer operator. In addition, if 

confidential trading information is not 

protected, many of the advantages or 

purposes for which a subscriber may 

choose to send its trading interest to an 

ATS (e.g., to 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, 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, the Commission believes 

that disclosures informing market 

participants about broker-dealer 

operators’ written safeguards and 

written procedures to protect 

confidential trading information are 

necessary so market participants can 

independently evaluate the robustness 

of the safeguards and procedures and 

decide for themselves whether they 

wish to do business with a particular 

Covered ATS. 

Part II, Item 7(a) of revised Form 

ATS–N contains, in part, the same 

disclosure requests as Part II, Item 7(a) 

of current Form ATS–N. The 

Commission is proposing to amend Part 

II, Item 7(a) of Form ATS–N by adding 

the disclosure requests in Part II, Items 

6(a) and 7(d) of current Form ATS–N. 

Item 6(a) of current Form ATS–N 

solicits information about ‘‘shared 

employees.’’ Part II, Item 7(d) of current 

Form ATS–N requires an 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. 

The Commission is relocating and 

consolidating these disclosure requests 

based on its experience with Form 

ATS–N filings by NMS Stock ATSs. In 

the Commission staff’s experience, the 

disclosures in Part II, Items 6(a), 7(a), 

and 7(d) in current Form ATS–N solicit 

similar information and thus, the 

structure of Form ATS–N often resulted 

in redundant disclosures within these 

Items. For example, in responding to 

Part II, Item 7(d) of current Form ATS– 

N, the ATS initially needs to describe 

what it considers to be confidential 

trading information, such as whether 

only pre-trade order information would 

be considered confidential trading 

information, or whether post-trade 

information would also be treated as 

confidential trading information, and for 

what period of time. To explain the 

basis for the access, the ATS currently 

needs to explain why the person would 

have access to the confidential trading 

information in Part II, Item 7(d). 

Similarly, Part II, Item 6(a) of current 

Form ATS–N requires the ATS to 

disclose whether and how shared 

employees can access confidential 

trading information. The Commission 

believes that consolidating these 

information requests into a single Item 

request in Part II, Item 7(a) on Form 

ATS–N would make the form easier to 

use because the reader will be able to 

find all the information previously 

spread across three items in a single 

item. 

Part II, Items 7(b) and (c) of Form 

ATS–N are designed to disclose 

information about 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 ATS who are operating the system 

or responsible for its compliance with 

applicable rules). Subscribers should be 


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562See Regulation ATS Adopting Release, supra 

note 31, at 70879. 

563See id. The Commission believes that there 

may be some Covered ATSs that might not offer any 

means by which a subscriber could consent to the 

dissemination of its confidential trading 

information. A Covered ATS would be required to 

disclose this fact pursuant to Item 7(a). See id. at 

70891 n.437. 

564For example, in Part III, Item 5, if a Covered 

ATS designed its operations to allow only certain 

types of subscribers to enter trading interest into the 

ATS through direct means (e.g., Financial 

Information eXchange (FIX) protocol) and other 

types of subscribers to enter trading interest into the 

ATS through indirect means (e.g., SOR or 

algorithm), the ATS would describe these 

differences in means of entry in Part III, Item 5(a). 

565See current Form ATS–N Part III, Items 2(c), 

3(b), 4(b), 5(b), 5(d), 6(b), 6(d), 6(f), 7(b), 8(b), 8(d), 

8(f), 9(b), 10(b), 10(d), 11(b), 11(d), 13(b), 13(e), 

14(b), 15(c), 17(b), 18(c), 19(b), 21(b), 22(b), and 

23(b). The Commission is proposing to delete these 

Items for Form ATS–N and re-number Items 

throughout Part III. 

able to give consent if they so choose to 

share their confidential trading 

information.562 Covered ATSs vary in 

terms of the types of orders, indications 

of interest (IOIs), or other forms of 

trading interest that 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). For this example, Part II, Items 7(b) 

and 7(c) of Form ATS–N would require 

the Covered 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.563 For example, a 

subscriber can consent to its open 

trading interest being displayed to 

certain subscribers that the subscriber 

believes are less likely to misuse or 

exploit such information, or that have 

open trading interest on the contra side 

in the same symbol. If the Covered ATS 

allows subscribers to consent in this 

manner, the ATS would mark ‘‘yes’’ to 

Part II, Item 7(b). Continuing the 

example, if the subscriber can 

subsequently withdraw its consent to 

this display of its open trading interest, 

the Covered ATS would mark ‘‘yes’’ to 

Part II, Item 7(c). 

Request for Comment—Part II 

100. Should the Commission expand 

the proposed disclosures in proposed 

Part II, Item 7(a)(i) to other employees, 

personnel, or independent contractors 

of the broker-dealer operator? If so, 

which employees, personnel, or 

independent contractors should be 

included and what information about 

such persons should be solicited? 

101. Should the Commission require 

Covered ATSs to disclose the 

information in Part II of Form ATS–N? 

If so, what level of detail should be 

disclosed? 

102. Would Part II of Form ATS–N 

capture the information that is most 

relevant to understanding the Covered 

ATS and its relationship with the 

broker-dealer operator and the brokerdealer operator’s affiliates? Please 

support your arguments. 

103. Would the proposed disclosures 

in Part II require broker-dealer operators 

of Covered ATSs to reveal too much (or 

not enough) information about their 

structure and operations? 

104. Is there other information about 

the activities of the broker-dealer 

operator and its affiliates that market 

participants might find relevant or 

useful in their assessment or use of the 

Covered ATS? If so, describe such 

information and explain whether or not 

such information should be required to 

be provided on Form ATS–N. 

105. Should Covered ATSs not be 

required to provide the proposed 

disclosures in Part II on Form ATS–N 

due to concerns regarding 

confidentiality, business reasons, trade 

secrets, burden, or any other concerns? 

If so, what information and why? 

106. Are there ways to obtain the 

same information as would be required 

from Covered ATSs by Part II other than 

through disclosure on Form ATS–N? If 

so, how else could this information be 

obtained and would such alternative 

means be preferable to the disclosures 

in Part II? 

107. Should Covered ATSs be 

required to publicly disclose in their 

entirety on Form ATS–N their written 

safeguards and written procedures to 

protect the confidential trading 

information of subscribers? Should the 

Commission require less information be 

disclosed about the written safeguards 

and procedures? 

108. Would the information about 

written safeguards and written 

procedures to protect the confidential 

trading information of subscribers 

described in Form ATS–N be sufficient 

for subscribers to independently 

evaluate such safeguards and 

procedures and thus evaluate the ATS 

as a destination for their orders? Should 

the Commission prohibit the disclosure 

of confidential subscriber information in 

some circumstances? If so, please 

describe. 

5. Part III: Manner of Operations 

Part III of Form ATS–N is designed to 

provide public disclosures to help 

market participants understand, among 

other things, how they may use a 

Covered ATS to buy and sell securities 

and find a counterparty to a trade. The 

Commission is proposing amendments 

to Part III that would apply to both NMS 

Stock ATSs and Government Securities 

ATSs. Government Securities ATSs 

would be required to respond to Part III 

of Form ATS–N in the same manner as 

NMS Stock ATSs, and the below 

description summarizes the types of 

disclosures Form ATS–N would solicit 

for both NMS Stock ATSs and 

Government Securities ATSs. 

As proposed, Form ATS–N would 

include an instruction at the beginning 

of Part III to require that the Covered 

ATS identify and explain any 

differences among and between 

subscribers, persons whose trading 

interest is entered into the ATS by a 

subscriber or the broker-dealer operator, 

the broker-dealer operator, and any 

affiliates of the broker-dealer.564 Current 

Form ATS–N is structured to include 

separate questions throughout the Items 

that require the ATS to identify and 

explain any differences in the treatment 

of subscribers and the broker-dealer 

operator. Based on its experience 

reviewing Form ATS–N filed by NMS 

Stock ATSs, the Commission believes 

that discussion of these differences is 

integral to the responses to each of the 

Items, and that requiring the discussion 

to be included in the response to each 

Item, rather than requiring separate, 

potentially disjointed disclosures, 

would improve the readability of the 

disclosures. By requiring Covered ATSs 

to disclose differences in treatment of 

persons whose trading interest is 

entered into the ATS by a subscriber or 

the broker-dealer operator, which would 

include, for example, sponsored access 

clients of subscribers, and affiliates of 

the broker-dealer operator, market 

participants will be able to discern any 

benefit or disadvantage they may 

receive in comparison to a broader, 

more comprehensive group of potential 

users of the ATS.565 The disclosure 

about differences in treatment of 

subscribers, other persons whose 

trading interest is entered into the ATS 

by a subscriber or the broker-dealer 

operator, the broker-dealer operator, and 

the broker-dealer operator’s affiliates is 

important to market participants and 

would better allow them to decide 

whether submitting trading interest to 

the Covered ATS aligns with their 

trading objectives. Accordingly, the 

Commission is proposing to restructure 

Part III to delete separate questions 

regarding whether subscribers and the 


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566 In Part III, Item 1 of Form ATS–N, the 

Commission is modifying the checkboxes listing 

types of subscribers to add insurance companies, 

pension funds, and corporations. The Commission 

believes that adding these checkboxes will provide 

more granular information on the types of 

subscribers participating on an ATS in an easier-toread format. The Commission is also proposing to 

remove the checkbox ‘‘NMS Stock ATS’’ under the 

list of types of subscriber in Form ATS–N. A brokerdealer operator of an NMS Stock ATS seeking to 

access another NMS Stock ATS would involve the 

broker-dealer operator for the NMS Stock ATS 

becoming a subscriber to the ATS, not the ATS that 

the broker-dealer operates. In this scenario, an NMS 

Stock ATS that accepts a broker-dealer operator for 

another NMS Stock ATS would mark the checkbox 

for broker and/or dealer in Part III, Item 1 on Form 

ATS–N as appropriate. 

567See NMS Stock ATS Adopting Release, supra 

note 2, at 38820–21 (discussing the definition of 

‘‘subscriber’’ and the persons encompassed 

thereunder). 

568 In Part III, Item 2(b), the Commission is 

proposing to delete the word ‘‘other’’ and ask 

whether there any conditions, rather than any 

‘‘other’’ conditions, that the ATS requires a person 

to satisfy before accessing the ATS services. The 

Commission believes it would be accurate to use 

the phrase ‘‘any conditions’’ rather than ‘‘any other 

conditions’’ in circumstances where a Covered ATS 

indicates that the ATS does not require subscribers 

to be registered broker-dealers in Part III, Item 2(a). 

569For example, if a Covered ATS has a practice 

of excluding subscribers that do not meet certain 

percentage thresholds for submitting firm-up orders 

in response to receiving an IOI, conditional order, 

or RFQ sent to them by the ATS, then this practice 

would be subject to disclosure under Part III, Item 

3 of Form ATS–N (‘‘Exclusion from ATS Services’’) 

and not Part III, Item 2 (‘‘Eligibility for ATS 

Services’’). 

570These limitations can result in some 

subscribers having different levels of functionality 

or more favorable terms of access than others. For 

example, in the Commission staff’s experience, 

some ATSs exclude subscribers that frequently fail 

to respond with a firm-up order after receiving an 

IOI or request for quote. 

broker-dealer operator are treated the 

same, and instead, proposing to include 

the instruction for the Covered ATS to 

disclose any differences in treatment in 

the applicable responses to Part III. To 

be clear, this proposed change would 

not relieve Covered ATSs from their 

obligation to disclose any differences in 

treatment that were required to be 

disclosed in current Form ATS–N. 

a. Item 1: Types of ATS Subscribers 

Part III, Item 1 of Form ATS–N is 

designed to provide information on the 

type(s) of subscribers that can use the 

Covered ATS services. The Item would 

provide market participants with 

information about the type of trading 

interest in the Covered ATS based on 

the types of subscribers that use it. 

Covered ATSs may design their system 

for trading by retail investors, 

institutional investors, dealers, or any 

other type of market participant. 

The Commission is proposing to 

revise the list of types of market 

participants in Part III, Item 1 of Form 

ATS–N that, in the Commission staff’s 

experience, are commonly used for 

Government Securities ATSs and NMS 

Stock ATSs.566 The list would include: 

Retail investors, issuers, asset managers, 

brokers, dealers, investment companies, 

hedge funds, market makers, PTFs, 

insurance companies, pension funds, 

corporations, and banks. The list is nonexhaustive and a Covered ATS would be 

required to list any type of subscriber 

that can use the ATS’s services.567 In 

addition to disclosing its subscribers, a 

Covered ATS may use Part III, Item 1 to 

disclose any types of participants whose 

trading interest may reach the ATS. For 

example, for an ATS that only allows 

brokers or dealers as subscribers, the 

ATS could identify the types of 

customers from which the brokers or 

dealers send trading interest to the ATS. 

Request for Comment 

109. Should Form ATS–N require a 

Covered ATS to include information 

about the types of subscribers to the 

ATS? Based on Commission staff 

experience, some ATSs only accept 

broker-dealers as subscribers to the ATS 

and various types of market participants 

send trading interest into the ATS 

through the broker-dealer subscriber. 

Should the Commission require the 

identification of the types of market 

participants whose trading interest may 

be sent to the ATS, whether directly or 

indirectly, by a broker-dealer subscriber 

to a Covered ATS? Would this 

information be useful to understanding 

the type of trading interest in the ATS? 

110. Should the Commission add any 

other categories of subscribers 

commonly applicable to Government 

Securities ATSs or NMS Stock ATSs, or 

both, to Form ATS–N? 

b. Item 2: Eligibility for ATS Services 

Part III, Item 2 of Form ATS–N is 

designed to provide market participants 

with information about whether the 

Covered ATS requires subscribers to be 

registered broker-dealers or enter a 

written agreement to use the ATS 

services, and whether there are any 

conditions that the ATS requires a 

person to satisfy before accessing the 

ATS services.568 This Item would 

require disclosure of the conditions a 

person must satisfy ‘‘before accessing 

the ATS services’’ (emphasis added). On 

the other hand, Part III, Item 3 of Form 

ATS–N (discussed infra), would require 

disclosures about any conditions that 

would exclude a subscriber, in whole or 

in part, from using the Covered ATS as 

a result of subscriber behavior while 

already actively participating in the 

ATS.569

The disclosures required by Part III, 

Item 2 would allow market participants 

to understand the conditions that they 

would need to satisfy to participate on 

the Covered ATS. If the Covered ATS 

indicates that it does have conditions 

that a person must satisfy before 

accessing the ATS services, the request 

would require the ATS to list and 

provide a ‘‘summary’’ of those 

conditions. Some Covered ATSs may 

only have the eligibility requirement 

that a person be a client of the brokerdealer operator. In that case, any 

eligibility requirements to become a 

client of the broker-dealer operator 

would be responsive to this Item. For 

example, if a subscriber must be a 

customer of the broker-dealer operator, 

the Covered ATS would provide a 

summary of conditions the subscriber, 

as a customer, would need to satisfy 

(e.g., know your customer) before its 

trading interest can be entered into the 

ATS. If the Covered ATS requires 

subscribers to contract with or become 

a member of a third party, for example, 

for purposes of clearance and 

settlement, such as, for Government 

Securities ATSs, the Fixed Income 

Clearing Corporation’s Government 

Securities Division, such information 

would be responsive. 

Request for Comment 

111. What eligibility requirements to 

access a Covered ATS are important to 

a potential subscriber or participant to 

the ATS and why? Are there any 

eligibility requirements that are 

particularly relevant to Government 

Securities ATSs (inclusive of 

Communication Protocol Systems, as 

proposed) or Communication Protocol 

Systems that trade NMS stock that 

should also be required to be disclosed 

on Form ATS–N? 

c. Item 3: Exclusion From ATS Services 

Based on Commission staff’s 

experience, ATSs often disclose rules 

governing subscribers’ participation in 

the ATS, and if a subscriber fails to 

comply with these rules, the ATS may 

limit or deny access to the ATS.570 Part 

III, Item 3 of Form ATS–N would 

require information about whether a 

Covered ATS can exclude, in whole or 

in part, any subscriber from the ATS 

services, and if so, to list and provide a 

summary of the conditions for 

excluding (or limiting) a subscriber from 

using the ATS. The disclosures are 

designed to provide information about 

when the Covered ATS can exclude, in 

whole or in part, a subscriber from the 

services of the ATSs and help 

subscribers reasonably anticipate the 


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571See infra Section IV.D.5.i. 

572The Commission is proposing to make minor 

changes to this Item in Form ATS–N to replace 

‘‘operation’’ with ‘‘operations’’ and to clarify that 

‘‘regular trading hours’’ refers to the ATS’s regular 

trading hours. 

573 In Part III, Item 5(b), the Commission is 

proposing to make a minor revision to this Item and 

change the word ‘‘indicate’’ to ‘‘including,’’ so the 

Covered ATSs would identify and explain the 

means for entering trading interest, ‘‘including’’ 

who provides the means, rather than identify and 

explain the means for entering trading interest and 

‘‘indicate’’ who provides the means. The 

Commission believes identifying and explaining the 

means for entering trading interest encompasses 

describing who is providing the means of entry, and 

for that reason, this revision would clarify what 

information this Item is requesting. The 

Commission is also proposing to add clarifying text 

to Part III, Item 5(b) of Form ATS–N (renumbered 

from Part III, Item 5(c) of current Form ATS–N) to 

more clearly contrast such question from Part III, 

Item 5(a). The question would read whether there 

are ‘‘means of entering trading interest into the ATS 

not otherwise disclosed in Part III, Item 5(a)’’ rather 

than asking whether there are any ‘‘other means for 

entering orders and trading interest into the NMS 

Stock ATS.’’ 

574Current Form ATS–N requires a summary of 

the ‘‘terms and conditions’’ for entering orders or 

trading interest into the ATS through these means. 

The Commission is proposing to revise the question 

to require a summary of the ‘‘requirements’’ for 

entering trading interest in the ATS. See supra note 

543 and accompanying text. 

types of activities that may cause them 

to be excluded (or limited) from using 

the services of the ATS. The question, 

which allows Covered ATSs to provide 

a ‘‘summary’’ of conditions for 

excluding (or limiting) a subscriber, is 

designed to solicit information to alert 

subscribers about the types of activities 

that may cause them to be excluded (or 

limited) from using the services of the 

ATS while protecting sensitive 

information to allow the ATS to 

reasonably control the activities and 

quality of flow on its platform and 

prevent subscribers from using the 

disclosures to potentially misuse or 

game the system. To the extent that the 

ATS monitors and surveils trading 

activity on the ATS that could result in 

excluding subscribers from ATS 

services, to avoid duplicative 

disclosures, the response to this Item 

could reference the monitoring and 

surveillance practices described in 

response to Part III, Item 9.571

Request for Comment 

112. Is there any subscriber behavior 

for which Covered ATSs, particularly 

Government Securities ATSs (inclusive 

of Communication Protocol Systems, as 

proposed) or Communication Protocol 

Systems that trade NMS stock, 

commonly exclude a subscriber in 

whole or in part? What is that 

behavior(s) and what form of exclusion 

is commonly employed (e.g., 

disqualification from ATS, limitation of 

services)? 

d. Item 4: Hours of Operations and 

Trading Outside of Regular Trading 

Hours 

Part III, Item 4 is intended to provide 

market participants with information 

about the days and hours of operation 

of the Covered ATS, including the times 

when trading interest can be entered in 

the ATS, and ATS services available 

outside of the ATS’s regular trading 

hours. Part III, Item 4(a) would require 

a Covered ATS to provide the hours 

when it is operating, which would 

include functions such as accepting 

trading interest or allowing participants 

to use communication protocols to 

message other participants.572 The 

disclosure required is not limited to 

only those hours when the ATS matches 

trading interest or allows participants to 

submit trading interest. 

The Commission is proposing to 

revise Part III, Item 4 to include as Part 

III, Item 4(b) a question about whether 

the ATS services are available outside of 

the ATS’s regular trading hours (e.g., 

after-hours trading) and with respect to 

services available outside of the ATS’s 

regular trading hours, whether there are 

any differences between the services 

during the ATS’s regular trading hours 

and outside of the ATS’s regular hours. 

Part III, Item 4(a) of current Form ATS– 

N asks about hours of operations outside 

of regular trading hours, and Part III, 

Item 18 of current Form ATS–N asks 

about whether the ATS conducts trading 

outside of regular trading hours, and 

whether there are any differences 

between trading outside regular trading 

hours and trading during regular trading 

hours. The Commission is proposing to 

streamline and combine the current 

questions, and, recognizing that ATSs, 

including Communication Protocol 

Systems, may provide other services 

beyond ‘‘conduct[ing] trading,’’ to ask 

about ATS services available outside of 

the ATS’s regular trading hours. The 

Commission believes that it is important 

for market participants and the 

Commission to understand when a 

Covered ATS operates, when trading 

interest can be entered, including when 

the ATS will accept trading interest 

outside of its regular trading hours, and 

whether any other ATS services are 

available outside the ATS’s regular 

hours of operations. 

To the extent that there are 

differences with respect to any services 

the Covered ATS provides during and 

outside of its regular trading hours, the 

Covered ATS must describe those 

differences. Similar to Item 17 

(requesting differences between any 

closing session(s) and regular trading 

hours), a Covered ATS would be 

required to disclose differences between 

trading outside of its regular trading 

hours and during regular trading hours 

with respect to the relevant information 

disclosed in Part III Items, including, 

among others, order types and sizes, and 

trading facilities (Item 7), use of nonfirm trading interest, and 

communication protocols and 

negotiation functionality (Item 8), 

segmentation and notice (Item 13), and 

display and visibility of trading interest 

(Item 15). Many of the disclosures 

discussed elsewhere in Form ATS–N 

will relate to the ATS’s regular trading 

hours so the ATS can simply discuss 

any differences between trading during 

its regular hours and trading outside its 

regular trading hours in Part III, Item 

4(c), if applicable. 

e. Item 5: Means of Entry 

Part III, Item 5 of Form ATS–N is 

intended to disclose the means that can 

be used to directly enter trading interest 

into the Covered ATS and any other 

means of entering trading interest into 

the ATS (e.g., smart order router, 

algorithm, order management system, 

sales desk, direct market access, webenabled system, or aggregation 

functionality). The Commission is 

proposing to revise Part III, Item 5 of 

Form ATS–N to include examples of 

means of entry that it believes may be 

relevant to Government Securities 

ATSs, as well as Communication 

Protocol Systems. These examples, 

which are not exhaustive, would 

include direct market access, webenabled systems, and aggregation 

functionalities. Part III, Item 5 of Form 

ATS–N would require the Covered ATS 

to identify and explain means of 

entering trading interest, including 

whether the means are provided 

through the broker-dealer operator itself, 

through a third-party contracting with 

the broker-dealer operator, or through 

an affiliate of the broker-dealer 

operator,573 and list and provide a 

summary of the requirements 574 for 

entering trading interest into the ATS 

through these means. 

Based on Commission staff 

experience, trading interest may be 

submitted into the Covered ATS both 

directly and indirectly. A direct method 

of sending trading interest to an ATS, 

for example, may include the use of a 

direct market access platform or FIX 

protocol connection, which allows 

subscribers to enter trading interest into 

the ATS without an intermediary. An 

example of an indirect method of 

submitting trading interest to an ATS 

could include the use of a smart order 


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575 If an intermediate application or functionality 

has access to information related to a subscriber’s 

trading interest, the Covered ATS must take 

appropriate measures to protect the confidentiality 

of such information pursuant to Rule 301(b)(10) of 

Regulation ATS. If the ATS arranges for an 

intermediate application to be provided by another 

party, the Covered ATS’s obligations under Rule 

301(b)(10) would apply to the activities that that 

party is performing for the ATS and the ATS’s 

written safeguards and procedures should be 

designed to protect subscriber confidential trading 

information with regard to that party. 

576 If a broker-dealer operator permits subscribers 

to send trading interest to the ATS by excluding all 

other trading venues from where such trading 

interest could be sent, this procedure in effect 

allows a subscriber to direct an order to the ATS 

and would be responsive to Part III, Item 5. 577See supra note 564 and accompanying text. 578Covered ATSs would not be required to 

calculate and disclose precise latencies for each 

means of entry for purposes of Form ATS–N. 

579See NMS Stock ATS Adopting Release, supra 

note 2, at 38832 and 38844. Depending on the 

activities of the persons involved with the market 

place, a group of persons can together provide, 

constitute, or maintain a market place or facilities 

for bringing together purchasers and sellers of 

securities and together meet the definition of 

exchange. In such a case, the group of persons 

would have the regulatory responsibility for the 

exchange. 

580See Regulation ATS Adopting Release, supra 

note 31, at 70873. See infra Section V.A.3.a. 

router (‘‘SOR’’), algorithm or similar 

functionality, website, graphical user 

interface (‘‘GUI’’), aggregation interface, 

or front-end system. The means of entry 

into an ATS (e.g., direct or indirect) 

could impact the speed with which a 

subscriber’s trading interest is handled 

and potentially executed and could 

increase the risk of information leakage. 

Today, the government securities 

markets are not interconnected markets 

like those for NMS stocks and therefore 

SOR technology may not be applied in 

the same manner by broker-dealer 

operators of Government Securities 

ATSs as it may for broker-dealer 

operators of NMS Stock ATSs. The 

Commission believes, however, that 

similar functionality may be used to 

send or receive trading interest to and 

from a Government Securities ATS to 

reduce latency or send trading interest 

to markets with better prices for certain 

government securities, and to the extent 

it does, the ATS should be required to 

provide information about that 

functionality as required. 

The Commission believes that the 

disclosures regarding the direct or 

indirect means of trading interest entry 

would inform market participants about 

the functionalities that their trading 

interest pass through on their way to the 

ATS and help them assess any potential 

advantages that trading interest sent 

through the broker-dealer operator may 

have as opposed to other methods used 

by other subscribers. A Covered ATS 

would be required to identify the 

functionality that directly connects to 

the ATS (e.g., algorithm, GUI, 

aggregation interface) and, if present, 

any intermediate functionality that 

trading interest passes through on its 

way to the functionality that directly 

connects to the ATS.575 Conversely, if 

ATS trading interest submitted through 

an algorithm is sent to another 

intermediate functionality, and then 

submitted to the ATS by that 

functionality, such information would 

need to be disclosed pursuant to this 

Item.576

The proposed disclosure requirements 

would only require the Covered ATS to 

‘‘list and provide a summary of the 

requirements for entering trading 

interest into the ATS’’ through these 

sources. Therefore, the Covered ATS 

would not need to provide a detailed 

description of the programming of the 

indirect means for entering trading 

interest that could put the ATS at a 

competitive disadvantage with 

competitors. However, if, for example, 

an ATS ‘‘throttled’’ the number of 

messages allowed for a given type of 

connection, that information would be 

responsive to this Item. 

Although the Commission is 

proposing to delete Part III, Items 5(b) 

and 5(d) of current Form ATS–N, which 

asks the Covered ATS to disclose 

whether the protocols required to be 

identified in Part III, Item 5 and the 

requirements for any means of entry are 

the same for all subscribers and the 

broker-dealer operator, a Covered ATS 

would be required to disclose such 

differences in Part III, Item 5 pursuant 

to the proposed instruction in Part III in 

Form ATS–N.577 For example, a 

Covered ATS would be required to 

disclose any differences in the latency 

of the alternative means for entering 

trading interest into the ATS. The 

Commission understands that there 

might be different latencies associated 

with each alternative. For instance, in 

some cases, a direct connection to the 

ATS may have reduced latencies as 

compared to indirect means where 

trading interest passes through an 

intermediate functionality. A brokerdealer operator could also, for example, 

configure the ATS to provide reduced 

latencies for certain means of entry used 

by itself or its affiliates.578

The Commission also believes that it 

is important for subscribers to 

understand if a means of entry is 

provided by an affiliate, even if it does 

not provide an advantage to a particular 

entity. 

Disclosures about a broker-dealer 

operator’s use of its or an affiliate’s 

direct or indirect functionality to enter 

trading interest into the Covered ATS 

are important to market participants to 

allow them to assess the potential for 

information leakage. The indirect means 

of access (e.g., SOR or algorithm) may 

obtain information about subscriber 

trading interest that is sent to the ATS 

(and may now be resting in the ATS) 

and subscriber trading interest that is 

sent out of the ATS. The potential that 

an indirect means of accessing the 

Covered ATS could lead to leakage of 

subscribers’ confidential trading 

information necessitates disclosure of 

certain information about the use of 

such indirect means to send subscriber 

trading interest in or out of the ATS. In 

addition, there may be instances where 

an ATS uses an intermediate 

functionality or entity as the means to 

bring together buyers and sellers or 

provide established methods (such as 

providing means to enter, display, 

communicate, or execute trading 

interest) and that intermediate 

functionality or entity would be 

considered part of the ATS for purposes 

of Regulation ATS and Form ATS–N.579

For example, if the broker-dealer 

operator arranges for trading interest to 

be entered into the ATS by another 

party, the activities of that party with 

respect to the ATS would be subject to 

the disclosure requirements of Form 

ATS–N. Likewise, if an ATS is subject 

to the Fair Access Rule under 

Regulation ATS and its participants 

must use an entity other than the 

broker-dealer operator to enter or 

receive information about trading 

interest in the ATS, the ATS must 

establish reasonable written standards 

governing the granting, denial, or 

limitation of access to ensure that those 

participants are not treated in an unfair 

and unreasonably discriminatory 

manner by the entity.580

Request for Comment 

113. Are there any means of entering 

trading interest into the Covered ATS 

where more or should be required to 

explain their operation? Are there any 

aspects of those means of entry that are 

particularly important? 

f. Item 6: Connectivity and Co-Location 

Part III, Item 6(a) of Form ATS–N 

would request information about 

whether the Covered ATS offers colocation and related services, and if so, 

would require a summary of the 

requirements for use of such services, 

including the speed and connection 

(e.g., fiber, copper) options offered. Part 


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581The Commission is proposing to re-number 

Part III, Item 6(c) of current Form ATS–N to Item 

6(b) and Part III, Item 6(e) of current Form ATS– 

N to Part III, Item 6(c). 

582To clarify that the Commission is soliciting 

information about any requirements the ATS 

imposes on subscribers or persons that submit 

trading interest to use co-location, related services, 

and other means to increase or reduce the speed of 

communication with the ATS, rather than the legal 

or contractual terms of such services, the 

Commission is proposing to replace the current 

requirement for a summary of the ‘‘terms and 

conditions’’ with ‘‘requirements for use’’ for such 

services in Part III, Items 6(a), 6(b), and 6(c). See 

supra note 543. 

583See October 15 Staff Report, supra note 188, 

at 36–37; Treasury Request for Information, supra 

note 193, at 3928. See also Letter from Dan Cleaves, 

Chief Executive Officer, BrokerTec Americas, and 

Jerald Irving, President, ICAP Securities USA LLC, 

to David R. Pearl, Office of the Executive Secretary, 

Treasury Department, dated April 22, 2016 

(‘‘BrokerTec/ICAP Letter’’), at 3–4, available at 

https://www.treasurydirect.gov/instit/statreg/ 

gsareg/ICAPTreasuryRFILetter.pdf; Letter from C. 

Thomas Richardson, Managing Director, Head of 

Electronic Trading Service, Wells Fargo Securities, 

and Cronin McTigue, Managing Director, Head of 

Liquid Products, Wells Fargo Securities, to Treasury 

Department, dated April 21, 2016, at 6–7, available 

at https://www.treasurydirect.gov/instit/statreg/ 

gsareg/RFIcommentWellsFargo.pdf. 

584 In the instruction to Part III, Item 7 of Form 

ATS–N, the Commission is proposing to make 

certain changes and clarify the examples provided 

in this Item regarding order types. Particularly, the 

Commission proposes to clarify the example 

provided regarding ‘‘how price conditions affect the 

rank and price at which it can be executed’’ by 

replacing ‘‘it’’ with ‘‘the order type.’’ In addition, 

the Commission is proposing to add ‘‘store orders’’ 

as an example of order types designed not to 

remove liquidity. The Commission recognizes that 

‘‘store orders’’ may be more relevant to Government 

Securities ATSs than to NMS Stock ATSs. 

III, Item 6(b) of Form ATS–N 581 would 

require a Covered ATS to indicate 

whether it provides any other means 

besides co-location and related services 

described in the Item 6(a) to increase the 

speed of communication with the ATS, 

and if so, to explain the means and 

provide a summary of the requirements 

for its use. Part III, Item 6(c) would 

require the Covered ATS to indicate 

whether it offers any means to reduce 

the speed of communication with the 

ATS and if so, to provide a summary of 

the requirements for its use.582

Latency is an important feature of 

trading in certain government securities 

and NMS stocks, and market 

participants are interested in 

understanding the functionalities 

employed by Covered ATSs to influence 

it.583 The Item would require a 

summary of the requirements where a 

trading venue employs mechanisms to 

increase the latency or the length of 

time for trading interest or other 

information to travel from a user to the 

system. Users of co-location services can 

experience faster or slower connection 

speeds to a Covered 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 

equalize connection speeds among 

subscribers, among others. Such 

differences in connection speed or 

latency would be required to be 

disclosed under Part III, Item 6. If, for 

example, the ATS offers means that 

would allow certain subscribers a 

competitive advantage, then the ATS 

should disclose such means on the 

Form ATS–N. The Commission believes 

that the information disclosed in Item 6 

would help market participants 

understand their connectivity options to 

the ATS and expedite the order entry 

process for subscribers. 

Request for Comment 

114. Are there any aspects of the 

means for increasing or reducing the 

speed of communication with Covered 

ATSs that the Commission should 

specifically require under this Item? 

g. Item 7: Order Types and Sizes; 

Trading Facilities 

Part III, Item 7 of Form ATS–N is 

designed to disclose whether the 

Covered ATS provides trading facilities 

or sets rules for bringing together orders 

of buyers and sellers (e.g., crossing 

system, auction market, limit order 

matching book, click-to-trade 

functionality). The request is intended 

to capture Covered ATSs that offer the 

use of firm trading interest and a trading 

facility or rules for buyers and sellers to 

interact and agree upon the terms of a 

trade. The Commission believes that 

systems that typically offer the use of 

orders and trading facilities and systems 

that offer the use of non-firm trading 

interest and communication protocols 

operate distinctively. Systems that offer 

the use of orders and trading facilities 

typically match orders of buyers and 

sellers pursuant to pre-determined rules 

programmed into an algorithm, while 

systems that offer the use of trading 

interest and communication protocols 

allow buyers and sellers to interact 

directly to find a counterparty and 

negotiate a trade. To facilitate market 

participants’ understanding of these 

systems and their unique aspects, the 

Commission is proposing that Covered 

ATSs disclose information about the use 

of orders and trading facilities or rules 

in Part III, Item 7 and disclose the use 

of trading interest and communication 

protocols in Part III, Item 8. These 

questions would apply to both NMS 

Stock ATSs and Government Securities 

ATSs. If a Covered ATS provides both 

a trading facility and communication 

protocol (e.g., provides both a limit 

order book and RFQ protocol), the 

Covered ATS would respond 

affirmatively to and explain the 

protocols separately under Items 7 and 

8. To the extent the trading facility and 

Communication Protocol Systems 

interact in any way, the Covered ATS 

would explain that interaction in 

response to each question. 

A Covered ATS that answers 

affirmatively to Part III, Item 7 of revised 

Form ATS–N would be required to 

explain the trading facilities and rules 

for bringing together the orders of 

buyers and sellers in the ATS. In this 

response, the ATS would be expected to 

disclose the information responsive to 

Part III, Items 7 (Order Types and 

Attributes), 8 (Order Sizes), and 11 

(Trading Services, Facilities, and Rules) 

of current Form ATS–N. Based on 

Commission staff experience reviewing 

Form ATS–N filings, and particularly 

disclosures related to order types, order 

size, and the ATSs’ rules, procedures, 

and facilities to bring buyers and sellers 

together, ATS are linked and 

intertwined. Allowing the Covered ATS 

to provide a narrative of these topics 

together in Part III, Item 7 of Form ATS– 

N would provide for more streamlined 

disclosures for market participants to 

understand and reduce redundancy. 

This proposed change would result in 

clearer, more readable narrative 

disclosures, and potentially reduce the 

burden to Covered ATSs of drafting 

repetitive disclosures in multiple 

responses in the form. 

Part III, Item 7 of Form ATS–N would 

require that ATSs provide a description 

of each order type offered by the 

Covered ATS, and provide a list of items 

that the ATS should include in its 

description. To provide transparency to 

market participants, the Item would 

require a complete and detailed 

description of the order types available 

on the Covered ATS, their 

characteristics, operations, and how 

they are handled.584 All market 

participants should have full 

information about the operations of 

order types available on a Covered ATS 

to comprehensively understand how 

their orders will be handled and 

executed in the ATS. Order types are a 

primary means by which users of a 

Covered ATS communicate their 

instructions to trade on an ATS. Given 

the importance, diversity, and 

complexity of order types, the 

Commission is proposing to require 

Covered ATSs to disclose the 

information called for by Part III, Item 

7 on Form ATS–N. 

Market participants should have 

sufficient information about all aspects 

of the operations of order types 


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585As discussed above, to streamline the format 

of responses, the Commission is proposing to 

consolidate current Form ATS–N Part III, Items 8(a) 

through (f) in Part III, Item 7 of revised Form ATS– 

N. The Commission believes that the information 

requested is the same, and the information requests 

covered by these sub-items (odd-lot orders and 

mixed-lot orders) would be covered in Part III, Item 

7 of revised Form ATS–N. 

586See Regulation ATS Adopting Release, supra 

note 31, at 70849 n.37. 

587The Commission is proposing to add examples 

of functionalities used in the government securities 

market for which a Government Securities ATS 

would be required to explain the ATS’s rules and 

procedures, if applicable. 

588The Commission is making a non-substantive 

change to Part III, Item 7 of Form ATS–N to state 

that a Covered ATS would be required to disclose 

the order type’s priority ‘‘in relation to’’ (rather than 

‘‘vis-a`-vis’’) other orders on the book due to changes 

in the NBBO or other reference price. 

589This non-exhaustive list is the same as what 

is in current Form ATS–N, Part III, Item 11. 

590Part III, Item 7 would require Government 

Securities ATSs and, to the extent applicable, NMS 

Stock ATSs, to describe any functionality to adjust 

or hedge orders. 

available on a Covered ATS to 

understand how to use order types to 

achieve their trading objectives, as well 

as to understand how order types used 

by other market participants could affect 

their trading interest. A detailed 

description of order type characteristics 

would assist subscribers in better 

understanding how their orders would 

interact with other trading interest in 

the ATS. It also would allow market 

participants to see what order types 

could be used by other market 

participants, which could affect the 

probability, timing, and quality of their 

own executions. For example, if the 

time priority of a pegged order changes 

in response to changes in the reference 

price, that would affect the likelihood of 

execution for such an order. The 

Commission is also proposing to require 

that Covered ATSs disclose any order 

size requirements (e.g., minimum or 

maximum size, odd-lot, mixed-lot, 

trading increments) and related 

handling procedures (e.g., handling of 

residual trading interest) in Part III, Item 

7 of Form ATS–N. This incorporates the 

requirements of Part III, Item 8 of 

current Form ATS–N, with 

modifications.585 This information 

would inform subscribers about the 

permissible size of orders and trading 

interest that a subscriber could enter in 

the ATS. For example, if a Covered ATS 

has minimum or maximum order sizes, 

or a minimum increment size 

requirement for order modifications, 

those requirements and related handling 

procedures would be responsive to the 

Item. The Commission is also proposing 

to add the example of how residual or 

unexecuted orders are handled to the 

types of related handling procedures 

that a Covered ATS would be required 

to include in Part III, Item 7. Brokerdealer operators employ market access 

and risk management controls and 

procedures that prevent the entry of 

erroneous orders and orders that are 

above a subscriber’s predetermined 

threshold. If order size requirements are 

imposed on subscribers as part of a risk 

management procedure, an explanation 

of those procedures as they relate to the 

ATS would be responsive to this Item. 

An explanation of how a Covered ATS’s 

requirements and conditions related to 

the size of trading interest differ among 

subscribers and persons would also 

provide a market participant with 

information regarding how its trading 

interest would be handled in relation to 

other market participants. 

Covered ATSs may offer the use of 

various types of trading facilities to 

bring together the orders of buyers and 

sellers and for such orders to interact. 

These types of systems would be 

disclosed in Part III, Item 7 of Form 

ATS–N. For example, many Covered 

ATSs bring together multiple buyers 

and sellers using limit order matching 

systems. Other Covered ATSs offer the 

use of 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.586 Some Covered ATSs offer the 

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. Certain Covered 

ATSs may use a voice system to bring 

together orders as well, or a 

combination of voice and electronic 

systems. Part III, Item 7, would require 

Covered ATSs to provide disclosure of 

how these facilities operate. 

In addition, Part III, Item 7 would 

require a Covered ATS to disclose its 

rules and procedures under which 

orders interact and buyers and sellers 

agree upon the terms of a trade.587 Form 

ATS–N sets forth a non-exhaustive list 

of such rules and procedures, which 

includes order interaction, priority,588

pricing methodologies, allocation, 

matching, and execution of orders and 

other procedures for trading, such as 

price improvement functionality, price 

protection mechanisms, short sales, 

functionality to adjust or hedge orders, 

locked-crossed markets, the handling of 

execution errors, the time-stamping of 

messages and executions, and any 

conditions or processes for terminating 

a counterparty match.589

The Commission is also proposing 

that a Covered ATS disclose pricing 

methodologies used for each type of 

security traded by the ATS under Part 

III, Item 7.590 For example, orders may 

be priced using spreads off a benchmark 

price, or spreads between two different 

maturities of a security. A Covered ATS 

may also restrict the allowable deviation 

from a benchmark price, or allow for 

indicative pricing of certain securities. If 

a transaction has more than one leg, the 

ATS may price both legs according to a 

price derived from one of the securities 

traded. In response to this request, a 

Covered ATS would be required to 

describe the ATS’s procedures for 

determining all pricing methodologies 

and to the extent the pricing 

methodologies differ among subscribers 

and the broker-dealer operator, the ATS 

must disclose those differences. 

In addition, Item 7 would require 

Covered ATSs to disclose how orders 

may interact with non-firm trading 

interest or separate trading 

functionalities within the ATS or 

offered by the broker-dealer operator. 

Item 7 would also require Covered ATSs 

to disclose the various procedures under 

which orders interact and match. Some 

Covered ATSs may offer price-time 

priority to determine how to match 

orders (potentially with various 

exceptions), while others may offer 

midpoint-only matching with time 

priority. Some Covered ATSs might also 

take into account other factors to 

determine priority. For example, a 

Covered ATS may assign either a lower 

or higher priority to an order entered by 

a subscriber in a certain class (e.g., 

orders of principal traders or retail 

investors) or sent from a particular 

source (e.g., orders sent by an algorithm 

or similar functionality) when compared 

to an equally priced order entered by a 

different subscriber or via a different 

source. Also, if applicable, the Item 

would require an explanation of which 

party to a trade would receive any price 

improvement depending on the priority, 

order type, and prices of the matched 

orders and the percentage of price 

improvement the party would receive. A 

broker-dealer operator could also act as 

the counterparty for each side of a 

transaction that matches on its ATS. 

Pursuant to the proposed instruction 

at the beginning of Part III, Covered 

ATSs would be required to disclose any 

differences in treatment among 

subscribers, the broker-dealer, and other 

participants in the ATS as they relate to 


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591Part III, Item 9 of current Form ATS–N asks 

about conditional orders and indications of interest. 

Part III, Item 8 of current Form ATS–N asks about 

order sizes. The Commission is proposing to 

incorporate the requirements of Part III, Item 8 into 

Part III, Items 7 and 8. In addition, the Commission 

is proposing to incorporate the requirements in Part 

III, Item 9 of current Form ATS–N in Part III, Item 

8 of revised Form ATS–N. 592See supra Section II.B.2. 

the means and facilities for bringing 

together the orders of buyers and sellers. 

Request for Comment 

115. What are the most prevalent 

order types on Government Securities 

ATSs? Are there more important means 

than order types for subscribers to 

communicate the handling of their 

trading interest on Government 

Securities ATSs? Does Form ATS–N 

capture all of the means for subscribers 

of Government Securities ATSs to 

communicate the handling of their 

orders? Are there any aspects of order 

types on Government Securities ATSs 

that should be specifically addressed in 

the Item? If yes, please explain. 

116. Are there any operations or 

procedures, either of an ATS or a 

broker-dealer operator, which could 

limit the entry, or size of, a subscriber’s 

orders submitted to the ATS? If so, 

please describe these operations or 

procedures and explain why they are 

important to subscribers. 

117. Are there any specific means or 

facilities used to bring together multiple 

buyers and sellers on Covered ATSs that 

should be specifically included as an 

example in this Item? Are there any 

rules and procedures that govern trading 

of government securities and repos that 

should be specifically included as 

examples in this Item? 

h. Item 8: Use of Non-Firm Trading 

Interest; Communication Protocols and 

Negotiation Functionality 

As discussed above, the proposed 

definition of ‘‘exchange’’ would include 

systems that make available the use of 

non-firm trading interest and 

communication protocols to bring 

together buyers and sellers of securities. 

Form ATS–N currently includes 

questions about NMS Stock ATSs’ use 

of conditional order functionality and 

indications of interest,591 which can be 

forms of communication protocols. 

Current Form ATS–N, however, does 

not contain comprehensive disclosure 

requests about systems that solely offer 

the use of non-firm trading interest and 

communication protocols because, as 

discussed above, such systems typically 

do not fall within the criteria of current 

Exchange Act Rule 3b–16(a) and, 

therefore, do not operate pursuant to the 

ATS exemption. The Commission is 

proposing to revise Part III, Item 8 to 

request information about the 

operations of these systems and the 

requests would be applicable to both 

NMS Stock ATSs and Government 

Securities ATSs. With respect to 

conditional orders and indications of 

interest, Part III, Item 8 of revised Form 

ATS–N incorporates and expands on the 

current disclosure requirements of Part 

III, Item 9 (Conditional Orders and 

Indications of Interest) and Part III, 

Items 7 (Order Types) and 8 (Order 

Sizes) of current Form ATS–N as they 

relate to conditional orders and 

indications of interest in the ATS. 

Proposed Part III, Item 8 of revised 

Form ATS–N would require Covered 

ATSs to disclose whether they make 

available communication protocols for 

buyers and sellers to communicate nonfirm trading interest, solicit interest to 

buy or sell a security, discover prices, 

find a counterparty, or negotiate a trade. 

Such systems could offer, for example, 

RFQ or workup protocols, stream axes, 

or conditional order functionalities.592

If the Covered ATS provides 

communication protocols and 

negotiation functionalities, it would be 

required to identify and explain the 

protocols and functionalities in the 

response to Part III, Item 8. The 

Commission believes that identifying 

and explaining these functionalities 

would provide transparency regarding 

how buyers and sellers can interact with 

each other on the system. This would 

require the Covered ATS to provide a 

narrative description of how 

participants in the ATS send and 

receive messages, how such messages 

interact, and the rules, procedures, and 

protocols governing the use of non-firm 

trading interest in the Covered ATS. To 

facilitate this disclosure, the 

Commission is proposing to include in 

Form ATS–N a description of the types 

of information that should be explained 

in this Item. The Commission 

recognizes, however, that each system 

operates differently and may offer 

unique protocols, and has designed Part 

III, Item 8 to allow ATSs the flexibility 

to provide a narrative response that will 

help market participants understand the 

protocols governing their systems. 

First, the Covered ATS would be 

required to explain the use of messages 

in the ATS. Messaging is a primary tool 

by which Communication Protocol 

Systems bring together buyers and 

sellers. Use of messaging is critical to 

how buyers and sellers can use the 

system to find one another and negotiate 

a transaction. The Commission believes 

that ATSs offer diverse types of 

messaging that facilitate communication 

and negotiation, including non-firm 

trading interest that subscribers expose 

to other subscribers, communications 

that subscribers send to other 

subscribers to negotiate transactions, 

messages that subscribers use to 

communicate to the ATS how they want 

their trading interest to be handled, as 

well as messages the ATS sends to 

subscribers to communicate the 

presence of trading interest. The 

Commission believes that this 

information will help market 

participants understand how they can 

use messages in the ATS to interact with 

potential counterparties and to 

communicate how they want their 

trading interest to be handled by the 

ATS. 

The Commission is proposing to 

provide a non-exhaustive list of what 

this explanation would include, as 

applicable to the Covered ATS’s 

protocols and functionalities. The 

Covered ATS would be required to 

describe and explain each type of 

message the ATS permits participants to 

send and receive and the types of 

persons that can send and receive each 

type of messages (e.g., the ATS, types of 

subscribers, specific subscribers, 

customers of subscribers, trading 

venues). The ATS would also be 

required to disclose the information 

contained in messages (e.g., symbol, 

price, direction (i.e., buy or sell), or size 

minimums) and any other information 

that a participant may choose to include 

in a message. If terms in messages can 

vary based on potential recipients (e.g., 

different subscribers may receive 

varying priced messages for the same 

security), the Covered ATS would be 

required to disclose that. 

The Commission is proposing that the 

Covered ATS disclose whether messages 

are attributed to their sender or 

anonymous, and whether a subscriber 

may elect to disclose its identity to other 

participants, and if so, what is disclosed 

and how, when, and to whom. The 

Commission understands that some 

Communication Protocol Systems allow 

participants to negotiate trades on an 

attributed basis so that certain 

counterparties may know the identity of 

other counterparties pre-trade. In some 

cases, subscribers on the ATS have 

established relationships and may 

choose to share their identity with a preselected list of potential counterparties 

or potential counterparties that meet 

certain criteria. Even while the 

subscriber discloses its identity to 

others, the identity of potential 

counterparties may be either known or 

anonymous. The Covered ATS would be 

required to describe when, and under 

what conditions, the subscriber or the 


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ATS discloses subscribers’ identities 

and how and when messages are 

transmitted (e.g., order management 

system, router, or FIX). 

The Covered ATS would be required 

to describe the processes to respond to 

a message and any parameters around 

such responses. In the Commission’s 

experience, on negotiation systems, a 

subscriber or the Covered ATS makes 

known the existence of trading interest 

or an interest in negotiation, and 

potential counterparties have the 

opportunity to respond. For example, a 

Covered ATS would be required to 

explain how the sender of a message 

would ‘‘firm-up’’ a conditional or other 

non-firm message to execute a trade. 

The ATS would also be required to 

describe the processes to respond to a 

request to negotiate, and for subscribers 

who initiate an RFQ to respond to any 

responses. In addition, if the ATS 

permits the initiating party or 

respondents a final opportunity prior to 

execution to accept or reject the price 

after the negotiating parties agree to a 

trading price (i.e., a ‘‘last look’’), the 

ATS must describe such processes. 

Part III, Item 8 would require the 

Covered ATS to describe any time 

parameters that the ATS sets or permits 

subscribers to set regarding sending and 

receiving messages. This would include 

time-in-force restrictions that a 

subscriber may place on trading interest 

in a message (e.g., fill-or-kill, day, goodtil-cancel). This would also include time 

parameters for updating prices or 

responding to trading interest or 

requests for negotiation applicable 

during any negotiation process. In the 

case of an RFQ, subscribers may provide 

a specific price with a ‘‘wire time’’ 

during which such price is actionable. 

Any parameters around such wire times 

would be required to be disclosed by the 

Covered ATS. Additionally, if the 

Covered ATS requires that a subscriber 

firm-up its conditional orders within, 

for example, three seconds of receiving 

a response, the Covered ATS would be 

required to state so. Any time 

parameters within which an initiator of 

a message would have to respond to 

responses to its messages would also be 

disclosed under Part III, Item 8. 

The Covered ATS would also be 

required to provide information 

regarding the contra-party trading 

interest made available or known on the 

system, including whether a subscriber 

may elect whether to display only part 

of its trading interest. The instruction in 

Part III, Item 8 would state that, if 

trading interest is made known on the 

system, the ATS would be required to 

describe it in Part III, Item 15. Part III, 

Item 8 of Form ATS–N would also 

require a description of the 

circumstances under which messages 

may be modified, replaced, canceled, 

rejected, or removed from the Covered 

ATS. The Covered ATS would also be 

required to describe any restrictions or 

conditions under which the message 

might result in the match of two 

counterparties, require a response, or 

result in an execution in the Covered 

ATS (e.g., interaction, matching, 

selection, automatic execution) and any 

price conditions (e.g., how price 

conditions affect the rank and price at 

which the message can result in an 

execution). 

The Covered ATS would also be 

required to describe the limits or 

requirements for multiple messages sent 

at the same time. For example, if the 

Covered ATS prohibits a subscriber 

from entering non-firm trading interest 

to buy and sell the same bond or 

security at the same time, entering the 

same price for a buy and sell order in 

the same bond (i.e., a locked market), or 

entering a lower-priced sell order than 

the buy order (i.e., inverted market), it 

should disclose these. In addition, the 

ATS would be required to state whether 

a message containing trading interest is 

eligible to be sent to destinations 

outside the Covered ATS, and if so, 

describe it in Part III, Item 16. The 

Covered ATS would also be required to 

disclose information about the 

availability of message types across all 

forms of connectivity to the ATS. To the 

extent there are differences in the 

availability of message types across 

forms of connectivity, the ATS would 

need to describe those differences. 

A Covered ATS would also be 

required to disclose, with respect to 

non-firm trading interest, any 

requirements relating to the size of 

trading interest (e.g., minimum or 

maximum size, odd-lot, mixed-lot, 

trading increments, message controls or 

throttling). This would include the 

requirements of Part III, Item 8 of 

current Form ATS–N, and also include 

examples of limitations, such as 

message controls or throttling, that the 

Commission understands a negotiation 

system, for example, may use to limit 

the number of messages sent by a 

subscriber. The Covered ATS would 

also be required to disclose any related 

handling procedures, such as, for 

example, the handling of residual 

trading interest after an execution on the 

ATS (e.g., whether it is canceled or 

remains in the system). 

In addition, in its response to Part III, 

Item 8, the Covered ATS would also be 

required to disclose in its response the 

procedures governing communication 

protocols. These requirements are 

currently incorporated in Part III, Item 

11 of current Form ATS–N. Requiring 

information about such procedures 

would provide transparency into how 

buyers and sellers may interact, and 

how non-firm trading interest may 

interact with other trading interest in 

the ATS. The Commission is proposing 

to require disclosure of how Covered 

ATSs prioritize and permit their 

subscribers to prioritize trading interest, 

to provide information that market 

participants can use to choose an 

appropriate venue at which they can 

interact with other subscribers or send 

trading interest. As applicable, the 

Covered ATS would be required to 

provide in Part III, Item 8, a description 

of priority applied to a message upon 

entry and any subsequent change to 

priority (if applicable, whether and 

when the message can receive a new 

time stamp, the message’s priority in 

relation to other messages in the 

Covered ATS due to a change to any 

reference price, and any instance in 

which a message could lose execution 

priority to a later arriving message at the 

same price); whether the Covered ATS 

permits or provides for subscribers to 

vary pricing based on the identity of 

other subscribers (e.g., preferred pricing 

feeds or tiered pricing); and whether 

subscribers can select counterparties 

based on their identity or other factors. 

If a Covered ATS allows subscribers 

complete discretion to, for example, 

select which counterparty to interact 

with when the prices such 

counterparties offer are the same, the 

Covered ATS would be required to 

disclose that. 

In addition, Part III, Item 8 would 

require a Covered ATS to disclose its 

rules and procedures under which 

buyers and sellers interact and agree 

upon the terms of a trade. Based on 

Commission staff experience, ATSs 

disclose various methods, rules, and 

conditions under which subscribers 

may interact using trading interest. 

Form ATS–N would provide a nonexhaustive list of such rules and 

procedures, which includes those for 

participant interaction, pricing 

methodologies, allocation, matching, 

and execution. This question is 

designed to provide transparency to 

those diverse methods, rules, and 

conditions so that market participants 

better understand how the ATS will 

handle non-firm trading interest and 

how subscribers may interact with 

others in the ATS. If the Covered ATS 

auto-executes non-firm trading interest, 

the ATS would also be required to 

disclose the functionality or protocols 

governing such auto-execution. The 


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593Section 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). 

594See Regulatory Notice 18–25, ATS 

Supervision Obligations, August 13, 2018, available 

at https://www.finra.org/sites/default/files/ 

Regulatory-Notice-18-25.pdf (‘‘FINRA Regulatory 

Notice’’) at 3. In addition, FINRA Rule 3310 

requires FINRA members to, among other things: 

Establish and maintain a system to supervise the 

activities of each associated person that is 

reasonably designed to achieve compliance with 

applicable securities laws, regulations, and FINRA 

rules; establish, maintain, and enforce written 

procedures to supervise the types of business in 

which it engages and the activities of associated 

persons that are reasonably designed to achieve 

compliance with applicable securities laws, 

regulations, and FINRA rules; conduct a review, at 

least annually of the businesses in which it engages 

reasonably designed to assist the member in 

detecting and preventing violations of, and 

achieving compliance with, applicable securities 

laws, regulations, and FINRA rules and retain a 

written record of the date upon which each review 

and inspection is conducted; and include in its 

supervisory procedures a process for the review of 

securities transactions that are reasonably designed 

to identify trades that may violate the provisions of 

the Exchange Act, the rules thereunder, or FINRA 

rules prohibiting insider trading and manipulative 

and deceptive devices that are effected for certain 

accounts. See FINRA Rule 3310. 

595See FINRA Regulatory Notice, supra note 594, 

at 3. 

Covered ATS would be required to 

disclose, for example, how the ATS or 

a subscriber can designate trading 

interest as automatically executable. 

Any limitations that subscribers may 

impose on auto-execution would be 

responsive to such request. 

The Covered ATS would also be 

required to discuss in Part III, Item 8 

how non-firm trading interest may 

interact with orders or separate trading 

functionalities in the ATS or 

functionality offered by the brokerdealer operator. For example, if an IOI 

can interact with a firm order on the 

Covered ATS’s order book, it should 

disclose this and any policies and 

procedures for such interaction. To the 

extent that the Covered ATS has 

disclosed this in Part III, Item 7 in its 

discussion of how firm orders can 

interact with non-firm trading interest, 

the ATS should describe how the nonfirm trading interest may interact with 

firm trading interest and may crossreference the disclosure in Part III, Item 

7. 

In the Commission’s experience, 

ATSs have adopted other trading 

procedures governing interaction and 

execution. The Commission is 

proposing to include examples of such 

procedures governing communication 

protocols that would be required to be 

disclosed. This would include 

functionality or protocols that permit 

the selection of displayed non-firm 

trading interest to trade against. In the 

Commission’s experience, negotiation 

systems may allow subscribers to 

choose the trading interest they interact 

with; any procedures governing such 

selection should be disclosed in Part III, 

Item 8. In addition, the Commission 

believes that market participants would 

benefit from transparency regarding 

procedures that could re-price trading 

interest or prevent it from interacting 

with other trading interest under certain 

conditions. Accordingly, the Form 

ATS–N would provide a non-exhaustive 

list of procedures that includes price 

improvement, price protection 

mechanisms, procedures related to short 

sales, functionality to adjust or hedge 

trading interest, locked-crossed markets, 

the handling of execution errors, 

platform and trade controls (e.g., fat 

finger checks, whether the ATS can 

employ a global kill switch), the timestamping of trading interest messages 

and executions, and any conditions or 

processes for terminating a counterparty 

match. 

In addition, the Covered ATS would 

be required to disclose what information 

is available to subscribers from the ATS 

about interaction history, counterparty 

matching, or executions (e.g., pre- and 

post-trade data, best execution analysis, 

transaction cost analysis), when such 

information is made available, the 

source(s) of such information, and the 

process for subscribers to access this 

information. The Commission believes 

that requiring such information would 

allow market participants to better 

assess the information that Covered 

ATSs provide, including allowing them 

to analyze or evaluate their 

performance, resolve potential disputes, 

and/or understand how their trading 

interest has historically interacted and 

been treated in the ATS, among other 

things. 

Request for Comment 

118. Are there any aspects of how 

Covered ATSs permit non-firm trading 

interest to be sent and/or received that 

are not covered by this Item? Are there 

any aspects of how subscribers interact 

with each other on Covered ATSs by 

using non-firm trading interest that are 

not covered by this Item? What 

information about non-firm trading 

interest and the process for transmitting 

non-firm trading interest would be 

useful to market participants? 

i. Item 9: Monitoring and Surveillance 

of the ATS Market 

The Commission is proposing that 

Part III, Item 9(a) of Form ATS–N 

require a Covered ATS to disclose 

information about the activities the ATS 

undertakes to supervise the trading 

activity that occurs on or through the 

ATS (e.g., supervisory systems and 

procedures to detect, deter, or limit 

potentially disruptive, manipulative, or 

non-bona fide quoting and trading 

activities that occur on or through its 

system and to ensure that they are 

reasonably designed to achieve 

compliance with applicable SRO rules 

and the Federal securities laws) and to 

provide a summary of any supervision 

activities that occur on or through the 

ATS, the sources of data the ATS uses 

to supervise trading activity (e.g., 

internal or external sources), and the 

activities that the ATS intends to detect, 

deter, or limit. 

As a registered broker-dealer, an ATS 

must comply with the filing and 

conduct obligations associated with 

being a registered broker-dealer, 

including becoming a member of an 

SRO, such as FINRA, and compliance 

with SRO rules.593 Accordingly, ATSs 

must comply with SRO rules which, 

among other things, require each 

member to maintain a reasonably 

designed supervisory system.594 For 

example, FINRA states it expects an 

ATS’s supervisory system to be 

reasonably designed to identify ‘‘red 

flags,’’ including potentially 

manipulative or non-bona fide trading 

that occurs on or through its systems, 

and that ATSs must regularly assess and 

evaluate their supervisory systems and 

procedures to ensure that they are 

reasonably defined to achieve 

compliance with applicable FINRA 

rules and the Federal securities laws.595

The Commission believes that the 

information disclosed in response to 

this request would help market 

participants understand the scope of 

supervision activities that an ATS 

performs to mitigate potentially 

manipulative and non-bona fide trading 

that occurs on or through its system. 

This information could also help 

regulators, including the Commission 

and FINRA, to assess the extent to 

which an ATS’s supervision procedures 

are designed to facilitate investor 

protection over activities occurring in 

the ATS and comply with the applicable 

rules, including the Exchange Act and 

FINRA rules. 

The Commission is proposing Part III, 

Item 9(b) of Form ATS–N to request 

disclosures about whether the ATS 

monitors for certain types of trading 

behaviors or activities that may be 

detrimental to the ATS market place or 

trading (e.g., anti-gaming technology) 

and, if so, to provide a summary of the 

ATS’s monitoring activities and the 

trading behaviors and explain the 


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596See NMS Stock ATS Adopting Release, supra 

note 2, at 38850. 597See Letter from David W. Blass, General 

Counsel, Investment Company Institute, dated 

February 25, 2016, at 9–10. 598See id. 599See id. 600See Letter from Phillip S. Gillespie, Executive 

Vice President, General Counsel, State Street Global 

Advisors, dated February 26, 2016 at 2–3. 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). 

601See NMS Stock ATS Adopting Release, supra 

note 2, 83 FR 38850. 

602The Commission is renumbering Part III, Item 

10(e) of current Form ATS–N as Part III, Item 10(b) 

in revised Form ATS–N. The Commission also 

proposes to clarify in Item 10 that ‘‘regular trading 

hours’’ refer to the ATS’s regular trading hours. 

activities that the ATS intends to detect, 

deter, or limit. In the NMS Stock ATS 

Adopting Release, the Commission 

described that, in response to the 

proposal of Form ATS–N, commenters 

requested that information about the 

monitoring activities the ATS performs 

be included in Form ATS–N.596 One 

commenter suggested that disclosure of 

certain additional trading services 

should be required, specifically whether 

the ATS employs technology designed 

to detect and deter price manipulation 

and other disruptive trading practices 

(i.e., anti-gaming technology), and, if so, 

the ATSs should include a description 

of this technology in the form.597 This 

commenter stated that existence of such 

technology can increase market 

confidence, particularly for market 

participants that transact in large 

volumes, such as funds, because it 

shows that a trading venue is committed 

to providing a fair and competitive 

market.598 This commenter further 

stated that funds currently have no 

mechanism to receive standardized 

information regarding anti-gaming 

technology or to compare anti-gaming 

technology across different ATSs.599

Another commenter stated that antigaming technology and other subscriberrelated safeguards are among the core 

attributes of ATSs that are of particular 

importance to buy-side institutions.600

The Commission, however, declined 

to adopt a request related to anti-gaming 

technology and subscriber-related 

safeguards at that time because such 

descriptions made in a publicly 

available document could serve to 

undermine those safeguards by 

disclosing information that makes 

evading those safeguards easier.601

However, the Commission is now 

proposing this requirement because it 

believes that market participants would 

want to know how the ATS may 

monitor for certain trading behaviors or 

activities that may be detrimental to the 

ATS market place or to the participants 

that use the ATS’s services. In addition, 

the information would help market 

participants determine which ATSs 

provide better market quality that the 

market participants would be more 

inclined to effect transactions on. In the 

Commission staff’s experience 

reviewing Forms ATS–N filed by NMS 

Stock ATSs, some NMS Stock ATSs 

have described information about their 

surveillance procedures and other 

safeguards, which allow market 

participants to understand their 

practices, while avoiding the level of 

detail that would help enable market 

participants to evade them. 

Accordingly, the Commission believes 

that the requests for information 

proposed would not serve to undermine 

the ATS’s surveillance and monitoring 

activities because the Commission is 

requesting summary level information, 

which would strike the right balance in 

requiring these important disclosures 

and avoiding the risk that market 

participants could use the disclosures 

on Form ATS–N to evade such tools and 

controls. 

Request for Comment 

119. Would requiring summary 

disclosure regarding the Covered ATS’s 

anti-gaming technology and similar 

safeguards benefit market participants? 

What other information regarding 

monitoring and surveillance of activity 

in the ATS would be beneficial? Does 

the proposed summary disclosure strike 

the right balance in providing disclosure 

and avoiding the risk that market 

participants could use the disclosures to 

evade the ATS’s tools and controls? 

j. Item 10: Opening and Reopening 

Part III, Item 10 of Form ATS–N is 

designed to provide information about 

the use of any special processes and 

procedures related to matching trading 

interest 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 

Commission believes that this 

disclosure requirement is important 

because market participants would 

likely want to know about any special 

opening or reopening processes, 

including which types of trading 

interest can participate in the opening 

or reopening processes or whether there 

are any protocols at the open for buyers 

and sellers to send messages and 

negotiate a trade. To capture processes 

related to sending, receiving, and 

viewing trading interest for 

communication protocols and 

negotiation systems, the Commission is 

proposing to specify in Part III, Item 10 

that the ATS should disclose when and 

how trading interest may be sent, 

received, and viewed at opening, how 

unexecuted trading interest is handled 

at the time the ATS begins its regular 

trading hours or following a stoppage of 

trading in a security during its regular 

trading hours, and whether there are 

any protocols at the open for buyers and 

sellers to send messages and negotiate a 

trade. 

Based on Commission staff experience 

with Form ATS–N filings, the 

Commission is proposing to amend 

Form ATS–N to incorporate the 

requirements of Part III, Item 10(c) of 

current Form ATS–N with the 

requirements of Part III, Item 10(a). In its 

experience, the Commission observed 

significant overlap in the responses to 

Part III, Item 10(a), which asks about 

how the ATS opens or re-opens after 

stoppage, and Part III, Item 10(c), which 

asks how unexecuted trading interest is 

handled at the start of regular trading 

hours or following a stoppage, as the 

treatment of unexecuted trading interest 

is an integral part of an ATS’s opening 

and re-opening procedures. Because of 

this overlap, some NMS Stock ATSs 

repeat the disclosures in both current 

Form ATS–N Part III, Items 10(a) and 

(c). To streamline the disclosure and 

reduce redundancy, the Commission is 

proposing to specify in Part III, Item 

10(a) of revised Form ATS–N that the 

Covered ATS describe how unexecuted 

trading interest is handled at the time 

the ATS begins its regular trading hours 

or following a stoppage of trading in a 

security during its regular trading hours, 

and to delete the separate disclosure 

requirements of Part III, Item 10(c) of 

current Form ATS–N. 

Information about when the Covered 

ATS will price and prioritize trading 

interest during the opening or reopening 

of the ATS would 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 processes or 

procedures to match trading interest to 

set a single opening or reopening price 

to maximize liquidity and accurately 

reflect market conditions at the opening 

or reopening of trading. For trading 

interest allowed to be submitted before 

an ATS opens for trading, the Item 10(b) 

would require an explanation of what 

priority rules would apply to that 

trading interest.602 The Commission 

believes most participants consider 

important the procedures for the pricing 

and priority of trading interest, and the 


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603Among other things, services to facilitate 

trading or source pricing for the Government 

Securities ATS using non-government securities 

markets that are offered by a third-party by 

arrangement with the broker-dealer operator or 

affiliates would also be required to be disclosed 

under this Item. 

604To the extent that a Government Securities 

ATS offers a functionality, procedure, or protocol 

using a market for government securities (e.g., 

trading venue for U.S. Treasury Securities or 

options) or an NMS Stock ATS offers a 

functionality, procedure, or protocol using a market 

for NMS stocks, the Covered ATS would disclose 

information about that functionality, procedure, or 

protocol in Part III, Item 11 of Form ATS–N. 

605 If a Covered ATS uses market data from 

another market that trades government securities, 

that information would be disclosed under Part III, 

Item 22 of revised Form ATS–N. 

606 Disclosure of any market data used by the 

Covered ATS, including market data for options 

and repos on government securities, would be 

required under Part III, Item 22 of Form ATS–N. 

607See, e.g., NYSE Guide Rule 104 (Dealings and 

Responsibilities of DMMs), Nasdaq Rules Equity 2, 

Section 5 (Market Maker Obligations). 

types of trading interest allowed 

because these rules and procedures can 

directly impact their execution price. 

The disclosures are also designed to 

provide information to subscribers 

about when they may use the systems to 

send or receive messages or view 

trading interest at the open or reopen, 

and the status of any messages or orders 

that may be pending before the ATS 

opens or reopens. 

Request for Comment 

120. Do Government Securities ATSs 

have any special opening and reopening 

processes and procedures around 

Treasury auctions? If so, do commenters 

believe there any aspects of the opening 

and reopening processes for Treasury 

auctions that should be specifically 

addressed in this Item? 

k. Item 11: Interaction With Related 

Markets 

Proposed Part III, Item 11 of Form 

ATS–N is designed to provide 

information about any functionality, 

procedure or protocol used to facilitate 

trading or communication on, or source 

pricing for, the Covered ATS that is 

offered by the broker-dealer operator or 

its affiliates 603 using markets for 

financial instruments related to the 

securities it trades (‘‘Related Markets’’). 

In the 2020 Proposal, the Commission 

proposed to add a similar question to 

Form ATS–G; the Commission is now 

proposing to add this question to Form 

ATS–N and to make it applicable to 

both Government Securities ATSs and 

NMS Stock ATSs. Markets for financial 

instruments related to government 

securities could include those nongovernment securities markets that trade 

futures, currencies, fixed income, and 

swaps, for example. Markets for 

financial instruments related to NMS 

stocks could include, for example, nonNMS stock markets that trade futures, 

options, and swaps. If applicable, the 

Covered ATS would: (1) Identify the 

functionality, procedures, protocols, 

and source of pricing and the Related 

Market; (2) state whether the 

functionality, procedures, protocols, 

and source of pricing is provided or 

operated by the broker-dealer operator 

or its affiliate, and whether the Related 

Market is provided or operated by the 

broker-dealer operator or its affiliate; (3) 

explain the use of the functionality, 

procedures, protocols, and source of 

pricing with regard to the Related 

Market and the ATS, including how and 

when the functionality, procedures, 

protocols, and source of pricing can be 

used, by whom, and with what markets. 

The functionalities, procedures, or 

protocols required to be disclosed 

would include, for example, offering 

order types to facilitate transactions in 

the ATS and the Related Market, 

procedures to allow subscribers to 

perform multi-leg transactions involving 

another market and the ATS, or a 

protocol to allow a subscriber to 

communicate with other persons to 

negotiate a trade including, for example, 

a government security and nongovernment security. A Covered ATS 

could offer, for example, Exchange-forPhysical (‘‘EFP’’) transactions that can 

involve markets in addition to the ATS. 

An EFP transaction where ATS 

subscribers agree to exchange a financial 

product, such as a futures contract on a 

government security, for the underlying 

related government security or NMS 

stock, would be responsive to this Item. 

The Commission believes that it would 

be important to participants to 

understand functionality, procedures, 

and protocols made available to them, 

as they can impact their experience in 

the ATS.604

Information about how the ATS uses 

market data from a Related Market, 

through an aggregator or otherwise, to 

provide the services it offers would also 

be required by the form.605 Among other 

things, for example, the ATS would 

need to disclose in response to this Item 

its use of such market data to display, 

price, prioritize, execute, and remove 

trading interest in the ATS.606 As part 

of this explanation, the ATS would 

specify, if applicable, when the ATS 

may change sources of market data to 

provide its services. In response to 

proposed Part III, Item 11 of Form ATS– 

N, the ATS would explain how, for 

example, market data from a Related 

Market is received by the ATS, 

compiled, and delivered to the matching 

engine. For example, among other 

possible arrangements, the ATS could 

explain that market data from a Related 

Market is received and assembled by the 

broker-dealer operator, 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. The ATS 

would disclose, for example, whether it 

uses market data from the futures 

market to price and execute EFP 

transactions and describe how it uses 

that market data under this Item. 

A broker-dealer operator’s activities in 

financial instruments related to the 

securities that the ATS trades or 

offerings of a Related Market, such as a 

futures exchange, along with its 

operation of an ATS, raise the potential 

for information leakage of a subscriber’s 

confidential trading information, or the 

broker-dealer operator could provide 

certain advantages to subscribers that 

use a Related Market that it operates. As 

such, Item 11 would require information 

about whether the functionality, 

protocols, procedures, and source of 

pricing on the Covered ATS or the 

Related Markets are provided or 

operated by the broker-dealer operator 

or its affiliates. 

Request for Comment 

121. What are commenters’ views on 

the relationship between markets for 

government securities and Related 

Markets and between markets for NMS 

stocks and Related Markets and how 

investors may use these markets 

together with a Covered ATS to achieve 

their trading objectives? 

122. What aspects of government 

securities markets or NMS stock markets 

and Related Markets, such as the futures 

markets, do market participants use for 

trading on a Covered ATS? What 

information about those markets might 

be useful to a subscriber and why? 

l. Item 12: Liquidity Providers 

Part III, Item 12 of Form ATS–N is 

designed to disclose information about 

arrangements with liquidity providers. 

Like national securities exchanges,607

ATSs might engage firms to provide 

liquidity on both sides of the market. 

The Commission has observed that the 

overwhelming majority of registered 

national securities exchanges have 

structured programs for market makers, 

which generally set forth both 

obligations (e.g., continuous quoting at 

or within the NBBO) and often, some 

benefits (e.g., fee rebates). Similarly, a 

Covered ATS may want to ensure that 

there is sufficient contra-side liquidity 


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608These liquidity providers may quote in a 

particular security in 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. 

609See Part II, Items 1(c) and 2(c) of Form ATS– 

N. 

610See NMS Stock ATS Adopting Release, supra 

note 2, at 38829. 

611The Commission is proposing to change the 

current requirement to disclose arrangements with 

any ‘‘Subscriber’’ to display, enter, or trade against 

trading interest in the Covered ATS to require 

disclosure of any such arrangements with any 

‘‘persons.’’ In the Commission’s experience, 

arrangements to display, enter, or trade against 

trading interest in a Covered ATS may include 

arrangements with subscribers, non-subscriber 

participants who submit orders through a 

subscriber or the broker-dealer operator, and 

persons controlling subscribers or participants to 

the ATS. The Commission is therefore proposing to 

revise the rule text by using the term ‘‘person’’ to 

capture arrangements with non-subscribers that 

could impact order flow on the ATS. 

available in the ATS in a particular 

security to incentivize market 

participants to send trading interest in 

that security to the ATS. To do this, the 

ATS may engage certain market 

participants to quote in a security or 

trade against orders in the Covered ATS, 

performing similar functions to a market 

maker on a national securities 

exchange.608

To the extent that a Covered ATS and 

a participant have entered into an 

arrangement under which that 

participant undertakes obligations to 

display, enter, or trade against trading 

interest on the Covered ATS, the 

Commission believes that market 

participants should know both the terms 

and conditions of such an arrangement 

and the identity of the liquidityprovider ATS participant. Form ATS–N 

currently requires an ATS to disclose 

the terms and conditions of an 

arrangement with a liquidity provider 

and the names of any liquidity 

providers that are either business units 

of the broker-dealer operator or affiliates 

of the broker-dealer operator.609 When it 

adopted Form ATS–N, the Commission 

explained that it was requiring 

disclosure regarding liquidity providers 

because it believed that market 

participants would want to know the 

identity of such liquidity providers to 

help evaluate potential conflicts of 

interest or information leakage on the 

trading platform.610 The Commission 

now believes that the names of all 

liquidity providers should be disclosed 

to evaluate potential conflicts of interest 

and the potential for information 

leakage. Specifically, if a participant is 

obligated to provide contra-side 

liquidity and, for example, derives a 

particular benefit in exchange for 

undertaking such an obligation, the 

Commission believes that other users of 

the ATS should know who that liquidity 

provider is, how it is expected to trade 

in the ATS, and the benefit that it is 

receiving. This disclosure would be 

similar to Exhibit M of Form 1, which 

requires national securities exchanges to 

publicly disclose, among other things, 

the identity of all market makers and 

liquidity providers. The Commission 

believes it appropriate to require a 

similar level of disclosure for Covered 

ATSs with regard to the identity of 

market makers and liquidity providers, 

given the sizable market share of such 

entities in their respective sectors. 

Additionally, the Commission 

believes that information about liquidity 

providers would be useful to ATS 

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 Covered ATS. 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. This Item could cover, for 

example, arrangements or agreements 

between the broker-dealer operator and 

another party to quote or trade on the 

Covered ATS. The Item does not cover 

agreements with a subscriber that has no 

obligation to buy or sell securities in the 

ATS. Furthermore, to obtain disclosures 

about activity on Communication 

Protocol Systems, the Commission is 

proposing to revise Part III, Item 12 of 

Form ATS–N, which asks about whether 

there are arrangements to ‘‘provide’’ 

orders and trading interest, and, instead, 

to ask about arrangements to ‘‘display, 

enter, or trade against’’ trading interest. 

Accordingly, the Commission is 

proposing that Part III, Item 12 require 

a Covered ATS to disclose any formal or 

informal arrangements with any 

person 611 or the broker-dealer operator 

to display, enter, or trade against trading 

interest in the ATS (e.g., undertaking to 

buy or sell continuously or to meet 

specified thresholds of trading or 

quoting activity). This will be in the 

form of a ‘‘yes’’ or ‘‘no’’ question, and 

if the ATS answers yes, it must both 

identify the liquidity provider(s) and 

describe the arrangement(s), including 

the terms and conditions. 

Request for Comment 

123. Are there any arrangements 

between Covered ATSs and persons to 

provide trading interest to the Covered 

ATS that may not be required by this 

Item but should be? If any, what is the 

nature of those arrangements, and why 

are they important to disclose publicly 

on Form ATS–N? 

124. Should Covered ATSs be 

required to identify liquidity providers 

on Form ATS–N? Please explain why or 

why not, including any advantages or 

disadvantages resulting from this 

disclosure. 

m. Item 13: Segmentation; Notice 

Part III, Item 13(a) of Form ATS–N is 

designed to disclose information about 

how trading interest in the Covered ATS 

is segmented into categories, 

classifications, tiers, or levels. The 

Covered ATS would be required to 

explain the segmentation procedures, 

including how and what trading interest 

is segmented. The Commission is 

proposing to add in Item 13(a) of Form 

ATS–N a requirement to explain where 

the identification of segmented trading 

interest is applied (e.g., when ATS 

trading interest is received by the 

broker-dealer operator or entered into 

the ATS). From the Commission’s 

experience, systems may segment 

trading interest when trading interest 

enters through the broker-dealer (from 

the SOR or similar functionality), or 

when the trading interest is entered into 

the ATS. The Commission believes 

subscribers would want to understand 

where their trading interest is 

segmented so they can assess who is 

making the decisions about how their 

trading interest will be categorized 

when entered into the ATS and the level 

of protections their confidential trading 

information will receive. The Covered 

ATS would also be required to identify 

and describe any categories, 

classifications, tiers, or levels and the 

types of trading interest that are 

included in each and provide a 

summary of the parameters for each 

segmented category and length of time 

each segmented category is in effect. 

The Commission is proposing to add to 

Item 13(a) that the parameters for each 

segmented category would include 

when such category is determined, 

reviewed, and can be changed. Item 

13(a) also requires disclosure of any 

procedures for overriding a 

determination of segmented category 

and would require how segmentation 

can affect trading interest interaction. 

This Item is designed to provide 

market participants with an 

understanding of the categories of 

trading interest or types of participants 

with which they may interact. In 

addition, the information provided 

would allow them to both assess the 

consistency of a segmented group and 

determine whether the manner in which 

the trading interest is segmented 

comports with their views of how 


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612See Bloomberg Letter at 8. 

613The Commission is proposing to specify that 

this question relates to process implemented ‘‘in the 

absence of subscriber direction.’’ The Commission 

is drawing a distinction from the filtering or 

blocking that a subscriber can do in the ATS, which 

would be disclosed in Part III, Item 14 (CounterParty Selection). If the ATS, on its own, and in the 

absence of subscriber directions, filters certain 

subscribers from viewing the existence of certain 

trading interest, that would be responsive to Part III, 

Item 13 of Form ATS–N. 

certain trading interest should be 

categorized. Disclosure of the 

procedures and parameters used to 

segment categories would allow a 

participant to determine whether its 

view of what constitutes certain trading 

interest it wants to seek or avoid is 

classified in the same way by the 

Covered ATS. For example, a subscriber 

may find it useful to understand the 

standards a Covered ATS uses to 

categorize high frequency trading firms 

so that it can compare the criteria used 

by the ATS with its view of what 

constitutes a high frequency trading 

firm, and thus be able to successfully 

trade against or avoid such trading 

interest. Similarly, information 

regarding the procedures applicable to 

trading among segmented categories 

would allow market participants to 

evaluate whether they can successfully 

trade against or avoid the segments of 

trading interest. In response to the 

question regarding segmentation on 

previously-proposed Form ATS–G in 

the 2020 Proposal, one commenter 

stated that, as the fixed income market 

structure continues to develop, types of 

segmentation options may occur in 

Government Securities ATSs and 

should be disclosed.612

Some Covered ATSs segment trading 

interest entered in the ATS according to 

various categories for purposes of 

trading interest interaction. For 

example, a Covered ATS could elect to 

segment trading interest by type of 

participant (e.g., buy-side or sell-side 

firms, PTFs, agency-only firms, firms 

above or below certain assets under 

management thresholds). When 

segmenting trading interest in the ATS, 

a Covered ATS might look to the 

underlying source of the trading interest 

such as the trading interest of retail 

customers. Some Covered 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. 

Covered ATSs might use some 

combination of these criteria or other 

criteria altogether. The ATS might use 

these segmented categories to design its 

trading interest interaction rules, 

allowing only trading interest from 

certain categories to interact with each 

other. 

The Commission recognizes the 

concern that describing the precise 

criteria used by the ATS to segment 

trading interest could result in gaming 

of those criteria by subscribers and thus 

reduce the effectiveness of segmentation 

as a control. On the other hand, market 

participants are interested in 

understanding how their trading interest 

is categorized in the ATS and the types 

of market participants that would 

interact with its trading interest. The 

Commission believes that Part III, Item 

13 of Form ATS–N appropriately 

balances these competing interests by 

soliciting a summary of the parameters 

for each segmented category. By 

requiring Covered ATSs to provide a 

summary of these parameters on Form 

ATS–N, rather than a detailed analysis 

of the parameters and how they are 

calculated, this Item is designed to 

avoid responses that could allow the 

gaming or manipulation of segmentation 

criteria. 

Based on the Commission’s 

experience, systems that offer RFQs or 

BWIC protocols that bring buyers and 

sellers together to negotiate may apply 

filtering technology to allow 

participants to more easily search for 

securities with particular characteristics 

that comport with the participants’ 

needs or exclude securities that do not 

meet the participants’ needs. They may 

also offer counterparty filtering that 

prevents transactions between certain 

participants (i.e., potential 

counterparties) by prohibiting views of 

either party’s inventory by the other 

party. Such systems may also 

implement permissioning procedures 

for subscribers to be able to view trading 

interest of certain other subscribers. The 

Commission believes that market 

participants would benefit from 

understanding how a Covered ATS 

controls the counterparty interest that 

they, and their potential counterparties, 

can view and interact with, and 

accordingly, the Commission is 

proposing to add new Part III, Item 

13(b), which would ask if the ATS, in 

the absence of subscriber direction, can 

prevent a participant or its potential 

counterparties from viewing or 

interacting with certain trading interest 

(e.g., permissioning, filtering, or 

blocking).613 An ATS that has such 

controls would be required to explain 

the processes, including what a 

subscriber or counterparty is prevented 

from viewing or interacting with and 

where this determination is made (i.e., 

when trading interest is received at the 

broker-dealer operator or the ATS); how 

and when the ATS prevents a subscriber 

or its potential counterparty from 

viewing or interacting with certain 

trading interest; any categories, 

classifications, tiers, or levels, and the 

types of trading interest that the ATS 

uses to determine how subscribers can 

view or interact with other trading 

interest; a summary of the parameters 

for such processes and the length of 

time any such parameter is in effect; any 

procedures for overriding a 

determination of any category, 

classification, tier, or level that the ATS 

uses to designate how subscriber trading 

interest can interact; how such 

processes can affect trading interest 

interaction; and how a subscriber can 

view filtered messages and any 

permissioning process and criteria for a 

subscriber to send, receive, or interact 

with a message. 

The Commission believes that market 

participants will benefit from 

transparency regarding protocols that 

Covered ATSs use to limit in any way 

the trading interest that certain 

subscribers can view or interact with 

based on the identity of the 

counterparty. The Commission 

recognizes that RFQs and similar 

systems may establish protocols to block 

or filter participants from viewing or 

interacting with the trading interest of 

certain potential counterparties. The 

Commission is thus proposing to clarify 

in Part III, Item 13 of Form ATS–N that 

the scope of the question would extend 

to ATS protocols involving the ATS 

filtering or blocking trading interest. 

Part III, Item 13(c) would address 

whether the ATS identifies trading 

interest entered by a customer of a 

broker-dealer as customer trading 

interest. Disclosing the origin of 

customer trading interest of a brokerdealer could be a form of segmentation 

because it can facilitate users restricting 

their trading to only certain types of 

market participants and it can 

contribute to information leakage and 

adverse selection of trading interest of 

institutional investors, who generally 

trade passively. Accordingly, Part III, 

Item 13(c) would require a Covered ATS 

to disclose if it identifies trading interest 

entered by a customer of a broker-dealer 

in the ATS as customer trading interest. 

In addition, in Part III, Item 13(d) of 

Form ATS–N, the ATS would be 

required to state whether it discloses to 

any person the designated segmented or 

otherwise designated category, 

classification, tier, or level of trading 

interest and, if so, 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 


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614The Commission is proposing minor changes 

to Form ATS–N, Part III, Item 14, which references 

how the designation affects the ‘‘interaction and 

priority of trading interest in the ATS’’ to be more 

inclusive of communication protocols. 615See supra Section IV.D.5.m. 

be contested. This requirement is 

substantially similar to the current 

requirement of Part III, Item 13(d) of 

Form ATS–N, but the Commission is 

proposing to amend this request to add 

designations other than segmentation, 

such as permissioning, filtering, and 

blocking, that would be responsive 

under proposed Part III, Item 13(b) of 

Form ATS–N. This would provide 

information to market participants about 

the notice that the ATS provides 

subscribers about the segmented 

category to which they are assigned, and 

also, if applicable, who can obtain 

information about the segmented 

categories of other subscribers. 

Request for Comment 

125. What information about the 

segmentation of trading interest by a 

Covered ATS or any other practices or 

procedures that allow a Covered ATS to 

control which counterparties view each 

other’s trading interest or are able to 

interact would be important to persons 

that use the services of the ATS? 

n. Item 14: Counter-Party Selection 

Part III, Item 14(a) of Form ATS–N is 

designed to provide information about 

whether trading interest can be 

designated to interact or not interact 

with certain trading interest in the ATS 

by an ATS participant. The Commission 

is proposing to make minor 

modifications to this question including 

new examples of the types of 

designations that a subscriber can make 

to control both interactions with and 

matching against trading interest or a 

participant in the ATS. These examples 

would include designations to interact 

with or execute against a specific 

subscriber’s trading interest or prevent 

the trading interest of a subscriber from 

interacting with or executing against the 

trading interest of that subscriber. If the 

ATS has such counterparty selection 

available, it would be required to 

explain the counterparty selection 

procedures, including how 

counterparties can be selected and 

whether the designation affects the 

trading rules (e.g., order interaction or 

priority) or communication protocols of 

the ATS.614 To analyze whether the 

ATS is an appropriate venue to 

accomplish their trading objectives, 

market participants have an interest in 

knowing whether—and how—they may 

designate their trading interest to 

interact or avoid interacting with 

specific trading interest or persons in 

the ATS. Part III, Item 14 is designed to 

require disclosure of such information. 

For instance, the disclosures proposed 

under this Item would allow a 

participant in the Covered ATS to know 

whether it can interact with certain 

categories of trading interest in the ATS 

or can designate trading interest 

submitted to the ATS to interact only 

with trading interest of certain other 

types of ATS participants. The ATS 

might allow subscribers to choose from 

categories of trading interest or 

categories of participants that the 

broker-dealer operator segments in the 

ATS. For example, buy-side or 

institutional subscribers might seek to 

trade only against other buy-side or 

institutional trading interest, or might 

seek to avoid trading against PTFs or 

high frequency trading firms. Also, it 

would also be responsive to this Item for 

a Covered ATS to state whether a 

subscriber can restrict interacting with 

its own trading interest, whether such 

restrictions are by default or only upon 

subscriber request, and any applicable 

limitations on such restrictions. This 

Item would require description of any 

procedures allowing a subscriber to 

limit its counterparty on an order-byorder basis or a participant-byparticipant basis, how it would go about 

doing so, and how such selection would 

affect the interaction and priority of 

trading interest. For example, an ATS 

would include in its response to this 

Item whether a designation to interact 

with a specific category of counterparty 

trading interest or participants can be 

made by the subscriber (i.e., by marking 

its trading interest) or whether the 

designation must be implemented by 

the broker-dealer, on the subscriber’s 

behalf. If the broker-dealer implements 

the counterparty designation, the ATS 

would also include when such 

designation would go into effect (e.g., on 

same trading day as the subscriber’s 

selection or on a date thereafter). 

The Commission is also proposing to 

amend Form ATS–N to add a 

requirement that the ATS disclose in 

Part III, Item 14(b) whether a subscriber 

can designate trading interest that the 

subscriber or potential counterparties 

can view (e.g., filtering, blocking, 

permissioning). The ATS would be 

required to explain any such processes, 

including how and when a subscriber 

can (or cannot) designate which trading 

interest it or a potential counterparty 

can view, any categories, classifications, 

or levels, and the types of trading 

interest that subscribers are able to 

designate, a summary of the parameters 

for such processes and the length of 

time any such parameter is in effect, and 

how such processes can affect how 

trading interest interacts in the ATS. 

The Commission believes this type of 

functionality may be particularly 

relevant to communication protocols 

and negotiation systems that may fall 

within the criteria of Rule 3b–16(a), as 

proposed to be amended. From 

Commission staff’s experience, ATSs 

may disclose counterparty filters that 

could, for example, allow a subscriber to 

prohibit itself from viewing a potential 

counterparty’s inventory or to prohibit a 

potential counterparty from viewing its 

inventory. Under proposed Part III, Item 

14(b), an ATS would include in its 

response if, for example, participants in 

the ATS can choose not to view trading 

interest from certain identified potential 

counterparties or certain types of 

counterparties, such as those that have 

failed to respond to RFQs in a given 

amount of time. Similarly, if a 

participant can block certain potential 

counterparties from viewing its trading 

interest, such functionality would be 

required to be disclosed in this Item as 

well. Market participants should be 

aware of how participants on the 

platform can choose not to interact with 

certain trading interest. If, however, the 

ATS (and not the participant) makes 

these designations and restricts the 

interactions of potential counterparties, 

such designations and restrictions 

would be required to be disclosed under 

Part III, Item 13.615

Request for Comment 

126. Should Form ATS–N request 

more or less information about how 

trading interest can be designated to 

interact or not interact with certain 

trading interest in the Covered ATS? 

Are there important forms of 

counterparty selection that the 

Commission should address? 

o. Item 15: Display and Visibility of 

Trading Interest 

The Commission is proposing to 

restructure Part III, Item 15 so market 

participants can more readily 

understand information regarding 

trading interest that the Covered ATS 

displays to the subscribers, the public, 

and any person, including the brokerdealer operator, and what information 

regarding trading interest a subscriber of 

the ATS can display through the ATS. 

Although, as discussed below, the 

Commission proposes to require 

Covered ATSs to divide the responses to 

Part III, Item 15(b) of current Form 

ATS–N into Items 15(a), (b), and (c) in 

revised Form ATS–N, the Commission 

believes that these questions would 

solicit substantially similar information 


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15564 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 

616 In the case of a Covered ATS offering a direct 

data feed with information about trading interest in 

the ATS, the ATS would be required to disclose 

under Part III, Item 15 what information the data 

feed provides about the trading interest, the 

associated timing in receiving the feed (e.g., realtime, delayed), how a subscriber would receive the 

feed (e.g., connectivity), and if all subscribers are 

treated the same in receiving the feed, including 

whether all subscribers are eligible to receive it and 

any differences in latency receiving the feed. 

617The broker-dealer operator typically controls 

the logic contained in these systems or functionality 

that determines where trading interest that the 

broker-dealer operator receives will be handled or 

sent. 

618See Part III, Item 1 of Form ATS–N (providing 

examples of types of market participants). 

that is required by current Item 15(b) of 

Form ATS–N, in addition to information 

that is relevant to communication 

protocols and the use of non-firm 

trading interest. 

Part III, Item 15(a) of Form ATS–N 

would require a Covered ATS to 

disclose whether the ATS displays 

trading interest to subscribers or the 

public (e.g., whether the ATS 

disseminates orders through market data 

feeds or a website or sends invitations 

or requests to subscribers about 

potential counterparties to trade with). 

If the ATS displays trading interest to 

subscribers or the public, the ATS 

would be required to explain what 

information the ATS displays (e.g., 

security, price, size, direction, the 

identity of the sender, rating 

information based on the sender’s past 

performance in the ATS), how and 

when such information is displayed, to 

whom such information is displayed 

(e.g., subscribers, public, types of 

market participant), and how long the 

displayed information is available. In 

addition, the ATS would also be 

required to indicate whether a 

subscriber can opt-out of the display of 

its trading interest, and if so, the process 

for subscribers to do so. This Item 

would also require the ATS to describe 

differences in latencies with which the 

ATS displays subscribers’ trading 

interest due to a functionality of the 

ATS. For example, if a Covered ATS 

transmits and displays its proprietary 

data feed to certain subscribers faster 

than to other subscribers as a result of 

the alternative means offered by the 

ATS to connect, such information 

would be responsive to this Item. In 

addition, this Item would require an 

ATS that offers work-ups to match 

trading interest to disclose the 

information that is displayed to all 

subscribers or certain subscribers in 

public or private phases of the work-up, 

as well as what characteristics of the 

trading interest are displayed. 

The ATS could display subscriber 

trading interest in a number of ways. 

For instance, when an ATS sends 

electronic messages outside of the ATS 

that expose the presence of trading 

interest in the ATS, it is displaying or 

making known trading interest in the 

ATS. In Part III, Item 15(a), a Covered 

ATS would be required to disclose the 

circumstances under which the ATS 

sends 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. An ATS may 

also offer a direct data feed from the 

ATS that contains real-time order 

information.616 Some ATSs have 

arrangements, whether formal or 

informal (oral or written), with third 

parties to display the ATS’s trading 

interest outside of the ATS, such as IOIs 

from the subscribers being displayed on 

vendor systems or arrangements with 

third parties to transmit IOIs between 

subscribers. A Covered ATS would be 

required to include this type of 

information in its response to this Item. 

Part III, Item 15(b) of Form ATS–N 

would require a Covered ATS to 

disclose whether a subscriber can use 

the ATS to display or make known 

trading interest to any person (e.g., 

stream quotes to the subscribers or the 

public or send a request for quote, IOI, 

conditional order, or invitation to 

negotiate to a subscriber or the brokerdealer operator). If yes, the ATS would 

explain what information the subscriber 

can display through the ATS (e.g., 

security, price, size, direction, the 

identity of the sender), procedures for 

subscribers to display such information, 

how and when such information is 

displayed, to whom such information is 

displayed (e.g., subscribers, public, 

types of market participant), and how 

long the displayed information is 

available. In addition, Communication 

Protocol Systems may offer 

functionalities or protocols to allow 

their subscribers, who otherwise do not 

have the ability to display their trading 

interest, to use the functionalities or 

protocols to display trading interest 

information. Part III, Item 15(b) would 

differ from Part III, Item 15(a) in that 

Item 15(b) would ask what information 

subscribers can display or make known 

about their trading interest through the 

ATS whereas Part III, Item 15(a) would 

ask what information regarding trading 

interest the ATS displays. For example, 

an ATS that receives orders and 

disseminates top-of-book information to 

subscribers would be required to 

disclose this in Item 15(a), while an 

RFQ system that allows participants to 

select when, how, and to whom to 

display their trading interest to solicit 

counterparty trading interest would be 

required to disclose this in Item 15(b). 

The Commission is proposing the 

disclosure requirements of Item 15(b) 

because it believes that ATS 

participants would want to know 

whether a particular ATS would 

provide them with any protocol or 

functionality that would enable them to 

stream quotes to other subscribers or the 

public or send a request or invitation to 

negotiate to another subscriber or the 

broker-dealer operator. The disclosures 

regarding whether subscribers can 

display or make known their trading 

interest and the types of information 

that the subscribers can display would 

help market participants understand the 

extent to which potential information 

leakage may occur on the ATS. 

Part III, Item 15(c) of Form ATS–N 

would require a Covered ATS to 

disclose whether any trading interest 

bound for the ATS is made known to 

any person—not including employees of 

the ATS who are operating the system. 

Many market participants are sensitive 

to precisely how and when the ATS 

displays or otherwise makes known 

their trading interest both inside and 

outside the ATS as such information 

could result in other market participants 

trading ahead of their positions, and 

thus possibly causing inferior execution 

prices for the participants whose trading 

interest is displayed or otherwise made 

known. These participants could use 

these disclosures to evaluate whether 

sending trading interest to a particular 

ATS would achieve their trading 

strategies. In particular, subscribers that 

use the services of Covered ATSs, 

including customers of the broker-dealer 

operator, have limited information 

about the extent to which their trading 

interest sent to the ATS could be 

displayed outside the ATS. 

For example, trading interest directed 

to the ATS could pass through the 

broker-dealer operator’s non-ATS 

systems or functionalities such as an 

algorithm or a SOR, before entering the 

ATS. Such non-ATS systems and 

functionalities could be used to support 

the broker-dealer operator’s other 

business units, including any trading 

venues.617 It would be responsive to this 

Item to identify the recipient of 

displayed information by identifying the 

functionality of the broker-dealer 

operator (e.g., SOR, algorithm, trading 

desk), third party, or the type of market 

participant 618 that receives the 

displayed information. If, for instance, 

the ATS displays orders to the brokerdealer operator’s SOR or trading desk, 

the ATS would indicate ‘‘yes’’ to this 


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619Covered ATSs, as proposed, would be subject 

to the requirements of Rule 301(b)(10) and would 

be 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). 

620Part III, Item 15(d) of revised Form ATS–N 

(which is currently included in Part III, Item 15(a) 

of current Form ATS–N) would be applicable only 

to NMS Stock ATSs because Rule 600(a)(31) only 

applies to systems that trade NMS stocks. A 

Government Securities ATS would select ‘‘no’’ in 

response to this question. The Commission is also 

correcting a typo referencing Rule 600(a)(23) and 

replacing the reference with Rule 600(a)(31). 

621As discussed above, the Commission believes 

it would be more efficient for market participants 

and filers to consolidate the current disclosure in 

Part II, Items 1(d) and 2(d) to proposed Part III, Item 

16(c). See supra Section IV.D.4.a. 

question. If the answer is ‘‘yes’’ to either 

of these questions, the ATS would be 

required to explain what information is 

displayed (e.g., security, price, size, 

direction, the identity of the sender), 

how and when such information is 

displayed, to whom such information is 

displayed (e.g., algorithm, SOR, trading 

desk, third party), and how long the 

displayed information is available. If, 

for instance, trading interest bound for 

the ATS passes through the brokerdealer operator’s common gateway or 

algorithm, the ATS would need to 

disclose these functionalities as the 

trading interest was displayed to a 

functionality of the broker-dealer 

operator that would likely be outside 

the ATS. If trading interest resting in the 

ATS is displayed to one or more of the 

broker-dealer operator business units, 

the ATS would need to identify the 

business units of the broker-dealer 

operator by type of market participant 

(e.g., institutional investors, PTFs, 

market makers, affiliates, trading desks 

at the broker-dealer operator, market 

data vendors, clearing entities, and 

potential subscribers, among others). 

This Item is designed to ensure that the 

ATS discloses any display of trading 

interest bound to the ATS or residing in 

the ATS not otherwise captured in Part 

III, Items 15(a) and (b). Consistent with 

the discussion above, the Commission 

believes that market participants should 

have a full understanding of how and 

when their trading interest becomes 

known to any person, particularly when 

the information is made known to the 

broker-dealer operator’s non-ATSsystems and functionalities. The 

Commission further believes that 

information required under this Item 

would help market participants assess 

the potential for information leakage of 

subscribers’ confidential trading 

information to the broker-dealer 

operator’s non-ATS systems and 

functionalities. 

The proposed Item would not require 

information about employees of the ATS 

in non-trading related roles, such as 

technical, quality assurance, 

compliance, or accounting roles, among 

others, that support the ATS’s 

operations and to whom trading interest 

are made known in the performance of 

their duties.619

Part III, Item 15(d) of Form ATS–N 

would require the ATS to indicate 

whether it is an Electronic 

Communication Network (‘‘ECN’’) as 

defined in Rule 600(a)(31) of Regulation 

ATS.620 NMS Stock ATSs that are also 

ECNs may differ in how and where 

trading interest are displayed. NMS 

Stock ATSs that indicate ‘‘yes’’ to this 

Item would also be required to provide 

information in response to Part III, Items 

15(a), (b), or (c) to inform market 

participants how ECNs display trading 

interest. 

Request for Comment 

127. What information involving NMS 

stocks, government securities, and repos 

do ATSs or Communication Protocol 

Systems display? Are there levels of 

displayed information that a system 

may offer to market participants? If so, 

what are the levels and are there any 

specific requirements for a market 

participant to access that information? 

For instance, do ATSs or 

Communication Protocol Systems have 

different mechanisms or functionalities 

for displaying trading interest 

depending on the subscriber? What 

functionalities does the system use to 

display information in government 

securities and repos? Please explain the 

purpose and operation of any such 

functionality. 

128. For ATSs or Communication 

Protocol Systems that display trading 

interest both on the system and outside 

the system, what is the process for 

market participants to submit trading 

interest to interact with the trading 

interest that is displayed outside the 

system? 

129. Are there any aspects of display 

of trading interest on Government 

Securities ATSs that should be 

specifically addressed in the Item? Are 

there any aspects of display that are 

unique to Communication Protocol 

Systems? 

p. Item 16: Routing 

Part III, Item 16 is designed to provide 

information about whether trading 

interest in the ATS can be routed or sent 

to a destination outside the ATS. As 

proposed, Part III, Item 16 would apply 

to both NMS Stock ATSs and 

Government Securities ATSs. In the 

Commission’s experience, routing of 

government securities among trading 

venues is not as prevalent as in the 

market for NMS stocks. To the extent it 

is inapplicable, a Government Securities 

ATS would check ‘‘no’’ on Form ATS– 

N. However, Government Securities 

ATSs may have mechanisms to send 

trading interest outside the ATS. 

Accordingly, the Commission is 

proposing to require Covered ATSs to 

disclose whether they route or 

otherwise ‘‘send’’ trading interest 

outside of the ATS. If the Covered ATS 

permits trading interest to be routed or 

sent to a destination outside of the ATS, 

the ATS would be required to indicate 

whether affirmative instructions from a 

subscriber must be obtained before its 

trading interest can be routed or sent 

from the ATS, and provide a description 

of the affirmative instruction and 

explain how the affirmative instruction 

is obtained. If the ATS is not required 

to obtain an affirmative instruction to 

route or send trading interest, the ATS 

would be required to explain when 

trading interest can be routed or sent 

from the ATS (e.g., at the discretion of 

the broker-dealer operator). The 

Commission believes that such 

disclosures provide ATS participants 

with the ability to gauge how their 

trading interest would be handled by 

the ATS. Subscribers might, for 

example, have concerns about the 

leakage of confidential trading 

information when their orders are 

routed to other trading venues. The 

Commission believes the disclosures in 

Part III, Item 16 would provide relevant 

information for ATS participants to 

evaluate the potential for leakage of 

their confidential trading information. 

The Commission is also proposing to 

relocate Part II, Items 1(d) and 2(d) of 

current Form ATS–N to Part III, Item 

16(c) of revised Form ATS–N.621

Specifically, proposed Item 16(c) of 

revised Form ATS–N would request 

whether trading interest in the ATS can 

be routed or sent to a destination 

operated or controlled by the brokerdealer operator or an affiliate of the 

broker-dealer. If yes, the ATS would be 

required to identify the destination and 

when and how trading interest is routed 

or sent from the ATS to the destination. 

The Commission believes that such 

information would help market 

participants evaluate whether the 

Covered ATS sending trading interest to 

a trading venue operated or controlled 


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15566 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 

622The Commission is proposing to revise Item 

17 of Form ATS–N to clarify that the question 

relates to the ATS’s closing session(s), and that 

‘‘regular trading hours’’ refers to the ATS’s regular 

trading hours. 

623The Item would, for example, require 

disclosure of any procedures to match trading 

interest to set a single closing price to maximize 

liquidity and accurately reflect market conditions at 

the close of trading in the ATS. 

624As discussed above, the Commission is 

proposing to delete current Part III, Item 18 of Form 

ATS–N (Trading Outside of Regular Trading Hours) 

to combine such disclosure requests with Part III, 

Item 4 (Hours of Operations). As a result of this 

deletion, the Commission is proposing to re-number 

Part III, Items 19 through 26 of current Form ATS– 

N. The discussion herein refers to the Items as 

proposed to be re-numbered. 

625The Commission is including non-exhaustive 

lists of examples of responsive information in 

parentheticals in the text of the Item. For instance, 

for the description of the structure of the fees, the 

Commission is providing as examples fixed, 

volume-based, and transaction-based fee structures. 

For the description of variables that impact the fees, 

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 

the types of subscribers: Broker-dealers, 

institutional investors, and retail investors. 

by the broker-dealer operator or its 

affiliates poses a conflict of interest and 

is consistent with its trading objectives. 

Request for Comment 

130. Do Government Securities ATSs 

(inclusive of Communication Protocol 

Systems, as proposed) and 

Communication Protocol Systems that 

trade NMS stocks send trading interest 

to destinations away from the system? If 

so, how and under what circumstances? 

Are there any aspects about how trading 

interest is sent away from a Covered 

ATS that should be addressed by Form 

ATS–N? Have the mechanisms for 

routing to a destination outside an NMS 

Stock ATS changed in any way since 

the adoption of Form ATS–N for NMS 

Stock ATSs? If so, do commenters 

believe that the Commission should 

require Covered ATSs to provide 

additional information in Part III, Item 

16 to reflect such change? 

q. Item 17: Closing 

Part III, Item 17 of Form ATS–N is 

designed to provide information about 

differences between how trading 

interest is treated on the ATS during the 

ATS’s closing session(s) 622 and during 

regular trading hours established by the 

ATS. The Item is designed to provide 

market participants with information 

about processes the Covered ATS uses 

to transition to the next trading day, 

including whether the ATS offers any 

particular order types during a closing 

session(s) or has different procedures for 

closing trading for a particular trading 

session and transitioning trading to the 

next trading day. The vast majority of 

requests in Part III of revised Form 

ATS–N relate to trading during the 

Covered ATS’s regular trading hours. 

Therefore, when discussing differences 

between trading during the Covered 

ATS’s closing session(s) and during 

regular trading hours set by the ATS, the 

Covered ATS would be required to 

discuss differences as compared to 

relevant information disclosed in Part III 

Items, including, among others, order 

types and sizes and trading facilities 

(Item 7), use of non-firm trading interest 

and communication protocols and 

negotiation functionality (Item 8), 

segmentation and notice (Item 13), and 

display and visibility of trading interest 

(Item 15). The Commission believes this 

information would be important for 

market participants to understand the 

closing procedures around a particular 

trading session, if any, to carry out their 

trading objectives.623

r. Item 18: Fees 

Part III, Item 18 of Form ATS–N 624

would require a Covered ATS to provide 

information on any fees or charges for 

use of the ATS’s services, including any 

fees or charges for use of the ATS’s 

services that are bundled with the 

subscriber’s use of non-ATS services or 

products offered by the broker-dealer 

operator or its affiliates, and any rebate 

or discount of fees or charges. The 

Commission believes that disclosures 

regarding fees on Form ATS–N are 

necessary and important, and should 

not be voluntary for Covered ATSs. Fee 

disclosures on Form ATS–N are 

designed to allow all market 

participants to analyze the fee structures 

across Covered 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. Requiring disclosures of ATS 

fees is warranted as, in the 

Commission’s experience, fees can be a 

primary factor for market participants in 

deciding where to send their trading 

interest. 

Part III, Item 18 would request that 

Covered ATSs include in their 

descriptions the types of fees, the 

structure of the fees, variables that 

impact the fees, and differentiation 

among types of subscribers, and 

whether the fee is incorporated into the 

price displayed for a security, and the 

Commission would provide examples of 

responsive information in a 

parenthetical in the text of each 

subpart.625 The Item also would require 

a range for each type of fee (e.g., 

subscription, connectivity, and market 

data) charged on the Covered ATS. 

The Commission is proposing to add 

the term ‘‘market data’’ to the examples 

listed in Part III, Item 18 of the types of 

fees that a Covered ATS must disclose. 

For example, if a Covered ATS 

distributed a market data feed and 

charged a fee for it, the ATS would be 

required to provide the information 

responsive to Item 18 regarding that fee. 

The Commission believes this example 

may be relevant to Government 

Securities ATSs, which are primarily lit 

venues that offer market data to 

subscribers. While most NMS Stock 

ATSs do not disseminate market data, a 

description of an NMS Stock ATS’s 

market data fees is currently required by 

the Item, which requires disclosure of 

‘‘any’’ fee or charge for use of the ATS 

services. Adding the example could 

assist Covered ATSs in responding 

comprehensively to the Item. 

The Commission recognizes that the 

fee structures of Covered ATSs can vary 

and that not all Covered ATSs apply set 

tiers or categories of fees for subscribers; 

however, the Commission believes that 

a market participant should have 

sufficient information to understand the 

fees for using the services of the 

Covered ATS. Recognizing the various 

fees that can be charged by Covered 

ATSs, the Commission is specifying in 

the fee request the types of information 

that a Covered 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). With regard to the variables that 

impact the fees set, ATSs would be 

required to be specific and delineate 

how a given variable would likely 

impact the fee level (e.g., higher or 

lower). In addition, the Commission is 

proposing to add a new requirement not 

included in current Form ATS–N that 

the Covered ATS must disclose whether 

the fee is incorporated into the price 

displayed for a security (e.g., markups, 

markdowns). For example, the price 

displayed by the security may be higher 

(or lower) than the market price, and the 

broker-dealer would be compensated by 

the difference between the displayed 

price and the market price. The 

Commission believes that, in particular, 

such fees or charges may be relevant to 

communication protocols that would be 


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626The Covered ATS services generally include 

those services used for the purpose of effecting 

transactions in securities, or for submitting, 

disseminating, or displaying trading interest in the 

ATS. See 17 CFR 242.300(b). 

627See NMS Stock ATS Adopting Release, supra 

note 2, at 38858 (discussing what fees should be 

categorized as for use of the ATS’s services). 

628See NMS Stock ATS Adopting Release, supra 

note 2, at 38858 (discussing responses to current 

Item 19(b) (proposed Item 18(b)) depending on 

whether there is an explicit fee for the ATS as part 

of any bundled services). 

629The Commission is proposing to revise Form 

ATS–N, Part III, Item 19 of revised Form ATS–N 

(numbered as Item 20 in current Form ATS–N) to 

reference trading in U.S. Treasury Securities and 

Agency Securities. 

630See Regulation SCI Adopting Release, supra 

note 3, at 72254–55 n.28. 

631See id. at 72255 n.29. 

included under the proposed definition 

of ‘‘exchange.’’ 

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. 

Although the fees charged for Covered 

ATS services may be individually 

negotiated between the broker-dealer 

operator and the subscriber, the 

disclosures about the type of fees 

charged by the Covered ATS are 

designed to help market participants 

discern how the ATS’s fees are 

organized and compare that information 

across Covered ATSs, which could 

reduce the search costs of market 

participants in deciding where to send 

their trading interest. The Commission 

believes that Covered ATSs should be 

required to disclose differences in the 

treatment among ‘‘types of subscribers’’ 

(e.g., broker-dealers, institutional 

investors, retail). This information 

would allow subscribers to observe 

whether a Covered ATS is offering 

preferential treatment for certain types 

of subscribers with respect to fees. 

Part III, Item 18(a) would cover 

charges to subscribers for their ‘‘use of 

the ATS services’’ 626 and would not 

request information on fees charged for 

non-ATS services by a third party not in 

contract with the broker-dealer 

operator.627 Part III, Item 18(b) would 

require a description of 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 18(b) is designed to allow 

market participants to better evaluate 

fees for bundled services and products 

that include access to the Covered ATS. 

Covered ATSs would 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 

bundled fees could apply to them as 

subscribers.628

The disclosure requests under Part III, 

Item 18 would contain a stand-alone 

Item—Item 18(c)—which requests 

information about rebates and discounts 

of fees that are identified in subparts (a) 

and (b) of Item 18. Item 18(c) would 

require information about rebates and 

discounts that is similar to information 

required for fees (e.g., 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). 

Request for Comment 

131. What fees should the 

Commission require a Covered ATS 

subject to the Fair Access Rule to 

disclose on Form ATS–N? Are there any 

fees disclosures that are unique to NMS 

Stock ATSs or Government Securities 

ATSs and, if so, what information about 

those fees should be disclosed on Form 

ATS–N? 

132. What disclosures about bundled 

fees would be relevant and useful to 

potential and current subscribers to the 

ATS? 

133. What fees should the 

Commission require a Communication 

Protocol System that operates as a 

Covered ATS to disclose on Form 

ATS–N? 

s. Item 19: Suspension of Trading 

Part III, Item 19 of Form ATS–N 

would require a Covered ATS to provide 

information about any procedures for 

suspending or stopping trading in the 

ATS, including the suspension of 

trading in an NMS stock, U.S. Treasury 

Security, or an Agency Security.629 This 

Item is designed to, for example, inform 

market participants of whether, among 

other things, a Covered ATS will 

continue to accept trading interest after 

a suspension or stoppage occurs, 

whether the ATS cancels, holds, or 

executes trading interest that was 

resting in the ATS before the suspension 

or stoppage was initiated, and what type 

of notice the ATS provides to 

subscribers regarding a suspension or 

stoppage. Examples of system 

disruptions would include, but are not 

limited to, internal software problems 

that prevent the Covered ATS’s system 

from opening or continuing trading,630 a 

significant increase in volume that 

exceeds the ability of the trading system 

of the ATS to process incoming trading 

interest,631 and the failure of the trading 

system of the ATS to receive external 

pricing information that is used in the 

system’s pricing methodology. 

Information regarding a Covered ATS’s 

procedures about how trading interest 

might be handled by the ATS during a 

suspension or stoppage of trading would 

be useful to market participants because 

an ATS’s procedures might require the 

cancelation of existing trading interest 

or preclude the acceptance or execution 

of trading interest during a suspension, 

both of which would impact a 

subscriber’s trading interest or its ability 

to trade in the ATS. This information 

would better inform a subscriber’s 

trading decisions at the time of such an 

event and thus help that subscriber 

accomplish its trading objectives. If a 

Covered ATS establishes different 

procedures for suspending or stopping 

trading in the ATS depending on 

whether the source of the disruption is 

internal or external, a description of 

both procedures would be responsive to 

this request. In addition, this Item 

would require disclosure of procedures 

whereby a Covered ATS suspends 

trading in NMS stocks, U.S. Treasury 

Securities, or Agency Securities so that 

it does not cross the volume thresholds, 

as proposed herein, that may subject the 

ATS to certain Federal securities laws, 

including the order display and 

execution access rule (Rule 301(b)(3)), 

Fair Access Rule, or Regulation SCI. 

Information regarding the procedures 

for how a Covered ATS would handle 

trading interest during a suspension of 

trading or system disruption or 

malfunction would help the 

Commission better monitor the 

securities markets. 

Request for Comment 

134. Should Form ATS–N request 

information about any procedures for 

suspending or stopping trading that is 

particularly relevant to Government 

Securities ATSs (inclusive of 

Communication Protocol Systems, as 

proposed) or Communication Protocol 

Systems that trade NMS stock? 

t. Item 20: Trade Reporting 

Part III, Item 20 of Form ATS–N 

would require a Covered ATS to provide 

information on any procedures and 

material arrangements for reporting 


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632This question is substantially the same as Part 

III, Item 21 of current Form ATS–N. 

633See supra notes 228–229 and accompanying 

text. 

634The contractual obligations of the ATS are 

ultimately those of the broker-dealer operator. 

Because an ATS must register as a broker-dealer, 

the broker-dealer operator controls the ATS and 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. See NMS Stock ATS 

Adopting Release, supra note 2, at 38819. 

635See Treasury Market Practices Group (TMPG), 

White Paper on Clearing and Settlement in the 

Secondary Market for U.S. Treasury Securities (July 

12, 2018), available at https://www.newyorkfed.org/ 

medialibrary/Microsites/tmpg/files/CS-DraftPaper071218.pdf. ‘‘The TMPG found that many market 

participants do not understand the role of the 

[interdealer brokers] platform in terms of who their 

counterparty credit risk was to and the roles of 

various market participants in settlement and 

clearing.’’ Id. at 27. 

transactions in the ATS.632 For 

Government Securities ATSs, FINRA 

member firms are required to report 

transactions in U.S. Treasury Securities 

and Agency Securities to TRACE.633

Part III, Item 20 would require a 

Covered ATS to disclose its trade 

reporting procedures for reporting 

transactions in the ATS to an SRO or 

any alternative trade reporting 

destinations, if applicable. For example, 

it would be responsive to Item 20 for a 

Covered ATS to disclose whether the 

ATS has a specific procedure for 

reporting transactions to the SRO at 

different times based on, for example, a 

subscriber’s use of a particular order 

type, or the type of subscriber involved 

in the transaction. Covered ATSs would 

also be required to disclose ‘‘material’’ 

arrangements for reporting transactions 

in the ATS. The Commission recognizes 

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. On 

the other hand, if a Covered ATS uses 

another party to report transactions 

occurring in the ATS or has a backup 

facility that it uses for trade reporting, 

that information is likely to be 

responsive as a material arrangement. 

Requiring reporting only of material 

arrangements would limit potential 

burdens on Covered ATSs while 

providing market participants with 

sufficient information to understand 

how their trade information will be 

reported. Also, the proposed disclosure 

of the trade reporting procedures would 

allow the Commission to more easily 

review the compliance of the Covered 

ATS with its applicable trade reporting 

obligations as a registered broker-dealer 

as proposed herein. 

u. Item 21: Post-Trade Processing, 

Clearance, and Settlement 

Part III, Item 21 is designed to provide 

information on any procedures and 

material arrangements undertaken as a 

result of the contractual agreements 

between the broker-dealer operator for 

the Covered ATS 634 and the ATS’s 

participants to manage the post-trade 

processing, clearance, and/or settlement 

of transactions on the Covered ATS. The 

Commission is proposing revisions to 

Part III, Item 21 that would request 

information about post-trade processing, 

which covers the steps taken after 

execution to prepare a trade for 

clearance and/or settlement. These steps 

include, but are not limited to, routing 

trade information to relevant parties; 

enrichment of trade details with 

supplemental information (such as 

counterparty account information) 

required to effect settlement; performing 

allocations whereby a block trade is 

broken down into various client 

accounts; comparing the terms of a trade 

submitted by each counterparty 

(performing matching) to reconcile the 

terms so as to generate an affirmed 

confirm; performing sequential 

affirmation and confirmation processes; 

or sending notifications to interested 

parties, such as custodians. These types 

of activities can be performed both 

manually (with trading desk, middle 

office, or back office personnel 

completing the steps) or through 

automated activity processes (which 

seek to achieve the goal of straightthrough processing whereby trade 

information passes through the 

necessary steps to effect settlement in an 

automated manner). 

The proposed revisions to Part III, 

Item 21 provide some specific examples 

of the types of procedures and material 

arrangements that should be described 

by a Covered ATS under this Item, such 

as whether the broker-dealer operator, 

or an affiliate of the broker-dealer 

operator becomes a counterparty; 

submits trades to a registered clearing 

agency; requires subscribers to have 

arrangements with a clearing firm, or 

terminates trades. These examples are 

intended to be illustrative and not the 

only types of material arrangements that 

may exist. From Commission staff’s 

experience reviewing Form ATS–N, the 

Commission understands that brokerdealer operators have different 

arrangements and contractual 

obligations that are important to 

understanding the clearance and 

settlement of transactions in the ATS. 

A Covered ATS would also be 

required to describe any user 

requirements for such procedures and 

material arrangements, including the 

type and extent of connectivity (e.g., 

FIX), and whether the connectivity is to 

an order management system (OMS), 

execution management system (EMS), 

end-of-month expirations (EOMS), 

clearinghouse/custodian, or other 

system. 

The integrity of the trading markets 

depends on the prompt and accurate 

post-trade processing, clearance, and/or 

settlement of securities transactions. For 

example, counterparties to a trade face 

counterparty credit risk, regardless of 

whether they choose to clear and settle 

bilaterally or through a central 

counterparty, and therefore knowledge 

of any specific arrangements that are 

required by an ATS as part of the 

clearing process promotes market 

integrity.635 The Covered ATS’s 

procedures or material arrangements 

that address post-trade processing, 

clearance, and/or settlement are critical 

to ensuring that a buyer receives 

securities and a seller receives proceeds 

in accordance with the agreed-upon 

terms of the trade by settlement date. 

The disclosures required by this Item 

are intended to cover each of the steps 

in the post-trade process from the time 

of execution (including whether the 

broker-dealer operator or an affiliate of 

the broker-dealer operator is a 

counterparty to a transaction and 

whether the obligations of a 

counterparty are ever assigned or 

novated), through trade matching or 

affirmation/confirmation, and then 

through clearing procedures (including 

whether the Covered ATS requires its 

participants to be a member of a 

registered clearing agency, whether 

participants have any particular clearing 

obligations, and whether transactions 

are—wholly or partially—submitted to a 

registered clearing agency or cleared 

bilaterally using clearing banks or 

clearing agents), until settlement of the 

transaction (including whether 

counterparties make use of custodians, 

settlement banks, or a registered 

clearing agency). If the Covered ATS has 

adopted post-trade processing, clearing, 

and/or settlement processes or imposes 

any obligations on its participants in the 

event of a disruption (for example, a 

failure to deliver securities, a liquidity 

shortfall, or a counterparty default), this 

proposed Item should include a 

discussion of these processes and any 

resulting participant obligations. 

The Item requires the disclosure of 

‘‘material’’ arrangements to manage the 

post-trade processing, clearance, and/or 

settlement of transactions on the 

Covered ATS. For example, an 

arrangement under which another party 

would have a role in clearance or 

settlement may constitute a material 


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636This Item is currently numbered as Part III, 

Item 23 of current Form ATS–N. 

637Part III, Item 23 of revised Form ATS–N 

(currently numbered as Part III, Item 24 of current 

Form ATS–N) would be required only for NMS 

Stock ATSs, as the associated rule is inapplicable 

to government securities. See also NMS Stock ATS 

Adopting Release, supra note 2, at Section V.D.24. 638 17 CFR 242.301(b)(3). 639See supra Section III.D. 640The Commission is proposing changes to the 

Fair Access Rule, which are discussed in detail 

below. See infra Section V.A.2. 641See infra Sections V.A.3 through V.A.4. 642See 17 CFR 242.301(b)(5)(iii)(A). The 

Commission is proposing that any change in a 

Covered ATS’s response to Item 24 would be filed 

as a contingent amendment. See supra note 440 and 

accompanying text. 

arrangement that could trigger the 

disclosure requirement under Part III, 

Item 21. Limiting the explanation 

required to material arrangements 

would reduce the burden on Covered 

ATSs while at the same time still 

allowing market participants to 

understand and more easily compare 

such arrangements required across 

Covered ATSs. 

Proposed Part III, Item 21 is also 

designed to help market participants 

understand the measures the Covered 

ATS takes to manage post-trade 

processing, clearance, and/or settlement 

of transactions. Market participants 

should know and be able to understand 

any requirements a Covered ATS places 

on its subscribers, or other persons 

whose trading interest is sent to the 

ATS, to receive certain post-trade 

processing, clearance, and/or settlement 

services. The Commission believes 

market participants would likely find 

the disclosures required by this Item to 

be useful in understanding the measures 

undertaken by a Covered ATS to 

manage post-trade processing, 

clearance, and/or settlement of 

subscriber orders in the ATS and allow 

them to more easily compare these 

arrangements across Covered ATSs as 

part of deciding where to send their 

trading interest. The Commission 

believes that these disclosures would 

assist the Commission in better 

understanding the post-trade 

processing, clearance, and/or settlement 

procedures of Covered ATSs and risks 

and trends in the market as part of its 

overall review of market structure. 

Request for Comment 

135. What aspects of the procedures 

and material arrangements undertaken 

to manage the post-trade processing, 

clearance, and/or settlement of 

transactions on Covered ATSs are 

important for ATSs to disclose on Form 

ATS–N for the benefit of market 

participants? 

v. Item 22: Market Data 

Part III, Item 22 636 of Form ATS–N is 

designed to solicit information about the 

sources of market data used by the 

Covered ATS and how the ATS uses 

that market data from these sources to 

provide the services that it offers. As the 

Commission is proposing to apply Form 

ATS–N to Government Securities ATSs, 

the Commission is proposing to add to 

Part III, Item 22 to include ‘‘feeds from 

trading venues’’ in the examples of 

sources of market data, which may be 

applicable to Government Securities 

ATSs. Specifically, market participants 

would likely find it useful to know the 

source and specific purpose for which 

the market data is used by the Covered 

ATS, as the market data received by the 

ATS might affect the price at which 

trading interest is prioritized and 

executed, including trading interest that 

is pegged to an outside reference price. 

An NMS Stock ATS, for example, would 

be required to provide the names of 

national securities exchanges from 

which the ATS receives direct market 

data feeds, either from a vendor or 

directly from the exchange, in addition 

to the specific types of market data 

received from each source. In addition, 

a Covered ATS would be required to 

provide information about how the ATS 

uses market data to provide the services 

it offers. To avoid duplicative 

disclosure, market data reflecting 

options traded on government securities 

that is used by the ATS could be 

discussed in response to proposed Part 

III, Item 11. The Commission is 

proposing to include determining the 

best bid or offer (BBO) as an example of 

how the ATS uses market data, which 

could be applicable to Government 

Securities ATSs. Among other things, 

Part III, Item 22 requires the disclosure 

of the use of market data to display, 

price, prioritize, execute, and remove 

trading interest. As part of this 

explanation, the Covered ATS would be 

required to specify, if applicable, when 

the ATS may change sources of market 

data to provide its services. A Covered 

ATS would also be required to explain 

how market data is received by the ATS, 

compiled, and delivered to the matching 

engine. For example, among other 

possible arrangements, a Covered ATS 

could explain in response to the Item 

that market data is received and 

assembled by the broker-dealer operator, 

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. 

Request for Comment 

136. What are the sources of market 

data in NMS stocks, government 

securities, and repos that are available 

to market participants as well as to 

Covered ATSs and how do market 

participants and ATSs use this 

information? What disclosures about an 

ATS’s use of market data would be 

important to market participants? 

w. Item 23: Order Display and 

Execution Access 

Part III, Item 23 is designed to provide 

information about whether an NMS 

Stock ATS is required to comply with 

Rule 301(b)(3)(ii) of Regulation ATS.637

The Commission is not proposing to 

make changes to this Item, other than 

specifying that this Item would be 

applicable to NMS Stock ATSs, as the 

order display and execution access 

provisions under Rule 301(b)(3) only 

apply to an ATS’s NMS stock 

activities.638

x. Item 24: Fair Access 

Part III, Item 24 of Form ATS–N 

would provide a mechanism under 

which a Covered ATS would notify 

market participants whether it has 

triggered the proposed fair access 

threshold and, if so, whether the ATS is 

subject to the Fair Access Rule. As 

described above, the Commission is 

proposing to require Government 

Securities ATSs to comply with the Fair 

Access Rule if they meet the applicable 

thresholds.639 As a result, Part III, Item 

24 would be applicable to both NMS 

Stock ATSs and Government Securities 

ATSs that meet the applicable 

thresholds. Pursuant to proposed Rule 

301(b)(5)(ii), a Covered ATS would 

aggregate the trading volume for a 

security or category of securities for 

ATSs that are operated by a common 

broker-dealer, or ATSs that are operated 

by affiliated broker-dealers for the 

purpose of calculating the volume 

thresholds.640 In connection with 

proposed Rule 301(b)(5)(ii), the 

Commission is proposing to require the 

Covered ATS to indicate in Part III, Item 

24(a) through (c) if the ATS crossed the 

volume thresholds ‘‘whether by itself or 

aggregated pursuant to Rule 

301(b)(5)(ii).’’ 

If a Covered ATS crosses the fair 

access thresholds, proposed Rule 

301(b)(5)(iii)(A) 641 requires the ATS to 

establish and apply reasonable written 

standards for granting, limiting, and 

denying access to the services of the 

ATS.642 If subject to the Fair Access 

Rule, the Covered ATS would be 

required to describe the reasonable 

written standards for granting, limiting, 

and denying access to the services of the 

ATS pursuant to Rule 301(b)(5)(iii) of 


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643The Commission is proposing revisions to Part 

III, Item 24 (currently numbered as Part III, Item 25) 

to conform to the proposed rule text of the Fair 

Access Rule, including rule re-numbering, 

describing the required written standards as 

‘‘reasonable,’’ and to reference standards limiting 

and denying access to the services of the ATS. 

644This Item is currently numbered as Part III, 

Item 26 of current Form ATS–N. 

645See supra Section II.C. 

646See 17 CFR 242.605. 

647 If, for example, a Covered ATS publishes or 

provides a particular statistic on a daily basis, the 

ATS would include in Exhibit 4 of 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). If a Covered ATS publishes or provides 

a particular statistic weekly, the ATS would be 

required to include in Exhibit 4 of 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). 

Regulation ATS (as proposed to be 

applied herein).643 A description of the 

Covered ATS’s reasonable written 

standards in response to Part III, Item 24 

should be clear and comprehensive and 

should explain, among other things, the 

objective and quantitative criteria upon 

which the ATS’s reasonable written 

standards are based, any differences in 

access to the services of the ATS by 

applicant and current participants, and 

why the standards including any 

differences in access to the services of 

the ATS) are fair and not unreasonably 

discriminatory. To the extent another 

person performs a function of the ATS, 

the ATS would be required to provide 

reasonable written standards for 

granting, limiting, or denying access to 

the services performed by such person. 

In addition, an NMS Stock ATS must 

provide the ticker symbol for each NMS 

stock for which the NMS Stock ATS has 

exceeded the fair access threshold 

during each of the last 6 calendar 

months. 

The Commission believes that the 

proposed disclosures would facilitate its 

oversight of Covered ATSs and their 

compliance with Rule 301(b)(5) as 

proposed herein. In addition, the 

proposed disclosures would allow 

market participants to assess whether 

fair access is, in fact, being applied by 

a Covered ATS that meets the fair access 

threshold, in part by making publicly 

available a description of the ATS’s 

written standards for granting access. 

Request for Comment 

137. Is there other information that 

market participants might find 

important or useful regarding the 

reasonable written standards for 

granting, denying, and limiting access to 

the services of a Covered ATS that is 

subject to the Fair Access Rule? If so, 

describe such information and explain 

whether, and if so, why, such 

information should be required to be 

provided on Form ATS–N. 

y. Item 25: Aggregate Platform-Wide 

Data; Trading Statistics 

Part III, Item 25 of Form ATS–N 644 is 

designed to make public aggregate, 

platform-wide statistics that a Covered 

ATS already otherwise collects and 

publishes, or provides to one or more 

subscribers to the ATS. The purpose of 

Item 25 is to place subscribers on a level 

playing field with regard to aggregate, 

platform-wide statistics about the 

Covered ATS that the ATS makes 

available. 

As explained above, the Commission 

is proposing to amend Form ATS–N to 

solicit information about the use of nonfirm trading interest in the ATS, which 

relates to the proposed changes to 

Exchange Act Rule 3b–16.645 Consistent 

with those proposed revisions, the 

Commission also proposes to change the 

request for information on Part III, Item 

25 to require statistics beyond solely 

platform-wide order flow and execution 

statistics. Specifically, the Commission 

proposes that Part III, Item 25 require a 

Covered ATS to disclose all aggregate, 

platform-wide statistics that it publishes 

or provides to one or more subscribers. 

Such statistics would include the order 

flow and execution data that is currently 

solicited in Form ATS–N. In addition, 

the proposed disclosure request would 

require a Covered ATS to disclose 

statistics related to use of non-firm 

trading interest. On an RFQ system, 

such statistics might include the 

percentage or total number of timed-out 

inquiries (i.e., when a participant 

receives no prices or other responses 

after posting an inquiry). With the use 

of a conditional order protocol, such 

statistics could include market 

participants’ firm-up rates (e.g., the ATS 

sends a firm-up request to participants 

after their conditional orders are 

matched). 

While the Commission proposes to 

expand the scope of information that 

this Item would solicit, the proposed 

disclosure request does not require a 

Covered ATS to create, maintain, or 

publish any specific type of statistic. As 

is the case with the current requirement, 

this disclosure request only requires a 

Covered ATS to publicly disclose any 

statistics within the scope of the 

question that it already discloses to one 

or more subscribers. If a Covered ATS 

compiles a particular statistic without 

distributing it (i.e., only uses it 

internally), it would not be required to 

provide that statistic on Form ATS–N. 

Finally, as with current Part III, Item 26 

(proposed to be renumbered to Item 25), 

the proposed disclosure request does 

not require a Covered ATS to provide on 

Form ATS–N any data that is otherwise 

required by Rule 605 of Regulation 

NMS.646 A Covered ATS may choose to 

create and publish or provide to one or 

more subscribers or persons aggregate, 

platform-wide statistics for different 

reasons. To the extent that a Covered 

ATS has made a determination to create 

and publish or provide to subscribers 

certain aggregate platform-wide data, 

the Commission believes that others 

may also find such information useful 

when evaluating the ATS as a possible 

venue for their trading interest. 

As with the current disclosure 

request, the proposed disclosure request 

would not require a Covered ATS to 

amend its Form ATS–N every time it 

receives a subscriber data request. To 

comply with the proposed requirements 

under Part III, Item 25, Form ATS–N 

only requires a Covered ATS to update 

its disclosures for Part III, Item 25 on a 

quarterly basis.647 For instance, if a 

participant were to request updated or 

new aggregate platform-wide statistics 

in January, the Covered ATS would not 

be required to immediately file an 

updating amendment containing these 

statistics after complying with the 

participant’s request. Rather, the ATS 

would need to file an updating 

amendment within 30 days following 

the end of March. That updating 

amendment must contain the most 

recently distributed version of these 

statistics, as well as the most recently 

distributed version of all other aggregate 

platform-wide data that was provided 

during that quarter. The Commission 

notes that communications associated 

with the responsive statistics are not 

required to be publicly filed. In the prior 

example, for instance, if the statistics 

provided in the quarterly amendment 

are the ones provided in January (i.e., 

those are the latest version of those 

aggregate platform-wide statistics the 

ATS distributed), the ATS would not 

(and should not) also attach to Form 

ATS–N the participant’s email 

requesting the statistics. 

Furthermore, Part III, Item 25 of Form 

ATS–N would only require a Covered 

ATS to publicly disclose aggregate 

platform-wide data. As such, a Covered 

ATS would not be required to disclose 

individualized or custom reports 

containing data relating to that 

participant’s specific usage of the ATS. 

For example, an individual participant’s 

trade reports, order and execution 

quality statistics, and other statistics 


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648See supra note 533 for the definition of 

affiliate under Form ATS–N. 

649To avoid confusion, the Commission is 

proposing to delete language in the signature block 

in Part IV of Form ATS–N that refers to the 

signatory as ‘‘duly sworn.’’ The Commission notes 

that unlike Form ATS, Form ATS–N filings, which 

are submitted to EDGAR, are not required to be 

notarized; instead, they are subject to the rules 

governing electronic signatures set forth in Rule 302 

of Regulation S–T. See 17 CFR 232.302. 

650See supra Section III.B.4. 

651 17 CFR 242.301(b)(5)(i)(A)–(B). 

652See Regulation ATS Adopting Release, supra 

note 31, at 70873 (‘‘Accordingly, if an [ATS] 

accounted for twenty percent or more of the share 

volume in any equity security, it must comply with 

the fair access requirements in granting access to 

trading in that security.’’) (emphasis added). 

specific to a participant’s trading in the 

ATS would not be covered by the 

disclosure request in Part III, Item 25. A 

Covered ATS would need to 

independently evaluate any statistics 

that it compiles and distributes to 

determine whether they are responsive 

to this disclosure request. 

Part III, Item 25 would require the 

Covered ATS to attach both the 

responsive statistics and its explanation 

of the categories or metrics of the 

statistics and the criteria or 

methodology used to calculate those 

statistics as Exhibits 4 and 5, 

respectively. Also, in lieu of filing 

Exhibits 4 and 5, the Covered ATS 

could certify that the information 

requested under Exhibits 4 and 5 is 

available at the website provided in Part 

I, Item 6 of the form and is accurate as 

of the date of the filing. The 

Commission is proposing to add to the 

instruction that if the ATS selects the 

checkbox, the ATS will maintain its 

website in accordance with the rules for 

amending Form ATS–N pursuant to 

Rule 304(a)(2)(i) to reflect any changes 

to such information. This would require 

an ATS checking the box to update its 

website as if it were Form ATS–N, and 

therefore, to update the information, as 

appropriate pursuant to the 

Commission’s rules for amending Form 

ATS–N. 

Request for Comment 

138. Does Part III of Form ATS–N 

capture the information that is most 

relevant to understanding the operations 

of the Government Securities ATS and 

the use of non-firm trading interest on 

Communication Protocol Systems? Are 

there any Items that commenters believe 

are unnecessary? If so, why? 

139. Should the Commission expand 

what Covered ATSs must disclose on 

Form ATS–N? Is there other information 

that market participants might find 

relevant or useful regarding the 

operations of Covered ATSs that should 

be publicly disclosed? If so, describe 

such information and explain whether, 

and if so, why, such information should 

be required to be provided under Form 

ATS–N. 

140. Is there any information related 

to repos that Form ATS–N should 

require? 

141. Is there any information related 

to options on government securities that 

Form ATS–N should require? 

142. Is there any information that 

would be required by Part III of Form 

ATS–N that a Covered ATS should not 

be required to disclose due to concerns 

regarding confidentiality, business 

reasons, trade secrets, commercially 

sensitive information, burden, or any 

other concerns? 

143. Should the Commission adopt a 

more limited or expansive definition of 

‘‘affiliate’’ for purposes of Part III? 648

144. Would the disclosures under Part 

III of Form ATS–N help market 

participants better evaluate trading 

opportunities and decide where to send 

trading interest to reach their trading 

objectives? 

145. Would the proposed disclosures 

in Part III of Form ATS–N require a 

Government Securities ATS to reveal 

too much (or not enough) information 

about its structure and operations? 

146. Are there ways to obtain the 

same information as would be required 

from Government Securities ATSs by 

Part III of Form ATS–N other than 

through disclosure on Form ATS–N? If 

so, how else could this information be 

obtained? 

147. Could the proposed requirement 

to disclose the information that would 

be required by Part III of Form ATS–N 

impact innovation in Government 

Securities ATSs? 

148. Are there any aggregate platformwide statistics of the Covered ATS that 

should not be required to be disclosed 

under Item 25? 

149. Has Form ATS–N allowed 

market participants to better evaluate 

trading venues? If so, how? How do 

commenters believe the manner in 

which NMS Stock ATSs currently 

disclose information on Form ATS–N 

could be improved? Is the level of detail 

required appropriate? Are there any 

aspects of Form ATS–N on which the 

Commission should provide further 

guidance? 

6. Part IV: Contact Information, 

Signature Block, and Consent to Service 

Part IV of Form ATS–N would require 

a Covered ATS to provide certain basic 

information about the point of contact 

for the ATS, such as the point of 

contact’s name, title, telephone number, 

and email address. Part IV would also 

require the Covered ATS to consent to 

service of any civil action brought by, or 

any notice of any proceeding before, the 

Commission or an SRO in connection 

with the ATS’s activities. The 

Commission is proposing that Form 

ATS–N would be filed electronically 

and require an electronic signature.649

The signatory to each Form ATS–N 

filing would be required to represent 

that the information and statements 

contained on the submitted Form ATS– 

N, including exhibits, schedules, 

attached documents, and any other 

information filed, are current, true, and 

complete. Given that market 

participants would use information 

disclosed on Form ATS–N to evaluate 

potential venues, and that the 

Commission intends to use the 

information to monitor developments of 

Covered ATSs, it is important that Form 

ATS–N contain disclosures that are 

current, true, and complete, and 

therefore the Commission is proposing 

to require that the signatory to Form 

ATS–N make such an attestation. 

V. Proposed Amendments to Form ATS, 

Form ATS–R, and Other Conditions to 

Regulation ATS 

A. Proposed Amendments to the Fair 

Access Rule for all ATSs 

In addition to the amendments to the 

Fair Access Rule for Government 

Securities ATSs,650 the Commission is 

proposing several amendments to the 

Fair Access Rule that would apply to all 

ATSs that are subject to the rule. The 

proposed amendments are discussed 

below. 

1. Rule Text Clarifications 

The Commission is re-proposing to 

amend the Fair Access Rule, as well as 

the Capacity, Integrity, and Security 

Rule under Rule 301(b)(6), to specify the 

use of volume to calculate the relevant 

thresholds under the rule. For purposes 

of determining whether an ATS crossed 

the average daily volume thresholds for 

compliance with the Fair Access Rule, 

Rule 301(b)(5)(i) does not specify 

whether the ATS’s transaction volume 

in an NMS stock or an equity security 

that is not an NMS stock and for which 

transactions are reported to an SRO is 

calculated using the dollar or the share 

volume.651 In the Regulation ATS 

Adopting Release, when discussing the 

Fair Access Rule, the Commission stated 

that for these two types of securities, the 

test should be based on the share 

volume.652 Similarly, Rules 301(b)(5)(i) 

and (b)(6)(i) do not specify whether, for 

purposes of determining compliance 

with the Fair Access Rule and the 


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653 17 CFR 242.301(b)(5)(i)(C)–(D); 17 CFR 

242.301(b)(6)(i)(A)–(B). 

654See Regulation ATS Adopting Release, supra 

note 31, at 70873, 70875 (requiring compliance with 

the Fair Access Rule and the Capacity, Integrity, 

and Security Rule if an ATS accounted for more 

than 20 percent of the total ‘‘share volume’’ in a 

security with respect to equity securities, and for 

more than 20 percent of the ‘‘volume’’ in a security 

with respect to debt securities). While Form ATS– 

R requires an ATS to report total volume in terms 

of both units and dollars for equity securities, it 

requires an ATS to report the total settlement value 

only in dollar terms for municipal securities and 

corporate debt securities. See id. at 70878. 

655See proposed Rule 301(b)(5)(i)(A)–(D); 

proposed Rule 301(b)(6)(i)(A)–(B). 

656To the extent transactions are reported to 

multiple SROs, the volume of transactions reported 

to such SROs would be combined for the purpose 

of calculating whether the transactions meet the 

threshold. 

657See Regulation ATS Adopting Release, supra 

note 31, at 70873. 

658See MSRB Rule G–14; FINRA Rule 6730. 

Electronic Municipal Market Access (‘‘EMMA’’), 

which is a service operated by the MSRB, and 

FINRA disseminate information on transactions in 

municipal securities and corporate debt securities, 

respectively. See EMMA Information Facility, 

available at http://www.msrb.org/Rules-andInterpretations/MSRB-Rules/Facilities/EMMAFacility.aspx; FINRA Rule 6750. 

659For Rule 301(b)(5)(ii), the Commission would 

refer to the definition of affiliate used for purposes 

of Form ATS–N. See NMS Stock ATS Adopting 

Release, supra note 2, at 38818–19. Affiliate was 

defined 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.’’ Id. The Commission is proposing 

to include the definition of affiliate in proposed 

Rule 300(c). The currently defined term ‘‘affiliate of 

a subscriber’’ in Rule 300(c) is not currently used 

in Regulation ATS, and the Commission is therefore 

replacing such term with the definition of 

‘‘affiliate.’’ The proposed amended definition of 

‘‘affiliate’’ would help ATSs determine whether to 

aggregate the trading volume of ATSs operated by 

affiliated broker-dealer operators. The proposed 

definition of ‘‘affiliate’’ is identical to the definition 

of affiliate in Form ATS–N Explanation of Terms. 

Like the definition of ‘‘affiliate of a subscriber’’ 

under current Rule 300(c), the proposed definition 

of ‘‘affiliate’’ would include a specified person that, 

directly or indirectly, controls, is under common 

control with, or is controlled by, the specified 

person, and therefore would include employees of 

the specified person. 

660The term ‘‘control’’ is defined in Rule 300(f) 

of Regulation ATS to mean: The power, directly or 

indirectly, to direct the management or policies of 

the broker-dealer 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: Is a director, general partner, 

or officer exercising executive responsibility (or 

having similar status or performing similar 

functions); 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 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). See also NMS Stock ATS Adopting 

Release, supra note 2, at 38818–19 (discussing 

definition of control). 

661See Rule 3a1–1(a)(2) (providing that an 

organization, association, or group of persons shall 

be exempt from the definition of ‘‘exchange’’ if it 

is in compliance with Regulation ATS) and Rule 

301(a) (providing that an ATS shall comply with 

the requirements of Rule 301(b)). 

662See ICE Bonds Letter I at 6. 

663See id. 

Capacity, Integrity, and Security Rule, 

the volume for municipal securities or 

corporate debt securities is calculated 

based on the dollar or the share 

volume.653 In the Regulation ATS 

Adopting Release, the Commission 

intended the test applicable to debt 

securities to be based on the dollar 

volume.654 To mitigate any potential 

confusion, the Commission is adding 

these terms to Rules 301(b)(5)(i) and 

(b)(6)(i) to align the rule text with the 

Regulation ATS Adopting Release.655

The Commission is also re-proposing 

to amend Rules 301(b)(5)(i)(C) and (D) to 

clarify that the average daily dollar 

volume in municipal securities is 

provided by the SRO to which such 

transactions are reported and average 

daily dollar volume in corporate debt 

securities is provided by the SRO to 

which such transactions are reported.656

When Regulation ATS was adopted, 

transaction reporting plans for 

municipal securities and corporate debt 

securities were being developed.657

Today, transactions in municipal 

securities are reported to the MSRB and 

transactions in corporate debt securities 

are reported to FINRA. These two SROs 

provide the information that can be 

used by ATSs to determine whether the 

ATS is subject to the Fair Access Rule 

for these two categories of securities.658

This amendment will add clarity to the 

rule given the established transaction 

reporting regimes for municipal 

securities and corporate debt securities. 

2. Aggregation of Volume Threshold for 

Affiliated ATSs 

The Commission is also proposing to 

amend the Rule 301(b)(5)(ii) of the Fair 

Access Rule to aggregate the trading 

volume for a security or category of 

securities for ATSs that are operated by 

a common broker-dealer, or ATSs that 

are operated by affiliated broker-dealers, 

solely for the purpose of calculating the 

average transaction volume under Rule 

301(b)(5)(i)(A) through (F).659 Today, 

there are single entities that may be the 

registered broker-dealer operator for 

different types of ATSs that trade 

different categories of securities (e.g., 

NMS Stock ATS and non-NMS Stock 

ATS), and there are broker-dealers that 

may operate multiple ATSs that trade 

the same type of securities with 

different matching protocols (e.g., limit 

order book for one and volumeweighted-average-price for the other). 

Likewise, there are entities that control 

multiple subsidiary broker-dealers, each 

of which operates one or more ATS or 

Communication Protocol System that 

trade the same or different categories of 

securities.660 In these instances, each 

ATS with a common broker-dealer 

operator—and each of the affiliated 

Communication Protocol Systems that 

would be subject to Regulation ATS 

under this proposal—must comply with 

Regulation ATS.661

In response to the 2020 Proposal, one 

commenter stated that because each 

ATS is unique, it believed that for 

purposes of determining whether an 

ATS should be subject to the Fair 

Access Rule, volume should be 

determined at an individual ATS level 

and not aggregated across commonly 

controlled ATSs.662 The commenter 

stated that a broker-dealer may choose 

to operate separate ATSs based on 

separate business units within the 

broker-dealer, different technology 

backbones, or different types of 

functionality, such as anonymous or 

fully disclosed order books or auctionbased offerings.663

The Commission is concerned, 

however, that despite differences that 

may exist between ATSs that are 

operated by a common broker-dealer or 

ATSs operated by affiliated brokerdealers, there is a potential for a brokerdealer operator or controlling entity for 

more than one broker-dealer to structure 

its business to avoid triggering the fair 

access thresholds, and thereby 

circumvent the Fair Access Rule. It 

could do this by establishing multiple 

ATSs under one broker-dealer, or 

establishing multiple broker-dealers that 

each operate an ATS, to trade the same 

security or category of securities. The 

Fair Access Rule is designed to ensure 

that market participants have reasonable 

access to ATS market places that 

capture a significant percentage of 

national trading volume for a security or 

type of security. When a single entity 

operates multiple market places, that 

entity ultimately controls which market 

participants have access to trading 

across those market places. 

When an organization, such as a 

broker-dealer, for example, provides an 

exchange market place for the same 

security or category of security but 

chooses to divide the market place into 

component parts by filing multiple 

Forms ATS or Forms ATS–N rather than 

filing a single form encompassing all the 

component market places, that 

organization is still the exchange 

providing a market place to bring 

together buyers and sellers of securities 


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664Also, if one of the ATSs operated by the 

common broker-dealer operator accounted for five 

percent of the average daily volume in an NMS 

stock for three months and the other ATS accounted 

for five percent of the average daily volume in the 

same NMS stock for the subsequent three months, 

then both ATSs would be subject to the Fair Access 

Rule for that NMS stock because aggregated they 

would have crossed the volume threshold for more 

than four of the preceding six calendar months. 665These requirements are currently in Rule 

301(b)(5)(ii), which the Commission is proposing to 

re-number as Rule 301(b)(5)(iii). 666See Regulation ATS Adopting Release, supra 

note 31, at 70872. The Commission believes that the 

addition of ‘‘reasonable’’ is consistent with its 

intent as expressed in the Regulation ATS Adopting 

Release. Specifically, in discussing the Fair Access 

Rule, the Commission stated that ‘‘fair treatment 

. . . is particularly important’’ when ATSs reach 

significant volume in a security, and the rule would 

serve to prohibit ‘‘unreasonably’’ discriminatory 

denials of access. 

667Rule 301(b)(5)(ii)(B) states that the ATS shall 

not ‘‘unreasonably prohibit or limit’’ (emphasis 

added) any person with respect to the services of 

the ATS. 

668See supra notes 666–667. 

and ultimately controls access to the 

entire security or category of securities 

that it makes available for trading across 

its multiple ATSs. In the Commission’s 

experience, ATSs under common 

operation of a broker-dealer generally 

are designed to function as 

complementary products of a single 

business of the broker-dealer as opposed 

to separate market places competing 

against each other for order flow in the 

same security or types of securities. In 

the Commission’s experience, it is 

typical for a broker-dealer that operates 

multiple ATSs for the same security or 

category of securities to use, for 

example, the same operations, 

technology, and administrative 

personnel for purposes of its ATSs’ 

trading operations. Furthermore, a 

single entity controlling multiple ATSs 

often applies similar standards for 

granting access across all of its ATSs 

that trade the same security or category 

of security and applies the same market 

data, clearance, settlement, and trade 

reporting processes, and procedures for 

protecting subscriber confidential 

trading information. Even in the case of 

a single parent company, for example, 

which controls several affiliated brokerdealers that each operate an ATS for the 

same category of security, access to each 

ATS is obtained from the broker-dealer 

operator, and each broker-dealer 

operator is subject to the direction of the 

parent company. Ultimately, those ATSs 

serve the business interests of, and are 

under common control by, the parent 

company. 

Aggregating trading volume among 

ATS market places and Communication 

Protocol Systems that would be subject 

to Regulation ATS under this 

proposal—either operated by a common 

broker-dealer or by affiliated brokerdealers—would help further the vital 

policy goal of ensuring that no single 

entity is able to restrict fair access to a 

security or type of security. As a result 

of this proposed change, if, for example, 

a broker-dealer operated two NMS Stock 

ATSs that each accounted for three 

percent of the average daily volume in 

an NMS stock during at least four of the 

preceding six calendar months, both 

NMS Stock ATSs would be subject to 

the Fair Access Rule for that security 

because their aggregated volume 

exceeds the five percent threshold of 

Rule 301(b)(5)(i)(A).664 If, instead, one 

of the ATSs had six percent of the 

average daily volume for an NMS stock 

and the other ATS had one percent, 

both NMS Stock ATSs would be subject 

to the Fair Access Rule as a result of 

their common broker-dealer operator 

and aggregated volume. In another 

example, if two broker-dealers that are 

subsidiaries of the same parent 

company each operate an ATS for 

corporate bonds and each ATS accounts 

for three percent of the average daily 

volume of corporate bonds traded in the 

United States during at least four of the 

preceding six calendar months, then 

both ATSs would be subject to the Fair 

Access Rule. This result would be 

because the ATSs are operated by 

affiliated broker-dealers and their 

aggregate volume exceeds the volume 

threshold of Rule 301(b)(5)(i)(C). 

3. Reasonable Written Standards 

The Commission is proposing to 

amend the requirements related to 

reasonable written standards.665 The 

Commission is proposing Rule 

301(b)(5)(iii)(A) to provide that the ATS 

‘‘establish and apply reasonable written 

standards for granting, limiting, and 

denying access to the services of the 

alternative trading system.’’ As 

discussed in more detail below, the 

Commission is proposing to add the 

word ‘‘reasonable’’ before ‘‘written 

standards’’ to incorporate the concept 

that is part of current Rule 

301(b)(5)(ii)(B) (‘‘not unreasonably 

prohibit or limit’’) and used in the 

Regulation ATS Adopting Release.666

The Commission is also adding in the 

rule text, for the removal of any doubt, 

that the ATS must ‘‘apply’’ the 

reasonable written standards as 

established. For example, if an ATS 

establishes a written standard that states 

subscribers’ trading interest will not be 

displayed to anyone, but the ATS in 

practice displays trading interest to a 

subscriber, then the ATS would not be 

applying its established written 

standards. Establishing the written 

standard is not sufficient if the ATS is 

not following or applying them. 

Also incorporated into proposed Rule 

301(b)(5)(iii)(A), and taken from current 

Rule 301(b)(5)(ii)(B), is that the written 

standards apply to access of ‘‘the 

services of the alternative trading 

system.’’ This addition to the rule text 

serves to emphasize that the Fair Access 

Rule applies not only to the initial grant 

or denial of access to an applicant of the 

ATS, but also to the services of the ATS 

that are offered to current participants. 

ATS services, including, among others, 

the provision of market data, order entry 

functionalities, priority rules, 

segmentation procedures, negotiation 

features, communication protocols, 

counterparty selection, and order types 

offered, would all be subject to the 

provisions of the Fair Access Rule. The 

Commission is also incorporating from 

current Rule 301(b)(5)(ii)(B) that the Fair 

Access Rule applies when limiting and 

denying access to the ATS services, not 

solely granting access.667 The 

application of the Fair Access Rule to 

limitations and denials of access would 

help ensure that market participants 

receive the full benefits of participation 

in an ATS subject to the Fair Access 

Rule unless a limitation or denial of 

access can be reasonably justified. 

As indicated above, the Commission 

is making explicit in the text of Rule 

301(b)(5) that the written standards 

required under the Fair Access Rule 

must be reasonable. An ATS subject to 

the Fair Access Rule is not required to 

treat all participants the same in all 

instances; however, the Fair Access 

Rule has always required that an ATS 

subject to the rule provide reasonable 

access to ATS services.668 The 

Commission is revising the rule text to 

make it clear that the written standards 

must be reasonable. For an ATS’s 

written standards to be reasonable, the 

standards must be fair and not 

unreasonably discriminatory. Some 

ATSs, for example, might offer different 

services, or levels of a service, to one 

subscriber or among different classes of 

subscribers. An ATS subject to the Fair 

Access Rule could not provide services 

to one class of participants and not to 

other classes of participants unless the 

ATS established standards with a 

reasonable basis for treating the 

participant classes differently. For 

example, as stated in the Regulation 

ATS Adopting Release, an ATS may 

establish a standard that requires all 

participants be registered broker-dealers 

and that ATS may deny access to the 

ATS to any applicant that is not a 


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669See Regulation ATS Adopting Release, supra 

note 31, at 70874. 670See proposed Rule 301(b)(5)(iii)(A)(4). 671 15 U.S.C. 78f(b)(5). 672 15 U.S.C. 78f(b)(2) and (c). 673See Regulation ATS Adopting Release, supra 

note 31, at 70874. 

674See MarketAxess Letter at 10. 675 In practice, the ATS participant making a 

selection of its potential counterparties would need 

to provide the ATS with its justification for 

selecting those counterparties, and the ATS would 

need to evaluate whether the stated justification 

comports with the Fair Access Rule, and if so, 

incorporate it into the ATS’s established written 

standards. 676Rule 301(b)(5)(ii)(D) requires ATSs to report to 

the Commission information on Form ATS–R 

regarding grants, limitations, and denial of access 

to an ATS subject to the Fair Access Rule. 

Specifically, Form ATS–R, Exhibit C requires the 

ATS to list of all persons granted, denied, or limited 

access to the ATS during the period covered by the 

report, designating for each person whether they 

were granted, denied, or limited access; the date the 

ATS took such action; the effective date of such 

action; and the nature of any denial on limitation 

of access. The Commission stated in the Regulation 

ATS Adopting Release that the Commission 

intended to enforce the Fair Access Rule by 

reviewing Form ATS–R reports and investigating 

any possible violations of the rules. See Regulation 

ATS Adopting Release, supra note 31, at 70874. 

registered broker-dealer.669 As part of its 

reasonable analysis, an ATS subject to 

the Fair Access Rule must explain why 

the standard for admitting registered 

broker-dealers rather than nonregistered broker-dealers is fair and not 

unreasonably discriminatory.670 Fees 

can be a manner of limiting or denying 

services. In another example, an ATS 

that charges certain fees to one class of 

participants but different fees to another 

class of participants for the same service 

could not, if it were subject to the Fair 

Access Rule, discriminate in this 

manner unless it adopted reasonable 

written standards and applied them in 

a fair and non-discriminatory manner. 

Also, to apply the standards fairly and 

non-discriminatorily, the ATS’s 

activities (or the activities of persons 

performing a function of the ATS) must 

be carried out in accordance with the 

established written standards of the 

ATS. 

When assessing the reasonableness of 

standards under the Fair Access Rule, 

the Commission may consider 

principles applied in the national 

securities exchange context to guide its 

analysis of whether an ATS’s written 

standards are fair and not unreasonably 

discriminatory. Under Section 6(b)(5) of 

the Exchange Act, for example, a 

national securities exchange must show 

that its rules are not designed to permit 

unfair discrimination between 

customers, issuers, brokers or dealers.671

Sections 6(b)(2) and 6(c) of the 

Exchange Act require national securities 

exchanges to consider the public 

interest in administering their markets 

and to establish rules designed to admit 

members fairly.672 National securities 

exchanges and ATSs are regulated 

pursuant to separate statutory and rule 

provisions of the Federal securities laws 

and there are different benefits and 

burdens associated with each entity; 

however, as the Commission stated in 

the Regulation ATS Adopting Release, 

fair access requirements are based on 

the principle that qualified market 

participants should have fair access to 

the U.S. securities markets, and such 

markets would include ATSs subject to 

the Fair Access Rule.673

The justification provided for why 

each written standard is fair and not 

unreasonably discriminatory is an 

important aspect of an ATS’s 

compliance with the Fair Access Rule as 

proposed to be amended. The same 

limitation or restriction on different 

ATSs may be unfair on one ATS and not 

another depending on the design of the 

ATS and its rationale for such a 

limitation. One commenter suggested 

that fair access is not applicable to fixed 

income platforms where each 

participant has discretion over which 

other participants they want to trade 

with.674 Under these circumstances 

where ATS participants can select their 

potential counterparties, the 

Commission would view an ATS that 

implements the participant’s choices as 

having adopted those as ATS standards. 

As a result, the ATS subject to the Fair 

Access Rule would need to establish 

reasonable written standards that, 

among other things, justify why the 

differences in access between the 

selected and not-selected counterparties 

are fair and non-discriminatory and thus 

reasonable. For example, if subscribers 

selected their counterparties based on 

the condition of the counterparty’s 

balance sheet (e.g., totals for assets and 

liabilities), and the ATS implemented 

those selections, then the ATS would 

need to include a justification in its 

written standards for why implementing 

those selections is fair and not 

unreasonably discriminatory.675 In cases 

where the Commission staff reviews an 

ATS’s fair access standards, whether in 

the description provided under Item 24 

of revised Form ATS–N for NMS Stock 

ATSs and Government Securities ATSs 

(as proposed) or during an examination, 

the Commission staff would review 

whether a given justification for the 

standard is, for example, unreasonably 

discriminatory, or is pretextual and, in 

fact, designed to thwart the goal of 

providing fair access to qualified market 

participants.676

Even if an ATS’s written standard is 

equally applicable to all participants, 

the ATS must nevertheless ensure the 

standard itself is not unfair or 

unreasonably discriminatory or applied 

in an unfair or unreasonably 

discriminatory manner. If an ATS 

included in its written standards that it 

reserves the right to accept or deny 

applicants to the ATS at its sole 

discretion, such standard may apply 

equally to all applicants, but it would 

not be reasonable as it would contradict 

the rule’s goal of promoting fair access 

to the securities markets. In another 

example, if an ATS adopts a written 

standard that it would only accept 

participants with ‘‘industry-leading 

reputations,’’ such written standard, 

depending on the justification, is 

unlikely to be considered reasonable 

because of its subjectivity and potential 

substantial limiting effect on market 

participants’ access to the ATS. As 

stated in the Regulation ATS Adopting 

Release, if an ATS applied its standards 

so as to discriminate among similarlysituated participants, such actions 

would be inconsistent with reasonable 

written standards because the ATS 

would not be acting impartially. One 

example of this would be an ATS that 

provides liquidity providers that met 

certain volume thresholds with trading 

privileges, yet does not provide those 

privileges equally to every qualifying 

liquidity provider. Another example 

would be a Communication Protocol 

System that establishes a standard to 

track all participants’ ‘‘firm up’’ rates in 

response to requests for quotes but 

subsequently denies or limits access to 

only certain subscribers that exceed the 

firm-up threshold and not to other 

participants who likewise exceeded the 

firm-up threshold. 

The Commission is also proposing 

Rule 301(b)(5)(iii)(A)(1) through (5) to 

provide minimum requirements for the 

reasonable written standards that must 

be established, and applied, by an ATS 

that is subject to the Fair Access Rule. 

These minimum requirements for what 

the written standards must include do 

not alter the substantive requirement 

that the written standards be reasonable. 

Rather, they explain in more granular 

detail what is required to be sufficient 

written standards to facilitate 

compliance. First, the Commission is 

proposing Rule 301(b)(5)(iii)(A)(1) to 

require that an ATS’s reasonable written 

standards provide the dates that each 

written standard is adopted, effective, 

and, if applicable, modified. This 

proposed requirement is designed to 

assist Commission examination staff in 

their evaluation of the application of an 

ATS’s written standards as well as help 

the staff understand the written fair 


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677See Regulation ATS Adopting Release, supra 

note 31, at 70874 (providing minimum capital or 

credit requirements for subscribers as an example 

of objective standards). 

678 In assessing whether such a standard is 

reasonable, the Commission could consider, among 

other things, the quantitative criteria upon which 

the standard is based, the justification by the ATS 

for why the standard is fair and not unreasonably 

discriminatory, the differences in, and impact on, 

access to services from the application of the 

standard, and other information provided through 

discussions with the ATS. 

679 In the Commission’s experience, a common 

method for ATSs to segment order flow is to 

measure a security’s change in price within a 

certain (usually short) time period after an 

execution and, based on that figure or reversion 

rate, assign a score to one or both of the parties to 

the transaction. If a security’s price moves 

substantially after an execution, then that 

subscriber’s (or subscribers’) score may cause it to 

be segmented into a class of subscribers that is 

considered riskier to trade against and other 

subscribers may select to not trade against that 

subscriber. Subscribers are assigned scores based on 

their reversion rates and segmented into classes or 

categories accordingly. 

680As the Commission is proposing to relocate 

these requirements under the requirements for an 

ATS’s written standards under Rule 

301(b)(5)(iii)(A), the Commission is proposing to 

delete the rule text under current Rule 

301(b)(5)(ii)(B) and renumber current paragraphs 

(b)(5)(ii)(B) and (C) to paragraphs (b)(5)(ii)(C) and 

(D), respectively. 

access standards that were in place at a 

given time. 

Second, the Commission is proposing 

Rule 301(b)(5)(iii)(A)(2) to require an 

ATS’s reasonable written standards set 

forth any objective and quantitative 

criteria upon which each standard is 

based.677 Objective or quantitative 

standards can help demonstrate an 

ATS’s compliance with the Fair Access 

Rule by limiting an ATS’s discretion 

and its ability to act arbitrarily with 

respect to an applicant to the ATS or 

current participant. Nevertheless, an 

ATS’s objective or quantitative 

standards must still be fair and not 

unreasonably discriminatory. An ATS 

could not, for example, establish, 

without reasonable justification, a 

quantitative standard at such a high 

level that it unfairly results in only a 

limited group of ATS participants that 

can meet it. If an ATS, for example, sets 

its required firm up rate on conditional 

orders at 95 percent, compliance with 

the Fair Access Rule would depend on 

whether that standard was fair and 

whether it unreasonably discriminated 

against those subscribers that did not 

attain a 95 percent firm up rate.678

In the case of an ATS that segments 

the order flow of its participants into 

certain categories based on quantitative 

metrics, such as reversion rates,679 the 

ATS’s standards generally should 

include, among other things, the metrics 

and factors used to determine the 

segmented categories and, as explained 

further below, how the metrics and 

factors are fair and not unreasonably 

discriminatory, and thus are reasonable. 

The presence of the objective and 

quantitative thresholds limits the ATS’s 

discretion in differentiating among 

participants (in this example, by setting 

segmented categories for order 

interaction and thus denying certain 

participants the ability to interact with 

other participants on the ATS). The 

quantitative threshold still must be 

reasonable; an objective or quantitative 

standard would not by itself be 

sufficient to comply with fair access. In 

cases where an ATS has a written 

standard for access that is not based on 

objective or quantitative criteria, the 

ATS must still justify why the standard 

is reasonable, and more specifically, 

how such standard is fair and not 

unreasonably discriminatory. 

Third, the Commission is proposing 

Rule 301(b)(5)(iii)(A)(3) to require that 

an ATS’s reasonable written standards 

identify any differences in access to the 

services of the ATS by applicants and 

current participants. The purpose of this 

provision is to highlight each instance 

where an ATS treats participants 

differently under the established written 

standards. Under the Fair Access Rule, 

ATSs may provide different services to 

different subscribers, or may vary how 

services are offered among ATS 

participants; however, the ATS must 

have a reasonable basis for doing so. An 

ATS might, for example, segment 

participant order flow into specific 

categories (i.e., based upon the type of 

market participant generating the order 

flow) to determine order interaction. As 

a result, some subscribers can only 

interact with certain subscribers and not 

others. In such a case, the ATS would 

be required to, among other things, 

identify the segmentation categories and 

criteria used to set the categories. If, for 

example, an ATS grants certain trading 

privileges, such as being able to view 

certain trading interest, to a person 

classified as a liquidity provider, the 

ATS would be required to describe any 

such differences in treatment for the 

liquidity provider. The identification of 

differences in treatment required would 

also include those applicable to 

applicants to the ATS. For example, if 

an ATS had different minimum capital 

and credit requirements for applicants 

to the ATS, the ATS would need to 

identify the differences in its written 

standards. As described above, 

differences in access must be reasonable 

and the ATS would be required to 

justify how such differences in access 

are fair and not unreasonably 

discriminatory pursuant to proposed 

Rule 301(b)(5)(iii)(A)(4). 

Fourth, the Commission is proposing 

Rule 301(b)(5)(iii)(A)(4) to require that 

an ATS’s reasonable written standards 

justify why each standard, including 

any differences in access to the services 

of the ATS, is fair and not unreasonably 

discriminatory. While the Fair Access 

Rule does not require that the ATS treat 

all market participants equally, the Fair 

Access Rule requires an ATS to have a 

reasonable basis for not treating market 

participants equally. Accordingly, an 

ATS would be required to justify in 

writing why its standards are fair and 

not unreasonably discriminatory.680

Requiring an ATS to justify its fair 

access standards in writing would 

facilitate Commission staff review of 

those standards, whether by reviewing 

the standards in the description 

provided under Item 24 of revised Form 

ATS–N for NMS Stock ATSs and 

Government Securities ATSs (as 

proposed) or during an examination of 

an ATS. Above, the Commission sets 

forth an example of an ATS establishing 

different minimum capital and credit 

requirements for applicants to the ATS. 

In addition to identifying that difference 

in its written standards, the ATS would 

also be required to justify why the 

difference is fair and not unreasonably 

discriminatory. The ATS could, for 

instance, explain: (1) Objective or 

quantitative criteria used to determine 

which minimum applies to which 

applicants and why the ATS chose the 

objective and qualitative criteria that it 

did, which would also meet the 

requirements of paragraph 

(b)(5)(iii)(A)(2) outlined above; and (2) 

why those objective or quantitative 

criteria are fair and not unreasonably 

discriminatory as applied to the ATS. If 

there are no objective criteria, the ATS 

must explain why it is fair and not 

unreasonably discriminatory to have 

and apply the capital and credit 

requirements among applicants to the 

ATS. 

Finally, the Commission is proposing 

Rule 301(b)(5)(iii)(A)(5) to require an 

ATS’s reasonable written standards 

address any standard for granting, 

limiting, or denying access to the 

services of the ATS performed by 

persons other than the broker-dealer 

operator. From the Commission’s 

experience, persons other than the 

broker-dealer operator may perform all 

or some functions of the ATS. In other 

cases, the broker-dealer operator, or 

affiliate of the broker-dealer operator, 

may direct the ATS participants to use 

the services of a person other than the 

broker-dealer operator. In both such 

cases, the activities of those persons can 

affect participants’ access to the ATS, 


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681See Regulation ATS Adopting Release, supra 

note 31, at 70873, n.252. 682This is currently in paragraph (b)(5)(iii)(C), but 

would be renumbered to paragraph (b)(5)(iii)(B) 

under the proposed changes. 

683The Commission is also proposing to specify 

in Rule 303(a)(1)(iv) and (v) that an ATS must 

maintain ‘‘each version’’ of copies of records made 

in the course of complying with Rule 301(b)(6) and 

copies of the written safeguards and written 

procedures to protect subscribers’ confidential 

trading information and written oversight 

procedures created in the course of complying with 

Rule 301(b)(10). 

684See Regulation ATS Adopting Release, supra 

note 31, at n.251 (stating that the Commission 

expects an ATS to maintain a record of its standards 

at each point in time, and that if the ATS amends 

or modifies its access standards, the records kept 

should reflect historic standards, as well as current 

standards). 

685When adopting the exclusion, the Commission 

contemplated that it would apply only to ATSs that 

trade equity securities, as one of the elements of the 

exclusion requires that the prices in the ATS be 

based on the SIP. The third prong of each exception 

states that if an ATS meets the requirement, among 

others, to execute customer orders ‘‘at a price for 

such security disseminated by an effective 

transaction reporting plan, or derived from such 

prices,’’ the ATS would not be subject to the Fair 

Access Rule or Capacity, Integrity, and Security 

Rule, as applicable. 17 CFR 242.301(b)(5)(iii)(C); 17 

CFR 242.301(b)(6)(iii)(C). 

686 17 CFR 242.301(b)(5)(iii); 17 CFR 

242.301(b)(6)(iii). 

687Regulation ATS Adopting Release, supra note 

31, at 70853. 

688 Id. at 70872. 

689See NMS Stock ATS Adopting Release, supra 

note 2, at 38770–71. 

and therefore, the ATS must ensure, 

through its written fair access standards, 

that those persons have established 

reasonable written standards for 

granting, denying, and limiting access to 

the ATS and are applying those 

standards in a fair and nondiscriminatory manner. 

For example, an ATS that arranges for 

an entity to provide order entry services 

to the ATS would be required to ensure 

that the order entry provider has 

reasonable standards for ATS 

participants to access the order entry 

services, and thus the ATS. The ATS 

would be required to address in its 

reasonable written standards how the 

provider ensures that its standards are 

reasonable because the activities of the 

provider can impact the ability of 

participants to access the ATS. In 

addition, if the ATS broker-dealer 

operator, or affiliate of the broker-dealer 

operator, directs participants to use the 

services of another entity in connection 

with the ATS, that ATS would be 

responsible to ensure that such entity 

establishes reasonable standards for 

access. For example, if the broker-dealer 

operator, or affiliate of the broker-dealer 

operator, directs participants to use the 

services of a certain clearing broker, the 

ATS would be required to ensure that 

the clearing broker has reasonable 

written standards and to include in the 

ATS’s written standards the clearing 

broker’s written standards for granting, 

denying, or limiting access to its 

clearing services as they relate to the 

ATS. The Commission is concerned that 

an ATS may attempt to use an affiliate 

or third party to perform ATS activities 

or functions while avoiding the 

application of Regulation ATS to those 

activities or functions.681 Requiring an 

ATS subject to the Fair Access Rule to 

address in its written standards the 

activities or functions performed by 

persons in conjunction with the ATS 

other than the broker-dealer operator 

would help ensure fair access to the 

ATS by investors. 

4. Recordkeeping Requirements 

The Commission is also proposing 

changes to the ATS recordkeeping 

requirements under Rule 

301(b)(5)(iii)(B), as proposed to be 

amended.682 The Commission is 

proposing to replace the reference to 

records relating to grants of access to 

‘‘subscribers’’ with references to 

‘‘participants.’’ In the Commission’s 

experience, ATSs can grant access to 

customers of subscribers who may not 

themselves be subscribers to the ATS. 

This proposed change would clarify that 

records related to such participants 

would need to be made and kept under 

the rule. In addition, the Commission is 

proposing to add to the rule text that the 

ATS must make and keep records 

related to denials or limitations of 

access and reasons for each applicant 

‘‘and participant.’’ By adding 

‘‘participant,’’ the Commission will 

reflect that it requires an ATS subject to 

the rules to keep records of when it 

limits access to existing participants 

(not only ‘‘applicants’’) to the ATS 

system. This is a technical change, as 

the current rule requires the ATS to 

make and keep all records related to 

limitations of access and reasons for 

such limitations, which would apply to 

both existing participants, as well as 

applicants upon entry to the ATS. 

The Commission is also proposing to 

add language to Rule 301(b)(5)(iii)(B)(1) 

and (2) to reference that grants of access 

and denials of limits of access and 

reasons for limitation and denying 

access to the services of the ATS would 

be under the standards provided in 

proposed Rule 301(b)(5)(iii)(A). 

Referencing the standards in Rule 

301(b)(5)(iii)(A) would clarify that 

grants, limitations, and denials of ATS 

services would be under the standards 

of the rule, as proposed to be revised. 

The Commission is also proposing to 

amend Rule 303(a)(1)(iii) of Regulation 

ATS to require an ATS subject to the 

Fair Access Rule, for a period of not less 

than three years, the first two years in 

an easily accessible place, to preserve at 

least one copy, including each version, 

of such ATS’s written standards for 

access to trading, all documents relevant 

to the ATS decision to grant, deny, or 

limit access to any person, and all other 

documents made or received by the ATS 

in complying with the Fair Access 

Rule.683 This change would modify the 

current rule to specify that the standards 

are ‘‘written’’ and that the ATS must 

maintain ‘‘each version’’ of the written 

standards required under Rule 301(b)(5), 

which is consistent with the previous 

Commission guidance.684

5. Removal of the Exclusion for Passive 

Systems From the Fair Access Rule 

The Commission is re-proposing to 

remove an exclusion from compliance 

with the Fair Access Rule under Rule 

301(b)(5) and the Capacity, Integrity, 

and Security Rule under Rule 301(b)(6) 

that is applicable to ATSs that trade 

equities.685 An ATS is excluded from 

complying with the requirements of the 

Fair Access Rule and the Capacity, 

Integrity, and Security Rule if the ATS: 

(i) matches customer orders for a 

security with other customer orders; (ii) 

such customers’ orders are not 

displayed to any person, other than 

employees of the ATS; and (iii) such 

orders are executed at a price for such 

security disseminated by an effective 

transaction reporting plan, or derived 

from such prices.686 In adopting the 

exclusion, the Commission stated that 

ATSs of this nature, the so-called 

‘‘passive systems,’’ did not contribute 

significantly to price discovery; 

however, the Commission also stated 

that they had the potential to and 

frequently do affect the markets from 

which their prices are derived, and thus, 

the Commission would continue to 

monitor these systems and reconsider 

whether the requirements should apply 

if concerns arise in the future.687

In the Regulation ATS Adopting 

Release, the Commission explained that 

fair treatment by ATSs of subscribers is 

particularly important when an ATS 

captures a large percentage of trading 

volume in a security because investors 

lack access to viable alternatives to 

trading in the ATS.688 Since the 

adoption of Regulation ATS, passive 

systems (as the term is used in the 

Regulation ATS Adopting Release) for 

NMS stocks have garnered a significant 

percentage of trading volume in 

securities and have come to play an 

important role in matching buyers and 

sellers of securities.689 Eliminating the 


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690 17 CFR 242.301(b)(6)(iii). 

691See Regulation SCI Adopting Release, supra 

note 3, at 72252, 72267. 

692 15 U.S.C. 78f(b)(5). 

693See 15 U.S.C. 78f(b)(2) and (c); 15 U.S.C. 78o– 

3(b)(8). 

694See Form ATS–R. See also supra notes 144– 

147. 

695See 17 CFR 242.301(b)(9)(i). An ATS must also 

file Form ATS–R more frequently upon request of 

the Commission. See Form ATS–R Instructions. 

696This amendment would be consistent with 

Rule 301(b)(2)(vii), which states that ‘‘[a]ll reports 

filed pursuant to this paragraph (b)(2) and 

Continued 

Rule 301(b)(5)(iii) exclusion would 

ensure that the Fair Access Rule is 

applied as intended and help ensure fair 

treatment of applicants and current 

subscribers by any type of ATS that 

captures a large percentage of trading in 

a security or type of security. 

The Commission is also re-proposing 

to amend Rule 301(b)(6) to remove the 

exclusion from compliance with the 

Capacity, Integrity, and Security Rule 

under Rule 301(b)(6)(iii).690 As part of 

Regulation SCI, Rule 301(b)(6) of 

Regulation ATS was amended to no 

longer apply to ATSs that trade equities 

because Regulation SCI superseded and 

replaced the requirements of the 

Capacity, Integrity, and Security Rule 

with regard to ATSs that trade NMS 

stocks and non-NMS stocks.691

Request for Comment 

150. Should the Commission change 

the five percent fair access threshold for 

NMS stocks, equity securities that are 

not NMS stocks, corporate bonds, or 

municipal securities? If so, should the 

threshold be changed higher or lower 

than the existing five-percent threshold 

under Rule 301(b)(5)(i)? National 

securities exchanges are required to 

have rules designed to prevent unfair 

discrimination 692 and admit members 

fairly.693 Because ATSs are operating 

pursuant to an exemption from 

exchange registration, should the 

Commission eliminate the volume 

threshold(s) for the Fair Access Rule 

and thus, require all ATSs to provide 

fair access to their participants 

regardless of trading volume? If yes, 

should the Commission eliminate the 

volume thresholds for all categories of 

securities subject to the Fair Access 

Rule or only specific categories? 

151. Should the Commission change 

the look-back period for applying the 

fair access thresholds from four out of 

the preceding six months to something 

different? For example, should an ATS 

be subject to fair access if its average 

daily trading volume in a subject 

security is five percent over the prior 

quarter or the prior month? Should the 

Commission change to the look-back 

period for all categories of securities 

subject to the Fair Access Rule, or just 

specific categories? 

152. Should the Commission allow or 

require ATSs to use sources of market 

data other than published data provided 

by the SRO to which trades are 

reported? If yes, which data sources? 

153. Should the Commission change 

the Fair Access Rule for it to apply 

categorically to NMS stocks rather than 

on a security-by-security basis? For 

example, should the Commission 

change the fair access threshold for 

equity securities so that an ATS would 

only be subject to the requirements of 

the Fair Access Rule if its average daily 

trading volume is five percent across all 

NMS stocks? Should the Commission 

change the Fair Access Rule to provide 

fair access in all NMS stocks if it 

surpasses the fair access threshold in a 

single NMS stock? 

154. Should the Commission change 

the Fair Access Rule so that it applies 

categorically, rather than on a securityby-security basis, to equity securities 

that are not NMS stocks? For example, 

should the Commission change the fair 

access threshold for equity securities so 

that an ATS would only be subject to 

the requirements of the Fair Access Rule 

if its average daily trading volume is 

five percent across all equity securities 

that are not NMS stocks? Additionally, 

or alternatively, should the Commission 

change the Fair Access Rule to require 

an ATS to provide fair access in all 

NMS stocks if it surpasses the fair 

access threshold in a single NMS stock? 

155. Should the Commission adopt 

rules to amend the Rule 301(b)(5)(ii) of 

the Fair Access Rule to aggregate the 

trading volume for a security or category 

of securities for ATSs that are operated 

by a common broker-dealer, or ATSs 

that are operated by affiliated brokerdealers, solely for the purpose of 

calculating the average transaction 

volume under Rule 301(b)(5)(i)(A) 

through (F)? 

156. Under Regulation ATS, an ATS 

would be subject to Rule 301(b)(3) 

(Order Display and Execution Rule) and 

Rule 301(b)(6) (Capacity, Integrity and 

Security Rule) if the ATS exceeded 

certain volume thresholds within a 

given period of time under the rules. 

Should the Commission amend the 

Order Display and Execution Rule and 

the Capacity, Integrity, and Security 

Rule to aggregate the trading volume for 

a security or category of securities for 

ATSs that are operated by a common 

broker-dealer, or ATSs that are operated 

by affiliated broker-dealers, for the 

purpose of calculating the average 

transaction volume under those rules? 

157. Instead of aggregating trading 

volume across multiple ATSs operated 

by a common broker-dealer, should the 

Commission amend Regulation ATS to 

require a broker-dealer to operate only 

one ATS for a category of security? If no, 

why is it important for one brokerdealer to be able to offer multiple ATS 

market places for the trading of the same 

category of security? 

158. Should the Commission adopt 

the same standard of reasonableness 

that is applied to national securities 

exchanges for purposes of the Fair 

Access Rule? If not, what standard of 

reasonableness should apply to ATSs 

that are subject to the Fair Access Rule? 

159. Should the Commission adopt 

requirements in addition to the 

reasonable written standards proposed 

in Rule 301(b)(5)(iii)(A)(1) through (4)? 

Should any of those standards be 

amended? 

160. Should the Commission 

eliminate the exclusion from 

compliance with the Fair Access Rule 

under Rule 301(b)(5)(iii) and with the 

Capacity, Integrity, and Security Rule 

under Rule 301(b)(6)(iii)? 

161. Should the Commission adopt 

the changes to the recordkeeping 

provisions of the Fair Access Rule? Are 

there any additional records that an 

ATS should be required to keep? 

B. Electronic Filing of and Other 

Changes to Form ATS and Form ATS– 

R 

The Commission is re-proposing 

revisions to Rule 301(b)(2), Form ATS, 

and Form ATS–R to modernize Form 

ATS and Form ATS–R and to provide 

that they are filed electronically. In 

addition, the Commission is proposing 

to require ATSs to provide certain 

additional information on Form ATS–R, 

including volume reporting for 

transactions in repurchase and reverse 

repurchase agreements on the ATS. 

ATSs are required to file the 

information required by Form ATS– 

R694 pursuant to Rule 301(b)(9) within 

30 calendar days after the end of each 

calendar quarter in which the ATS has 

operated.695

First, the Commission is re-proposing 

an amendment to Rule 301(b)(2)(vi), 

which currently states that ‘‘[e]very 

notice or amendment filed pursuant to 

this paragraph (b)(2) shall constitute a 

‘report’’’ within the meaning of 

applicable provisions of the Exchange 

Act. The Commission proposes to add a 

reference to Rule 301(b)(9) to state that 

Form ATS–R, as is the case with Form 

ATS, constitutes a report within the 

meaning of applicable provisions of the 

Exchange Act.696


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paragraph (b)(9)’’ of Rule 301 are, as proposed, 

accorded confidential treatment subject to 

applicable law. See 17 CFR 242.301(b)(2)(vii). The 

instructions to Form ATS and Form ATS–R require 

an ATS to submit one original and two copies of 

Form ATS and Form ATS–R to the Commission. 

See Form ATS and Form ATS–R Instructions. In 

addition, Rule 301(b)(2)(vii) requires that an ATS 

file copies of its Form ATS filings with the 

examining authority of the SRO with which it is 

registered (e.g., FINRA) at the same time it files 

with the Commission, and upon request, the ATS 

must provide its SRO’s surveillance personnel with 

duplicate Form ATS–R filings. See 17 CFR 

242.301(b)(2)(vii). 

697Rule 301(b)(2)(vii) of Regulation ATS specifies 

that reports on Form ATS shall be considered filed 

upon receipt by the Division of Trading and 

Markets, at the Commission’s principal office in 

Washington, DC See 17 CFR 242.301(b)(2)(vii). 

698See infra note 701 and accompanying text. 

699Accordingly, the Commission is proposing to 

delete the provisions of Rule 301(b)(2)(vii) related 

to paper submission. Specifically, the Commission 

is proposing to delete the sentence that the reports 

shall be considered filed ‘‘upon receipt by the 

Division of Trading and Markets, at the 

Commission’s principal office in Washington, DC’’ 

Additionally, although the Commission would 

continue to require that duplicates of filings on 

Form ATS be provided to the SRO that is the 

examining authority for each ATS, and that 

duplicates of the Form ATS–R be made available to 

the surveillance personnel of such SRO upon 

request, the Commission proposes to eliminate the 

reference to ‘‘originals’’ in Rule 301(b)(2)(vii) 

because paper reports will no longer be furnished 

to the Commission and there will therefore be no 

‘‘original’’ version of the reports. 

700The Commission notes that the proposed 

provisions would conform to similar provisions of 

Rule 304, which provide for the electronic filing of 

Form ATS–N. See 17 CFR 242.304(c). 701The Commission proposes to eliminate the 

language in the Form ATS instructions and Form 

ATS–R instructions requesting that an ATS type all 

information because an ATS would not otherwise 

have the option to handwrite any responses. The 

instructions for both forms would be amended to 

eliminate the option to use a ‘‘reproduction’’ of the 

forms. The Commission also believes it is 

redundant to state that the Form ATS or Form ATS– 

R must be the ‘‘current version’’ as the ATS is 

required to attest that the form is ‘‘current.’’ The 

Commission also proposes to delete the 

requirement to attach an execution page with 

original manual signatures for Form ATS because, 

as discussed above, Form ATS and Form ATS–R 

would be signed electronically and thus there 

would be no need for an execution page. The 

Commission also proposes to delete the instruction 

that the name of the alternative trading system, CRD 

number, SEC file number, and report period dates 

be listed on each page, as this requirement will be 

unnecessary because the Form ATS or Form ATS– 

R will be submitted as a single submission. Because 

Form ATS and Form ATS–R would be submitted 

via EDGAR, the Commission is also proposing to 

delete references to submitting the ‘‘original’’ and 

‘‘copies’’ of the form to the Commission at the 

Commission’s mailing address. 

702 17 CFR part 232. This is also consistent with 

the requirements for Form ATS–N. 

703The Form ATS Instructions state that ‘‘Form 

ATS shall not be considered filed, unless it 

complies with applicable requirements.’’ 

704Rule 303 of Regulation ATS provides the 

record preservation requirements for ATSs. See 17 

CFR 242.303. 

705See infra Section V.C. 

706See supra note 180 and accompanying text. 

707See Rule 301(b)(2)(ii)–(iv). 

Next, the Commission is re-proposing 

to require that all Forms ATS and ATS– 

R are filed with the Commission 

electronically. As proposed, following 

the effective date of the proposed rule, 

all Form ATS filers would be required 

to file an amendment on Form ATS in 

the electronic format proposed herein 

that would also include all new 

information required by revised Form 

ATS. Currently, ATSs are required to 

submit paper submissions of Forms ATS 

and ATS–R to the Commission.697 The 

Commission proposes to amend Rule 

301(b)(2)(vii) to require that an ATS 

must file a Form ATS or a Form ATS– 

R in accordance with the instructions 

therein. The Commission is proposing 

to revise the instructions to Form ATS 

and Form ATS–R to require that they be 

submitted electronically via EDGAR.698

The Commission is also proposing to 

require in Rule 301(b)(2)(vii) that 

reports provided for in Rule 301(b)(2) 

and (9) shall be filed on Form ATS and 

Form ATS–R, as applicable, and include 

all information as prescribed in Form 

ATS or Form ATS–R, as applicable, and 

the instructions thereto.699 In addition, 

the Commission is proposing to require 

that any Form ATS or Form ATS–R 

shall be executed at, or prior to, the time 

Form ATS or Form ATS–R is filed and 

shall be retained by the ATS in 

accordance with Rule 303 of Regulation 

ATS and Rule 302 of Regulation S–T, 

and the instructions in Form ATS or 

Form ATS–R, as applicable.700 Among 

other benefits, the electronic filing of 

Forms ATS and ATS–R would increase 

efficiencies and decrease filing costs for 

ATSs (i.e., ATSs would no longer be 

required to print and mail paper filings) 

and for Commission staff when 

undertaking a review of these forms. 

Form ATS–N is required to be filed in 

EDGAR. EDGAR is currently configured 

to support the Commission’s receipt and 

review of filings under Regulation ATS, 

and requiring electronic Form ATS and 

Form ATS–R filings to be submitted via 

EDGAR would be the most efficient way 

to facilitate their electronic filing. 

To facilitate electronic filing, the 

Commission is proposing to amend the 

text of General Instructions A.4 of 

Forms ATS and ATS–R to require that 

all filings be submitted via EDGAR and 

prepared, formatted, and submitted in 

accordance with Regulation S–T and the 

EDGAR Filer Manual.701 The 

Commission also proposes to amend 

Forms ATS and ATS–R General 

Instruction A.5 to state that a filing that 

is defective may be rejected and not be 

accepted by the EDGAR system and that 

any filing so rejected shall be deemed 

not filed. This is consistent with the 

requirements of Regulation S–T, which 

provides the rules for EDGAR 

submissions.702 The Commission also 

notes that the instructions for current 

Form ATS contain similar language,703

but the current instructions for Form 

ATS–R do not contain such language. 

The Commission believes that it would 

be appropriate to reject a filing as 

defective if it does not comply with the 

technical requirements of the form, for 

example, if a Form ATS or Form ATS– 

R is missing exhibits, or if the ATS does 

not provide a response to a Form ATS 

request or does not comply with the 

electronic filing requirements. The 

Commission is also proposing to amend 

General Instruction A.6 

(‘‘Recordkeeping’’) of both forms to 

reflect that records must be retained in 

accordance with the EDGAR Filer 

Manual and Rule 303 of Regulation ATS 

and to conform to the recordkeeping 

instructions on Form ATS–N, as 

revised.704 Instruction A.8 would also 

be revised to reflect updated Paperwork 

Reduction Act estimates, and, to 

conform to changes the Commission is 

proposing in Rule 301(b)(2)(vii),705 to 

state that types of securities traded 

provided on Form ATS and Form ATS– 

R will not be afforded confidential 

treatment. The Commission is also 

proposing to add new Instruction A.8 to 

Form ATS to require that, for 

amendments, the filer attach an Exhibit 

C marked to indicate additions to or 

deletions from the disclosures in Items 

1 through 6 of Form ATS. This 

document would help enable the 

Commission to identify any changes to 

the form more easily. Most ATSs 

currently provide such a marked 

document to the Commission on a 

voluntary basis. The Commission is also 

proposing to amend the instructions to 

Form ATS to state that Newly 

Designated ATSs are required to file a 

Form ATS no later than the date 30 

calendar days after the effective date of 

any final rule, if adopted.706

In addition, the Commission is reproposing to amend Form ATS to 

require an ATS filing an amendment on 

Form ATS to identify whether the Form 

ATS filing is a material amendment 

under Rule 301(b)(2)(ii), a periodic 

amendment under Rule 301(b)(2)(iii), or 

a correcting amendment under Rule 

301(b)(2)(iv).707 An ATS currently 

identifies an amendment to current 

Form ATS by marking the ‘‘Amendment 

to Initial Operation Report’’ box on 

Form ATS, and Form ATS currently 

does not ask the ATS to specify whether 

the amendment to Form ATS is a 

material, periodic, or correcting 


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708The Commission is also proposing to add cites 

to the relevant rule text next to the check boxes on 

Form ATS identifying whether the ATS is filing an 

Initial Operation Report (‘‘IOR’’), amendment to 

IOR, or a cessation of operations report. 

709See Rule 301(b)(2)(v) (requiring an ATS to 

promptly file a cessation of operations report on 

Form ATS in accordance with the instructions 

therein upon ceasing to operate as an ATS). 

710See supra Section IV.D.3. 

711Form ATS and Form ATS–R currently ask for 

the ATS’s main street address, mailing address, 

business telephone number and facsimile number, 

and the contact information for the ATS’s contact 

person. The Commission is proposing to move the 

information requests for the name and title and 

telephone number of the contact employee to the 

signature block on the form, and to request an email 

address for such person and not require the 

facsimile number. The proposed signature block 

would ask for the primary street address and 

mailing address of the ATS. The current 

certifications required in Form ATS and Form 

ATS–R, including that the information filed is 

current, true, and complete, would remain 

unchanged. However, the Commission is proposing 

to delete the provision allowing for service of any 

civil action pursuant to confirmed telegram and 

instead, permit service of any civil action via email. 

The signature block on Form ATS and Form ATS– 

R would conform to the signature block in Form 

ATS–N, as proposed. See supra Section IV.D.6. 

712See supra note 506. 

713See supra Section IV.D.3 (proposing requiring 

the ATS to disclose the MPID of its broker-dealer 

operator). 

714The Commission proposes to replace in Item 

1 of Form ATS and Form ATS–R the requests for 

the ATS’s main street address, mailing address, and 

business telephone number and facsimile number 

with a requirement that the ATS provide the 

primary, and if any, secondary physical street 

address of the ATS’s matching system, as well as 

a URL address for its website if it has a website. 

Knowing the location of the matching system 

address and secondary matching system address 

could be useful to the Commission in the event of, 

for instance, a natural disaster that could impact 

market participants’ ability to trade in the ATS and 

potential latency that could be experienced due to 

the location of the secondary site of the ATS. The 

Commission is also requesting the full name of the 

national securities association of the broker-dealer 

operator, the effective date of the broker-dealer 

operator’s membership with the national securities 

association, and MPID of the ATS. In addition, 

because any current or former names of the ATS 

would be searchable on EDGAR and there will be 

multiple identifiers included on the form, including 

MPID, the Commission is proposing to delete the 

requirement that the ATS indicate if it is changing 

its name and list its former name. 

715 In response to the 2020 Proposal, one 

commenter stated that current Form ATS Exhibit F, 

which requires the ATS to provide certain specified 

information about its operations and procedures, 

should be amended to follow the same structure as 

current Form ATS Exhibit G, which requires a 

‘‘brief description’’ of the ATS’s procedures for 

reviewing system capacity, security, and 

contingency planning procedures to provide ATS 

operators with latitude in the manner in which they 

provide information to the Commission. See ICE 

Bonds Letter I at 6–7. The Commission is not 

proposing a change to the structure of Exhibit F of 

Form ATS to conform to the structure of Exhibit G. 

The structures of Exhibits F and G are not 

dissimilar in that they both require an ATS to 

provide a description of ATS policies and 

procedures and that the information solicited by 

Exhibit F is important for the Commission to 

understand and oversee ATSs. 

716See supra note 714. 

amendment.708 Requiring an ATS to 

specify the type of amendment would 

better enable the Commission to 

determine whether an ATS is in 

compliance with Regulation ATS. The 

Commission also proposes requiring an 

ATS that is filing a cessation of 

operations report to provide the date 

that the ATS ceased to operate, which 

is not currently required on Form ATS. 

The Commission believes that having 

information about the date that the ATS 

ceased to operate would enable the 

Commission to determine more readily 

whether an ATS is, or was, in 

compliance with Regulation ATS.709

The Commission is also re-proposing 

to amend Form ATS and Form ATS–R 

to change the solicitation of information 

relating to the name of the broker-dealer 

operator and the registration and contact 

information of the broker-dealer 

operator. Because many broker-dealer 

operators of ATSs engage in brokerage 

and/or dealing activities in addition to 

operating an ATS, and some brokerdealers operate multiple ATSs, the 

name of the broker-dealer operator of an 

ATS often differs from the commercial 

name under which the ATS conducts 

business. To identify the broker-dealer 

operator of an ATS and to assist the 

Commission in collecting and 

organizing its filings and assessing 

whether the ATS has met its 

requirement to register as a brokerdealer, Forms ATS and ATS–R would 

require the ATS to indicate the full 

name of the broker-dealer operator of 

the ATS, as it is stated on Form BD, in 

Item 1 of Form ATS and Form ATS–R. 

To further facilitate compliance with the 

requirements of Regulation ATS, as 

proposed, Form ATS and Form ATS–R 

would require the ATS to indicate 

whether the filer is a broker-dealer 

registered with the Commission and 

whether the broker-dealer operator has 

been authorized by a national securities 

association to operate an ATS. Such 

requirements would conform to the 

proposed requirements of Form ATS– 

N.710 The Commission is proposing to 

conform Item 1 of Form ATS and Form 

ATS–R711 to the requirements of Form 

ATS–N, which is currently filed 

electronically. In addition, the 

Commission is proposing to add to Item 

1 of Form ATS and Form ATS–R a 

requirement that the ATS provide the 

broker-dealer operator’s LEI, if the 

broker-dealer operator has an LEI,712

and the MPID of the broker-dealer 

operator.713 These requests would help 

the Commission in identifying and 

corresponding with ATSs and would 

conform to the identifying information 

on Form ATS–N, as proposed to be 

revised.714 To determine whether the 

compliance transition rules applicable 

to Newly Designated ATSs apply, the 

Commission is also proposing to require 

the ATS to indicate if it is a Newly 

Designated ATS in Item 2. 

In addition, to facilitate the electronic 

filing of Form ATS, the Commission is 

proposing to revise Form ATS to 

provide that the narrative disclosures be 

included in a single document, rather 

than multiple exhibits.715 The ATS 

would be required to provide the 

information currently required in 

Exhibits A, B, C, E, F (other than a copy 

of the ATS’s subscriber manual and any 

other materials provided to subscribers), 

G, H, and I in a single document. 

Because the subscriber manual may be 

lengthy, it would be more efficient for 

the ATS to provide a copy of its 

subscriber manual and any other 

materials provided to subscribers, 

which are currently required to be 

included in Exhibit F, as a separate, new 

Exhibit A. In addition, the Commission 

is proposing new Exhibit B, which 

would include a copy of the 

constitution, articles of incorporation or 

association, with all amendments, and 

of the existing by-laws or corresponding 

rules or instruments, whatever the 

name, of the alternative trading system. 

Today, an ATS may, in lieu of attaching 

such documents, indicate that the ATS 

makes such information publicly 

available on a continuous basis on an 

internet site controlled by the ATS and 

indicate the website of the ATS. 

Because the Commission is requiring 

the ATS to provide its website in Part 

I,716 the Commission is proposing to 

include a checkbox for the ATS to select 

if, in lieu of filing, the ATS certifies that 

the information requested under the 

exhibit is available at the website above 

and is maintained on a continuous basis 

and is accurate as of the date of the 

filing. 

The Commission is also re-proposing 

to amend Form ATS–R to make it easier 

for the Commission staff to identify if 

the ATS has met its reporting 

obligations. First, the Commission is 

proposing to require an ATS to specify 

whether it is filing a quarterly report 

amendment under Rule 301(b)(9)(i) or a 

report for an ATS that has ceased to 

operate under Rule 301(b)(9)(ii) and, if 

the latter, to indicate the date the ATS 

ceased to operate. Requiring an ATS to 

indicate its type of Form ATS–R filing 

would enable the Commission to more 

effectively review Form ATS–R 

submissions and determine whether an 

ATS is in compliance with Regulation 

ATS. The Commission is also proposing 


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717See Form ATS–R and Form ATS–R 

Instructions, No. 8. 

718The Commission is proposing to add to the 

Form ATS–R instructions the definitions of U.S. 

Treasury Security and Agency Security, which 

would conform to the definitions the Commission 

is proposing in Rule 300(o) and (p), respectively. 

719See supra Sections III.B.4 and III.C. 

720Currently, any equity securities traded on the 

Nasdaq Global Market are required to be reported 

under ‘‘Nasdaq National Market Securities,’’ and 

any equity securities traded on the Nasdaq Capital 

Market are required to be reported under ‘‘Nasdaq 

SmallCap Market Securities.’’ ‘‘Listed Equity 

Securities’’ include all other equity securities listed 

on any other markets or national securities 

exchanges, including the Nasdaq Global Select 

Market. Any rights and warrants are required to be 

reported under the ‘‘Rights and Warrants’’ category 

even if they are listed on a national securities 

exchange. As proposed, Items 4B, 4C, 6B, and 6C 

would be deleted, and therefore, Items 4D through 

4N and Item 6D would be re-numbered. 

721 ‘‘Debt Securities’’ is defined as ‘‘any security 

other than an equity security, as defined in 

§ 240.3a11–1’’ in Form ATS–R. See Instruction B of 

Form ATS–R. Section 240.3b–4 (Rule 3b–4(a) under 

the Exchange Act) defines ‘‘foreign government’’ as 

the government of any foreign country or of any 

political subdivision of a foreign country. See 17 

CFR 240.3b–4. 

722For repurchase or reverse repurchase 

agreements collateralized with a basket or group of 

securities, ‘‘total unit volume of transactions’’ 

would mean the number of units within each basket 

or group rather than the number of baskets or 

groups. 

723Overnight repo trades end in one business 

day, whereas term repos mature on a specific future 

business day that is more than one business day. 

See, e.g., Office of Financial Research, U.S. Repo 

Market Data Release Methodology for Tri-party 

Repo, available at https://

www.financialresearch.gov/data/files/2021-04- 

Methodology-TPR.pdf; Office of Financial Research, 

U.S. Repo Market Data Release Methodology for 

DVP Cleared Repo, available at https://

www.financialresearch.gov/data/files/2021-04- 

Methodology-DVP.pdf. 

724See supra note 521. Triparty repurchase and 

reverse repurchase transactions would include 

triparty trades between members that participate in 

the Fixed Income Clearing Corporation’s (‘‘FICC’’) 

General Collateral Financing (GCF) Repo Service. 

On the other hand, repurchase and reverse 

repurchase transactions in the FICC’s Delivery vs. 

Payment (‘‘DVP’’) Repo Service would be reported 

under the bilateral category. 

725See supra note 522. 

726As a result, ATSs would report the total unit 

and dollar volume of transactions for each of 80 

categories of repos: 2 types of agreements 

(repurchase or reverse repurchase) × 2 transaction 

types (overnight or term) × 2 party types (bilateral 

or triparty) × 10 collateral types (NMS stocks, U.S. 

Treasury Securities, Federal Agency Securities, 

Agency Mortgage-Backed Securities, municipal 

securities, U.S. corporate debt securities, non-U.S. 

corporate debt securities, asset-backed securities, 

foreign sovereign debt securities, or other 

securities). 

to amend Form ATS–R to ask whether 

the ATS was subject to the fair access 

obligations under § 242.301(b)(5) during 

any portion of the period covered by the 

report by adding a corresponding box 

for the ATS to check ‘‘yes’’ or ‘‘no.’’ 

Currently, Form ATS–R requires an ATS 

that is subject to the Fair Access Rule to 

report a list of all persons for whom 

access to the ATS was granted, denied, 

or limited during the period covered by 

the Form ATS–R.717 Asking the ATS to 

indicate whether the ATS was subject to 

the Fair Access Rule during any portion 

of the period covered by the report 

would facilitate the Commission’s 

review of Form ATS–R submissions. 

The Commission is also proposing 

changes to the Form ATS–R categories 

of securities to modernize them and add 

more specificity with regard to all 

categories of securities. Form ATS–R 

currently requires ATSs to indicate the 

total dollar volume of government 

securities transactions in the period 

covered by the report. The Commission 

is proposing to require that ATSs 

specify the total dollar volume of 

transactions in ‘‘U.S. Treasury 

Securities’’ and ‘‘Agency Securities’’ 

under the heading ‘‘Government 

securities.’’ 718 As currently, ATSs 

would also be required to indicate the 

total dollar volume in government 

securities overall. This change would 

help the Commission facilitate 

compliance with the thresholds for the 

Fair Access Rule and Regulation SCI, 

which the Commission is proposing 

would be based on trading volume in 

U.S. Treasury Securities and Agency 

Securities.719 To avoid double-reporting 

of transactions in after-hours trading 

(reported under Item 6), the 

Commission is proposing to specify that 

Item 4 pertains to transactions ‘‘other 

than those for after-hours trading.’’ In 

addition, the Commission is proposing 

to amend Form ATS–R to update the 

descriptions of certain categories of 

securities for which volume is required 

to be reported on Form ATS–R by an 

ATS. Specifically, the Commission is 

proposing to delete the categories of 

securities, ‘‘Nasdaq National Market 

Securities’’ and ‘‘Nasdaq SmallCap 

Market Securities,’’ reported in Items 4 

and 6 of Form ATS–R.720 The proposal 

to require ATSs to file Form ATS–R 

electronically via EDGAR would allow 

the Commission staff to easily ascertain 

on which national securities exchanges 

the equity securities the ATS traded 

during the applicable period, as 

disclosed in Exhibit B, are traded. 

Therefore, it would no longer be 

necessary to separate out the total 

volume of securities traded on the 

Nasdaq markets from the total volume of 

securities traded on other national 

securities exchanges. The proposal 

would require ATSs to report the total 

volume previously reported under the 

‘‘Nasdaq National Market Securities’’ 

and ‘‘Nasdaq SmallCap Market 

Securities’’ categories under ‘‘Listed 

Equity Securities.’’ 

The Commission is proposing to 

require ATSs to break down the volume 

for corporate debt securities, currently 

reported in Item 4J, by U.S. and nonU.S. corporate debt securities. Non-U.S. 

corporate debt securities would include 

debt securities issued by a foreign issuer 

(excluding a foreign government) in 

emerging markets as well as nonemerging markets. In addition, the 

Commission is adding new Item 4L to 

require ATSs to report total dollar 

volume for foreign sovereign debt 

securities, which currently are required 

to be reported under other debt 

securities in Item 4N. Foreign sovereign 

debt securities would be defined in 

Instruction B of Form ATS–R as any 

security other than an equity security, as 

defined in § 240.3a11–1, issued or 

guaranteed by a foreign government, as 

defined in § 240.3b–4.721 Creating 

subcategories of corporate debt 

securities and a reporting requirement 

for foreign sovereign debt securities 

would improve the quality of data that 

the Commission already gathers through 

Form ATS–R. In addition, the proposed 

reporting requirements would help the 

Commission further understand the 

amount of trading that occurs on the 

ATSs for corporate bonds and foreign 

sovereign debt securities markets. 

The Commission is also proposing to 

add new Items 4N and 4O to Form 

ATS–R, which would require ATSs to 

disclose the total unit and dollar volume 

of transactions in repurchase 

agreements and reverse repurchase 

agreements. Specifically, the 

Commission is proposing to require 

ATSs to disclose the total unit 722 and 

dollar volume of repurchase and reverse 

repurchase transactions broken down by 

(1) whether the transaction is overnight 

or term; 723 (2) whether the transaction 

is triparty 724 or bilateral; 725 and (3) the 

type of securities used to finance the 

collateral—i.e., NMS stocks, U.S. 

Treasury Securities, Federal Agency 

Securities, Agency Mortgage-Backed 

Securities, municipal securities, U.S. 

and non-U.S. corporate debt securities, 

asset-backed securities, foreign 

sovereign debt securities, and other 

securities.726 If an ATS traded 

repurchase or reverse repurchase 

agreements collateralized with other 

securities, the ATS would list the other 

types of securities in proposed Item 4N 

or 4O. In the Commission’s experience, 

some ATSs that trade repurchase or 

reverse repurchase agreements, which 

are currently required to be disclosed as 

debt securities on Item 4N of Form 

ATS–R, currently provide in Item 5B of 


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727For instance, the Treasury Department’s Office 

of Financial Research (‘‘OFR’’) collects data on 

repurchase agreements cleared by triparty clearing 

banks and major central counterparties, such as the 

FICC, and publishes aggregate statistics on these 

transactions broken out by three venues—which are 

the triparty market, FICC’s DVP Service, and FICC’s 

GCP Repo Service—collateral, tenor, volume, and 

rates. See OFR, U.S. Repo Market Data Release, 

available at https://www.financialresearch.gov/ 

data/us-repo-data/. 

728See supra note 98 and accompanying text. 

729See id. 

730See Item 4.g of Form ATS, as proposed to be 

revised. 

731See NMS Stock ATS Adopting Release, supra 

note 2, at 38869 (describing that many of the 

disclosure items on Form ATS–N are also required 

by respondents in whole or in part on current Form 

ATS). See also NMS Stock ATS Proposing Release, 

supra note 29, at 81099–102 (describing that some 

of the disclosures of Form ATS–N that the 

Commission was proposing were already required 

under Form ATS). 

Form ATS–R on a voluntary basis a 

breakdown of nominal trade value of 

each of these types of securities. Adding 

new Items 4N and 4O to Form ATS–R 

to require that ATSs provide the total 

unit and dollar volume of transactions 

in repurchase and reverse repurchase 

agreements would require all ATSs that 

trade repurchase or reverse repurchase 

agreements to take a consistent 

approach in providing this information. 

The Commission understands that 

certain transaction information about 

repurchase and reverse repurchase 

agreements is publicly available.727

However, individual ATSs are not 

currently required to provide the 

Commission with information breaking 

down the types of transactions in 

repurchase and reverse repurchase 

agreements. In addition, transactions in 

repurchase and reverse repurchase 

agreements are not generally required to 

be reported to an SRO, and the absence 

of information about the trading of 

repurchase and reverse repurchase 

agreements that occur on ATSs impedes 

the Commission’s oversight of these 

markets. The proposed reporting 

requirement would enhance the 

Commission’s oversight of ATSs that 

trade repurchase and reverse repurchase 

agreements. 

Finally, the Commission is proposing 

to add new Item 5C, which would 

require an ATS to list the types of listed 

options reported in Item 4F of Form 

ATS–R. Item 4F of Form ATS–R 

currently requires ATSs to disclose the 

total unit volume and dollar volume of 

transactions in listed options. Under 

new Item 5C, an ATS might indicate, for 

example, that it trades equity options 

and options on government securities. 

This would provide the Commission 

with more specific information about 

the types of options that each ATS 

trades. 

In addition, because the Commission 

is proposing to change the definition of 

‘‘exchange’’ to include systems that use 

trading interest, the Commission is 

proposing to revise Form ATS to require 

information related to the entry of 

‘‘trading interest.’’ Communication 

Protocol Systems that transact in 

securities other than NMS stocks or 

government securities or repos will be 

required to file Form ATS if they choose 

to comply with Regulation ATS and the 

resulting disclosures will help the 

Commission oversee these systems. In 

addition, the Commission is proposing 

to include in Form ATS the definition 

of ‘‘trading interest’’ identical to that 

proposed in Rule 3b–16(e) and Rule 

300(q).728 The Commission is also 

proposing to change the definition of 

‘‘subscriber’’ to conform to the changes 

the Commission is proposing in Rule 

300(b).729 Form ATS Item 3.g (current 

Exhibit F.a) requests that the ATS 

provide information about ‘‘the manner 

of operations of the alternative trading 

system.’’ 730 An ATS that either operates 

a Communication Protocol System, or 

an order-driven system, would be 

required to provide information about 

the manner of operations on Form ATS 

that is akin to information provided in 

response to in Part III of Form ATS–N 

(e.g., display, connectivity, 

segmentation, market data, counterparty 

selection).731 For example, ATSs that 

use orders generally should provide 

information about order types and sizes, 

and the trading facilities and rules for 

bringing together the orders of buyers 

and sellers on the ATS. ATSs that use 

non-firm trading interest generally 

should provide information about the 

communication protocols and 

functionalities of the ATS, including the 

use of messages, requirements related to 

the size of trading interest, and 

procedures governing the 

communication protocols. 

Request for Comment 

162. Would the proposed changes to 

Form ATS and Form ATS–R enhance 

the Commission’s oversight of ATSs? Do 

commenters disagree with any of the 

proposed modifications? If so, what 

alternatives should the Commission 

implement? 

163. Form ATS–R requires an ATS to 

quarterly report volume of transactions 

for certain securities, all subscribers that 

were participants in the ATS, and 

securities that were traded in the ATS. 

Should the Commission adopt 

amendments to Form ATS–R to add, 

change, or modify any of the requests 

for information on Form ATS–R? Are 

the current categories of securities and 

the proposed categories of securities for 

reporting transaction volume to the 

Commission appropriate? 

164. Should Form ATS–R require 

ATSs to disclose total unit volume in 

government securities, U.S. Treasury 

Securities, and/or Agency Securities? 

165. Proposed Items 4N and 4O of 

Form ATS–R would require ATSs to 

report unit and dollar volume of 

transactions in repurchase and reverse 

repurchase agreements broken down by, 

among other categories, whether the 

transaction is triparty or bilateral. Do 

commenters believe that categorizing 

repurchase and reverse repurchase 

agreements into these two segments 

would yield useful information to the 

Commission? Do commenters believe 

that the Commission should require 

ATSs to separately report volumes for 

repurchase and reverse repurchase 

agreements in the FICC’s GCF Repo 

Service and FICC’s DVP Service rather 

than include them under volumes for 

triparty and bilateral, respectively? Are 

there any types of securities, not 

otherwise covered in proposed Items 4N 

and 4O, that are used as collateral in 

repurchase and reverse repurchase 

agreements? 

166. Proposed Items 4N and 4O of 

Form ATS–R would require ATSs to 

report transaction volumes of 

repurchase and reverse repurchase 

agreements in total unit and dollar 

volume. Do commenters believe that 

ATSs should be required to provide the 

unit volume as well as the dollar 

volume? 

167. Are there characteristics unique 

to repurchase or reverse repurchase 

agreements collateralized with a basket 

or group of securities that would make 

reporting those repurchase or reverse 

repurchase agreements in both unit and 

dollar volume in Form ATS–R unduly 

burdensome or inappropriate for ATSs? 

For such basket repos, the Commission 

is proposing to define ‘‘total unit 

volume of transactions’’ as the number 

of units within each basket or group 

rather than the number of baskets or 

groups. Do commenters believe ‘‘unit’’ 

should be defined differently for basket 

repos? 

168. Proposed Item 4J of Form ATS– 

R would require ATSs to report dollar 

volume of transactions in U.S. and nonU.S. corporate debt securities. Do 

commenters believe that the two 

subcategories would yield useful 

information to the Commission? NonU.S. corporate debt securities would 

include debt securities issued by a 

foreign issuer in emerging markets as 

well as non-emerging markets. Do 

commenters believe that the 

Commission should require ATSs to 


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732See 17 CFR 242.301(b)(2)(vii). 

733The Commission notes, however, that Form 

ATS and Form ATS–R are available to the 

examination staff of state securities authorities and 

SROs. See Instruction A.7 of Form ATS and Form 

ATS–R. See also 17 CFR 242.301(b)(2)(vii) 

(requiring duplicate of filings on Form ATS be 

provided to the surveillance personnel designated 

by the SRO that is the examining authority for each 

ATS, and that duplicates of the Form ATS–R be 

made available to the surveillance personnel of 

such SRO upon request). 

734See, e.g., 17 CFR 200.83, 240.24b–2. 735 44 U.S.C. 3501 et seq. 

further break down the volume for nonU.S. corporate debt securities by type of 

market—emerging and non-emerging? If 

so, how should ‘‘emerging markets’’ be 

defined for the purpose of reporting on 

Form ATS–R? Do commenters believe 

‘‘emerging markets’’ should be defined 

by country or region? 

169. Do commenters believe that the 

Commission should require ATSs to 

report total dollar volume of foreign 

sovereign debt securities on Form ATS– 

R, as proposed? Should the proposed 

definition of sovereign debt securities be 

modified in any way? 

170. Instruction A.1 of Form ATS–R 

requires ATSs to file Form ATS–R 

within 30 days after the end of each 

calendar quarter, or more frequently 

upon the request of the Commission. Do 

commenters believe that the 

Commission should request information 

from ATSs on Form ATS–R on a more 

frequent basis (e.g., monthly)? Do 

commenters believe that such request 

would be unduly burdensome for ATSs? 

171. Form ATS requires an ATS to 

report information to the Commission 

about the ATS, including but not 

limited to, types of subscribers and 

differential access to services, types of 

securities traded, counsel, governance 

documents, service providers, manner 

of operations, including entry of trading 

interest, order execution procedures, 

clearance and settlement procedures, 

and trade reporting, procedures for 

reviewing system capacity, security, and 

contingency planning, procedures to 

safeguard subscriber funds and 

securities, and direct owners. Should 

the Commission adopt amendments to 

Form ATS to add, change, or modify 

any of the requests for information on 

Form ATS? The proposed changes to 

Rule 3b–16 would require 

Communication Protocol Systems that 

trade securities other than NMS stocks 

or government securities or repos to file 

Form ATS. Are there any changes that 

the Commission should make to Form 

ATS that would be relevant to 

Communication Protocol Systems? If so, 

please identify the request and explain 

how it should be amended. 

172. Should the Commission amend 

Form ATS to require disclosures similar 

to disclosures required on Part II of 

Form ATS–N, which requests 

information about ATS-related activities 

of the broker-dealer operator and its 

affiliates? 

173. Should the Commission amend 

Form ATS to include questions similar 

to those in Part III of Form ATS–N, 

which requests information about the 

manner of the ATS’s operations? 

174. Are there any specific items on 

Form ATS–N, currently or as proposed 

to be revised, that the Commission 

should incorporate into Form ATS? 

175. Should the Commission amend 

Rule 301(b)(2) and Form ATS to provide 

that Form ATS is publicly 

disseminated? If so, should any of the 

information on Form ATS be kept 

confidential? 

C. Amendment to Rule 301(b)(2)(vii) 

Rule 301(b)(2)(vii) provides that all 

reports filed pursuant to Rules 301(b)(2) 

and (9) are ‘‘deemed confidential.’’ 732

As a result, the Commission does not 

make Form ATS and Form ATS–R 

disclosures available to the public, 

including the types of securities that the 

ATS trades or intends to trade.733

Currently, the Commission makes 

public on a monthly basis on the 

Commission website information about 

ATSs that have a Form ATS on file with 

the Commission, which includes the 

name of the ATS, any name(s) under 

which business is conducted, and the 

location of each ATS. The list also 

identifies each ATS that filed a 

cessation of operations report in the 

prior month. While the Commission 

does not approve Form ATS filings, the 

list is designed to inform the public 

about ATSs that have noticed their 

operations with the Commission. 

The Commission is re-proposing to 

amend Rule 301(b)(2) to clarify that 

being ‘‘deemed confidential’’ means 

receiving confidential treatment under a 

relevant Commission regulation subject 

to applicable law 734 and to eliminate 

confidential treatment for information 

about the type(s) of securities that the 

ATS trades as disclosed in the Exhibit 

B, subpart (a) of Form ATS and Exhibit 

B of Form ATS–R. The Commission 

does not believe that ATSs will be 

harmed by these disclosures because a 

vast majority of ATSs currently 

publicize the types of securities in 

which they transact, for example, on the 

website for the ATS or the website of 

the ATS broker-dealer operator. The 

Commission publishes on its website a 

list of ATSs that have an active Form 

ATS on file with the Commission; 

however, information about types of 

securities traded is not provided on that 

list and the Commission frequently 

receives requests from the public and 

regulators for more detail in the 

Commission’s publication about the 

types of securities traded by ATSs. 

Disclosing this information could help 

the public understand a fundamental 

aspect of an ATS. To allow for this 

narrow exception, the Commission is 

proposing to amend Rule 301(b)(2)(vii) 

of Regulation ATS to state that the 

content of reports filed under Rule 

301(b)(2) and (9) ‘‘(except for types of 

securities traded provided on Form ATS 

and Form ATS–R) will be accorded 

confidential treatment subject to 

applicable law.’’ 

Request for Comment 

176. Should the Commission amend 

Rule 301(b)(2)(vii) to make Form ATS, 

Form ATS–R, or both public? Should 

the Commission amend Rule 

301(b)(2)(vii) to make any other 

disclosures provided on Form ATS or 

Form ATS–R public? 

177. Should the Commission 

eliminate confidential treatment for 

information about the type(s) of 

securities that the ATS trades as 

disclosed on Form ATS and Form ATS– 

R? 

VI. General Request for Comment 

The Commission is requesting 

comments from all members of the 

public. The Commission particularly 

requests comment from the point of 

view of persons who operate ATSs that 

would meet the proposed definition of 

Government Securities ATS, subscribers 

to those systems, and investors. The 

Commission seeks comment on all 

aspects of the proposed rule 

amendments and proposed form, 

particularly the specific questions posed 

above. Commenters are requested to 

provide empirical data in support of any 

arguments or analyses. With respect to 

any comments, the Commission notes 

that they are of the greatest assistance to 

its rulemaking initiative if accompanied 

by supporting data and analysis of the 

issues addressed in those comments and 

by alternatives to the Commission’s 

proposals where appropriate. 

VII. Paperwork Reduction Act 

Certain provisions of the proposed 

rule amendments contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’).735 The 

Commission is submitting these 

collections of information to the Office 

of Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11. An agency 


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736See infra Section VII.C for a description of the 

categories of respondents. 

737Unless otherwise described, none of the 

existing information collections are being revised 

with new requirements. 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless the 

agency displays a currently valid 

control number. The Commission is 

proposing to alter seven existing 

collections of information and apply 

such collections of information to new 

categories of respondents. The titles of 

such existing collections of information 

are: 

Rule Rule title OMB 

control No. 

Rule 301 of Regulation ATS ..................... Regulation ATS Rule 301 Amendments ...................................................................... 3235–0509 

Rule 302 of Regulation ATS ..................... Rule 302 (17 CFR 242.302) Recordkeeping Requirements for Alternative Trading 

Systems.

3235–0510 

Rule 303 of Regulation ATS ..................... Rule 303 (17 CFR 242.303) Record Preservation Requirements for Alternative 

Trading Systems.

3235–0505 

Rule 304 of Regulation ATS ..................... Regulation ATS Rule 304 and Form ATS–N ............................................................... 3235–0763 

17 CFR 240.15b1–1 (Rule 15b1–1 under 

the Exchange Act).

Form BD and Rule 15b1–1 Application for Registration as a Broker-Dealer ............. 3235–0012 

17 CFR 232.10(b) (Rule 10(b) of Regulation S–T).Form ID ........................................................................................................................ 3235–0328 

Rules 1001 through 1007 of Regulation 

SCI.

Regulation SCI and Form SCI ..................................................................................... 3235–0703 

A. Summary of Collection of 

Information 

The proposed amendments create 

burdens under the PRA by (1) adding 

new categories of respondents to the 

seven existing collections of information 

noted above and (2) modifying the 

requirements of two of those collections, 

as noted below. The proposed 

amendments do not create any new 

collections of information. The 

collections of information and 

applicable categories of new 

respondents736 are summarized in the 

following table: 737

Collection of information Rule Burden description Respondent categories 

Rule 301 of Regulation ATS 

and Forms ATS and 

ATS–R.

Rule 301(b)(2) ................... Revised Burden: File initial operations 

report using the proposed modernized 

Form ATS.

Certain Communication Protocol Systems. 

All Other Form ATS Filers. 

Rule 301(b)(5) ................... Comply with fair access standards recordkeeping and fair access notice requirements for certain securities, including, as proposed, U.S. Treasury 

Securities and Agency Securities.

Certain Communication Protocol Systems. 

Certain Legacy Government Securities 

ATSs. 

Certain NMS Stock ATSs. 

Certain Other ATS Filers. 

Rule 301(b)(6) ................... Comply with ATS-specific systems capacity, integrity and security recordkeeping and systems outages notice 

requirements.

Certain Communication Protocol Systems. 

Rule 301(b)(9) ................... Revised Burden: File quarterly reports 

using the proposed modernized Form 

ATS–R.

All Communication Protocol Systems. 

All Legacy Government Securities ATSs. 

All NMS Stock ATSs. 

All Other Form ATS Filers. 

Rule 301(b)(10) ................. Comply with written safeguards and procedures requirement.All Communication Protocol Systems. 

All Currently Exempted Government Securities ATSs. 

Rule 302 of Regulation ATS Rule 302 ............................ Comply with ATS recordkeeping requirements (required by Rule 301(b)(8)).All Communication Protocol Systems. 

All Currently Exempted Government Securities ATSs. 

Rule 303 of Regulation ATS Rule 303 ............................ Comply with ATS record preservation requirements (required by Rule 

301(b)(8)).

All Communication Protocol Systems. 

All Currently Exempted Government Securities ATSs. 

Rule 304 of Regulation ATS 

and Form ATS–N.

Rule 304 ............................ Revised Burden: File initial Form ATS–N 

(required by Rule 301(b)(2)(viii)), as 

proposed to be revised.

Certain Communication Protocol Systems. 

All Legacy Government Securities ATSs. 

All NMS Stock ATSs. 

Rule 15b1–1 and Form BD Rule 15b1–1 ...................... Register as a broker-dealer using Form 

BD (required by Rule 301(b)(1)).

Certain Communication Protocol Systems. 

Certain Currently Exempted Government 

Securities ATSs. 

Form ID ................................ Rule 101 of Regulation S– 

T.

Apply for EDGAR access using Form ID Certain Communication Protocol Systems. 

Certain Currently Exempted Government 

Securities ATSs. 


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738See supra Section V.A. 

739See supra notes 165–166 and accompanying 

text. 

Collection of information Rule Burden description Respondent categories 

Regulation SCI .................... Rules 1001–1007 of Regulation SCI.Comply with Regulation SCI ................... Certain Communication Protocol Systems. 

Certain Legacy Government Securities 

ATSs. 

B. Proposed Use of Information 

The existing information collections 

affected by the proposed amendments 

are used as described below: 

1. Rule 301 of Regulation ATS and 

Forms ATS and ATS–R 

Rule 301 of Regulation ATS sets forth 

the conditions that an ATS must comply 

with to be exempt pursuant to Exchange 

Act Rule 3a1–1(a)(2). Rule 301 requires 

an ATS to register as a broker-dealer. 

Rule 301 further requires all ATSs that 

wish to comply with Regulation ATS to 

file an initial operation report on Form 

ATS. The initial operation report 

requires information regarding 

operation of the system including the 

manner of operation, how subscribers 

access the trading system, and the types 

of securities traded. ATSs are also 

required to notice changes in their 

operations by filing amendments to 

Form ATS to the Commission. 

In addition, Regulation ATS requires 

ATSs to provide quarterly transaction 

reports on Form ATS–R. ATSs are also 

required to file cessation of operations 

reports on Form ATS. The gathering of 

such information permits the 

Commission to oversee the operation of 

such systems and track the growth of 

their role in the securities markets. 

The Commission is proposing 

revisions to Rule 301(b)(2), Form ATS, 

and Form ATS–R to modernize Form 

ATS and Form ATS–R and to provide 

that they are filed electronically. The 

Commission believes that, among other 

benefits, the electronic filing of Forms 

ATS and ATS–R would increase 

efficiencies and decrease filing costs for 

ATSs. 

ATSs with significant volume are 

required to comply with requirements 

for fair access pursuant to Rule 301(b)(5) 

of Regulation ATS. As proposed, such 

ATSs would be required to establish 

and apply reasonable written standards 

for granting, limiting, and denying 

access to the services of the ATS and 

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 the 

reasons for each applicant for denying 

or limiting access.738 The Commission 

is proposing to apply the Fair Access 

Rule to the trading of U.S. Treasury 

Securities and Agency Securities. The 

Commission believes that, today, the 

principles undergirding the Fair Access 

Rule are equally relevant to a 

Government Securities ATS and 

amending the Fair Access Rule to 

include the trading of U.S. Treasury 

Securities and Agency Securities would 

help ensure the fair treatment of 

potential and current subscribers to 

ATSs that consist of a large percentage 

of trading volume in these two types of 

securities. 

ATSs with significant volume are also 

required to comply with requirements 

for systems capacity, integrity and 

security pursuant to Rule 301(b)(6), 

which, together with the requirements 

under Rule 302, requires ATSs to 

preserve any records made in the 

process of complying with the systems 

capacity, integrity, and security 

requirements. In addition, such ATSs 

are required to notify Commission staff 

of material systems outages and 

significant systems changes. 

The Commission uses the information 

provided pursuant to Rule 301 to 

comprehensively monitor the growth 

and development of ATSs to confirm 

that investors effecting trades through 

the systems are adequately protected, 

and that the systems do not impede the 

maintenance of fair and orderly 

securities markets or otherwise operate 

in a manner that is inconsistent with the 

Federal securities laws. In particular, 

the information collected and reported 

to the Commission by ATSs enables the 

Commission to evaluate the operation of 

ATSs with regard to national market 

system goals, and monitor the 

competitive effects of these systems to 

ascertain whether the regulatory 

framework remains appropriate to the 

operation of such systems. 

Without the information provided on 

Forms ATS and ATS–R, the 

Commission would not have readily 

available information on a regular basis 

in a format that would allow it to 

determine whether such systems have 

adequate safeguards. Further, in the 

absence of Rule 301, the Commission 

would not regularly obtain uniform 

trading data to identify areas where 

surveillance by SROs may be more 

appropriately tailored to the detection of 

fraudulent, deceptive and manipulative 

practices that may be peculiar to an 

automated trading environment. 

2. Rule 302 of Regulation ATS 

Rule 302, as proposed to be 

amended,739 would require ATSs to 

make a record of subscribers to the ATS, 

daily summaries of trading in the ATS 

and time-sequenced records of trading 

interest information in the ATS. 

Regulators (including the Commission 

and SROs) use the information 

contained in the records required to be 

preserved by Rule 302 to ensure that 

ATSs are in compliance with Regulation 

ATS as well as other applicable rules 

and regulations. Without the data 

required by Rule 302, regulators would 

be limited in their ability to comply 

with their statutory obligations, provide 

for the protection of investors, and 

promote the maintenance of fair and 

orderly markets. 

3. Rule 303 of Regulation ATS 

Rule 303 describes the record 

preservation requirements for ATSs. 

Rule 303 also describes how such 

records must be maintained, what 

entities may perform this function, and 

how long records must be preserved. 

The information contained in the 

records required to be preserved by Rule 

303 is used by regulators (including the 

Commission and the SROs) to ensure 

that ATSs are in compliance with 

Regulation ATS as well as other 

applicable rules and regulations. 

Without the data required by Rule 303, 

regulators would be limited in their 

ability to comply with their statutory 

obligations, provide for the protection of 

investors, and promote the maintenance 

of fair and orderly markets. 

4. Rule 304 of Regulation ATS and Form 

ATS–N 

Rule 304 provides conditions for NMS 

Stock ATSs seeking to rely on the 

exemption from the definition of 

‘‘exchange’’ provided by Rule 3a1–1(a) 

of the Exchange Act, including to file a 

Form ATS–N, and for that Form ATS– 

N to become effective. Form ATS–N 

requires NMS Stock ATSs to provide 

information about their manner of 

operations, the broker-dealer operator, 

and the ATS-related activities of the 

broker-dealer operator and its affiliates 

to comply with the conditions provided 

under Rule 304. Form ATS–N promotes 


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740See supra Section IV.A. 741See supra Section IV.D.1. 742See supra Section IV.D.5. 743See supra Section IV.D. 744See supra Section III.B.2. 745See supra Section IV.A. 746The Commission estimates that there are 7 

Currently Exempted Government Securities ATSs 

that would be newly subject to the requirements of 

the exemption under Rule 3a1–1(a)(2) and will be 

required to comply with the applicable sections of 

Regulation ATS, as amended. The Commission 

estimates that 5 such ATSs limit their trading 

activity to government securities and the other 2 

ATSs limit their trading activity to repos. 

747As of September 30, 2021, 17 Government 

Securities ATSs currently operate pursuant to a 

Form ATS currently on file with the Commission. 

more efficient and effective market 

operations by providing more 

transparency to market participants 

about the operations of NMS Stock 

ATSs and the potential conflicts of 

interest of the controlling broker-dealer 

operator and its affiliates, and helps 

brokers meet their best execution 

obligations to their customers. 

Operational transparency rules, 

including Form ATS–N, are designed to 

increase competition among trading 

centers in regard to order routing and 

execution quality. 

As discussed above, the Commission 

is re-proposing to amend Rule 304(a) to 

require that a Covered ATS, which 

would include a Government Securities 

ATS, must comply with Rules 300 

through 304 of Regulation ATS, as 

applicable, to be exempt pursuant to 

Rule 3a1–1(a)(2). As proposed, all 

Government Securities ATSs would be 

required to comply with Rule 304, as 

proposed to be amended, to file Form 

ATS–N, as revised.740

The Commission is proposing to 

revise Form ATS–N to include 

information it previously proposed on 

Form ATS–G, including a question 

requiring information about interaction 

with related markets, which would be 

required to be responded to by both 

Government Securities ATSs and NMS 

Stock ATSs.741 The Commission is also 

proposing to reorganize certain 

questions on Form ATS–N and to 

require disclosure about any 

surveillance and monitoring that is 

conducted with respect to the ATS.742

The Commission believes that the 

proposed revisions to Form ATS–N will 

continue to allow for better comparisons 

between ATSs, and applying Form 

ATS–N to Government Securities ATSs 

will help enable market participants to 

compare Government Securities ATSs. 

The Commission is also proposing 

certain amendments to Form ATS–N 

that would apply globally to Form ATS– 

N unless otherwise noted.743 The 

Commission believes that Form ATS– 

N’s public disclosures would provide 

important information to market 

participants that would help them better 

understand these operational facets of 

Government Securities ATSs and select 

the best trading venue based on their 

needs. 

5. Rule 15b1–1 and Form BD 

The Commission uses the information 

disclosed by applicants in Form BD: (1) 

To determine whether the applicant 

meets the standards for registration set 

forth in the provisions of the Exchange 

Act; (2) to develop a central information 

resource where members of the public 

may obtain relevant, up-to-date 

information about broker-dealers, 

municipal securities dealers, and 

government securities broker-dealers, 

and where the Commission, other 

regulators, and SROs may obtain 

information for investigatory purposes 

in connection with securities litigation; 

and (3) to develop statistical 

information about broker-dealers, 

municipal securities dealers, and 

government securities broker-dealers. 

Without the information disclosed in 

Form BD, the Commission could not 

effectively implement policy objectives 

of the Exchange Act with respect to its 

investor protection function. 

6. Form ID 

The information provided on Form ID 

allows the Commission staff to review 

applications for EDGAR access and, if 

the application is approved, assign 

identification numbers (if the applicant 

does not already have an identification 

number) and access codes to applicants 

to permit filing on EDGAR. Form ID is 

essential to EDGAR security. 

7. Regulation SCI 

Regulation SCI requires certain key 

market participants to, among other 

things: (1) Have comprehensive policies 

and procedures in place to help ensure 

the robustness and resiliency of their 

technological systems, and also that 

their technological systems operate in 

compliance with the Federal securities 

laws and with their own rules; and (2) 

provide certain notices and reports to 

the Commission to improve 

Commission oversight of securities 

market infrastructure. 

C. Respondents 

The categories of respondents for 

which the proposed amendments create 

a burden under the PRA are described 

below. 

1. Legacy Government Securities ATSs 

As discussed above, the Commission 

is re-proposing amendments to 

Regulation ATS that would require a 

Currently Exempted Government 

Securities ATS that seeks to operate 

pursuant to the exemption from the 

definition of an ‘‘exchange’’ under 

Exchange Act Rule 3a1–1(a)(2), and thus 

not be required to be registered as a 

national securities exchange, to comply 

with Regulation ATS as proposed 744

and that Current Government Securities 

ATSs will have to comply with the 

enhanced requirements for Government 

Securities ATSs.745 The Commission 

estimates the total number of Currently 

Exempted Government Securities ATSs 

to be 7 746 and Current Government 

Securities ATSs to be 17,747 and some 

or all of this number will be subject to 

the following collections of information 

as estimated below: 

Collection of information Rule Number of respondents Description 

Rule 301 of Regulation ATS 

and Forms ATS and 

ATS–R.

Rule 301(b)(5) ................... 7 ......................................... The Commission estimates that certain Legacy Government Securities ATSs would satisfy the conditions for the proposed application of the Fair Access 

Rule to Government Securities ATS and be subject 

to the related recordkeeping and notice provisions. 


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748See supra Section II.D. 

749Some of the below estimates could change 

based on how the Communication Protocol Systems 

structure their operations if subject to Regulation 

ATS. For example, the Commission is basing some 

of the below estimates on the assumption that 

operators of Communication Protocol Systems that 

are affiliated with existing broker-dealers would 

structure their operations so that the existing 

broker-dealer would operate the ATS to avoid the 

costs of new broker-dealer registration. In addition, 

the Commission estimates that 2 Communication 

Protocol Systems that trade municipal securities or 

corporate debt securities would meet the volume 

thresholds to satisfy the conditions for complying 

with ATS-specific systems capacity, integrity and 

security recordkeeping as well as systems outages 

requirements. This number is based on aggregate 

data reported by broker-dealers and could vary 

based on how these systems structure their 

businesses. 

750The estimated respondents for the Rule 304/ 

Form ATS–N collection of information is based on 

the assumption that systems that operate multiple 

market places that are affiliated with a new or 

existing broker-dealer will all be operated by such 

broker-dealer, and that such systems will not 

register multiple broker-dealers to operate multiple 

affiliated ATSs. 

Collection of information Rule Number of respondents Description 

Rule 301(b)(9) ................... 24 ....................................... The Commission estimates that all Legacy Government Securities ATSs will have to comply with the 

requirement to file quarterly reports on the proposed 

modernized Form ATS–R. The proposal would impose the full currently-authorized baseline burden of 

filing on Currently Exempted Government Securities 

ATSs, for which the requirement is new. For Current 

Government Securities ATSs, the proposal would 

only impose the marginal new burden of filing using 

the modernized version of the form. 

Rule 301(b)(10) ................. 7 ......................................... The Commission estimates that all Currently Exempted Government Securities ATSs will have to comply 

with the requirement to have written safeguards and 

written procedures to protect subscribers’ confidential trading information. 

Rule 302 of Regulation ATS Rule 302 ............................ 7 ......................................... The Commission estimates that all Currently Exempted Government Securities ATSs will have to comply 

with the recordkeeping requirements for ATSs. 

Rule 303 of Regulation ATS Rule 303 ............................ 7 ......................................... The Commission estimates that all Currently Exempted Government Securities ATSs will have to comply 

with the record preservation requirements for ATSs. 

Rule 304 of Regulation ATS 

and Form ATS–N.

Rule 304 ............................ 24 ....................................... The Commission estimates that all Legacy Government Securities ATSs will have to comply with the 

requirement to file initial Form ATS–N, as proposed 

to be revised. 

Rule 15b1–1 and Form BD Rule 15b1–1 ...................... 1 ......................................... The Commission estimates that certain Currently Exempted Government Securities ATSs currently operated by a bank and not registered as a broker-dealer will have to register using Form BD. 

Form ID ................................ Rule 101 of Regulation S– 

T.

1 ......................................... The Commission estimates that the same subset of 

Currently Exempted Government Securities ATSs 

that are not currently registered as a broker-dealer 

will also have to file Form ID to apply for EDGAR 

access. 

Regulation SCI .................... Rules 1001–1007 of Regulation SCI.1 Legacy Government Securities ATS that is an 

existing SCI entity and 1 

that is a new SCI entity.

The Commission estimates that certain Legacy Government Securities ATSs would meet the specified 

volume threshold to meet the proposed amended 

definition of ‘‘SCI alternative trading system’’ and be 

subject to the requirements of Regulation SCI. 

2. Communication Protocol Systems 

As discussed above, the Commission 

is proposing to amend Exchange Act 

Rule 3b–16(a) to cause Communication 

Protocol Systems to fall within the 

definition of ‘‘exchange’’ and believes 

that such Communication Protocol 

Systems would likely choose to register 

as a broker dealer and be regulated 

under the Regulation ATS exemption 

than register as a national securities 

exchange because of the lighter 

regulatory requirements imposed on 

ATSs, as compared to registered 

exchanges.748 The Commission 

estimates the total number of 

Communication Protocol Systems to be 

22,749 and some or all of this total 

number will be subject to the following 

collections of information as estimated 

below:750

Collection of information Rule Number of 

respondents Description 

Rule 301 of Regulation ATS 

and Forms ATS and ATS–R.

Rule 301(b)(2) ......................... 14 The Commission estimates that certain Communication Protocol Systems, which trade securities other than NMS 

stocks or government securities or repos, would be required to file the proposed modernized Form ATS. 


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751See supra Section IV.D.1. 752See id. and Section IV.D.4–5. In addition, for 

purposes of calculating whether an ATS meets the 

Fair Access Rule volume thresholds, the 

Commission is proposing to aggregate trading 

volume among certain affiliated ATSs. See supra 

Section V.A. At this time, the Commission 

estimates that no NMS Stock ATSs would be 

subject to the Fair Access Rule as a result of the 

proposed changes to aggregate affiliated ATS 

trading volume, and that the proposed change 

would therefore impose no additional burden. Also 

see infra note 1085. 

753As of September 30, 2021, there are 34 NMS 

Stock ATSs that have filed an effective Form ATS– 

N with the Commission. For the purpose of this 

PRA analysis, NMS Stock ATSs include only those 

that operate today. The burden on Communication 

Protocol Systems that the Commission estimates 

will trade NMS stocks are included in the 

discussion of that category of respondent. See 

supra, Section VII.C.2; infra, Section VII.D.3. 

Collection of information Rule Number of 

respondents Description 

Rule 301(b)(5) ......................... 8 The Commission estimates that certain Communication Protocol Systems would meet the volume thresholds in government securities, NMS stocks, corporate debt securities, 

municipal securities, equity securities that are not NMS 

stocks and for which transactions are reported to an SRO 

and be subject to the Fair Access Rule and the related 

recordkeeping and notice provisions. 

Rule 301(b)(6) ......................... 2 The Commission estimates that certain Communication Protocol Systems that trade municipal securities or corporate 

debt securities and meet certain volume requirements 

would satisfy the conditions for complying with ATS-specific systems capacity, integrity and security recordkeeping 

as well as systems outages requirements. 

Rule 301(b)(9) ......................... 22 The Commission estimates that all Communication Protocol 

Systems will have to comply with the requirement to file 

quarterly reports on the proposed modernized Form ATS– 

R. 

Rule 301(b)(10) ....................... 22 The Commission estimates that all Communication Protocol 

Systems will have to comply with the requirement to have 

written safeguards and written procedures to protect subscribers’ confidential trading information. 

Rule 302 of Regulation ATS ... Rule 302 ................................. 22 The Commission estimates that all Communication Protocol 

Systems will have to comply with the recordkeeping requirements for ATSs. 

Rule 303 of Regulation ATS ... Rule 303 ................................. 22 The Commission estimates that all Communication Protocol 

Systems will have to comply with the record preservation 

requirements for ATSs. 

Rule 304 of Regulation ATS 

and Form ATS–N.

Rule 304 ................................. 8 The Commission estimates that certain Communication Protocol Systems that trade NMS stocks or government securities or repos would be required to file Form ATS–N, as 

proposed to be revised. 

Rule 15b1–1 and Form BD ..... Rule 15b1–1 ........................... 6 The Commission estimates that certain Communication Protocol Systems are not currently registered as or affiliated 

with a broker-dealer and will have to register using Form 

BD. 

Form ID ................................... Rule 101 of Regulation S–T ... 6 The Commission estimates that the same subset of Communication Protocol Systems that are not currently registered 

as or affiliated with a broker-dealer will also have to file 

Form ID to apply for EDGAR access. 

Regulation SCI ........................ Rules 1001–1007 of Regulation SCI.2 The Commission estimates that certain Communication Protocol Systems that trade government securities, NMS 

stocks, or equity securities other than NMS stocks reported 

to an SRO would meet the specified volume threshold to 

meet the proposed amended definition of ‘‘SCI alternative 

trading system’’ and be subject to the requirements of 

Regulation SCI. 

3. NMS Stock ATSs 

As discussed above, the Commission 

is proposing to revise Form ATS–N to 

include information it previously 

proposed on Form ATS–G, including 

adding questions requiring information 

about interaction with related markets, 

surveillance and monitoring on the 

ATS, and liquidity providers, which 

would be required to be responded to by 

both Government Securities ATSs and 

NMS Stock ATSs.751 The Commission is 

also proposing to reorganize certain 

questions on Form ATS–N.752 The 

Commission estimates the total number 

of NMS Stock ATSs to be 34 753 and that 

all will be subject to the following 

collections of information as estimated 

below: 

Collection of information Rule Number of 

respondents Description 

Rule 301 of Regulation ATS 

and Forms ATS and ATS–R.

Rule 301(b)(9) ......................... 34 The Commission estimates that all NMS Stock ATSs will 

have to prospectively comply with the requirement to file 

quarterly reports on the proposed modernized Form ATS– 

R. 


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754 Government Securities ATSs that also have 

trading activities other than in government 

securities or repos will be required to separately 

report that activity on Form ATS after the effective 

date of any final rule. 

755See supra Section V.B. In addition, for 

purposes of calculating whether an ATS meets the 

Fair Access Rule volume thresholds, the 

Commission is proposing to aggregate trading 

volume among certain affiliated ATSs. See supra 

Section V.A. At this time, the Commission 

estimates that no Other Form ATS Filers would be 

subject to the Fair Access Rule as a result of the 

proposed changes to aggregate affiliated ATS 

trading volume, and that the proposed change 

would therefore impose no additional burden. As 

discussed above, the Commission is also reproposing to remove an exclusion from compliance 

with the Fair Access Rule under Rule 301(b)(5) and 

the Capacity, Integrity, and Security Rule under 

Rule 301(b)(6) that is applicable to ATSs that trade 

equities and also re-proposing revisions to Rule 

301(b)(2), Form ATS, and Form ATS–R to 

modernize Form ATS and Form ATS–R and to 

provide that they are filed electronically. See id. 

The Commission does not expect, however, that any 

ATSs will be newly subject to the Fair Access Rule 

or the Capacity, Integrity, and Security Rule as a 

result of removing the exclusion. Also see infra note 

1085. 

756As of September 30, 2021, there are 61 ATSs 

that file Form ATS. Two of these trade only 

government securities or repos and, as proposed, 

would only be required to file a Form ATS–N and 

amendments to Form ATS–N after the effective date 

of any final rule. Accordingly, the Commission 

estimates that 59 ATSs will continue to file Form 

ATS amendments. 

757See supra Section II.D. 

758The Commission believes that the proposed 

electronic submission of Forms ATS and ATS–R 

would impose no additional burden on existing 

filers under Regulation ATS such as Other Form 

ATS Filers. These respondents would already have 

been required to register as broker-dealers pursuant 

to Rule 301(b)(1), and registered broker-dealers have 

been assigned a CIK number and do not need to 

submit a Form ID to access EDGAR. A broker-dealer 

that has never used EDGAR to make electronic 

submissions may use its assigned CIK number to 

receive access codes that will allow that brokerdealer operator to submit Form ATS–N filings on 

EDGAR without needing to apply for a Form ID, so 

the proposed changes would not impose a burden 

under the existing Rule 15b1–1 and Form BD or 

Form ID collections of information on this category 

of respondents. 

759The Commission’s currently approved 

baseline burden for the average initial compliance 

burden for each Form ATS IOR is 20 hours 

(Attorney at 13 hours + Compliance Clerk at 7 

hours). See Extension Without Change of a 

Currently Approved Collection: Regulation ATS 

Rule 301 Amendments; ICR Reference No. 202101– 

3235–011; OMB Control No. 3235–0509 (June 9, 

2018), available at https://www.reginfo.gov/public/ 

do/PRAViewDocument?ref_nbr=202101-3235-011 

(‘‘Rule 301 PRA Supporting Statement’’). The 

Commission is proposing amendments to Part I of 

Form ATS, which would add an additional burden 

of 0.5 hours per filing using the modernized form 

(Compliance Clerk at 0.5 hours), and therefore the 

average compliance burden for each Form ATS 

filing would be 20.5 hours. See supra Section V.B 

and infra Section VII.E (discussing proposed 

changes). 

760The Commission’s currently approved 

baseline burden for the average ongoing compliance 

burden for each amendment to a Form ATS IOR is 

4 hours ((Attorney at 1.5 hours + Compliance Clerk 

at 0.5 hours) × 2 IOR amendments a year). See Rule 

301 PRA Supporting Statement, supra note 759. 

The Commission is proposing amendments to Part 

I of Form ATS, including a requirement applicable 

to an ATS filing an IOR amendment to attach as 

Exhibit 3 a marked document to indicate changes 

to ‘‘yes’’ or ‘‘no’’ answers and additions or deletions 

from any Item in Part I, Part II, and Part III, which 

would add an additional annual burden of 1 hour 

per ATS using the modernized form (Compliance 

Clerk at 0.5 hours × 2 IOR amendments a year). 

Therefore the average compliance burden for each 

Form ATS filing would be 5 hours. See supra 

Section V.B and infra Section VII.E (discussing 

proposed changes). 

Collection of information Rule Number of 

respondents Description 

Rule 304 of Regulation ATS 

and Form ATS–N.

Rule 304 ................................. 34 The Commission estimates that all NMS Stock ATSs will be 

required to re-file their current electronic Form ATS–N disclosure using Form ATS–N, as proposed to be revised. 

4. Other Form ATS Filers 

There is set of respondents (‘‘Other 

Form ATS Filers’’) that are currently 

required to file Form ATS and are 

neither NMS Stock ATSs nor 

exclusively 754 Legacy Government 

Securities ATSs and will continue to 

have an obligation to file Form ATS 

after the effective date of any final rule. 

These filers will incur burdens to 

comply with the proposed revisions to 

Forms ATS and ATS–R discussed 

above.755 The Commission estimates the 

total number of Other Form ATS Filers 

to be 59 756 and that these respondents 

will be subject to the following 

collections of information as estimated 

below: 

Collection of information Rule Number of 

respondents Description 

Rule 301 of Regulation ATS 

and Forms ATS and ATS–R.

Rule 301(b)(2) ......................... 59 The Commission estimates that all Other Form ATS Filers 

will be required to re-file their current paper Form ATS disclosure using the proposed modernized Form ATS. 

Rule 301(b)(9) ......................... 59 The Commission estimates that all Other Form ATS Filers 

will have to comply prospectively with the requirement to 

file quarterly reports on the proposed modernized Form 

ATS–R. 

D. Total PRA Burdens 

1. Burden of Rule 301 of Regulation 

ATS and Forms ATS and ATS–R 

a. Rule 301(b)(2) Burden on 

Communication Protocol Systems and 

Other Form ATS Filers 

As discussed above, the Commission 

is proposing to amend Exchange Act 

Rule 3b–16(a), which would cause 

Communication Protocol Systems to fall 

within the definition of ‘‘exchange’’ and 

believes that such Communication 

Protocol Systems would likely choose to 

register as a broker dealer and be 

regulated under the Regulation ATS 

exemption.757 Certain Communication 

Protocol Systems that trade securities 

other than NMS stocks or government 

securities would be subject to 

requirements under Rule 301(b)(2), 

including to file an IOR and 

amendments thereto using the proposed 

modernized and electronic 758 Form 

ATS. 

Other Form ATS Filers—current Form 

ATS filers that are not required to file 

Form ATS–N after the effective date of 

any final rule—would incur a burden to 

comply with the requirements to file 

Form ATS using the proposed 

modernized form. To comply with the 

requirements of revised Form ATS, such 

respondents would be required to re-file 

their most recently-filed Form ATS IOR 

or Amendment to IOR using the 

proposed modernized Form ATS. The 

Commission estimates an initial burden 

of 20.5 hours 759 and an annual burden 

of 5 hours 760 per respondent for 

complying with Rule 301(b)(2) and the 

following total initial and annual 

burdens: 


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761See supra Section II.D.2. 

762See proposed Rule 301(b)(5)(ii). See supra 

Section V.A. 

763See Rule 301 PRA Supporting Statement, 

supra note 759. 

764The Commission’s currently approved 

baseline for the average compliance burden per 

respondent is 37 hours = 10 hours for Fair Access 

Standards recordkeeping (Attorney at 5 hours × 2 

responses a year) + 27 hours for Fair Access notices 

(Attorney at 1 hour × 27 responses a year). See Rule 

301 PRA Supporting Statement, supra note 759. 

765See Rule 301 PRA Supporting Statement, 

supra note 759. 

766The Commission’s currently approved 

baseline for the average compliance burden per 

respondent is 11.25 hours = 10 hours for systems 

capacity, integrity and security recordkeeping 

(Attorney at 10 hours) + 1.25 hours for systems 

outages notice (Attorney at .25 hours × 5 systems 

outages a year). See Rule 301 PRA Supporting 

Statement, supra note 759. 

767As discussed above, the Commission believes 

that the proposed electronic submission of Form 

ATS–R would impose no additional burden on 

current Forms ATS and ATS–N filers. See supra 

note 758. 

Burden type Respondent type Number of 

respondents 

Burden per 

respondent 

(hours) 

Total burden 

(number of 

respondents × 

burden per 

respondent) 

(hours) 

Initial .................................... Communication Protocol Systems .................................... 14 20.5 287 

Annual 5 70 

Initial .................................... Other Form ATS Filers ...................................................... 59 20.5 1,209.5 

Annual 5 295 

b. Rule 301(b)(5) Burden on 

Communication Protocol Systems and 

Legacy Government Securities ATSs 

As discussed above, the Commission 

is proposing to apply the Fair Access 

Rule to the trading of U.S. Treasury 

Securities and Agency Securities. 

Certain Communication Protocol 

Systems and Legacy Government 

Securities ATS that trade U.S. Treasury 

Securities and Agency Securities and 

meet the relevant thresholds would be 

newly subject to the requirements of 

Rule 301(b)(5) of Regulation ATS.761 In 

addition, for purposes of calculating 

whether an ATS meets the Fair Access 

Rule volume thresholds, the 

Commission is proposing to aggregate 

trading volume among certain affiliated 

ATSs, which will impose a burden on 

certain NMS Stock ATSs and Other 

Form ATS Filers that trade securities 

subject to the Fair Access Rule.762 There 

is no initial burden associated with the 

currently approved collection of 

information for this requirement.763 The 

Commission estimates an annual 

compliance burden of 37 hours per 

respondent 764 and the following total 

annual burdens: 

Respondent type Number of 

respondents 

Annual burden 

per respondent 

(hours) 

Total annual 

burden 

(number of 

respondents × 

annual burden 

per respondent) 

(hours) 

Communication Protocol Systems ....................................................................................... 8 37 296 

Legacy Government Securities ATSs ................................................................................. 7 37 259 

c. Rule 301(b)(6) Burden on 

Communication Protocol Systems 

As discussed above, the Commission 

is proposing to amend Exchange Act 

Rule 3b–16(a) to cause Communication 

Protocol Systems to fall within the 

definition of ‘‘exchange’’ and believes 

that such Communication Protocol 

Systems would likely choose to register 

as a broker dealer and be regulated 

under the Regulation ATS exemption. 

Certain Communication Protocol 

Systems that trade municipal and 

corporate debt securities and meet the 

relevant thresholds would be newly 

subject to the systems capacity, 

integrity, and security recordkeeping 

and systems outages notice 

requirements of Rule 301(b)(6) of 

Regulation ATS. There is no initial 

burden associated with the currently 

approved collection of information for 

this requirement.765 The Commission 

estimates an annual compliance burden 

of 11 hours per respondent 766 and the 

following total annual burden: 

Respondent type Number of 

respondents 

Annual burden 

per respondent 

(hours) 

Total annual burden 

(number of respondents 

× annual burden per 

respondent) 

(hours) 

Communication Protocol Systems ............................................................................. 2 11.25 22.5 

d. Rule 301(b)(9) Burden on All 

Respondents 

All respondent categories— 

Communication Protocol Systems, 

Legacy Government Securities ATSs, 

NMS Stock ATSs, and Other Form ATS 

Filers—are subject to the requirements 

of Rule 301(b)(9) and would incur a 

burden to file quarterly transaction 

reports using the proposed modernized 

and electronic 767 Form ATS–R. 


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768The Commission’s currently approved 

baseline for the average compliance burden for each 

Form ATS–R filing is 4 hours (Attorney at 3 hours 

+ Compliance Clerk at 1). See Rule 301 PRA 

Supporting Statement, supra note 759. The 

Commission is proposing amendments to Form 

ATS–R, which would add an additional burden of 

0.75 hours per filing (Compliance Manager at 0.25 

hours + Compliance Clerk at 0.5), and therefore the 

average compliance burden for each Form ATS–R 

filing would be 4.75 hours. See supra Section V.B 

and infra Section VII.E (discussing proposed 

changes to Form ATS–R applicable to all ATSs). 

769See Rule 301 PRA Supporting Statement, 

supra note 759. 770The annual burden per Currently Exempted 

Government Securities ATS or Communication 

Protocol System would be 4.75 hours × 4 quarterly 

filings annually = 19 burden hours. 771The annual burden per existing Form ATS–R 

respondent would be 0.75 hours × 4 quarterly 

filings annually = 3 burden hours. 

772The proposal would not impose a new burden 

on Current Government Securities ATSs, NMS 

Stock ATSs, and Other Form ATS Filers, as these 

categories of respondents would already be required 

to comply with Rule 301(b)(10) before the effective 

date of any final rule. 

773The Commission’s currently approved 

baseline for the average initial compliance burden 

is 8 hours (Attorney at 7 hours + Compliance Clerk 

at 1 hour). See Rule 301 PRA Supporting Statement, 

supra note 759. 

774The Commission’s currently approved 

baseline for the average ongoing compliance burden 

is 4 hours (Attorney at 2 hours + Compliance Clerk 

at 2 hours). See Rule 301 PRA Supporting 

Statement, supra note 759. 

Presently, neither Currently Exempted 

Government Securities ATSs—the 

subset of Legacy Government Securities 

ATSs not operating pursuant to a Form 

ATS on file with Commission as of the 

effective date of any final rule—nor 

Communication Protocol Systems—are 

required to file quarterly transaction 

information on Form ATS–R, but the 

proposed amendments will newly 

impose on all respondents in these 

categories the currently-approved 

baseline burden of filing Form ATS–R 

and the additional burden of filing using 

the proposed modernized form.768

Current Government Securities 

ATSs—the subset of Legacy Government 

Securities ATSs operating pursuant to a 

Form ATS on file with Commission as 

of the effective date of any final rule— 

as well as NMS Stock ATSs and Other 

Form ATS Filers already incur a burden 

to file Form ATS–R, so the proposed 

rules would only impose upon them the 

new increased burden of filing on the 

modernized version of Form ATS–R. 

There is no initial burden associated 

with the currently approved collection 

of information for this requirement.769

The Commission estimates an annual 

compliance burden of 19 hours per new 

Form ATS–R respondent 770 and 3 hours 

per existing Form ATS–R 

respondent; 771 and the following total 

annual burdens: 

Respondent type Number of 

respondents 

Annual burden 

per respondent 

(hours) 

Total annual burden 

(number of respondents 

× annual burden per 

respondent) 

(hours) 

Communication Protocol Systems ............................................................................. 22 19 418 

Currently Exempted Government Securities ATSs ................................................... 7 19 133 

Current Government Securities ATSs ....................................................................... 17 3 51 

NMS Stock ATSs ....................................................................................................... 34 3 102 

Other Form ATS Filers .............................................................................................. 59 3 177 

e. Rule 301(b)(10) Burden on 

Communication Protocol Systems and 

Currently Exempted Government 

Securities ATSs 

Rule 301(b)(10) requires ATSs to 

establish adequate written safeguards 

and written procedures to protect 

subscribers’ confidential trading 

information. Neither Currently 

Exempted Government Securities ATSs 

nor Communication Protocol Systems 

are presently subject to any of the 

requirements of Rule 301(b), but the 

current proposal will newly impose on 

all respondents in these categories the 

currently-approved baseline burden of 

complying with Rule 301(b)(10) after the 

effective date of any final rule.772 The 

Commission estimates an initial burden 

of 8 hours 773 and an annual burden of 

4 hours 774 per respondent for 

complying with Rule 301(b)(10) and the 

following total initial and annual 

burdens: 

Burden type Respondent type Number of 

respondents 

Burden per 

respondent 

(hours) 

Total burden 

(number of respondents 

× burden per 

respondent) 

(hours) 

Initial .................................. Communication Protocol Systems ............................... 22 8 176 

Annual 4 88 

Initial .................................. Currently Exempted Government Securities ATSs ..... 7 8 56 

Annual 4 28 

2. Burden of Rules 302 and 303 of 

Regulation ATS on Communication 

Protocol Systems and Currently 

Exempted Government Securities ATSs 

Rule 301(b)(8) of Regulation ATS 

requires ATSs to comply with the 

recordkeeping requirements of Rule 302 

and the record preservation 

requirements of Rule 303. 


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775The proposal would not impose a new burden 

on Current Government Securities ATSs, NMS 

Stock ATSs, and Other Form ATS Filers, as these 

categories of respondents would already be required 

to comply with Rules 302 and 303 before the 

effective date of any final rule. 

776The Commission’s currently approved 

baseline for the average compliance burden is 45 

hours (Compliance Clerk at 45 hours). See 

Extension Without Change of a Currently Approved 

Collection: Rule 302 (17 CFR 242.302) 

Recordkeeping Requirements for Alternative 

Trading Systems; ICR Reference No. 201906–3235– 

011; OMB Control No. 3235–0510 (October 24, 

2019), available at https://www.reginfo.gov/public/ 

do/PRAViewDocument?ref_nbr=201906-3235-011. 

There is no initial burden associated with this rule. 

777The Commission’s currently approved 

baseline for the average compliance burden is 15 

hours (Compliance Clerk at 15 hours). See 

Extension Without Change of a Currently Approved 

Collection: Rule 303 (17 CFR 242.303) Record 

Preservation Requirements for Alternative Trading 

Systems; ICR Reference No. 202101–3235–010; 

OMB Control No. 3235–0505 (June 25, 2021), 

available at https://www.reginfo.gov/public/do/ 

PRAViewDocument?ref_nbr=202101-3235-010. 

There is no initial burden associated with this rule. 

778See supra Section II.D. 

779See supra Section III. 

780See supra Section IV. 

781The Commission’s currently approved 

baseline burden for the average initial compliance 

burden for each initial Form ATS–N is 130.4 hours 

(currently approved baseline burden to complete an 

initial Form ATS at 20 hours: Attorney at 13 hours 

and Compliance Clerk at 7 hours; see Rule 301 PRA 

Supporting Statement, supra note 759) + (Part I at 

0.5 hour) + (Part II at an average of 29 hours) + (Part 

III at an average of 78.75 hours) + (Access to EDGAR 

at 0.15 hours) + (Posting link to published Form 

ATS–N on ATS website at 2 hours) = 130.4 burden 

hours. See Extension Without Change of a Currently 

Approved Collection: Regulation ATS Rule 304 and 

Form ATS–N; ICR Reference No. 202109–3235–014; 

OMB Control No. 3235–0763 (January 3, 2022), 

available at https://www.reginfo.gov/public/do/PRA

ViewICR?ref_nbr=202109-3235-014 (‘‘Rule 304 PRA 

Supporting Statement’’). The aggregate totals by 

professional, including the baseline, are estimated 

to be approximately 54.6 hours for an Attorney, 0.5 

hours for a Chief Compliance Manager, 34.55 hours 

for a Compliance Manager, 32.25 hours for a Senior 

Systems Analyst, 1 hour for a Senior Marketing 

Manager, and 7.5 hours for a Compliance Clerk. The 

Commission estimates that the proposed 

amendments to Form ATS–N would add an 

additional burden of 6 hours per filing (Attorney at 

2.5 hours, Compliance Manager at 1.5 hours, Senior 

Systems Analyst at 1.5 hours, and Compliance 

Clerk at 0.5 hours), and therefore the average 

compliance burden for each new Form ATS–N filer 

would be 136.4 hours. See supra Section V.B and 

infra Section VII.E (discussing proposed changes). 

782The Commission estimates that existing Form 

ATS filers will not incur the portion of the 

currently approved baseline burden to file an initial 

Form ATS–N that is attributable to completing an 

initial Form ATS, estimated at 20 hours. See Rule 

304 PRA Supporting Statement, supra note 781. 

Thus, the total initial burden for these respondents 

will be 116.4 hours (130.4 hours baseline burden to 

file an Initial Form ATS–N¥20 hours + 6 hours per 

filing to complete the proposed revised items of 

Form ATS–N). See id. 

783The Commission estimates the proposal would 

impose upon current Form ATS–N filers a one-time 

burden of 8 hours: The marginal burden of 6 hours 

to respond to the revised items in the form (see 

supra note 781) + 2 hours for a Compliance Clerk 

to reorganize their current Form ATS disclosures to 

respond to revised Form ATS–N. 

784The currently approved baseline burden for 

filing amendments to Form ATS–N is 47 hours 

((Attorney at 5.5 hours + Compliance Manager at 2 

hours + Compliance Clerk at 1.9 hours) × 5 

amendments a year). See Rule 304 PRA Supporting 

Statement, supra note 781. 

785The currently approved baseline annual 

burden for Rule 304 contemplates NMS Stock ATSs 

filing amendments to Form ATS–N, and this 

proposal does not add to that burden. 

The proposal would newly impose the 

currently-approved baseline burden of 

complying with these rules on 

Communication Protocol Systems and 

Currently Exempted Government 

Securities ATS.775 The Commission 

estimates an annual burden of 45 hours 

per respondent to comply with Rule 

302 776 and 15 hours to comply with 

Rule 303; 777 and the following total 

annual burdens: 

Rule Respondent type Number of 

respondents 

Annual burden 

per respondent 

(hours) 

Total annual burden 

(number of respondents 

× annual burden per 

respondent) 

(hours) 

Rule 302 ........................... Communication Protocol Systems .............................. 22 45 990 

Rule 303 15 330 

Rule 302 ........................... Currently Exempted Government Securities ATSs .... 7 45 315 

Rule 303 15 105 

3. Burden of Rule 304 of Regulation 

ATS and Form ATS–N on 

Communication Protocol Systems, 

Legacy Government Securities ATSs, 

and NMS Stock ATSs 

As discussed above, the Commission 

is proposing to amend Exchange Act 

Rule 3b–16(a) to cause Communication 

Protocol Systems to fall within the 

definition of ‘‘exchange’’ and believes 

that such Communication Protocol 

Systems would likely choose to register 

as a broker dealer and be regulated 

under the Regulation ATS 

exemption.778 Under the proposal, 

Government Securities ATSs (inclusive 

of Communication Protocol Systems) 

would be subject to the proposed 

changes to Regulation ATS related to 

Government Securities ATSs.779 Those 

respondents, as well as Communication 

Protocol Systems that trade NMS 

Stocks, will be newly required to file 

Form ATS–N as revised,780 pursuant to 

Rule 304. In addition, existing NMS 

Stock ATSs that do not also trade in 

government securities will, after the 

effective date of any final rule, be 

required to re-file their most recent 

Form ATS–N or Form ATS–N 

amendment using the revised Form 

ATS–N. The Commission estimates the 

initial burden for new filers of Form 

ATS–N, as revised—Currently 

Exempted Government Securities ATSs 

and Communication Protocol Systems 

that trade government securities or NMS 

Stocks—to be 136.4 hours.781 The 

Commission estimates the initial burden 

for Current Government Securities 

ATSs, which currently file on Form 

ATS, to file on Form ATS–N, as revised, 

to be 116.4 hours.782 The Commission 

estimates the initial burden for existing 

NMS Stock ATSs that do not also trade 

government securities, which currently 

file on Form ATS–N, to be 8 hours.783

The Commission estimates that the 

annual burden for each new Form ATS– 

N respondent to file amendments to 

Form ATS–N is 47 hours.784 The total 

estimated initial and annual 785 burdens 

for each respondent type are as follows: 


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786The proposal would not impose a new burden 

on Current Government Securities ATSs, NMS 

Stock ATSs, and Other Form ATS Filers, as these 

categories of respondents are already subject to the 

requirement of Regulation ATS, and specifically 

Rule 301(b)(1) to register as a broker-dealer. The 

Commission also estimates that a subset of 

Communication Protocol Systems and Currently 

Exempted Government Securities ATSs would 

already be registered as broker-dealers. 

787The Commission’s currently approved 

baseline burden for the average initial compliance 

burden for each Form BD is 2.75 hours (Compliance 

Manager at 2.75 hours). See Extension Without 

Change of a Currently Approved Collection: Form 

BD and Rule 15b1–1. Application for registration as 

a broker-dealer; ICR Reference No. 201905–3235– 

016; OMB Control No. 3235–0012 (August 7, 2019), 

available at https://www.reginfo.gov/public/do/ 

PRAViewDocument?ref_nbr=201905-3235-016. 

(‘‘Form BD PRA Supporting Statement’’). 

788The Commission’s currently approved 

baseline burden for the average ongoing compliance 

burden for each respondent amending Form BD is 

.95 hours (Compliance Manager at 0.33 hours × 2.87 

amendments per year). See Form BD PRA 

Supporting Statement, supra note 787. 

789As discussed above, respondents burdened 

under the PRA by this proposal that are already 

registered as broker-dealers would not incur this 

burden. See supra note 786. 

790See Revision of a Currently Approved 

Collection: Form ID—EDGAR Password; ICR 

Reference No. 202104–3235–022; OMB Control No. 

3235–0328 (April 29, 2021), available at https://

www.reginfo.gov/public/do/ 

PRAViewDocument?ref_nbr=202104-3235-022. 

791See supra Section III.C. 

Burden type Respondent type Number of 

respondents 

Burden per 

respondent 

(hours) 

Total burden 

(number of respondents 

× burden per 

respondent, rounded to 

nearest 0.5 hours) 

Initial .................................. Communication Protocol Systems ............................... 8 136.4 1,091 

Annual 47 376 

Initial .................................. Currently Exempted Government Securities ATSs ..... 7 136.4 955 

Annual 47 329 

Initial .................................. Current Government Securities ATSs ......................... 17 116.4 1,979 

Annual 47 799 

Initial .................................. NMS Stock ATSs ......................................................... 34 8 272 

4. Burden of Rule 15b1–1 and Form BD 

on Communication Protocol Systems 

and Currently Exempted Government 

Securities ATSs 

Rule 301(b)(1) of Regulation ATS 

requires ATSs to register as a brokerdealer under section 15 of the Act. The 

proposal would newly impose the 

currently-approved baseline burden of 

complying with the Rule 15b1–1 and 

Form BD collection of information on 

certain Communication Protocol 

Systems and Currently Exempted 

Government Securities ATSs that are 

not already registered as brokerdealers.786 The Commission estimates 

an initial burden of 2.75 hours 787 and 

an annual burden of 1 hour 788 per 

respondent for completing Form BD and 

the following total initial and annual 

burdens: 

Burden type Respondent type Number of 

respondents 

Burden per 

respondent 

(hours) 

Total burden 

(number of respondents 

× burden per 

respondent, rounded to 

nearest 0.5 hours) 

Initial .................................. Communication Protocol Systems ............................... 6 2.75 16.5 

Annual .95 5.5 

Initial .................................. Currently Exempted Government Securities ATSs ..... 1 2.75 3 

Annual .95 1 

5. Burden of Form ID on 

Communication Protocol Systems and 

Currently Exempted Government 

Securities ATSs 

The same subset of Communication 

Protocol Systems and Currently 

Exempted Government Securities ATSs 

that are not already registered as brokerdealers discussed above would also 

newly incur the currently-approved 

baseline burden of the Form ID 

collection of information necessary to 

apply for EDGAR access.789 The 

Commission estimates an initial burden 

of 0.15 hours 790 and no annual burden 

per respondent for completing Form ID, 

and the following total burdens: 

Respondent type Number of 

respondents 

Initial burden 

per respondent 

(hours) 

Total initial burden 

(number of respondents 

× initial burden per 

respondent, rounded to 

nearest 0.5 hours) 

Communication Protocol Systems ............................................................................. 6 0.15 1 

Currently Exempted Government Securities ATSs ................................................... 1 0.15 0 

6. Burden of Regulation SCI on 

Communication Protocol Systems and 

Legacy Government Securities ATSs 

As discussed above, the Commission 

is re-proposing to amend Regulation SCI 

to expand the definition of ‘‘SCI 

alternative trading system’’ to include 

Government Securities ATSs that meet 

a specified volume threshold, which 

would, in turn, fall within the definition 

of ‘‘SCI entity’’ and, as a result, be 

subject to the requirements of 

Regulation SCI.791 As proposed, (1) 

Communication Protocol Systems that 

transact in U.S. Treasuries, Agency 

Securities, NMS stocks, or equity 

securities other than NMS stocks 

reported to an SRO and (2) Legacy 

Government Securities ATSs could 

become newly subject to the 

requirements of Regulation SCI if they 


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792The proposal would not impose a new burden 

on (1) Communications Protocol Systems that 

transact in categories of securities that are not 

within the definition of ‘‘SCI alternative trading 

system,’’ (2) NMS Stock ATSs, which are already 

subject to the requirements of Regulation SCI 

(unless they are Communication Protocol Systems 

that meet the Regulation SCI thresholds in NMS 

stocks), and (3) Other Form ATS Filers, which, as 

defined in this proposal, do not transact in the 

categories of securities within the definition of ‘‘SCI 

alternative trading system.’’ 

793The Commission’s currently approved 

baseline burden for the average initial compliance 

burden for an existing SCI entity that is not an SRO 

or a plan processor is 1,017.15 hours. See Extension 

Without Change of a Currently Approved 

Collection: Regulation SCI and Form SCI; ICR 

Reference No. 201807–3235–001; OMB Control No. 

3235–0703 (September 26, 2018) available at 

https://www.reginfo.gov/public/do/ 

PRAViewDocument?ref_nbr=201807-3235-001 

(‘‘2018 SCI PRA Supporting Statement’’). 

794The Commission’s currently approved 

baseline burden for the average initial compliance 

burden for an existing SCI entity that is not an SRO 

or a plan processor is 2,034.3 hours. See 2018 SCI 

PRA Supporting Statement supra note 793. 

795The Commission’s currently approved 

baseline burden for the average ongoing compliance 

burden for an SCI entity that is not an SRO or a 

plan processor is 2,458.6 hours. See 2018 SCI PRA 

Supporting Statement supra note 793. 

796Exchange 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). 

satisfy the thresholds set forth in the 

proposed amended definition of ‘‘SCI 

alternative trading system.’’ 792

The Commission estimates 2 

Communication Protocol Systems will 

initially satisfy the conditions and 

thresholds set forth in the proposed 

amended definition of ‘‘SCI alternative 

trading system’’ that are not existing SCI 

entities or affiliated with SCI entities 

and will incur a higher initial burden to 

comply. With respect to Legacy 

Government Securities ATSs, the 

Commission estimates that 1 respondent 

will qualify as an SCI alternative trading 

system that is currently an SCI entity or 

is affiliated with an SCI entity and will 

incur a lower initial burden to comply 

with Regulation SCI, and 1 respondent 

will qualify as an SCI alternative trading 

systems that is not an existing SCI entity 

or affiliated with an SCI entity and will 

incur the higher initial burden to 

comply. 

The Commission estimates an initial 

compliance burden for existing SCI 

entities of 1,017.15 hours,793 an initial 

compliance burden for new SCI entities 

of 2,034.3 hours,794 an annual 

compliance burden for all qualifying 

SCI entities of 2,458.65 hours,795 and 

the following total initial and annual 

burdens: 

Burden type Burden description/respondent type Number of 

respondents 

Burden per 

respondent 

(hours) 

Total burden 

(number of respondents 

× burden per 

respondent, rounded to 

nearest 0.5 hours) 

Initial ..................................

Annual 

Compliance with Regulation SCI (Legacy Government Securities ATSs that are existing SCI entities).1 1,017.15 

2,458.65 

1,017 

2,458.5 

Initial ..................................

Annual 

Compliance with Regulation SCI (Legacy Government Securities ATSs that are new SCI entities).1 2,034.3 

2,458.65 

2,034.5 

2,458.5 

Initial ..................................

Annual 

Compliance with Regulation SCI (Communication 

Protocol Systems that are new SCI entities).

2 2,034.3 

2,458.65 

4,068.5 

4,917.5 

E. Request for Comments 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

the Commission solicits comments to: 

178. Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

Commission’s functions, including 

whether the information shall have 

practical utility; 

179. Evaluate the accuracy of the 

Commission’s estimates of the burden of 

the proposed collection of information; 

180. Determine whether there are 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; 

181. Evaluate whether there are ways 

to minimize the burden of collection of 

information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology; 

and 

182. Evaluate whether the proposed 

amendments would have any effects on 

any other collection of information not 

previously identified in this section. 

Persons submitting comments on the 

collection of information requirements 

should direct them to the Office of 

Management and Budget, Attention: 

Desk Officer for the Securities and 

Exchange Commission, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, and should also 

send a copy of their comments to 

Vanessa Countryman, Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090, with reference to File 

Number S7–02–22. Requests for 

materials submitted to OMB by the 

Commission with regard to this 

collection of information should be in 

writing, with reference to File Number 

S7–02–22 and be submitted to the 

Securities and Exchange Commission, 

Office of FOIA/PA Services, 100 F Street 

NE, Washington, DC 20549–2736. As 

OMB is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication, a comment to OMB is best 

assured of having its full effect if OMB 

receives it within 30 days of 

publication. 

VIII. Economic Analysis 

A. Introduction 

We are mindful of the economic 

effects that may result from the 

proposed amendments, including the 

benefits, costs, and the effects on 

efficiency, competition, and capital 

formation.796 This section analyzes the 

expected economic effects of the 

proposed rules relative to the current 

baseline, which consists of the current 

market and regulatory framework in 

existence today. 

A significant number of buyers and 

sellers for securities are brought together 

through Communication Protocol 

Systems, Government Securities ATSs, 

ATSs trading other securities asset 

classes, and registered exchanges, but 

this activity is subject to different 

regulations according to the type of 

venue and asset class. By amending 

Exchange Act Rule 3b–16 to include 

Communication Protocol Systems 

within the definition of exchange and 

ending the exemption for Government 

Securities ATSs, the proposed 

amendments would functionally apply 


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797See infra Tables VIII.5 and VIII.6 for a 

breakdown of the market share of different 

protocols, including ATS protocols, in the markets 

for government securities and corporate debt. 

798See infra Sections VIII.B.2.b, VIII.B.3.b, 

VIII.B.4.b, VIII.B.5.d, VIII.B.6.b, and VIII.B.7. 

799See MarketAxess Letter at 3, stating that 

variations of the RFQ protocol can allow clients to 

simultaneously request liquidity on an anonymous 

basis from over 1,000 platform participants, and 

that connecting to more counterparties improves 

trading outcomes and lowers transaction costs for 

liquidity providers and takers. 

800See supra Section V.A.3, discussing the 

applicability of fair access to platforms where each 

participant has discretion over which other 

participants they want to trade. 

801This reduction in information leakage may be 

offset by the fact that on disclosed RFQs, the 

initiator’s identity is revealed to participants in the 

session, which may be an especially sensitive bit of 

information to reveal. 

802The use of anonymous RFQ is not uniform 

across asset classes. The Commission preliminarily 

believes that anonymous RFQ is uncommon in the 

market for U.S. Treasury Securities. 

803See, e.g., MarketAxess Letter at 5, stating that 

the majority of RFQ trades are completed on a 

name-disclosed basis with no central clearing party. 

Regulation ATS to an additional number 

of entities not currently regulated by it. 

This would have a number of benefits, 

including enhanced regulatory oversight 

and protection for investors, a reduction 

in trading costs and improvement in 

execution quality, and enhancement of 

price discovery and liquidity. 

The proposed amendments would 

also have costs for those entities subject 

to new requirements, including 

compliance costs associated with filing 

forms such as Form ATS–N or Form 

ATS, protecting confidential 

information, keeping certain records, 

and complying with the Fair Access 

Rule and/or Regulation SCI. 

B. Baseline 

1. Current State of Communication 

Protocol Systems 

Communication Protocol Systems 

bring together buyers and sellers of 

securities through the use of non-firm 

trading interest and by providing 

structured methods for communication. 

Three common types of protocols, RFQ, 

stream axes, and conditional order 

protocols, along with their potential 

advantages and disadvantages for 

participants, are described in following 

subsections.797 Subsequent sections 

discuss details of Communication 

Protocol Systems that are particular to 

different asset classes.798

a. Request-for-Quote Protocol 

As described in Section II.B.2, an RFQ 

protocol system typically allows market 

participants to obtain quotes for a 

particular security by simultaneously 

sending messages to one or more 

potential respondents. The initiating 

participant is typically required to 

provide information related to the 

request in a message, which may 

include the name of the initiating 

participant, CUSIP, side, and size. 

Participants that observe the initiating 

participant’s request have the option to 

respond to the request with a price 

quote. These respondents are typically 

dealers in the relevant asset class, and 

are often, though not always, preselected. The initiating participant can 

then select among the respondents by 

either accepting one of multiple 

responses or rejecting all responses, 

usually within a ‘‘good for’’ time period. 

After the initiating participant and a 

respondent agree on the terms of the 

trade, the trade will then proceed to 

post-trade processing. 

Initiating participants have an 

incentive to invite multiple respondents 

to an RFQ, because receiving more 

quotes increases price competition and 

thus may improve execution quality.799

The Commission understands that it is 

common for an RFQ to include at least 

three participants. 

The number of respondents that are 

invited to participate in the RFQ is 

generally less than the total number of 

dealers available through the system.800

There may be several reasons for this. 

First, the Commission understands that 

the system itself may limit the total 

number of respondents that can be 

selected for a single RFQ, typically to 

five counterparties. This limitation may 

encourage dealers to respond to RFQs, 

since it reduces the number of other 

dealers they would compete with in any 

give request session. 

A second reason stems from the 

initiating participant’s possible 

incentive to limit the degree of 

information leakage. If the trade the 

initiating participant is seeking to 

complete with the help of the RFQ is 

not completely filled in that one 

session, and other participants know 

this, quotes the initiating participant 

receives elsewhere may be affected, 

including in subsequent RFQ sessions. 

A third reason is that respondents and 

initiators both have an incentive to limit 

price impact because of the expense it 

will add to the offsetting trade that must 

follow. Specifically, a dealer who takes 

a position to fill a customer order 

through an RFQ will often subsequently 

offset that position in the interdealer 

market. If a large number of dealers are 

invited to participate in an RFQ, this 

would lead to widespread knowledge 

that the dealer with the winning bid 

will now try to offset that position, 

which could impact the prices available 

to that dealer in the interdealer market. 

Because RFQs give the initiating 

participant the opportunity to mitigate 

the information leakage described 

above, they may give the initiating 

participant more control over its 

information than a limit order book 

(‘‘LOB’’).801

Once the initiator receives responses 

from the counterparties, the initiator can 

select a quote with which to trade. On 

some RFQ platforms, it is at this point 

that both sides become committed to the 

trade. However, there are other RFQ 

platforms which allow the respondent 

an opportunity to confirm the trade. 

Additionally, after the RFQ session has 

ended, the system may inform other 

respondents to the RFQ of the price of 

the second best quote. This allows them 

to get information as to what other 

respondents are quoting in the market, 

while limiting information leakage 

regarding the details of the actual trade 

that took place. 

Anonymous RFQ sessions may reduce 

information leakage more than a 

disclosed RFQ, because the identity of 

the initiating participant might 

otherwise reveal something about the 

initiating participant’s willingness to 

pay.802 However, this means 

respondents are not able to price quotes 

on the basis of an ongoing relationship 

with the counterparty. 

RFQ systems have disadvantages for 

the initiating participants, when 

compared with LOBs. For liquid 

securities, trading on an RFQ system 

results in less price competition among 

respondents when compared with an 

LOB, if the number of respondents are 

limited. Compared to an LOB, 

respondents cannot see what quotes 

they would have to beat to win the 

auction, and may not have to compete 

with as many respondents to provide a 

quote. 

Also, the Commission understands 

that there may be less straight-through 

processing when trading is conducted 

via an RFQ protocol system, as opposed 

to on an exchange. Furthermore, 

depending on the type of asset being 

traded, there may not be centralized 

means of clearing and settlement 

available. For these reasons, the 

Commission understands that one 

reason why disclosed RFQs are used is 

so that RFQ initiating participants can 

choose dealers with whom the initiator 

has an established relationship.803

Then, after an RFQ session has ended, 

all necessary processing for the trade is 

completed through this relationship, in 

the same way that a transaction might 


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804Bilateral voice trading refers to telephone 

calls, chat messages, etc. 

805See supra note 58. 

806See Monthly Statement of the Public Debt of 

the United States, dated December 31, 2020, 

available at https://www.treasurydirect.gov/govt/ 

reports/pd/mspd/2020/opds122020.pdf. 

807See Financial Accounts of the United States 

Z.1 at 177, available at https://

www.federalreserve.gov/releases/z1/20210311/ 

z1.pdf. 

808See SIFMA Fixed Income Trading Volume, 

available at https://www.sifma.org/resources/ 

research/us-fixed-income-securities-statistics/. The 

stated figures include Treasury Securities, Agency 

MBS, and Federal Agency Securities. 

809Absent an exception or an exemption, Section 

15(a)(1) of the Exchange Act makes it unlawful for 

a ‘‘dealer’’ to effect any transactions in, or to induce 

or attempt to induce the purchase or sale of, any 

security unless registered with the Commission in 

accordance with Section 15(b) of the Exchange Act. 

Similarly, Section 15C of the Exchange Act makes 

it unlawful for a ‘‘government securities dealer’’ 

(other than a registered broker-dealer or financial 

institution) to induce or attempt to induce the 

purchase or sale of any government security unless 

such government securities dealer is registered in 

accordance with Section 15C(a)(2). 

810See Letter from Jim Greco, CEO, Direct Match, 

to David R. Pearl, Office of the Executive Secretary, 

U.S. Department of the Treasury, dated April 22, 

2016, (‘‘Direct Match Letter’’) at 5, available at 

https://www.treasurydirect.gov/instit/statreg/ 

gsareg/RFIcommentletterDirectMatch.pdf at 6–7. 

811See supra Section VII.C.1. The Commission 

estimates that some of these ATSs only support 

Treasuries trading to facilitate hedging in 

Continued 

be processed via bilateral voice 

trading.804

In order to facilitate processing of the 

trade while maintaining the anonymity 

of the counterparties, the operator of the 

anonymous RFQ, which is typically a 

broker-dealer, may act as a counterparty 

to each side of the trade. Also, the 

Commission understands that 

anonymous RFQs are often received by 

all liquidity providers participating on 

the platform, instead of a pre-selected 

few. The Commission understands that 

providing an intermediary broker to act 

as a counterparty to each side of a trade 

on the system may also function as a 

convenience to RFQ participants 

generally, by allowing the system to 

help facilitate more straight-through 

processing. 

As described in Section II.B.2, RFQ 

Lists, also referred to as BWIC or 

OWIC,805 are a variation of the RFQ 

protocol in which quotes are solicited 

for multiple securities simultaneously. 

Market participants use RFQ Lists to 

complete trades in a number of different 

securities at the same time. Bringing all 

liquidity providers together into a 

single, multi-security RFQ may be a 

more efficient way of trading multiple 

securities at once than initiating a 

separate RFQ session for each security, 

especially if it is important to complete 

the trades close together in time. 

However, the use of the joint session 

may reveal more about the trading 

intentions of the initiator to its 

counterparties than using separate RFQ 

sessions, where information leakage is 

more limited, as respondents may be 

less aware of the complete position the 

initiator is seeking to take. 

b. Stream Axes 

As defined in Section II.B.2, ‘‘stream 

axes’’ are systems that electronically 

display continuous trading interest (firm 

or non-firm) in a security or type of 

security to participants on the systems. 

The Commission understands a typical 

stream axe to operate as follows: Dealers 

submit an indication or indications of 

interest (‘‘axe’’ or ‘‘axes’’), which may 

include price quotes and sizes for 

buying and selling securities. Axes are 

streamed to participants, updating 

continuously as dealers adjust prices 

and inventory offerings. A market 

participant may choose an axe with 

which to trade at the broadcasted price 

and size. In some cases, the axes are 

streamed on a non-anonymous basis, 

which permits the prices to be 

customized to the recipient on the basis 

of the relationship between the recipient 

and the dealer. 

Stream axes differ from RFQs in that 

the dealer streaming the axes receives 

less information about the 

counterparty’s trading intentions before 

the trade is agreed to. Stream axes are 

similar to an LOB in this way. This lack 

of information may end up reflected in 

the prices the dealer chooses to stream, 

as well as the type of dealer who 

chooses to participate in stream axes. 

Therefore, the decision to use an RFQ or 

stream axe may depend on the trading 

intentions of the participant. The stream 

axes protocol gives the participant 

receiving the stream the free option to 

trade at whatever price is being 

streamed at the moment, without 

revealing anything about its trading 

intentions beyond its identity. On the 

other hand, this may be less conducive 

to trading in certain sizes, and may not 

result in the same price as an RFQ. 

c. Conditional Order Protocol 

Section II.B.2 defines conditional 

orders as trading interest that may not 

be executable until after a user takes 

subsequent action, for example, sending 

a firm-up invitation message to other 

participants. Conditional order 

protocols often allow the matched 

parties to modify the attributes of the 

non-firm trading interest before 

accepting the firm-up invitation. If both 

matching parties accept the firm-up 

invite, the parties would agree upon the 

terms of the trade and an execution 

would occur. 

Unlike LOBs, conditional order 

protocols allow participants to 

ultimately decline a transaction after 

receiving a response to their quote. This 

may be particularly useful for large size 

orders or for illiquid securities, for 

which search costs may be particularly 

high. For example, participants can 

place conditional orders on various 

systems in search of liquidity, and use 

the fact that the orders are non-firm to 

avoid the risk of double-execution by 

declining some responses if they receive 

more than one. However, the ability for 

the matched counterparty to also 

decline to transact implies that the risk 

of non-execution on conditional order 

protocols is likely higher than that of 

LOBs. 

2. Current State of Government 

Securities Market 

The market for U.S. Government 

securities is large both in terms of the 

outstanding debt and daily trading 

volume. According to the Treasury 

Department, as of the end of 2020, the 

total amount outstanding of marketable 

Treasury Securities was approximately 

$21 trillion.806 The Financial Accounts 

of the United States Z.1 released by the 

Federal Reserve Board shows that the 

amount outstanding of Agency- and 

GSE-Backed Securities is about $10.1 

trillion, as of the end of 2020.807

According to data published by SIFMA, 

in September 2021, the average daily 

trading volume in government securities 

was about $850.1 billion, or roughly 95 

percent of all fixed income trading 

volume in the U.S.808 This includes 

$582.1 billion average daily trading in 

U.S. Treasury Securities, $265.7 billion 

in Agency MBSs, and $2.4 billion in 

other Agency Securities. 

a. ATSs in the Market for U.S. 

Government Securities 

i. Operations and Market Share of 

Government Securities ATSs 

The variety of market participants 

trading on Government Securities ATSs 

has increased since their inception. 

While Government Securities ATSs in 

the market for U.S. Treasury Securities 

historically only allowed bank and nonbank dealers 809 to trade, beginning in 

2003, firms that were neither banks nor 

dealers, such as hedge funds, insurance 

companies, and PTFs, gained 

permission from the ATSs to trade 

directly on Government Securities 

ATSs.810 The Commission estimates 

that there are currently 17 ATSs trading 

in government securities (either 

Treasury or Agency securities, or both) 

that have a Form ATS on file.811


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conjunction with corporate bonds transactions, but 

typically are not used for outright Treasuries 

trading. See also ICE Bonds Letter I at 3, stating that 

this offering of Government Securities ATSs gives 

participants the convenience of electronically 

trading in instruments with correlated trading 

activities in a centralized location. 

812As discussed in Section I, a Currently 

Exempted Government Securities ATS is defined as 

an ATS that limits its securities activities to 

government securities or repos and registers as a 

broker-dealer or is a bank. Currently Exempted 

Government Securities ATSs transact exclusively in 

government securities or repos, and are not required 

to file a Form ATS. 

813TRACE aggregation and analysis methods 

follow those used by Treasury market regulators 

and FINRA, including adjustments for multiple 

trade reports for a single transaction and counting 

only one trade report for an ATS or inter-dealer 

broker (IDB). Commission staff uses the regulatory 

version of TRACE in its analysis. 

A ‘‘Give-Up’’ ID is reported when a principal to 

a transaction delegates another participant to report 

a trade on its behalf. When a ‘‘Give-Up’’ ID is 

reported, the corresponding reporting or contraparty is replaced with the ‘‘Give-Up’’ ID. This 

ensures that trades are attributed to the principals 

to each transaction. System control numbers are 

used to link corrected, canceled, and reversed trade 

messages with original new trade messages. In these 

cases, only corrected trades are kept and all 

cancellation and reversal messages and their 

corresponding new trade messages are removed. 

Special care must be taken when counting market 

volume. When a FINRA registered broker directly 

purchases from another FINRA member, two trade 

messages are created. If those FINRA registered 

brokers transact through an IDB, four trade 

messages are created, two for the IDB and one for 

each member. In both cases, the volume from only 

one report is needed. To ensure that double 

counting of transactions does not occur, only the 

following trade messages are summed to calculate 

market volume: Sales to non-IDB members, sales to 

identified customers, such as banks, hedge funds, 

asset managers, and PTFs, and purchases from and 

sales to customers and affiliates. Any trade in 

which the contra-party is an IDB is excluded. Thus, 

in the case of trades involving IDBs, only the IDBs’ 

sale message is added to overall volume. 

Additionally, the Commission estimates 

that 7 Currently Exempted Government 

Securities ATSs are not currently 

required to register as a national 

securities exchange or comply with 

Regulation ATS.812

Currently, Government Securities 

ATSs account for a significant 

percentage of all Treasury trading 

activity reported to TRACE.813 As 

shown in Table VIII.1, ATSs accounted 

for approximately 32 percent of U.S. 

Treasury Securities trading volume in 

the first half of 2021. Dealer participants 

on current ATSs use them as a source 

of liquidity in government securities, 

including the liquidity needed to 

efficiently fill customer orders outside 

the current ATSs. The Commission 

understands that this means some 

portion of dealer transactions on 

Government Securities ATSs are 

associated with the dealers’ activity in 

filling customer orders. 

TABLE VIII.1—ATS MARKET SHARE ANALYSIS

Treasury 

securities 

Agency 

securities 

Number of 

unique 

platforms 

Num. of Current Gov. Sec. ATSs ................................................................................................ 13 7 15 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 5 1 5 

Num. of Grouped-Affiliated ATSs ................................................................................................ 18 7 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 24.5% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... 9.6% 0.7% ........................

Total volume share of Grouped-Affiliated ATSs Companies ...................................................... 34.1% 12.3% ........................

Above 10% Market Share 

Num. of Current Gov. Sec. ATSs ................................................................................................ 1 1 2 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 0 0 0 

Num. of Grouped-Affiliated ATSs ................................................................................................ 2 1 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 15.2% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... ........................ ........................ ........................

Total volume share of Grouped-Affiliated ATSs .......................................................................... 15.2% ........................ ........................

Above 5% Market Share 

Num. of Current Gov. Sec. ATSs ................................................................................................ 2 1 2 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 0 0 0 

Num. of Grouped-Affiliated ATSs ................................................................................................ 4 1 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 21.3% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... ........................ ........................ ........................

Total volume share of Grouped-Affiliated ATSs .......................................................................... 23.7% ........................ ........................

Above 4% Market Share 

Num. of Current Gov. Sec. ATSs ................................................................................................ 2 1 2 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 0 0 0 

Num. of Grouped-Affiliated ATSs ................................................................................................ 4 1 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 21.3% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... ........................ ........................ ........................

Total volume share of Grouped-Affiliated ATSs .......................................................................... 23.7% ........................ ........................

Above 3% Market Share 

Num. of Current Gov. Sec. ATSs ................................................................................................ 2 1 2 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 2 0 2 

Num. of Grouped-Affiliated ATSs ................................................................................................ 8 1 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 21.3% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... 7.9% ........................ ........................

Total volume share of Grouped-Affiliated ATSs .......................................................................... 32.0% ........................ ........................


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814See October 15 Staff Report, supra note 188, 

at 35–36, discussing increased electronic trading in 

the market for Treasuries. See also Bloomberg Letter 

at 5, stating that liquid on-the-run government 

securities are mostly traded on central limit order 

books and Bloomberg Letter at 21, stating that ATSs 

are a significant source of liquidity for on-the-run 

U.S. Treasury Securities. 

815See Letter from Dan Cleaves, Chief Executive 

Officer, BrokerTec Americas, and Jerald Irving, 

President, ICAP Securities USA LLC, to David R. 

Pearl, Office of the Executive Secretary, Treasury 

Department, dated April 22, 2016 at 7, available at 

https://www.treasurydirect.gov/instit/statreg/ 

gsareg/ICAPTreasuryRFILetter.pdf. 

816See supra Section III.A. 

817See October 15 Staff Report at 32, 35–36, 39. 

818One market participant stated that this 

liquidity provision may fill a gap that was left after 

the introduction of post-2008 financial crisis 

regulations and their subsequent effects on dealers. 

See Direct Match Letter at 7. 

TABLE VIII.1—ATS MARKET SHARE ANALYSIS—Continued 

Treasury 

securities 

Agency 

securities 

Number of 

unique 

platforms 

Above 2% Market Share 

Num. of Current Gov. Sec. ATSs ................................................................................................ 3 1 3 

Num. of Currently Exempted Gov. Sec. ATSs ............................................................................ 2 0 2 

Num. of Grouped-Affiliated ATSs ................................................................................................ 8 1 ........................

Total volume share of Current Gov. Sec. ATSs ......................................................................... 23.7% 11.6% ........................

Total volume share of Currently Exempted Gov. Sec. ATSs ..................................................... 7.9% ........................ ........................

Total volume share of Grouped-Affiliated ATSs .......................................................................... 32.0% ........................ ........................

Each panel reports the volume share (%) for Government Securities ATSs and the number of Government Securities ATSs above the specified 

market share level. Grouped-Affiliated ATSs refer to ATSs operated by a common broker-dealer or affiliated broker-dealer and for which their 

volume would be aggregated under the proposed changes to the Fair Access Rule. Treasury Securities include nominal bonds, TIPS and 

STRIPS. Agency Securities include Agency Debentures, Agency Collateralized Mortgage Obligations, and Agency Pass-Through Mortgage 

Backed Securities.a Trading volume is measured in dollar volume in par value. Data is based on the regulatory version of TRACE for U.S. 

Treasury Securities and TRACE for Agency Securities from April 1, 2021 to September 30, 2021.b c

aAgency Pass-through Mortgage Backed Securities include those traded in specified pool transactions and those to be announced. ‘‘Agency 

Debenture’’ is equivalent to ‘‘Federal Agency Security,’’ as used in Part I, Item 8(b) of Form ATS–N. ‘‘Agency Mortgage Backed Securities’’ as 

used in Part I, Item 8(b) of Form ATS–N include both ‘‘Agency Collateralized Mortgage Obligations’’ and ‘‘Agency Pass-Through Mortgage 

Backed Securities.’’ bThe analysis based on TRACE is necessarily limited to transactions reported to TRACE, which may not be all transactions in government securities. Transactions that take place on non-FINRA member ATSs or between two non-FINRA members are not reported to TRACE. cTrades reported to TRACE may include trades conducted on a Communication Protocol System if one participant in the trade is a FINRA 

member. The volume reported in this table is categorized given this limitation. 

Government Securities ATSs have 

evolved such that they operate with a 

level of technology use and speed of 

trading that is similar to that observed 

on NMS Stock ATSs, particularly in the 

secondary electronic cash market for onthe-run U.S. Treasury Securities.814

Some Government Securities ATSs 

operate as anonymous LOB systems and 

offer features such as low latency 

connectivity, direct market data feeds, 

co-location services, and a variety of 

order types. In addition to facilitating 

low latency trading, the Commission 

understands that the data feeds 

provided by Government Securities ATS 

serve as a source for real-time prices in 

the market for government securities.815

In providing such information to market 

participants about Treasury prices in 

particular, these feeds may serve as a 

source for real-time risk-free rate 

benchmarks, which help price other 

financial instruments. 

PTFs have a significant presence on 

Government Securities ATSs.816 Table 

VIII.2 shows that, during April to 

September of 2021, PTFs accounted for 

approximately 25.4 percent of total onthe-run U.S. Treasury Securities ATS 

trading volume. There were 41 PTFs 

operating on ATSs that trade U.S. 

Treasury Securities as of August 2021. 

The Commission understands that PTFs 

trading on the electronic market for U.S. 

Treasury Securities often employ 

automated, algorithmic trading 

strategies that rely on speed and allow 

the PTFs to quickly execute trades, or 

cancel or modify quotes in response to 

perceived market events.817 The 

Commission understands that PTFs 

contribute liquidity to the trading 

environment on Government Securities 

ATSs.818

TABLE VIII.2—ON-THE-RUN U.S. TREASURY SECURITIES TRADING VOLUME

Number of 

venues Volume Volume share (%) 

On-the-Run U.S. Treasury Securities Trading Volume 

ATSs ............................................................................................................................................ 18 812,480 49.7 

Customer trades ................................................................................................................... 11 52,754 3.2 

Dealer trades ........................................................................................................................ 18 344,781 21.1 

PTF trades ............................................................................................................................ 11 414,945 25.4 

Non-ATS Interdealer Brokers ...................................................................................................... 24 118,067 7.2 

Customer trades ................................................................................................................... 19 77,334 4.7 

Dealer trades ........................................................................................................................ 23 40,252 2.5 

PTF trades ............................................................................................................................ 9 481 0.0 a

Bilateral dealer-to-dealer trades .................................................................................................. 352 92,051 5.6 

Bilateral dealer-to-customer trades ............................................................................................. 333 604,823 37.0 

Bilateral dealer-to-PTF trades ..................................................................................................... 97 7,250 0.4 


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819All ATSs identified in this table are 

determined by the regulatory version of TRACE. 

TRACE data contains an identifier for trades 

occurring on ATSs, identifying the MPID of the 

ATS. 

820One commenter referenced that market 

participants trading in less liquid off-the-run 

securities are better able to find liquidity in nonATS trading methods. See Bloomberg Letter at 5 

and 21–22. 

821See supra note 193. 

TABLE VIII.2—ON-THE-RUN U.S. TREASURY SECURITIES TRADING VOLUME—Continued 

Number of 

venues Volume Volume share (%) 

Total ............................................................................................................................... ........................ 1,634,671 100.0 

This table reports trading volume and volume share for ATSs,b Non-ATS interdealer brokers, bilateral dealer-to-dealer transactions, bilateral 

dealer-to-customer, and bilateral dealer-to-PTF transactions for on-the-run U.S. Treasury Securities. On-the-run U.S. Treasury Securities are 

the most recently issued nominal coupon securities. Nominal coupon securities pay a fixed semi-annual coupon and are currently issued at 

original maturities of 2, 3, 5, 7, 10, 20, and 30 years. Treasury Bills and Floating Rate Notes are excluded. Volume is the average weekly dollar volume in par value (in millions of dollars) over the 6-month period, from April 1, 2021, to September 30, 2021.c Number of Venues is the 

number of different trading venues in each category and the number of distinct MPIDs for bilateral transactions.d Market Share (%) is the 

measure of the dollar volume as a percent of total dollar volume.e The volumes of ATSs and non-ATS interdealer brokers are broken out by 

Customer trades, Dealer trades, and PTF trades within each group.f Data is based on the regulatory version of TRACE for U.S. Treasury Securities from April 1, 2021, to September 30, 2021. Bilateral trades are a catchall classification that may include trades conducted via bilateral 

negotiation, as well as trades conducted electronically via platforms not registered with FINRA as an ATS. Bilateral trades may include trades 

conducted on Communication Protocol Systems. 

aThe percentage to the nearest non-zero is 0.02%. 

b See supra notes b and c in Table VIII.1. cFINRA reports volume as par volume, where par volume is the volume measured by the face value of the bond, in dollars. See relevant 

weekly volume files, available at https://www.finra.org/filing-reporting/trace/data/trace-treasury-aggregates. d Dealers are counted using the number of distinct MPIDs. 

eTotal dollar volume (in par value) is calculated as the sum of dollar volume for ATSs, non-ATS interdealer brokers, bilateral dealer-to-dealer 

transactions, and bilateral dealer-to-customer transactions. fWe identify ATS trades and non-ATS interdealer broker trades using MPID in the regulatory version of TRACE for U.S. Treasury Securities. 

The regulatory version of TRACE for U.S. Treasury Securities includes an identifier for customer and interdealer trades. Furthermore, we use 

MPID for non-FINRA member subscriber counterparties in the regulatory version of TRACE for U.S. Treasury Securities to identify PTF trades on 

ATSs. 

Table VIII.1 also shows that trading in 

the Treasury Securities market is 

concentrated on a few large ATSs.819

The largest ATS by Treasury dollar 

volume has 15.2 percent of the total 

Treasury Securities market reported to 

TRACE. Two Government Securities 

ATSs have dollar volumes that are over 

five percent of the total TRACE volume 

figure, and four have dollar volumes 

over three percent. 

Table VIII.2 shows that the majority of 

trading in on-the-run government 

securities reported to TRACE goes 

through Government Securities ATSs. 

Specifically, Government Securities 

ATSs accounted for nearly 50 percent of 

total dollar volume. 

When on-the-run securities transition 

to off-the-run status, their trading 

activity shifts away from Government 

Securities ATSs, and towards other 

transaction methods, including 

Communication Protocol Systems.820

This is reflected in Table VIII.3, which 

shows that Government Securities ATSs 

account for approximately 21 percent of 

the total dollar volume of off-the-run 

Treasury trading reported to TRACE.821

Table VIII.3 also shows that, while 

dealers remain a significant contributor 

to ATS trading in Treasury Securities in 

the off-the-run market, PTFs make up a 

smaller percentage of volume than they 

do in the on-the-run market. 

TABLE VIII.3—OFF-THE-RUN U.S. TREASURY SECURITIES TRADING VOLUME

Number of 

venues Volume Volume share (%) 

Off-the-Run U.S. Treasury Securities Trading Volume 

ATSs ............................................................................................................................................ 17 110,945 21.7 

Customer trades ................................................................................................................... 10 13,304 2.1 

Dealer trades ........................................................................................................................ 17 83,668 13.0 

PTF trades ............................................................................................................................ 11 13,973 2.2 

Non-ATS Interdealer Brokers ...................................................................................................... 22 43,604 6.8 

Customer trades ................................................................................................................... 18 15,092 2.4 

Dealer trades ........................................................................................................................ 21 28,451 4.4 

PTF trades ............................................................................................................................ 12 61 0.0 a

Bilateral dealer-to-dealer trades .................................................................................................. 509 47,912 7.5 

Bilateral dealer-to-customer trades ............................................................................................. 333 437,665 68.2 

Bilateral dealer-to-PTF trades ..................................................................................................... 114 1,415 0.2 

Total ............................................................................................................................... ........................ 641,540 100.0 


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822Agency Securities are those issued by U.S. 

Government sponsored enterprises (‘‘GSEs’’) such 

as Federal Home Loan Banks (‘‘FHLBs’’), the 

Federal National Mortgage Association (‘‘Fannie 

Mae’’), and the Federal Home Loan Mortgage 

Corporation (‘‘Freddie Mac’’). 

TABLE VIII.3—OFF-THE-RUN U.S. TREASURY SECURITIES TRADING VOLUME—Continued 

Number of 

venues Volume Volume share (%) 

This table reports trading volume and volume share for ATSs,b non-ATS interdealer brokers, bilateral dealer-to-dealer transactions, bilateral 

dealer-to-customer, and bilateral dealer-to-PTF transactions for off-the-run U.S. Treasury Securities. Off-the-run or ‘‘seasoned’’ U.S. Treasury 

Securities include TIPS, STRIPS, and nominal coupon securities issues that preceded the current on-the-run nominal coupon securities. 

Number of Venues is the number of different trading venues in each category and the number of distinct MPIDs for bilateral transactions. Volume is the average weekly dollar volume in par value (in millions of dollars) over the 6-month period, from April 1, 2021, to September 30, 

2021. Market Share (%) is the measure of the dollar volume as a percent of the total dollar volume. The volumes of ATSs and non-ATS interdealer brokers are broken out by Customer trades, Dealer trades, and PTF trades within each group.c Data is based on the regulatory 

version of TRACE for U.S. Treasury Securities from April 1, 2021, to September 30, 2021. Bilateral trades are a catchall classification that 

may include trades conducted via bilateral negotiation, as well as trades conducted electronically via platforms not registered with FINRA as 

an ATS. Bilateral trades may include trades conducted on Communication Protocol Systems. 

aThe percentage to the nearest non-zero is 0.009%. 

bSee supra notes b and c of Table VIII.1. cWe identify ATS trades and non-ATS interdealer broker trades using MPID in the regulatory version of TRACE for U.S. Treasury Securities. 

The regulatory version of TRACE for U.S. Treasury Securities includes an identifier for customer and interdealer trades. Furthermore, we use 

MPID for non-FINRA member subscriber counterparties in the regulatory version of TRACE for U.S. Treasury Securities to identify PTF trades on 

ATSs. 

Government Securities ATSs also play 

a significant role in the market for 

Agency Securities, accounting for 

approximately 12 percent of the total 

dollar volume reported to TRACE. Like 

in the Treasury market, dealers play a 

significant role in trading on ATSs for 

Agency Securities.822

It is the Commission’s understanding 

that PTFs play only a small role in the 

market for Agency Securities. The 

Commission invites comment on the 

role of PTFs in trading Agency 

Securities. The Commission also 

requests comment on the providers of 

liquidity in the market for Agency 

Securities. 

TABLE VIII.4—AGENCY SECURITIES TRADING VOLUME

Number of 

venues Volume Volume share (%) 

Agency Securities Trading Volume 

ATSs ............................................................................................................................................ 8 31,940 12.3 

Customer trades ................................................................................................................... 7 6,767 2.6 

Dealer trades ........................................................................................................................ 7 25,173 9.7 

PTF trades ............................................................................................................................ 3 1 a 0.0 

Non-ATS Interdealer Brokers ...................................................................................................... 13 7,935 3.0 

Customer trades ................................................................................................................... 9 1,096 0.4 

Dealer trades ........................................................................................................................ 13 6,838 2.6 

PTF trades ............................................................................................................................ 5 0 b 0.0 

Bilateral dealer-to-dealer trades .................................................................................................. 470 12,170 4.7 

Bilateral dealer-to-customer trades ............................................................................................. 470 206,777 79.9 

Bilateral dealer-to-PTF trades ..................................................................................................... 84 3 c 0.0 

Total ...................................................................................................................................... ........................ 264,916 100.0 

This table reports trading volume and volume share for ATSs,d non-ATS interdealer brokers, bilateral dealer-to-dealer transactions, and bilateral 

dealer-to-customer transactions for U.S. Agency Securities. Agency Securities include Agency Debentures, Agency Collateralized Mortgage 

Obligations, and Agency Pass-Through Mortgage Backed Securities. Number of Venues is the number of different trading venues in each 

category and the number of MPIDs for bilateral transactions. Volume is the average daily dollar volume in par value (in millions of dollars) 

over the 6-month period, from April 1, 2021, to September 30, 2021. Market Share (%) is the measure of the dollar volume as a percent of 

the total dollar volume. The volume of ATSs and non-ATS interdealer brokers are broken out by Customer trades and Dealer trades within 

each group.e Data is based on the regulatory version of TRACE for Agency Securities from April 1, 2021, to September 30, 2021. Bilateral 

trades are a catchall classification that may include trades conducted via bilateral negotiation, as well as trades conducted electronically via 

platforms not registered with FINRA as an ATS. Bilateral trades may include trades conducted on Communication Protocol Systems.

aThe percentage to the nearest non-zero is 0.0003%. 

bThe percentage to the nearest non-zero is 0.00007%. 

cThe percentage to the nearest non-zero is 0.001%. 

dSee supra notes b and c of Table VIII.1. eWe identify ATS trades and non-ATS interdealer broker trades using MPID in the regulatory version of TRACE for Agency Securities. The 

regulatory version of TRACE for Agency Securities includes an identifier for customer and interdealer trades. 


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823One commenter stated that the lack of a 

consistent regulatory framework for entities that 

undertake similar activities leads to opportunities 

for arbitrage and may result in market 

fragmentation, which in turn may cause reduced 

market liquidity. See Tradeweb Letter at 9. 

824The Commission may use this information in 

monitoring, examinations and enforcement. 

825These requirements come from Rule 301(b)(10) 

of Regulation ATS. Current Government Securities 

ATSs are currently subject to these rules. See supra 

Section II.D.2. 

826Currently Exempted Government Securities 

ATSs are not required to file their written 

safeguards and written procedures with the 

Commission. Therefore, absent an examination by 

the Commission staff, the Commission is not able 

to determine which Currently Exempted 

Government Securities ATSs currently have 

adequate, written safeguards and written 

procedures to protect subscribers’ confidential 

trading information. At the same time, based on the 

experience of the Commission, the Commission 

believes that some Currently Exempted Government 

Securities ATSs currently have, and maintain in 

writing, safeguards and procedures to protect 

subscribers’ confidential trading information, as 

well as the oversight procedures to ensure such 

safeguards and procedures are followed. 

827See FINRA Letter at 2–3, stating that nearly all 

Government Securities ATSs currently are FINRA 

members 

828See supra note 228 and corresponding text 

discussing TRACE reporting requirements for U.S. 

Government securities. 829FINRA Rule 6731 exempts certain ATSs from 

TRACE reporting requirements as long as all of the 

following conditions are met: All trades are 

between ATS subscribers that are both FINRA 

members; the ATS demonstrates that member 

subscribers are fully disclosed to one another at all 

times, the system does not permit automatic 

execution and a member must take affirmative steps 

to agree to a trade, the trade does not pass through 

any ATS account and the ATS does not hold itself 

out as a party to the trade; and the ATS does not 

exchange TRACE-Eligible Securities or funds on 

behalf of its subscribers, take either side of the trade 

for clearing or settlement purposes, or in any other 

way insert itself into the trade; the ATS and the 

member subscribers acknowledge and agree in 

writing that the ATS shall not be deemed a party 

to the trade for purposes of trade reporting and that 

trades shall be reported by each party to the 

transaction; and the ATS agrees to provide to 

FINRA on a monthly basis data relating to the 

volume of trades by security executed by the ATS’s 

member subscribers using the ATS’s system. 

Furthermore, Rule 6732 exempts certain 

transactions on ATS from TRACE reporting 

requirements as long as all of the following 

conditions are met: The trade is between FINRA 

members; the trade does not pass through any ATS 

account, and the ATS does not exchange TRACEEligible Securities or funds on behalf of the 

subscribers, take either side of the trade for clearing 

or settlement purposes, or in any other way insert 

itself into the trade; the ATS agrees to provide to 

FINRA on a monthly basis data relating to each 

exempted trade occurring on the ATS’s system 

pursuant to this Rule 6732; the ATS remits to 

FINRA a transaction reporting fee for each 

exempted sell transaction occurring on the ATS; 

and the ATS has entered into a written agreement 

with each party to the transaction that such trade 

must be reported by such party. See also FINRA 

Letter at 6–7, stating that a fixed income ATS is a 

‘‘party to a transaction’’ in a TRACE-eligible 

security occurring through its system and has 

TRACE transaction reporting obligations, unless an 

exception or exemption applies. 830For example, the ATS may disclose order 

execution statistics to some customers. 

ii. Regulatory Environment for 

Government Securities ATSs 

The regulatory environment for 

Government Securities ATSs varies 

according to whether the ATS is a 

Current Government Securities ATS or 

a Currently Exempted Government 

Securities ATS, and whether the ATS is 

operated by a registered broker-dealer. 

Differences in reporting requirements 

can lead to an uneven competitive 

landscape for Government Securities 

ATSs and leave room for regulatory 

arbitrage.823 In addition, current 

regulation for Government Securities 

ATSs does not require public disclosure 

about operations, fair access, or robust 

systems. 

Much of the difference in regulatory 

treatment among Government Securities 

ATSs comes from the fact that Current 

Government Securities ATSs must 

comply with Regulation ATS, while 

Currently Exempted Government 

Securities ATSs do not. For example, 

Currently Exempted Government 

Securities ATSs are not required to file 

Form ATS with the Commission, while 

ATSs that trade U.S. Government 

securities as well as non-government 

securities, such as corporate or 

municipal securities, must have filed 

Form ATS as a confidential filing with 

the Commission when they began 

operations, and will incur the cost to do 

so again if there is a material change in 

operations.824

Current Government Securities ATSs 

are also required to confidentially report 

their transaction dollar volume in 

government securities to the 

Commission on a quarterly basis via 

Form ATS–R within 30 days after the 

end of each calendar quarter. Currently 

Exempted Government Securities ATSs 

are not subject to this requirement. 

Unlike Current Government Securities 

ATSs, Currently Exempted Government 

Securities ATSs are not required to 

establish written safeguards and written 

procedures to protect subscribers’ 

confidential trading information.825 To 

the extent that a Currently Exempted 

Government Securities ATS does not 

have these procedures, or has them but 

the procedures are not adequate,826 a 

subscriber’s confidential trading 

information might be at risk of 

unauthorized disclosure or subject to 

potential misuse. 

Current Government Securities ATSs 

must also comply with certain 

additional requirements, such as 

recordkeeping requirements pursuant to 

Rule 301(b)(8). These include 

requirements to make and keep certain 

records for an audit trail of trading 

activity, such as time-sequenced order 

information, as well as information 

about current subscribers and 

summaries of trading activity. The 

requirement to keep such records may 

impose compliance costs on Current 

Government Securities ATSs to which 

Currently Exempted Government 

Securities ATSs are not subjected. To 

the extent that Currently Exempted 

Government Securities ATSs do not 

voluntarily maintain records similar to 

those required by Rule 301(b)(8), 

detection and investigation of potential 

market irregularities may be inhibited. 

A further disparity exists in the case 

of the estimated one bank-operated 

Currently Exempted Government 

Securities ATS. All other Currently 

Exempted Government Securities ATSs 

and all Current Government Securities 

ATSs are registered broker-dealers that 

incur the costs of registering with the 

Commission as well as the costs of SRO 

membership, and face operational 

regulatory reporting requirements.827 In 

contrast, the estimated one bankoperated Currently Exempted 

Government Securities ATS is not 

required to register as a broker-dealer 

with the Commission and thus, does not 

have to file Form BD with the 

Commission or be subject to FINRA 

rules. 

The estimated one bank-operated 

Currently Exempted Government 

Securities ATS does not report 

government securities transactions to 

TRACE. All transactions in government 

securities that include at least one 

FINRA member are required to be 

reported to TRACE within 15 minutes of 

the time of execution.828 Trades on 

ATSs operated by FINRA members may 

be required to be reported to TRACE, by 

either the ATS, counterparties to the 

trade, or both, depending on whether 

the counterparties are FINRA members 

and whether the ATS holds itself out as 

a party to the trade.829

Neither Current Government 

Securities ATSs nor Currently 

Exempted Government Securities ATSs 

are required to make disclosures on 

public forms, and this might lead to 

information asymmetries amongst 

different subscribers. For example, 

certain Government Securities ATSs 

might make voluntary disclosures 

regarding their operations as a signal of 

quality to some customers,830 without 

disclosing the same information to other 

customers or market participants 

generally. As a result, some subscribers 

have limited information which may 

affect their trading decisions. 

There is no legal mechanism to 

prevent Government Securities ATSs 

from unreasonably denying or limiting 


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831See supra Section II.D.2, discussing the Fair 

Access Rule requirements. 

832One commenter stated that registered 

investment companies generally are not able to 

directly access liquidity on most Treasury 

interdealer platforms. See ICI Letter at 4. 

833See MFA Letter at 3, stating that currently 

there is no mechanism to prevent Government 

Securities ATSs from unreasonably denying or 

limiting subscribers’ access to an ATS that is a 

significant market for government securities. 

834Systems up-time is a measure of the time that 

a computer system is running and available. 

835On January 11, 2019, the largest trading 

platform in on-the-run U.S. Treasury Securities, 

experienced a system outage approximately from 2 

p.m. to 3:30 p.m. ET. While the outage resulted in 

a modest reduction in market volume, had it 

occurred at a time other than late on a Friday 

afternoon when trading activity is normally already 

low, the outage could have resulted in more adverse 

consequences on the overall market. See also 

Elizabeth Stanton, Nick Baker, & Matthew Leising, 

Treasuries Hit by One-Hour Outage on Biggest 

Electronic Platform, Bloomberg, January 13, 2019, 

https://www.bloomberg.com/news/articles/2019-01- 

11/brokertec-inter-dealer-treasury-broker-suffersoutage. 

836As noted in the October 15 Staff Report, price 

discovery is especially important in the secondary 

market for on-the-run U.S. Treasury Securities 

because the transaction prices are used as risk-free 

rate benchmarks to price other securities 

transactions. 

837See BrokerTec Letter at 6. 

838A commenter on the 2020 stated ‘‘. . . we 

believe that market forces alone may be insufficient 

to significantly reduce systems issues in the market 

for trading and execution services in government 

securities.’’ See MFA Letter at 6. 

839See Letter from Mike Zolik, Nate Kalich, and 

Larry Magargal, Ronin Capital LLC, to David R. 

Pearl, Office of the Executive Secretary, U.S. 

Department of the Treasury, dated March 19, 2016, 

at 31–33, available at https://

www.treasurydirect.gov/instit/statreg/gsareg/ 

RoninCapital.pdf. See also BrokerTec Letter at 6. 

The Treasury Market Practices Group promotes a 

robust control environment for government 

securities trading, using internal controls and risk 

management. See Treasury Market Practices Group, 

Best Practices For Treasury, Agency Debt, and 

Agency Mortgage-Backed Securities Markets (July 

2019), available at https://www.newyorkfed.org/ 

medialibrary/Microsites/tmpg/files/TMPG_

BestPractices_071119.pdf. 

840See infra Section VIII.B.2.d, Table VIII.5. Some 

part of the stream axes volume accounted for in that 

table may be ATS volume. 

841As described in Section III.A, the secondary 

market for U.S. Treasury Securities is generally 

bifurcated between the dealer-to-customer market 

and the interdealer market. See also Bloomberg 

Letter at 5, referencing that the bifurcating of the 

market is due to some extent to structural issues in 

clearing. 

842See supra Section VIII.B.1.a, discussing 

information leakage and RFQs. 

subscribers’ access, because the Fair 

Access Rule does not currently apply to 

any ATS that trades government 

securities.831 When a Government 

Securities ATS has a significant share of 

trading volume in government 

securities, unfairly discriminatory 

actions might hurt investors because 

viable alternatives to trading on such a 

high-volume system might be limited. 

To the extent this happens, it results in 

higher trading costs and a reduced 

efficiency with which such excluded 

participants achieve trading objectives, 

which may also lead to concentration in 

the market for dealers in government 

securities.832 Furthermore, market 

forces alone might not be sufficient to 

prevent a Government Securities ATS 

from unreasonably denying access to 

some market participants.833

The Commission preliminarily 

believes that Government Securities 

ATSs may not fully internalize the cost 

of the externalities associated with not 

having robust, resilient systems, as 

would be required by the provisions of 

Regulation SCI and Rule 301(b)(6) of 

Regulation ATS. Without appropriate 

safeguards in place for Government 

Securities ATSs, technological 

vulnerabilities continue to exist and 

could lead to the potential for costly 

failures, disruptions, delays, intrusions, 

and the reduction in systems uptime,834 which could harm the price 

discovery process and price efficiency 

of government securities. Systems issues 

pose significant negative externalities 

on the market, in that if a trading system 

of a Government Securities ATS with 

significant trading volume fails, this 

failure will not only force the ATS to 

forgo revenue but might also diminish 

trading in government securities during 

the disruption. This would increase the 

trading costs of market participants that 

have optimized their trading strategy 

under the assumption that all 

Government Securities ATSs with 

significant volume are fully operational, 

and might harm the price discovery 

process and liquidity flows for 

government securities.835 In addition, 

price discovery in securities that use 

government security transaction prices 

as risk-free rate benchmarks might also 

be harmed.836

One commenter on the 2020 Proposal 

stated that ‘‘many Government 

Securities ATSs may already align with 

industry standards that achieve many of 

the same goals of Regulations SCI, 

although in slightly different 

manner.’’837 While the Commission 

recognizes that Government Securities 

ATSs have some incentives to maintain 

robust systems to remain competitive 

and thereby reduce systems issues, the 

Commission believes that market forces 

alone may not be sufficient to 

significantly reduce systems issues, 

because some of the impact of these 

systems issues represent an externality 

to the Government Securities ATS.838

A comment letter received in 

response to the Treasury Request for 

Information stated that many 

Government Securities ATSs adopted 

system testing and control procedures 

that followed the recommended best 

practices of the Treasury Market 

Practices Group.839 However, these best 

practices are meant only as useful 

operational guideposts rather than 

binding rules, and each trading venue 

can choose if it wants to comply and 

how to comply, which might provide 

weak only incentives to internalize the 

externality costs associated with system 

failures. 

The Commission is aware of 1 

Government Securities ATS operated by 

a broker-dealer that also operates an 

NMS Stock ATS that is an SCI entity 

and so may already comply with much 

of Regulation SCI. 

b. Communication Protocol Systems in 

the Market for Government Securities 

Communication Protocol Systems 

play a significant role in the market for 

government securities. The Commission 

estimates that there are 3 

Communication Protocol Systems 

operating in the market for government 

securities that may meet the definition 

of exchange under the proposed changes 

to Exchange Act Rule 3b–16. The 

Commission understands that these 

systems are a significant component of 

the dealer-to-customer segment of the 

U.S. Treasury market and account for 

approximately 30 to 40 percent of the 

total trading volume in U.S. 

Treasuries.840 One of the roles of such 

systems is to provide a means to 

communicate trading interest in the 

dealer-to-customer market.841

The Commission understands that 

investors who wish to transact in 

government securities generally do so 

with a dealer on a principal basis. 

Communication Protocol Systems 

typically facilitate the first step in a 

principal trade, namely trading between 

the dealer and customer. In this 

capacity, the systems provide a way for 

customers to obtain quotes from dealers 

and to select a dealer to fill their order, 

in addition to the other reasons for 

using a Communication Protocol System 

described in Section VIII.B.1. The 

Commission understands that dealers 

and PTFs may also use Communication 

Protocol Systems to demand liquidity in 

government securities, a decision which 

may be motivated by the possibility of 

executing block trades with less 

information leakage compared to 

ATSs.842

The Commission understands that 

dealer respondents on RFQ systems in 

the market for government securities 

typically provide a continuous stream of 

indicative, non-firm quotes that are 

aggregated into a single quote and made 


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843One commenter pointed out that, at around 30 

percent, U.S. Treasury market ATS market share is 

at a similar level that NMS equities ATS market 

share was in 1999 when Regulation ATS was 

adopted. The commenter stated that the exemption 

of Treasury securities from Regulation ATS gave 

Treasury market structure time to develop, but the 

market has now matured to a point where the 

exemption should be reconsidered. See Bloomberg 

Letter at 21. 

844See supra Section VIII.B.2.a.i for additional 

discussion on the role of PTFs in the Treasury 

market. 845See supra Section VIII.B.2.a.i. 

available to all participants who may 

wish to initiate an RFQ on the trading 

system. Such quotes may also be 

disseminated over the internet to the 

general public. These indicative quote 

streams are an important service on RFQ 

systems for at least two reasons. First, 

they are a source of price information in 

government securities, and the 

Commission understands that some 

market data vendors may rely 

exclusively on such quote streams for 

the information they provide on, for 

example, the Treasury market. In 

providing such transparency in the 

Treasury market, these quote streams 

may be used as a risk-free rate 

benchmark, and to help price other 

financial instruments. Second, the quote 

streams give potential participants in 

the RFQ a sense of what quotes they 

would receive in response to a request 

without having to make a request, 

which helps these market participants 

get a sense of the market without 

revealing trading interest. 

Communication Protocol Systems do 

not meet the current definition of an 

exchange and thus are not subject to 

regulation either as an exchange or an 

ATS. This means they face a regulatory 

regime similar to that of Currently 

Exempted Government Securities ATSs 

as described in Section VIII.B.1.ii above. 

Furthermore, depending on how much 

of a role the Communication Protocol 

System takes in facilitating the 

transaction (e.g., acting as a 

counterparty to each side of the trade), 

and whether the Communication 

Protocol System operator and/or parties 

to the transaction are FINRA members, 

transactions taking place through the 

Communication Protocol System may 

not be reported to TRACE at all. 

The Commission estimates that a 

single Communication Protocol System 

trading in government securities is not 

currently operated by a registered 

broker-dealer. This system does not 

currently incur the costs of registering 

with the Commission as well as the 

costs of SRO membership, and is not 

subject to FINRA operational regulatory 

reporting requirements. 

c. Other Methods of Trading in U.S. 

Government Securities 

Market participants may also transact 

in government securities via bilateral 

voice trading. As the Commission 

understands, a market participant 

wishing to make a purchase or sale of 

government securities would phone a 

potential counterparty, typically a 

dealer in government securities, to 

inquire about specific securities. The 

parties would then negotiate on price 

and size. If there were agreement, the 

parties would execute a trade. If not, the 

liquidity demander could repeat this 

process to find a more suitable 

counterparty. The Commission 

understands that a liquidity demander 

would typically contact more than one 

dealer, in order to compare quotes. 

Bilateral voice trading can be 

attractive to traders in government 

securities because this method of 

trading allows for flexibility, minimizes 

information leakage relative to other 

trading protocols, and may be 

conducive to maintaining relationships. 

The lack of information leakage may 

cause bilateral voice trading to be a 

useful method for traders seeking to 

execute large block trades of 

government securities. 

d. Competition for U.S. Government 

Securities Trading Services 

Government securities are traded 

through a diverse set of methods, 

including ATSs, Communication 

Protocol Systems, and bilateral 

negotiation methods such as voice 

trading. The Commission preliminarily 

believes that each type of trading 

method may be more prevalent in 

separate segments of the government 

securities market. 

TABLE VIII.5—U.S. TREASURY SECURITIES TRADING PROTOCOL MARKET SHARE

Limit order book RFQ Stream axes a Voice 

26.3 .............................................................................................................................................. 29.9 10.4 33.4 

This table reports volume share by trading protocol type in the market for U.S. Treasury Securities. Market Share (%) is the measure of the dollar volume as a percent of total dollar volume. Data is based on Coalition Greenwich’s Greenwich MarketView data from January 2021 

through September 2021. Voice protocol is calculated as the remainder of volume after accounting for Limit Order Book, RFQ, and Stream 

Axes reported directly to Coalition Greenwich from aggregated FINRA TRACE volume. 

a Coalition Greenwich’s Greenwich MarketView refers to this data value as ‘‘Stream/Click-to-Engage.’’ 

ATSs and Communication Protocol 

Systems compete with one another to 

attract order flow. Table VIII.5 shows 

the percentage of TRACE-reported 

Treasury Securities transactions that are 

completed using different trading 

protocols, and shows that the use of 

ATSs and Communication Protocol 

Systems to transact in Treasury 

Securities are roughly evenly matched 

in terms of volume.843 LOB volume 

represents ATS trades, and the 

Commission understands that some 

amount of stream axes volume may also 

be from ATSs. The remaining portion of 

stream axes and the RFQ volume 

represent Communication Protocol 

Systems in this market. 

The Commission understands that the 

primary customers of ATSs tend to be 

dealers and PTFs. The Commission 

understands that many of the PTFs 

trading on Government Securities ATSs 

utilize latency-sensitive trading 

strategies.844 Such strategies would 

likely not be possible to implement 

when trading on a Communication 

Protocol System, or via bilateral voice 

trading. This gives ATSs an advantage 

in attracting such order flow. Because 

orders on LOB ATSs are generally 

displayed to all participants on the ATS, 

ATSs with LOBs may have more price 

competition among liquidity providers 

than alternatives. Also, ATSs, unlike 

non-ATS trading services, can offer 

certain additional execution protocols, 

such as crossing mechanisms and 

auctions, which generally meet the 

current definition of an exchange. 

Government Securities ATSs compete 

on fees, trading features, and by 

attracting liquidity to their system. As 

described above in Section VIII.B.2.a, a 

substantial amount of order flow in 

government securities is concentrated 

on the largest Government Securities 

ATS.845


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846See supra Sections VIII.B.1 and VIII.B.2.b for 

additional details on the nature of Communication 

Protocol Systems. See infra Section VIII.B.3.b for 

additional details on the trading of corporate bonds 

on Communication Protocol Systems. 

847See supra Section VIII.B.2.a.ii, discussing the 

regulatory regime for Government Securities ATSs 

and Section VIIIB.2.b, discussing the regulatory 

regime for Communication Protocol Systems. 

848See ICE Bonds Letter II at 2, stating that the 

significant regulatory burdens on fixed income 

ATSs puts them at a competitive disadvantage to 

non-ATS trading systems that are not subject to 

these same regulatory obligations. See also ICE 

Bonds Letter II at 5, stating that market participants 

are harmed when electronic trading systems that 

perform market place functions in fixed income 

securities are not subject to the same requirements 

as a fixed income ATSs, and that if the regulatory 

obligations of operating a fixed income ATS become 

too burdensome or impair the ability of fixed 

income ATSs to compete, it may discourage the 

expansion of ATSs and potentially encourage 

operators of fixed income ATSs to restructure their 

operations to avoid being characterized as an ATS. 

849The estimated average daily relative quoted 

spread for interdealer transactions for on-the-run 

U.S. Treasury Securities is small, approximately 0.8 

bps for 2-year Treasury Securities and 2.4 bps for 

10-year Treasury Securities. The estimated average 

daily relative quoted spread for interdealer 

transactions for off-the-run U.S. Treasury Securities, 

approximately 1.7 bps for 2-year Treasury 

Securities and 5.4 bps for 10-year Treasury 

Securities, is larger compared to that of on-the-run 

Treasury Securities. Spreads have narrowed in the 

past couple of years with a change to a smaller 

minimum trading increment of 1⁄8 of 1/32 of $1. The 

average daily relative quoted spread is computed as 

the daily average of the difference between the 

intraday offer and bid prices divided by the 

corresponding price mid-quote. See also Paolo 

Pasquariello & Clara Vega, The On-the-Run 

Liquidity Phenomenon, 92 J. Fin. Econ. 1 (2009); 

Tobias Adria, Michael Fleming, & Or Shachar, 

Market Liquidity after the Financial Crisis (June, 28, 

2017), Federal Reserve Bank of New York, Liberty 

Street Economics, available at https://

libertystreeteconomics.newyorkfed.org/2017/06/ 

market-liquidity-after-the-financial-crisis.html. 

850See http://finramarkets.morningstar.com/ 

BondCenter/ 

TRACEMarketAggregateStats.jsp?bondType=C. 

While there are many types of corporate bonds, 

most tend to fall within two categories: Investmentgrade bonds and high-yield bonds (also commonly 

referred to as ‘‘non-investment-grade’’ or ‘‘junk’’ 

bonds). High-yield bonds tend to have higher yields 

than both government securities and investmentgrade bonds, but are also subject to a higher degree 

of risk. 

851See Healthy Markets Letter at 8. 

852See id. 

853See https://vegaeconomics.com/trends-in-theus-corporate-bond-market-since-the-financial-crisis. 

854See A Financial System That Creates 

Economic Opportunities: Capital Markets, U.S. 

Department of the Treasury, October 2017, available 

at https://www.treasury.gov/press-center/pressreleases/documents/a-financial-system-capitalmarkets-final-final.pdf (‘‘Treasury Report’’) at 85. 

855See Bloomberg Letter at 9, citing Financial 

Times at https://www.ft.com/content/3175772a7ea0-3b61-ae53-063459e78c42. Another commenter 

gave a similar number, estimating that only 17 

percent of the more than 43,000 unique U.S. 

investment-grade bonds traded on any given day in 

2020. See MarketAxess Letter at 3. 

856See Bloomberg Letter at 20, mentioning that 

the corporate bond market is non-standard and 

highlighting the importance of market-making, and 

MarketAxess Letter at 3, stating that liquidity is 

lower for corporate bonds than for equities because, 

while there are only a few thousand common 

Continued 

The primary customers of 

Communication Protocol Systems are 

those market participants in the dealerto-customer market. Customers seeking 

to trade government securities may find 

the sophistication and infrastructure 

required to trade on ATSs to not be costeffective relative to the type and 

quantity of trading they wish to 

undertake. This may give the 

Communication Protocol Systems an 

advantage in attracting such traders. In 

addition, Communication Protocol 

Systems offer features that ATSs might 

not, such as the ability to trade on a 

fully disclosed, non-anonymous basis; 

or the ability to connect trading in 

Treasuries to related trades in corporate 

bonds.846

Communication Protocol Systems 

compete with each other through the 

fees they charge, and through 

innovation and improvement in the type 

and quality of the protocols they offer. 

The Commission preliminarily believes 

that such competition among 

Communication Protocol Systems may 

explain the proliferation of different 

types of protocols. 

Both ATSs and Communication 

Protocol Systems compete against the 

option of transacting through bilateral 

voice trading. Such methods of trading 

in government securities have been 

common historically and continue to be 

used today. As described above in 

Section VIII.B.2.c, these methods of 

trading provide traders with the ability 

to customize transactions on the basis of 

a relationship between the two parties. 

At the same time, these trades may be 

more cumbersome and may suffer from 

a lack of price competition relative to 

Communication Protocol Systems and 

ATSs. 

The Commission preliminarily 

believes that the differences in 

regulatory regimes among ATSs and 

between ATSs and Communication 

Protocol Systems 847 can lead to an 

uneven competitive landscape and 

adversely impact the potential for robust 

competition in the market for 

government securities.848

The Commission believes that the 

current lack of public disclosure about 

the operations and potential conflicts of 

interest of Government Securities ATSs 

and Communication Protocol Systems 

that currently trade government 

securities might hinder competition 

among these ATSs and between 

Government Securities ATSs and 

Communication Protocol Systems in the 

market for government securities. 

Competition among Government 

Securities ATSs and between 

Government Securities ATSs and nonATS trading systems would affect the 

trading costs of government securities 

market participants, including dealers, 

PTFs, hedge funds, and institutional 

investors. Their trading costs include 

bid-ask spreads,849 search costs in the 

selection of trading venues and 

counterparties, and trading venue fees. 

When deciding which trading system 

most suits their trading objectives, 

market participants consider various 

operational facets of the system, such as 

order handling, order types, order 

segmentation, trading functionalities, 

and any potential conflicts of interest 

that might arise from the operator of the 

trading service or its affiliates. Trading 

system fees would also be a factor for 

market participants in deciding between 

trading systems. 

3. Current State of Corporate Debt 

Market 

Although smaller than the market for 

government securities, the market for 

corporate debt securities (‘‘corporate 

bonds’’) represents a significant part of 

the fixed income market. In September 

2021, the average daily dollar volume of 

corporate bond trading was $26.4 

billion, including $19.8 billion in 

investment-grade bonds and $6.5 billion 

in high-yield bonds.850 One commenter 

stated that levels of trading in corporate 

debt have typically been lower than in 

other fixed income markets, such as 

government securities: While corporate 

bonds made up 20 percent of new 

issuances in Q4 2020, they only made 

up 4.4 percent of fixed income market 

trading.851 However, the commenter 

pointed out that the absolute dollar 

volume of corporate bond trading 

volume is still very significant, as is the 

overall size of the market: As of January 

2021, the corporate bond market is 

valued at $9.3 trillion in investmentgrade and $2.4 trillion in high-yield 

debt outstanding.852 Estimates put the 

annualized growth rate of the corporate 

bond market at 5.2 percent between 

2008 and 2019, a growth rate second 

only to that of government securities 

within the fixed income space.853

Trading in corporate bonds tends to 

be more illiquid than trading in 

government securities, with liquidity 

often concentrated in the largest and 

most recently issued bonds.854 One 

commenter referenced that only 18 

percent of corporate bonds trade each 

day, and only 8 percent have more than 

five trades on any given day.855 Several 

commenters stated that this is due in 

part to the highly idiosyncratic nature of 

corporate bond characteristics,856 which 


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stocks, there are hundreds of thousands of CUSIPs 

for corporate and municipal bonds. See also ICI 

Letter at 8, stating that corporate bond liquidity 

varies dramatically across bonds due to their 

diverse nature, and that liquidity shifts can be 

exacerbated during times of market stress. 857See https://fredblog.stlouisfed.org/2015/10/ 

illiquidity-in-the-bond-market/. 858See MarketAxess Letter at 3. 859One commenter stated that registered 

investment companies (‘‘funds’’) held 21 percent of 

bonds issued by both U.S. corporate issuers and 

foreign bonds held by U.S. residents as of year-end 

2019. See ICI Letter at 1–2. 860See, e.g., ≤https://www.marketwatch.com/ 

story/u-s-corporate-debt-soars-to-record-10-5- 

trillion-11598921886. (Retrieved from Factiva 

database); O’Hara, M., & Zhou, X.A. (2021). 

Anatomy of a liquidity crisis: Corporate bonds in 

the COVID–19 crisis. Journal of Financial 

Economics. 

861See McDowell, Hayley. (2020, April 30). 

‘‘MarketAxess reveals record number of buy-side 

acted as liquidity providers in COVID–19 crisis,’’ 

THETRADE, available at https://

www.thetradenews.com/marketaxess-revealsrecord-buy-side-acted-liquidity-providers-covid-19- 

crisis/. 

862See TRACE Monthly Volume Files, available 

at https://www.finra.org/finra-data/browse-catalog/ 

trace-volume-reports/trace-monthly-volume-files. 

One commenter referenced similar numbers for 

2020, stating that corporate bond trades (including 

both investment-grade and high-yield bonds) on all 

ATSs represented 6.4 percent of the trade volume 

and 18.7 percent of the trade count reported to 

TRACE. See MarketAxess Letter at 1. 

863 In addition, a small percentage of corporate 

bonds are exchange-traded on trading systems such 

as NYSE Bonds and the Nasdaq Bond Exchange. 

See, e.g., https://www.nyse.com/markets/bonds and 

https://www.nasdaq.com/solutions/nasdaq-bondexchange. Trading volume in exchange-traded 

bonds was reported to be around $19 billion as of 

January 2020. See Uhlfelder, Eric, (Jan. 2020), A 

Forgotten Investment Worth Considering: 

Exchange-Traded Bonds, The Wall Street Journal, 

available at https://www.wsj.com/articles/aforgotten-investment-worth-considering-exchangetraded-bonds-11578279781. (Retrieved from Factiva 

database). 

864See Kozora, M., Mizrach, B., Peppe, M., 

Shachar, O., & Sokobin, J.S. (2020). Alternative 

Trading Systems in the Corporate Bond Market. 

FRB of New York Staff Report, (938). 

865See Craig, L., Kim, A., & Woo, S.W. (2020). 

Pre-trade Information in the Corporate Bond 

Market. U.S. Securities and Exchange Commission, 

Division of Economic and Risk Analysis White 

Paper. White papers and analyses are prepared by 

SEC staff in the course of rulemaking and other 

Commission initiatives. The U.S. Securities and 

Exchange Commission disclaims responsibility for 

any private publication or statement of any 

employee or Commissioner. White papers express 

the authors’ views and do not necessarily reflect 

those of the Commission, the Commissioners, or 

other members of the staff. 

866See supra Section II.D.2. See also supra 

Section VIII.B.2.a.ii for a discussion about the 

effects of these regulations and the costs to comply. 

867See supra Section VIII.B.2.b.ii for additional 

discussion on the effects of a lack of public 

disclosure. 

868An ATS trading in corporate debt securities is 

subject to the Fair Access Rule if, during at least 

four of the preceding six months, the ATS had five 

percent or more of the average daily volume in 

corporate debt securities traded in the United 

States. See 17 CFR 242.301(b)(5)(i) and https://

www.sec.gov/tm/faq-regulation-ats-fair-access-rule. 

869See supra Section II.D.2. Also, see supra 

Section VIII.B.2.b.ii describing the impact of the 

Fair Access Rule. 

870See 17 CFR 242.301(b)(6) and supra note 157 

and corresponding text. Rule 301(b)(6) currently 

applies to an ATS that trades only corporate debt 

securities with 20 percent or more of the average 

daily volume traded in the United States during at 

least four of the preceding six calendar months. One 

commenter stated that, given current aggregate ATS 

volumes, it is unlikely that any single ATS will 

approach 20 percent of overall corporate debt 

market volume. See MarketAxess Letter at 10. 

871See FINRA Rule 6730(a)(1) requiring FINRA 

members to report transactions in TRACE-Eligible 

Securities, which FINRA Rule 6710 defines to 

include corporate debt securities. For each 

transaction in corporate debt securities, a FINRA 

member would be required to report the CUSIP 

number or similar numeric identifier or FINRA 

symbol; size (volume) of the transaction; price of 

the transaction (or elements necessary to calculate 

price); symbol indicating whether transaction is a 

buy or sell; date of trade execution (‘‘as/of’’ trades 

only); contra-party’s identifier; capacity (principal 

or agent); time of execution; reporting side 

executing broker as ‘‘give-up’’ (if any); contra side 

introducing broker (in case of ‘‘give-up’’ trade); the 

commission (total dollar amount), if applicable; 

date of settlement; if the member is reporting a 

transaction that occurred on an ATS pursuant to 

FINRA Rule 6732, the ATS’s separate Market 

Participant Identifier (‘‘MPID’’); and trade modifiers 

as required. See FINRA Rule 6730(c). 

872See supra note 829 describing exemptions for 

ATS transaction reporting to TRACE. 

873See, e.g., Edwards, A.K., Harris, L.E., & 

Piwowar, M.S. (2007). Corporate bond market 

can differ along many different 

dimensions, including issuer, tenor, 

coupon rate, and covenants.857 One 

commenter stated that, compared to the 

equity market, the large number of 

individual CUSIPs in the corporate debt 

market has resulted in a meaningful 

subset of corporate bonds without 

market makers, which in turn lowers the 

liquidity of these bonds.858

Corporate bondholders, who are 

mainly institutional investors such as 

mutual funds, pension funds, insurance 

companies, and banks,859 have 

traditionally facilitated their trades 

through broker-dealers on a principal 

basis.860 The past decade has seen an 

increasing shift towards trading 

arrangements in which dealers quickly 

arrange offsetting trades when 

intermediating between buyers and 

sellers so as to avoid taking on 

significant inventory risk for extended 

periods of time. A more recent trend has 

seen a rise in the direct participation of 

institutional investors as corporate bond 

liquidity providers: In April 2020, one 

corporate bond RFQ platform reported a 

record 900 firms providing liquidity, 

including 700 asset managers.861

a. ATSs in the Market for Corporate 

Debt 

In September 2021, corporate bond 

trading on ATSs accounted for 7.7 

percent of total TRACE-reported 

corporate bond trading volume in terms 

of dollar volume.862 Currently, the 

Commission understands that there are 

12 ATSs with a Form ATS on file 

trading corporate bonds.863 Protocols in 

corporate bond ATSs include limit 

order books (LOBs), displayed and nondisplayed venues, and auctions, among 

others. According to Table VIII.6, the 

most commonly reported protocol used 

for trading corporate bonds via ATSs is 

an auction. Typically, auctions operate 

by periodically crossing at prices that 

maximizes the amount of buy and sell 

trading interest that can be executing at 

that price. 

Corporate bond ATSs are mostly used 

by dealers, who may be either using 

them to trade on behalf of retail 

investors or to rebalance excess 

inventories.864 A Division of Economic 

Risk and Analysis (‘‘DERA’’) white 

paper on corporate bond ATSs finds 

that large dealers (i.e., those in the 

highest quartile of trading volume and 

number of bonds traded) are more likely 

to provide corporate bond quotes on 

ATSs than smaller dealers.865

Similar to Current Government 

Securities ATSs, an ATS that trades in 

corporate debt securities must comply 

with the requirements of Regulation 

ATS, including registering as a brokerdealer.866 Also, similar to Current 

Government Securities ATSs, corporate 

bond ATSs are not required to make 

public disclosures, and, as discussed 

above, this lack of disclosure 

requirements might lead to information 

asymmetries amongst different 

subscribers.867 Further, corporate bond 

ATSs with significant volume 868 are 

required to comply with the 

requirements of the Fair Access Rule.869

Moreover, ATSs that trade in corporate 

debt must also comply with Rule 

301(b)(6) of Regulation ATS (‘‘Capacity, 

Integrity, and Security Rule’’) if they 

meet certain volume thresholds.870 The 

requirements of Rule 301(b)(6), while 

similar, are less rigorous and less costly 

than the requirements of Regulation SCI. 

All transactions in corporate bonds 

that include at least one FINRA member 

are required to be reported to TRACE 

within 15 minutes of the time of 

execution.871 Furthermore, trades on 

ATSs operated by FINRA members may 

be required to be reported to TRACE, by 

either the ATS, counterparties to the 

trade, or both, depending on whether 

the counterparties are FINRA members 

and whether the ATS holds itself out as 

a party to the trade.872 Academic studies 

have shown that TRACE reporting 

requirements have reduced overall 

trading costs in corporate bond 

markets,873 but may increase the cost of 


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transaction costs and transparency. The Journal of 

Finance, 62(3), 1421–1451. 

874See Bessembinder, H., Maxwell, W., & 

Venkataraman, K. (2006). Market transparency, 

liquidity externalities, and institutional trading 

costs in corporate bonds. Journal of Financial 

Economics, 82(2), 251–288. 

875See Bloomberg Letter at 12. 

876See Husveth, Ted (2021) ‘‘Electronic Portfolio 

Trading Rewrites the Corporate Bond Liquidity 

Playbook,’’ Tradeweb, available at https://

www.tradeweb.com/newsroom/media-center/ 

insights/blog/electronic-portfolio-trading-rewritesthe-corporate-bond-liquidity-playbook/. 

877See McPartland, Kevin (2020), ‘‘All Electronic 

Trading is Not Created Equal,’’ Greenwich 

Associates, available at https://

www.greenwich.com/fixed-income/all-electronictrading-not-created-equal. 

878See McPartland, Kevin (2021), ‘‘Making the 

Case for Portfolio Trading,’’ Greenwich Associates, 

available at https://www.greenwich.com/fixedincome/making-case-portfolio-trading. 

879One commenter stated that submitting 

multiple securities as a portfolio of liquid and lessliquid securities enables a liquidity provider to 

potentially offer better prices than trading each 

security individually. See Bloomberg Letter at 13. 

880See McPartland, Kevin (2020), ‘‘All Electronic 

Trading is Not Created Equal,’’ Greenwich 

Associates, available at https://

www.greenwich.com/fixed-income/all-electronictrading-not-created-equal; and Husveth, Ted (2021) 

‘‘Electronic Portfolio Trading Rewrites the 

Corporate Bond Liquidity Playbook,’’ Tradeweb, 

available at https://www.tradeweb.com/newsroom/ 

media-center/insights/blog/electronic-portfoliotrading-rewrites-the-corporate-bond-liquidityplaybook/. 

881See Bloomberg Letter at 8, referencing the 

Joint Staff Report on the U.S. Treasury Market on 

October 15, 2014, available at https://

www.treasury.gov/press-center/pressreleases/ 

Documents/Joint_Staff_Report_Treasury_10-15- 

2014.pdf, stating that markets, including the U.S. 

Treasury market, are connected through ‘‘automated 

trading strategies that involve a nearly 

instantaneous response to common trading signals 

or that seek to arbitrage short-lived opportunities 

across related interest-rate products.’’ 

882See ‘‘Net Spotting: Reducing Trading Costs for 

U.S. Corporate Bonds,’’ (2021), Tradeweb, available 

at https://www.tradeweb.com/newsroom/mediacenter/insights/commentary/net-spotting-reducingtrading-costs-for-u.s.-corporate-bonds/. 

883See id. 

884See https://www.greenwich.com/blog/ 

what%E2%80%99s-next-high-frequency-traders, 

which mentions that one PTF has begun to trade 

using corporate bond RFQs. 

885See, e.g., Rennison, Joe, Armstrong, Robert, 

and Wigglesworth, Robin, January 22, 2020, ‘‘The 

new kings of the bond market,’’ Financial Times, 

available at https://www.ft.com/content/9d6e520e3ba8–11ea-b232-000f4477fbca. 

886See supra Section VIII.B.2.b for a discussion 

of PTFs’ role in government securities ATSs. 

887See supra Section VIII.B.2.b for discussion of 

the effects of not being subject to such regulations. 

One commenter stated that, given the lack of a 

central clearing party for corporate and municipal 

Continued 

trading through large dealers, who 

previously were able to offer lower 

transaction costs due to their 

information advantages.874

b. Communication Protocol Systems in 

the Market for Corporate Debt 

Communication Protocol Systems 

play a significant role in the market for 

corporate debt. Table VIII.6, which 

breaks down corporate bond dollar 

volumes according to different trading 

protocols, shows that corporate bond 

trading on Communication Protocol 

Systems (including anonymous and 

disclosed RFQs, portfolio trading, and 

stream axes), accounted for 23.1 percent 

of total corporate bond trading volume 

during the first half of 2021. Currently, 

the Commission estimates that there are 

8 Communication Protocol Systems 

trading corporate bonds that may meet 

the definition of exchange under the 

proposed changes to Exchange Act Rule 

3b–16. 

One commenter stated that protocols 

such as electronic RFQs in the fixed 

income market evolved from single 

dealer order routing and the use of the 

‘‘three quote rule,’’ in which 

institutional investors would seek three 

quotes from three dealers in order to 

assist them in getting the best prices. 

According to the commenter, in more 

liquid securities, electronification has 

allowed traders to better organize pretrade data, allowing for new 

Communication Protocol Systems that 

enable functionalities such as RFQ Lists 

and other multiple-security trade 

messaging inquiries.875

‘‘Portfolio trading’’ is a multi-security 

protocol that may be particularly useful 

for corporate bond market participants. 

This protocol is similar to RFQ Lists as 

defined in Section II.B.2 and discussed 

in Section VIII.B.1.b; however, while 

RFQ Lists permit users to respond with 

quotes for only some of the securities 

listed, securities that are listed in a 

portfolio trading protocol are executed 

for the entire portfolio at a single price 

with a single counterparty.876 One 

industry report estimates that two to 

five percent of TRACE trading volume 

in investment-grade bonds is executed 

via portfolio trading protocols.877

Furthermore, one report estimates that 

portfolio trading volume increased by 

159 percent between 2019 and 2021.878

The ‘‘all-or-none’’ nature of portfolio 

trading can be especially beneficial for 

corporate bond market participants who 

wish to trade baskets of securities that 

include some difficult-to-trade bonds. 

Specifically, market participants may be 

able to receive better prices for more 

illiquid bonds, which may or may not 

be balanced out by receiving worse 

prices on more liquid bonds.879

Additionally, portfolio trading also 

tends to be faster than list trading, as 

there is less of a need to look at each 

individual security. However, these 

trades tend to be complex and may be 

more difficult to automate, as they often 

require extensive negotiations.880

While not necessarily its own 

protocol, one functionality that is 

increasingly being added to corporate 

bond Communication Protocol Systems 

involves so-called ‘‘net spotting.’’ 

Spotting is the practice of hedging 

corporate bond transactions through 

offsetting government security 

transactions, which is useful for 

participants as corporate bonds— 

investment-grade bonds in particular— 

are typically traded ‘‘on spread,’’ i.e., 

quoted relative to a benchmark 

government bond yield. This practice 

has led to interlinkages between the 

corporate bond and government 

securities markets.881 However, the 

Commission understands that manual 

spotting can suffer from inefficiencies 

resulting from time delays in 

completing trades in the two markets. 

‘‘Net spotting,’’ which incorporates 

automated spotting functionalities into 

corporate bond Communication 

Protocol Systems, may reduce these 

inefficiencies. This practice calculates a 

net interest rate exposure resulting from 

a spot trade, producing a net position 

that can be traded as a single 

transaction.882 Net spotting may help to 

reduce transaction costs of spot trades. 

A growth in the popularity of this 

practice is also likely to increase 

interlinkages between trading protocols 

in the corporate bond and government 

securities markets. One trading system 

operator estimates that, only six months 

after adding net spotting functionality to 

its trading system, almost 10 percent of 

the corporate bond trading volume on 

its trading system was using this 

functionality.883

In recent years, driven in part by an 

increase in the popularity of corporate 

bond exchange-traded funds (ETFs), 

there is some evidence that PTFs have 

begun to enter the corporate bond 

market.884 One factor that may correlate 

with the entry of these firms is the 

ability to use portfolio trading protocols 

to more efficiently trade in the bonds 

underlying corporate bond ETFs.885

Therefore, unlike in the market for 

government securities, in which PTFs 

prefer to trade on Government 

Securities ATSs, PTFs may have a more 

active presence on corporate bond 

Communication Protocol Systems than 

on corporate bond ATSs.886

Corporate bond Communication 

Protocol Systems do not meet the 

current definition of an exchange and 

thus are not subject to exchange 

registration or the requirements of 

Regulation ATS, such as requirements 

for robust systems.887 The Commission 


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bond trades, each participant has the discretion 

over which other participants they wish to extend 

credit to and trade; therefore, fair access to a 

corporate bond Communication Protocol System 

may not have the same meaning given to it in the 

equity ATS context as the system does not have the 

ability to ensure that all participant have the same 

access to liquidity. See MarketAxess Letter at 10. 

Another commenter stated that Communication 

Protocol Systems such as RFQs do not pose the 

same technological risks as, e.g., fully automated 

central limit order books (CLOBs) because trading 

is slower, there are fewer algorithms that may 

malfunction, and, if RFQ systems are unavailable, 

parties can continue to negotiate and execute 

transactions bilaterally away from the trading 

system. See Tradeweb Letter at 6. 

888See supra notes 157 and 870. One commenter 

stated that, other than Rule 301(b)(6)(ii)(F) and (G), 

it expects that nearly all existing platforms already 

meet or are trying to meet the requirements of Rule 

301(b)(6). See MarketAxess Letter at 11. Another 

commenter that runs a fixed-income 

Communication Protocol System stated that it 

invested in proper contingency planning, disaster 

recovery, robustness, and resiliency to ensure there 

is no disruption in service. See FlexTrade Systems 

Letter at 3. 

889See, e.g., Bloomberg Letter at 18 and 23 and 

MarketAxess Letter at 12. 

890One commenter stated that, even if 

Communication Protocol System providers do not 

meet the standard of brokerage activity, since 

registered broker-dealers are using these trading 

systems, they are supervised under FINRA 

standards for brokers relying on outsourced 

technology. The commenter states that these 

systems are also monitored by broker-dealer, who 

are incentivized to do so. See Bloomberg Letter at 

30–31. 

891One commenter pointed out that FINRA has 

recently proposed changes to TRACE reporting of 

portfolio trades. See Bloomberg Letter at 14, citing 

FINRA request for comment, Regulatory Notice 20– 

24, September 15, 2020, available at https://

www.finra.org/sites/default/files/2020–07/ 

Regulatory-Notice-20-24.pdf. 

892See FINRA Rule 6730(a)(1) requiring FINRA 

members to report transactions in TRACE-Eligible 

Securities. See also supra note 228 and https://

www.finra.org/rules-guidance/notices/14-53. 

893One commenter stated that approximately 32 

percent of investment-grade and 23 percent of highyield corporate bond daily dollar volumes are 

executed electronically. See BDA Letter at 1. 

894See FINRA Rule 6730(a)(1) requiring FINRA 

members to report transactions in TRACE-Eligible 

Securities. See also supra note 228 and https://

www.finra.org/rules-guidance/notices/14-53 and 

https://www.finra.org/filing-reporting/markettransparency-reporting/trace/faq/reportingcorporate-and-agencies-debt. 

895See Bloomberg Letter, Figure 2. See also 

Bloomberg Letter at 14. See also MarketAxess Letter 

at 2, stating that institutional investors in credit 

markets prefer RFQs because they have found that 

liquidity on demand results in the best pricing for 

illiquid securities. 

896See, e.g., ICI Letter at 6 and MarketAxess 

Letter at 3. 

897See Kozora, M., Mizrach, B., Peppe, M., 

Shachar, O., & Sokobin, J.S. (2020). Alternative 

Trading Systems in the Corporate Bond Market. 

FRB of New York Staff Report, (938). 

898See Section VIII.B.1 for a discussion on the 

difference between disclosed and anonymous RFQs. 

estimates that there are currently 2 

Communication Protocol Systems with 

sufficient corporate bond trading 

volume such that they would otherwise 

be over the threshold for the Capacity, 

Integrity, and Security Rule 301(b)(6).888

Several commenters stated that the 

resiliency of the fixed income market 

during the COVID crisis showed that the 

current structure of the fixed income 

market, and of the electronic trading 

market in particular, is already resilient 

and robust.889

The Commission estimates that 6 

Communication Protocol Systems for 

corporate bonds are not currently 

operated by registered broker-dealers. 

These systems do not currently incur 

the costs of registering with the 

Commission as well as the costs of SRO 

membership, and are not subject to 

FINRA operational regulatory reporting 

requirements.890

A corporate bond transaction on a 

Communication Protocol System is 

reported to TRACE if at least one party 

to the transaction is a FINRA member, 

and/or if the Communication Protocol 

System itself is a member of FINRA.891

Depending on how much of a role the 

Communication Protocol System takes 

in facilitating the transaction (e.g., 

acting as a counterparty to each side of 

the trade), and whether the 

Communication Protocol System 

operator and/or parties to the 

transaction are FINRA members, 

transactions taking place through the 

Communication Protocol System may 

not be reported to TRACE at all.892

c. Other Methods of Trading in the 

Market for Corporate Debt Securities 

While the electronic trading of 

corporate bonds through ATSs and 

Communication Protocol Systems has 

grown over time,893 traditionally 

corporate bonds trading has taken place 

bilaterally through either dealer-todealer or dealer-to-customer 

negotiations, often using telephone 

calls. There is evidence that such 

manual transactions methods remain an 

important part of the corporate bond 

market: Table VIII.6 shows that 71.4 

percent of trading in corporate bonds 

was facilitated via bilateral voice trading 

during the first half of 2021. 

Transactions in corporate bonds that 

do not take place on electronic 

platforms will be reported to TRACE if 

at least one party to the trade is a 

member of FINRA.894

d. Competition for Corporate Debt 

Securities Trading Services 

The trading of corporate debt 

securities takes place through a variety 

of different methods, including ATSs, 

Communication Protocol Systems, and 

informal bilateral trading methods such 

as voice trading. These different 

methods compete with each other for 

customers, and may appeal to different 

segments of the corporate market 

depending on that segment’s 

preferences and trading needs. Trading 

systems within the ATS and 

Communication Protocol System spaces 

also compete with one another on the 

basis of fees, trading features, and their 

ability to attract liquidity. 

One commenter stated that the choice 

of trading method is driven largely by 

liquidity considerations, with less 

liquid securities trading via manual 

protocols such as voice trading, more 

liquid securities using protocols such as 

RFQs, and the most liquid securities 

trading electronically on ATSs using 

protocols such as LOBs and call 

auctions.895 Other commenters stated 

that the majority of corporate bonds are 

not liquid enough to support order book 

trading,896 which may be one reason 

why there is not much corporate bond 

trading volume in ATSs as compared to 

Communication Protocol Systems, and 

why there is less ATS trading in 

corporate bonds as compared to other 

securities, such as government 

securities. As discussed in Section 

VIII.B.1, customers who want to trade 

electronically but are concerned about 

information leakage may be more likely 

to use Communication Protocol 

Systems, particularly RFQs, as opposed 

to ATSs. One study finds that corporate 

bond ATSs may be most utilized for 

smaller transactions in investment-grade 

bonds, which are less vulnerable to 

information asymmetry, and transaction 

in bonds that have (all else being equal) 

experienced a recent decrease in 

secondary market trading volume, for 

which search costs may be high.897

As shown in Table VIII.6, the majority 

(65.4 percent) of non-voice trading in 

corporate bonds is conducted on RFQs. 

About one fourth of RFQ volume is 

anonymous, and, while the majority of 

corporate bond trading volume on RFQs 

is disclosed, even participants on 

disclosed RFQs often have greater 

flexibility over the extent to which they 

reveal their trading interest, for example 

by limiting how many entities can view 

their trading interest or by refraining 

from responding to a quote request.898

RFQs may also help facilitate a wider 

variety of functionalities that market 

bond participants find particularly 

useful, such as portfolio trading and net 

spotting. Automated executions and 

limited negotiation possibilities may 

make these functionalities more difficult 

to implement on many ATSs. 


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899See Hendershott, T., & Madhavan, A. (2015). 

Click or call? Auction versus search in the overthe-counter market. The Journal of Finance, 70(1), 

419–447. 900See Bloomberg Letter at 9 and10, citing 

Treasury Report. 901See supra Section VIII.B.2.d. 

902See Tradeweb Letter at 6. 

903See Municipal Securities Rulemaking Board, 

Muni Facts, available at https://www.msrb.org/ 

News-and-Events/Muni-Facts. 

904See Municipal Securities Rulemaking Board, 

Municipal Trade Statistics, available at https://

emma.msrb.org/MunicipalTradeStatistics/ 

ByTradeCharacteristic.aspx. 

905See ‘‘Trends in Municipal Bond Ownership’’ 

(2021), Municipal Securities Rulemaking Board, 

available at https://www.msrb.org/Market-Topics/ 

Other-Market-Topics. Note that this source groups 

together households and nonprofit organizations. 

One commenter pointed out the role of registered 

investment companies (‘‘funds’’) in this market, 

stating that funds held 29 percent of municipal 

bonds outstanding as of year-end 2019. See ICI 

Letter at 1–2. 

906See Schultz, P. (2012). The market for new 

issues of municipal bonds: The roles of 

transparency and limited access to retail investors. 

Journal of Financial Economics, 106(3), 492–512. 

907See Bessembinder, H., Spatt, C., & 

Venkataraman, K. (2020). A survey of the 

microstructure of fixed-income markets. Journal of 

Financial and Quantitative Analysis, 55(1), 1–45. 

908See ‘‘2021 Municipal Market Trading Update,’’ 

(2021), Municipal Securities Rulemaking Board, 

available at https://www.msrb.org/Market-Topics/ 

Reports. 

TABLE VIII.6—CORPORATE DEBT SECURITIES AND DOLLAR VOLUME SHARE BY TRADING PROTOCOL

Anonymous RFQ Disclosed 

RFQ Auction Limit order book 

Non-displayed 

venue a

Portfolio 

trading Stream axes b Voice 

4.8 ................................ 13.9 3.0 2.4 0.1 2.2 2.2 71.4 

This table reports volume share by trading protocol type in the market for corporate debt securities. Market Share (%) is the measure of the dollar volume as a percent of total par dollar volume. Data is based on Coalition Greenwich’s Greenwich MarketView data from April 2021 

through September 2021. Voice market share is calculated as a remainder of total market volume after accounting for electronic protocols 

volume reported to Coalition Greenwich. 

a Non-displayed venues are referred to as ‘‘dark pools’’ in the Coalition Greenwich’s Greenwich MarketView data. 

b Coalition Greenwich’s Greenwich MarketView refers to this data value as ‘‘Stream/Click-to-Engage.’’ 

Customers may prefer other methods 

such as bilateral voice trading because 

they wish to transact in less liquid 

bonds that may require more 

intermediation to find a counterparty, 

despite the possibility that the lack of 

price competition may lead to higher 

trading costs. One academic study 

shows that the movement of corporate 

bond trading volume from voice trading 

to an RFQ-type protocol system mainly 

reduced transaction costs for the most 

liquid securities.899 However, one 

commenter referenced that the 

electronification of manual trading 

methods, while improving operational 

efficiencies, does not fundamentally 

change liquidity in the corporate bond 

market as the same intermediaries and 

interactions between dealers and 

customers are still involved.900

Similarly to the market for 

government securities, the Commission 

preliminarily believes that the 

differences in regulatory regime 

between ATSs and other trading 

methods, including Communication 

Protocol Systems such as RFQs and 

others, can lead to an uneven 

competitive landscape and adversely 

impact the potential for robust 

competition in the market for corporate 

debt securities.901 Specifically, the lack 

of public disclosure about the 

operations and potential conflicts of 

interest of Communication Protocol 

Systems trading in corporate bonds 

might hinder competition among these 

trading systems and between 

Communication Protocol Systems and 

ATSs in the market for corporate bond 

trading services. 

The fact that ATSs are subject to 

numerous regulatory requirements that 

Communication Protocol Systems, 

which may perform a similar market 

place function, are not subject to may 

place ATSs at competitive disadvantage 

compared to Communication Protocol 

Systems as a result of the associated 

compliance costs and potentially higher 

barriers to entry. Furthermore, one 

commenter stated that the different 

regulatory treatment of fixed income 

trading platforms, with some platforms 

regulated as ATSs, some regulated as 

broker-dealers, and others not regulated 

at all, leaves room for regulatory 

arbitrage.902

4. Current State of the Municipal 

Securities Market 

The market for municipal securities 

(‘‘municipal bonds’’) represents another 

important part of the fixed income 

market. Daily trading volumes in the 

municipal bond market averaged around 

$12.4 billion during the 2020 calendar 

year.903 Average trade sizes in this 

market tend to be smaller than in other 

fixed income markets: In September 

2021, 81 percent of trades were for 

$100,000 or less, reflecting the higher 

presence of retail investors in this 

market.904

The relatively large role of retail 

investors in the market for municipal 

bonds represents one important way in 

which this market differs from the 

markets for government securities and 

corporate bonds. Unlike in the markets 

for other fixed income securities, which 

are mostly owned by institutional 

investors, retail investors play a 

prominent role in the ownership of 

municipal bonds, with 45.2 percent of 

municipal bonds held by households 

and nonprofits as of 2020.905 This is 

largely due to the tax-exempt status of 

most municipal bonds, which makes 

them attractive to households but less 

attractive to institutional investors such 

as pension funds, whose holdings are 

already tax-deferred or tax exempt. 

Municipal bond markets also tend to be 

highly localized, as investors that are 

located in geographic proximity to an 

issuer are more likely to be informed 

about that issuer, and tax benefits are 

often conferred on investors that are 

located in the same state as the 

issuer.906

Households tend to be buy-and-hold 

investors, which may contribute to 

overall low liquidity levels in the 

secondary market for municipal bonds. 

In 2018, less than one percent of 

outstanding municipal bonds traded on 

a typical day, and, as in the corporate 

bond market, liquidity is mostly 

concentrated in newly-issued bonds.907

Furthermore, there is evidence that 

trading in municipal bonds has declined 

in recent years, as secondary market 

trading volume declined by about 19 

percent between 2019 and 2021.908

The market for municipal bonds is 

highly heterogeneous, and perhaps even 

more fragmented than the market for 

corporate bonds. In addition to a wide 

diversity of bond characteristics, 

including maturity, tax status, and 

coupon type, there are more than 50,000 

different issuers in the municipal bond 

market, including state and local 

governments, towns, cities, and 

counties, who as of 2020 have issued 


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909See Municipal Securities Rulemaking Board, 

Muni Facts, available at https://www.msrb.org/ 

News-and-Events/Muni-Facts. This is compared to 

the corporate bond market, in which there are 

around 43,000 unique securities with a total market 

size around $10.6 trillion. See also SIFMA letter at 

9 (stating that there are 50,000 issuers of municipal 

securities and one million unique municipal bonds, 

compared to 30,000 unique corporate bonds). 

910See ‘‘Analysis of Municipal Securities PreTrade Data from Alternative Trading Systems’’ 

(2018), Municipal Securities Rulemaking Board, 

available at https://www.sec.gov/spotlight/fixedincome-advisory-committee/msrb-staff-analysis-ofmunicipal-securities-pre-trade-data.pdf. 

911See Li, D., & Schu ̈rhoff, N. (2019). Dealer 

networks. The Journal of Finance, 74(1), 91–144. 

912See Schultz, P. (2013). State taxes, limits to 

arbitrage and differences in municipal bond yields 

across states. Unpublished working paper. 

University of Notre Dame. 

913See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. See also 

Letter from Edward J. Sisk, Chair, Municipal 

Securities Rulemaking Board, dated March 1, 2021 

(‘‘MSRB Letter’’), stating that MSRB trade data 

shows that ATSs were involved in 21 percent of all 

trades and 55 percent of all inter-dealer trades in 

the municipal bond market. 

914The commenter also stated that the median 

size of trades reported as occurring on an ATS was 

$25,000 and that, for trades of $100,000 or less, 

ATSs accounted for 24 percent of all trades and 59 

percent of all inter-dealer trades. See MSRB Letter 

at 2–3. 

915See SIFMA letter at 11. 

916See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. 

917See Craig, L., Kim, A., & Woo, S.W. (2018). 

Pre-Trade Information in the Municipal Bond 

Market. DERA White Paper, available at https://

www.sec.gov/files/DERA_WP_Pre-trade_

Information_in_the_Municipal_Bond_Market.pdf. 

918See id. 

919See id. The paper defines institutional-size 

trades as trades greater than $100,000, and retailsize trades as trades less than $100,000, citing 

Harris and Piwowar (2006), who use trade size of 

$100,000 to distinguish retail- and institutional-size 

customer trades. See Harris, L.E., & Piwowar, M.S. 

(2006). Secondary trading costs in the municipal 

bond market. The Journal of Finance, 61(3), 1361– 

1397. 

920See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. 

921See ‘‘Municipal Securities Pre-Trade Market 

Activity: What Has Changed Since 2015?’’ (2020), 

Municipal Securities Rulemaking Board, available 

at https://www.msrb.org/Market-Topics/∼/ 

link.aspx?_

id=9089AC4BA1F144B388D090177FADCDD6&_

z=z. 922See supra note 866 and Section VIII.B.2.a.ii for 

a discussion of the impact of some of the elements 

of Regulation ATS. 923An ATS trading in municipal debt securities 

is subject to the Fair Access Rule if, during at least 

four of the preceding six months, the ATS had five 

percent or more of the average daily volume in 

municipal debt securities traded in the United 

States. See 17 CFR 242.301(b)(5)(i) and https://

www.sec.gov/tm/faq-regulation-ats-fair-access-rule. 

See supra Section VIII.B.2.a.ii for a discussion of 

the impact of the Fair Access Rule. 

924See 17 CFR 242.301(b)(6) and supra note 157 

and corresponding text. Rule 301(b)(6) currently 

applies to an ATS that trades only municipal debt 

securities with 20 percent or more of the average 

daily volume traded in the United States during at 

least four of the preceding six calendar months. See 

supra Section VIII.B.3.a for a discussion of the 

current impact of being subjected to Rule 301(b)(6). 

925The MSRB is an SRO that is overseen by the 

SEC. See Municipal Securities Rulemaking Board, 

The Role and Jurisdiction of the MSRB, available 

at https://www.msrb.org/About-MSRB/About-theMSRB. 

926See MSRB Rule G–14 requiring brokers, 

dealers and municipal securities dealers (‘‘dealers’’) 

to report transactions in municipal securities. The 

following transactions in municipal debt securities 

are exempt from reporting requirements: 

Transactions in securities without assigned CUSIP 

numbers; transactions in Municipal Fund 

Securities; and inter-dealer transactions for 

principal movement of securities between dealers 

that are not inter-dealer transactions eligible for 

comparison in a clearing agency registered with the 

Commission. Dealers are exempt from reporting if 

they do not affect any transactions in municipal 

securities or if they only deal in exempt 

transactions. 

around one million unique bonds 

valuing $3.9 trillion.909

The market for municipal bonds is 

largely an OTC market, in which 

investors place orders with dealers who 

execute these orders by either 

committing their own capital (via 

principal trades) or by searching the 

market for counterparties (via riskless 

principal trades or agency trades).910

Academic research of regulatory data 

has shown that the interdealer market in 

municipal bonds has a decentralized 

network structure composed of between 

10 to 30 central dealers and more than 

2,000 periphery dealers.911 Further 

research shows that the highly 

geographically localized nature of this 

market can limit competition between 

dealers.912

a. ATSs in the Market for Municipal 

Securities 

ATSs play an increasingly important 

role in the municipal bond market. 

Between August 2016 and April 2021, 

an estimated 56.4 percent of municipal 

bond interdealer trades (26 percent in 

terms of dollar volume) were conducted 

via ATSs.913 One commenter stated that, 

in 2020, more than 1.7 million trades 

were reported to the MSRB as being 

executed on an ATS, 1.55 million of 

which were for $100,000 or less, 

showing that ATSs are of particular 

significance for individual investors.914

The Commission understands that there 

are currently 6 reporting ATSs trading 

in municipal securities. One commenter 

stated that tremendous consolidation in 

the municipal securities ATS market 

has occurred over time, such that there 

are only a few remaining ATSs with 

significant trading in municipal 

bonds.915

As mentioned in the introduction to 

Section VIII.B.4 above, municipal bond 

owners are typically retail investors. 

Retail investors are unlikely to subscribe 

directly to ATSs, and so almost all 

trades executed on ATSs are from dealer 

quotes.916 A DERA white paper found 

that, during a three-month period in 

2014, 62 percent of trades on ATSs were 

between dealers and customers, 

including both retail and institutional 

investors, while the remainder were 

interdealer trades.917 The white paper 

also found that large broker-dealers are 

more likely to post quotes on ATSs than 

small broker-dealers.918

In terms of available protocols, 

municipal bond ATSs offer LOB-based 

protocols, but many also offer protocols 

similar to RFQs. For the latter, quote 

information is only available to a 

limited subset of ATS participants. This 

shortage of public pre-trade information 

may make it more difficult for retail 

investors in this market, who may not 

have access to quote information, to 

ensure that they are getting the best 

prices; in fact, the DERA white paper 

found that smaller retail-sized 

municipal bond trades tend to receive 

worse prices than large trades.919

80 percent of all quoted municipal 

bonds have only a single quote offered 

by a single broker at any given point in 

time, which corresponds to the 

heterogeneous nature of this market.920

Another reason why municipal bonds 

tend to be thinly quoted may be the 

difficulty in shorting municipal bonds, 

as Internal Revenue Service (IRS) rules 

regulating the shorting of tax-exempt 

securities and difficulties in locating 

securities to borrow makes shorting in 

this market costly.921 A dealer likely 

will not quote in a bond unless it 

already owns that bond. 

ATSs that trade in municipal bonds 

face many of the same regulatory 

requirements as those that trade in 

corporate bonds, including complying 

with Regulation ATS.922 This includes 

requirements that ATSs with significant 

volume in municipal securities markets 

must comply with the Fair Access 

Rule 923 and with Rule 301(b)(6) of 

Regulation ATS (‘‘Capacity, Integrity, 

and Security Rule’’).924

Broker-dealers operating in the 

municipal bond market must be 

registered with the Municipal Securities 

Rulemaking Board (MSRB), which 

creates rules governing their conduct 

and transparency.925 Since 2005, all 

MSRB-registered dealers must report 

municipal bond trades within 15 

minutes of the time of execution to the 

MSRB’s Real-Time Transaction 

Reporting System (RTRS).926 Since 


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927See MSRB Letter at 3. One commenter stated 

that a difference between ATS trade reporting 

requirements between FINRA and MSRB is that, 

while the MSRB, like FINRA, requires an ATS flag 

for reports to their Real-time Trade Reporting 

System, this only applies to interdealer trades 

conducted on ATSs, not trades with customers. See 

BDA Letter at 3. 

928See Regulatory Notice 2015–07, Municipal 

Securities Rulemaking Board, May 26, 2015, 

available at https://www.msrb.org/Rules-andInterpretations/RegulatoryNotices?type=All&filter=2015. 

929See id. 

930See Municipal Securities Rulemaking Board, 

MSRB Rule G–43. 

931See SIFMA, ‘‘The Role of Municipal Securities 

Broker’s Brokers in the Municipal Markets,’’ 2017. 

932See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. 

933See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. 

934 In this respect they are similar to 

Communication Protocol Systems in the market for 

corporate debt. See supra Sections VIII.B.3.b and 

VIII.B.3.d for a discussion of the impact of not being 

subject to these regulations. 

935See Regulatory Notice 2015–07, Municipal 

Securities Rulemaking Board, May 26, 2015, 

available at https://www.msrb.org/Rules-andInterpretations/RegulatoryNotices?type=All&filter=2015. 

936One commenter estimated only 15 percent of 

daily dollar trading volume in municipal bonds is 

executed electronically. See BDA Letter at 1. 

937See Schultz, P. (2012). The market for new 

issues of municipal bonds: The roles of 

transparency and limited access to retail investors. 

Journal of Financial Economics, 106(3), 492–512. 

938See Harris, L.E., & Piwowar, M.S. (2006). 

Secondary trading costs in the municipal bond 

market. The Journal of Finance, 61(3), 1361–1397. 

939See ‘‘Transaction Costs for Customer Trades in 

the Municipal Bond Market: What is Driving the 

Decline?’’ (2018), Municipal Securities Rulemaking 

Board, available at https://www.msrb.org/MarketTopics/∼/link.aspx?_

id=9089AC4BA1F144B388D090177FADCDD6&_

z=z. 

940See Schultz, P. (2012). The market for new 

issues of municipal bonds: The roles of 

transparency and limited access to retail investors. 

Journal of Financial Economics, 106(3), 492–512. 

941See ‘‘Characteristics of Municipal Securities 

Trading on Alternative Trading Systems and 

Broker’s Broker Platforms’’ (2021), Municipal 

Securities Rulemaking Board, available at https://

www.msrb.org/Market-Topics/Reports. 

942See ‘‘Municipal Securities Pre-Trade Market 

Activity: What Has Changed Since 2015?’’ (2020), 

Municipal Securities Rulemaking Board, available 

at https://www.msrb.org/Market-Topics/∼/ 

link.aspx?_

id=9089AC4BA1F144B388D090177FADCDD6&_

z=z. 

2016, dealer-reported trades to the 

MSRB have been required to include an 

indicator to identify trades that have 

been executed on an ATS.927 Trades 

that take place on an ATS are required 

to be reported both by the member 

dealers that transact with the ATS, as 

well as by the ATS if that ATS has taken 

a principal position between the buyer 

and seller. If the ATS only facilitates the 

connection between the buyer and seller 

but does not take a principal or agency 

position, it has no reporting requirement 

under MSRB rules.928

b. Communication Protocol Systems in 

the Market for Municipal Securities 

At least 43.6 percent of interdealer 

trades (74.1 percent in terms of dollar 

volume) in the municipal bond market 

take place via trading methods that are 

not ATSs, including 38.3 percent direct 

dealer-to-dealer and 5.3 percent on 

broker’s broker platforms.929 At least 

some of these transaction are likely to 

take place via Communication Protocol 

Systems. The Commission estimates 

that there are currently 3 

Communication Protocol Systems 

operating in the municipal debt market 

that may meet the definition of 

exchange under the proposed changes to 

Exchange Act Rule 3b–16. 

Of particular interest in this context 

are broker’s broker platforms. A broker’s 

broker is defined by the MSRB as a 

dealer that principally effects 

transactions for other dealers or that 

holds itself out as a broker’s broker.930

The broker’s broker does not participate 

in the decision to buy or sell and does 

not exercise discretion as to the price at 

which a transaction is executed or 

determine the timing of a trade.931

While broker’s brokers traditionally 

conducted their activities via bilateral 

means such as voice trading, they have 

increasingly made use of electronic 

systems.932 Most electronic broker’s 

broker platforms use only quote 

solicitation protocols and do not post 

quotes; those that do post quotes 

typically are registered as an ATS with 

the SEC.933 However, only about 1.6 

percent of all inter-dealer trades take 

place on broker’s broker platforms that 

are registered as ATSs. 

The Commission estimates that 1 

Communication Protocol System trading 

in municipal bonds is not currently 

operated by a registered broker-dealer. 

This system is not subject to exchange 

registration or the requirements of 

Regulation ATS, and is not subject to 

FINRA operational regulatory reporting 

requirements.934

If the Communication Protocol 

System only facilitates the connection 

between the buyer and seller but does 

not take a principal or agency position 

to the transaction, the Communication 

Protocol System may not currently be 

required to report post-trade data under 

MSRB rules.935 However, trades that 

take place on a Communication Protocol 

System will currently be reported to 

MSRB’s RTRS if at least one party to the 

transaction is a municipal bond dealer. 

c. Other Methods of Trading in the 

Market for Municipal Securities 

Similar to other fixed income markets, 

the market for municipal securities has 

traditionally relied on bilateral voice 

trading.936 As mentioned above in the 

introduction to Section VIII.B.4, due to 

the particularly fragmented and 

localized nature of the municipal bond 

market, competition between individual 

dealers may be limited.937 Therefore, it 

is likely that the lack of pre-trade price 

transparency in a market traditionally 

dominated by bilateral voice trading has 

been particularly costly for municipal 

bond customers, who lack both price 

information and bargaining power when 

negotiating prices with their dealers 

over the phone. In fact, transaction costs 

in the municipal bond market have 

typically been large compared to other 

markets, and academic studies have 

indeed attributed these large transaction 

costs to a lack of price transparency and 

subsequent information asymmetry 

between dealers and customers.938 One 

MSRB report found that technological 

advancements in this market and the 

movement away from voice trading and 

towards electronic trading have helped 

reduce transaction costs for dealercustomer trades by 51 percent between 

2005 and 2018.939

Transactions that take place via 

bilateral negotiations will only be 

reported to MSRB’s RTRS if at least one 

party to the transaction is a MSRBmember dealer. 

d. Competition for Municipal Securities 

Trading Services 

The trading of municipal debt 

securities takes place through a variety 

of different methods, including 

electronic protocols through ATSs and 

Communication Protocol Systems, as 

well as more traditional methods such 

as telephone calls. These various 

methods compete with one another in 

attracting order flow. 

Due to the buy-and-hold nature of 

municipal bond trading, usually 

brokers’ main task is to locate investors 

that are willing to buy new issues.940

ATSs may help to reduce search costs. 

Indeed, one study finds that dealers are 

more likely access ATS systems for 

trades that are more difficult to price 

and that face substantial search costs, 

such as smaller-sized trades and trades 

involving municipal bonds with 

complex features.941 Accordingly, 90 

percent of quotes on municipal bond 

ATSs are offer quotes.942 On the other 

hand, the vast majority of RFQs on 

municipal bond ATSs are requests for 


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943See id. 

944See id. 

945See Section VIII.B.3. 

946See ICI Letter at 6–7. 

947See Craig, L., Kim, A., & Woo, S.W. (2018). 

Pre-Trade Information in the Municipal Bond 

Market. DERA White Paper, available at https://

www.sec.gov/files/DERA_WP_Pre-trade_

Information_in_the_Municipal_Bond_Market.pdf. 

948See ‘‘Market capitalization of listed domestic 

companies (current US$)—United States,’’ The 

World Bank, available at https://

data.worldbank.org/indicator/ 

CM.MKT.LCAP.CD?locations=US. 

949See Regulation NMS Rules 600(b)(46) and (47) 

(17 CFR 242.600(b)(46) and (47)). 

950See https://www.finra.org/filing-reporting/ 

oats/oats-reportable-securities-list. This includes 

NYSE Arca, NYSE MKT, BZX Exchange (BATS), 

NASDAQ, and New York Stock Exchange (NYSE). 

951See CBOE Historical Market Volume Data, 

available at https://www.cboe.com/us/equities/ 

market_statistics/historical_market_volume/ 

market_history_monthly_2019.csv. The statistic is 

calculated by summing the ‘‘Total Notional’’ value 

for all entries in September 2021, and then dividing 

this sum by the number of trading days in 

September 2021 (21). 

952There are 34 NMS Stock ATSs operating with 

a Form ATS–N on file. See Form ATS–N Filings 

and Information, available at https://www.sec.gov/ 

divisions/marketreg/form-ats-n-filings.htm. 

Wholesalers are broker-dealers to whom retail 

brokers send their clients’ orders to be filled 

internally (as opposed to sending the trade orders 

to an exchange). Typically, a wholesaler promises 

to provide price improvement relative to the NBBO 

for filled orders. Wholesalers often pay retail 

brokers for sending their clients’ orders to the 

wholesaler. 

953This discussion does not address other types 

of exchange-traded products that are not registered 

under the 1940 Act, such as exchange-traded 

commodity funds or exchange-traded notes. See 

https://www.sec.gov/investor/alerts/etfs.pdf. It is 

estimated that at year-end 2020, less than 3% of net 

assets were held in ETFs that are not registered with 

or regulated by the SEC under the Investment 

Company Act of 1940; see https://

www.icifactbook.org/21_fb_ch4.html. 

954See https://www.icifactbook.org/21_fb_

ch4.html. 

955See id. 

956See id. 

957The Commission estimates that quoted OTC 

securities were valued at approximately $32.3 

trillion in 2019, with 94.7 percent of the total 

market capitalization coming from companies that 

also have securities listed on public foreign 

exchanges. 

958See https://www.finra.org/filing-reporting/ 

oats/oats-reportable-securities-list/. 

959See ‘‘Unraveling the Mystery of Over-theCounter Trading’’ (2016), FINRA, available at 

https://www.finra.org/investors/insights/unravelingmystery-over-counter-trading. 

960See SEC Release No. 34–87115, ‘‘Publication 

or Submission of Quotations Without Specified 

Information’’ Proposed Rule and Concept Release, 

available at https://www.sec.gov/rules/proposed/ 

2019/34-87115.pdf. 

bids, reflecting that RFQ protocols are 

more likely to be used when customers 

want to sell.943

Meanwhile, empirical results show 

that broker’s broker platforms, which 

may have functionalities similar to 

Communication Protocol Systems, are 

more likely to be used for large-sized 

trades, and less likely to be used for 

municipal bonds with complex 

features.944 The study implied that this 

is because the lower price transparency 

on many broker’s broker platforms, 

which do not post quotes, makes these 

systems less useful for trading securities 

that are difficult to price. 

Meanwhile, similar to the case of 

corporate bond markets, RFQs may 

instead be preferred by traders that want 

to limit information leakage, such as in 

case of large-sized trades.945

Furthermore, as in the market for 

corporate bonds, one commenter stated 

that the majority of municipal bonds are 

not liquid enough to support order book 

trading.946

More generally, for the reasons 

described in Section VIII.B.4.c, the 

movement of municipal bond trading 

onto electronic platforms has helped to 

reduce transaction costs. Specifically, 

an increase in transparency in this 

market has particularly been beneficial 

for retail investors who otherwise have 

little access to municipal bond 

information.947

The Commission preliminarily 

believes that, as in other fixed income 

markets, the differences in regulatory 

regime between ATSs and other trading 

methods can lead to an uneven 

competitive landscape and adversely 

impact the potential for robust 

competition in the market for municipal 

debt securities. 

5. Current State of the Equity Market 

The market for U.S. equity securities 

represents one of the largest U.S. and 

global financial markets. As of 2020, the 

capitalization of the U.S. equity market 

was estimated to be more than $40 

trillion.948 The market for equity trading 

services is served by exchanges, ATSs, 

other trading systems, such as OTC 

systems, and other liquidity providers 

(such as internalizers). The type of 

trading system on which an equity 

security is eligible to trade will depend 

on the equity security’s characteristics, 

including whether the issuing company 

periodically reports its financial 

information and whether the security is 

exchange-listed and/or registered with 

the SEC. U.S. equity securities contain 

NMS stocks (including ETFs), OTC 

securities, and restricted stocks, in 

addition to other types of securities. 

a. Categorization and Trading 

Characteristics of U.S. Equity Securities 

The largest and most liquid part of the 

U.S. equity market consists of national 

market system (NMS) stocks. In general, 

NMS stocks are exchange-listed equity 

securities for which transactions are 

reported pursuant to an effective 

transaction reporting plan.949 As of 

August 2021, there were around 5,669 

equities listed across five exchanges.950

In September 2021, the average daily 

trading volume in NMS stocks across all 

market centers was $545 billion.951 The 

market for trading services in NMS 

stocks consists of 16 national securities 

exchanges, and 34 ATSs, as well as 

other off-exchange trading venues, 

including broker-dealer internalizers 

and wholesalers.952

One subset of NMS stocks that has 

been increasing in popularity in recent 

years includes exchange-traded funds 

(ETFs). ETFs are securities that are 

registered as open-end investment 

companies or unit investment trusts 

under the Investment Company Act of 

1940 (the ‘‘1940 Act’’),953 that typically 

track financial instruments or bundles 

of financial instruments (such as an 

index), and are listed on national 

securities exchanges. ETFs are 

investment vehicles that issue shares 

that can be bought or sold throughout 

the day on securities exchanges in the 

secondary market at a marketdetermined price. The ETF market has 

seen significant growth in the past 

decade, as the number of ETFs nearly 

doubled from 1,134 to 2,204 and net 

assets more than quintupled, from $939 

billion to more than $5.3 trillion.954 ETF 

secondary market trading made up 26 

percent of total daily U.S. stock market 

trading on average in 2020.955 At the 

same time, ETF liquidity may be highly 

concentrated, with studies estimating 

that more than 85 percent of all ETF 

value traded is concentrated in around 

150 ETFs, or around five percent of all 

ETFs.956 As with other NMS securities, 

ETFs can be traded on exchanges and at 

off-exchange venues. 

There is also a significant market for 

stocks that are not listed on a national 

securities exchange, which are often 

referred to as over-the-counter (OTC) 

equities.957 As of August 2021, there 

were 8,777 unlisted stocks that fell 

under FINRA reporting requirements.958

Unlike NMS stocks, which may trade 

on- or off-exchange, OTC equities may 

only trade off-exchange, on ATSs or 

through Communication Protocol 

Systems for example.959 Liquidity in 

OTC equities can be limited: A 2019 

Commission analysis estimated that 

only 44 percent of quoted OTC equities 

are traded per day, and two percent did 

not trade at all during the 2019 calendar 

year.960

OTC equities tend to be held by small 

investors. One academic study found 

that institutions only held about 26 

percent of OTC stocks, as compared to 

71 percent of listed stocks, implying 


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961See Andrew Ang et al., Asset Pricing in the 

Dark: The Cross-Section of OTC Stocks, 26 Rev. Fin. 

Studs. 2985–3028 (2013). 

962See ‘‘Unraveling the Mystery of Over-theCounter Trading’’ (2016), FINRA, available at 

https://www.finra.org/investors/insights/unravelingmystery-over-counter-trading. 

963See https://www.sec.gov/reportspubs/investorpublications/investorpubsmicrocapstockhtm.html. 

Note that, as discussed in infra Section VIII.5.d, 

recent amendments to 17 CFR 240.15c2–11 (Rule 

15c2–11 of the Exchange Act) adopted in September 

2020 limit public quoting in OTC equities for which 

current financial statement information is not 

publically available. 

964Unregistered securities typically avoid SEC 

registration through one of two exemptions: 

Regulation D offerings, which are mostly limited to 

accredited (i.e., institutional or high-net-worth) 

investors, and Regulation A offerings, which are 

open to unaccredited investors. 

965See https://www.sec.gov/reportspubs/investorpublications/investorpubsrule144htm.html. These 

conditions include a minimum holding period, the 

availability of up-to-date information about the 

issuing company, and certain limits to the size of 

the trade. In addition, notice of trades by affiliates 

are required to be filed with the SEC, and the trades 

themselves must be handled by a broker as a 

routine transaction (e.g., no special commissions). 

966See, e.g., Private Equity Exchange (http://

peqx.com/); Nasdaq Private Market (https://

www.nasdaq.com/secondmarket). 

967See https://www.finra.org/filing-reporting/otctransparency/ats-quarterly-statistics. 

968See Market Data Infrastructure Final Rule, 

Release No. 90610 (Dec. 9, 2020), available at 

https://www.sec.gov/rules/final/2020/34-90610.pdf. 

969See SEC Release No. 34–83663, ‘‘Regulation of 

NMS Stock Alternative Trading Systems,’’ available 

at https://www.sec.gov/rules/final/2018/34- 

83663.pdf. 

970An ATS trading in NMS stock is subject to 

Regulation SCI if, during at least four of the 

preceding six months, the ATS had five percent or 

more in any single NMS stock, and 0.25 percent or 

more in all NMS stocks, of the average daily dollar 

volume reported by applicable effective transaction 

reporting plans, or one percent or more, in all NMS 

stocks, of the average daily dollar volume reported 

by applicable effective transaction reporting plans. 

See https://www.sec.gov/divisions/marketreg/ 

regulation-sci-faq.shtml. See supra Section 

VIII.B.2.a.ii for a discussion of the impact of 

Regulation SCI. 

971An ATS trading in NMS stock is subject to the 

Fair Access Rule if, during at least four of the 

preceding six months, the ATS had five percent or 

more of the average daily volume in an NMS stock 

reported by an effective transaction reporting plan. 

See 17 CFR 242.301(b)(5)(i) and https://

www.sec.gov/tm/faq-regulation-ats-fair-access-rule. 

See supra Section VIII.B.2.a.ii for a discussion of 

the impact of the Fair Access Rule. 

972These include FINRA/Nasdaq TRF Carteret, 

FINRA/Nasdaq TRF Chicago, and FINRA/NYSE 

TRF. See https://www.finra.org/filing-reporting/trf/ 

trf-exchange-participants. 

973See https://www.finra.org/filing-reporting/ 

market-transparency-reporting/trade-reporting-faq. 

Certain transactions are exempt from FINRA TRF 

reporting requirements; see https://www.finra.org/ 

filing-reporting/market-transparency-reporting/ 

trade-reporting-faq#500 and FINRA Rules 

6282(f)(1), 6380A(e)(1), 6380B(e)(1), and 6622(e)(1). 

974The National Market System Plan Governing 

the Consolidated Audit Trail (CAT NMS Plan) is a 

national market system plan approved by the 

Commission pursuant to Section 11A of the 

Exchange Act and the rules and regulations 

thereunder. See Securities Exchange Act Release 

No. 79318 (November 15, 2016), 81 FR 84696 

(November 23, 2016). The CAT NMS Plan and 

subsequent amendments to the Plan are available at 

https://catnmsplan.com/about-cat/cat-nms-plan. 

Section 1.1 of the CAT NMS Plan defines an 

Industry Member as a member of a national 

securities exchange or a member of a national 

securities association. ‘‘CAT Reporters’’ include 

national securities exchanges, national securities 

associations and Industry Members that are 

required to record and report information to the 

Central Repository pursuant to SEC Rule 613(c). 

975Section 1.1 of the CAT NMS Plan defines the 

term ‘‘order,’’ with respect to Eligible Securities, as 

having the meaning set forth in 17 CFR 242.613(j)(8) 

(SEC Rule 613(j)(8)). SEC Rule 613(j)(8) defines an 

‘‘order’’ as any order received by a member of a 

national securities exchange or national securities 

association from any person; any order originated 

by a member of a national securities exchange or 

national securities association; or any bid or offer. 

976Section 1.1 of the CAT NMS Plan defines 

Eligible Securities as’’ (a) all NMS Securities and (b) 

all OTC Equity Securities,’’ where OTC Equity 

Securities are defined as any equity security, other 

than an NMS Security, subject to prompt last sale 

reporting rules of a registered national securities 

association and reported to one of such 

Continued 

that most owners of OTC stocks are 

retail investors.961 A study found that 

retail investors may be attracted to the 

low price of OTC equities, which 

include equities that trade under $5 per 

share (so-called ‘‘penny stocks’’).962

Transparency in the market for OTC 

securities can be limited. While some 

OTC equity trading systems require 

issuers to register their securities with 

the SEC and/or periodically file their 

financial statements (either with the 

SEC or with the trading venue), other 

systems may trade in OTC equities 

without any reporting standards or 

eligibility requirements.963 The market 

for OTC equities is largely regulated by 

FINRA under Section 15A of the 

Securities Exchange Act of 1934, which 

requires FINRA to, among other things, 

establish rules governing the form and 

content of quotations for securities sold 

otherwise than on an exchange. 

One particular type of unlisted 

securities is referred to as restricted (or 

sometimes ‘‘control’’) stocks. Restricted 

stocks are either unregistered shares 

issued by public companies in private 

placements 964 or shares (both registered 

and unregistered) held by an issuer or 

its affiliates (such as insiders and large 

shareholders). The secondary market for 

restricted stocks is governed by SEC 

Rule 144, and allows restricted stocks to 

be sold to the public if several 

conditions are met.965 While 

investments in restricted stocks are 

typically limited to only accredited 

investors, new SEC rules adopted in 

2015 under Section 401 of the Jumpstart 

Our Business Startups (JOBS) Act, often 

referred to as ‘‘Regulation A+,’’ 

expanded the ability for non-accredited 

investors to trade in certain unregistered 

equities. Eligible restricted stocks can be 

traded on a number of electronic 

platforms that specialize in the 

secondary market for restricted shares, 

as well as through broker-dealers.966

b. ATSs in the Equity Market 

As mentioned above, NMS stocks that 

are listed on national securities 

exchanges may trade both on exchanges 

and at off-exchange trading venues, 

including on ATSs. Currently there are 

34 NMS Stock ATSs, collectively 

handling an average of around 453 

million trades during Q3 2021.967 Since 

the adoption of Regulation NMS in 

2005, the market for trading services has 

become more fragmented, and the 

proportion of NMS stocks trading offexchange has increased. For example, as 

of July 2020, NMS Stock ATSs 

comprised approximately 10 percent of 

consolidated dollar volume, and other 

off-exchange volume totaled 

approximately 23 percent of 

consolidated dollar volume.968

NMS Stock ATSs generally operate as 

non-displayed venues, which do not 

display quotes. Traditionally, market 

participants that used non-displayed 

venues to trade listed stocks have been 

large institutional investors seeking to 

execute block trades. However, average 

trade sizes in many ATSs have shrunk 

from block-size trades to smaller trade 

sizes that match those of traditional 

exchanges. In 2018, the Commission 

found that, while eight NMS Stock 

ATSs had average trade sizes larger than 

10,000 shares, the vast majority had 

average trade sizes between 100 and 460 

shares, which is similar to average trade 

sizes on the national securities 

exchanges.969 One feature, among 

others, that may attract some market 

participants to non-displayed venues is 

their lower information leakage as 

compared to trades on exchanges. 

NMS Stock ATSs are subject to 

Regulation ATS and are also required to 

file and publicly disclose Form ATS–N. 

Furthermore, those with significant 

volume are required to comply with the 

requirements of Regulation SCI 970 and 

the Fair Access Rule.971 Trades in NMS 

stocks that are transacted off-exchange, 

which includes transactions on ATSs, 

are required to be reported to one of 

three FINRA Trade Reporting Facilities 

(TRF).972 If the execution is handled by 

an ATS, then in most cases the ATS has 

the reporting obligation and must report 

itself as a counterparty to both sides of 

the trade.973

Furthermore, national securities 

exchanges, national securities 

associations and Industry Members 974

that receive or originate orders 975 in 

Eligible Securities 976 are required to 


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association’s equity trade reporting facilities.’’ This 

includes both OTC Equity Securities and 

transactions in Restricted Equity Securities effected 

pursuant to Securities Act Rule 144A. See CAT 

NMS Plan, supra note 974. 

977According to Section 1.1 of the CAT NMS 

Plan, ‘‘Reportable Event’’ includes, but is not 

limited to, the original receipt or origination, 

modification, cancellation, routing, execution (in 

whole or in part) and allocation of an order, and 

receipt of a routed order. See CAT NMS Plan, supra 

note 974. 

978The Participants are the national securities 

exchanges and national securities associations who 

collectively control and operate the CAT. 

979See CAT FAQ B40, available at https://

www.catnmsplan.com/faq. This release refers to the 

FAQs published by the Participants because the 

Commission believes those FAQs are guiding the 

how Industry Members are reporting information to 

the CAT. The Commission has not approved the 

FAQs so is expressing no view in this release 

regarding such FAQs. 

980See https://www.finra.org/filing-reporting/otctransparency/ats-quarterly-statistics. Note that this 

dataset aggregates volume across two OTC Link 

LLC-operated ATSs under the label OTC LINK ECN 

ATS. 

981Rule 15c2–11 of the Exchange Act defines an 

inter-dealer quotation system as any system of 

general circulation to brokers or dealers that 

regularly disseminates quotations of identified 

brokers or dealers, and further defines a qualified 

inter-dealer quotation system as any inter-dealer 

quotation system that meets the definition of an 

‘‘alternative trading system’’ and operates pursuant 

to the exemption from the definition of an 

‘‘exchange.’’ 

982For example, the OTC Link LLC ATS is 

organized into several market places, broadly 

organized according to the issuers’ regulatory 

compliance and disclosure: OTCQX, which 

includes equities that are subject to and current 

with the reporting requirements of the Exchange 

Act, and that additionally meet numerous other 

eligibility requirements; OTCQB, which includes 

equities that are subject to and current with the 

reporting requirements of the Exchange Act, but not 

subject to any additional eligibility requirements; 

and Pink Sheets, which includes equities without 

any reporting or eligibility requirements. A fourth 

tier, the so-called ‘‘Expert Market’’ or ‘‘Grey 

Market,’’ contains equities that are not or cannot be 

publically quoted, either due to regulatory 

restrictions or lack of investor interest. See https:// 

www.sec.gov/reportspubs/investor-publications/ 

investorpubsmicrocapstockhtm.html. Additionally, 

for another example, see https://

www.globalotc.com/brokers/eligible-securities. 

983See Cass Sanford, Understanding the Expert 

Market, OTC Markets Blog (March 25, 2021), 

available at https://blog.otcmarkets.com. 

984See Bru ̈ ggemann, U., Kaul, A., Leuz, C., & 

Werner, I.M. (2018). The twilight zone: OTC 

regulatory regimes and market quality. The Review 

of Financial Studies, 31(3), 898–942. 

985See https://www.finra.org/rules-guidance/ 

notices/21-38. 

986See SEC Release No. 34–90067, October 1, 

2020, ‘‘Self-Regulatory Organizations; Financial 

Industry Regulatory Authority, Inc.; Notice of Filing 

of a Proposed Rule Change to Adopt FINRA Rule 

6439 (Requirements for Member Inter-Dealer 

Quotation Systems) and Delete the Rules Related to 

the OTC Bulletin Board Service,’’ available at 

https://www.sec.gov/rules/sro/finra/2020/34- 

90067.pdf. 

987See https://www.finra.org/rules-guidance/ 

notices/21-28. 

988FINRA Rule Series 6620 and 7300 govern OTC 

and restricted equity trade reporting to FINRA 

Facilities. See https://www.finra.org/filingreporting/market-transparency-reporting/tradereporting-faq. 

989See supra note 973. 

990See supra notes 974 to 979 and corresponding 

discussion. 

991An ATS trading in non-NMS stock is subject 

to Regulation SCI if, during at least four of the 

preceding six months, the ATS had five percent or 

more of the average daily volume in transactions 

that are reported to and calculated by a selfregulatory organization, such as FINRA. See https:// 

www.sec.gov/divisions/marketreg/regulation-scifaq.shtml. See supra Section VIII.B.2.a.ii for a 

discussion of the impact of Regulation SCI. 

992An ATS trading in non-NMS stock is subject 

to the Fair Access Rule if, during at least four of 

the preceding six months, the ATS had five percent 

or more of the average daily volume in non-NMS 

stock transactions that are reported to and 

calculated by a self-regulatory organization, such as 

FINRA. See 17 CFR 242.301(b)(5)(i) and https://

www.sec.gov/tm/faq-regulation-ats-fair-access-rule. 

See supra Section VIII.B.2.a.ii for a discussion of 

the impact of the Fair Access Rule. 

report any Reportable Event 977 to the 

Consolidated Audit Trail (CAT), which 

is designed to capture customer and 

order event information from the time of 

order inception through routing, 

cancellation, modification, or execution 

in a single, consolidated data source. 

The Participants 978 have issued 

guidance stating that trading interest 

must be ‘‘firm’’ to fall within the 

definition of an ‘‘order,’’ and thus be 

reportable to CAT, and so certain 

trading interest (e.g., conditional orders) 

that may be available on some ATSs is 

not reportable to the CAT until it is 

‘‘firmed up’’/confirmed.979

OTC equities also trade on ATSs. 

There are currently five ATSs operating 

in the OTC equity market. As of Q3 

2021, FINRA reports that OTC equity 

ATSs collectively handled around 4 

million trades.980 ATSs that offer 

trading services in OTC equities also 

typically operate as interdealer 

quotation systems (IDQS), which 

regularly disseminate broker-dealer 

quotes.981 The majority of OTC equity 

trading on ATSs is concentrated on one 

platform, which executed more than 60 

percent of OTC equity ATS trading in 

Q1 2021. ATSs that trade in OTC 

equities usually segment securities into 

different markets or use eligibility status 

symbols to inform investors regarding 

issuers’ regulatory compliance and 

disclosure.982 This is designed to inform 

investors whether companies are 

current or delinquent in their filing 

requirements in the interest of 

transparency.983 One academic study 

found that OTC equities that are subject 

to stricter disclosure requirements have 

higher market quality, including higher 

liquidity and lower crash risk.984

FINRA is the SRO that regulates 

trading in OTC securities. The 

Commission understands that the 

current ATS market place for OTC 

equities has evolved to replace the 

functions formally performed by the 

OTC Bulletin Board (OTCBB), a FINRAoperated inter-dealer quotation system 

for OTC equities that was retired by 

FINRA in November 2021.985 In its 

filing with the SEC, FINRA cited 

technological advancements and ‘‘the 

subsequent increase in alternative 

electronic venues with more extensive 

functionality than the OTCBB’’ as 

reasons for its retirement, which 

highlights market participants’ 

preference for electronic trading systems 

in this market.986 Concurrently to its 

retirement of the OTCBB, FINRA has 

adopted new Rule 6439 (Requirements 

for Member Inter-Dealer Quotation 

Systems), which implements additional 

requirements for firms that operate 

systems that regularly disseminate 

quotes in OTC equities, including 

requirements related to fair access, 

transparency, and systems integrity.987

Furthermore, trades to which a FINRA 

member is a party must be reported to 

FINRA’s OTC Reporting Facility (ORF) 

within ten seconds of execution.988 This 

includes executions in OTC equities, as 

well as executions in restricted stocks 

effected under 17 CFR 230.144A 

(Securities Act Rule 144A); however, 

trades in restricted equity securities 

effected under Rule 144A are reported 

to the ORF for regulatory purposes only 

and are not publicly disseminated. 

Similarly to requirements for FINRA’s 

TRF described above, if the execution is 

handled by an ATS, then in most cases 

the ATS has the reporting obligation 

and must report itself as a counterparty 

to both sides of the trade.989 In addition, 

OTC equities fall within the definition 

of ‘‘Eligible Securities’’ under the CAT 

NMS Plan, and therefore any eligible 

events in OTC equities are reportable to 

CAT.990

In addition to its requirements under 

FINRA, ATSs that trade in OTC equities 

must comply with Regulation ATS, 

including filing Form ATS and 

periodically filing Form ATS–R, and 

complying with Regulation SCI 991 and 

the Fair Access Rule if volume 

thresholds are met.992 However, ATSs 

that trade in OTC equities are not 

required to file and publicly disclose 

Form ATS–N. 

c. National Securities Exchanges for 

NMS Stock 

NMS Stock ATSs compete with 

national securities exchanges in the 

market for trading services in NMS 

securities. Currently, 16 national 

securities exchanges effect transactions 

in NMS stocks. These exchanges 


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993See CBOE Historical Market Volume Data, 

available at https://www.cboe.com/us/equities/ 

market_statistics/historical_market_volume/, 

market_history_monthly_2021.csv. This statistic is 

calculated by dividing the sum of all non-FINRA 

entries for the month of September 2021 divided by 

the sum of all entries for the month of September 

2021. 

994See 15 U.S.C. 78s(b)(1). 

995See 15 U.S.C. 78s(b). 

996See, e.g., Section 19(b) of the Exchange Act, 

15 U.S.C. 78s(b)(1), and Section 6(b) of the 

Exchange Act, 15 U.S.C. 78f(b). 

997See Regulation ATS Adopting Release, supra 

note 31, at 70880, 70902–70903 (Section discussing 

generally some of the obligations and benefits of 

registering as a national securities exchange). 

998On the contrary, RFQ platforms are 

increasingly playing a role in block trading in 

European equities, particularly in the wake of the 

2018 adoption of MiFID II, which placed limits on 

other off-exchange sources of liquidity. See, e.g., 

Basar, Shanny. (2020, March 31). MarketsMedia, 

available at https://www.marketsmedia.com/icapadds-to-equity-rfqs/. 

999See Bloomberg Letter at 3, 10, 20, and 23. The 

commenter also referenced that trading in small and 

micro NMS stocks on exchanges has been difficult 

and has not necessarily improved with recent 

technological changes. See Bloomberg Letter at 21, 

citing https://www.nasdaq.com/articles/nasdaqsproposal-improve-trading-environment-small-andmedium-growth-companies-and. 

1000See ‘‘RFQ for Equities: One Year On,’’ (2019), 

Tradeweb, available at https://www.tradeweb.com/ 

newsroom/media-center/insights/blog/rfq-forequities-one-year-on/. 

1001See, e.g., McDowell, Hayley. (2018, October 

23). ‘‘Buy-side throws doubt on RFQ for equities as 

‘last chance saloon’ for liquidity,’’ THETRADE, 

available at https://www.thetradenews.com/buyside-throws-doubt-rfq-equities-last-chance-saloonliquidity/. 

1002See, e.g., ‘‘ETFs’’, Tradeweb, available at 

https://www.tradeweb.com/our-markets/ 

institutional/equities/ETPs_Funds/. Additional 

market participants may also be developing 

Communication Protocol Systems for U.S.-listed 

ETFs. See, e.g., Rennison, Joe, April 4, 2019, 

‘‘MarketAxess muscles into ETF industry with Virtu 

tie-up,’’ Financial Times, available at https://

www.ft.com/content/b88d53b6-5709-11e9-a3db1fe89bedc16e. 

1003See, e.g., Bae, K., & Kim, D. (2020). Liquidity 

risk and exchange-traded fund returns, variances, 

and tracking errors. Journal of Financial Economics, 

138(1), 222–253. 

1004See supra Section VIII.B.3.b for a discussion 

of portfolio trading on Communication Protocol 

Systems in the corporate bond market. 

accounted for 58 percent of NMS 

security share volume and 65 percent of 

NMS security dollar volume in 

September 2021.993 National securities 

exchanges have greater regulatory 

obligations than NMS Stock ATSs. They 

must register with the Commission on 

Form 1, file proposed rule changes with 

the Commission under Section 19(b) of 

the Exchange Act, and are SROs. The 

proposed rule changes of national 

securities exchanges must be made 

available for public comment,994 and in 

general, these proposed rule changes 

publicly disclose, among other things, 

details relating to the exchange’s 

operations, procedures, and fees. 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 national 

securities exchange’s proposed rule 

changes are consistent with the 

Exchange Act.995 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 market 

participants such as ATSs.996

While national securities exchanges 

have more regulatory obligations than 

NMS Stock ATSs, they also enjoy 

certain unique benefits that are not 

afforded to NMS Stock ATSs. While 

national securities exchanges are SROs, 

and are thus subject to surveillance and 

oversight by the Commission, they can 

still establish norms regarding conduct, 

trading, and fee structures for external 

access. Trading venues that elect to 

register as national securities exchanges 

may gain added prestige by establishing 

listing standards for their securities. 

Additionally, national securities 

exchanges can be direct participants in 

NMS plans, which provides additional 

sources of revenue and input into the 

operation of the national market system 

that is not available to NMS Stock 

ATSs.997

d. Communication Protocol Systems in 

the Equity Market 

The Commission estimates that there 

are currently 4 Communication Protocol 

Systems operating in the market for 

NMS stocks that may meet the 

definition of exchange under the 

proposed changes to Exchange Act Rule 

3b–16. Furthermore, the Commission 

understands that some NMS Stock ATSs 

offer functionalities similar to 

Communication Protocol Systems, such 

as conditional orders and indications of 

interest (IOIs), both of which can 

interact with their limit order books. As 

mentioned in Section II.B.2, the 

Commission has observed that 26 NMS 

Stock ATSs have disclosed on their 

public Form ATS–N that they send or 

receive messages indicating trading 

interest, such as conditional orders. 

While NMS Stock ATSs may make 

use of Communication Protocol System 

functionalities, there is limited evidence 

that Communication Protocol Systems 

play a significant role in the non-ATS 

OTC market for liquid NMS stocks in 

the U.S.998 One commenter stated that 

NMS stocks and ETFs with limited 

liquidity are now beginning to use 

protocols such as RFQ to bridge 

liquidity gaps.999 However, because the 

Commission lacks data on the use of 

protocols that would qualify as 

Communication Protocol Systems by 

non-ATS trading systems operating in 

the OTC equity market, it is unable to 

quantify to what extent Communication 

Protocol Systems are used in the nonATS OTC market for NMS stocks. The 

Commission requests comment on this 

issue. 

Communication Protocol System 

operators cite their protocols’ abilities to 

service very large orders, the option for 

participants to pick and choose which 

aspects of their order to disclose (e.g., 

price or size), and higher discretion as 

advantages of these protocols over 

trading on exchanges or ATSs.1000

However, some market participants 

have expressed skepticism over 

information leakage in the use of RFQs 

for equity transactions, as their use may 

signal that the participants are unable to 

locate ‘‘natural’’ sources of liquidity.1001

Communication Protocol Systems 

may also play a role in the trading of 

U.S.-listed ETFs. However, the 

Commission lacks data to quantify what 

proportion of ETF volume trades via 

Communication Protocol Systems. At 

least one trading system operator claims 

to offer several protocols, including 

RFQ, for trading in U.S.-listed ETFs.1002

The use of Communication Protocol 

Systems for trading in ETFs may be 

motivated by a lack of liquidity in some 

ETF securities, and associated risks 

involved in trading in illiquid ETFs.1003

Similar to the corporate bond market, 

the use of Communication Protocol 

Systems may also be used for the 

trading of bundles of securities in order 

to facilitate transaction services for 

participants that may be using the same 

Communication Protocol System to 

trade in the securities underlying 

ETFs.1004

Unlike NMS Stock ATSs, 

Communication Protocol Systems that 

trade NMS stocks are not subject to any 

of the requirements of Regulation SCI or 

Regulation ATS, including the 

requirement to file the public Form 

ATS–N. Trades in NMS stocks that are 

transacted elsewhere than on an 

exchange, which may include 

transactions executed on a 

Communication Protocol System, are 

required to be reported to FINRA TRF 

as discussed in Section VIII.B.5.a if at 

least one of the parties to the transaction 

is a FINRA member. 

Trading interest on Communication 

Protocol Systems may not be required to 

be reported to CAT, depending on the 

nature of the solicitation and/or 

response(s) as firm or non-firm. CAT 

guidance issued by the Participants 


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1005See CAT FAQ B3, available at https://

www.catnmsplan.com/faq. 

1006See CAT FAQ B45, available at https://

www.catnmsplan.com/faq. 

1007See SEC Release No. 34–87115, ‘‘Publication 

or Submission of Quotations Without Specified 

Information’’ Proposed Rule and Concept Release, 

available at https://www.sec.gov/rules/proposed/ 

2019/34-87115.pdf. 

1008See supra note 982. 

1009See https://www.sec.gov/news/press-release/ 

2020-212. 

1010 In compliance with the amendments, in 

March 2021 OTC Markets announced that OTC 

equities without current public information would 

be moved off its Pink Sheets market place. See 

https://blog.otcmarkets.com/2021/03/25/ 

understanding-the-expert-market/. 

1011 In 2018, the Commission estimated that 5,915 

OTC securities were traded at some point during 

the year without having published quotations, and 

3% of these securities had average daily trading 

volumes above $100,000. See SEC Release No. 34– 

87115, ‘‘Publication or Submission of Quotations 

Without Specified Information’’ Proposed Rule and 

Concept Release, available at https://www.sec.gov/ 

rules/proposed/2019/34-87115.pdf. 

1012See supra Section III.B.1. 

1013See Tuttle, L.A. (2014). OTC trading: 

Description of non-ATS OTC trading in National 

Market System stocks. DERA White Paper. 

1014See Market Data Infrastructure Final Rule, 

Release No. 90610 (Dec. 9, 2020), available at 

https://www.sec.gov/rules/final/2020/34-90610.pdf. 

1015See Tuttle, L.A. (2014). OTC trading: 

Description of non-ATS OTC trading in National 

Market System stocks. DERA White Paper. A more 

recent study found that retail wholesalers 

accounted for 49.9 percent of off-exchange trading 

in Q3 2021. See Rosenblatt Securities, November 4, 

2021, ‘‘A Closer Look at Off Exchange and Retail 

Market Share.’’ 

1016See Tuttle, L.A. (2014). OTC trading: 

Description of non-ATS OTC trading in National 

Market System stocks. DERA White Paper. 

Specifically, defining block trades as trades of 

10,000 or more shares, block trades comprised only 

0.10 percent of dark ATS trading while they 

comprise 2.53 percent of non-ATS OTC trading. 

1017SDPs do not permit participants to post 

liquidity, but rather offer bilateral trading with the 

counterparty operating the venue. See id. 

1018See, e.g., https://www.ft.com/content/ 

44841008-3cf7-11e4-a2ab-00144feabdc0. 

1019 In the survey, market participants cited the 

expertise and consulting services offered by brokers 

as some of the benefits of using the phone to 

conduct ‘‘high touch’’ trades. See https://

www.greenwich.com/press-release/high-touchexecution-consulting-services-and-performancedriving-technologies-spell. 

provides that non-firm expressions of 

trading interest that contain information 

about the security name, side, size, 

capacity and/or price, which includes 

IOIs and RFQs, do not fall within the 

definition of an ‘‘order’’ and are 

therefore not reportable to CAT.1005

However, this guidance also states that 

any response to an RFQ or other form 

of solicitation response that is accessible 

electronically and is immediately 

actionable (i.e., no further manual or 

electronic action is required by the 

responder providing the quote in order 

to execute or cause a trade to be 

executed) is reportable whether or not it 

is ultimately accepted. Furthermore, 

once an order is ‘‘firmed up’’ by the 

initiating participant and winning 

bidder, the origination of the new order 

by the initiating participant, the routing 

of that new order to the winning bidder, 

and the acceptance of that order by the 

winning bidder are all reportable events, 

with the initiating participant reporting 

the new order and routing events, and 

the winning bidder reporting the order 

acceptance, as well as any subsequent 

actions taken to process the order.1006

The Commission understands that the 

majority of trading in OTC equities takes 

place on IDQS, most of which are 

registered as ATSs. However, there may 

be some IDQS or other OTC equity 

trading systems that are not registered as 

ATSs and that operate using trading 

protocols that would qualify as 

Communication Protocol Systems.1007

The Commission estimates that there 

may currently be 1 Communication 

Protocol System operating in the OTC 

equity market. Such a trading system 

may not be subject to FINRA Rule 6439 

or trade reporting requirements, or 

quoting requirements under the 

amended Rule 15c2–11 discussed in the 

next paragraph, if it is not operated by 

a FINRA member and does not meet the 

definition of a ‘‘qualifying’’ IDQS. The 

Commission lacks the data to estimate 

the number or trading volume of IDQS 

or other OTC equity trading systems that 

operate as Communication Protocol 

Systems and are not registered as 

broker-dealers. The Commission 

requests comment on this topic. 

Communication Protocol Systems 

may also play a role in the Grey Market 

for OTC equities.1008 Recent 

amendments to Rule 15c2–11 of the 

Exchange Act adopted in September 

2020 limit public quoting in OTC 

equities for which current financial 

statement information is not publically 

available.1009 This limits the ability of 

many OTC equities to trade on 

ATSs,1010 but many OTC securities are 

still traded even without publically 

available quotes.1011 However, due to 

the opacity of this market, the 

Commission lacks data to estimate the 

extent to which broker-dealers trading 

in Grey Market equities are using 

protocols that would qualify as 

Communication Protocol Systems and 

requests comment on this issue. 

Communication Protocol Systems 

may play a role in the secondary market 

for restricted shares. The Commission 

preliminarily estimates that there are 

currently 10 Communication Protocol 

Systems operating in the market for 

restricted shares. Furthermore, an 

estimated 2 of these are run by nonbroker-dealers, who therefore would not 

currently be subject to the associated 

costs of complying with broker-dealer 

filing and conduct obligations, 

including becoming a member of an 

SRO, such as FINRA.1012

Unlike ATSs that trade OTC equities, 

Communication Protocol Systems that 

trade OTC equities are not subject to any 

of the requirements of Regulation ATS. 

Trades in OTC equities and restricted 

equities effected under Securities Act 

Rule 144A that are transacted elsewhere 

than on an exchange, which may 

include transactions executed on a 

Communication Protocol System, are 

required to be reported to FINRA’s OTC 

ORF as described in Section VIII.B.5.a, 

if at least one of the parties to the 

transaction is a FINRA member. 

e. Other Methods of Trading in Equities 

The majority of off-exchange trading 

in NMS stocks occurs outside of ATSs. 

A DERA white paper estimated that, in 

2014, non-ATS off-exchange trading in 

NMS stocks represented nearly 17 

percent of total equity market dollar 

volume; 1013 by July 2020, this number 

increased to 23 percent, while trading 

on ATSs was composed of only 10 

percent of total equity market dollar 

volume.1014 The DERA white paper 

found that more than a third of non-ATS 

trading volume in NMS stock comprised 

of retail orders executed by OTC market 

makers.1015 Block trades (i.e., trades 

larger than 10,000 shares) made up a 

higher percentage of non-ATS trading 

volume than ATS trading volume.1016

Additionally, single-dealer platforms 

(SDPs) accounted for nine percent of offexchange trading volume in Q3 

2021.1017

The Commission believes that 

manually negotiated trades via the 

telephone are still taking place in the 

market for NMS stocks, in particular for 

large block trades by institutional 

investors.1018 A survey taken in April 

2014 estimated that more than 55 

percent of buy-side U.S. equity trading 

was still being executed via phone 

calls.1019

Additionally, it is likely that 

traditional bilateral negotiations are still 

actively used in the market for OTC 

equities as well, particularly in the Grey 

Market and the market for restricted 

equities, where electronic trading may 

be limited due to restrictions on public 

quoting activity. However, due to the 

opacity of this market, it is difficult to 

estimate the extent to which voice 

trading still plays a role in the market 

for OTC and restricted equities. 

As described above in Section 

VIII.B.5.a, trades in equities that are 

transacted elsewhere than on an 


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1020See Securities Exchange Act Release No. 

76474 (Nov. 18, 2015), 80 FR 80998, 81112 (Dec. 

28, 2015) (Regulation of NMS Stock Alternative 

Trading Systems Proposing Release). 

1021See id. 

1022See, e.g., Foucault, T., & Menkveld, A.J. 

(2008). Competition for order flow and smart order 

routing systems. The Journal of Finance, 63(1), 119– 

158; O’Hara, M., & Ye, M. (2011). Is market 

fragmentation harming market quality? Journal of 

Financial Economics, 100(3), 459–474. 

1023See, e.g., Cantillon, E., & Yin, P.L. (2011). 

Competition between exchanges: A research 

agenda. International journal of industrial 

organization, 29(3), 329–336; Budish, E., Lee, R.S., 

& Shim, J.J. (2019). A Theory of Stock Exchange 

Competition and Innovation: Will the Market Fix 

the Market? National Bureau of Economic Research. 

1024See OCC Monthly & Weekly Volume 

Statistics, available at https://www.theocc.com/ 

Market-Data/Market-Data-Reports/Volume-andOpen-Interest/Monthly-Weekly-Volume-Statistics. 

These statistics were calculated by downloading the 

monthly files for ‘‘Equity,’’ ‘‘Index,’’ and ‘‘ETF’’ 

options for October 2021. The OCC combined value 

from each file was added together and divided by 

the trading days in October 2021 to generate these 

statistics. 

1025See Bennett, Jay, John Colon, and John Feng. 

(2010). FIA, available at https://secure.fia.org/files/ 

css/magazinearticles/article-1446.pdf. 

1026See Thyagaraju Adinarayan, ‘‘Retail trading 

fever drives U.S. equity option volumes to record 

monthly high’’, Reuters, (2021, February 3). 

(Retrieved from Factiva database). 

1027See ‘‘What Is OCC?’’ The Options Clearing 

Corporation, available at https://www.theocc.com/ 

Company-Information/What-Is-OCC. 

1028See https://www.sec.gov/rules/final/34- 

43591.htm. 

1029See ‘‘Liquidity Management Software For US 

Listed Options Market’’, DASH Financial, available 

at https://dashfinancial.com/execution-services/ 

dash-ats/. 

1030See supra notes 974 to 979 and corresponding 

discussion. 

1031See ‘‘Request-for-Quote Options Trading’’, 

Tradeweb, available at https://

www2.tradeweb.com/optionsweb. 

exchange, which may include 

transactions executed via voice trading, 

are required to be reported to either 

FINRA’s TRF (in the case of NMS 

stocks) or ORF (in the case of OTC or 

restricted equities) if at least one of the 

parties to the transaction is a FINRA 

member. As described above, trades in 

restricted equity securities are reported 

for regulatory purposes only and are not 

publicly disseminated. 

f. Competition in the Market for Equity 

Trading Services 

As discussed above, since Regulation 

NMS was adopted in 2005, the market 

for equity trading services has become 

more fragmented, with trading 

fragmented not only across exchanges, 

but across different trading systems 

(exchanges, ATSs, and non-ATS offexchange trading venues). For instance, 

from 2005 to 2013, there was a decline 

in the market share of trading volume 

for exchange-listed stocks on NYSE.1020

At the same time, there was an increase 

in the market share of newer national 

securities exchanges such as NYSE 

Arca, Cboe BYX, and Cboe BZX.1021

This development increased 

competition in the market for trading 

services. Several academic studies have 

shown that an increase in competition 

between exchanges, or between 

exchanges and ATSs, improves market 

quality by reducing transactions costs 

and increasing liquidity.1022

Trading venues compete with each 

other along a number dimensions in 

order to attract order flow. For example, 

in addition to other ways, trading 

venues can compete via fees, rebates, 

speed, and trading protocols in order to 

attract order flow.1023 However, the 

actual level of competition that any 

given trading venue faces may depend 

on multiple factors including the 

liquidity of a stock as well as the type 

of trading venue and market participant 

engaging in the trade. A market 

participant’s preference for where to 

trade can depend on a number of 

factors, including, among other things, 

speed, anonymity, and price impact. 

The choice of trading venue may also be 

limited by regulatory restrictions on 

where certain equities may be traded 

and by whom, as quoting activities in 

some OTC stocks are restricted, and 

some investors are prohibited from 

trading in certain types of equities, such 

as restricted stocks. 

6. Current State of Options Markets 

There are currently 16 exchanges 

(‘‘options exchanges’’) and 1 ATS 

offering listed options trading services. 

During the month of October 2021, 

approximately 39 million options 

contracts, equating to approximately 

$21 billion in total premiums, were 

traded daily on exchanges.1024 The 

market for listed options has been 

historically dominated by institutional 

investors; 1025 however, the market has 

seen a dramatic increase in retail 

investor participation in recent 

years.1026

a. Currently Regulated Trading Systems 

in the Market for Listed Options 

The market for listed options trading 

services is dominated by registered 

exchanges. This dominance stems from 

the role of the Options Clearing 

Corporation (OCC), which is the sole 

entity clearing trades for exchange-listed 

options, security futures, and OTC 

options.1027 Central clearing of listed 

options incentivizes the use of 

exchanges. Exchanges offer traders a 

centralized location to interact with 

other traders in the market. Exchanges 

compete with each other by offering 

different cost structures to participate 

on the exchange, and differing order 

types to allow customers advanced 

trading strategies. Largely due to 

regulation,1028 options exchanges offer 

the ability to route orders to competing 

options exchanges in the event of a 

competing option exchange having the 

best price for a given options order. 

Thus, while there is competition 

amongst options exchanges for trading 

services, they are joined together in an 

integrated market system. 

There is one ATS in the market for 

listed options. As the Commission 

understands, this ATS offers 

participants an RFQ protocol.1029 A 

customer may accept the quote the ATS 

returns from the RFQ protocol. 

However, the orders are routed to an 

exchange for execution. 

As described above, the ATS in the 

market for listed option trading services 

competes with exchanges by offering the 

potential of price improvement on 

orders, the ability to view market 

liquidity without submitting a firm 

order, and the ability to interact with 

multiple market makers, across multiple 

exchanges, simultaneously. It should be 

noted, however, that this competition is 

not direct; the ATS ultimately sends 

orders to exchanges, and thus could be 

seen as complementary to exchanges. 

Options exchanges are subject to 

many of the same regulations as NMS 

Stock trading systems. Options 

exchanges are part of the NMS and are 

required to participate in many NMS 

plans. Options exchanges also are 

subject to Regulation SCI. 

Similar to other security types, an 

ATS that trades in listed option 

securities must comply with Regulation 

ATS and broker-dealer filing and 

conduct obligations, including 

becoming a member of an SRO, such as 

FINRA. In addition, listed options fall 

within the definition of ‘‘eligible 

securities’’ under the CAT NMS Plan, 

and therefore any eligible events in 

listed options are reportable to CAT.1030

b. Communication Protocol Systems in 

the Market for Listed Options 

As the Commission understands, 

there is currently 1 Communication 

Protocol System trading in listed 

options that may meet the definition of 

exchange under the proposed changes to 

Exchange Act Rule 3b–16.1031 This 

Communication Protocol System 

operates in a similar fashion to the 

single ATS in the market for listed 

options described above in Section 

VIII.B.6.a. This system offers an RFQ 

protocol that allows a customer to 

request a quote for a specified option. 

The system then surveys market makers 


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1032See supra notes 1005 and 1006 and 

corresponding discussion. 

1033See supra Section III.A for a discussion of 

‘‘repos’’ (repurchase agreements and reverse 

repurchase agreements on government securities). 

While U.S. Treasury Securities are frequently used 

as the underlying collateral of repurchase and 

reverse repurchase agreements, other securities may 

also be used, such as corporate bonds and stocks. 

1034See Board of Governors of the Federal 

Reserve System (US), All Sectors; Federal Funds 

and Security Repurchase Agreements; Asset, Level 

[BOGZ1FL892050005Q], retrieved from FRED, 

Federal Reserve Bank of St. Louis; https://

fred.stlouisfed.org/series/BOGZ1FL892050005Q, 

December 2, 2021. 1035See, e.g., Cheng, Jeffrey and David Wessel. 

‘‘What is the repo market, and why does it matter?’’ 

(2020). Brookings Institute, available at https://

www.brookings.edu/blog/up-front/2020/01/28/ 

what-is-the-repo-market-and-why-does-it-matter/. 

1036These ATSs are Current Government 

Securities ATSs. See supra note 5. 

1037See, e.g., ‘‘Tradeweb Reports September 2021 

Total Volume of $21.7 Trillion and Average Daily 

Volume of $1.02 Trillion,’’ (2021). Tradeweb, 

available at https://www.tradeweb.com/newsroom/ 

media-center/news-releases/tradeweb-reportsseptember-2021-total-volume-of-$21.7-trillion-andaverage-daily-volume-of-$1.02-trillion/; CME 

Group. (2021, July 2). ‘‘CME Group Reports Q2 and 

June 2021 Monthly Market Statistics,’’ CME Group, 

available at https://www.cmegroup.com/mediaroom/press-releases/2021/7/02/cme_group_

reportsq2andjune2021monthlymarket

statistics.html; ‘‘MarketAxess Announces Monthly 

Volume Statistics for September 2021,’’ (2021). 

MarketAxess, available at https://

investor.marketaxess.com/news-releases/newsrelease-details/marketaxess-announces-monthlyvolume-statistics-september-2021; ‘‘MarketAxess 

3Q21: Stat Sheet,’’ (2021), MarketAxess, available at 

https://www.marketaxess.com/pdf/match-repo-statsheet.pdf; ‘‘GLMX Gains ATS and Broker-Dealer 

Status,’’ (2018). THETRADE, available at https://

www.thetradenews.com/glmx-gains-ats-brokerdealer-status/. 

1038See ‘‘Bloomberg launches electronic repo 

trading system,’’ (2005), Finextra, available at 

https://www.finextra.com/newsarticle/14580/ 

bloomberg-launches-electronic-repo-trading-system. 

1039See supra note 521 defining triparty repos. 1040See also Trott, Tom, (2018), ‘‘Electronic RFQ 

Repo Markets,’’ Tradeweb, available at https://

www.tradeweb.com/newsroom/media-center/ 

insights/commentary/electronic-rfq-repo-markets/ 

and Trott, Tom, (2018). ‘‘Electronic RFQ Repo 

Markets: The Solution for Reporting Challenges and 

Laying the Building Blocks for Automation,’’ 

Tradeweb, available at https://www.tradeweb.com/ 

4a6f74/globalassets/newsroom/media-center/ 

insights/commentary/repo_-tradeweb.pdf. 

1041See ‘‘6730. Transaction Reporting’’, FINRA, 

available at https://www.finra.org/rules-guidance/ 

rulebooks/finra-rules/6730. 1042See https://www.financialresearch.gov/briefs/ 

files/OFRbr-2015-03-repo-sec-lending.pdf. The 

Treasury’s Office of Financial Research (OFR) 

requires daily reporting by covered central 

counterparties of centrally cleared U.S. repurchase 

and reverse repurchase agreement transactions, 

which covers about half of the estimate U.S. market 

for repurchase and reverse repurchase agreements. 

See 84 FR 4975 (Feb. 20, 2019) (https://

www.federalregister.gov/documents/2019/02/20/ 

2019-02639/ongoing-data-collection-of-centrallycleared-transactions-in-the-us-repurchaseagreement-market). OFR publishes daily aggregate 

data on rates and volumes of repurchase and 

reverse repurchase agreement transactions in each 

segment, by tenor or collateral. See https://

www.financialresearch.gov/data/us-repo-data/. The 

Federal Reserve Bank of New York (FRBNY) reports 

daily demand, utilization, rates and participants of 

the Federal Reserve’s Reverse Repo Facility. 

Primary dealers are subject to weekly reporting 

requirements by the Federal Reserve Bank of New 

York using Form FR2004, which describes the 

repurchase and reverse repurchase agreement 

positions, cumulative transactions, and outstanding 

financial arrangements and becomes publically 

available a day after reporting. FR2004 does not, 

however, include information on haircuts, rates, 

and counterparty exposures. Non-primary dealers 

are not required to submit FR2004, and 

consequently there is less available data on their 

bilateral transactions. U.S. chartered depository 

institutions and bank holding companies are 

required to report netted repurchase and reverse 

repurchase agreement positions on a quarterly 

basis, which becomes publically available. Much of 

the publically available data from regulatory 

agencies is consolidated and produced quarterly by 

the Federal Reserve Board in the form of the 

Financial Accounts of the United States (Z.1). 

of options exchanges. The system 

returns the quotes to the customer, 

where the customer has the ability to 

accept one of the proposed trades. The 

trade is then executed on the option 

exchange. The Commission requests 

comment on the full role of 

Communication Protocol Systems in the 

market for listed options. 

Communication Protocol Systems 

compete with options exchanges and 

ATSs for trading services. Similar to 

ATSs, Communication Protocol Systems 

in the market for listed options 

ultimately interact with exchanges in 

their trading operations; thus, the 

competition between Communication 

Protocol Systems and exchanges might 

be better characterized as a 

complementary relationship. As the 

Commission understands, competition 

between ATSs and Communication 

Protocol Systems in the market for listed 

options occurs primarily through the 

quality of their trading systems, cost 

structures, and speed of RFQ protocol 

completion. 

Communication Protocol Systems in 

the market for listed options are not 

formally regulated by any regulatory 

authority. This lack of regulation puts 

listed option ATSs at a disadvantage 

compared to Communication Protocol 

Systems. The Commission believes that 

the participation of the OCC in centrally 

clearing options trades on exchanges is 

a major factor contributing to the 

decision of traders to trade on options 

exchanges compared to using 

Communication Protocol Systems and 

ATSs. 

As in the market for equities, trading 

interest in listed options on 

Communication Protocol Systems may 

not be required to be reported to CAT, 

depending on the nature of the 

solicitation and/or response(s) as firm or 

non-firm.1032

7. Other Securities 

a. Repurchase and Reverse Repurchase 

Agreements 

The market for repurchase and reverse 

repurchase agreements 1033 plays a role 

both in the stability of the banking and 

financial system and in the transmission 

of U.S. monetary policy. Repurchase 

agreements account for between $4 

trillion and $6 trillion in notional value 

trades daily.1034 Moreover, reverse 

repurchase agreements have become an 

important tool of monetary policy. 

Specifically, the market for reverse 

repurchase agreements is used by banks 

to lend out excess reserves, while the 

market for repurchase agreements is 

used to borrow to meet reserve 

requirements.1035

The Commission estimates that there 

are currently 4 ATSs 1036 facilitating 

trades in repurchase and reverse 

repurchase agreements. Furthermore, 

the Commission estimates that 3 

Communication Protocol Systems 

facilitate trading in repurchase and 

reverse repurchase agreements that may 

meet the definition of exchange under 

the proposed changes to Exchange Act 

Rule 3b–16.1037 The Commission 

understands that these systems typically 

use U.S. Treasury securities as collateral 

for trades in repurchase and reverse 

repurchase agreements conducted on 

their systems. The Commission 

understands that RFQ systems for 

repurchase and reverse repurchase 

agreements are a relatively recent and 

rapidly growing phenomenon.1038

Repurchase and reverse repurchase 

agreement transactions usually involve 

collateral haircuts and counterparty risk 

inherent in the contract. Counterparty 

risk may give market participants an 

incentive to maintain balances across 

multiple liquidity providers to reduce 

exposure to a single liquidity provider. 

This incentive to maintain balances 

across multiple liquidity providers may 

be alleviated, at least partially, if trades 

in repurchase and reverse repurchase 

agreements with liquidity providers are 

centrally cleared as in triparty repo 

trades.1039 The interest in maintaining 

balances across multiple liquidity 

provider in bilateral transactions has 

spurred the introduction and adoption 

of electronic RFQ platforms.1040

Under FINRA Rule 6730(e), 

repurchase and reverse repurchase 

agreement transactions involving 

TRACE-Eligible Securities are not 

reportable to TRACE.1041 However, 

repurchase and reverse repurchase 

agreement holdings and transactions are 

currently subject to several other 

reporting requirements.1042

The Commission is unable to 

determine the full scope of the role 


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1043See https://www.greenwich.com/fixedincome-fx-cmds/understanding-us-fixed-incomemarket. 1044See https://www.finra.org/finra-data/browsecatalog/trace-volume-reports/trace-monthlyvolume-files. We include trading data for Asset 

Backed Securities (‘‘ABS’’) and Collateralized Bond 

Obligations (CBO), Collateralized Debt Obligations 

(CDO), Collateralized Loan Obligations (CLO), and 

Non-Agency Commercial Mortgage Backed 

Securities (CMBS). See https://www.finra.org/finradata/browse-catalog/trace-volume-reports/abouttrace-monthly-volume-reports for definitions. 

1045See Bessembinder, H., Maxwell, W.F., & 

Venkataraman, K. (2013). Trading activity and 

transaction costs in structured credit products. 

Financial Analysts Journal, 69(6), 55–67. 1046See He, A., & Mizrach, B. (2017). Analysis of 

securitized asset liquidity. Research Note, FINRA 

Office of the Chief Economist. 

1047See https://www.finra.org/finra-data/browsecatalog/trace-volume-reports/trace-monthlyvolume-files. 

1048Note that Form ATS doesn’t have a specific 

category for ABS. The number of ATSs trading in 

ABS is estimated from a combination of the number 

of ATSs that report Form ATS–R volume for ‘‘Other 

Debt Securities,’’ which could include asset-backed 

securities, and TRACE MPIDs with ABS-related 

volumes and ATS flags. 

1049See ‘‘ABS East 2014: Securitization Shrugs off 

Electronic Trading,’’ (2014). American Banker, 

available at https://asreport.americanbanker.com/ 

news/abs-east-2014-securitization-shrugs-offelectronic-trading. 

1050See FINRA Rule 6730(a)(1) requiring FINRA 

members to report transactions in TRACE-Eligible 

Securities, which FINRA Rule 6710 defines to 

include asset-backed securities. For each 

transaction in asset-backed securities, a FINRA 

member would be required to report the CUSIP 

number or similar numeric identifier or FINRA 

symbol; size (volume) of the transaction; price of 

the transaction (or elements necessary to calculate 

price); symbol indicating whether transaction is a 

buy or sell; date of trade execution (‘‘as/of’’ trades 

only); contra-party’s identifier; capacity (principal 

or agent); time of execution; reporting side 

executing broker as ‘‘give-up’’ (if any); contra side 

introducing broker (in case of ‘‘give-up’’ trade); the 

commission (total dollar amount), if applicable; 

date of settlement; if the member is reporting a 

transaction that occurred on an ATS pursuant to 

FINRA Rule 6732, the ATS’s separate Market 

Participant Identifier (‘‘MPID’’); and trade modifiers 

as required. See FINRA Rule 6730(c). 

1051See https://www.finra.org/media-center/ 

news-releases/2015/finra-brings-transparency-assetbacked-securities-market. 

1052As proposed, Currently Exempted 

Government Securities ATSs that are operated by 

banks would be required to structure their business 

to either comply with Regulation ATS or register as 

a national securities exchange. See supra footnote 

261. The Commission also expects Currently 

Exempted Government Securities ATSs currently 

registered as broker-dealers will continue to operate 

as broker-dealers under the proposal rather than 

register as a national securities exchange. 

1053See supra Section II.A. 

1054See Regulation ATS Adopting Release at 

70903–07 for a discussion of benefits and costs for 

registering as a national securities exchange. 

played by Communication Protocol 

Systems in the market for repurchase 

and reverse repurchase agreements 

because the Commission lacks data on 

the volume facilitated by these systems. 

The Commission requests comment on 

the full role of Communication Protocol 

Systems in this market. 

b. Asset-Backed Securities 

Asset-backed securities (ABS) are 

securities that are collateralized by an 

underlying pool of assets, usually 

constructed from bundled loans such as 

mortgages, leases, credit card balances, 

and student loans. A broad definition of 

asset-backed securities may include 

assets such as Collateralized Bond 

Obligations (CBO), Collateralized Debt 

Obligations (CDO), Collateralized Loan 

Obligations (CLO), and Non-Agency 

Commercial Mortgage Backed Securities 

(CMBS), along with non-agency 

mortgage-backed securities (MBS). The 

majority of holders of ABS are large 

institutional investors. Data from 2015 

shows that asset managers are the 

largest holders of ABS, making up 

around 60 percent of buyers, followed 

by hedge funds (18 percent) and banks 

(10 percent).1043

The presence of large institutions in 

this market is also evident in looking at 

the secondary market trading data. In 

September 2021, average daily trading 

volume in the ABS market was around 

$8 billion. At the same time, there was 

only an average of 823 trades per day, 

reflecting that average trade sizes in this 

market are very large.1044 Due to the 

complexity and heterogeneity of ABS 

products, liquidity in this market tends 

to be low. The majority of ABS never 

trade after issuance.1045

There is evidence that the size of the 

ABS market has shrunk since the 2008 

financial crisis. Not only have new 

issues of ABS declined sharply after the 

financial crisis, but overall daily trading 

volume in secondary ABS markets fell 

by 16 percent between 2013 and 

2017.1046 The Commission understands 

that very little ABS trading takes place 

on ATSs. In September 2021, less than 

0.1 percent of the average daily trading 

volume in ABS was reported to TRACE 

as having taken place on ATSs.1047 The 

Commission estimates that there are 

currently 3 ATSs offering trading in 

ABS. Additionally, the Commission 

estimates that 1 ATS trades non-agency 

MBS securities.1048

As the data mentioned above shows, 

99.9 percent of ABS trading volume 

takes place through trading methods 

other than ATSs, and some of this 

trading volume may take place using 

protocols that qualify as 

Communication Protocol Systems. The 

Commission estimates that there are 3 

Communication Protocol Systems 

trading in ABS that may meet the 

definition of exchange under the 

proposed changes to Exchange Act Rule 

3b–16. As in other fixed income 

markets, Communication Protocol 

Systems trading in ABS do not meet the 

current definition of an exchange and 

thus are not subject to the exchange 

regulatory framework. The Commission 

estimates that 1 Communication 

Protocol System trading in ABS is not 

currently operated by a registered 

broker-dealer. This system does not 

currently incur the costs of registering 

with the Commission as well as the 

costs of SRO membership, and is not 

subject to FINRA operational regulatory 

reporting requirements. 

It is likely that the vast majority of 

trading in ABS still takes place via 

bilateral voice trading. Industry 

participants have pointed out that the 

complexity of this market makes it more 

likely that traders want discussions with 

and access to individualized guidance 

from dealers and analysts in deciding 

whether to trade, which can be difficult 

to achieve on more automated electronic 

platforms.1049

Since 2011, FINRA has required 

FINRA members to report transaction 

prices and quantities in ABS to 

TRACE.1050 In 2015, FINRA began 

publishing post-trade price information 

for ABS, which is available to the public 

no later than 15 minutes after the trade 

is executed.1051

C. Economic Effects and Effects on 

Efficiency, Competition, and Capital 

Formation 

The Commission has considered the 

economic effects of the proposed 

amendments to Exchange Act Rule 3b– 

16, Regulation ATS, and Regulation SCI. 

The Commission recognizes that 

under the proposed amendments, a 

bank-operated Currently Exempted 

Government Securities ATS or 

Communication Protocol System could 

choose to register as an exchange rather 

than choose to comply with the 

Regulation ATS exemption, which 

includes registering as a brokerdealer.1052 A bank-operated Currently 

Exempted Government Securities ATS 

or Communication Protocol System that 

chooses to register as an exchange 

would be an SRO and subject to the 

requirements under Section 6 of the 

Exchange Act.1053 The Commission 

preliminarily believes that registering as 

a national securities exchange would 

enhance regulatory oversight, market 

surveillance, and investor 

protection.1054 Registering as an 

exchange would also result in costs 

associated with applying to register as a 

national securities exchange and 

complying with the requirements under 

Section 6(b) of the Exchange Act, such 

as the requirement to be so organized 

and have the capacity to carry out the 


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1055See generally supra Section II.D.1 (discussing 

the national securities exchange registration 

requirements under Sections 6 of the Exchange 

Act). 

1056See supra Section II.B.3. 

1057The proposed amendments would enhance 

regulatory oversight and investor protection by 

requiring: Non-broker-dealer-operated 

Communication Protocol Systems and bankoperated Currently Exempted Government 

Securities ATSs to register as a broker-dealers; 

Communication Protocol Systems and Currently 

Exempted Government Securities ATSs to safeguard 

subscribers’ confidential trading information; 

Communication Protocol Systems and Currently 

Exempted Government Securities ATSs to comply 

with recordkeeping and reporting requirements; 

Communication Protocol Systems that are not 

Government Securities ATSs nor NMS Stock ATSs 

to file Form ATS; and Government Securities ATSs 

and Communication Protocol Systems that are NMS 

Stock ATSs to file Form ATS–N. One commenter 

on the 2020 Proposal stated that removing the 

exemption for Currently Exempted Government 

Securities ATSs would significantly improve 

market transparency and resiliency, and that 

requirements to provide transparency to market 

participants regarding key aspects of the platform, 

and comply with fair access requirements would 

promote market integrity and help to ensure that 

multilateral U.S. Treasury trading venues are 

subject to appropriate regulatory oversight. See 

Citadel Letter at 1. Another commenter stated that 

the extension of Regulation ATS to include 

Currently Exempted Government Securities ATSs 

would help foster investor protection and market 

integrity. See FINRA Letter at 2. 1058Non-broker-dealer-operated Communication 

Protocol Systems without a broker-dealer affiliate 

would be required to register as broker-dealers with 

the Commission and become members of an SRO 

under the proposed Rule 301(b)(1). Proposed Rule 

301(b)(1) would enhance regulatory oversight over 

the estimated 1 bank-operated Currently Exempted 

Government Securities ATS and 9 non-brokerdealer-operated Communication Protocol Systems 

(6 non-broker-dealer-operated Communication 

Protocol Systems without a broker-dealer affiliate 

and 3 non-broker-dealer-operated Communication 

Protocol Systems with a broker-dealer affiliate). See 

also Section VIII.C.2.a.ii for a discussion about a 

bank-operated Currently Exempted Government 

Securities ATS and non-broker-dealer-operated 

Communication Protocol Systems with a brokerdealer affiliate adopting a registered affiliate 

structure to comply with the proposed Rule 

301(b)(1). 

1059The broker-dealer registration would enable 

the Commission to examine the trading operations 

of registered broker-dealer operators and FINRA to 

examine its members and markets that its members 

operate. See also supra Section II.D.2. 

1060FINRA Rule 6730(a)(1) would require its 

members to report transactions of certain securities 

to FINRA. See FINRA Rule 6730(a)(1) requiring 

FINRA members to report transactions in TRACEEligible Securities, which FINRA Rule 6710 defines 

to include any debt security that is U.S. dollardenominated and is: Issued by a U.S. or foreign 

private issuer, and, if a restricted security, sold 

pursuant to Securities Act Rule 144A; issued or 

guaranteed by an Agency or a GovernmentSponsored Enterprise; or a U.S. Treasury Security. 

Debt securities issued by foreign sovereigns and 

Money Market Instruments are explicitly excluded. 

Note that, under FINRA Rule 6730(e), repurchase 

and reverse repurchase transactions involving 

TRACE-Eligible Securities are not reportable to 

TRACE. See also MSRB Rule G–14 requiring 

brokers, dealers and municipal securities dealers 

(‘‘dealers’’) to report transactions in municipal 

securities. See supra note 829 describing 

exemptions for ATS transaction reporting to TRACE 

and supra note 926 describing exemptions for 

transaction reporting to MSRB’s RTRS. Trades in 

restricted equities effected under Securities Act 

Rule 144A that are transacted elsewhere than on an 

exchange are required to be reported to FINRA’s 

OTC Reporting Facility (ORF) if at least one of the 

parties to the transaction is a FINRA member. See 

supra note 988. 

1061The Commission estimates that there is 

currently 1 non-broker-dealer-operated 

Communication Protocol System trading in 

government and agency securities, corporate and 

municipal debt securities, and ABS/MBS. The 

Commission also estimates that there are 5 

additional non-broker-dealer-operated 

Communication Protocol Systems trading in 

corporate debt securities, 2 trading in restricted 

equities, and 1 trading in repos. One commenter on 

the 2020 Proposal stated that, even if benefits from 

purposes of the Exchange Act and 

enforce member compliance with 

Federal securities laws and the rules of 

the exchange.1055 However, the 

Commission expects that many 

Communication Protocol Systems 

would not elect to register as an 

exchange but instead would register as 

a broker-dealer and comply with 

Regulation ATS because the regulatory 

costs associated with registering and 

operating as an exchange would be 

higher than those associated with 

registering as a broker-dealer and 

complying with Regulation ATS.1056

Similarly, the Commission preliminarily 

believes that a bank-operated Currently 

Exempted Government Securities ATS 

would also choose to structure its 

business to comply with the relatively 

lighter regulatory requirements of 

Regulation ATS. 

The Commission has attempted, 

where possible, to quantify the benefits 

and costs anticipated to result from the 

amendments to Exchange Act Rule 3b– 

16, Regulation ATS, and Regulation SCI. 

However, as explained in more detail 

below, because the Commission does 

not have, and in certain cases does not 

believe it can reasonably obtain data to 

inform the Commission on certain 

economic effects, the Commission is 

unable to quantify certain economic 

effects. Further, even in cases where the 

Commission has some data, it might not 

be practicable to perform a quantitative 

analysis due to the number and type of 

assumptions necessary to quantify 

certain economic effects, which would 

likely render any such quantification 

unreliable. Therefore, certain parts of 

the discussion below are qualitative in 

nature and focus on the direction of the 

various effects of the amendments. The 

inability to quantify certain benefits and 

costs, however, does not mean that the 

overall benefits and costs of the 

proposed amendments are insignificant. 

1. Benefits 

The Commission has considered the 

benefits of the proposed amendments to 

Exchange Act Rule 3b–16, Regulation 

ATS, and Regulation SCI. 

a. Enhancement of Regulatory Oversight 

and Investor Protection 

The proposed amendments to 

Exchange Act Rule 3b–16, which would 

include Communication Protocol 

Systems within the definition of 

exchange, along with the proposed 

amendments to remove the exemption 

from compliance with Regulation ATS 

for Currently Exempted Government 

Securities ATSs and apply the enhanced 

disclosure and filing requirements of 

Rule 304 to all Government Securities 

ATSs would enhance regulatory 

oversight and investor protection.1057

The proposed amendments would 

enhance regulatory oversight and 

investor protection and help facilitate 

market surveillance by extending the 

broker-dealer registration requirement of 

Regulation ATS to Currently Exempted 

Government Securities ATSs that are 

operated by banks (i.e., bank-operated 

Currently Exempted Government 

Securities ATSs) and Communication 

Protocol Systems that are not operated 

by registered broker-dealers (i.e., nonbroker-dealer-operated Communication 

Protocol Systems).1058 Registering as a 

broker-dealer would require, among 

other things, the filing of Form BD and 

SRO membership. Such requirements 

would allow the Commission and an 

SRO to examine bank-operated 

Currently Exempted Government 

Securities ATSs and non-broker-dealeroperated Communication Protocol 

Systems for compliance with Federal 

securities laws.1059 Furthermore, upon 

registering as broker-dealers and 

becoming members of an SRO, these 

Currently Exempted Government 

Securities ATSs and Communication 

Protocol Systems would be required to 

report certain transactions to an SRO for 

public dissemination, which would 

help facilitate market surveillance by 

the SRO.1060

The magnitude of benefits from this 

increase in transaction transparency 

depends on the portion of transactions 

executed by bank-operated Currently 

Exempted Government Securities ATSs 

and non-broker-dealer-operated 

Communication Protocol Systems. 

However, these platforms are not subject 

to transaction reporting obligations, and 

thus, the Commission cannot estimate 

the magnitude of this benefit because 

the Commission does not have data on 

transactions executed by the estimated 1 

bank-operated Currently Exempted 

Government Securities ATS and 9 nonbroker-dealer-operated Communication 

Protocol Systems.1061


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expanding Regulation ATS to bank-operated 

Currently Exempted Government Securities ATSs 

are limited by the Commission’s estimate that there 

is only one bank-operated Currently Exempted 

Government Securities ATS today, the Proposal 

will also help maintain and promote the integrity 

of the Treasuries audit trail in the future to the 

extent it limits the opportunity for trades to be done 

on non-broker-dealer ATSs to avoid inclusion in the 

TRACE audit trail. See FINRA Letter at 4. 

1062One commenter on the 2020 Proposal stated 

that requiring Currently Exempted Government 

Securities ATSs to adopt written safeguards and 

written procedures to protect subscribers’ 

confidential trading information and to separate 

ATS functions from other broker-dealer functions 

can help protect the integrity of a subscriber’s 

confidential trading information that could 

otherwise be at risk of unauthorized disclosure and 

subject to potential misuse, and that such 

safeguards and practices also can help prevent the 

sharing of confidential subscriber trading 

information by ATSs with other customers or 

having the operator of the ATS use the confidential 

trading information of other subscribers to 

advantage its own trading on the ATS. See MFA 

Letter at 3. 

1063Although the Commission currently lacks 

this information, we describe above a potential 

scenario where the confidential trading information 

of a subscriber could be impermissibly shared with 

the personnel of the broker-dealer operator or any 

of its affiliates, and the broker-dealer operator, in 

turn, could potentially abuse that relationship to 

provide itself or its affiliates with a direct 

competitive advantage over that subscriber. See 

supra Section VIII.B.2.a.ii. 

1064See supra Section II.D.2 for a discussion 

about the requirements of Rule 302 and 303. 

1065Rule 301(b)(9) would require filing of Form 

ATS–R. 

1066One commenter on the 2020 Proposal stated 

that requiring currently exempted Government 

Securities ATSs to comply with the recordkeeping 

and reporting requirements of Regulation ATS and 

requiring such ATSs to file a confidential Form 

ATS–R with the Commission would improve the 

Commission’s ability to monitor currently 

exempted Government Securities ATSs and 

improve its oversight of the market for government 

securities execution services overall. See MFA 

Letter 3. 

1067 Government Securities ATSs would include 

Currently Exempted Government Securities ATSs, 

Current Government Securities ATSs, and 

Communication Protocol Systems that trade 

government securities. 

1068The filing of Form ATS–N would be a new 

requirement for Government Securities ATSs. 

Currently, NMS Stock ATSs are required to file 

Form ATS–N. See NMS Stock ATS Adopting 

Release, supra note 2. 

1069See SIFMA Letter at 4. 

Furthermore, the proposed 

requirements with respect to 

safeguarding subscribers’ confidential 

trading information would enhance 

investor protection by helping to 

prevent Currently Exempted 

Government Securities ATSs and 

Communication Protocol Systems from 

potentially abusing such information. 

The requirements to establish written 

safeguards and procedures to protect 

subscribers’ confidential trading 

information and to separate ATS 

functions from other broker-dealer 

functions for Currently Exempted 

Government Securities ATSs and 

Communication Protocol Systems 

would reduce the chance that a 

subscriber’s confidential information is 

accessed or shared inappropriately.1062

While the Commission lacks 

information on the extent to which the 

confidential trading information of 

subscribers to Currently Exempted 

Government Securities ATSs and 

Communication Protocol Systems is 

currently accessed or shared 

inappropriately,1063 the requirements 

would promote the protection of 

confidential information even if such 

information is not being inappropriately 

accessed or shared. 

Moreover, the proposed amendment 

to apply the recordkeeping 1064 and 

reporting requirements 1065 of 

Regulation ATS to Currently Exempted 

Government Securities ATSs and 

Communication Protocol Systems 

would help improve regulatory 

oversight because the requirements to 

keep and preserve records of customer 

trading interest and transactions would 

create an audit trail of trading activities 

on these systems.1066 This information 

would allow the Commission to better 

monitor the types of investors that trade 

on these systems, help the Commission 

understand the role these systems play 

in their respective securities markets, 

and improve the ability of the 

Commission or an SRO to detect and 

investigate potential irregularities that 

might occur in markets in which these 

systems operate. 

By requiring Currently Exempted 

Government Securities ATSs and 

Communication Protocol Systems to 

provide certain information on Form 

ATS–R, such as a list of all securities 

traded and all subscribers that were 

participants on the ATS during a 

reporting quarter, the Commission 

would be able to better monitor the 

trading on ATSs and evaluate for 

compliance with the Federal securities 

laws including Fair Access Rule and 

Regulation SCI, if applicable. The 

information collected on Form ATS–R 

regarding fair access grants, denials, and 

limitations of access to ATSs along with 

the proposed amendment to ask the 

ATS to indicate whether it was subject 

to the Fair Access Rule during any 

portion of the period covered by the 

report would help the Commission 

oversee those ATSs to evaluate for 

compliance with the Fair Access Rule. 

Furthermore, requiring information with 

respect to repurchase and reverse 

repurchase transactions on Form ATS– 

R would help the Commission identify 

and monitor important ATSs in the 

market for repurchase and reverse 

repurchase agreements. 

The proposed amendments to require 

Government Securities ATSs 1067 and 

Communication Protocol Systems that 

are NMS Stock ATSs 1068 to file Form 

ATS–N would help facilitate the 

Commission’s regulatory oversight and 

enhance investor protection. Under the 

proposed amendments, Current 

Government Securities ATSs would file 

Form ATS–N in lieu of Form ATS for 

their government securities trading 

operations. In addition, under the 

proposed amendments, Currently 

Exempted Government Securities ATSs 

and Communication Protocol Systems 

that are either Government Securities 

ATSs or NMS Stock ATSs would be 

required to file Form ATS–N. 

Information reported on Form ATS–N 

would provide the Commission with 

increased and better quality information 

on Current Government Securities ATSs 

and improve the effectiveness and 

efficiency of the examination process of 

Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs by facilitating the 

Commission and the ATS SRO’s ability 

to better examine for compliance with 

the Federal securities laws. 

Furthermore, the Commission’s 

review process to declare Form ATS–N 

ineffective that is set forth in the 

proposed amendments would help 

ensure the quality of information 

disclosed in Form ATS–N. One 

commenter on the 2020 Proposal stated 

that market participants are incentivized 

to make disclosures that are robust, 

readable and sufficient because of the 

competitive forces and the variety of 

regulatory tools the Commission and 

other regulators have at their disposal to 

police the quality and content of 

statements made on the previously 

proposed Form ATS–G.1069 While 

competitive forces would likely 

incentivize Government Securities ATSs 

to make robust, readable and sufficient 

disclosures, the Commission 

preliminarily believes that extending 

the ability for the Commission to be able 

to declare a Government Securities 

ATS’s Form ATS–N or Form ATS–N 

amendment ineffective would improve 

the quality of information disclosed by 

these ATSs as compared to the 

information currently filed on Form 

ATS by Current Government Securities 

ATSs, which is not subject to the 

Commission’s review and effectiveness 

process. The Commission’s recent 

experience with Form ATS–N for NMS 

Stock ATSs informs this belief. Since 

February 2019, the Commission has 

reviewed initial Form ATS–N filings 

and amendments thereto and engaged in 

direct conversation with all NMS Stock 


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1070Form ATS–N requires detailed disclosure 

about the manner of operations of ATSs, including 

display, execution and priority procedures, order 

segmentation, counterparty selection, fair access, 

eligibility of services, fees, and suspension of 

trading. See NMS Stock ATS Adopting Release, 

supra note 2. 

1071Market participants would include 

prospective subscribers of Government Securities 

ATSs and Communication Protocol Systems that 

trade NMS stocks. For example, prospective 

subscribers would benefit from the public 

disclosure of Form ATS–N in their selection of 

trading venues. 

1072One commenter on the 2020 Proposal stated 

that it agrees with the Commission that the 

proposed public disclosure of the operational 

aspects of Government Securities ATSs could 

improve investors’ ability to select trading venues 

and lower trading costs. See FINRA Letter at 2. 

Another commenter stated that increasing 

accessibility to and standardizing information 

regarding the operations and activities of fixed 

income trading venues benefits investors by helping 

them make more informed decisions about where 

to send their orders. See MFA Letter at 9. A third 

commenter stated that more operational 

transparency would aid investors in conducting 

analysis of executions, and that transparency 

regarding pricing, market activity and market 

quality promotes healthy competition in the market 

place, supports fair and equitable access to 

potential participants and offers investor protection. 

See SIFMA Letter at 1 and 2. 

1073As discussed above, market participants may 

select trading venues based on factors other than 

fees. For example, investors interested in effecting 

transactions in U.S. Treasury Securities and 

corporate debt securities simultaneously may find 

information regarding a trading venue’s interaction 

with related markets on Form ATS–N useful in the 

selection of trading venue. 

1074 Government Securities ATSs would include 

Currently Exempted Government Securities ATSs, 

Current Government Securities ATSs, and 

Communication Protocol Systems that trade 

government securities. 

1075For more discussion on the impact of the 

effective process on the quality of Form ATS–N 

disclosures, see supra Section VIII.C.1.a. 

1076 In the Commission staff’s experience 

reviewing Form ATS–N amendments, some NMS 

Stock ATSs have filed updating amendments no 

later than 30 days from the end of the calendar 

quarter in which the ATS implemented the fee 

change. See also supra Section IV.A. 

ATSs about their Form ATS–N filings. 

The Commission believes that this 

review process has helped ensure that 

such disclosures are complete and 

comprehensible. Many NMS Stock 

ATSs have opted to seek the 

Commission staff’s input about pending 

material amendments prior to filing, 

which has contributed to clearer and 

more effective disclosures. When new 

NMS Stock ATSs seek to begin 

operations, the initial Form ATS–N 

provides the Commission with detailed 

information about how the ATS will 

operate. With this knowledge, the 

Commission is better able to monitor for 

compliance and evaluate how NMS 

Stock ATSs as a group are evolving. 

Requiring Communication Protocol 

Systems that are not NMS Stock ATSs 

nor Government Securities ATSs to file 

confidential Form ATS would improve 

the Commission oversight of those 

Communication Protocol Systems and 

promote investor protection. The 

information regarding the manner of 

operation, the procedures governing 

execution, reporting, clearance, and 

settlement of transactions, types of 

securities traded, and subscriber 

information disclosed in Form ATS 

would help the Commission monitor 

securities markets for which 

Communication Protocol Systems 

provide trading services, and oversee 

the compliance with Federal securities 

laws. These benefits from requiring 

Form ATS, while similar in kind, would 

be smaller in magnitude compared to 

the benefits from requiring Form ATS– 

N because of the differences between 

the information disclosed in Form ATS 

and Form ATS–N.1070

b. Reduction of Trading Costs and 

Improvements to Execution Quality 

The proposed amendments would 

help enhance operational transparency, 

reduce trading costs, and improve 

execution quality for market 

participants 1071 by requiring public 

disclosure of Form ATS–N and applying 

the Fair Access Rule to certain ATSs. 

The public disclosure of Form ATS–N 

for Government Securities ATSs and 

Communication Protocol Systems that 

trade NMS stocks would also help 

enhance operational transparency, and 

thus, reduce search costs and trading 

costs for market participants.1072 The 

reduced search costs and trading costs 

would result in better execution quality 

for market participants. Specifically, 

based on Commission staff’s experience 

with its review of initial Form ATS–N 

filings for NMS Stock ATSs, Form ATS– 

N would result in more standardized 

public information about Government 

Securities ATSs and Communication 

Protocol Systems that trade NMS stocks 

including how trading interests are 

handled, fee structures, the ATS’s 

interaction with related markets, 

liquidity providers, activities the ATS 

undertakes to surveil and monitor its 

market, and any potential conflicts of 

interest that might arise from the 

activities of the broker-dealer operator 

or its affiliates. As a result, search costs 

for market participants would be lower 

because consistent disclosure 

requirements for all Government 

Securities ATSs and NMS Stock ATSs, 

including Communication Protocol 

Systems, would facilitate market 

participants’ comparison of Government 

Securities ATSs and NMS Stock ATSs 

when deciding which venue best suits 

their trading objectives. In addition, 

based on the Commission’s experience, 

fees can be a primary factor for market 

participants in deciding where to send 

their orders.1073 Fee disclosures on 

Form ATS–N and requiring consistent 

and timely fee amendments on Form 

ATS–N would help market participants 

compare and analyze the fee structures 

and fee ranges across Government 

Securities ATSs and NMS Stock ATSs 

in an expedited manner and decide 

which ATS offers them the best pricing 

according to the characteristics of their 

order flow and the type of participant 

they are, which would lower their 

search costs and hence trading costs. 

Furthermore, the proposed 

requirement that Government Securities 

ATSs 1074 and Communication Protocol 

Systems that trade NMS stocks file Form 

ATS–N subject to the Commission’s 

review and effectiveness process would 

help ensure the quality of information 

disclosed in Form ATS–N with 

attendant benefits to market participants 

who utilize Form ATS–N, including 

helping market participants select a 

trading venue that best suits their 

trading objectives.1075

With regard to the Commission’s 

proposal to require Government 

Securities ATSs and NMS Stock ATSs 

to file fee amendments with respect to 

fee changes, under the current filing 

requirements of Form ATS–N, there 

could be a considerable lapse of time 

from the actual fee change to the public 

disclosure of the fee change on Form 

ATS–N if an NMS Stock ATS files a fee 

change as an updating amendment.1076

If there is such delay in the public 

disclosure of fee changes on Form ATS– 

N, requiring NMS Stock ATSs to file a 

fee amendment no later than the date it 

makes a change to a fee or fee disclosure 

would result in more timely public 

disclosure of fee changes for NMS Stock 

ATSs. Because the fee is an important 

factors in the selection of trading 

venues, the proposed fee amendment on 

Form ATS–N would allow market 

participants to use more up-to-date fee 

information in the selection of trading 

venues, which could lower trading costs 

for market participants. 

However, the Commission is unable 

to quantify these benefits to market 

participants because the Commission 

lacks data on the amount of information 

that is currently available to different 

market participants regarding the 

operations of Government Securities 

ATSs and Communication Protocol 

Systems that are NMS Stock ATSs 

operations and the activities of their 

broker-dealer operators and their 

affiliates. The magnitude of the 

anticipated benefits discussed above 


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1077The Commission estimates 8 Government 

Securities ATSs would be subject to the Fair Access 

Rule. One commenter on the 2020 Proposal stated 

that registered investment companies generally are 

not able to directly access liquidity on most 

Treasury interdealer platforms. See ICI Letter at 4. 

Other commenters stated that applying the Fair 

Access Rule to Government Securities ATSs would 

ensure that market participants are not 

unreasonably denied access from important sources 

of liquidity for a particular security (see SIFMA 

Letter at 5) and would ensure that qualified market 

participants have access to the U.S. Government 

Securities market (see FIA PTG Letter at 2). Another 

commenter stated that including the trading of U.S. 

Treasury Securities and Agency Securities in the 

Fair Access Rule can prevent discriminatory actions 

that would otherwise result in higher trading costs 

for investors and the reduction in trading efficiency. 

See MFA Letter at 4. 

1078See also supra note 833 and accompanying 

text. 

1079The proposed Fair Access threshold for U.S. 

Treasury Securities is 3 percent or more of the 

average weekly dollar volume traded in the United 

States. The proposed Fair Access threshold for 

Agency Securities is 5 percent or more of the 

average daily dollar volume traded in the United 

States. The Fair Access threshold for NMS stocks 

and equity securities are 5 percent or more of the 

average daily share volume in an individual 

security. The Fair Access threshold for corporate 

debt and municipal securities is 5 percent or more 

of the average daily dollar volume. See supra 

Section III.B.4 for a discussion about the volume 

thresholds for government securities in applying 

the Fair Access Rule. See also supra Section V.A.2 

for a discussion about the aggregation of volume 

threshold. 

1080See supra Section V.A.3. 

1081See supra Section III.B.4 for discussion about 

volume thresholds. 

1082One commenter on the 2020 Proposal stated 

that applying fair access requirements to 

Government Securities ATSs would enhance the 

ability of funds to onboard and participate on these 

platforms directly, and that the fair access to these 

additional pools of liquidity would benefit fund 

shareholders. See ICI Letter at 4. 

1083The Commission estimates 2 Communication 

Protocol Systems that trade corporate debt 

securities and 1 Communication Protocol System 

that trades municipal securities would be subject to 

the Fair Access Rule. Furthermore, the Commission 

estimates that 3 Communication Protocol Systems 

that trade non-NMS stock equity securities would 

be subject to the Fair Access Rule, but that no 

Communication Protocol System and no passive 

system that trades NMS stocks would be subject to 

the Fair Access Rule. 

1084Communication Protocol Systems would be 

subject to Rule 3b–16 and Regulation ATS. See 

supra Section II.D. The exemption for passive 

systems under Rule 301(b)(5)(iii) of Regulation ATS 

would be removed. See supra Section V.A.5. 

1085This estimate is computed using the 

regulatory version of FINRA’s Trade Reporting 

Facility data and NYSE’s TAQ data (accessed via 

WRDS). See supra note 1079 for details on the Fair 

Access thresholds. See supra note 310 for the 

application of the Fair Access Rule on the trading 

of NMS stocks, non-NMS stock equity securities, 

municipal securities, and corporate debt securities. 

See also supra Section V.A.2 for a discussion about 

the aggregation of volume threshold. 

1086The proposed amendments would help 

enhance the price discovery process and liquidity 

in securities markets through: Applying the brokerdealer registration requirements of Regulation ATS 

to bank-operated Currently Exempted Government 

Securities ATSs and non-broker-dealer-operated 

Communication Protocol Systems; applying 

Regulation SCI to Government Securities ATSs that 

meet certain volume thresholds; applying Rule 

301(b)(6) to significant Communication Protocol 

Systems that trade corporate debt securities or 

municipal securities; and applying Regulation SCI 

to significant Communication Protocol Systems that 

trade NMS stocks and non-NMS stock equity 

securities. 

would also depend on a number of 

factors, including the extent to which 

market participants would change their 

behavior as a result of receiving the 

public disclosure of more 

comprehensive, comparable, and 

uniform information of this type in 

Form ATS–N. It is inherently difficult to 

predict how different market 

participants would use the information 

contained in Form ATS–N in evaluating 

and choosing the Government Securities 

ATSs and NMS Stock ATSs that best 

serve their trading objectives. 

The Commission believes that 

applying the Fair Access Rule to 

Government Securities ATSs, which 

would require the establishment and 

objective application of fair access 

standards, would increase trading venue 

options available to market participants 

who are currently excluded. To the 

extent that there are market participants 

that wish to trade on significant 

Government Securities ATSs but are 

currently excluded from doing so, 

applying the Fair Access Rule to 

Government Securities ATSs would 

lower their trading costs.1077 As 

discussed in Section VIII.B.2.a.ii, market 

forces alone may not be sufficient to 

prevent a significant Government 

Securities ATS from unreasonably 

denying access to some market 

participants.1078 Under the proposed 

amendments, if a Government Securities 

ATS meets certain aggregate volume 

thresholds,1079 the ATS would be 

required to establish and apply 

reasonable written standards for 

granting, limiting, and denying access to 

subscribers and applicants.1080 As a 

result, for example, there would be a 

mechanism to prevent a Government 

Securities ATS that met the aggregate 

volume thresholds 1081 from 

unreasonably denying access to one 

institutional investor while granting 

access to another similarly-situated 

institutional investor.1082

Significant ATSs that trade NMS 

stocks, non-NMS stock equity securities, 

corporate debt securities, or municipal 

securities are subject to the Fair Access 

Rule of Regulation ATS.1083 However, 

Communication Protocol Systems and 

passive systems that trade NMS stocks 

are currently not subject to the Fair 

Access Rule, but would be under the 

proposed amendments.1084 Applying 

the Fair Access Rule to those significant 

Communication Protocol Systems 

would generate the benefits discussed 

above for market participants in the 

markets for corporate debt securities, 

municipal securities, and non-NMS 

stocks. Additionally, the proposed 

amendments would help ensure that the 

benefits of the Fair Access Rule would 

also apply if a Communication Protocol 

System or passive system reached 

significant size and met the aggregate 

volume thresholds in the future. 

To the extent that there are market 

participants currently excluded from 

trading on significant ATSs, the 

proposed amendments to aggregate 

volume across affiliated ATSs in 

calculating certain volume thresholds 

under the Fair Access Rule would 

increase the number of smaller affiliate 

ATSs available to market participants 

who are currently excluded, which 

would lower their trading costs for 

them. The proposed amendments to 

apply certain aggregate volume 

thresholds would increase the number 

of smaller affiliate ATSs that would be 

subject to the Fair Access Rule. Smaller 

affiliate ATSs that would not have met 

the current volume thresholds 

individually would be subject to the 

Fair Access Rule if they meet the 

proposed aggregate volume thresholds. 

The Commission estimates that no 

current smaller affiliate ATS that trades 

NMS stocks, non-NMS stock equity 

securities, corporate debt securities, or 

municipal securities and does not 

already currently meet the Fair Access 

volume thresholds would meet the 

volume thresholds if volume is 

aggregated across affiliated ATSs.1085

c. Enhancement of Price Discovery and 

Liquidity 

Applying broker-dealer registration 

requirements of Regulation ATS, 

Regulation SCI, and the Capacity, 

Integrity, and Security Rule (i.e., Rule 

301(b)(6) of Regulation ATS) under the 

proposed amendments would help 

enhance the price discovery process and 

liquidity in securities markets.1086

The proposed broker-dealer 

registration requirements of Regulation 

ATS, including SRO membership 

requirements, for bank-operated 

Currently Exempted Government 

Securities ATSs and non-broker-dealeroperated Communication Protocol 

Systems would enhance the price 

discovery process in securities markets. 

As discussed in Section II.B.3, upon 

registering as broker-dealers and 

becoming members of an SRO, bankoperated Currently Exempted 

Government Securities ATSs and nonbroker-dealer-operated Communication 

Protocol Systems would be required to 

report certain transactions to an SRO for 


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1087FINRA members are subject to transaction 

reporting obligation under FINRA Rule 6730, while 

municipal bond dealers are subject to transaction 

reporting obligations under MSRB Rule G–14. See 

supra note 1060, discussing transaction reporting 

requirements for fixed income securities and supra 

note 1061, describing the non-broker-dealeroperated Communication Protocol Systems that are 

not currently subject to reporting requirements. As 

discussed in supra Section VIII.C.1.a, the 

Commission is unable to estimate the magnitude of 

this benefit because the Commission lacks the 

necessary data. Except for government securities, 

reported transactions in all other TRACE-Eligible 

Securities (which includes Agency securities, 

corporate debt securities, and ABS) are publically 

disseminated via FINRA TRACE. FINRA 

disseminates weekly summary of U.S. Treasury 

Securities transactions produced from TRACE data. 

See FINRA Rule 6740. Reported transactions in 

municipal debt securities are publicly disseminated 

via EMMA, which is a service operated by the 

MSRB. See supra note 658. Trades in restricted 

equity securities effected pursuant to Rule 144A are 

reported to the FINRA’s ORF for regulatory 

purposes only and are not publicly disseminated. 

1088The Commission estimates that 4 

Government Securities ATSs would be subject to 

Regulation SCI. See Table VIII.1 in supra Section 

VIII.B.2.a.i and Section VIII.B.2.d. See Sections 

VIII.B.2.a and VIII.B.2.b for discussions about the 

importance of real-time price information on 

Government Securities ATS and indicative quotes 

on Communication Protocol Systems that trade U.S. 

Treasury Securities in price discovery of various 

securities. The proposed amendments to Regulation 

SCI would promote the establishment of more 

robust systems that are less likely to experience a 

system disruption by requiring Government 

Securities ATSs that meet the definition of SCI 

entity to establish and enforce written policies and 

procedures to ensure that their SCI systems have 

adequate levels of capacity, integrity, resiliency, 

availability, and security to maintain the SCI 

entity’s operational capability. Furthermore, the 

extension of Regulation SCI would help strengthen 

the infrastructure and improve the resiliency of the 

automated systems of Government Securities ATSs 

that are important to the government securities 

markets. See also Section III.C. 

1089See also supra note 838 and accompanying 

text. 

1090See supra Sections VIII.B.2.a and VIII.B.2.b 

for discussions about the importance of real-time 

price information on Government Securities ATS 

and indicative quotes on Communication Protocol 

Systems that trade U.S. Treasury Securities in price 

discovery of various securities. 1091See supra Section VIII.B.2.a.ii for a 

discussion of Government Securities ATSs of 

existing SCI entities. 1092See Tradeweb Letter at 3. 1093See Tradeweb Letter at 3. 

1094See supra notes 357–362 and corresponding 

text. One commenter stated that applying 

Regulation ATS and Regulation SCI to interdealer 

Treasury platforms is appropriate and would 

promote operational transparency, fair access, and 

system security and resiliency and that, given the 

linkage between the interdealer and the dealer-tocustomer segments of the market, these benefits in 

turn would help dealers and other liquidity 

providers better facilitate trading with customers 

such as funds. See ICI Letter at 3 and 4. Other 

commenters on the 2020 Proposal opposed 

requiring Government Securities ATSs to comply 

with Regulation SCI. See supra notes 363–367 and 

corresponding text. 

1095The Commission estimates that no 

Communication Protocol System that trades NMS 

stocks would be subject to Regulation SCI. 

1096See Regulation SCI Adopting Release, supra 

note 3. 

1097See supra Section II.D.2 for a discussion 

about volume threshold for Rule 301(b)(6) of 

Regulation ATS. The Commission estimates that 2 

Communication Protocol Systems that trade 

corporate debt securities and no Communication 

Protocol Systems that trade municipal securities 

would be subject to Rule 301(b)(6). 

public dissemination, which would 

help enhance price discovery by 

providing the market with better posttrade price transparency in the 

government securities market and other 

securities markets in which the 

Communication Protocol Systems 

provide trading services.1087

The Commission believes that 

applying the proposed requirements of 

Regulation SCI to Government 

Securities ATSs that meet certain 

volume thresholds would help prevent 

systems issues from occurring and 

reduce their severity when they do 

occur, and thus, limit interruptions to 

the price discovery process and 

liquidity flow in the government 

securities market.1088 As discussed in 

Section VIII.B.2.a.ii, market forces alone 

may not be sufficient to induce 

significant Government Securities ATSs 

to establish standards that would help 

significantly reduce systems issues.1089

A systems outage at a significant 

Government Securities ATS would not 

only disrupt price discovery 1090 and 

liquidity flow, but also would reduce 

trading venue options resulting in 

higher trading costs for market 

participants. 

The Commission recognizes that one 

Government Securities ATS is operated 

by a broker-dealer operator of an NMS 

Stock ATS that is a SCI entity, and 

therefore, might already have modified 

some of the policies and procedures of 

Regulation SCI as needed for systems 

related to trading of U.S. Treasury 

Securities and Agency Securities.1091

However, imposing the requirements of 

Regulation SCI on this ATS’s systems 

related to trading of U.S. Treasury 

Securities and Agency Securities would 

further strengthen these policies and 

procedures, which would help improve 

the robustness of SCI systems and SCI 

indirect systems. 

Furthermore, extending Regulation 

SCI to significant Government Securities 

ATSs would help prevent disruptions in 

trading of linked fixed income 

securities, such as corporate debt 

securities, and thus, enhance the price 

discovery process and liquidity in those 

fixed income securities markets. U.S. 

Treasury Securities are used as a 

hedging instrument for hedging interest 

rate risk. The Commission understands 

that investors trading corporate debt 

securities simultaneously trade U.S. 

Treasury Securities in the direction that 

offsets the interest rate risk from the 

corporate debt securities trades. Systems 

issues at significant Government 

Securities ATSs would disrupt these 

hedging activities that use U.S. Treasury 

Securities, which in turn, would disrupt 

and the price discovery process and 

liquidity flow in corporate debt 

securities. 

One commenter on the 2020 Proposal 

stated that it did not support applying 

Regulation SCI to Government 

Securities ATSs because trading venues 

for government securities are not 

interconnected.1092 This commenter 

stated that unlike the equities markets, 

where linkages among venues under 

Regulation NMS can cause systems 

issues at a single ATS with a relatively 

more modest trading volume to present 

issues for the broader market, the 

government securities market has no 

similar linkages among venues.1093

Other commenters on the 2020 Proposal 

expressed the view that application of 

Regulation SCI is appropriate.1094

The Commission believes that a 

system outage at a significant 

Government Securities ATS could 

disrupt trading at another significant 

Government Securities ATS even if 

these Government Securities ATSs are 

not connected. For example, if a 

significant Government Securities ATS 

is experiencing a system outage, there 

could be a sudden surge in message 

traffic (e.g., quoting activities) and 

trading at other significant Government 

Securities ATSs. If a sudden surge in 

message traffic and trading exceeds the 

system capacity of the Government 

Securities ATS, this could result in 

systems issues and disrupt trading at the 

ATS. The requirements of Regulation 

SCI, including the requirements with 

respect to capacity planning, would 

help prevent such systems issues at 

significant Government Securities ATSs 

and enhance the price discovery process 

and liquidity in the government 

securities market. 

NMS Stock ATSs that meet certain 

volume thresholds are subject to the 

requirements of Regulation SCI for SCI 

ATS.1095 Subjecting significant 

Communication Protocol Systems that 

are NMS Stock ATSs to Regulation SCI 

would likely generate the benefits 

discussed in the Regulation SCI 

Adopting Release.1096

Significant ATSs that trade corporate 

debt securities or municipal securities 

are subject to Rule 301(b)(6).1097 The 

application of Rule 301(b)(6) to 

significant Communication Protocol 

Systems that trade corporate debt 

securities or municipal securities would 

help reduce disruptions in the price 

discovery process of corporate debt 


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1098See supra Section V.B. 1099See id. 

securities and municipal securities due 

to failures or capacity issues with 

respect to automated systems of 

significant Communication Protocol 

Systems, and thus, enhance the price 

discovery process and liquidity in those 

markets. 

d. Electronic Filing Requirements 

With respect to the filing location and 

data language of the proposed 

disclosure requirements for Government 

Securities ATSs and Communication 

Protocol Systems that are NMS Stock 

ATSs, requiring these disclosures to be 

filed on Form ATS–N would benefit 

market participants by improving the 

usability, accessibility, and reliability of 

the new disclosures. Form ATS–N is 

filed on the EDGAR system in a 

structured, machine-readable XMLbased data language that is specific to 

Form ATS–N (‘‘custom XML,’’ here 

‘‘ATS–N-specific XML’’).1098 By 

requiring a structured data language and 

a publicly accessible filing location for 

the required disclosures, the 

Commission would allow market 

participants to download the disclosed 

information directly into their databases 

and analyze the information using 

various tools and applications. This 

would make it easier for market 

participants to aggregate the information 

and compare multiple ATSs to help 

select the venue that best suits their 

trading objectives, thereby potentially 

avoiding the cost of paying a third party 

data vendor to extract and structure the 

disclosed information on their behalf. 

The Commission believes requiring 

all Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs to submit the 

required disclosures in ATS–N-specific 

XML will facilitate more effective and 

thorough review and analysis of those 

ATSs by the Commission, which should 

yield greater insights into the operations 

of those ATSs and the activities of their 

operators and affiliates. Additionally, 

Commission staff would be better able 

to assemble and review a larger pool of 

data regarding Government Securities 

ATSs and Communication Protocol 

Systems that are NMS Stock ATSs. Both 

of these outcomes would benefit market 

participants by facilitating the 

Commission’s examination process, and 

thus, would help protect investors and 

ensure the sufficiency of information in 

the market related to Government 

Securities ATSs and Communication 

Protocol Systems that are NMS Stock 

ATSs. 

Requiring all Government Securities 

ATSs to file the required disclosures on 

EDGAR would benefit market 

participants by ensuring that the 

disclosures are in a centralized, publicly 

accessible filing location with validation 

capabilities. Providing a centralized 

filing location would prevent market 

participants from incurring additional 

costs to locate and retrieve Government 

Securities ATS disclosures from various 

filing or posting locations. Similarly, 

because EDGAR is a publicly accessible 

system, an EDGAR requirement would 

prevent market participants from 

incurring additional costs that will arise 

if an operator or other party were to 

place any barriers to access the 

Government Securities ATS disclosures 

(such as a website registration 

requirement). Because EDGAR provides 

basic validation capabilities, an EDGAR 

requirement would reduce the 

incidence of non-discretionary errors, 

thereby improving the quality of the 

Government Securities ATS disclosures. 

Requiring all Forms ATS and ATS–R 

to be filed on EDGAR would provide a 

centralized filing location with 

validation capabilities for submitted 

filings, and would also increase filing 

efficiencies for ATSs by removing the 

need to print and mail paper 

versions.1099 All ATSs subject to 

Regulation ATS are required to file a 

Form ATS–R, and all ATSs that do not 

trade NMS stocks or government 

securities (which, under the proposal, 

would include Communication Protocol 

Systems), would file a Form ATS. 

2. Costs 

The Commission has considered the 

costs of the proposed amendments to 

Exchange Act Rule 3b–16, Regulation 

ATS, and Regulation SCI. The aggregate 

compliance costs are presented in Table 

VIII.7 below. 

TABLE VIII.7—TOTAL IMPLEMENTATION COSTS a AND OTHER COMPLIANCE COSTS b

Type of entity Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Communication Protocol Systems (Government Securities ATS) ... 4 $2.4 million ∼ $6.6 million c ... $2.4 million ∼ $5.1 million.d

Currently Exempted Government Securities ATSs .......................... 7 $1.5 million ∼ $3.5 million e ... $1.3 million ∼ $2.7 million.f

Current Government Securities ATSs .............................................. 17 $1.4 million ∼ $3.5 million g ... $1.3 million ∼ $2.6 million.h

Communication Protocol Systems (NMS Stock ATS) ..................... 4 $209,000 i .............................. $59,000.j

Current NMS Stock ATSs ................................................................ 34 $77,000 k ............................... $16,000.l

Other Communication Protocol Systems ......................................... 14 $2 million m ............................ $660,000.n

Other Current ATSs ......................................................................... 59 $374,000 o ............................. $115,000.p

Subscriber ........................................................................................ .................... ............................................... $10,000.q

Total .......................................................................................... 139 $8 million ∼ $16 million ......... $5.9 million ∼ $11 million. 

aSee infra note 1127. bSee id. 

cSee infra Table VIII.9. dSee id. 

eSee infra Table VIII.10. fSee id. 

gSee infra Table VIII.11. hSee id. 

iSee infra Table VIII.12. 

jSee id. 

kSee infra Table VIII.13. lSee id. 

m See infra Table VIII.14. nSee id. 

oSee infra Table VIII.15. pSee id. 

qThis figure represents costs per ATS subscriber. See also infra note aa in Table VII.8. 


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1100Compliance costs consist of implementation 

costs, which are the monetized costs of PRA 

burdens and other compliance costs (non-PRA 

based costs). 1101The proposed requirements would include: 

broker-dealer registration requirements for nonbroker-dealer-operated Communication Protocol 

Systems and bank-operated Currently Exempted 

Government Securities ATSs; the requirements with 

respect to written safeguards and procedures for 

subscribers’ trading information, recordkeeping, 

record preservation, and Form ATS–R for 

Communication Protocol Systems and Currently 

Exempted Government Securities ATSs; the 

requirements of Form ATS for Communication 

Protocol Systems that are not Government 

Securities ATSs nor NMS Stock ATSs; the 

requirements with respect to capacity, integrity, and 

security of automated systems for Communication 

Protocol Systems that trade corporate debt 

securities or municipal securities; the requirements 

of Form ATS–N for Government Securities ATSs 

and Communication Protocol Systems that are NMS 

Stock ATSs; the requirements to amend Form ATS– 

N for NMS Stock ATSs; the requirements to amend 

Form ATS and Form ATS–R and such forms be 

filed electronically; the requirements of the Fair 

Access Rule for significant Government Securities 

ATSs and significant Communication Protocol 

Systems; and the requirements of Regulation SCI for 

significant Government Securities ATSs and 

significant Communication Protocol Systems. 

1102The Commission estimates the wage rate 

associated with PRA burden hours based on salary 

information for the securities information 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/ 

management-and-professional-earnings-in-thesecurities-industry-2013/. The 2013 professional 

wage rates are adjusted for an inflation rate of 17.45 

percent based on the Bureau of Labor Statistics data 

on Consumer Price Index for all Urban Consumers 

(CPI–U) between September 2013 and September 

2021. Therefore, the current inflation adjusted 

effective hourly wage rates for attorneys are 

estimated at $446 ($380 × 1.1745), $570 ($485 × 

1.1745) for chief compliance managers, $332 ($283 

× 1.1745) for compliance managers, $305 ($260 × 

1.1745) for senior systems analysts, $328 ($279 × 

1.1745) for senior marketing manager, and $75 ($64 

× 1.1745) for compliance clerks. 

a. Compliance Costs 1100

The proposed amendments to extend 

Regulation ATS to Communication 

Protocol Systems, Currently Exempted 

Government Securities ATSs, and 

Current Government Securities ATSs 

and Regulation SCI to significant 

Government Securities ATSs and 

certain Communication Protocol 

Systems would result in a number of 

compliance costs. The Commission 

believes that compliance costs could be 

passed through (e.g., via higher fees) to 

market participants, resulting in higher 

trading costs. 

The requirements with respect to 

becoming a broker-dealer, filing Form 

ATS and Form ATS–N, and complying 

with the Fair Access Rule of Regulation 

ATS and Regulation SCI under the 

proposed amendments would result in 

compliance costs.1101 The initial and 

ongoing implementation costs and other 

compliance costs per entity associated 

with these requirements are presented 

in Table VIII.8.1102 The aggregates of 

these compliance costs are presented in 

Table VIII.9 through Table VIII.15. 

TABLE VIII.8—PER ATS IMPLEMENTATION COSTS AND OTHER COMPLIANCE COSTS FOR EACH PROPOSED AMENDMENT

Rule Compliance action Initial costs per 

entity 

Ongoing costs per 

entity 

Reg ATS, 301(b)(1) ............... Form BD filing ..................................................................... $900 a ............................. $300 d

Form ID filing ...................................................................... 50 b .................................

Other compliance costs (non-PRA based) ......................... 316,000 c ........................ 57,700 e

Reg ATS, 301(b)(2) ............... Form ATS filing ................................................................... 6,400 f ............................. 1,500 g

Reg ATS, 301(b)(5) ............... Fair Access ......................................................................... ........................................ 17,000 h

Reg ATS, 301(b)(6) ............... Capacity, Integrity, and Security of automated systems .... ........................................ 5,000 i

Reg ATS, 301(b)(9) ............... Form ATS–R filing .............................................................. ........................................ 6,000 j

........................................ 500 k

Reg ATS, 301(b)(10) ............. Written safeguards and procedures to protect subscribers’ 

trading information.

3,200 l ............................. 1,000 m

Reg ATS, 302 ........................ Recordkeeping .................................................................... ........................................ 3,400 n

Reg ATS, 303 ........................ Record preservation ........................................................... ........................................ 1,100 o

Reg ATS, 304 ........................ Form ATS–N filing .............................................................. 49,000 p .......................... 3,300 s

43,000 q .......................... 3,300 t

2,300 r ............................

Reg SCI ................................. Implementation costs (PRA based) .................................... 777,000 u ........................ 924,000 w

388,000 v ........................ 924,000 x

Reg SCI ................................. Other compliance costs (non-PRA based) ......................... 320,000 ∼ 2.4 million y ... 214,000 ∼ 1.6 million z

Reg SCI ................................. Subscriber costs (non-PRA based) .................................... ........................................ 10,000 aa

a Compliance Manager at $332 × 2.75 hours = $914. See also supra note 787. b Compliance Manager at $332 × 0.15 hour = $50. See also supra note 790. c See infra note 1120. d Compliance Manager at $332 × 0.95 hour = $316. See also supra note 788. e See infra note 1120. f(Attorney at $446 × 13 hours) + (Compliance Clerk at $75 × 7.5 hours) = $6,366. See also supra note 759. g (Attorney at $446 × 3 hours) + (Compliance Clerk at $75 × 2 hours) = $1,489. See also supra note 760. hAttorney at $446 × 37 hours = $16,513. See also supra note 764. iAttorney at $446 × 11.25 hours = $5,021. See also supra note 766. 

j((Attorney at $446 × 3 hours) + (Compliance Manager at $332 × 0.25 hour)) × 4 times = $6,114. See also supra note 770. k ((Compliance Manager at $332 × 0.25 hour) + (Compliance Clerk at $75 × 0.5 hour)) × 4 times = $483. See also supra note 771. l(Attorney at $446 × 7 hours) + (Compliance Clerk at $75 × 1 hour) = $3,199. See also supra note 773. m (Attorney at $446 × 2 hours) + (Compliance Clerk at $75 × 2 hours) = $1,043. See also supra note 774. n Compliance Clerk at $75 × 45 hours = $3,383. See also supra note 776. o Compliance Clerk at $75 × 15 hours = $1,128. See also supra note 777. p (Attorney at $446 × 57.1 hours) + (Chief Compliance Manager at $570 × 0.5 hour) + (Compliance Manager at $332 × 36.05 hours) + (Sr. 

Systems Analyst at $305 × 33.75 hours) + (Sr. Marketing Manager at $328 × 1 hour) + (Compliance Clerk at $75 × 8 hours) = $48,987. See also 

supra note 781. q (Attorney at $446 × 44.1 hours) + (Chief Compliance Manager at $570 × 0.5 hour) + (Compliance Manager at $332 × 36.05 hours) + (Sr. 

Systems Analyst at $305 × 33.75 hours) + (Sr. Marketing Manager at $328 × 1 hour) + (Compliance Clerk at $75 × 1 hour) = $42,659. See also 

supra note 782. r (Attorney at $446 × 2.5 hours) + (Compliance Manager at $332 × 1.5 hours) + (Sr. Systems Analyst at $305 × 1.5 hours) + (Compliance Clerk 

at $75 × 2.5 hours) = $2,260. See also supra note 783. 


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s ((Attorney at $446 × 5.5 hours) + (Compliance Manager at $332 × 2 hours) + (Compliance Clerk at $75 × 1.9 hours)) × 5 times = $3,262. See 

also supra note 784. tSee id. 

uThe PRA burden hours are based on the 2018 SCI PRA Supporting Statement. The Commission estimates an initial PRA burden for new

SCI entities of 2,034.3 hours. See also supra note 794. The PRA burden hours are monetized by applying inflation adjusted professional wage 

rates obtained via the methodology presented in supra note 1102. vSee id. The Commission estimates an initial PRA burden for existing SCI entities of 1,017.15 hours. See also supra note 793. w See id. The Commission estimates an ongoing PRA burden for all SCI entities of 2,458.65 hours. See also supra note 795. xSee id. 

ySee infra Section VIII.C.2.a.vi for discussion about non-PRA based initial compliance costs per entity. zSee infra Section VIII.C.2.a.vi for discussion about non-PRA based ongoing compliance costs per entity. aaSee infra Section VIII.C.2.a.vi for discussion about non-PRA based compliance costs per ATS subscriber. 

TABLE VIII.9—COMMUNICATION PROTOCOL SYSTEMS THAT ARE GOVERNMENT SECURITIES ATSS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Regulation SCI ........................................ 2 $2.2 million ∼ $6.4 million a ..................... $2.3 million ∼ $5 million.b

BD Registration. 

Fair Access .............................................. 2 .................................................................. 33,000.c

Other ........................................................ 4 209,000.d ................................................. 59,000.e

Total .................................................. 4 2.4 million ∼ 6.6 million ........................... 2.4 million ∼ 5.1 million. 

aThis cost figure is obtained by the summing initial implementation costs ($777,000) and non-PRA based compliance costs ($320,000 ∼ $2.4 

million) associated with Regulation SCI presented in supra Table VIII.8 for 2 Communication Protocol Systems that trade government securities. bThis cost figure is obtained by summing the ongoing implementation costs ($924,000) and non-PRA based compliance costs ($214,000 ∼ 

$1.6 million) associated with Regulation SCI presented in supra Table VIII.8 for 2 Communication Protocol Systems that trade government securities. cThis cost figure is the ongoing implementation cost associated with Rule 301(b)(5) presented in supra Table VIII.8 for 2 Communication Protocol Systems that trade government securities. dThis cost figure is obtained by summing the initial implementation costs associated with Rule 301(b)(10) and 304 ($49,000) presented in 

supra Table VIII.8 for 4 Communication Protocol Systems that trade government securities. eThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(9) ($6,000), 301(b)(10), 302, 303, and 

304 ($3,300) presented in supra Table VIII.8 for 4 Communication Protocol Systems that trade government securities. 

TABLE VIII.10—CURRENTLY EXEMPTED GOVERNMENT SECURITIES ATSS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Regulation SCI ........................................ 1 $1.1 million ∼ $3.2 million a ..................... $1.1 million ∼ $2.5 million.b

BD Registration. 

Fair Access .............................................. 3 .................................................................. 50,000.c

Other ........................................................ 7 365,000 d ................................................. 103,000.e

Total .................................................. 7 1.5 million ∼ 3.5 million ........................... 1.3 million ∼ 2.7 million. 

aThis cost figure is obtained by summing the initial implementation costs ($777,000) and non-PRA based compliance costs ($320,000 ∼ $2.4 

million) associated with Regulation SCI presented in supra Table VIII.8 for 1 Currently Exempted Government Securities ATS. bThis cost figure is obtained by summing the ongoing implementation costs ($924,000) and non-PRA based compliance costs ($214,000 ∼ 

$1.6 million) associated with Regulation SCI presented in supra Table VIII.8 for 1 Currently Exempted Government Securities ATS. cThis cost figure is the ongoing implementation cost associated with Rule 301(b)(5) presented in supra Table VIII.8 for 3 Currently Exempted 

Government Securities ATSs. dThis cost figure is obtained by summing the initial implementation costs associated with Rule 301(b)(10) and 304 ($49,000) presented in 

supra Table VIII.8 for 7 Currently Exempted Government Securities ATSs. eThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(9) ($6,000), 301(b)(10), 302, 303, and 

304 ($3,300) presented in supra Table VIII.8 for 7 Currently Exempted Government Securities ATSs. 

TABLE VIII.11—CURRENT GOVERNMENT SECURITIES ATS 

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Regulation SCI ........................................ 1 $708,000 ∼ $2.8 million a ......................... $1.1 million ∼ $2.5 million.b

Fair Access .............................................. 3 .................................................................. 50,000.c

Other ........................................................ 17 725,000 d ................................................. 64,000.e

Total .................................................. 17 1.4 million ∼ 3.5 million ........................... 1.3 million ∼ 2.6 million. 

aThis cost figure is obtained by summing the ongoing implementation costs ($924,000) and non-PRA based compliance costs ($214,000 ∼ 

$1.6 million) associated with Regulation SCI presented in supra Table VIII.8 for 1 Current Government Securities ATS. bThis cost figure is obtained by summing the ongoing implementation costs ($924,000) and non-PRA based compliance costs ($214,000 ∼ 

$1.6 million) associated with Regulation SCI presented in supra Table VIII.8 for 1 Current Government Securities ATS. cThis cost figure is the ongoing implementation cost associated with Rule 301(b)(5) presented in supra Table VIII.8 for 3 Current Government 

Securities ATSs. dThis cost figure is the initial implementation cost associated with Rule 304 ($43,000) presented in supra Table VIII.8 for 17 Current Government Securities ATSs. eThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(9) ($500) and 304 ($3,300) presented 

in supra Table VIII.8 for 17 Current Government Securities ATSs. 


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TABLE VIII.12—COMMUNICATION PROTOCOL SYSTEMS THAT ARE NMS STOCK ATSS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Regulation SCI. 

Fair Access. 

BD Registration. 

Other ........................................................ 4 209,000 a ................................................. 59,000.b

Total .................................................. 4 209,000 .................................................... 59,000. 

aThis cost figure is obtained by summing the initial implementation costs associated with Rule 301(b)(10) and 304 ($49,000) presented in 

supra Table VIII.8 for 4 Communication Protocol Systems that trade NMS stocks. bThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(9), 301(b)(10), 302, 303, and 304 

($3,300) presented in supra Table VIII.8 for 4 Communication Protocol Systems that trade NMS stocks. 

TABLE VIII.13—CURRENT NMS STOCK ATSS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Regulation SCI. 

Fair Access. 

Other ........................................................ 34 77,000 a ................................................... 16,000.b

Total .................................................. 34 77,000 ...................................................... 16,000. 

aThis cost figure is the initial implementation cost associated with Rule 304 ($2,300) presented in supra Table VIII.8 for 34 Current NMS Stock 

ATSs. bThis cost figure is the ongoing implementation cost associated with Rule 301(b)(9) ($500) presented in supra Table VIII.8 for 34 Current NMS 

Stock ATSs. 

TABLE VIII.14—OTHER COMMUNICATION PROTOCOL SYSTEMS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Rule 301(b)(6) ......................................... 2 .................................................................. $10,000.a

Fair Access .............................................. 6 .................................................................. 99,000.b

BD Registration ....................................... 6 1.9 million c .............................................. 360,000.d

Other ........................................................ 14 133,000 e ................................................. 191,000.f

Total .................................................. 14 2 million ................................................... 660,000. 

aThis cost figure is the ongoing implementation cost associated with Rule 301(b)(6) presented in supra Table VIII.8 for 2 Communication Protocol Systems that trade corporate debt securities. bThis cost figure is the ongoing implementation cost associated with Rule 301(b)(5) presented in supra Table VIII.8 for 6 Communication Protocol Systems that trade corporate debt securities or municipal securities. cThis cost figure is obtained by summing the initial implementation costs associated with Rule 301(b)(1) presented in supra Table VIII.8 for 6 

Communication Protocol Systems that trade neither government securities nor NMS stocks. dThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(1) presented in supra Table VIII.8 for 

6 Communication Protocol Systems that trade neither government securities nor NMS stocks. eThis cost figure is obtained by summing the initial implementation costs associated with Rule 301(b)(2) and 301(b)(10) presented in supra 

Table VIII.8 for 14 Communication Protocol Systems that trade neither government securities nor NMS stocks. fThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(2), 301(b)(9) ($6,000), 301(b)(10), 

302, and 303 presented in supra Table VIII.8 for 14 Communication Protocol Systems that trade neither government securities nor NMS stocks. 

TABLE VIII.15—OTHER CURRENT ATSS

Compliance Number of 

entities Aggregate initial costs Aggregate ongoing costs 

Rule 301(b)(6). 

Fair Access. 

Other ........................................................ 59 374,000 a ................................................. 115,000.b

Total .................................................. 59 374,000 .................................................... 115,000. 

aThis cost figure is the initial implementation cost associated with Rule 301(b)(2) presented in supra Table VIII.8 for 59 Current ATSs that 

trade neither government securities nor NMS stocks. bThis cost figure is obtained by summing the ongoing implementation costs associated with Rule 301(b)(2) and 301(b)(9) ($500) presented in 

supra Table VIII.8 for 59 Current ATSs that trade neither government securities nor NMS stocks. 

One commenter stated that the 

proposed amendments in the 2020 

Proposal would require a Legacy 

Government Securities ATS to separate 

trading activity in government securities 

and repos from non-NMS stock trading 

activity, which could impose 

administrative and operational burdens 

on both Government Securities ATSs 


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1103See ICE Bonds Letter I at 3 and 4. The 

commenter on the 2020 Proposal stated that this 

separation requirement would result in fewer 

venues and higher trading costs for subscribers to 

trade and hedge and concentrate trading among a 

few large Government Securities ATSs because 

smaller Legacy Government Securities ATSs may 

determine to exit due to the prohibitive costs 

associated with this separation requirement. This 

commenter also provided a list of costs associated 

with separating operation. See also supra Section 

III.B.1 and note 250. 

1104See supra Section III.B.I. 1105 Implementation costs are the monetized costs 

of PRA burdens. See also supra note 1100. 1106See the implementation costs associated with 

Rule 301(b)(10) in supra Table VIII.8. 1107See the implementation costs associated with 

Rule 302 in supra Table VIII.8. 1108See the implementation costs associated with 

Rule 303 in supra Table VIII.8. 1109See the implementation costs associated with 

Rule 301(b)(9) in supra Table VIII.8. 1110See the implementation costs associated with 

Rule 301(b)(2) and Rule 304 in supra Table VIII.8. 1111The initial and ongoing implementation costs 

per entity associated with Rule 301(b)(2) are 

approximately $6,400 and $1,500, respectively. See 

supra notes f and g in Table VIII.8. See also supra 

Section VII.D.1.a for a discussion about the 

implementation costs associated with Rule 

301(b)(2). 

1112The implementation cost associated with 

amending revised Form ATS–N is approximately 

$2,300 per entity. See supra note r in Table VII.8. 

See also supra Section VII.D.3 for a discussion 

about the implementation costs associated with 

Rule 304. 

1113The implementation costs associated with 

filing or re-filing electronic Form ATS–R is 

approximately $500 per entity. See supra note k in 

Table VII.8. See supra Section VII.D.1.d for a 

discussion about the implementation costs 

associated with Rule 301(b)(9). 

1114See 2018 SCI PRA Supporting Statement, 

supra notes 793, 794, and 795. 

1115 Government Securities ATSs are divided into 

two groups in discussing implementation costs 

because Government Securities ATSs operated by a 

broker-dealer operator of an NMS Stock ATS that 

is a SCI entity would have lower initial 

implementation costs. See also 2018 SCI PRA 

Supporting Statement, supra note 793. 

and subscribers.1103 The Commission 

believes that the proposed amendments 

do not require separating operations, 

and thus, Legacy Government Securities 

ATSs would not incur costs associated 

with separating operations.1104

i. Implementation Costs: 1105

Currently Exempted Government 

Securities ATSs and Communication 

Protocol Systems that would be newly 

subject to the requirements of 

Regulation ATS would incur 

implementation costs associated with, 

among other things, written safeguards 

and procedures to protect subscribers’ 

trading information,1106

recordkeeping,1107 record 

preservation,1108 and Form ATS–R.1109

Currently Exempted Government 

Securities ATSs and Communication 

Protocol Systems that trade NMS stocks 

or government securities would incur 

higher implementation costs due to the 

heightened requirements of filing Form 

ATS–N compared to other 

Communication Protocol Systems that 

would file Form ATS.1110

Current ATSs and Communication 

Protocol Systems that trade neither 

NMS stocks nor government securities 

would incur implementation costs 

associated with re-filing or filing the 

modernized Form ATS.1111 Current 

NMS Stock ATSs would incur 

implementation costs associated with 

amending revised Form ATS–N.1112

Furthermore, all current ATSs, 

Currently Exempted Government 

Securities ATSs, and Communication 

Protocol Systems would incur 

implementation costs to re-file or file 

the revised electronic Form ATS–R.1113

Government Securities ATSs that 

meet certain volume thresholds would 

be subject to the Fair Access Rule of 

Regulation ATS. The Commission 

estimates 3 Currently Exempted 

Government Securities ATSs, 3 Current 

Government Securities ATSs, and 2 

Communication Protocol Systems that 

trade government securities would be 

subject to the Fair Access Rule. These 

entities would incur the implementation 

costs per entity presented in Table 

VIII.8. 

Significant NMS Stock ATSs and 

ATSs that trade corporate debt 

securities, municipal securities, or nonNMS stock equity securities are subject 

to the Fair Access Rule. The 

Commission estimates 2 

Communication Protocol Systems that 

trade corporate debt securities, 1 

Communication Protocol System that 

trades municipal securities, and 3 

Communication Protocol Systems that 

trade non-NMS stock equity securities 

would be subject to the Fair Access 

Rule. These entities would incur the 

same implementation costs per entity 

presented in Table VIII.8. 

Significant ATSs that trade corporate 

debt securities or municipal securities 

are subject to Rule 301(b)(6). The 

Commission estimates that 2 

Communication Protocol Systems that 

trade corporate debt securities would be 

subject to Rule 301(b)(6) and incur the 

implementation costs per entity 

presented in Table VIII.8. 

The Commission believes that the 

2018 estimates of initial PRA burdens 

for new SCI entities and ongoing PRA 

burdens for all SCI entities under 

Regulation SCI are largely applicable to 

Government Securities ATSs.1114 For 

the purpose of implementation cost 

estimation, two groups of Government 

Securities ATSs are considered: 1115

Government Securities ATSs that are 

existing SCI entities; and Government 

Securities ATSs that are entirely new 

SCI entities currently not subject to 

Regulation SCI. For the first group 

(Government Securities ATSs that are 

existing SCI entities), the Commission 

believes that such entities would incur 

approximately 50 percent of the 

Commission’s initial PRA burden 

estimates for entirely new SCI entities. 

Furthermore, for the second group 

(Government Securities ATSs that are 

new SCI entities currently not subject to 

Regulation SCI), the Commission 

believes that such entities would incur 

the same estimated initial PRA burdens 

as those estimated for new SCI entities 

in the 2018 SCI PRA Supporting 

Statement. The Commission also 

believes that the same ongoing PRA 

burdens for all SCI entities estimated in 

the 2018 SCI PRA Supporting Statement 

are applicable to Government Securities 

ATSs in both the first and the second 

group. 

The Commission estimates that 4 

Government Securities ATSs would be 

subject to the requirements of 

Regulation SCI and incur the 

implementation costs per entity 

presented in Table VIII.8. Among the 

four Government Securities ATSs that 

satisfy the volume thresholds, the 

Commission believes that one 

Government Securities ATS (referred as 

the first group above) would incur 

approximately 50 percent of initial PRA 

burden estimates for an entirely new 

SCI entity included in the 2018 SCI PRA 

Supporting Statement, and three 

Government Securities ATSs (referred 

as the second group above) would incur 

the same estimated initial PRA burdens 

as those estimated for new SCI entities 

included in the 2018 SCI PRA 

Supporting Statement. In addition, the 

Commission believes that all four 

Government Securities ATSs would 

incur the same ongoing PRA burdens as 

all other SCI entities included in the 

2018 SCI PRA Supporting Statement. 

Significant ATSs that trade either 

NMS stocks or non-NMS stock equity 

securities are subject to the 

requirements of Regulation SCI. The 

Commission estimates that no 

Communication Protocol System that 

trades NMS stocks or non-NMS stock 

equity securities would be subject to 

Regulation SCI. If a significant 

Communication Protocol System that 

trades NMS stocks or equity securities 

that are not NMS stocks exists, it would 

incur the same range of implementation 

costs per entity presented in Table 

VIII.8. 

The estimated implementation costs 

for Communication Protocol Systems 

and Currently Exempted Government 

Securities ATSs associated with Rule 


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1116See supra Section II.D.2 for a discussion 

about FINRA rules. 

1117See https://www.finra.org/registration-examsce/classic-crd/fee-schedule#examfees for the 

schedule of FINRA registration fees. 

1118FINRA imposes a Gross Income Assessment 

as follows: $1,200 on a Member Firm’s annual gross 

revenue up to $1 million; a charge of 0.1215% on 

a Member Firm’s annual gross revenue between $1 

million and $25 million; a charge of 0.2599% on 

a Member Firm’s annual gross revenue between $25 

million and $50 million; a charge of 0.0518% on 

a Member Firm’s annual gross revenue between $50 

million and $100 million; a charge of 0.0365% on 

a Member Firm’s annual gross revenue between 

$100 million and $5 billion; a charge of 0.0397% 

on a Member Firm’s annual gross revenue between 

$5 and $25 billion; and a charge of 0.0855% on a 

Member Firm’s annual gross revenue greater than 

$25 billion. When a firm’s annual gross revenue 

exceeds $25 million, the maximum of current year’s 

revenue and average of the last three years’ revenue 

is used as the basis for the income assessment. See 

also https://www.finra.org/rules-guidance/notices/ 

09–68. 

1119Fees for reporting trades to FINRA may 

depend on the types of security, the size of trade, 

and the types of message (e.g., cancellation 

message, correction message). For example, fees for 

reporting trades to FINRA TRACE as follows: 

$0.475/trade for trade size up to and including 

$200,000 par value; $0.000002375 times the par 

value of the transaction (i.e., $0.002375/$1,000) for 

trade size over $200,000 and up to and including 

$999,999.99 par value; $2.375/trade for trade size of 

$1,000,000 par value or more; $1.50/trade for all 

transactions in securitized products that are Agency 

Pass-Through Mortgage-Backed Securities traded to 

be announced (‘‘TBA’’) or SBA-Backed ABS traded 

TBA (each ‘‘TBA transaction’’); $1.50/trade for 

cancellation or correction; and $3/trade for late 

trades. See also https://www.finra.org/rulesguidance/rulebooks/finra-rules/7730. 

1120See Exchange Act Release No. 33–9974 

(October 30, 2015), 80 FR 71388, 71509 (November 

16, 2015) (‘‘Regulation Crowdfunding Adopting 

Release’’). These estimates are adjusted for an 

inflation rate of 15.33 percent based on the Bureau 

of Labor Statistics data on CPI–U between October 

2015 and September 2021. In addition to the initial 

costs to become a member of FINRA, this cost 

includes the initial implementation costs of $950 

for filing Form BD and Form ID tabulated in Table 

VIII.8. The Commission recognizes that the cost of 

registering and becoming a member of a national 

securities association varies significantly among 

brokers, depending on facts and circumstances. The 

Commission estimates the range of cost to be 

between $57,500 and $576,500, and thus, chose the 

average amount of $317,000 for purposes of this 

discussion. 

1121See id. See also Regulation Crowdfunding 

Adopting Release at 71509. In addition to the 

ongoing annual costs to maintain a membership 

with FINRA, this cost includes the ongoing annual 

implementation costs of $300 to amend Form BD 

tabulated in Table VIII.8. 

301(b)(9) and (10), Rule 302, and Rule 

303 would represent a larger fraction of 

revenue for a small (measured in trading 

volume) ATS relative to that for a large 

ATS. This is because these costs would 

be fixed costs that these ATSs would 

incur regardless of the amount of 

trading activity that takes place on 

them. Furthermore, regardless of their 

size and transaction volume, all 

Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs would need to 

ensure that their disclosures meet the 

requirements of Form ATS–N and that 

they correctly file their Form ATS–N 

under Rule 304. Such Government 

Securities ATSs and Communication 

Protocol Systems might develop internal 

processes to ensure correct and 

complete reporting on Form ATS–N, 

which would result in a fixed 

implementation cost. These 

implementation costs would fall 

disproportionately on smaller 

(measured in trading volume) such 

Government Securities ATSs and 

Communication Protocol Systems in 

terms of implementation costs relative 

to trading volume (as opposed to larger 

such Government Securities ATSs and 

Communication Protocol Systems in 

terms of implementation costs relative 

to trading volume), because all 

Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs would likely incur 

these fixed implementation costs. 

However, smaller such Government 

Securities ATSs and Communication 

Protocol Systems that are not operated 

by multi-service broker-dealer operators 

and that generally do not engage in 

other brokerage or dealing activities in 

addition to their ATSs would likely 

incur lower implementation costs 

because certain sections of revised Form 

ATS–N would not be applicable to 

Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs. 

The implementation costs associated 

with Rule 304 would also vary across 

Government Securities ATSs and 

Communication Protocol Systems that 

are NMS Stock ATSs depending on the 

complexity of the ATS and the services 

that it offers. For example, some such 

ATSs might not segment subscriber 

order flow or offer counterparty 

selection protocols. These ATSs would 

not be required to complete Part III, 

Items 13 and 14 of revised Form ATS– 

N. As a result, such Government 

Securities ATSs and Communication 

Protocol Systems that are NMS Stock 

ATSs would incur lower 

implementation costs because these 

ATSs would apply lesser burden hours 

to complete their Form ATS–N. 

ii. Costs Associated With Broker-Dealer 

Requirements 

Under the proposed Rule 301(b)(1), 

Currently Exempted Government 

Securities ATSs that are banks (i.e., 

bank-operated Currently Exempted 

Government Securities ATSs) and 

Communication Protocol Systems that 

are non-broker-dealers (i.e., non-brokerdealer-operated Communication 

Protocol Systems) would be subject to 

broker-dealer registration requirements. 

The Commission believes that nonbroker-dealer-operated Communication 

Protocol Systems without a brokerdealer affiliate would incur additional 

compliance costs related to registering 

with the Commission as broker-dealers, 

becoming members of an SRO, such as 

FINRA, and maintaining broker-dealer 

registration and SRO membership, 

compared to those operated by brokerdealers and those with a broker-dealer 

affiliate. The initial costs would include 

the costs associated with filing Form BD 

and Form ID, FINRA membership 

application fees, and any legal or 

consulting costs necessary for 

effectively completing the application to 

be a member of FINRA (e.g., ensuring 

compliance with FINRA rules 1116

including drafting policies and 

procedures as may be required). The 

ongoing costs would include the costs 

associated with amending Form BD, and 

ongoing fees associated with FINRA 

membership and legal work relating to 

FINRA membership. 

The Commission recognizes that the 

costs associated with obtaining and 

maintaining FINRA membership would 

vary significantly depending on entity 

characteristics, activities, and the degree 

of the firm’s reliance on outside legal or 

consulting for effectively completing the 

application process and maintaining 

FINRA membership. The initial 

registration costs for FINRA 

membership 1117 would depend on, 

among other things, the number of 

associated persons being registered. The 

ongoing costs to remain a FINRA 

member would vary based on the scope 

of brokerage activities, revenue,1118 size 

(i.e., the number of registered persons 

and the number of branch offices), and 

trading volume.1119 Thus, entities with 

a smaller number of registered persons, 

fewer brokerage activities, smaller 

trading volume, and lower revenue 

would face lower costs. 

As outlined in Table VIII.8, the 

Commission estimates an initial cost of 

approximately $317,000 to register as a 

broker-dealer with the Commission and 

become a member of FINRA.1120

Additionally, the Commission estimates 

an ongoing annual cost of 

approximately $58,000 to maintain the 

broker-dealer registration and FINRA 

membership.1121 The Commission 

preliminarily believes that these costs 

related to broker-dealer registration and 

FINRA membership are relevant to nonbroker-dealer-operated Communication 

Protocol Systems without a brokerdealer affiliate. However, these cost 

estimates are uncertain because the 


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1122See supra note 1119 for fees for reporting 

trades to FINRA. The Commission estimates that 2 

non-broker-dealer-operated Communication 

Protocol Systems without a broker-dealer affiliate 

trade restricted securities, which may be subject to 

FINRA transaction reporting requirements. Thus, 

with respect to those restricted securities, these 

Communication Protocol Systems may incur costs 

associated with reporting trades to FINRA. 

1123See fee schedules for incorporation and 

amending the certificate of incorporation and its 

bylaws in the state of Delaware at: https://

corpfiles.delaware.gov/Aug09feesch.pdf. 

1124Registered Broker-dealers would be subject to 

requirements under the rules, such as 17 CFR 

240.15c3–1, 204.17a–1, 204.17a–3, 240.17a–4, and 

240.17a–5 (Rule 15c3–1, Rule 17a–1, Rule 17a–3, 

Rule 17a–4, and Rule 17a–5). 

1125See supra Section III.B.2 for a discussion 

about ATSs that are banks. 

1126For an entity that may adopt a registered 

affiliate structure, it is possible that it may have to 

file a Continuing Membership Application with 

FINRA noticing material changes to business 

operations resulting from adding ATS operations. 

See (under material change) https://www.finra.org/ 

registration-exams-ce/classic-crd/fee-schedule 

regarding the fees for the Continuing Membership 

Application with FINRA. 

Commission does not have information 

on the estimated 6 non-broker-dealeroperated Communication Protocol 

Systems without a broker-dealer 

affiliate, such as the number of 

associated persons of the broker entity 

and their licensing requirements, the 

scope of the proposed brokerage 

activities, and the degree of reliance on 

outside legal or consulting expertise 

necessary for effectively completing the 

application to be a member of FINRA. 

Furthermore, the Commission is unable 

to provide cost estimates related to trade 

reporting obligations 1122 because these 

costs would depend on various factors, 

such as the number of trades and the 

costs of updating systems for trade 

reporting requirements, for which the 

Commission does not have information. 

In addition to the costs associated 

with broker-dealer registration and 

FINRA membership, a non-brokerdealer-operated Communication 

Protocol System without a broker-dealer 

affiliate could incur costs related to 

restructuring its business and 

incorporating itself or a separate entity 

(i.e., an affiliate) to be registered as a 

broker-dealer. Such restructuring costs 

would include any costs that may be 

associated with making necessary 

changes to its business practices, fees 

for consulting and legal services, fees for 

incorporation and the amendment of its 

certificate of incorporation and its 

bylaws, and tax consequences. Fees for 

incorporation and amending the 

certificate of incorporation and its 

bylaws may be minimal. For example, 

fees for incorporation and amending the 

certificate of incorporation and its 

bylaws in the state of Delaware would 

range approximately between $89 and 

$200 depending on the entity type of 

incorporation.1123 However, certain 

restructuring costs, such as costs 

associated with making changes to 

business practices to comply with the 

broker-dealer registration requirements, 

could be significant. The Commission 

estimates that up to 6 non-broker-dealeroperated Communication Protocol 

Systems without a broker-dealer affiliate 

could be required to restructure their 

business in order to comply with the 

broker-dealer registration requirements. 

The Commission is unable to provide 

estimates on certain restructuring 

related costs for a non-broker-dealeroperated Communication Protocol 

System because the Commission does 

not have information regarding the 

scope of its restructuring, such as the 

need and the extent of required changes 

in current business practices, the need 

and the extent of consulting services, 

and its choice of entity type for 

incorporation. 

Upon becoming broker-dealers, 

operators of these Communication 

Protocol Systems would be subject to 

certain broker-dealer requirements with 

respect to maintaining net capital, 

reporting, and recordkeeping.1124 The 

compliance costs associated with 

maintaining net capital, reporting, and 

recordkeeping would depend on the 

business structure of a broker-dealer 

(i.e., the capital structure of a brokerdealer and the scope of a broker-dealer’s 

activities). For example, the costs would 

vary significantly depending on the 

types of securities a broker-dealer holds, 

the level of net capital a broker-dealer 

maintains, and whether a broker-dealer 

carries customer accounts, carries for 

other broker-dealers, is a registered 

investment adviser, is affiliated with an 

investment adviser, or transacts in 

principal capacity. However, to the 

extent that an operator of 

Communication Protocol System limits 

its activities to trading operations and 

does not expand into these other 

business activities, the operator would 

incur minimal costs with respect to net 

capital, reporting, and recordkeeping 

requirements upon registering as a 

broker-dealer. The Commission is 

unable to estimate the costs associated 

with these broker-dealer requirements 

because the Commission does not have 

information about whether or how the 

current business structures of the 

estimated 6 Communication Protocol 

Systems that are not operated by a 

registered broker-dealer nor how a 

broker-dealer affiliate might change 

upon registering as a broker-dealer. 

The Commission believes that a bankoperated Currently Exempted 

Government Securities ATS or a nonbroker-dealer-operated Communication 

Protocol System would not incur 

compliance costs associated with 

registering as a broker-dealer and 

becoming a member of an SRO (e.g., 

FINRA) if it has a broker-dealer affiliate. 

It is the Commission’s understanding 

that ATSs that are banks often are 

operated by bank affiliates that are 

themselves registered broker-dealers, 

rather than by the banks themselves.1125

A bank-operated Currently Exempted 

Government Securities ATS might adopt 

a similar registered affiliate structure for 

its government securities trading 

operations. For a non-broker-dealeroperated Communication Protocol 

System that is affiliated with an existing 

broker-dealer, it would be more costeffective for the Communication 

Protocol System to move its operations 

to an existing broker-dealer affiliate 

rather than restructure itself to become 

a broker-dealer or create a new brokerdealer entity to comply with the brokerdealer registration requirements. Thus, 

the Commission expects that such nonbroker-dealer-operated Communication 

Protocol Systems would choose the 

more cost-effective way of moving its 

trading operations to its registered 

broker-dealer affiliate. 

A broker-dealer affiliate that is adding 

ATS or Communication Protocol System 

operations would incur additional 

ongoing costs associated with 

maintaining FINRA membership if 

adding trading operations increases 

revenue, the number of registered 

persons or branch offices, trading 

volume, or expands the scope of 

brokerage activities.1126 Furthermore, a 

broker-dealer affiliate that is adding 

ATS or Communication Protocol System 

operations could incur additional costs 

associated with maintaining adequate 

net capital level, reporting, and 

recordkeeping depending on the 

changes in business structure of the 

broker-dealer. For the reasons discussed 

above, the Commission is unable to 

provide estimates on these additional 

costs for the estimated 1 bank-operated 

Currently Exempted Government 

Securities ATS and 2 non-brokeroperated Communication Protocol 

Systems that are affiliated with an 

existing broker-dealer. 

iii. Costs Associated With 

Ineffectiveness Declaration 

In addition to the implementation 

costs associated with filing and 

amending Form ATS–N, the 

Commission preliminarily believes that 

the proposed ability for the Commission 

to declare a Form ATS–N or Form ATS– 


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1127See Rule 304(a)(1)(iv)(B). 

1128See infra Section VIII.C.3.a.i.d for a 

discussion about the impact of a declaration of 

ineffectiveness on competition in the market for 

government securities and repo trading services. 

1129One commenter on the 2020 Proposal stated 

that the use of the same initial filing, amendment 

review, and effectiveness process for the previously 

proposed Form ATS–G as is currently in place for 

the Form ATS–N should reduce compliance 

burdens for market participants and reduce 

potential market confusion. See Tradeweb Letter at 

10. 

1130See ICE Bonds Letter I at 5. 

1131Smaller Government Securities ATSs and 

Communication Protocol Systems that trade NMS 

stocks that are not operated by multi-service brokerdealer operators and that generally do not engage 

in other brokerage or dealing activities in addition 

to their ATSs would likely incur lower 

implementation costs because certain sections of 

revised Form ATS–N would not be applicable to 

these ATSs. Furthermore, smaller such Government 

Securities ATSs and Communication Protocol 

Systems that operate simpler systems would likely 

incur lower implementation costs associated with 

the requirements of Form ATS–N because certain 

sections of revised Form ATS–N would not be 

applicable to these ATSs. 

1132See supra Section V.A.3 for a discussion 

about reasonableness and fees under the proposed 

amendments to the Fair Access Rule. 

N amendment ineffective could result in 

direct costs for Government Securities 

ATSs and Communication Protocol 

Systems that are NMS Stock ATSs.1127

If the Commission declares a 

Government Securities ATS’s or an 

NMS Stock ATS’s Form ATS–N or Form 

ATS–N amendment ineffective, then the 

ATS might have to cease operations, roll 

back a change in operations, or delay 

the start of operations until it is able to 

address the deficiencies in the 

previously filed form. 

An ineffective Form ATS–N could 

also impose indirect costs on the overall 

market for government securities and 

NMS stock trading services resulting 

from a potential reduction in 

competition or the removal of a sole 

provider of a niche service within the 

market.1128

However, the Commission believes 

that there would not be a substantial 

burden imposed in connection with 

resubmitting Form ATS–N or a Form 

ATS–N amendment or from an 

ineffective declaration in general.1129

Because Government Securities ATSs, 

Communication Protocol Systems that 

are NMS Stock ATSs, and market 

participants would not incur these costs 

unless the Commission declares a Form 

ATS–N or amendment ineffective, such 

Government Securities ATSs and 

Communication Protocol Systems 

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. These 

incentives would encourage such 

Government Securities ATSs and 

Communication Protocol Systems to 

initially submit a more accurate and 

complete Form ATS–N and 

amendments thereto, which would 

reduce the likelihood that they are 

declared ineffective. 

Additionally, Current Government 

Securities ATSs and Communication 

Protocol Systems that are NMS Stock 

ATSs would not have to bear the costs 

of immediately ceasing operations 

under the proposal without having an 

effective Form ATS–N on file with the 

Commission because Current 

Government Securities ATSs would be 

able to continue operations pursuant to 

a previously filed initial operation 

report on Form ATS and Currently 

Exempted Government Securities ATSs 

and Communication Protocol Systems 

that trade NMS stocks would also be 

able to continue operations pending the 

Commission’s review of their initial 

Form ATS–N. However, if after notice 

and opportunity for hearing, the 

Commission declares an initial Form 

ATS–N filed by a Current Government 

Securities ATS, Currently Exempted 

Government Securities ATS, or 

Communication Protocol System 

ineffective, the ATS would be required 

to cease operations until an initial Form 

ATS–N is effective. 

One commenter stated that the 

Commission’s imposition of an 

‘‘effectiveness’’ regime to previously 

proposed Form ATS–G under the 2020 

proposal is an unnecessary 

administrative burden on Government 

Securities ATSs, and will be 

particularly burdensome on those 

Government Securities ATSs with 

limited volumes in government 

securities.1130 The implementation costs 

associated with the requirements of 

Form ATS–N, including the costs for 

developing internal processes to ensure 

correct and complete reporting on Form 

ATS–N to avoid an ineffectiveness 

declaration, would be fixed costs, and 

thus, would represent a larger fraction 

of revenue for a small (measured in 

trading volume) ATS relative to that for 

a large ATS. However, the Commission 

preliminarily believes that this adverse 

effect on small ATSs would be mitigated 

to some extent, because, as discussed in 

Section VIII.C.2.a.i, the Commission 

believes that certain smaller 

Government Securities ATSs and 

Communication Protocol Systems that 

trade NMS stocks would likely incur 

lower implementation costs.1131

iv. Costs Associated With the Fair 

Access Rule 

The Commission preliminarily 

believes that applying the Fair Access 

Rule could impose compliance costs 

(non-PRA based) on Government 

Securities ATSs, Communication 

Protocol Systems that trade NMS stocks, 

non-NMS stock equity securities, 

corporate debt securities, or municipal 

securities, and passive systems that 

trade NMS stocks. Under the proposal, 

Government Securities ATSs, 

Communication Protocol Systems that 

trade NMS stocks, non-NMS stock 

equity securities, corporate debt 

securities, or municipal securities, and 

passive systems that trade NMS stocks 

that meet the specified aggregate volume 

thresholds could no longer treat 

subscribers differently with respect to 

access to the services of the ATS 

without a reasonable basis. For example, 

an ATS could not offer one class of 

subscriber a service (e.g., an order 

interaction procedure, order type, 

trading protocol, or connectivity 

method) without offering the service to 

all subscribers unless the ATS had a 

reasonable basis for the differential 

treatment. In addition, an ATS could 

not charge fees that unreasonably 

prohibit certain market participants 

from accessing the services of the 

ATS.1132 If ATSs must change fee 

structures, order interaction procedures, 

trading protocols, or access provisions 

and adapt their operating model due to 

the Fair Access Rule, those ATSs would 

incur costs related to changing business 

operations. 

The Commission, however, is unable 

to quantify the potential compliance 

costs discussed above. In particular, the 

Commission lacks data on the extent to 

which Communication Protocol 

Systems that trade NMS stocks, nonNMS stock equity securities, corporate 

debt securities, or municipal securities, 

passive systems that trade NMS stocks, 

and Government Securities ATSs that 

meet the aggregate volume thresholds 

currently grant access to the ATS 

services to all subscribers on the same 

terms, and on the specific types of 

services and subscribers in question. In 

addition, the Commission lacks similar 

data for other trading venues in the 

government securities, corporate debt 

securities, and municipal securities 

market, which might offer differential 

access to services. Thus, the 

Commission is not able to estimate the 

costs associated with changing fee 

structures and adapting operating 

models. 

Significant ATSs that trade NMS 

stocks, non-NMS stock equity securities, 

corporate debt securities, or municipal 

securities are subject to the Fair Access 


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1133See supra note 1079 for details on the Fair 

Access thresholds. See supra note 310 for the 

application of the Fair Access Rule on the trading 

of NMS stocks, non-NMS stock equity securities, 

municipal securities, and corporate debt securities. 

See also supra Section V.A.2 for a discussion about 

the aggregation of volume threshold. 

1134See supra note 1085. 

1135The Commission estimates that 2 

Communication Protocol Systems that trade 

corporate debt securities or municipal securities 

would exceed the thresholds under the proposed 

Rule 301(b)(6). See supra Section VIII.C.2.a.i. 

1136See supra note 157. 

1137See supra note 888 (discussing commenter 

statements on the extent to which fixed incomes 

systems already comply with the provisions of Rule 

301(b)(6)). 

1138For example, Rule 301(b)(6) would apply to 

a narrower set of systems, as compared to 

Regulation SCI: Rule 301(b)(6) of Regulation ATS 

applies only to systems that support order entry, 

order routing, order execution, transaction 

reporting, and trade comparison, which is narrower 

than the definition of SCI system. Furthermore, 

Rule 301(b)(6) would not require significant 

Communication Protocol Systems that trade 

corporate debt securities or municipal securities to 

maintain a geographically diverse backup facility. 

1139While NMS Stock ATSs that meet certain 

volume thresholds are also subject to Regulation 

SCI, the Commission estimates that no 

Communication Protocol Systems that trade NMS 

stocks would be subject to Regulation SCI. The 

Commission preliminarily believes that a 

Communication Protocol System that trades NMS 

stocks would incur the same implementation costs 

and other compliance costs (non-PRA based), 

including ATS’s participant costs, in the same range 

as those presented in Table VIII.8. 

1140See BrokerTec Letter at 7. 

1141See supra note 374 and accompanying text. 

1142See supra Table VIII.8 for the compliance 

costs associated with Regulation SCI. 

1143See Regulation SCI Adopting Release, supra 

note 3. In the Regulation SCI Adopting Release, 

fixed income ATSs are excluded from the 

regulation. 

1144See id. The Regulation SCI Adopting Release 

explains that compliance costs would depend on 

the complexity of SCI entities’ systems and they 

would be higher for SCI entities with more complex 

systems. 

Rule. The proposed amendments to 

aggregate volume across affiliated ATSs 

in calculating certain volume thresholds 

could increase the number of smaller 

affiliate ATSs that would be subject to 

the Fair Access Rule. Smaller affiliate 

ATSs that would not have met the 

current volume thresholds individually 

would be subject to the Fair Access Rule 

if they meet the proposed aggregate 

volume thresholds. As discussed above, 

if ATSs must adapt their operating 

models as a result of being subject to the 

Fair Access Rule, those ATSs would 

incur costs related to changing business 

operations. The Commission estimates 

that no current smaller affiliate ATS that 

trades NMS stocks, non-NMS stock 

equity securities, corporate debt 

securities, or municipal securities and 

does not already currently meet the Fair 

Access volume thresholds would meet 

the volume thresholds 1133 and be 

subject to the Fair Access Rule if 

volume is aggregated across affiliated 

ATSs.1134

v. Costs Associated With Rule 301(b)(6) 

In addition to the implementation 

costs associated with reporting outages 

and recordkeeping under the proposed 

Rule 301(b)(6), the Commission 

preliminarily believes that significant 

Communication Protocol Systems that 

trade corporate debt securities or 

municipal securities could incur 

compliance costs (non-PRA based) to 

ensure adequate capacity, integrity, and 

security with respect to those systems 

that support order entry, order routing, 

order execution, transaction reporting, 

and trade comparison.1135 To the extent 

that these significant Communication 

Protocol Systems currently do not meet 

certain standards under the proposed 

Rule 301(b)(6), they would incur 

compliance costs associated with, 

among other things, capacity planning, 

and conducting periodic capacity stress 

tests of critical systems that process 

transactions.1136 For example, a 

Communication Protocol System would 

incur the costs associated with 

upgrading systems (e.g., investing in 

computer hardware and software) if its 

critical systems that process 

transactions do not have adequate 

capacity. In addition, significant 

Communication Protocol Systems 

would incur costs associated with the 

independent review of their systems on 

an annual basis. 

The Commission believes that the 

compliance costs for one of these 

significant Communication Protocol 

Systems would depend on the extent to 

which its existing policies with respect 

to maintaining adequate capacity, 

integrity, and security of systems that 

support order entry, order routing, order 

execution, transaction reporting, and 

trade comparison already comply with 

the standards under the proposed Rule 

301(b)(6). The Commission is unable to 

estimate these compliance costs because 

it lacks information on the existing 

policies for maintaining adequate 

capacity, integrity, and security of such 

systems for significant Communication 

Protocol Systems that trade corporate 

debt securities or municipal 

securities.1137 However, the 

Commission believes that compliance 

costs associated with Rule 301(b)(6) 

would be significantly less than those of 

Regulation SCI because the scope and 

requirements of Rule 301(b)(6) would be 

narrower than those of Regulation 

SCI.1138

vi. Costs Associated With Regulation 

SCI 

Government Securities ATSs that 

meet certain volume thresholds would 

incur compliance costs (non-PRA based 

costs) as SCI entities.1139 The Regulation 

SCI Adopting Release in 2014 estimated 

that an SCI entity would incur an initial 

cost of between approximately $320,000 

and $2.4 million. Additionally, an SCI 

entity would incur an ongoing annual 

cost of between approximately $214,000 

and $1.6 million. The Commission 

believes that these compliance costs are 

largely applicable to Government 

Securities ATSs. 

One commenter on the 2020 Proposal 

stated that Regulation SCI imposes a 

specific manner in which SCI Entities 

must organize their asset inventories, 

and that redesigning and implementing 

new asset inventories to comply with 

Regulation SCI would require 

significant investment and would 

impose material upfront compliance 

costs that may divert resources rather 

than encourage meaningful 

investment.1140 Although Regulation 

SCI would require SCI Entities to 

identify systems based on their 

functionality, as discussed above, the 

Commission believes that Regulation 

SCI is designed to provide flexibility in 

applying industry standards to establish 

policies and procedures.1141 This 

flexibility may not require SCI Entities 

to redesign their systems to comply with 

Regulation SCI. However, to the extent 

that an SCI Entity would be required to 

redesign its systems, the Commission 

believes that the costs would be 

included in the compliance costs 

associated with Regulation SCI 

discussed above.1142

However, the Commission is 

uncertain about the actual level of costs 

Government Securities ATSs would 

incur because these costs might differ 

from the types of SCI entities considered 

in the Regulation SCI Adopting Release, 

which did not include fixed income 

ATSs.1143 The Commission is also 

uncertain about the actual level of costs 

Government Securities ATSs would 

incur because the actual costs might 

differ based on various factors, such as 

complexity of SCI entities’ systems and 

the degree to which SCI entities employ 

third-party systems. The Commission 

believes that Government Securities 

ATSs with relatively simpler systems 

would incur lower compliance costs 

compared to those with more complex 

systems.1144 Also, any SCI systems 

operated by a third-party on behalf of an 

SCI entity would be subject to the 

requirements of Regulation SCI. The 

Commission believes that Government 

Securities ATSs with higher 

dependency on SCI systems operated by 


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1145See id. The Regulation SCI Adopting Release 

discusses that compliance costs could in part 

depend on the extent to which an SCI entity uses 

third-party systems because ensuring compliance of 

systems operated by a third-party with Regulation 

SCI may be more costly than ensuring compliance 

of internal systems with Regulation SCI. 

1146See id. The Regulation SCI Adopting Release 

estimated connectivity costs as part of business 

continuity and disaster recovery plans to be 

approximately $10,000 per SCI entity member or 

participant. 

1147See supra note 467 and accompanying text. 

1148The Commission believes that, even if, an 

ATS has to change its business operations as a 

result of exceeding the Fair Access Rule threshold 

and is able to attract additional order flow or 

subscribers, the ATS’s profits will likely be lower. 

If an ATS could have increased its profits by 

altering its business model before it was subject to 

the Fair Access Requirements, it would presumably 

have done so. 

third-party vendors might incur higher 

compliance costs compared to those 

with lower dependency on third-party 

systems.1145

In addition, the Commission believes 

that some Government Securities ATSs’ 

participants required to participate in 

the testing of business continuity and 

disaster recovery plans would incur 

Regulation SCI-related connectivity 

costs of approximately $10,000 

apiece.1146 If larger members or 

participants of SCI Government 

Securities ATSs already maintain 

connections to backup facilities 

including for testing purposes, the 

compliance costs associated with the 

business continuity and disaster 

recovery plans testing requirements in 

Rule 1004 for those larger member or 

participants might be limited. 

The Commission believes that the 

costs to comply with Regulation SCI 

discussed above would also fall on 

third-party vendors employed by 

Government Securities ATSs to provide 

services used in their SCI systems. The 

costs for third-party vendors imposed by 

Regulation SCI would depend on the 

extent to which Government Securities 

ATSs use third-party systems that fall 

under the definition of SCI systems and 

the portion of third-party vendors 

operating SCI systems on behalf of large 

(i.e., over the volume threshold) 

Government Securities ATSs that 

already comply with the requirements 

of Regulation SCI. It is possible that 

some third-party vendors operating SCI 

systems on behalf of large Government 

Securities ATSs already comply with 

the requirements of Regulation SCI 

because they also operate the SCI 

systems for other SCI (e.g., SCI ATSs, 

SCI SROs). The additional compliance 

costs from the proposed amendments of 

Regulation SCI for these third-party 

vendors would be minimal. However, at 

this time, it is difficult to estimate the 

cost for third-party vendors because the 

Commission does not know the extent 

to which Government Securities ATSs 

use third-party systems that fall under 

the definition of SCI systems. 

b. Indirect Costs 

The Commission believes that the 

proposed amendments could result in 

indirect costs for market participants 

and certain Government Securities 

ATSs and Communication Protocol 

Systems. 

The public disclosure requirements of 

Form ATS–N under the proposal could 

generate indirect costs for some 

subscribers by causing Government 

Securities ATSs and Communication 

Protocol Systems that are NMS Stock 

ATSs to stop sharing information that 

they might currently offer to only some 

subscribers. Form ATS–N would require 

Government Securities ATSs and NMS 

Stock ATSs to publicly disclose any 

platform-wide order execution metrics 

that they share with any subscriber. To 

avoid publicly disclosing this 

information, an ATS might stop sharing 

the information with subscribers. The 

trading costs of subscribers that 

currently use this information to help 

make trading decisions would increase 

if the information is no longer available 

to them. The risk of ATSs disclosing 

less information than they currently do 

depends on several factors, such as the 

commercial purpose for releasing such 

information. If the subscribers who 

receive such information demand the 

information as a condition of 

subscribing, ATSs would have a 

commercial incentive to continue 

disclosing it. Thus, the Commission 

believes that this risk might be low. 

The Commission believes that the 

public disclosure of Form ATS–N 

would generate indirect costs, in the 

form of transfers, for some subscribers of 

Government Securities ATSs or 

Communication Protocol Systems that 

are NMS Stock ATSs who might 

currently have more information 

regarding some ATS features, such as 

order priority and matching procedures, 

than other subscribers. The public 

disclosure of these features would 

reduce informed subscribers’ 

information advantage over other 

subscribers on such Government 

Securities ATSs or Communication 

Protocol Systems and increase their 

trading costs. In this regard, the 

Commission recognizes that this effect 

would be a transfer to those subscribers 

who would receive the proposed 

information, from those subscribers 

currently exclusively receive such 

information. 

Some Government Securities ATSs 

and Communication Protocol Systems 

that are NMS Stock ATSs would 

experience indirect costs from the 

public disclosure of Form ATS–N to the 

extent that this form would reveal 

information to competitors. If a 

Government Securities ATS or NMS 

Stock ATS in part relies on certain 

operational characteristics (e.g., order 

types, trading functionalities) to attract 

customer order flow and generate 

trading revenues, it is possible that the 

public disclosure of these characteristics 

in Form ATS–N would make it easier 

for other trading venues to adopt the 

operational characteristics, which 

would lower trading volume and reduce 

revenue of the disclosing ATS. Such 

costs to the disclosing ATS would 

constitute transfers to competing ATSs 

rather than a net cost to the market. 

That said, the Commission believes 

that the risk of these transfers is low 

because it is not likely the responsive 

information to the revised Form ATS–N 

would include detailed enough 

information regarding operational facets 

such that the public disclosure of the 

information would allow another ATS 

to replicate the functionality to the 

extent it would adversely affect the 

competitive position of the disclosing 

ATS in the market.1147

The Commission believes that 

Government Securities ATSs and 

Communication Protocol Systems that 

trade NMS stocks, non-NMS stock 

equity securities, corporate debt 

securities, or municipal securities, and 

passive systems that trade NMS stocks 

could indirectly experience costs in the 

form of lost revenue if they meet or 

exceed the Fair Access Rule thresholds 

and need to alter their business model 

to comply with the requirements of the 

Fair Access Rule. If they need to alter 

their terms of service or operations it 

may lead some subscribers that 

currently trade on the venue and benefit 

from the existing terms of service or 

operations to reduce the order flow they 

route to the venue or even leave the 

venue entirely, which could reduce the 

ATS’s revenue. However, this revenue 

loss may be mitigated if the ATS is also 

able to attract new subscribers or 

additional order flow that was 

previously not able to access the 

venue.1148 The Commission is not able 

to estimate the loss of revenues that 

Government Securities ATSs, 

Communication Protocol Systems that 

trade NMS stocks, and passive systems 

that meet the aggregate volume 

thresholds could incur as a result of 

applying the Fair Access Rule, because 

the venues may alter their business 

operations in response to being subject 


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1149See supra Section VIII.C.1 for a discussion 

about benefits from the requirements of Regulation 

ATS and Regulation SCI and Section VIII.C.2 for a 

discussion about costs of the requirements of 

Regulation ATS and Regulation SCI. 

1150The expected compliance costs of Regulation 

SCI could act as a barrier to entry for new entrants 

who expect to eventually become SCI ATSs. If the 

expected compliance costs reduce the number of 

potential new entrants, this would reduce the 

potential competition from new entrants. However, 

these effects may not be significant because the 

entry decision at the margin, when the venue is 

small, may not be significantly influenced by what 

would happen if the venue later became large 

enough and met the requirements of Regulation SCI. 

to the requirements of the Fair Access 

Rule and how the venue’s existing 

subscribers may consequently alter their 

order flow or subscription to the ATS. 

The Commission believes that market 

participants could incur indirect costs 

related to Government Securities ATSs, 

Communication Protocol Systems that 

trade NMS stocks, non-NMS stock 

equity securities, corporate debt 

securities, or municipal securities, and 

passive systems that trade NMS stocks 

being subject to the Fair Access Rule. As 

discussed in Section VIII.C.1.b, applying 

the Fair Access Rule could lower 

trading costs for market participants 

who are able to gain access to a trading 

venue from which they were previously 

excluded. This could impose costs on 

existing subscribers who may currently 

benefit from limiting access to the 

trading venue, though the Commission 

recognizes these costs would amount to 

transfers. To the extent this occurs, it is 

possible that some existing subscribers 

may redirect some or all of their trading 

interest to another trading venue that is 

not subject to the Fair Access Rule in 

order to preserve some of the benefits 

they may receive from a trading venue 

limiting access. These existing 

subscribers may incur search costs to 

find other venues to trade on as well as 

costs associated with administrative and 

operational procedures (e.g., means of 

access, connectivity, order entry) to 

trade on a new trading venue. To the 

extent that existing subscribers shift 

their trading from the trading venue that 

is subject to the Fair Access Rule to a 

trading venue that is not subject to the 

rule, the benefits marker participants 

receive from gaining access to trading 

venues subject to the Fair Access Rule 

could be reduced. 

Furthermore, compared to larger and 

more established ATSs, it is possible 

that younger ATSs rely more on 

providing catered services, including 

more advantageous access, to specific 

clients or a clientele, in order to grow 

their businesses. If being subject to the 

Fair Access Rule prohibits these ATSs 

from doing this, these ATSs could 

restrict trading on their systems when 

they are close to meeting the volume 

thresholds under the Fair Access Rule. 

This may not result in a significant 

increase in trading costs for market 

participants, because the order flow that 

was being sent to those ATSs would 

likely be absorbed and redistributed 

amongst other ATSs or non-ATS 

venues. However, if an ATS that is the 

sole provider of a niche service limits 

the trading in certain securities to avoid 

being subject to the Fair Access Rule, it 

could be more difficult for some market 

participants to find an alternative 

trading venue for that niche service, 

which would result in a larger increase 

in trading costs. 

Similarly, the proposed amendments 

to apply certain aggregate volume 

thresholds to the Fair Access Rule in the 

markets for government securities, 

corporate debt and municipal securities, 

and equity securities could also cause 

market participants to incur similar 

indirect costs. If the aggregate volume of 

ATSs operated by a common brokerdealer or operated by affiliated brokerdealers approaches the Fair Access 

volume thresholds, then the operators 

could restrict trading in one or more 

securities on their systems in order to 

avoid being subject to the requirements 

of the Fair Access Rule. However, ATSs 

in the markets for government 

securities, corporate debt securities, and 

municipal securities may be unlikely to 

restrict trading in individual securities 

on their systems because the aggregated 

volume threshold is applied 

categorically rather than to individual 

securities. 

Market participants could also incur 

indirect costs from the proposed 

amendments to apply certain aggregate 

volume thresholds to the Fair Access 

Rule if it causes a broker-dealer or 

affiliated broker-dealers that operate 

multiple ATSs to shut down one or 

more their smaller ATSs in order to 

avoid triggering the Fair Access 

threshold. This could cause market 

participants that subscribed to one of 

the shutdown platforms to incur search 

costs to find another venue to trade on. 

The Commission believes that market 

participants could incur indirect costs 

related to applying Regulation SCI to 

Government Securities ATSs and 

Communication Protocol Systems in 

equity securities and with applying Rule 

301(b)(6) to Communication Protocol 

Systems in the market for corporate debt 

securities or municipal securities. If a 

Government Securities ATS or 

Communication Protocol System that 

trades NMS stocks is close to satisfying 

the volume thresholds of Regulation SCI 

or Rule 301(b)(6), it could limit the 

trading in certain securities on its 

systems to stay below the volume 

thresholds in order to avoid being 

subject to Regulation SCI or Rule 

301(b)(6). If this occurs for a 

Government Securities ATS or 

Communication Protocol System that is 

the sole provider of a niche service, as 

discussed above, some market 

participants would incur higher trading 

costs. 

Additionally, in order to stay below 

the volume thresholds under Regulation 

SCI or Rule 301(b)(6), an ATS could 

break itself up into smaller ATSs. If this 

results in its subscribers changing their 

administrative and operational 

procedures (e.g., means of access, 

connectivity, order entry), the 

subscribers would incur costs associated 

with making those administrative and 

operational changes to utilize the ATS, 

or otherwise incur search costs to find 

another venue to trade. 

3. Efficiency, Competition, and Capital 

Formation 

The Commission has considered the 

effects of the proposed amendments on 

efficiency, competition, and capital 

formation, and discussed these effects 

below. 

a. Competition 

The Commission preliminarily 

believes that the proposed amendments 

to Regulation ATS and Regulation SCI 

would affect competition in the market 

for trading services.1149

i. Regulation ATS 

The Commission believes that the 

proposed amendments to Rule 3b–16 

and Regulation ATS would promote 

competition by requiring current ATSs 

and Communication Protocol Systems 

to operate on a more equal basis. 

Additionally, the Commission believes 

that the regulatory requirements and 

compliance costs associated with the 

proposed amendments to Rule 3b–16 

and Regulation ATS could act as a 

deterrent or a barrier to entry for 

potential ATSs or cause some smaller 

existing trading venues to exit the 

market for trading services.1150

However, based on the estimated costs 

in Section VIII.C.2.a.i above, the 

burdens imposed by these regulatory 

requirements or compliance costs may 

not be large enough for these effects to 

be significant. Even if a smaller trading 

venue ceased operating, the 

Commission believes it may not have a 

significant adverse effect on overall 

competition among trading venues, 

because the market for trading services 

is competitive and the trading volume 

from the venue would likely be 


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1151The competitive effects would vary based on 

the types of securities and the role that ATSs and 

Communication Protocol Systems play in each 

securities market. See supra Sections VIII.B.2.d, 

VIII.B.3.d, VIII.B.4.d, and VIII.B.5.f for a discussion 

about competition in the market for trading services 

in different securities markets. Furthermore, the 

Commission acknowledges that the effects on 

competition could be greater if a smaller trading 

venue that is the sole provider of a niche service 

were shut down. To the extent this occurs, it could 

adversely impact competition because it would 

require some market participants to find other 

venues to trade on that may not minimize their 

trading costs to the same extent. However, even in 

this case, the overall effects on competition may 

still be limited because a competitor could create 

similar business models if demand were adequate, 

and if it did not do so, it seems likely new entrants 

would do so if demand were sufficient. 

1152See supra Sections VIII.B.2.d, VIII.B.2.d, 

VIII.B.2.d, and VIII.B.7 (discussing how current 

ATSs in some markets tend to be interdealer 

markets and Communication Protocol Systems tend 

to be dealer-to-customer markets). 

1153Under the proposal, Communication Protocol 

Systems that choose not to register as exchanges can 

instead register as broker-dealers and comply with 

Regulation ATS. Furthermore, under the proposal, 

Communication Protocol Systems operated by nonbroker-dealers would be subject to the same 

regulatory requirements as ATSs, including the 

broker-dealer registration requirement of Regulation 

ATS. The Commission estimates that 6 non-brokerdealer-operated Communication Protocol Systems 

without a broker-dealer affiliate exist. The 

Commission assumes that, under the proposed 

amendments, Communication Protocol Systems 

would choose to register as broker-dealers and 

comply with Regulation ATS, rather than register as 

exchanges. See supra note 1056 and accompanying 

text. 

1154See ICE Bonds Letter II at 2 and 3. 

1155See supra Sections VIII.B.2, VIII.B.3, VIII.B.4, 

VIII.B.5, and VIII.B.6 for discussions regarding 

regulatory requirements for ATSs in the government 

securities, corporate debt securities, municipal 

securities, equities, and options market, 

respectively. One commenter on the Concept 

Release stated that applying a consistent regulatory 

framework to trading platforms that provide 

equivalent services to market participants, while 

also distinguishing between platforms that offer 

distinct trading protocols, would level the 

competitive landscape and allow market 

participants to choose trading platforms and 

protocols based on the merits of the services 

provided. Furthermore, this commenter also stated 

that it would not be appropriate to regulate all types 

of electronic trading protocols in the same manner 

regardless of their systemic risk profiles or to 

regulate electronic trading protocols more strictly 

than equivalent non-electronic trading protocols. 

See Tradeweb Letter at 4. 

1156Under the proposal, bank-operated Currently 

Exempted Government Securities ATSs would be 

subject to the same regulatory requirements as nonbank-operated Currently Exempted Government 

Securities ATSs and Current Government Securities 

ATSs. The Commission estimates that 1 bankoperated Currently Exempted Government 

Securities ATS exists. 

1157Current Government Securities ATSs might 

be at a competitive disadvantage to Currently 

Exempted Government Securities ATSs and 

Communication Protocol Systems, which do not 

currently incur compliance costs associated with 

the requirements of Regulation ATS. As discussed 

above, Currently Exempted Government Securities 

ATSs, bank-operated Currently Exempted 

Government Securities ATSs, Communication 

Protocol Systems, and Current Government 

Securities ATSs compete in the market for 

government securities and repo trading services 

with different regulatory requirements. For 

example, due to reporting requirements of 

Regulation ATS, it would be more difficult or costly 

for a Current Government Securities ATS to 

implement significant operational changes to 

compete with Currently Exempted Government 

Securities ATSs and Communication Protocol 

Systems if the Current Government Securities 

ATS’s competitive advantage is driven by 

operational facets that would be reported on Form 

ATS. See also supra Sections II, III, VIII.B.2.a, and 

VIII.B.2.b for a discussion about the differences in 

regulatory requirements between Current 

Government Securities ATSs, Currently Exempted 

Government Securities ATSs, and Communication 

Protocol Systems under the current regulatory 

framework. 

1158Additionally, although non-ATS venues 

would compete with ATSs in the market for 

government securities and repo trading services, 

non-ATS venues cannot offer the same services as 

ATSs without becoming ATSs. 

1159See supra Section VIII.C.1 for a discussion 

about benefits from the requirements of Regulation 

ATS and Regulation SCI. 

1160For the purpose of this discussion, financial 

technology firm is interpreted to be a type of 

Communication Protocol System (e.g., RFQ system). 

absorbed and redistributed amongst 

other ATSs or non-ATS venues.1151

Although the proposed amendments 

to Exchange Act Rule 3b–16 and 

Regulation ATS may not significantly 

increase the barriers to entry for new 

trading venues or cause some existing 

smaller trading venues to exit the 

market, the Commission lacks certain 

information necessary to quantify the 

extent to which entities that otherwise 

would seek to operate as a trading venue 

in the markets for government 

securities, repos, corporate, municipal, 

or equity securities would be dissuaded 

from doing so. Specifically the decision 

for a trading venue to continue 

operating or to cease operating depends 

on numerous factors and the 

Commission lacks information about 

many of those factors. For example, the 

Commission does not have information 

on the extent to which an existing 

Communication Protocol Systems 

would potentially need to alter its 

operations or business model as a result 

of the proposed amendments to Rule 

3b–16 and Regulation ATS. 

(a) Regulatory Framework 

To the extent that current ATSs and 

Communication Protocol Systems 

compete,1152 the proposed changes to 

Exchange Act Rule 3b–16, which would 

subject Communication Protocol 

Systems to the exchange regulatory 

framework, which can include 

complying with Regulation ATS,1153

would promote competition by 

requiring current ATSs and 

Communication Protocol Systems to 

operate on a more equal basis in 

securities markets. One commenter on 

the Concept Release stated that nonATS trading platforms that are neither 

registered as exchanges nor as ATSs 

perform core market place functions in 

fixed income securities (e.g., corporate 

and municipal bonds) trading.1154 This 

commenter also noted that these nonATS trading platforms are operated by 

either broker-dealers or unregulated 

entities. Furthermore, this commenter 

stated that the significant regulatory 

burdens on ATSs put ATSs at a 

competitive disadvantage to non-ATS 

trading platforms that are not subject to 

the same regulatory obligations. 

Extending the requirements of 

Regulation ATS to Communication 

Protocol Systems would help eliminate 

a competitive disadvantage for ATSs 

arising from uneven regulatory 

requirements in the market for trading 

services.1155 As discussed in Section 

II.B.3, the proposed amendment would 

subject both broker-dealer-operated and 

non-broker-dealer-operated 

Communication Protocol Systems to the 

requirements of Regulation ATS. To 

comply with the broker-dealer 

registration requirements of Regulation 

ATS, a non-broker-dealer-operated 

Communication Protocol System would 

be required to become a member of an 

SRO (e.g., FINRA) and comply with the 

requirements of the SRO, to which ATSs 

are currently required. 

Similarly, extending Regulation ATS 

to Currently Exempted Government 

Securities ATSs 1156 and 

Communication Protocol Systems that 

trade government securities would help 

promote competition by eliminating a 

Current Government Securities ATS’s 

competitive disadvantage that might 

arise due to uneven regulatory 

requirements in the market for 

government securities and repo trading 

services.1157

The Commission acknowledges that 

some Government Securities ATSs and 

Communication Protocol Systems could 

restructure their operations to be nonATSs to avoid being subject to 

Regulation ATS and Regulation SCI if 

the requirements are too burdensome or 

impair the ability of the trading venue 

to compete. However, the risk of this 

occurring may be mitigated because the 

proposed amendments to Rule 3b–16 

may make it difficult for Government 

Securities ATSs and Communication 

Protocol Systems to restructure their 

operations to be non-ATSs.1158 To the 

extent this does occur, the benefits and 

enhancements to competition discussed 

above would be reduced.1159

One commenter on the Concept 

Release stated that the flexibility of the 

current regulatory framework allows 

financial technology firms1160 to 


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1161See Bloomberg Letter at 10 and 17. 1162See Bloomberg Letter at 23. 1163For example, it would take longer for a 

Communication Protocol System that trades 

government securities to implement an innovative 

operational facet that required a significant change 

to its systems, e.g. an innovative trading protocol, 

because they it need to file a Form ATS–N material 

amendment 30 days before implementing the 

system change. See supra IV.A. 1164See supra Section VIII.C.1. 1165The compliance costs associated with the 

requirements of Regulation ATS are generally 

represented by implementation costs (the 

monetized costs of PRA burdens). See also supra 

note 1100. See supra Section VIII.C.2.a.i for a 

discussion on the implementation costs associated 

with Rule 301(b)(9) and (10), Rule 302, and Rule 

303. Communication Protocol Systems that are not 

broker-dealers and Currently Exempted 

Government Securities ATSs that are banks would 

incur additional compliance costs associated with 

the broker-dealer registration requirements under 

Rule 301(b)(1). See infra Section VIII.C.3.1.i.c) for 

a discussion of the competitive effects of brokerdealer registration requirements. 

1166See supra Section VIII.2.a.i for a discussion 

about the impact of implementation costs for small 

ATSs. 

1167Based on the estimated costs in Section 

VIII.C.2.a.i above, the Commission preliminarily 

believes that the compliance costs may not be large 

enough for these effects to be significant. See supra 

note 1151 and accompanying text. 

1168See supra Section VIII.C.2. 

1169See SIFMA Letter at 9 and 11. Another 

commenter on the Concept Release stated that the 

revision of the definition of ‘‘exchange’’ in 

Exchange Act Rule 3b–16 (‘‘Rule 3b–16’’) to expand 

the applicability of Regulation ATS to firms 

currently regulated as non-ATS broker-dealers may 

cause disruption if not undertaken carefully. See 

Tradeweb Letter at 2. An additional commenter 

stated that the Commission must be careful in 

implementing any reforms to the oversight of 

corporate bond and municipal securities trading 

venues to ensure that there are no unintended 

consequences for investors, such as the reduction 

in the availability of the types of platforms that 

investors utilize to effect transactions in these 

securities. See MFA Letter at 8. 

1170For the purpose of this discussion, fintech is 

interpreted to be a type of Communication Protocol 

System (e.g., RFQ system). 

1171See Bloomberg Letter at 3. This commenter 

on the Concept Release stated that adding fintechs, 

such as RFQ systems, to the definition of exchange 

would erect high regulatory hurdles for innovation 

and new fintech entrants. See also Bloomberg Letter 

at 28. Another commenter on the Concept Release 

similarly expressed concern that any revisions to 

the regulatory framework for fixed income 

electronic trading should not stifle the investment 

and innovation that has led to the variety of existing 

trading protocols, and that it would be a mistake to 

interrupt this evolution through the increased 

imposition of an equity-based regulatory 

framework. See MarketAxess Letter at 3. 

1172See Bloomberg Letter at 20. This commenter 

also stated that a change in the definition of 

exchange would threaten to distort the market 

structure by creating a one-size-fits-all approach 

that is biased against the trading of less-liquid 

instruments, damaging liquidity formation. See id. 

1173See supra Section VIII.C.3.a.i.a). 

innovate and compete fiercely.1161 This 

commenter also stated that this 

structure creates relatively low costs for 

entry (and exit) in the development of 

new technologies.1162 Subjecting 

Communication Protocol Systems to the 

requirements of Regulation ATS could 

reduce operational flexibility. For 

example, it would be more costly for a 

Communication Protocol System to 

implement significant changes to 

operational facets that would be 

required to be reported on Form ATS or 

Form ATS–N. The Commission 

acknowledges that this reduction in 

operational flexibility could, under 

certain circumstances, make it more 

difficult to innovate.1163 That said, in 

addition to the other benefits discussed 

above,1164 the Commission believes that 

the proposed amendments would foster 

competition by requiring current ATSs 

and Communication Protocol Systems 

to operate on a more equal basis in the 

market for trading services. This, in 

turn, would help promote innovation. 

(b) Compliance Costs of Regulation ATS 

The Commission preliminarily 

believes that the compliance costs 

associated with the requirements of 

Regulation ATS would have different 

effects on the competitive position of 

ATSs depending on their size. However, 

the Commission believes that these 

initial and ongoing compliance costs 

may not have a significant adverse 

impact on overall competition in the 

market for trading services. 

As a result of the proposed extension 

of Regulation ATS to Communication 

Protocol Systems and Currently 

Exempted Government Securities ATSs, 

these ATSs would be subject to Rule 

301(b)(9) and (10), Rule 302, and Rule 

303. Most of the estimated compliance 

costs 1165 associated with these rules 

would be fixed costs to those ATSs 

regardless of the amount of trading 

activity that takes place on them, and 

thus, these compliance costs would 

represent a larger fraction of revenue for 

a small (measured in trading volume) 

ATS relative to that for a large ATS.1166

Furthermore, most of the estimated 

compliance costs associated with the 

requirements of Form ATS–N under 

Rule 304, which all Government 

Securities ATSs and Communication 

Protocol Systems that trade NMS stocks 

would incur, would be fixed costs. This 

could have an adverse impact on small 

ATSs in competing against larger ATSs, 

which could act as a deterrent or a 

barrier to entry for potential ATSs or 

result in small ATSs exiting the market 

for trading services.1167 However, if 

small Government Securities ATSs and 

Communication Protocol Systems that 

trade NMS stocks engage in providing 

simpler services, these small ATSs are 

likely to incur lower compliance 

costs.1168

One commenter on the Concept 

Release stated that the regulatory 

burdens associated with subjecting all 

electronic platforms to the requirements 

of Regulation ATS could ultimately 

reduce the number of different 

platforms available.1169 Another 

commenter on the Concept Release 

stated that the changes contemplated to 

Rule 3b–16 could end up raising costs 

for new financial technology (i.e., 

fintech) 1170 entrants (liquidity 

solutions) to enter, stifle innovation and 

damage the current ability of market 

participants to locate liquidity in all 

illiquid security markets.1171 This 

commenter also stated that a change in 

the definition of exchange would insert 

unnecessary intermediation between 

dealers and their customers and damage 

liquidity formation.1172

As discussed above, the compliance 

costs from the proposed amendments to 

Regulation ATS may not significantly 

increase the barriers to entry for new 

trading venues or cause some existing 

Communication Protocol Systems and 

Currently Exempted Government 

Securities ATSs to exit the market. 

Therefore, the Commission believes that 

the compliance costs associated with 

Regulation ATS may not have a 

significant adverse impact on 

competition in the markets for trading 

services. As discussed above, while the 

Commission acknowledges the 

proposed amendments could reduce 

operational flexibility, which could, 

under certain circumstances, make it 

more difficult to innovate, the 

Commission believes increased 

competition from the proposed 

amendments providing a more equal 

regulatory basis would help promote 

innovation.1173 To the extent the 

proposed amendments force an 

innovative fintech to exit the market, it 

may be able to restructure itself (rather 

than operate as an ATS) as a third-party 

vendor and continue to provide certain 

innovative services, or otherwise sell its 

technology to another ATS, which 

would mitigate to some extent any 

adverse impact the proposed 

amendments may have on innovation. 

To the extent the proposed 

amendments result in a Communication 

Protocol System that trades less liquid 

securities exiting the market for trading 

services, it could increase the trading 

costs of its subscribers if they need to 

find a new trading venue or are forced 

to go through multiple intermediaries 

(i.e., broker-dealers) to find 

counterparties. However, as discussed 

above, the Commission preliminarily 

believes this may not result in a 

significant increase in trading costs for 

market participants because the trading 


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1174See supra Section VIII.C.2.b. 

1175The Commission estimates there are 6 nonbroker-dealer-operated Communication Protocol 

Systems without a broker-dealer affiliate. See supra 

Section VIII.C.2.a.ii. 

1176As discussed above, the costs would vary 

significantly across firms and the Commission’s 

estimate is uncertain because it does not have 

information on the non-broker-dealer-operated 

Communication Protocol Systems without a brokerdealer affiliate. See id. 

1177The Commission estimates an initial cost of 

approximately $317,000 to register as a brokerdealer with the Commission and become a member 

of FINRA and an ongoing annual cost of 

approximately $58,000 to maintain the brokerdealer registration and FINRA membership. See id. 

1178See id for a discussion about the costs 

associated with the broker-dealer registration 

requirements under Rule 301(b)(1). 

1179See supra note 1151 and accompanying text. 

1180Unlike the current rules applicable to NMS 

Stock ATSs under Rule 304 of Regulation ATS with 

respect to ineffectiveness, the Commission does not 

have a process to declare a Form ATS ineffective 

because of the quality of the disclosures and cause 

the ATS cease operating pursuant the exemption. 

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

1181See Rule 304(a)(1)(iv)(B). 

1182See id. 

1183See supra Section VIII.C.2.a.iii (discussing 

the Commission’s belief that the potential costs of 

an ineffectiveness declaration would incentivize 

Government Securities ATSs and Communication 

Protocol Systems to initially submit a more accurate 

and complete Form ATS–N and amendments, 

which would reduce the likelihood that they are 

declared ineffective). 

1184See supra Section VIII.C.1.b. 

1185One commenter on the 2020 Proposal stated 

that, since the bilateral fixed-income market is a 

heavily relationship-driven business, the Fair 

Access rule would better ensure that broker-dealers 

and their affiliates cannot engage in retaliatory 

behavior, and thus improve access and competition 

for the largest, most systemically important 

markets. See AFREF Letter at 3. 

1186See supra Section VIII.C.2.b (discussing the 

indirect costs to market participants related to the 

requirements of the Fair Access Rule). 

interest that was being sent to the 

Communication Protocol System would 

likely be absorbed and redistributed 

amongst other ATSs or non-ATS 

venues.1174

(c) Broker-Dealer Registration 

Requirements 

In addition to the compliance costs 

associated with the requirements of 

Regulation ATS, non-broker-dealeroperated Communication Protocol 

Systems without a broker-dealer affiliate 

would incur additional compliance 

costs related to registering with the 

Commission as broker-dealers, 

becoming members of an SRO, such as 

FINRA, and maintaining broker-dealer 

registration and SRO membership.1175

Although these additional compliance 

costs could harm the competitive 

position of these Communication 

Protocol Systems and raise barriers to 

entry for entrants who are not brokerdealers nor affiliated with another 

broker-dealer, the Commission 

preliminarily believes that the 

compliance costs associated with the 

proposed broker-dealer registration 

requirements may not have a significant 

adverse effect on overall competition in 

the market for trading services. 

Although the Commission 

acknowledges uncertainty about the 

compliance costs associated with the 

proposed broker-dealer registration 

requirements,1176 there are two reasons 

why these costs may not be significant 

enough to make a non-broker-dealeroperated Communication Protocol 

Systems exiting the market likely. First, 

the Commission believes that the 

estimated average costs may not be 

significant enough to make exiting the 

market likely.1177 Second, the 

Commission believes that the adverse 

effect on competition may be limited to 

existing small Communication Protocol 

Systems and this adverse effect may be 

mitigated to some extent because small 

Communication Protocol Systems 

would incur lower compliance costs 

associated with the broker-dealer 

registration requirements.1178 To the 

extent that one of these Communication 

Protocol Systems ceased operating, the 

Commission believes it may not have a 

significant adverse effect on overall 

competition among trading venues, 

because the market for trading services 

is competitive and the trading volume 

from the venue would likely be 

absorbed and redistributed amongst 

other ATSs or non-ATS venues.1179

(d) Ineffectiveness Declaration 

The proposed ability for the 

Commission to be able to declare a Form 

ATS–N or Form ATS–N amendment 

ineffective could result in compliance 

costs for Government Securities ATSs 

and Communication Protocol Systems 

that are NMS Stock ATSs and may affect 

competition in the market for 

government securities, repos, and NMS 

stock trading services. However, based 

on Commission staff’s experience with 

NMS Stock ATSs that filed an initial 

Form ATS–N, the Commission 

preliminarily believes this would be an 

unlikely result.1180 To the extent the 

Commission declares an initial Form 

ATS–N or amendment ineffective, the 

ATS would either have to cease 

operations 1181 or, in the case of an 

amendment, roll back any changes it 

made and operate pursuant to its 

previous Form ATS–N that is effective 

until it is able to address the 

deficiencies and file a new Form ATS– 

N that becomes effective.1182 To the 

extent the Commission declares an 

initial Form ATS–N or amendment 

ineffective, some broker-dealer 

operators of Government Securities 

ATSs and Communication Protocol 

Systems in NMS Stocks might find that 

the costs of addressing deficiencies in 

Form ATS–N outweigh the benefits of 

continuing to operate the trading venue, 

particularly if the trading venue does 

not constitute a significant source of 

profit for a broker-dealer operator. 

The ability of the Commission to 

declare Form ATS–N ineffective could 

also raise barriers to entry for new 

ATSs, as it might create uncertainty as 

to whether the Commission would 

declare its initial Form ATS–N effective 

or ineffective and as to the cost of 

avoiding an ineffective declaration. If a 

new ATS’s initial Form ATS–N is 

declared ineffective, it would require 

time and additional expenditures to 

address the deficiencies delaying the 

commencing of operations, which 

would deter some potential ATSs from 

entry into the market for trading 

services. However, because an 

ineffectiveness declaration would be an 

unlikely result,1183 the Commission 

believes it would not significantly raise 

the barriers to entry for new ATSs. 

(e) Fair Access 

The Commission believes that 

applying the Fair Access Rule to 

Government Securities ATSs, 

Communication Protocol Systems, and 

passive systems could increase 

competition between market 

participants in the markets for 

government securities, repos, corporate 

and municipal securities, and equity 

securities. As discussed above, to the 

extent that there are market participants 

currently excluded from trading on 

significant Government Securities ATSs, 

Communication Protocol Systems, or 

passive systems, applying the Fair 

Access Rule to Government Securities 

ATSs, Communication Protocol 

Systems, and passive systems could 

increase trading venue options available 

to these market participants, which 

could lower their trading costs.1184 This, 

in turn, could increase competition 

among market participants trading on 

these platforms, which could be 

significant sources of liquidity and 

represent a significant portion of trading 

volume in their respective markets.1185

However, these competitive effects may 

be reduced to the extent that some 

existing subscribers of trading venues 

that are subject to the Fair Access Rule 

redirect their trading interest to other 

trading venues not subject to the Fair 

Access Rule in order to preserve some 

of the benefits they may receive from a 

trading venue limiting access.1186 If the 


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1187See supra Section VIII.C.2.b. 

1188See id. 

1189Under the proposed amendments, 

Government Securities ATSs (inclusive of 

Communication Protocol Systems, as proposed) and 

Communication Protocol Systems that trade NMS 

stocks would need to begin disclosing their Form 

ATS–N. Current NMS Stock ATSs already 

publically disclose their Form ATS–N. 

1190See supra Section VIII.C.1.b for a discussion 

about benefits from public disclosure of Form 

ATS–N. 

1191See supra note 1151 and accompanying text 

for a discussion on the effects of ATSs exiting the 

market for trading services. 

1192Under the proposed amendments, 

Government Securities ATSs would also be 

required to file fee amendments on Form ATS–N. 

This could promote competition among 

Government Securities ATSs because timely fee 

disclosure of fee changes by Government ATSs 

would make it easier for market participants to 

compare fees between trading venues. This could 

incentivize trading venues in the market for 

Government Securities to reduce their fees to 

compete to attract order flow. 

1193See supra Section IV.A for a discussion about 

fee amendments on Form ATS–N. 1194Under Section 19(b)(3), SRO rule changes 

that: Constitute a stated policy, practice, or 

interpretation with respect to the meaning, 

administration, or enforcement of an existing rule 

of the SRO; establish or changing a due, fee, or 

other charge imposed by the SRO; or are concerned 

solely with the administration of the SRO, are 

immediately effective upon filing. However, the 

Commission may suspend one of these SRO rule 

changes within 60 days of the date the SRO rule 

change is filed with the Commission, if it appears 

to the Commission that such action is necessary or 

appropriate in the public interest, for the protection 

of investors, or the maintenance of fair and orderly 

markets, to remove impediments to, and perfect the 

mechanisms of, a national market system, or 

otherwise in furtherance of the purposes of the 

Exchange Act. If the Commission does suspend a 

SRO rule change, then it shall institute proceedings 

under Section 19(b)(2)(B) to determine whether the 

proposed SRO rule change should be approved or 

disapproved. See 15 U.S.C. 78s(b)(2) and 15 U.S.C. 

78s(b)(3). 

1195Currently, an amendment to a fee could result 

in an ATS filing an updating amendment or a 

material amendment, depending on the nature of 

the change and the ATS’s assessment of whether 

such change was material. If an NMS Stock ATS 

would file an updating amendment to disclose a fee 

change, then the proposed amendment would help 

level the playing field by reducing the amount of 

time that the NMS Stock ATS would have before 

it had to disclose a fee change, bringing it more in 

line with the disclosure timeframes of exchanges. 

If an NMS Stock ATS would file a material 

amendment to disclose a fee change, then the 

proposed amendment would help level the playing 

field because the NMS Stock ATS would no longer 

have to give 30 days’ notice before initiating the fee 

Continued 

proposed amendments to apply certain 

aggregate volume thresholds increase 

the number of smaller affiliate ATSs 

that would be subject to the Fair Access 

Rule, it could also increase competition 

among market participants, to the extent 

certain market participants are currently 

excluded from accessing these 

platforms. 

The Commission believes that the 

proposed amendments to apply certain 

aggregate volume thresholds to the Fair 

Access Rule could harm competition 

among trading venues in the markets for 

government securities, corporate debt 

and municipal securities, and equity 

securities. As discussed above, if the 

aggregate volume of ATSs operated by a 

common broker-dealer or operated by 

affiliated broker-dealers approaches the 

Fair Access volume thresholds, then the 

operators could restrict trading on their 

systems in one or more securities in 

order to avoid being subject to the 

requirements of the Fair Access 

Rule.1187 However, ATSs in the markets 

for government securities and corporate 

debt and municipal securities may be 

unlikely to restrict trading in individual 

securities on their systems because the 

aggregated volume threshold is applied 

categorically rather than to individual 

securities. If these venues restrict 

trading in some securities, it would 

reduce competition among trading 

venues to attract order flow in these 

securities. 

Additionally, the proposed 

amendments to apply certain aggregate 

volume thresholds to the Fair Access 

Rule could also harm competition 

among trading venues if they cause a 

broker-dealer or affiliated broker-dealers 

that operate multiple ATSs to shut 

down one or more their smaller ATSs in 

order to avoid triggering the Fair Access 

threshold.1188 However, because the 

trading volume on these smaller ATSs 

would likely be absorbed and 

redistributed amongst other ATSs or 

non-ATS venues, the Commission 

believes that the overall effects on 

competition among trading venues may 

not be significant. 

(f) Public Disclosure 

The increase in transparency due to 

the public disclosure of Form ATS–N 

would promote competition in the 

markets for government securities, 

repos, and NMS stock trading services. 

The increase in competition could result 

in lower venue fees, improve the 

efficiency in customer trading interest 

or order handling procedures, and 

promote innovation. For instance, 

because the public disclosure of Form 

ATS–N would make it easier for market 

participants to compare fees across 

ATSs,1189 market participants could 

choose to send their orders to ATSs that 

offer lower fees, which in turn, could 

induce ATSs to lower their fees to 

attract new subscribers. If non-ATS 

venues compete with ATSs for trading 

services, the increased operational 

transparency of ATSs might also 

incentivize non-ATS trading venues to 

reduce their fees to compete with ATSs. 

Because the public disclosure of Form 

ATS–N would make it easier for market 

participants to compare the quality of 

trading services, such as innovative 

trading functionalities, order handling 

procedures, and execution statistics—if 

they are made available, across 

venues,1190 market participants would 

be more likely to send their trading 

interests or orders to ATSs that offer 

better trading services. This would 

promote greater competition in the 

market for trading services and 

incentivize ATSs to innovate, including, 

in particular, technology related to 

trading services to improve the quality 

of such services to attract more 

subscribers. 

Similarly, the public disclosure of 

Form ATS–N would also result in 

market participants redirecting their 

trading interest away from ATSs that 

offer lower quality trading services 

compared to other ATSs, which could 

result in these ATSs earning less 

revenue. If the loss in revenue causes 

these ATSs to become unprofitable, they 

might choose to exit the market.1191

The proposed amendment to require 

timely fee change disclosure on Form 

ATS–N would promote competition 

between current NMS Stock ATSs and 

other trading venues in the market for 

NMS stocks, including exchanges.1192 In 

the Commission staff’s experience, NMS 

Stock ATSs have taken varied 

approaches to the reporting of fees. 

Current NMS Stock ATSs that treat fee 

changes as material changes in filing 

Form ATS–N are required to wait 30 

calendar days from the filing date to 

implement a fee change.1193 In other 

cases, NMS Stock ATSs have filed 

updating amendments no later than 30 

days following the end of the calendar 

quarter in which a fee change was made. 

The Commission believes that requiring 

NMS Stock ATSs to file a fee 

amendment no later than the date it 

makes the change to a fee or fee 

disclosure would require those NMS 

Stock ATSs to provide the public with 

sufficient notice about a fee change 

while enabling those NMS Stock ATSs 

to nimbly change fees in competing 

against other trading venues. 

Furthermore, under Section 19(b) of the 

Exchange Act, national securities 

exchanges can implement fee changes 

upon filing with the Commission.1194

To the extent that NMS Stock ATSs 

compete with exchanges in fees to 

attract order flow, the proposed 

amendment would promote competition 

by helping to level the playing field 

between NMS Stock ATSs and 

exchanges in terms of the timeframes in 

which they can initiate and disclose fee 

changes.1195


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change, bringing it more in line with the notice 

timeline in which exchanges can initiate fee 

changes. 

1196See supra note 1151 and accompanying text 

for a discussion on the effects of ATSs exiting the 

market for trading services. 

1197See supra note 467 and accompanying text. 

1198See Tradeweb Letter at 3, 10, and 11. 

Similarly, another commenter stated that 

publication of compliance procedures/processes is 

not commonplace and risks requiring disclosure of 

proprietary information. See ICE Bonds Letter I at 

6. 

1199See ICE Bonds Letter I at 5 and ICE Bonds 

Letter II at 4. 

1200See supra Section VIII.C.3.a.i.a). 

1201NMS Stock ATSs that meet certain volume 

thresholds are subject to Regulation SCI. The 

Commission estimates that no Communication 

Protocol System that is an NMS Stock ATS would 

be subject to Regulation SCI. The Commission 

preliminarily believes that subjecting significant 

Communication Protocol Systems that are NMS 

Stock ATSs to Regulation SCI would affect 

competition as discussed in the Regulation SCI 

Adopting Release. 

1202The expected compliance costs could act as 

a barrier to entry for new entrants who expect to 

eventually become SCI ATSs, but the Commission 

preliminarily believes this would not be a likely 

possibility. See supra note 1150. 

1203See supra note 348 for the definition of 

indirect SCI systems. 

1204See supra Section VIII.C.2.a.vi. 

The public disclosure of a 

Government Securities ATS’s or 

Communication Protocol System that 

trades NMS stock’s previously nonpublic information regarding innovative 

operational facets could adversely 

impact competition in the market for 

trading services and also reduce the 

incentives for these trading venues to 

innovate. If the competitive advantage 

of an ATS in the market is driven by 

certain operational innovations, the 

disclosure of this information could 

result in other competing ATSs with 

similar operational platforms 

implementing similar methodologies, 

which could cause market participants 

to send their trading interest or orders 

to those other ATSs. To the extent some 

ATSs may rely on these innovations to 

attract trading interest, this could cause 

some existing ATSs to exit the market 

or raise the barriers to entry for new 

ATSs, which could adversely impact 

competition.1196 Additionally, it could 

reduce the incentives for ATSs to 

innovate if publicly disclosing new 

innovations results in the disclosing 

ATS earning less revenue from new 

innovations it develops. However, the 

Commission believes that the risk of 

these adverse effects occurring would be 

low, because the information disclosed 

on Form ATS–N is not likely to include 

detailed enough information regarding 

operational facets or innovations such 

that the public disclosure would 

adversely affect the competitive position 

of the disclosing ATS.1197

One commenter on the 2020 Proposal 

stated that the Commission should not 

require making commercially sensitive 

information filed on the previously 

proposed Form ATS–G publicly 

available, which the commenter 

classified as information on certain fees 

or charges for use of the ATS’s services 

and on aggregate, platform-wide order 

flow and execution statistics that the 

ATS already otherwise collects and 

publishes to one or more 

subscribers.1198 The commenter stated 

that the public disclosure of such 

information would have a negative 

impact on innovation and competition 

among ATSs. As discussed above, the 

Commission believes that the 

responsive information to the Form 

ATS–N is not likely to include 

commercially sensitive or other 

information the public disclosure of 

which would result in the disclosing 

ATSs exiting the market for trading 

services and ultimately reduce 

transparency. 

One commenter on the 2020 Proposal 

stated that if the disclosure 

requirements of previously proposed 

Form ATS–G are too burdensome or 

impair the ability of Government 

Securities ATSs to compete, it will 

discourage the expansion of ATSs and 

potentially encourage operators of 

Government Securities ATS to 

restructure their operations to avoid 

being characterized as an ATS, which 

would ultimately result in less 

transparency rather than more.1199 As 

discussed above, although the 

Commission acknowledges that some 

Government Securities ATSs could 

restructure their operations to be nonATSs to avoid being subject to the 

public disclosure of Form ATS–N, the 

risk of this occurring may be mitigated 

because the proposed amendments to 

Rule 3b–16 may make it difficult for 

them to restructure their operations to 

be non-ATSs.1200

ii. Regulation SCI 

The Commission believes that the 

requirements imposed by Regulation 

SCI may not have a significant adverse 

effect on competition in the market for 

trading services or on market 

participants’ trading costs. 

The Commission believes that the 

compliance costs imposed by 

Regulation SCI may not have a 

significant adverse effect on competition 

among SCI ATSs, non-SCI ATSs, and 

non-ATS venues in the government 

securities market due to mitigating 

factors.1201 The compliance costs 

imposed by Regulation SCI would have 

some impact on competition in the 

market for government securities trading 

services. Specifically, because non-SCI 

ATSs do not have to incur the 

compliance costs associated with 

Regulation SCI, non-SCI ATSs and nonATS venues would gain a competitive 

advantage in the market for trading 

services over SCI ATSs, with which 

they compete.1202 If SCI ATSs pass on 

the compliance costs to their subscribers 

in the form of higher fees, SCI ATSs 

would lose order flow or their 

subscribers to other non-SCI ATSs and 

non-ATS venues with lower fees. 

Adverse competitive effects, however, 

would be mitigated because an SCI ATS 

would likely have more robust systems, 

fewer disruptive systems issues, and 

better up-time compared to non-SCI 

ATSs. Furthermore, any adverse 

competitive effect may be minor if an 

SCI ATS is large and has a more stable 

and established subscriber base than 

other ATSs and non-ATS venues. 

The compliance costs associated with 

participating in business continuity and 

disaster recovery plan testing would 

affect competition among subscribers of 

SCI ATSs and also would raise barriers 

to entry for new subscribers. Because 

some subscribers would incur 

compliance costs associated with Rule 

1004 and others would not, it would 

adversely impact the ability for those 

subscribers of SCI ATSs to compete. 

However, it is difficult to gauge the 

extent of impact on competition because 

the Commission does not have sufficient 

information, for example, on whether 

certain subscribers of SCI ATSs 

currently maintain connections to 

backup facilities, including for testing 

purposes. If larger subscribers of SCI 

ATSs already maintain connections to 

backup facilities including for testing 

purposes, the adverse impact on 

competition would be mitigated because 

the incremental compliance costs 

associated with the business continuity 

and disaster recovery plan testing 

requirements under Rule 1004 would be 

limited for those larger subscribers. The 

Commission believes that new 

subscribers are less likely to be 

designated immediately to participate in 

business continuity and disaster 

recovery plan testing than are existing 

larger subscribers because new 

subscribers might not initially satisfy 

the ATS’s designation standards as they 

establish their businesses. 

It is difficult to estimate the costs of 

Regulation SCI for third-party vendors 

that operate SCI systems or indirect SCI 

systems 1203 on behalf of SCI ATSs.1204

If Regulation SCI imposes compliance 

costs on such vendors, the compliance 

costs would affect the competition 


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1205See supra Sections VIII.B.2.a and VIII.B.2.b 

for discussions about the importance of real-time 

price information on Government Securities ATS 

and indicative quotes on Communication Protocol 

Systems that trade U.S. Treasury Securities in price 

discovery of various securities. See supra Section 

VIII.C.1.c, discussing the benefits of reducing 

system disruptions through Regulation SCI and 

Rule 301(b)(6). 

1206See supra Section VIII.C.1.b 

1207See id. 

1208See, e.g., Shleifer, A. and Vishny, R. (1997). 

The Limits of Arbitrage. The Journal of Finance, 

52(1), 35–55 (discussing limits to arbitrage); 

Grossman, S. and Stiglitz, J. (1980). On the 

impossibility of informationally efficient markets. 

American Economic Review, 70, 393–408 

(discussing informed traders and price efficiency). 

1209Systems up-time is a measure of the time that 

a computer system is running and available. 

1210See supra Section VIII.C.1.c. 

1211Based on the Commission’s understanding, 

Government Securities ATSs disseminate their 

Treasury trades via private feeds and third-party 

vendors. These prices also serve as benchmarks for 

pricing other financial products. See October 15 

Staff Report, supra note 188. 

1212See supra Section VIII.C.2.b. 

among third-party vendors in the market 

for SCI systems or indirect SCI systems. 

If the costs associated with Regulation 

SCI for third-party vendors outweigh the 

benefits of continuing to operate SCI 

systems or indirect SCI systems on 

behalf of SCI ATSs, these third-party 

vendors would exit the market for SCI 

systems or indirect systems. In this 

respect, Regulation SCI would adversely 

impact such vendors and reduce the 

ability for some third-party vendors to 

compete in the market for SCI systems 

and indirect SCI systems, with attendant 

costs to SCI ATSs. If this happens, SCI 

ATSs would incur costs from having to 

find a new vendor, form a new business 

relationship, and adapt their systems to 

those of the new vendor. SCI ATSs 

might also elect to perform the relevant 

functions internally. If the current thirdparty vendors are the most efficient 

means of performing certain functions 

for SCI ATSs, and to the extent that any 

third-party vendor exits the market, 

finding new vendors or performing the 

functions internally would represent a 

reduction in efficiency for SCI ATSs. 

b. Efficiency and Capital Formation 

The Commission believes the 

proposed amendments to Rule 3b–16, 

Regulation ATS, and Regulation SCI 

could promote price efficiency and 

capital formation by reducing trading 

costs and the potential for systems 

disruptions on ATSs that capture a 

significant portion of trading 

volume.1205 However, if ATSs restrict 

trading volume in certain securities to 

stay below the Fair Access Rule, 

Regulation SCI, and Rule 301(b)(6) 

thresholds, it could adversely affect 

price efficiency and capital formation. 

As discussed above, the proposed 

requirement for certain Communication 

Protocol Systems and Government 

Securities ATSs to publically disclose 

Form ATS–N could help reduce trading 

costs for market participants.1206

Additionally, subjecting significant 

Communication Protocol Systems and 

Government Securities ATS to the Fair 

Access Rule could also help reduce 

market participants’ trading costs.1207 A 

reduction in trading costs could, in turn, 

reduce limits to arbitrage and help 

facilitate informed traders impounding 

information into security prices, which 

could enhance price efficiency.1208

Furthermore, extending Regulation SCI 

and Rule 301(b)(6) would help improve 

systems up-time 1209 for ATSs and 

would also promote more robust 

systems that directly support execution 

facilities, order matching, and the 

dissemination of market data, which 

could also enhance price efficiency.1210

In particular, enhanced price efficiency 

in the secondary market for on-the-run 

U.S. Treasury Securities might also 

enhance the price efficiency of risky 

securities because the transaction prices 

of on-the-run U.S. Treasury Securities 

are used as risk-free rate benchmarks to 

price risky securities transactions.1211

Enhanced price efficiency could also 

promote capital formation. Price 

efficiency of securities is important 

because prices that accurately convey 

information about fundamental value 

improve the efficiency in allocating 

capital across projects and entities, 

which helps promote capital formation. 

On the other hand, the Commission 

believes that the proposed amendments 

of the Fair Access Rule, Regulation SCI, 

and Rule 301(b)(6) could also adversely 

affect price efficiency and capital 

formation if ATSs that are close to 

satisfying the volume threshold limit 

trading over some period restrict trading 

or cease operating to stay below the 

volume thresholds and avoid being 

subject to these rules.1212 To the extent 

that this keeps ATSs from getting larger, 

it would increase fragmentation, and 

thus, adversely affect price efficiency in 

those markets, harming capital 

formation. 

D. Reasonable Alternatives 

The Commission considered several 

alternatives to the proposal: (1) Require 

Currently Exempted Government 

Securities ATSs and certain 

Communication Protocol Systems to file 

Form ATS, but not publicly disclose 

Form ATS; (2) require differing levels of 

public disclosure by Government 

Securities ATSs depending on their 

trading volume; (3) extend the 

transparency requirements (i.e., Form 

ATS–N) of Regulation ATS to all ATSs 

and Communication Protocol Systems; 

(4) apply Rule 301(b)(6) of Regulation 

ATS to Government Securities ATSs; (5) 

alter the volume thresholds for the Fair 

Access Rule; (6) alter the Government 

Securities ATS volume thresholds for 

Regulation SCI; (7) exclude 

Communication Protocol Systems from 

the definition of ‘‘exchange’’ but require 

them to register as broker-dealers; (8) 

require Forms ATS–N, ATS, and ATS– 

R to be submitted in Inline XBRL; and 

(9) require the content of Form ATS–N 

to be posted on individual ATS 

websites. 

1. Require Government Securities ATSS 

To File a Non-Public Form ATS 

One alternative could require 

Government Securities ATSs (inclusive 

of Communication Protocol Systems, as 

proposed) to file Form ATS and 

subsequent amendments with the 

Commission, instead of filing Form 

ATS–N. This alternative would allow 

Current Government Securities ATSs to 

continue to file current Form ATS. 

However, Form ATS would be deemed 

confidential for all Government 

Securities ATSs and would not have to 

be publicly disclosed. Under this 

alternative, compliance costs would be 

lower because the costs to prepare a 

Form ATS for Government Securities 

ATSs is less than preparing a Form 

ATS–N. Furthermore, Government 

Securities ATSs would not incur 

additional costs associated with 

amending Form ATS–N to address any 

deficiencies to avoid an ineffectiveness 

determination, because Rule 304 of 

Regulation ATS does not apply to Form 

ATS filings. However, this alternative 

would reduce regulators’ insight into 

Government Securities ATSs compared 

to the proposal because Form ATS 

would require the disclosure of less 

information about the operations of 

Government Securities ATSs and the 

activities of their broker-dealer 

operators and their affiliates, as 

compared to Form ATS–N. 

The lack of public disclosure of Form 

ATS under the alternative could result 

in market participants making less 

informed decisions regarding where to 

send their orders, and thus, could result 

in lower execution quality than they 

would obtain under the proposal. 

Additionally, this alternative could 

result in higher search costs for 

subscribers to identify potential trading 

venues for their orders. Because 

Government Securities ATSs would not 

have to publicly disclose their fees or 

details about their operations, there 

would be less competition among 

Government Securities ATSs and 


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1213As discussed above, the risk that the public 

disclosure of Form ATS–N would reduce the 

incentives for ATSs to is likely to be low. See supra 

Section VIII.C.3.a.i.f). 

1214See supra Section VIII.C.1.b. 

1215See supra Section VIII.C.3.a.i.f) for a 

discussion about the risk that the responsive 

information to the revised Form ATS–N would 

include information regarding operational facets 

such that the public disclosure of the information 

would adversely affect the competitive position of 

the disclosing ATS or Communication Protocol 

Systems and why the Commission believes that this 

risk is likely to be low. See also supra note 467 and 

accompanying text. 

1216As also explained above, Rule 301(b)(6) 

addresses the capacity, integrity, and security 

requirements of automated systems for ATSs that 

meet certain volume thresholds. See supra note 

157. 

1217See supra Section VIII.C.1.c. 

between Government Securities ATSs 

and non-ATS trading venues compared 

to the proposal. If there is less 

competition for order flow in the market 

for government securities and repo 

trading services, there could also be less 

incentive for Government Securities 

ATSs to innovate. 

2. Initiate Differing Levels of Public 

Disclosure Depending on Government 

Securities ATS Dollar Volume 

The Commission could require 

different levels of disclosure (i.e., under 

Rule 304) among Government Securities 

ATSs based on the dollar volume in 

government securities traded on the 

platform. In particular, this alternative 

would subject Government Securities 

ATSs with lower dollar volumes to 

lower levels of disclosure on the revised 

Form ATS–N. This alternative could 

provide smaller Government Securities 

ATSs with a competitive advantage over 

larger ones because smaller Government 

Securities ATSs would incur lower 

compliance costs relative to the 

proposal, which could translate into 

lower entry barriers relative to such 

barriers under the proposal. Because 

these small Government Securities 

ATSs would not have to disclose as 

much information pertaining to their 

operational facets to their competitors, 

they would have a competitive 

advantage over more established 

Government Securities ATSs and other 

trading venues. This approach therefore 

would promote competition in the 

market. To the extent the public 

disclosure of Form ATS–N would have 

discouraged innovation,1213 this 

alternative also would promote 

innovation because these small 

Government Securities ATSs would not 

be deterred from innovating by the 

possibility of having to disclose certain 

operational facets, which could also 

benefit market participants who trade 

on these ATSs by improving the 

execution quality of their trades. 

However, because some Government 

Securities ATS would not have to 

publicly disclose as much information 

on their Form ATS–N, market 

participants may not be as able to 

compare Government Securities ATSs to 

select the most appropriate venue for 

the their trading objectives, which could 

increase market participant search costs 

and trading costs relative to the 

proposal.1214 Additionally, this 

alternative could incentivize small 

Government Securities ATSs to limit the 

trading in government securities on 

their ATSs to stay small and not trigger 

additional disclosure requirements. If 

this were to happen, it could limit 

market participants’ options for trading 

venues, which could result in higher 

trading costs relative to the proposal. 

3. Extend the Transparency 

Requirements of Regulation ATS to All 

ATSs and Communication Protocol 

Systems 

As another alternative, the 

Commission could extend the 

transparency requirements (i.e., the 

public disclosure on Form ATS–N 

under Rule 304) of Regulation ATS to 

all ATSs and Communication Protocol 

Systems. Under this alternative, 

investors would receive information 

about the ATS operations and the 

activities of the broker-dealer operators 

and affiliates of all ATSs and 

Communication Protocol Systems. 

While the disclosure requirements of 

individual systems would be similar to 

what is required under the proposal, 

investors would be able to access 

detailed information on ATSs and 

Communication Protocol Systems that 

currently do not file Form ATS–N. This 

could help market participants make 

better-informed decisions about where 

to send their orders to achieve their 

trading objectives as compared to under 

the proposal. Compared to the proposal, 

the public disclosure of Form ATS–N by 

all ATSs and Communication Protocol 

Systems would further promote 

competition, which could result in 

lower venue fees, improve the efficiency 

in handling of customer trading interest 

procedures, and promote innovation. 

Under this alternative, ATSs and 

Communication Protocol Systems that 

currently do not file Form ATS–N 

would incur the compliance costs 

discussed in Section VIII.C.2.a to 

comply with Regulation ATS. 

Additionally, the public disclosure of 

details regarding the operational facets 

of these ATSs and Communication 

Protocol Systems could adversely 

impact competition and raise barriers to 

entry in the market for trading services, 

and could also lower the incentives for 

these ATSs and Communication 

Protocol Systems to innovate. However, 

the Commission believes that the risk of 

this is likely to be low.1215

4. Apply Rule 301(b)(6) of Regulation 

ATS to Government Securities ATSs 

Another alternative for the 

Commission is to apply the Capacity, 

Integrity, and Security Rule in Rule 

301(b)(6) 1216 of Regulation ATS to 

Government Securities ATSs instead of 

extending Regulation SCI. The scope 

and requirements of the Capacity, 

Integrity, and Security Rule would be 

narrower than those of Regulation SCI. 

For example, Rule 301(b)(6) of 

Regulation ATS would apply to a 

narrower set of systems, as compared to 

Regulation SCI. Rule 301(b)(6) of 

Regulation ATS applies only to systems 

that support order entry, order routing, 

order execution, transaction reporting, 

and trade comparison, which is 

narrower than the definition of SCI 

system. This could result in the 

establishment of less robust systems in 

Government Securities ATSs compared 

to the proposal. This may increase the 

duration and severity of any system 

distributions, and result in more system 

issues occurring on Government 

Securities ATSs, which may, in turn, 

cause more interruptions in the price 

discovery process and liquidity flows 

and increase the occurrence of periods 

with pricing inefficiencies compared to 

the proposal.1217 Furthermore, the 

Commission believes that compliance 

costs associated with the Capacity, 

Integrity, and Security Rule would be 

significantly less than those under the 

proposal because the scope and 

requirements of the Capacity, Integrity, 

and Security Rule would be narrower 

than those of Regulation SCI. For 

example, the Capacity, Integrity, and 

Security Rule would not require 

Government Securities ATSs to 

maintain a backup facility to comply 

with the requirements of Regulation SCI 

related to business continuity and 

disaster recovery plans. To the extent 

that Government Securities ATSs pass 

on these compliance costs to their 

subscribers, the significantly lower 

compliance costs of this alternative 

could result in lower trading costs for 

market participants compared to the 

proposal. Furthermore, the lower 

compliance costs of this alternative 

could lower barriers to entry in the 

market for government securities trading 

services and increase competition 

compared to the proposal, which would 


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1218See supra Section VIII.C.2.a. 1219See supra Sections VII.D.1.b and VIII.C.2.a for 

estimates of the number of additional trading 

venues that would be subject to the Fair Access 

Rule under the proposal. 

1220The Commission believes that this would 

lower the barriers to entry compared to the proposal 

for both new ATSs that are the sole ATS operated 

by a broker-dealer, as well as new ATSs that are 

operated by a broker-dealer or affiliated brokerdealers that already operate one or more ATSs. 

1221See supra Sections VIII.C.2.a.iv and 

VIII.C.3.a.i.e. 

1222See supra Sections VII.D.6 and VIII.C.2.a for 

estimates of the number of additional trading 

venues that would be subject to Regulation SCI 

under the proposal. 

1223See supra Section VIII.C.1.c. 

also result in lower trading costs for 

market participants. 

As another alternative, the 

Commission could apply the Capacity, 

Integrity, and Security Rule in Rule 

301(b)(6) to smaller Government 

Securities ATSs and extend Regulation 

SCI to larger Government Securities 

ATSs as proposed. For example, the 

Commission could require a 

Government Securities ATS that falls 

within a volume range for U.S. Treasury 

Securities of 5 percent and 10 percent 

to comply with Rule 301(b)(6) of 

Regulation ATS and a Government 

Securities ATS that exceeds a 10 

percent volume threshold for U.S. 

Treasury Securities to comply with 

Regulation SCI. Under this alternative, 

the Commission believes that the 

smaller Government Securities ATSs 

subject to Rule 301(b)(6) would incur 

significantly lower compliance costs, as 

compared to the proposal, where these 

smaller Government Securities ATSs 

would be subject to Regulation SCI.1218

To the extent that Government 

Securities ATSs pass on the additional 

compliance costs associated with Rule 

301(b)(6) or Regulation ATS to their 

subscribers, the Commission believes 

that the trading costs for subscribers to 

these smaller Government Securities 

ATSs would be smaller, as compared to 

the proposal. Furthermore, the lower 

compliance costs of this alternative 

incurred by smaller Government 

Securities ATSs could lower barriers to 

entry in the market for government 

securities trading services and increase 

competition compared to the proposal, 

which could also result in lower trading 

costs for market participants. 

5. Alter the Volume Thresholds for the 

Fair Access Rule 

Another alternative for the 

Commission is to alter the volume 

thresholds for the Fair Access Rule.1219

A higher aggregate volume threshold for 

the Fair Access Rule would result in a 

smaller number of ATSs and 

Communication Protocol Systems that 

are subject to the Fair Access Rule than 

under the proposal. With fewer ATSs 

and Communication Protocol Systems 

subject to the Fair Access Rule, some 

market participants may not be able to 

trade on as many ATSs and 

Communication Protocol Systems as 

they could have under the proposal, 

which could result in these market 

participants experiencing higher trading 

costs or worse execution quality than 

they would under the proposal. With a 

higher aggregate volume threshold for 

the Fair Access Rule, fewer ATSs and 

Communication Protocol Systems 

would incur compliance costs discussed 

in Section VIII.C.2.a to comply with the 

Fair Access Rule than under the 

proposal. This could lower the barriers 

to entry for new ATSs compared to the 

proposal.1220 Additionally, a higher 

aggregate volume threshold could result 

in fewer broker-dealers shutting down 

some of their ATSs to avoid being 

subject to the Fair Access Rule 

compared to the proposal.1221 Both 

lower barriers to entry and fewer ATSs 

exiting the market could increase 

competition compared to the proposal, 

resulting in lower trading costs for 

market participants. Since the aggregate 

volume threshold would be higher, 

broker-dealers operators would be less 

likely to restrict trading in certain 

securities in one or more of their 

systems in order to avoid the 

requirements of the Fair Access Rule. 

This would cause less order flow to be 

absorbed and redistributed amongst 

other trading venues, which could result 

in lower trading costs compared to the 

proposal, especially if the sole provider 

of a niche service is less likely to limit 

the trading in certain securities. 

A lower aggregate volume threshold 

for the Fair Access Rule would cause a 

greater number of small ATSs and 

Communication Protocol Systems to be 

subject to the Fair Access Rule 

compared to the proposal. This would 

allow market participants that currently 

may be restricted in their access to 

access a greater number of ATSs and 

Communication Protocol Systems and 

provide them with more options in the 

selection of trading venues than under 

the proposal. Thus, compared to the 

proposal, these market participants 

could better access the trading venue 

that best meets their trading objectives, 

which result in the experiencing lower 

trading costs. With a lower aggregate 

volume threshold for the Fair Access 

Rule, ATSs and Communication 

Protocol Systems would incur greater 

compliance costs discussed in Section 

VIII.C.2.a to comply with the Fair 

Access Rule than under the proposal, 

which could increase the barriers to 

entry for new ATSs. Additionally, a 

lower aggregate volume threshold for 

the Fair Access Rule could cause a 

greater number of small ATSs and 

Communication Protocol Systems to 

exit the market for trading services 

compared to the proposal. Both higher 

barriers to entry and more ATSs 

shutting down could result in less 

competition compared to the proposal, 

which could result in market 

participants facing higher trading costs. 

Broker-dealers operators that are near 

the lower volume threshold would be 

more likely to restrict trading in one or 

more of their systems in order to avoid 

the requirements of the Fair Access 

Rule. This would result in more order 

flow being absorbed and redistributed 

amongst other trading venues compared 

to the proposal, which could result in 

higher trading costs, especially if the 

sole provider of a niche service is more 

likely to limit the trading in certain 

securities. 

6. Alter the Government Securities ATS 

Volume Thresholds for Regulation SCI 

Another alternative for the 

Commission is to alter the Government 

Securities ATS volume thresholds for 

Regulation SCI.1222 A higher volume 

threshold for Regulation SCI would 

result in a smaller number of 

Government Securities ATSs being 

subject to Regulation SCI than under the 

proposal. Compared to the proposal, 

this could result in the establishment of 

less robust systems in Government 

Securities ATSs that would be subject to 

Regulation SCI under the proposal but 

fall below the higher volume threshold. 

This may increase the duration and 

severity of any system distributions, and 

result in more system issues occurring 

on these Government Securities ATSs, 

which may, in turn, cause more 

interruptions in the price discovery 

process and liquidity flows and increase 

the occurrence of periods with pricing 

inefficiencies compared to the 

proposal.1223 With a higher volume 

threshold for Regulation SCI, the 

Commission believes that a smaller 

number of Government Securities ATSs 

would incur compliance costs discussed 

in Section VIII.C.2.a to comply with 

Regulation SCI requirements than under 

the proposal. This could lower barriers 

to entry in the market for government 

securities execution services compared 

to the proposal, which could increase 

competition, resulting in lower trading 

costs or better execution quality for 

investors. Compared to the proposal, a 

higher volume threshold for Regulation 


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15642 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 

1224As discussed above, Communication Protocol 

Systems function similarly to exchanges as market 

places and that including them within the 

definition of ‘‘exchange’’, rather than only 

subjecting them to the requirements of brokerdealers, would appropriately regulate a market 

place that brings together buyers and sellers of 

securities. See supra Section II. 

1225The Commission assumes that, under the 

proposed amendments, Communication Protocol 

Systems would choose to register as broker-dealers 

and comply with Regulation ATS, rather than 

register as national securities exchanges. See supra 

note 1056 and accompanying text. 

1226See supra Section VIII.C.1.a. 

1227See supra Section VIII.C.1.b. Under this 

alternative, significant Communication Protocol 

Systems in the NMS stock market would also not 

be required to display their best quotes in the SIP, 

because they would not be subject to the order 

display and execution access requirements of Rule 

301(b)(3) of Regulation ATS. 

1228See supra Section VIII.C.1.c. 

1229See supra Section VIII.C.2. 

1230See supra Section VIII.C.2.b. 

1231See supra Section V.B. The EDGAR system 

generally requires filers to use ASCII or HTML for 

their document submissions, subject to certain 

exceptions. See Regulation S–T, 17 CFR 

232.101(a)(1)(iv); 17 CFR 232.301; EDGAR Filer 

Manual (Volume II) version 60 (December 2021), at 

5–1. 

1232Such a requirement would be implemented 

by revising Regulation S–T (17 CFR part 232) and 

including an Instruction to Forms ATS–N, ATS, 

and ATS–R which cites to Regulation S–T. In 

conjunction with the EDGAR Filer Manual, 

SCI could also lead to less Government 

Securities ATSs restricting trading in 

certain government securities on their 

platform in order to stay below the 

volume threshold. This would cause 

less order flow to be absorbed and 

redistributed amongst other trading 

venues, which could result in lower 

trading costs compared to the proposal, 

especially if the sole provider of a niche 

service is less likely to limit the trading 

in certain securities. 

A lower volume threshold for 

Regulation SCI would result in a larger 

number of Government Securities ATSs 

being subject to Regulation SCI than 

under the proposal. Compared to the 

proposal, a lower volume threshold for 

Regulation SCI likely would promote 

the establishment of more robust 

systems, help reduce the duration and 

severity of any system distributions, and 

help prevent system issues from 

occurring on smaller Government 

Securities ATSs that met the lower 

volume thresholds. This, in turn, could 

help prevent interruptions in the price 

discovery process and liquidity flows 

and thus may reduce the chance of 

periods with pricing inefficiencies 

occurring compared to the proposal. 

With a lower volume threshold for 

Regulation SCI, more Government 

Securities ATSs would incur 

compliance costs discussed in Section 

VIII.C.2.a to comply with Regulation SCI 

requirements than under the proposal, 

which could increase the barriers to 

entry for new Government Securities 

ATSs. This could decrease competition, 

resulting in higher trading costs or 

worse execution quality for investors 

compared to the proposal. Compared to 

the proposal, a lower volume threshold 

for Regulation SCI could also lead to 

more Government Securities ATSs 

restricting trading in certain government 

securities on their platform in order to 

stay below the volume threshold. This 

would cause more order flow to be 

absorbed and redistributed amongst 

other trading venues, which could result 

in higher trading costs compared to the 

proposal, especially if the sole provider 

of a niche service is more likely to limit 

the trading in certain securities. 

7. Exclude Communication Protocol 

Systems From the Definition of 

‘‘Exchange’’ but Require Them To 

Register as Broker-Dealers 

The proposed amendments to 

Exchange Act Rule 3b–16 would require 

Communication Protocol Systems to 

either register as an exchange or register 

as a broker-dealer and comply with 

Regulation ATS.1224 As an alternative, 

the Commission could require 

Communication Protocol Systems to 

register as broker-dealers, but continue 

to exclude them from the definition of 

‘‘exchange’’ under Rule 3b–16, and thus, 

the requirements of Regulation ATS and 

Regulation SCI.1225 Under this 

alternative, operators of Communication 

Protocol Systems would still need to 

register as broker-dealers with the 

Commission and FINRA, so they would 

still be subject to Commission and 

FINRA inspections and examinations. 

However, the benefits of enhanced 

regulatory oversight and investor 

protection would be less than in the 

proposal because Communication 

Protocol Systems would not be subject 

to the additional reports and 

requirements of Regulation ATS, which 

include having to report additional 

information to the Commission on Form 

ATS and Form ATR, or, if applicable, 

Form ATS–N.1226

Additionally, compared to the 

proposal, the reduction in market 

participant trading costs and 

improvements in their execution quality 

would not be as large because 

Communication Protocol Systems that 

trade government securities or NMS 

stocks would not be required to file and 

publicly disclose Form ATS–N and 

because significant Communication 

Protocol Systems would not be subject 

to the Fair Access Rule.1227

Furthermore, because significant 

Communication Protocol Systems 

would not be subject to Regulation SCI 

or Rule 301(b)(6) of Regulation ATS, the 

enhancements to the price discovery 

process and liquidity in securities 

markets would be reduced relative to 

the proposal.1228

Under this alternative, 

Communications Protocol Systems 

would still incur the costs of registering 

as a broker-dealer, but would not incur 

the additional costs associated with 

Regulation ATS, including the costs 

associated with the Fair Access Rule 

and Regulation SCI and Rule 

301(b)(6).1229 This could result in less 

Communication Protocol Systems 

exiting the market and create lower 

barriers to entry for new 

Communication Protocol Systems 

compared to the proposal, which, 

relative to the proposal, could increase 

competition. Increased competition, in 

turn, could lower market participant 

trading costs and increase innovation 

among Communication Protocol 

Systems relative to the proposal. Since 

significant Communication Protocol 

Systems would not be subject to the Fair 

Access Rule or Regulation SCI and 

Capacity, Integrity, and Security Rule, 

Communication Protocol Systems 

would not have an incentive to restrict 

trading volume in certain securities to 

avoid reaching the volume threshold 

associated with these rules. This could 

cause less order flow to be absorbed and 

redistributed amongst other trading 

venues, which could result in lower 

trading costs compared to the proposal, 

especially if a Communication Protocol 

System that is the sole provider of a 

niche service is less likely to limit the 

trading in certain securities.1230

8. Require Forms ATS–N, ATS, and 

ATS–R To Be Submitted in Inline XBRL 

The proposal would require 

Government Securities ATSs to file 

Form ATS–N, which is submitted in 

ATS–N-specific XML. In addition, the 

proposal would require confidential 

Forms ATS and ATS–R, which are 

currently submitted as paper 

documents, to be submitted to the 

Commission electronically via EDGAR 

in unstructured HTML or ASCII.1231 As 

an alternative, the Commission might 

require Form ATS–N, as well as Forms 

ATS and ATS–R, to be submitted in the 

Inline eXtensible Business Reporting 

Language (‘‘Inline XBRL’’) data 

language. Inline XBRL is a derivation of 

XML that is designed for business 

reporting information and is both 

machine-readable and humanreadable.1232 This alternative might 


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Regulation S–T governs the electronic submission 

of documents filed with the Commission. 

Modifying a structured data language requirement 

for a Commission filing or series of filings can 

generally be accomplished through changes to 

Regulation S–T, and would not require dispersed 

changes to the various rules and forms that would 

be impacted by the data language modification. 

1233See supra Sections IV.D.4.y and IV.D.4.t. 

1234See supra Section VIII.C.2.a.i. The 

Commission estimates that one Currently Exempted 

Government Securities ATS is operated by a bank. 

See supra Section VII.C.1. 

include numerical detail tagging of 

quantitative disclosures (e.g., platformwide statistics) and text block tagging 

for narrative disclosures (e.g., trade 

reporting arrangements).1233 Compared 

to the proposal, the Inline XBRL 

alternative for Forms ATS–N, ATS, and 

ATS–R would provide more 

sophisticated validation, presentation, 

and reference features for filers and data 

users. However, the Inline XBRL 

alternative would also impose initial 

implementation costs (e.g., training staff 

to prepare filings in Inline XBRL, 

licensing Inline XBRL filing preparation 

software) upon filers that do not have 

prior experience structuring data in the 

Inline XBRL data language. By contrast, 

because Form ATS–N may be filed 

using a fillable web form, filers that lack 

experience structuring data in EDGAR 

Form-specific XML would not incur 

technical implementation costs related 

to filing Form ATS–N under the 

proposal. 

9. Require the Content of Form ATS–N 

To Be Posted on Individual ATS 

Websites 

Under the proposal, Form ATS–N 

would be filed on the EDGAR system. 

Alternatively, the Commission might 

require the content of Form ATS–N to 

be posted on the individual ATSs’ 

websites. Requiring the content of Form 

ATS–N to be posted on the individual 

ATSs’ websites rather than EDGAR 

would impose additional direct costs on 

data users, who would need to navigate 

to and manually retrieve data from 

different ATSs’ websites to aggregate, 

compare, and analyze the data. In 

addition, individual websites would not 

provide the validation capabilities that 

an EDGAR requirement would enable, 

and would thus, impose on data users 

the indirect costs associated with lower 

reliability of the data. An individual 

website requirement would provide a 

small benefit to bank-operated 

Government Securities ATSs relative to 

the proposal’s EDGAR requirement, as 

those entities would not be required to 

incur the $50 compliance cost of 

submitting a Form ID to begin making 

EDGAR filings.1234

E. Request for Comments 

The Commission is sensitive to the 

potential economic effects, including 

costs and benefits, of the proposed Rule. 

The Commission has identified certain 

costs and benefits associated with the 

proposal and requests comment on all 

aspects of its preliminary economic 

analysis, including with respect to the 

specific questions below. The 

Commission encourages commenters to 

identify, discuss, analyze, and supply 

relevant data, information, or statistics 

regarding any such costs or benefits. 

177. Do you agree with the 

Commission’s characterization of the 

relevant baseline against which it 

considered the effects of the proposed 

amendments? 

178. Do you agree with the 

Commission’s characterization of 

Communication Protocol Systems? 

Please provide any relevant details that 

you believe are missing from the 

Commission’s description. 

179. Do you agree with the 

Commission’s characterization of the 

current state of the government 

securities market? 

180. Do you agree that PTFs provide 

liquidity to Government Securities 

ATSs? 

181. Do you agree that trading in the 

Treasury securities market is 

concentrated in a few large ATSs? 

Please provide data to support your 

position. 

182. The Commission invites 

comment on the role of PTFs in trading 

Agency Securities. The Commission 

also requests comment on the providers 

of liquidity in the market for Agency 

Securities. 

183. Do you agree with the 

Commission’s characterization of the 

regulatory environment for Government 

Securities ATSs? Please provide any 

details you feel are relevant to 

understanding the impact of the 

variation in regulation across different 

ATSs in this market. Also, do you agree 

that the differences in regulation across 

different entities providing trading 

services in this market has placed some 

of them at a competitive disadvantage? 

184. Please provide any additional 

details you feel are relevant to the role 

of Communication Protocol Systems in 

the government securities market. 

185. Do you agree with the 

Commission’s characterization of the 

role played by the RFQ indicative quote 

streams? Please provide any details you 

feel are important to understanding 

their role in the market. 

186. Do you agree with the 

Commission’s characterization of the 

competition baseline for government 

securities trading services? 

187. Do you agree with the 

Commission’s characterization of the 

state of the corporate debt market? 

Please provide any additional details 

you believe are relevant to 

understanding this market. 

188. Do you agree with the 

Commission’s description of the 

implications of the difference in 

regulation for Communication Protocol 

Systems compared to ATSs in the 

corporate debt market? 

189. Do you agree with the 

Commission’s description of the 

competition baseline for providing 

trading services in the corporate debt 

market? Do you agree with the 

Commission’s characterization of the 

role of the existing regulatory regime in 

creating the current competitive 

environment? 

190. Do you agree with the 

Commission’s description of the 

municipal debt market? 

191. Do you agree with the 

Commission’s description of broker’s 

brokers and their role in the municipal 

bond market? Please provide any details 

you feel are necessary to fully 

understanding this point. 

192. The Commission requests any 

information pertaining to the role of 

Communication Protocol Systems in the 

market for municipal debt generally. 

193. Do you agree with the 

Commission’s description of the equity 

market? In particular, please provide 

any additional details you feel are 

relevant to understanding the role of 

Communication Protocol Systems in 

this market. 

194. The Commission requests 

comment on the extent to which 

Communication Protocol Systems are 

used in the non-ATS OTC market for 

NMS stocks. 

195. The Commission lacks the data 

to estimate the number or trading 

volume of IDQS or other OTC equity 

trading systems that operate 

Communication Protocol Systems and 

are not registered as ATSs or with 

FINRA, and requests comment on this 

topic. 

196. Do you agree with the 

Commission’s description of the options 

market? 

197. The Commission requests 

comment on the full role of 

Communication Protocol Systems in the 

market for listed options. 

198. Do you agree with the 

Commission’s description of the market 

for repurchase and reverse repurchase 

agreements? 

199. The Commission requests 

comment on the full role of 

Communication Protocol Systems in the 


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1235 5 U.S.C. 603. 

market for repurchase and reverse 

repurchase agreements. 

200. Do you agree with the 

Commission’s description of the market 

for asset-backed securities? 

201. The Commission requests 

comment on the full role of 

Communication Protocol Systems in the 

asset-backed securities market. 

202. The Commission requests 

comment on whether Communication 

Protocol Systems play a role in the 

trading of to-be-announced mortgagebacked securities. 

203. The Commission requests 

comment on whether Communication 

Protocol Systems play a role in asset 

classes besides those discussed in 

Section VIII.B, and on what role they 

play in those asset classes. 

204. Do you agree that the proposed 

amendments would enhance regulatory 

oversight and investor protection? Do 

you agree that requiring Communication 

Protocol Systems to register as brokerdealers would help lead to these 

benefits? Do you believe that the 

proposed amendments would lead to 

improvements in the safeguarding of 

confidential information? 

205. Do you agree that the proposed 

amendments would reduce trading costs 

and improve execution quality for 

market participants? Do you agree that 

Regulation SCI would improve the 

resiliency of the systems that provide 

trading services in the government 

securities markets? Do you agree that 

Rule 301(b)(6) would improve the 

resiliency of systems in the applicable 

securities markets? 

206. Do you agree with the 

Commission’s assessment of the costs of 

the proposed amendments? If not, 

please provide as many quantitative 

estimates to support your position on 

costs as possible. 

207. The Commission requests that 

commenters provide any insights or 

data they may have on the costs 

associated with the proposed brokerdealer requirements for Communication 

Protocol Systems that are operated by 

non-broker-dealers? 

208. Are the initial implementation 

cost estimates for new and existing SCI 

entities and the ongoing implementation 

cost estimates for all SCI entities under 

Regulation SCI largely applicable to 

Government Securities ATSs? How 

would these costs vary between Current 

Government Securities ATSs and 

Communication Protocol Systems that 

trade government securities? Please 

explain. 

209. Would Government Securities 

ATSs also incur direct compliance costs 

(non-PRA based) as SCI entities? The 

Regulation SCI Adopting Release in 

2014 estimated that an SCI entity would 

incur an initial cost of between 

approximately $320,000 and $2.4 

million. Additionally, an SCI entity 

would incur an ongoing annual cost of 

between approximately $213,600 and 

$1.6 million. Are these estimated costs 

applicable to Government Securities 

ATSs? How might the actual level of 

costs Government Securities ATSs 

would incur differ from the estimates in 

the Regulation SCI Adopting Release 

because they differ from existing SCI 

entities? How might other factors, such 

as the complexity of SCI entities’ 

systems and the degree to which SCI 

entities employ third-party systems, 

affect the estimated costs? How would 

these costs vary between Current 

Government Securities ATSs and 

Communication Protocol Systems that 

trade government securities? Please 

explain and provide cost estimates or a 

range for cost estimates, if possible. 

210. Do you agree with the 

Commission’s assessment of the indirect 

costs of applying the Fair Access rule? 

211. Do you agree that ATSs could 

break themselves up to stay below the 

volume threshold for Regulation SCI? 

Please explain. 

212. Do you agree with the 

Commission’s assessment of the impact 

of the proposed amendments on 

efficiency, competition and capital 

formation? Do you agree that the 

proposed amendments would allow for 

competition among trading systems on a 

more equal basis? Do you agree with the 

Commission’s assessment as to the risks 

of increasing barriers to entry and 

causing current trading systems to exit 

the market? 

213. To what extent would the 

proposed amendments to Exchange Act 

Rule 3b–16 and Regulation ATS 

increase the barriers to entry for new 

trading venues or cause some existing 

trading venues to exit the market? How 

would these effects vary based on the 

size and/or type of trading venue and 

the securities market in which it 

operates? Please explain in detail. 

214. How would the proposed 

amendments affect innovation? Please 

explain. If so, which provisions of the 

proposed amendments would affect 

innovation the most and how? Please 

explain. 

215. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to require Currently 

Exempted Government Securities ATSs 

and certain Communication Protocol 

Systems to file a non-public Form ATS? 

216. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to initiate differing 

levels of public disclosure depending on 

Government Securities ATS (inclusive 

of a Communication Protocol System, as 

proposed) or other Communication 

Protocol System dollar volume? 

217. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to extend the 

transparency requirements of Regulation 

ATS to all ATSs and Communication 

Protocol Systems? 

218. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to apply Rule 301(b)(6) 

of Regulation ATS to Government 

Securities ATSs? 

219. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to alter the volume 

thresholds for the Fair Access Rule? 

220. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to alter the Government 

Securities ATS volume thresholds for 

Regulation SCI? 

221. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to require 

Communication Protocol Systems to 

register as broker-dealers but exempt 

them from the requirements of Rule 3b– 

16, Regulation ATS, and Regulation 

SCI? 

222. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to require Forms ATS– 

N, ATS, and ATS–R to be submitted in 

Inline XBRL? 

223. Do you agree with the 

Commission’s assessment of the effects 

of an alternative to require the content 

of Form ATS–N to be posted on 

individual ATS websites? 

224. How would the economic effects 

of the proposal differ if Forms ATS–N, 

ATS, and ATS–R were proposed to be 

submitted using the Commission’s 

Electronic Form Filing System/SRO 

Rule Tracking System (‘‘EFFS/SRTS’’)? 

IX. Consideration of Impact on the 

Economy 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996,1235 the Commission requests 

comment on the potential effect of the 

proposed amendments on the United 

States economy on an annual basis. The 

Commission also requests comment on 

any potential increases in costs or prices 

for consumers or individual industries, 

and any potential effect on competition, 

investment, or innovation. Commenters 

are requested to provide empirical data 

and other factual support for their views 

to the extent possible. 


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1236 5 U.S.C. 603(a). 

1237 5 U.S.C. 605(b). 

1238Although Section 601(b) of the RFA defines 

the term ‘‘small entity,’’ the statute permits agencies 

to formulate their own definitions. The Commission 

has adopted definitions for the term ‘‘small entity’’ 

for the purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this proposed rulemaking, are set forth 

in Rule 0–10 under the Exchange Act, 17 CFR 

240.0–10. See Securities Exchange Act Release No. 

18451 (January 28, 1982), 47 FR 5215 (February 4, 

1982) (File No. AS–305). 

1239 17 CFR 240.17a–5(d). 

1240See 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). 

1241See supra Section III.B.2. See also 17 CFR 

242.301(b)(1). 

1242See supra Section II.D.2. 

1243 In order to be as inclusive as is reasonable, 

the Commission is nevertheless counting this ATS 

for purposes of projecting expected costs under the 

PRA. 

X. Regulatory Flexibility Act 

Certification 

Section 3(a) of the Regulatory 

Flexibility Act of 1980 1236 (‘‘RFA’’) 

requires the Commission to undertake 

an initial regulatory flexibility analysis 

of the impact of the proposed rule 

amendments on small entities unless 

the Commission certifies that the rule, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.1237 For 

purposes of Commission rulemaking in 

connection with the RFA,1238 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,1239 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.1240

All Government Securities ATSs 

would be required to register as brokerdealers, including those that are 

currently exempt from such 

requirement.1241 In addition, all 

Communications Protocol Systems that 

choose to comply with Regulation ATS 

in lieu of exchange registration will be 

required to register as brokerdealers.1242 The Commission examined 

recent FOCUS data for the 17 brokerdealers that currently operate Legacy 

Government Securities ATSs and 

concluded that 1 of the broker-dealer 

operators of these ATSs 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). 

The Commission notes that this brokerdealer operator has never reported any 

transaction volume in any government 

security or repo to the Commission on 

Form ATS–R. Given that this ATS has 

never reported any transaction volume 

in government securities to the 

Commission, the Commission believes 

that this ATSs is unlikely to submit a 

Form ATS–N if the proposed 

amendments to Regulation ATS are 

adopted.1243 The Commission has 

recently examined recent FOCUS data 

for 4 broker-dealers that the 

Commission estimates are Currently 

Exempted Government Securities ATSs 

and concluded that none of the brokerdealer operators of ATSs that currently 

trade government securities 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). The Commission has also 

recently examined recent FOCUS data 

for 7 systems that the Commission 

estimates are Communication Protocol 

Systems operated by broker-dealers or 

affiliates of broker-dealers and trade 

various securities asset classes 

including, among others, government 

securities. The Commission concluded 

that none of these broker-dealer 

operators of ATSs 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). 

Consequently, the Commission certifies 

that the proposed amendments to 

Regulation ATS would not, if adopted, 

have a significant economic impact on 

a substantial number of small entities. 

The Commission encourages written 

comments regarding this certification. 

The Commission solicits comment as to 

whether the proposed amendments 

could have impacts on small entities 

that have not been considered. The 

Commission requests that commenters 

describe the nature of any impacts on 

small entities and provide empirical 

data to support the extent of such effect. 

Such comments will be placed in the 

same public file as comments on the 

proposed amendments to Regulation 

ATS. Persons wishing to submit written 

comments should refer to the 

instructions for submitting comments in 

the front of this release. 

XI. Statutory Authority and Text of 

Proposed Amendments 

Pursuant to Exchange Act, 15 U.S.C. 

78a et seq., and particularly Sections 

3(b), 5, 6, 11A, 15, 15C, 17(a), 17(b), 19, 

23(a), and 36 thereof (15 U.S.C. 78c(b), 

78e, 78f, 78o, 78o–5, 78q(a), 78q(b), 78s, 

78w(a), and 78mm), the Commission 

proposes amendments to Form ATS–N 

under the Exchange Act, Regulation 

ATS under the Exchange Act, and 17 

CFR parts 232, 240, 242, and 249. 

List of Subjects in 17 CFR Parts 232, 

240, 242, and 249 

Administrative practices and 

procedure, 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 proposed to be 

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: 

■ a. Removing the periods at the end of 

paragraphs (a)(1)(xiii) and (xiv) and 

adding semicolons in their places; 

■ b. Removing the word ‘‘and’’ at the 

end of paragraphs (a)(1)(xviii) and (xix); 

■ c. Removing the periods at the end of 

paragraphs (a)(1)(xx) and (xxi) and 

adding semicolons in their places; and 

■ d. Adding paragraphs (a)(1)(xxii) and 

(xxiii). 

The additions read as follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(xxii) Form ATS (§ 249.637 of this 

chapter); and 

(xxiii) Form ATS–R (§ 249.638 of this 

chapter). 

* * * * * 


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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, 78dd, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, and 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; Pub. L. 111–203, 939A, 124 Stat. 

1376 (2010); and Pub. L. 112–106, sec. 503 

and 602, 126 Stat. 326 (2012), unless 

otherwise noted. 

* * * * * 

■ 4. Amend § 240.3b–16 by: 

■ a. Revising paragraphs (a)(1) and (2) 

and (b)(1) and (2); 

■ b. Adding paragraph (b)(3); 

■ c. Redesignating paragraph (e) as 

paragraph (f); and 

■ d. Adding new paragraph (e). 

The revisions and additions read as 

follows: 

§ 240.3b–16 Definitions of terms used in 

Section 3(a)(1) of the Act. 

(a) * * * 

(1) Brings together buyers and sellers 

of securities using trading interest; and 

(2) Makes available established, nondiscretionary methods (whether by 

providing a trading facility or 

communication protocols, or by setting 

rules) under which buyers and sellers 

can interact and agree to the terms of a 

trade. 

(b) * * * 

(1) Routes trading interest to a 

national securities exchange, a market 

operated by a national securities 

association, or a broker-dealer for 

execution; 

(2) Allows persons to enter trading 

interest for execution against the bids 

and offers of a single dealer; and 

(i) As an incidental part of these 

activities, matches trading interest that 

is not displayed to any person other 

than the dealer and its employees; or 

(ii) In the course of acting as a market 

maker registered with a self-regulatory 

organization, displays the limit orders of 

such market maker’s, or other brokerdealer’s, customers; and 

(A) Matches customer orders with 

such displayed limit orders; and 

(B) As an incidental part of its market 

making activities, crosses or matches 

orders that are not displayed to any 

person other than the market maker and 

its employees; or 

(3) Allows an issuer to sell its 

securities to investors. 

* * * * * 

(e) For purposes of this section, the 

term trading interest means an order as 

the term is defined under paragraph (c) 

of this section or any non-firm 

indication of a willingness to buy or sell 

a security that identifies at least the 

security and either quantity, direction 

(buy or sell), or price. 

* * * * * 

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 (b), removing ‘‘orders’’ 

and adding in its place ‘‘trading 

interest’’; 

■ b. Revising paragraph (c); 

■ c. Adding a sentence at the end of 

paragraph (k); and 

■ d. Adding paragraphs (l) through (s). 

The revision and additions read as 

follows: 

§ 242.300 Definitions. 

* * * * * 

(c) Affiliate means, 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. 

* * * * * 

(k) * * * An NMS Stock ATS shall 

not trade securities other than NMS 

stocks. 

(l) Government Securities ATS means 

an alternative trading system, as defined 

in paragraph (a) of this section, that 

trades government securities, as defined 

in section 3(a)(42) of the Act (15 U.S.C. 

78c(a)(42)) or repurchase and reverse 

repurchase agreements on government 

securities. A Government Securities 

ATS shall not trade securities other than 

government securities or repurchase and 

reverse repurchase agreements on 

government securities. 

(m) Covered ATS means an NMS 

Stock ATS or Government Securities 

ATS, as applicable. 

(n) Legacy Government Securities 

ATS means a Government Securities 

ATS operating as of [effective date of the 

final rule] that was either: 

(1) Formerly not required to comply 

with this section and §§ 242.301 

through 242.304 (Regulation ATS) 

pursuant to the exemption under 

§ 240.3a1–1(a)(3) of this chapter prior to 

[effective date of the final rule]; or 

(2) Operating pursuant to an initial 

operation report on Form ATS on file 

with the Commission as of [effective 

date of the final rule]. 

(o) U.S. Treasury Security means a 

security issued by the U.S. Department 

of the Treasury. 

(p) Agency Security means a debt 

security issued or guaranteed by a U.S. 

executive agency, as defined in 5 U.S.C. 

105, or government-sponsored 

enterprise, as defined in 2 U.S.C. 622(8). 

(q) Trading Interest means an order, as 

defined in paragraph (e) of this section, 

or any non-firm indication of a 

willingness to buy or sell a security that 

identifies at least the security and either 

quantity, direction (buy or sell), or 

price. 

(r) Newly Designated ATS means an 

alternative trading system operating as 

of [effective date of the final rule] that 

meets the criteria under § 240.3b–16(a) 

of this chapter as of [effective date of the 

final rule] but did not meet the criteria 

under § 240.3b–16(a) of this chapter in 

effect prior to [effective date of the final 

rule]. 

(s) Covered Newly Designated ATS 

means a Newly Designated ATS that is 

a Government Securities ATS or NMS 

Stock ATS. 

■ 7. Amend § 242.301 by: 

■ a. Removing and reserving paragraphs 

(a)(4)(ii)(A) through (C); 

■ b. Revising paragraphs (b)(1) and 

(b)(2)(i); 

■ c. In paragraph (b)(2)(vi), adding the 

words ‘‘and information filed pursuant 

to paragraph (b)(9) of this section’’ after 

the words ‘‘pursuant to this paragraph 

(b)(2)’’; 

■ d. Revising paragraphs (b)(2)(vii) and 

(viii) and (b)(5)(i) introducotry text; 

■ e. In paragraph (b)(5)(i)(A), adding the 

word ‘‘share’’ after the phrase ‘‘average 

daily’’; 

■ f. In paragraph (b)(5)(i)(B), adding the 

word ‘‘share’’ after the phrase ‘‘average 

daily trading’’; 

■ g. In paragraphs (b)(5)(i)(C): 

■ i. Adding the word ‘‘dollar’’ after the 

phrase ‘‘average daily’’; 

■ ii. Adding the phrase ‘‘as provided by 

the self-regulatory organization to which 

such transactions are reported’’ after the 

phrase ‘‘in the United States’’; and 

■ iii. Removing the word ‘‘or’’ at the end 

of the paragraph; 

■ h. In paragraph (b)(5)(i)(D): 

■ i. Adding the word ‘‘dollar’’ after the 

phrase ‘‘average daily’’; 

■ ii. Adding the phrase ‘‘as provided by 

self-regulatory organizations to which 

such transactions are reported’’ after the 

phrase ‘‘in the United States’’; and 

■ iii. Removing the period and adding a 

semicolon in its place; 

■ i. Adding paragraphs (b)(5)(i)(E), (F), 

and (G); 


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■ j. Removing paragraph (b)(5)(iii); 

■ k. Redesignating paragraph (b)(5)(ii) as 

paragraph (b)(5)(iii) and revising the 

newly redesiganted paragraph; 

■ l. Adding new paragraph (b)(5)(ii); 

■ m. In paragraphs (b)(6)(i)(A) and (B), 

adding the word ‘‘dollar’’ after the 

phrase ‘‘average daily’’; 

■ n. Removing paragraph (b)(6)(iii); 

■ o. In paragraph (b)(9)(i): 

■ i. Removing the words ‘‘Separately 

file’’ and adding ‘‘File’’ in their place; 

and 

■ ii. Removing the phrase ‘‘for 

transactions in NMS stocks, as defined 

in paragraph (g) of this section, and 

transactions in securities other than 

NMS stocks’’; and 

■ p. In paragraph (b)(9)(ii): 

■ i. Removing the words ‘‘Separately 

file’’ and adding ‘‘File’’ in their palce; 

and 

■ ii. Removing the phrase ‘‘for 

transactions in NMS stocks and 

transactions in securities other than 

NMS stocks’’. 

The revisions and additions read as 

follows: 

§ 242.301 Requirements for alternative 

trading systems. 

* * * * * 

(b) * * * 

(1) Broker-dealer registration. The 

alternative trading system shall register 

as a broker-dealer under section 15 of 

the Act (15 U.S.C. 78o) or section 

15C(a)(1)(A) of the Act (15 U.S.C. 78o– 

5(a)(1)(A)). Notwithstanding the 

preceding sentence, provided that it 

complies with the applicable conditions 

in § 240.3a1–1(a)(2) of ths chapater, an 

alternative trading system that is not 

registered as a broker-dealer and is 

either: 

(i) A Legacy Government Securities 

ATS that was formerly not required to 

comply with §§ 242.300 through 

242.304 (Regulation ATS) pursuant to 

the exemption under § 240.3a1–1(a)(3) 

of this chapter prior to [effective date of 

the final rule]; or 

(ii) A Newly Designated ATS, may 

provisionally operate pursuant to the 

exemption under § 240.3a1–1(a)(2) of 

this chapter, until the earlier of: 

(A) The date the alternative trading 

system registers as a broker-dealer under 

section 15 of the Act or section 

15C(a)(1)(A) of the Act and becomes a 

member of a national securities 

association; or 

(B) [date 210 calendar days after the 

effective date of the final rule]. 

(2) * * * 

(i) The alternative trading system 

(other than a Covered ATS) shall file an 

initial operation report on Form ATS, 

§ 249.637 of this chapter, in accordance 

with the instructions therein, at least 20 

days prior to commencing operation as 

an alternative trading system. 

Notwithstanding the preceding 

sentence, a Newly Designated ATS 

(other than a Covered Newly Designated 

ATS) shall file an initial operation 

report on Form ATS, in accordance with 

the instructions therein, no later than 

[date 30 calendar days after the effective 

date of the final rule]. 

* * * * * 

(vii) An ATS must file a Form ATS or 

Form ATS–R in accordance with the 

instructions therein. The reports 

provided for in paragraphs (b)(2) and (9) 

of this section shall be filed on Form 

ATS or Form ATS–R, as applicable, and 

include all information as prescribed in 

Form ATS or Form ATS–R, as 

applicable, and the instructions thereto. 

Any such document shall be executed 

at, or prior to, the time Form ATS or 

Form ATS–R is filed and shall be 

retained by the ATS in accordance with 

§ 242.303 and § 232.302 of this chapter, 

and the instructions in Form ATS or 

Form ATS–R, as applicable. Duplicates 

of the reports provided for in paragraphs 

(b)(2)(i) through (v) of this section must 

be filed with surveillance personnel 

designated as such by any selfregulatory organization that is the 

designated examining authority for the 

alternative trading system pursuant to 

§ 240.17d–1 of this chapter 

simultaneously with filing with the 

Commission. Duplicates of the reports 

required by paragraph (b)(9) of this 

section shall be provided to surveillance 

personnel of such self-regulatory 

authority upon request. All reports filed 

pursuant to this paragraph (b)(2) and 

paragraph (b)(9) of this section (except 

for types of securities traded provided 

on Form ATS and Form ATS–R) will be 

accorded confidential treatment subject 

to applicable law. 

(viii) A Legacy Government Securities 

ATS operating pursuant to an initial 

operation report on Form ATS on file 

with the Commission as of [effective 

date of the final rule] 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 Government Securities ATS 

shall file reports pursuant to § 242.304 

and shall not be subject to the 

requirements of paragraphs (b)(2)(i) 

through (vii) of this section. A Legacy 

Government Securities ATS that was 

formerly not required to comply with 

Regulation ATS pursuant to the 

exemption under § 240.3a1–1(a)(3) of 

this chapter prior to [effective date of 

the final rule], or a Covered Newly 

Designated ATS, shall file reports 

pursuant to § 242.304 and shall not be 

subject to the requirements of 

paragraphs (b)(2)(i) through (vii) of this 

section. As of [effective date of the final 

rule], an entity seeking to operate as a 

Government Securities 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. An NMS Stock ATS or 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. An ATS that is 

not a Covered ATS shall be subject to 

paragraph (b)(2) of this section. Each 

Covered ATS that is operated by a 

broker-dealer that is the registered 

broker-dealer for more than one ATS 

must comply with Regulation ATS, 

including the filing requirements of 

§ 242.304. 

* * * * * 

(5) Fair access. (i) An alternative 

trading system shall comply with the 

requirements in paragraph (b)(5)(iii) of 

this section, if during at least 4 of the 

preceding 6 calendar months, such 

alternative trading system had: 

* * * * * 

(E) With respect to U.S. Treasury 

Securities, 3 percent or more of the 

average weekly dollar volume traded in 

the United States as provided by the 

self-regulatory organization to which 

such transactions are reported; or 

(F) With respect to Agency Securities, 

5 percent or more of the average daily 

dollar volume traded in the United 

States as provided by the self-regulatory 

organization to which such transactions 

are reported. 

(G) Provided, however, that a Newly 

Designated ATS or Legacy Government 

Securities ATS shall not be required to 

comply with the requirements in 

paragraph (b)(5)(iii) of this section until 

one month after initially satisfying any 

of the paragraphs (b)(5)(i)(A) through (F) 

of this section. 

(ii) For purposes of calculating the 

volume thresholds of paragraph (b)(5)(i) 

of this section, the average transaction 

volume for a security or security 

category of alternative trading systems 

that are operated by a common brokerdealer, or alternative trading systems 

operated by affiliated broker-dealers, 

will be aggregated. 

(iii) An alternative trading system 

shall: 

(A) Establish and apply reasonable 

written standards for granting, limiting, 

and denying access to the services of the 


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alternative trading system that, at a 

minimum: 

(1) Provide the date that each 

standard is adopted, effective, and 

modified; 

(2) Set forth any objective and 

quantitative criteria upon which each 

standard is based; 

(3) Identify any differences in access 

to the services of the alternative trading 

system by an applicant and current 

participants; 

(4) Justify why each standard, 

including any differences in access to 

the services of the alternative trading 

system, is fair and not unreasonably 

discriminatory; and 

(5) Provide the information required 

by paragraphs (b)(5)(iii)(A)(1) through 

(4) of this section about any standards 

for granting, limiting, or denying access 

to the alternative trading system 

services that are performed by a person 

other than the broker-dealer operator. 

(B) Make and keep records of: 

(1) All grants of access including, for 

all participants, the reasons for granting 

such access under the standards 

provided in paragraph (b)(5)(iii)(A) of 

this section; and 

(2) All denials or limitations of access 

and reasons, for each applicant and 

participant, for denying or limiting 

access to the services of the alternative 

trading system under the standards 

provided in paragraph (b)(5)(iii)(A) of 

this section; and 

(C) Report the information required 

on Form ATS–R (§ 249.638 of this 

chapter) regarding grants, denials, and 

limitations of access. 

* * * * * 

§ 242.302 Recordkeeping requirements for 

alternative trading systems. 

■ 8. Amend § 242.302 by: 

■ a. In the introductory text to 

paragraph (c), removing ‘‘order’’ and 

adding in its place ‘‘trading interest’’; 

■ b. In paragraphs (c)(1), (3), (5), and (8) 

through (15), removing ‘‘order’’ 

wherever it appears and adding in its 

place ‘‘trading interest’’; and 

■ c. In paragraph (c)(5), removing ‘‘a’’ 

before the phrase ‘‘buy or sell’’. 

§ 242.303 Record preservation 

requirements for alternative trading 

systems. 

■ 9. Amend § 242.303 by: 

■ a. In paragraph (a)(1)(iii), adding ‘‘, 

including each version,’’ after the 

phrase ‘‘at least one copy’’ and adding 

‘‘written’’ before the word ‘‘standards’’; 

■ b. In paragraph (a)(1)(iv), adding ‘‘, 

including each version,’’ after the 

phrase ‘‘At least one copy’’; and 

■ c. In paragraph (a)(1)(v), adding ‘‘, 

including each version,’’ after the 

phrase ‘‘At least one copy’’. 

■ 10. Amend § 242.304 by: 

■ a. Revising the section heading; 

■ b. In the introductory text to 

paragraph (a), removing ‘‘an NMS Stock 

ATS’’ and adding in its place ‘‘a 

Covered ATS’’; 

■ c. In paragraphs (a)(1)(i) through (iii): 

■ i. Removing ‘‘an NMS Stock ATS’’ 

wherever it appears and adding in its 

place ‘‘a Covered ATS’’; and 

■ ii. Removing ‘‘NMS Stock ATS’’ 

wherever it appears and adding in its 

place ‘‘Covered ATS’’; 

■ d. In paragraph (a)(1)(i), adding a 

sentence at the end of the paragraph; 

■ e. In paragraph (a)(1)(ii)(A)(1), 

removing the phrase ‘‘the Form ATS–N 

is unusually lengthy or raises novel or 

complex issues that require additional 

time for review’’ and adding in its place 

‘‘the Commission determines that a 

longer period is appropriate’’; 

■ f. In paragraph (a)(1)(ii)(B), removing 

the phrase ‘‘paragraphs (a)(2)(i)(B) and 

(C)’’ and adding in its place ‘‘paragraphs 

(a)(2)(i)(B), (C), and (E)’’; 

■ g. In paragraph (a)(1)(iv): 

■ i. Revising the paragraph heading; and 

■ ii. Removing ‘‘Legacy NMS Stock 

ATS’’ wherever it appears and adding in 

its place ‘‘Legacy Government Securities 

ATS or Covered Newly Designated 

ATS’’; 

■ h. Revising paragraph (a)(1)(iv)(A) 

introductory text; 

■ i. In the introductory text to paragraph 

(a)(1)(iv)(B), removing ‘‘120’’ and adding 

in its place ‘‘180’’; 

■ j. In paragraph (a)(1)(iv)(B)(1), 

removing ‘‘the initial Form ATS–N is 

unusually lengthy or raises novel or 

complex issues that require additional 

time for review’’ and ‘‘initial 120- 

calendar day’’ and adding in their 

places ‘‘the Commission determines that 

a longer period is appropriate’’ and 

‘‘initial 180-calendar day’’, respectively; 

■ k. In the introductory text to 

paragraph (a)(2)(i), removing ‘‘An NMS 

Stock ATS’’ and adding ‘‘A Covered 

ATS’’ in its place; 

■ l. In paragraph (a)(2)(i)(A), removing 

‘‘except as provided by paragraph 

(a)(2)(i)(D) of this section,’’ and ‘‘NMS 

Stock ATS’’ and adding in their places 

‘‘or the length of any extended review 

period pursuant to paragraph 

(a)(2)(ii)(A) of this section,’’ and 

‘‘Covered ATS’’, respectively; 

■ m. In paragraph (a)(2)(i)(B), removing 

‘‘or (D)’’ and adding ‘‘(D), or (E)’’ in its 

place; 

■ n. In paragraph (a)(2)(i)(C), removing 

‘‘or’’ at the end of the paragraph; 

■ o. In paragraph (a)(2)(i)(D): 

■ i. Removing ‘‘Items 24 and 25’’ and 

‘‘Order Display and Fair Access 

Amendment’’ and adding in their places 

‘‘Items 23 and 24’’ and ‘‘Contingent 

Amendment’’, respectively; and 

■ ii. Removing the period at the end of 

the paragraph and adding ‘‘; or’’ in its 

place; 

■ p. Adding paragraph (a)(2)(i)(E); 

■ q. Revising paragraph (a)(2)(ii); 

■ r. In paragraphs (a)(3) and (4), (b), and 

(c): 

■ i. Removing ‘‘An NMS Stock ATS’’ 

and ‘‘an NMS Stock ATS’’ and adding 

in their places ‘‘A Covered ATS’’ and ‘‘a 

Covered ATS’’, respectively; and 

■ ii. Removing ‘‘NMS Stock ATS’’ 

wherever it appears and adding in its 

place ‘‘Covered ATS’’; 

■ s. In paragraph (b)(2)(iii)(A): 

■ i. Removing the colon at the end of the 

paragrpah heading and adding a period 

in its place; and 

■ ii. Adding ‘‘, or any extended review 

period,’’ after ‘‘the expiration of the 

review period’’; and 

■ t. In paragraph (b)(2)(iii)(B): 

■ i. Revising the heading; and 

■ ii. In the first sentence, removing 

‘‘Updating, Correcting, and Order 

Display and Fair Access Amendments’’ 

and adding ‘‘Updating, Correcting, Fee, 

and Contingent Amendments’’ in it 

place. 

The revisions and addition read as 

follows: 

§ 242.304 Covered ATSs. 

(a) * * * 

(1) * * * 

(i) * * * Notwithstanding the 

preceding sentence, a Legacy 

Government Securities ATS that was 

formerly not required to comply with 

§§ 242.300 through 242.304 (Regulation 

ATS) pursuant to the exemption under 

§ 240.3a1–1(a)(3) of this chapter prior to 

[effective date of the final rule] or 

Covered Newly Designated ATS, may 

continue to operate pursuant to the 

exemption under § 240.3a1–1(a)(2) of 

this chapter until its initial Form ATS– 

N becomes effective. 

* * * * * 

(iv) Transition for Legacy Government 

Securities ATSs and Covered Newly 

Designated ATSs—(A) Initial Form 

ATS–N filing requirements. A Legacy 

Government Securities ATS or a 

Covered Newly Designated ATS shall 

file with the Commission an initial 

Form ATS–N, in accordance with the 

conditions of this section, no later than 

[date 90 calendar days after the effective 

date of the final rule]. An initial Form 

ATS–N filed by a Legacy Government 

Securities ATS operating pursuant to an 

initial operation report on Form ATS on 

file with the Commission as of [effective 

date of the final rule] shall supersede 

and replace for purposes of the 

exemption the previously filed Form 

ATS of the Legacy Government 

Securities ATS. A Legacy Government 


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Securities ATS or Covered Newly 

Designated 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 Government Securities 

ATS or Covered Newly Designated ATS, 

as amended, will become effective, 

unless declared ineffective, upon the 

earlier of: 

* * * * * 

(2) * * * 

(i) * * * 

(E) No later than the date that the 

information required to be disclosed in 

Part III, Item 18 on Form ATS–N has 

become inaccurate or incomplete (‘‘Fee 

Amendment’’). 

(ii) Commission review period; 

ineffectiveness determination. (A) The 

Commission will, by order, declare 

ineffective any Form ATS–N 

amendment filed pursuant to 

paragraphs (a)(2)(i)(A) through (E) of 

this section, no later than 30 calendar 

days from filing with the Commission, 

or, if applicable, the end of the extended 

review period, 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 may extend 

the amendment review period for: 

(1) An additional 30 calendar days, if 

the Commission determines that a 

longer period is appropriate; or 

(2) Any extended review period to 

which a duly authorized representative 

of the Covered ATS agrees in writing. 

(B) A Form ATS–N amendment 

declared ineffective shall prohibit the 

Covered ATS from operating pursuant 

to the ineffective Form ATS–N 

amendment. A Form ATS–N 

amendment declared ineffective does 

not prevent the Covered ATS from 

subsequently filing a new Form ATS–N 

amendment. 

(C) During review by the Commission 

of a Material Amendment, the Covered 

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 ATS shall withdraw 

its filed Material Amendment and must 

file the new Material Amendment 

pursuant to (a)(2)(i)(A) of this section. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) * * * 

(B) Updating, Correcting, Fee, and 

Contingent Amendments. * * * 

* * * * * 

■ 11. Amend § 242.1000 by: 

■ a. Adding, in alphabetical order, a 

definition for ‘‘Agency Securities’’; 

■ b. In the definition of ‘‘SCI alternative 

trading system or SCI ATS’’: 

■ i. Removing the word ‘‘or’’ at the end 

of paragraph (1)(ii); 

■ ii. Redesignating paragraph (3) as 

paragraph (5); 

■ iii. Adding a new paragraph (3) and 

paragraph (4); and 

■ iv. In newly redesignated paragraph 

(5), removing ‘‘paragraphs (1) or (2)’’ 

and adding in its place ‘‘paragraph (1), 

(2), (3), or (4)’’; and 

■ c. Adding, in alphabetical order, a 

definition for ‘‘U.S. Treasury 

Securities’’. 

The additions read as follows: 

§ 242.1000 Definitions. 

* * * * * 

Agency Security has the meaning set 

forth in § 242.300(p). 

* * * * * 

SCI alternative trading system or SCI 

ATS * * * 

(3) Had with respect to U.S. Treasury 

Securities, five percent (5%) or more of 

the average weekly dollar volume traded 

in the United States as provided by the 

self-regulatory organization to which 

such transactions are reported; or 

(4) Had with respect to Agency 

Securities, five percent (5%) or more of 

the average daily dollar volume traded 

in the United States as provided by the 

self-regulatory organization to which 

such transactions are reported. 

* * * * * 

U.S. Treasury Security has the 

meaning set forth in § 242.300(o). 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 12. 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), Sec. 72001 Pub. L. 114–94, 129 

Stat. 1312 (2015), and secs. 2 and 3 Pub. L. 

116–222, 134 Stat. 1063 (2020), unless 

otherwise noted. 

* * * * * 

■ 13. Amend Form ATS (referenced in 

§ 249.637) by: 

■ a. In the General Instructions, Item 

A.2, after ‘‘commencing operation’’ 

adding ‘‘and a Newly Designated ATS 

(other than a Covered Newly Designated 

ATS, as defined in Rule 300(s) of the 

Exchange Act (17 CFR 242.300(s))) must 

file an initial operation report on Form 

ATS no later than [date 30 calendar 

days after the date of effective date of 

the final rule].’’. 

■ b. In the General Instructions, revising 

Items A.3 through A.6. 

■ c. In the General Instructions, revising 

the fifth and seventh paragraphs of Item 

A.7. 

■ d. In the General Instructions, adding 

new paragraph A.8. 

■ e. In the Explanation of Terms, in the 

definition of ‘‘Subscriber’’, removing the 

word ‘‘order’’ and adding ‘‘trading 

interest’’ in its place. 

■ f. In the Explanation of Terms, adding 

the definition of ‘‘Trading Interest’’ and 

‘‘Newly Designated ATS’’ in 

alphabetical order. 

■ g. At the top of page 1 of the form, 

removing ‘‘INITIAL OPERATION 

REPORT’’, ‘‘AMENDMENT TO INITIAL 

OPERATION REPORT’’, ‘‘CESSATION 

OF OPERATIONS REPORT’’ and 

accompanying check boxes and adding 

text under a new heading ‘‘Type of 

Filing (select one)’’. 

■ h. At the top and side of page 1 to the 

Form removing: 

■ i. ‘‘Form ATS Page 1 Execution Page’’; 

■ ii. ‘‘Date filed (MM/DD/YY)’’; and 

■ ii. ‘‘[OFFICIAL USE ONLY]’’. 

■ i. Revising Items 2 through 5. 

■ j. Removing Items 6 through 11. 

■ k. Removing the text on page 1 of the 

form beginning ‘‘EXECUTION’’, the 

signature block below, the instruction 

that states ‘‘This page must always be 

completed in full with original, manual 

signature and notarization. Affix notary 

stamp or seal where applicable.’’ and 

‘‘DO NOT WRITE BELOW THIS LINE— 

FOR OFFICIAL USE ONLY’’. 

■ l. On page 2 of the form, removing the 

following text: 

Alternative trading system name: lll

Filing date: lllllllllllll

CRD Number: llllllllllll

SEC File Number: 8– llllllll

■ m. At the top and side of page 2 to the 

Form removing: 

■ i. ‘‘Form ATS Page 2 Execution Page’’; 

■ ii. ‘‘Date filed (MM/DD/YY)’’; and 

■ iii. ‘‘[OFFICIAL USE ONLY]’’. 

The revisions and additions read as 

follows: 

Note: The text of Form ATS does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

BILLING CODE 8011–01–P 


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BILLING CODE 8011–01–C 

* * * * * 

■ 14. Amend Form ATS–R (referenced 

in § 249.638) by: 

■ a. In the General Instructions, revising 

Items A.3 through A.6. 

■ b. In the General Instructions, revising 

the fifth and seventh paragraphs of Item 

A.7. 

■ c. In the Explanation of Terms, 

removing the definitions of ‘‘Nasdaq 

National Market Securities’’ and 

‘‘Nasdaq SmallCap Market Securities’’. 

■ d. In the Explanation of Terms, adding 

the definitions of ‘‘Agency Securities,’’ 

‘‘Foreign Sovereign Debt Securities,’’ 

‘‘U.S. Treasury Securities,’’ and 

‘‘Trading Interest’’. 

■ e. In the Explanation of Terms, in the 

definition of ‘‘Subscriber,’’ removing the 

word ‘‘order’’ and adding in its place 

the word ‘‘trading interest’’. 

■ f. On page 1 of the form, immediately 

before Section 1, adding text under a 

new heading ‘‘Type of Filing’’. 

■ g. At the top and side of page 1 to the 

Form removing: 

■ i. ‘‘Form ATS Page 1 Execution Page’’; 

■ ii. ‘‘Date filed (MM/DD/YY)’’; and 

■ iii. ‘‘[OFFICIAL USE ONLY]’’. 

■ h. Revising Item 1. 

■ i. Removing the text on page 1 of the 

form beginning ‘‘EXECUTION’’, the 

signature block below, the instruction 

that states ‘‘This page must always be 

completed in full with original, manual 

signature and notarization. Affix notary 

stamp or seal where applicable.’’ and 

‘‘DO NOT WRITE BELOW THIS LINE— 

FOR OFFICIAL USE ONLY’’. 

■ j. On pages 2 and 3 of the form, 

removing the following text: 

DO NOT WRITE BELOW THIS LINE— 

FOR OFFICIAL USE ONLY 

Alternative trading system name: lll

Filing date: lllllllllllll

CRD Number: llllllllllll

SEC File Number: 8– llllllll

■ k. At the top and side of page 2 to the 

Form removing: 

■ i. ‘‘Form ATS Page 2 Execution Page’’; 

■ ii. ‘‘Date filed (MM/DD/YY)’’; and 

■ iii. ‘‘[OFFICIAL USE ONLY]’’. 

■ l. At the top and side of page 3 to the 

Form removing: 

■ i. ‘‘Form ATS Page 3 Execution Page’’; 

■ ii. ‘‘Date filed (MM/DD/YY)’’; and 

■ iii. ‘‘[OFFICIAL USE ONLY]’’. 

■ m. Revising Item 4. 

■ n. Adding Item 5.C. 

■ o. Revising Item 6. 

■ p. Adding Item 8. 

■ q. Adding a signature block at the end 

of the form. 

The additions and revisions read as 

follows: 

Note: The text of Form ATS–R does not 

and this amendment will not appear in the 

Code of Federal Regulations. 

BILLING CODE 8011–01–P 


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■ 15. Revise Form ATS–N (referenced in 

§ 249.640). 

Note: Form ATS–N is attached as 

Appendix A to this document. Form ATS–N 

will not appear in the Code of Federal 

Regulations. 

Dated: January 26, 2022. 

Vanessa A. Countryman, 

Secretary. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

APPENDIX A—MARKED FORM ATS– 

N 

Deleted text is [bracketed]. New text 

is italicized. 


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15672 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


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Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15673 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.012</GPH>
15674 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.013</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15675 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.014</GPH>
15676 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.015</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15677 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.016</GPH>
15678 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.017</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15679 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.018</GPH>
15680 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.019</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15681 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.020</GPH>
15682 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.021</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15683 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.022</GPH>
15684 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.023</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15685 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.024</GPH>
15686 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.025</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15687 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.026</GPH>
15688 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.027</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15689 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.028</GPH>
15690 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.029</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15691 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.030</GPH>
15692 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.031</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15693 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.032</GPH>
15694 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.033</GPH>
Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 15695 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.034</GPH>
15696 Federal Register / Vol. 87, No. 53 / Friday, March 18, 2022 / Proposed Rules 

[FR Doc. 2022–01975 Filed 3–17–22; 8:45 am] 

BILLING CODE 8011–01–C 


jspears on DSK121TN23PROD with PROPOSALS2EP18MR22.035</GPH>