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.