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SEC Adopts New Form ATS-N and Amendments to Regulation ATS and Exchange Act Rule 3a1-1 to Enhance Transparency and Oversight of Alternative Trading Systems

On July 18, the Securities and Exchange Commission adopted new Form ATS-N and amendments to Regulation ATS and Exchange Act Rule 3a1-1. The new requirements are designed to enhance transparency of alternative trading systems (ATSs) that trade stocks listed on a national securities exchange (NMS Stock ATSs) by requiring them to publicly disclose detailed information about their operations, including order types and market data used on the ATS, fees, the ATS’s execution and priority procedures, and any procedures to segment orders on the ATS.

Form ATS-N will require an NMS Stock ATS to disclose information regarding: (1) its broker-dealer operator (including identifying information and ownership); (2) ATS-related activities of its broker-dealer operator (including trading activities of the broker-dealer operator and its affiliates on the ATS, whether subscribers to the ATS can opt out of interacting with orders and trading interest of the broker-dealer operator and its affiliates, arrangements between the broker dealer operator and trading centers to access the ATS services, activities of service providers to the broker dealer operator, and safeguards and procedures established to protect the confidential trading information of subscribers); and (3) the manner of operations of the NMS Stock ATS (including the means of entry for orders and trading interests, trading services, facilities, and rules of the ATS, display of orders and other trading interests, procedures for stopping or suspending trading, fees, counter-party selection, procedures regarding trade reporting, clearance and settlement, and sources, and uses of market data).

The SEC will make public an NMS Stock ATS’s Form ATS-N, and any amendments thereto, when it becomes effective through the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. Additionally, each NMS Stock ATS will be required to include a direct URL hyperlink on its website linking to where such NMS Stock ATS’s documents are located on the SEC’s website. An NMS Stock ATS will be required to file material amendments to its Form ATS-N 30 calendar days prior to the implementation of the change.

Finally, the amendments will require all ATSs to have, maintain and adhere to written safeguards and procedures to protect the confidential trading information of their subscribers.

The amendments will become effective 60 days from the date they are published in the Federal Register and an entity seeking to operate as an NMS Stock ATS will be required to file a Form ATS-N effective as of January 7, 2019.

More information is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

Janet M. Angstadt, Securities, Financial Services, Chicago, Lawyer, Katten Law FIrm

Janet M. Angstadt is the head of Katten's Chicago Financial Services practice. She focuses her practice on broker-dealer and exchange compliance issues and advises companies on matters regarding compliance with the regulations of the US Securities and Exchange Commission (SEC) and self-regulatory organizations (SROs).

Janet represents clients in a wide range of legal and regulatory matters, including mergers and acquisitions, SRO investigations, compliance issues related to registrations, sales practice, short sales, Regulation NMS, market-making and...

Timothy Nolan, Katten Law Firm, Chicago, Corporate Law Attorney

Timothy Nolan concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients, including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Timothy served as the CEO and the president of the board of directors of a small commercial real estate company and spent 10 years in the scrap recycling industry, including several years as general manager of a mid-sized company. In his time in the scrap recycling industry, Timothy worked with traders, brokers, importers and exporters, and other industry professionals around the world relating to ferrous, non-ferrous and precious metal recycling, together with paper and plastic recycling.