Amendments Regarding the Definition of “Exchange” and Alternative Trading Systems

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Conformed to the Federal Register Version 

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 re-proposing 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 re-proposing, 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 



 

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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-submit-comments); or  

• Send an e-mail to [email protected].  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 e-mail 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.  



 

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 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 e-mail. 

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 

                                                
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. 



 

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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 example, an ATS that limits its securities activities to government securities or 

                                                
2  The 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”). 

3  The Commission adopted 17 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”). 

4  See Securities Exchange Act Release No. 90019 (September 28, 2020), 85 FR 87106 
(December 31, 2020). 

5  For 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. 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 



 

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repurchase and reverse repurchase agreements on government securities (“repos”) and registers 

as a broker-dealer 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 non-discriminatory manner pursuant Rule 301(b)(5) of Regulation ATS (“Fair Access 

                                                
the use of non-firm 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). 



 

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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, 

                                                
6  The 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 non-displayed 
customer orders using prices disseminated by an effective transaction reporting plan. 

7  See 2020 Proposal, supra note 4. 
8  These comment letters are available at https://www.sec.gov/comments/s7-12-

20/s71220.htm and discussed throughout this proposal. 
9  See, 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 



 

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some commenters expressed concern regarding aspects of the 2020 Proposal, including the 

proposed enhanced disclosure requirements and effectiveness regime10 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 

                                                
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. 

10  See letter from Robert Laorno, General Counsel, ICE Bonds Securities Corporation, 
dated March 8, 2021(“ICE Bonds Letter I”) at 5. 

11  See 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. 

12  See, 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. 

13  See, 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 



 

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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 199816 

have changed the methods by which securities markets bring together buyers and sellers of 

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, 

                                                
(“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.  

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

16  See Regulation ATS Adopting Release, infra note 31. 



 

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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.  

                                                
17  See infra Section VIII.C.3.a. 
18  17 CFR 240.3b-16(a). 



 

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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 re-proposing 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) re-

proposing, 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) 

                                                
19  U.S. Treasury Securities and Agency Securities are not classes of securities for purposes 

of Exchange Act Rule 3a1-1(b). 
20  The 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 



 

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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   

                                                
to Form ATS-N.  The Commission believes that this would limit the number of unique 
forms and simplify filing requirements. 

22  The 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.   

23  See infra Section V.A. 
24  See infra Section V.B. 
25  See 15 U.S.C. 78c(a)(1). 



 

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Section 5 of the Exchange Act26 requires an organization, association, or 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 

                                                
26  15 U.S.C. 78e. 
27  See 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.    
29  Section 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). 

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

32 See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

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recognized that advances in technology had increasingly blurred the line between exchange and 

broker-dealer activities33 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 terms35 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 

                                                
33  See id. at 70847. 
34  See id. 
35  The 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). 
36  See 17 CFR 240.3b-16(a). 
37  See 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.   



 

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Rule 3b-16; or (3) the Commission otherwise conditionally or unconditionally exempts38 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 

                                                
38  See 17 CFR 240.3b-16(e).   
39  See 17 CFR 240.3a1-1(a)(2).   
40  See 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. 

41  See 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.”   



 

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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 

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 

                                                
42  See 17 CFR 242.300(a).   
43  See Regulation ATS Adopting Release, supra note 31, at 70859.   
44  See id.   
45  See generally Sections 5, 6, and 19 of the Exchange Act, 15 U.S.C. 78e, 78f, and 78s. 
46  See 15 U.S.C. 78e.   
47  See Regulation ATS Adopting Release, supra note 31, at 70900. 



 

16 
 

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, non-discretionary 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  

                                                
48  See id. at 70848.   
49  See id. at 70900. 
50  For 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. 

51  See id. at 70900. 
52  See id. at 70899-900, n.536. 



 

17 
 

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, non-firm trading interest54 or did not establish rules or operate a trading 

facility55 would not fall within Rule 3b-16(a).    

2. Prevalence of Systems Offering Non-Firm 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-for-Quote” (“RFQ”) 

system.  RFQ systems are designed to allow market participants to obtain quotes for a particular 

                                                
53  See id. at 70899, n.525. 
54  See id. at 70850.  In the Regulation ATS Adopting Release, the Commission stated that 

generally, 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.   

55  See 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.  

56  See id. at 70848. 



 

18 
 

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 ldentification 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 

                                                
57  Communication 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. 

58  An 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. 



 

19 
 

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 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 

                                                
59  Based 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. 



 

20 
 

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 contra-party’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 pre-approved 

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 

                                                
60  An 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.   
61  Many 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”). 



 

21 
 

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 

                                                
62  See Citadel Letter at 1-2.   
63  See 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. 

64  Tradeweb Investor Presentation, July 2021, available at: 
https://investors.tradeweb.com/static-files/e63caabf-d71d-46c0-9589-353fb8b93388. 



 

22 
 

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, 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 



 

23 
 

participants can use non-firm trading interest as a tool to avoid the risk of double-execution.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.  

                                                
65  For 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. 

66  See 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-income-advisory-
committee/fimsac-electronic-trading-platforms-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). 



 

24 
 

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 exchanges67 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   

                                                
67  See infra Section II.D.1. 
68  See infra Section II.D.2. 
69  See infra Section II.D. 
70  See infra Section VIII.C.3.a. 
71  See supra Section II.A. 
72  The 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 broker-
dealer’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 



 

25 
 

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 information76 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 

                                                
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. 

73  See infra Section II.D. 
74  See infra Section II.D.1. 
75  See infra Section II.D.2. 
76  See infra note 170 and accompanying text. 
77  See 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. 

78  See infra notes 154-155 and accompanying text. 



 

26 
 

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 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 non-ATS trading platforms, which are not subject to the same regulatory obligations designed 

                                                
79  See infra notes 131-133 and accompanying text. 
80  See infra Section VIII.C.3.a. 
81  See, 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). 

82  See supra note 66.  The FIMSAC concerns were highlighted by the Commission in the 
Concept Release. 



 

27 
 

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 broker-dealer 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.   

                                                
83  See 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).   
84  See 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). 

85  See 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.   

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



 

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Amending Exchange Act Rule 3b-16(a) to include non-firm trading interest would 

eliminate the possibility that systems may offer the use of non-firm 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 firm-up 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 

                                                
87  See Regulation ATS Adopting Release, supra note 31, at 70850. 
88  See supra Section II.B.2. 



 

29 
 

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 Regulation ATS and 

the current exchange framework on existing and emerging electronic trading protocols and 

                                                
89  See Bloomberg Letter at 17-20.  This commenter specifically cited RFQs as a new 

protocol that has helped in discovering less liquid instruments. 
90  See 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. 



 

30 
 

functionalities that do not meet the existing definition of an ATS or an exchange91 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 

                                                
91  See 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. 

92  See id. at 8. 
93  See MarketAxess Letter at 2-4. 
94  See id. 
95  See Bloomberg Letter at 17-20. 
96  See ICI Letter at 8. 



 

31 
 

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, non-discretionary methods (whether by providing a trading facility or by setting 

                                                
97  See Regulation ATS Adopting Release, supra note 31, at 70846. 



 

32 
 

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, non-discretionary 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 



 

33 
 

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 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 

                                                
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. 

99  See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

34 
 

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 non-firm trading interest allow participants to 

communicate their trading intentions, either on a bilateral or multilateral basis, to negotiate a 

trade.  Unlike orders, non-firm trading interest typically does not interact with other non-firm 

                                                
100  A 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, non-discretionary 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.” 



 

35 
 

trading interest without further action by the potential counterparties.  Rather, the potential 

counterparties submitting non-firm 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 Release101 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  

                                                
101  See id. at 70849. 



 

36 
 

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 transaction-by-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 

                                                
102  See id. 
103  One 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.    

104  The 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 



 

37 
 

systems have more than one buyer and more than one seller, such systems do not have a single 

counterparty and thus 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 

                                                
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. 

105  The 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. 

106  See supra note 102 and accompanying text.   



 

38 
 

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 non-

discretionary 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 

                                                
107  See Regulation ATS Adopting Release, supra note 31, at 70852. 
108  See NMS Stock ATS Adopting Release, supra note 2, at 38844 (citing Regulation ATS 

Adopting Release, 63 FR 70852). 



 

39 
 

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 “non-discretionary” 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 interests111 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   

                                                
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. 

110   See Regulation ATS Adopting Release, supra note 31, at 70863. 
111  See id. at 70851. 
112  See 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). 



 

40 
 

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, non-discretionary 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 

“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 

                                                
114  One commenter on the 2020 Proposal and Concept Release stated their belief that “unlike 

an ATS on which trading takes place on a non-discretionary 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 non-discretionary 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 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 broker-dealer is unlikely to be viewed as using discretionary methods 
in handling the order.  See Regulation ATS Adopting Release, supra note 31, at 70851.   

115  See 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). 



 

41 
 

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.  



 

42 
 

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 

                                                
116  One 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.     

117  To 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. 



 

43 
 

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 

                                                
118  See 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). 

119  See 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). 

120  See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

44 
 

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 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   

                                                
121  ATSs 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. 



 

45 
 

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 

                                                
122  Section 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. 

123  See, 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). 

124  See 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)). 



 

46 
 

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 broker-dealer 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 

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

127  See Section 6(b) of the Exchange Act.   
128  See generally Section 19(b) of the Exchange Act, 15 U.S.C. 78s(b).   



 

47 
 

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., the Consolidated Tape Association 

(CTA)/Consolidated Quotation (CQ) Plans and the Joint Self-Regulatory Organization Plan 

Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction 

Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading 

Privileges Basis (Nasdaq/UTP) Plan),129 among others.  

2. Regulation ATS Exemption; Broker-Dealer 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 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 

                                                
129  Details and the history of each plan can be found at https://www.ctaplan.com/plans; and 

https://www.utpplan.com.  



 

48 
 

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-the-counter (“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 ATS133 at least 20 days before commencing operations or, 

                                                
130 The 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. 

131  See Section 15(b)(8) of the Exchange Act; 15 U.S.C. 78o(b)(8). 
132  See Regulation ATS Adopting Release, supra note 31, at 70903.   
133  Form 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 



 

49 
 

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   

                                                
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). 

135  See 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”). 

136  See Regulation ATS Adopting Release, supra note 31, at 70864.   
137  Form 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). 



 

50 
 

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 

                                                
138  See 17 CFR 242.301(b)(2)(vii); Form ATS at 3, General Instructions A.7.  
139  See proposed changes to 17 CFR 242.304. 
140  See infra Section IV.A. 
141  See Rule 304(a)(1)(i). 
142  See infra Section IV.A. 
143  See infra Section IV. 



 

51 
 

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 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 

obligations149 under Rule 301(b)(3) if the ATS displays subscriber orders in an NMS stock to 

                                                
144  See 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). 

145  See 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. 

146  Form ATS-R also requires an ATS that is subject to the fair access obligations under 
Rule 301(b)(5) of Regulation ATS to provide 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). 

147  See 17 CFR 242.301(b)(2)(vii); Form ATS-R at 2, General Instruction A.7. 
148  See Regulation ATS Adopting Release, supra note 31, at 70874 and 70878. 
149  An 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 17 CFR 
242.602 (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 



 

52 
 

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 

Rule154 under Rule 301(b)(5) if the ATS meets volume thresholds in NMS stocks, equity 

                                                
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). 

150  An 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). 

151  See Regulation ATS Adopting Release, supra note 31, at 70867. 
152  See 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. 

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



 

53 
 

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 standards157 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. 

                                                
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. 

155  See 17 CFR 242.301(b)(5). 
156  See infra Section III.B.4.   
157  An 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). 

158  See 17 CFR 242.301(b)(6)(i). 



 

54 
 

 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 ATS163 and preserve the records specified in 17 CFR 

242.303.164  The Commission is proposing to amend Rule 302 of Regulation ATS to require 

                                                
159  Regulation 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.   

160  See infra Section III.C. 
161  See 17 CFR 242.301(b)(7). 
162  See 17 CFR 242.301(b)(8).   
163  See 17 CFR 242.302.  Rule 302 requires all ATSs to make and keep current certain 

records, including:  a record of subscribers to the ATS; daily summaries of trading in the 
ATS; and time-sequenced records of order information in the ATS.  See 17 CFR 242.302. 

164  See Rule 303 of Regulation ATS.  In the Regulation ATS Adopting Release, the 
Commission stated that these requirements to make, keep, and preserve records are 



 

55 
 

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 

procedures168 to protect confidential trading information and to separate ATS functions from 

                                                
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. 

165  See supra note 98 and accompanying text. 
166  Specifically, 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). 

167  See Regulation ATS Adopting Release, supra note 31, at 70878. 
168  These 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 



 

56 
 

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 

                                                
rules; and implementing standards controlling employees of the ATS trading for their 
own accounts. 

169  See 17 CFR 242.301(b)(10); NMS Stock ATS Adopting Release, supra note 2, Section 
VI.  

170  See 17 CFR 242.301(b)(10)(ii). 
171  See NMS Stock ATS Adopting Release, supra note 2, at 38864. 
172  See 17 CFR 242.301(b)(11); Regulation ATS Adopting Release, supra note 31, Section 

II.C.   
173  See Securities Exchange Act Release No. 39884 (April 17, 1998), 63 FR 23504, 23523 

(April 29, 1998) (“Regulation ATS Proposing Release”). 
174  For purposes of the rule text, the Commission is proposing to apply the transitional rules 

to “Newly Designated ATSs.” 
175  A 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. 



 

57 
 

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, 

                                                
176  After 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-become-member-membership-application-time-frames.  See also 
FINRA Rule 1014. 

177  See 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 broker-dealer.  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). 



 

58 
 

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 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?  

                                                
179  The rule text uses the term “Covered Newly Designated ATS.” 
180  See proposed changes to Rule 301(b)(2)(i).  
181  See infra note 300 and Section IV.A. 



 

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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 



 

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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 broker-dealer?  If not, what, if any, transition period would be appropriate and why? 

 

III. Proposed Changes Applicable to Government Securities ATSs 



 

61 
 

A. ATS Markets for Government Securities  

Government securities182 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  

                                                
182  Under 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).   

183  See 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. 

184  See 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/IAWG-
Treasury-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. 



 

62 
 

Specifically, most interdealer trading takes place on electronic platforms provided by interdealer 

brokers that operate limit order books, with electronic interdealer trading being 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  

                                                
185  See id. at 3. 
186  See 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. 

187  See 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. 

188 See 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/treasury-market-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 



 

63 
 

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-the-run189 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 

                                                
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.  

189  See infra note 193 for a description of “off-the-run” securities.   
190  See 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-market-structure-
treasuries-vs-agency-mbs-20200825.htm (“August 25th FEDS Notes”) (explaining the 
recent evolution of the government securities market structure).  

191  STRIPS 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. 



 

64 
 

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-to-customer 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, 

                                                
192  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.  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. 

193  Off-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. 

194  See id. 
195  See id. 



 

65 
 

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 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 

                                                
196  See 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.  

197  See 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.     

198  The 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 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. 

199  See infra Table VIII.2 and accompanying text. 



 

66 
 

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 voice-assisted interdealer broker platforms and Communication Protocol Systems that 

offer various trading protocols to bring together buyers and sellers,202 though some interdealer 

trading of off-the-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 

                                                
200  For 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.  
201  Also, 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. 

202  See 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. 

203  While 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. 

204 See U.S. Department of the Treasury Resource Center, “Fixed Income: Agency 
Securities,” available at https://www.treasury.gov/resource-
center/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.  



 

67 
 

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-

                                                
205  Additionally, repos on government securities are also traded on some ATSs.   
206  PTFs 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.”). 



 

68 
 

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 

                                                
207  See 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 
US Treasury Market Structure Conference (September 23, 2019), available at 
https://home.treasury.gov/news/press-releases/sm782.  

208  See infra Table VIII.2.  (ATS PTF volume / ATS volume) x 100 = PTF share of ATS 
volume (%).  

209  See October 15 Staff Report, supra note 188, at 32, 35-36, 39.   
210  See November 2021 IAWG Report, supra note 184, at 5; October 15 Staff Report, supra 

note 188, at 38.  
211  See October 15 Staff Report, supra note 188, at 37. 



 

69 
 

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 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/broker-dealer 

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   

                                                
212  See, e.g., BrokerTec Letter, SIFMA Letter, AFREF Letter. 
213  See FINRA Letter. 
214  See SIFMA Letter at 2. 
215  See also MFA Letter at 4. 
216  See AFREF Letter at 1. 
217  See id. 
218  See 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-



 

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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 ATS221 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 

                                                
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). 
222  See 15 U.S.C. 78o(b) (pertaining to the registration and regulation of brokers and 

dealers). 
223  See 15 U.S.C. 78o-5 (pertaining to the registration and regulation of government 

securities brokers and dealers).  
224 See 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 



 

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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 

                                                
automated quotation system operated by a registered securities association.  See supra 
note 182.   

225  See 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.  

226  Some 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.   

227  See supra notes 130-131 and accompanying text. 
228  See 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); 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.  



 

72 
 

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 government securities.233  The Capacity, Integrity, 

                                                
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). 

229  FINRA 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). 

230  See 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.   
232 See 17 CFR 242.301(b)(5). 
233  See infra Section III.C (describing the types of entities that are currently subject to the 

requirements of Regulation SCI).   



 

73 
 

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 

                                                
234  17 CFR 242.301(b)(6). 
235  See supra notes 157-158 and accompanying text. 
236  17 CFR 242.304.  See also supra notes 139-143 and accompanying text. 
237  See supra notes 149-151 and accompanying text. 
238  See supra note 152 and accompanying text. 
239  See supra Section II.A. 



 

74 
 

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 repos244 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 

                                                
240  See, e.g., 2020 Proposal, supra note 4, at 87125.  
241  See id. at Section III.B.4 (discussing the Fair Access Rule) and III.C (discussing 

Regulation SCI). 
242  See proposed Rule 300(l). 
243  17 CFR 242.300(a).  See Regulation ATS Adopting Release, supra note 31, at 70851-52. 
244  See proposed Rule 300(l). 
245  An 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. 



 

75 
 

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 non-government 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 non-

Government 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 

                                                
246  Broker-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. 

247  See ICE Bonds Letter I at 5. 
248  See 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., 17 
CFR 240.15c3-5).  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 



 

76 
 

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 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 broker-dealer 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 

                                                
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. 

249  See id. 
250  See id. 
251  See supra note 246. 



 

77 
 

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 non-

government 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 

                                                
252  See infra Section IV.D.4.f. 
253  See infra Section IV.D.5.k. 
254  See proposed Rule 300(k). 
255  See current Rule 301(b)(2)(viii).   



 

78 
 

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   

                                                
256  See 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. 

257  See proposed Rule 300(m). 
258  See proposed Rule 300(s). 
259  See proposed Rule 300(o)-(p). 
260  See infra Section III.B.4.  The proposed definitions are similar to those in FINRA’s rules.  

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



 

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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? 



 

80 
 

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 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 

                                                
261  See 17 CFR 240.3a1-1(a)(3) and 17 CFR 242.301(a)(4).   
262  The 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.  



 

81 
 

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 broker-dealers 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 broker-dealers, stating that such requirement would provide regulatory oversight with regard 

to risk management and regulatory controls.268   

                                                
263  See Regulation ATS Adopting Release, supra note 31, at 70878.  See also infra notes 

287-297 and accompanying text.   
264  See, 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. 

265  See 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). 

266  See Citadel Letter. 
267  See MFA Letter at 3. 
268  See SIFMA Letter at 2. 



 

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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 

                                                
269  See Bloomberg Letter at 4. 
270  See id. 
271  See, 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. 



 

83 
 

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

government securities brokers and dealers other than registered broker-dealers 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 self-

regulatory 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 

                                                
273  See 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. 

274  Broker-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.   

275  See 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 self-regulatory 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. 

276  See, e.g., FINRA Rule 1000 Series, FINRA Rules 4140, 4510, 4520, 4530, and 8210.  
277  See, e.g., FINRA Rule 6730. 
278  See, e.g., FINRA Rules 3110, 4370, 5210, 5220, 5230, 5310, and 5340. 



 

84 
 

securities dealer under Section 15C(a)(1)(A) would be subject to oversight and market 

surveillance by an SRO.279   

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   

                                                
279  See Regulation ATS Adopting Release, supra note 31, at 70863. 
280  Unlike 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). 

281  Exchange 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). 

282  See Exchange Act Sections 3(a)(6) (defining “bank”) and 3(a)(46) (defining “financial 
institution”). 



 

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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 

                                                
283  See 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 
broker-dealer 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.   

284  See 17 CFR 242.301(b)(3)-(4). 



 

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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 re-proposing 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 

                                                
285  See infra Section III.B.4. 
286  See infra Section III.C. 
287  See 17 CFR 242.301(b)(7).  See also Regulation ATS Adopting Release, supra note 31, 

Section IV.A.2.f.  
288  See Regulation ATS Adopting Release, supra note 31, at 70877. 



 

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• Make and keep certain records specified in Rule 302289 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 

                                                
289  See supra note 163.   
290  See supra notes 164 and 166. 
291  See 17 CFR 242.301(b)(8).  See also Regulation ATS Adopting Release, supra note 31, 

Section IV.A.2.g.  
292  See Regulation ATS Adopting Release, supra note 31, at 70878. 
293  See 17 CFR 242.301(b)(9).  See also supra notes 144-148 and infra Section III.B.4. 
294  See Regulation ATS Adopting Release, supra note 31, at 70874 and 70878. 
295  See 17 CFR 242.301(b)(10); infra note 168; NMS Stock ATS Adopting Release, supra 

note 2, Section VI. 



 

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Exempted Government Securities ATSs will help prevent the potential for abuse 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)?  

                                                
296  See NMS Stock ATS Adopting Release, supra note 2, at 38864. 
297  See 17 CFR 242.301(b)(11); Regulation ATS Adopting Release, supra note 31, Section 

II.C.   
298  See Regulation ATS Proposing Release, supra note 173. 



 

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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?   



 

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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 Broker-Dealers that Operate ATSs that Trade 
Government Securities and Non-Government 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 

                                                
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. 



 

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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 broker-dealer 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 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 

                                                
300  The Commission is also proposing to amend Rule 301(b)(2)(viii) to state that Covered 

Newly Designated ATSs will be subject to Rule 304. 
301  The 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. 

302  See 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)).   



 

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ATS that noticed on its initial operation report on Form ATS that the ATS trades government 

securities and corporate debt securities would be the broker-dealer 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 

                                                
303  Under 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).    

304  See supra note 246 and accompanying text. 
305  See 17 CFR 242.301(b)(9). 
306  The 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. 



 

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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 broker-dealer that is also the registered 

broker-dealer 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 non-government securities 

                                                
307  See supra notes 244 and 254 and accompanying text. 
308  See NMS Stock ATS Adopting Release, supra note 2, Section III.B.5. 



 

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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 

                                                
309  See infra Section V.A.  See also proposed Rule 301(b)(5)(iii).   
310  See 17 CFR 242.301(b)(5)(i). 



 

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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 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. 

                                                
311  See Regulation ATS Adopting Release, supra note 31, at 70872. 
312  See id. 
313  Under 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.  



 

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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 

                                                
314  See, e.g., SIFMA Letter; MFA Letter; ICE Bonds Letter I; and Healthy Markets Letter. 
315  See 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). 

316  See 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). 

317  See 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. 

318  See 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-to-dealer and dealer-to-customer 
transactions). 



 

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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 

                                                
319  See supra note 229. 
320  The 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.   



 

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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 Securities and Agency Securities are 

                                                
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. 

323  For 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.  



 

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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 security-by-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 

                                                
One commenter stated that Commission should not, for example, distinguish between on-
the-run and off-the-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.   

325  However, 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. 



 

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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 on-the-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 

                                                
326  See AFREF Letter at 3. 
327  See Bloomberg Letter at 6. 
328  See SIFMA Letter at 5. 
329  See 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.  



 

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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-by-security 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 

                                                
330  See 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.   

331  Based 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. 



 

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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 

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 re-proposing for Agency Securities a five percent threshold that 

                                                
332  See 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 
“grouped-affiliated ATSs” would be affected) has been adjusted based on the 
Commission’s knowledge of current ATS operations.   

333  See id. 
334  Data is based on the regulatory version of TRACE for U.S. Treasury Securities from 

April 1, 2021 through September 30, 2021. 



 

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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 one-month 

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 

                                                
335  See Rule 301(b)(5)(i)(A)-(D). 
336  This ATS would also meet the proposed threshold for trading in U.S. Treasury Securities. 
337 See 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.   

338  See infra Section V.A.3. 



 

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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. 



 

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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 non-FINRA 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 



 

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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. 

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 

                                                
339  See supra Section II.  



 

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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 

                                                
340  A 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. 

341  See Regulation SCI Adopting Release, supra note 3, at 72252-56 for a discussion of the 
background of Regulation SCI. 



 

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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 

                                                
342  See id. at 72253-56.  
343  See id. at 72277-79. 
344  Id. at 72253, 72256. 
345 See 17 CFR 242.1000.   
346  See 17 CFR 242.1001; infra notes 397-398. 



 

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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 

                                                
347  See 17 CFR 242.1002-1007; infra notes 400-411. 
348 See 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”). 



 

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debt.351  Explaining this departure, the Commission differentiated ATSs trading 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 

                                                
351  See Regulation SCI Proposing Release, Securities Exchange Act Release No. 69077 

(Mar. 8, 2013), 78 FR 18084, 18093-95 (Mar. 25, 2013). 
352  See Regulation SCI Adopting Release, supra note 3, at 72270. 
353  See id. 
354  See id. 
355  See 2020 Proposal, supra note 4, at 87152.  See also supra Section II.B; Regulation SCI 

Adopting Release, supra note 3, at 72253. 



 

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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 

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

358  See SIFMA Letter at 5; MFA Letter at 5; AFREF Letter at 2, 4; and Healthy Markets 
Letter at 10-11. 

359  See MFA Letter at n.13. 
360  See MFA Letter at 5; and Healthy Markets Letter at 9. 



 

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“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 

                                                
361  See 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).  

362  See AFREF Letter at 2. 
363  See 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. 

364  See Tradeweb Letter at 11; BrokerTec Letter at 5-9; and MarketAxess Letter at 11. 
365  See Tradeweb Letter at 3, 11; and BrokerTec Letter at 8-9. 
366  See Tradeweb Letter at 3, 11. 



 

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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 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 

                                                
367  See MarketAxess Letter at 11. 
368  Some 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. 

369  As 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.  

370  See Regulation SCI Adopting Release, supra note 3, at 72270. 



 

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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 that371 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     

                                                
371  See generally SIFMA Letter at 5, MFA Letter at 5, and AFREF Letter at 2. 
372  See Regulation SCI Adopting Release, supra note 3, at 72264.  
373  See 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 



 

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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 re-proposing 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 

                                                
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. 

374  See BrokerTec Letter at 6. 
375  Specifically, 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. 

376  See Regulation SCI Adopting Release, supra note 3, at 72259-60, 72290-91. 
377 See paragraphs (3) and (4) of the definition of “SCI ATS” under Rule 1000 of Regulation 

SCI.   



 

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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 

                                                
378  See AFREF Letter at 2 and 4. 
379  Specifically, 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). 



 

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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   

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 

                                                
380  See ICE Bonds Letter II at 5. 
381  See Tradeweb Letter at 3, 11.  This commenter stated that the threshold should be raised 

to a “more material percentage” such as 25 percent. 
382  See Bloomberg Letter at 5. 
383  Regulation 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, 



 

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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 

                                                
including repos on U.S. Treasury Securities and Agency Securities should be subject to 
Regulation SCI.  

384  See 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. 



 

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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 off-the-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 

                                                
385  See Regulation SCI Adopting Release, supra note 3, at 72270. 
386  See id.  
387  See supra notes 187-190 and accompanying text. 
388  See 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. 



 

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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 systems issues that cause widespread systemic 

                                                
389  The 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.   

390  See Tradeweb Letter at 3, 11. 



 

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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 

                                                
391  See Regulation SCI Adopting Release, supra note 3, at 72263. 



 

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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 

                                                
392  See supra note 379. 
393  See BrokerTec Letter at 9-10. 
394  As 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. 



 

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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 six-month 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 

                                                
395  See 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. 



 

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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 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 

                                                
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). 
400 See 17 CFR 242.1002(a) (Rule 1002(a) of Regulation SCI). 



 

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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 

                                                
401 See 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. 

402  See 17 CFR 242.1002(c). 
403  See id. 
404  See 17 CFR 242.1003(a) (Rule 1003(a) of Regulation SCI). 
405  See 17 CFR 242.1003(b). 
406 See 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 



 

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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 SCI409 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. 

                                                
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). 

407 See 17 CFR 242.1003(b)(2)-(3). 
408 See 17 CFR 242.1004 (Rule 1004 of Regulation SCI). 
409  See 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. 

410  See 17 CFR 242.1006 (Rule 1006 of Regulation SCI). 
411  See 17 CFR 242.1007 (Rule 1007 of Regulation SCI). 



 

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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 



 

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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 on-

the-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 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 



 

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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?  



 

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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 broker-dealer, or operated by affiliated broker-dealers?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?  

                                                
412  See Section V.A.2, infra, discussing the proposed aggregation of volume of affiliated 

ATSs for purposes of application of the Fair Access Rule.  



 

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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 



 

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commenters believe that different or unique requirements should apply to 

Communication Protocol Systems?  What should they be and why? 

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 

                                                
413  As 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. 

414  See infra Section IV.D. 
415  See infra Section IV.D.1. 



 

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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 

                                                
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.   

417  See, 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. 

418  See ICE Bonds Letter I at 4-5. 



 

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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: 

                                                
419  See MFA Letter at 5. 
420  See 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.   
421  See NMS Stock ATS Adopting Release, supra note 2, at 38782.   



 

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• 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 amendments425 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 ineffective if it finds, 

after notice and opportunity for hearing, that such action is necessary or appropriate 

                                                
422  The Commission staff may reject a Form ATS-N filing that is defective because, for 

example, it is missing sections or missing responses to any sub-questions, 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. 

423  See Rule 304(a)(1)(i). 
424  See proposed Rule 304(a)(1)(ii).  See also infra note 430. 
425  See infra note 451. 
426  As 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). 

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



 

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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 

                                                
428  Like 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.   

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



 

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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 

                                                
authorized representative of the Form ATS-N agrees in writing.  See Rule 
304(a)(1)(ii)(A)(2). 

431  See 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. 

433  See 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 



 

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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 

                                                
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. 



 

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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 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 days436 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 

                                                
434  See supra note 424 and accompanying text. 
435  See supra notes 430-432 and accompanying text. 
436  Consistent 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. 



 

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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: 

                                                
437  See 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.   

438  See 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). 

439  See NMS Stock ATS Adopting Release, supra note 2, Section IV.A.3. 



 

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• 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 

                                                
440  See 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.   

441  See Rule 304(a)(2)(i)(B).  See also infra note 451. 
442  See 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. 



 

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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 broker-dealer 

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 

                                                
443  The 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. 

444  See 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. 



 

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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 firm-up trading interest) and priority 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 



 

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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 

                                                
446  For 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. 

448  See infra Section IV.D.5.r. 



 

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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 

                                                
449  15 U.S.C. 78s(b). 
450  17 CFR 240.19b-4(f)(2). 



 

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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 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 

                                                
451  See 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). 

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



 

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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 

                                                
453  See 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). 



 

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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 

                                                
454  See infra note 463 and accompanying text. 
455  See Rule 304(a)(3). 
456  The 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.  

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



 

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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? 

                                                
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.  

459  Pursuant 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). 



 

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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 (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?  



 

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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?   



 

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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:   

                                                
460  See 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). 



 

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• 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. 

                                                
461  See Rule 304(b)(1). 
462  See Rule 304(b)(2). 
463  See proposed Rule 304(b)(2)(iii). 



 

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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 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   

                                                
464  See, 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).   

465  See FINRA Letter at 2. 
466  See 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).   



 

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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 

                                                
468  See 17 CFR 240.301(b)(2)(vii). 
469  See Alternative Trading System List, https://www.sec.gov/foia/docs/atslist.htm. 



 

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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 

                                                
470  Unlike 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.  



 

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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-N472 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 

                                                
471  See Item A.3 of the Instructions to Form ATS-N (as revised). 
472  See NMS Stock ATS Adopting Release, supra note 2, Section VII.   



 

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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. 

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 broker-dealer 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 

                                                
473  See Regulation ATS Adopting Release, supra note 31, at 70877-78. 
474  See 2020 Proposal, supra note 4. 



 

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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” 

                                                
475  See infra Section IV.D.5.k. 
476  See infra Section IV.D.5.i. 
477  See FINRA Letter at 4. 



 

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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 sub-questions 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 broker-dealer 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 

                                                
478  The 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.   

479  See 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. 

480  See supra notes 563-564 and accompanying text. 
481  See infra note 565. 
482  See infra note 497 and accompanying text.  See proposed revisions to Form ATS-N Part 

II, Item 4 and Part III, Item 7.  



 

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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, 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 

                                                
483  See proposed changes to Part II, Items 1 and 2 and Part III, Items 4(a), Item 22(a), Item 

24(d)(ii). 
484  See infra Section IV.  See also supra note 467. 
485  See Instruction A.3 of Form ATS-N (requiring that a Form ATS-N filing is accurate, 

current, and complete). 



 

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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 after-hours 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 broker-dealer 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 



 

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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 

                                                
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). 
488  The 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. 

489  See supra note 254 and accompanying text. 
490  See supra note 242 and accompanying text. 
491  See supra note 259 and accompanying text. 
492  See id. 
493  See supra note 256 and accompanying text. 



 

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“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 

                                                
494  See supra Section II.C.1. 
495  See supra note 273 and accompanying text. 
496  See proposed Rule 3b-16(e) and Rule 300(q). 
497  See revised Form ATS-N, Explanation of Terms. 
498  This 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.”   



 

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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 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 

                                                
499  See Rule 304(a)(1)(iv), as proposed to be revised. 
500  The 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.   

501  The 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. 

502  See 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 broker-dealer operator 
equally.  If a change would apply differently among subscribers or types of subscribers, 
between subscribers and the broker-dealer 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 



 

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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 

                                                
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.   

503  See Instruction A.9 of Form ATS-N. 



 

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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 broker-dealer 

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 broker-dealer 

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 

                                                
504  See 15 U.S.C. 78o(b)(8).  See also NMS Stock ATS Adopting Release, supra note 2, at 

38773. 
505  As 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. 

506  Current 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 



 

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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   

                                                
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 broker-dealer 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.  

507  The 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%209-12-14_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 



 

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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 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 

                                                
the ATS, such activities and functionality would be subject to Regulation ATS, including 
the disclosure requirements of Form ATS-N. 

508  See FINRA Rules 6160, 6170, 6480, and 6720.  



 

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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 notes517 and indicate whether each type of security traded is on-the-run, off-the-run, 

                                                
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. 
510  The 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.   
511  The types of securities traded would be limited to government securities (15 U.S.C. 

78c(a)(42)) and repos.  See proposed Rule 300(l).   
512  Treasury 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). 

513  Treasury 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.  

514  Treasury 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. 

515  Treasury 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. 

516  See supra note 191. 
517  A 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 



 

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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 Securities519 and/or Federal 

Agency Securities.520  In addition, if the Government Securities ATS trades repos, the ATS 

would indicate whether it trades triparty521 and/or bilateral repos,522 and whether such securities 

are repurchase agreements or reverse repurchase agreements and are centrally cleared523 or non-

                                                
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. 

518  A “when-issued” transaction is a transaction in a U.S. Treasury Security that is executed 
before the issuance of the security. 

519  Agency 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).   

520  Federal Agency Securities include all Agency Securities except Agency Mortgage-
Backed Securities.  See supra note 519.   

521 A 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”). 

522  A 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. 

523  Centrally 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).  



 

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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 10525 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 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 

                                                
524  Non-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.   
525  These items are numbered as Part I, Items 8 and 9 in current Form ATS-N, but would be 

renumbered as Items 9 and 10.  
526  Part 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. 



 

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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 broker-dealer that is not 

the ATS’s current broker-dealer operator, the new broker-dealer 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 broker-dealer 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” 

                                                
527  See supra note 455 and accompanying text. 
528  See 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.  

529  This 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.   



 

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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 



 

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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 non-ATS 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 

                                                
530  See infra Section IV.D.4. 
531  See NMS Stock ATS Proposing Release, supra note 29, at 81010, 81041. 
532  See id. at 81010. 



 

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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 broker-dealer operator has the opportunity to place its interest 

ahead of participants trading in the ATS that the broker-dealer 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 

                                                
533  Form 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 



 

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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 

                                                
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. 

534  See 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.   



 

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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 broker-dealer 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 broker-dealer 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 broker-dealer 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 broker-dealer, and that third-party broker-dealer, 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 

                                                
536  For 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. 

537  As explained above, Form ATS-N will remove references to “orders,” and its disclosures 
will focus on “trading interest.” 



 

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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 understand both the types of broker-dealer operator 

business units and affiliates that can trade in a Covered ATS, and their trading activities.538  

                                                
538  Although 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. 



 

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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 

                                                
539  Depending on how the Covered ATS operates, it is possible that disclosures about the 

broker-dealer 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 (Post-Trade 
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 broker-dealer 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.  

540  The 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 broker-dealer 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. 



 

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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 

broker-dealer 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 

                                                
541  This request is contained in Part III, Item 12.  See infra Section V.D.5.l. 



 

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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?  



 

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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 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 broker-dealer 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) 



 

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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 requirements543 of the opt-out 

processes for the broker-dealer operator and affiliates required to be identified in Items 3(a) and 

(b) are the same for all subscribers.  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 

                                                
542  For example, if a broker-dealer operator uses algorithms to submit subscriber orders into 

the Covered ATS, any steps that either the broker-dealer 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.   

543 The 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.   

544  See supra Section IV.D.3.a. 



 

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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 

                                                
545  See 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 



 

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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 

                                                
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.   



 

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functionality, post-trade processing),548 and if applicable, to indicate whether the requirements of 

use549 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 

                                                
548  In Part II, Item 5, the Commission is proposing to add “order hedging or aggregation 

functionality” and “post-trade processing” as examples of 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.   

549  The 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). 

550  For 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. 



 

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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, over-the-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 

                                                
551  See 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 broker-dealer 
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. 



 

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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 broker-

dealer 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 broker-dealer 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. 

                                                
552  See infra Section IV.D.5.l.   
553  Services 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. 



 

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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 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. 



 

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Request for Comment 

95. What types of products and services do broker-dealer operators of Covered ATSs or 

affiliates of broker-dealer 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 broker-dealer 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 broker-dealer 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 

                                                
554  As 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. 

555  Legacy 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 



 

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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 

                                                
Exhibit E of Form ATS).  Proposed Part II, Item 6(b) would expand upon this 
requirement. 

556  See 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). 



 

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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.     

                                                
558  See 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. 

560  See supra note 109.   



 

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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 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, 

                                                
561  The 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). 



 

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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 broker-dealer 



 

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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.   



 

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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 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 

                                                
562  See Regulation ATS Adopting Release, supra note 31, at 70879. 



 

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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?   

                                                
563  See 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.   



 

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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 broker-dealer 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 



 

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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 

                                                
564  For 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).   



 

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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 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.   

                                                
565 See 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. 



 

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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 non-exhaustive 

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 

                                                
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-to-read 
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 broker-dealer 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. 

567  See NMS Stock ATS Adopting Release, supra note 2, at 38820-21 (discussing the 
definition of “subscriber” and the persons encompassed thereunder).     



 

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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” 

                                                
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).  

569  For 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”).       



 

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of those conditions.  Some Covered ATSs may only have the eligibility requirement that a person 

be a client of the broker-dealer 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 

                                                
570  These limitations can result in some subscribers having different levels of functionality or 

more favorable terms of access than others.  For example, in the Commission 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. 



 

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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 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 

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



 

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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.   

                                                
572  The 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.   



 

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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 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).  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, web-enabled 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, web-

enabled 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 



 

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operator,573 and list and provide a summary of the requirements574 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 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 

                                                
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.”  

574  Current 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. 



 

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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 

                                                
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.     



 

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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 broker-dealer 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 

                                                
577  See supra note 564 and accompanying text.   
578  Covered ATSs would not be required to calculate and disclose precise latencies for each 

means of entry for purposes of Form ATS-N.  



 

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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   

                                                
579  See 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. 

580  See Regulation ATS Adopting Release, supra note 31, at 70873.  See infra Section 
V.A.3.a.   



 

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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 co-location 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 III, Item 6(b) of Form ATS-N581 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 

                                                
581  The 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).  
582  To 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. 

583  See 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 



 

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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 

                                                
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. 



 

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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 



 

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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 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 

                                                
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.   



 

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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.  Broker-dealer 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.   

                                                
585  As 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.   



 

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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 

                                                
586  See Regulation ATS Adopting Release, supra note 31, at 70849 n.37. 
587  The 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. 

588  The 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-à-vis”) other orders on the book due to changes in the 
NBBO or other reference price. 



 

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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 

                                                
589  This non-exhaustive list is the same as what is in current Form ATS-N, Part III, Item 11. 
590  Part 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.   



 

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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 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? 



 

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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 IOIs,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 IOIs, 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 IOIs 

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 non-firm trading interest, solicit interest to buy or sell a security, discover prices, 

                                                
591  Part III, Item 9 of current Form ATS-N asks about conditional orders and IOIs.  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. 



 

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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 

                                                
592  See supra Section II.B.2. 



 

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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 pre-selected 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 ATS discloses subscribers’ identities and how and when messages are 

transmitted (e.g., order management system, router, or FIX). 



 

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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, good-til-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 



 

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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 



 

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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 



 

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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 non-

exhaustive 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 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 broker-dealer 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 non-firm trading interest may interact with firm trading interest 

and may cross-reference 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 



 

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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 time-stamping 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?   



 

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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 

                                                
593  Section 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). 

594  See 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 



 

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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 

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 

                                                
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. 

595  See FINRA Regulatory Notice, supra note 594, at 3. 
596  See NMS Stock ATS Adopting Release, supra note 2, at 38850. 



 

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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 anti-gaming technology and other subscriber-

related 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 

                                                
597  See Letter from David W. Blass, General Counsel, Investment Company Institute, dated 

February 25, 2016, at 9-10.   
598  See id. 
599  See id. 
600  See 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). 

601  See NMS Stock ATS Adopting Release, supra note 2, 83 FR 38850. 



 

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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 



 

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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 



 

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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 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 affiliates603 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 

                                                
602  The 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.   

603  Among 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. 



 

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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 non-government securities markets that 

trade futures, currencies, fixed income, and swaps, for example.  Markets for financial 

instruments related to NMS stocks could include, for example, non-NMS 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 non-government security.  A Covered 

ATS could offer, for example, Exchange-for-Physical (“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 



 

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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. 

                                                
604  To 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. 



 

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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 

                                                
607  See, e.g., NYSE Guide Rule 104 (Dealings and Responsibilities of DMMs), Nasdaq  

Rule Equity 2, Section 5 (Market Maker Obligations). 



 

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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 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 liquidity-provider 

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 

                                                
608  These 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. 

609  See Part II, Items 1(c) and 2(c) of Form ATS-N. 
610  See NMS Stock ATS Adopting Release, supra note 2, at 38829. 



 

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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 person611 or the broker-dealer operator 

                                                
611  The 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 



 

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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 

                                                
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. 



 

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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 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 



 

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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 

                                                
612  See Bloomberg Letter at 8. 



 

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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 

                                                
613  The 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 (Counter-Party 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.   



 

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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 broker-dealer 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 



 

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disclosure, when and how the disclosure is communicated, who receives it, and whether and how 

such designation can 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 



 

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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-by-order basis or a participant-by-participant 

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-

                                                
614  The 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. 



 

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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 



 

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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 broker-dealer 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 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 

                                                
615  See supra Section IV.D.5.m. 



 

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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 

                                                
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., real-time, 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.   



 

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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 broker-dealer 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 



 

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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 

participant618 that receives the displayed information.  If, for instance, the ATS displays orders to 

                                                
617  The 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.   

618  See Part III, Item 1 of Form ATS-N (providing examples of types of market participants). 



 

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the broker-dealer operator’s SOR or trading desk, the ATS would indicate “yes” to this 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 broker-dealer 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-ATS-systems 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, 



 

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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 17 CFR 242.600(a)(31) (Rule 

600(a)(31) of Regulation NMS).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.   

                                                
619  Covered 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). 

620  Part 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). 



 

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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 



 

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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 broker-dealer 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 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? 

                                                
621  As 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. 



 

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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 

                                                
622  The 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. 

623  The 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.   



 

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Part III, Item 18 of Form ATS-N624 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.   

                                                
624  As 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. 

625  The 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 



 

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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., 

                                                
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. 



 

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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 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 

                                                
626  The 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). 

627  See NMS Stock ATS Adopting Release, supra note 2, at 38858 (discussing what fees 
should be categorized as for use of the ATS’s services).  



 

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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? 

                                                
628  See 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). 



 

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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 

                                                
629  The 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. 

630  See Regulation SCI Adopting Release, supra note 3, at 72254-55 n.28.   
631  See id. at 72255 n.29. 



 

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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 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   

                                                
632  This question is substantially the same as Part III, Item 21 of current Form ATS-N. 
633  See supra notes 228-229 and accompanying text. 



 

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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 ATS634 and the ATS’s participants to manage the post-trade processing, 

                                                
634  The 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. 



 

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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 straight-through 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 broker-dealer 

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), 



 

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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 

                                                
635  See 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-DraftPaper-
071218.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. 



 

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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 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.   



 

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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 22636 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 

                                                
636  This Item is currently numbered as Part III, Item 23 of current Form ATS-N. 



 

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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 

                                                
637  Part 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). 



 

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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 Regulation ATS (as 

proposed to be applied herein).643  A description of the Covered ATS’s reasonable written 

                                                
639  See supra Section III.D.     
640  The Commission is proposing changes to the Fair Access Rule, which are discussed in 

detail below.  See infra Section V.A.2. 
641  See infra Sections V.A.3 through V.A.4. 
642  See 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. 

643  The 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 



 

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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 

                                                
re-numbering, describing the required written standards as “reasonable,” and to reference 
standards limiting and denying access to the services of the ATS. 



 

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Part III, Item 25 of Form ATS-N644 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 non-firm 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 

                                                
644  This Item is currently numbered as Part III, Item 26 of current Form ATS-N. 
645  See supra Section II.C. 



 

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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 17 CFR 242.605 (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 

                                                
646   See 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).  



 

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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 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, 



 

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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   

                                                
648  See supra note 533 for the definition of affiliate under Form ATS-N. 



 

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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 platform-wide 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 



 

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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) 

                                                
649  To 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 17 CFR 232.302 (Rule 302 of Regulation S-T).  See 17 
CFR 232.302. 

650  See supra Section III.B.4. 



 

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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 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 

                                                
651  17 CFR 242.301(b)(5)(i)(A)-(B).  
652  See 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). 

653  17 CFR 242.301(b)(5)(i)(C)-(D); 17 CFR 242.301(b)(6)(i)(A)-(B). 
654  See 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.     

655  See proposed Rule 301(b)(5)(i)(A)-(D); proposed Rule 301(b)(6)(i)(A)-(B). 



 

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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 

                                                
656  To 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. 

657  See Regulation ATS Adopting Release, supra note 31, at 70873. 
658  See 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 https://www.msrb.org/Rules-
and-Interpretations/MSRB-Rules/Facilities/EMMA-Facility.aspx; FINRA Rule 6750. 

659  For 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 



 

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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 

volume-weighted-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    

                                                
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. 

660  The 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). 

661  See 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)).   



 

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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 auction-based 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 broker-

dealers, there is a potential for a broker-dealer 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 

                                                
662  See ICE Bonds Letter I at 6. 
663  See id. 



 

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providing a market place to bring together buyers and sellers of securities 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 broker-dealers 

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 broker-dealers – 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 



 

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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 

                                                
664  Also, 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. 

665  These requirements are currently in Rule 301(b)(5)(ii), which the Commission is 
proposing to re-number as Rule 301(b)(5)(iii). 

666  See 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 



 

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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, 

                                                
significant volume in a security, and the rule would serve to prohibit “unreasonably” 
discriminatory denials of access. 

667  Rule 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.   



 

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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 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 

non-registered 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.     

                                                
668  See supra notes 666-667. 
669  See Regulation ATS Adopting Release, supra note 31, at 70874. 
670  See proposed Rule 301(b)(5)(iii)(A)(4). 



 

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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 

                                                
671  15 U.S.C. 78f(b)(5). 
672  15 U.S.C. 78f(b)(2) and (c). 
673  See Regulation ATS Adopting Release, supra note 31, at 70874. 
674  See MarketAxess Letter at 10. 



 

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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 

                                                
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. 

676  Rule 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.   



 

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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 similarly-situated 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 



 

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application of an ATS’s written standards as well as help the staff understand the written fair 

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 

                                                
677  See 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 



 

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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 

                                                
not trade against that subscriber.  Subscribers are assigned scores based on their reversion 
rates and segmented into classes or categories accordingly.   



 

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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 

                                                
680  As 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. 



 

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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, 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 non-discriminatory 

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, 



 

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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 

                                                
681  See Regulation ATS Adopting Release, supra note 31, at 70873, n.252. 
682  This is currently in paragraph (b)(5)(iii)(C), but would be renumbered to paragraph 

(b)(5)(iii)(B) under the proposed changes.   



 

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“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 

                                                
683  The 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).   

684  See 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).  



 

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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 

                                                
685  When 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).   
687  Regulation ATS Adopting Release, supra note 31, at 70853. 
688  Id. at 70872.  



 

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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 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 discrimination692 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 

                                                
689  See NMS Stock ATS Adopting Release, supra note 2, at 38770-71. 
690  17 CFR 242.301(b)(6)(iii).   
691  See Regulation SCI Adopting Release, supra note 3, at 72252, 72267. 
692  15 U.S.C. 78f(b)(5).    
693  See 15 U.S.C. 78f(b)(2) and (c); 15 U.S.C. 78o–3(b)(8). 



 

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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 security-by-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 



 

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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 broker-

dealers, 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 the order display and execution 

access provisions under Rule 301(b)(3) 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 

access provisions 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 

broker-dealer 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? 



 

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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 

                                                
694  See Form ATS-R.  See also supra notes 144-147. 

695  See 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. 



 

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case with Form ATS, constitutes a report within the meaning of applicable provisions of the 

Exchange Act.696   

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 

                                                
696  This amendment would be consistent with Rule 301(b)(2)(vii), which states that “[a]ll 

reports filed pursuant to this paragraph (b)(2) and 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). 

697  Rule 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, D.C.  See 17 CFR 242.301(b)(2)(vii).   

698  See infra note 701 and accompanying text. 
699  Accordingly, 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 



 

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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 

                                                
Trading and Markets, at the Commission’s principal office in Washington, D.C.”  
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. 

700  The 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).  

701  The 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 



 

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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 

                                                
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.  
703  The Form ATS Instructions state that “Form ATS shall not be considered filed, unless it 

complies with applicable requirements.” 
704  Rule 303 of Regulation ATS provides the record preservation requirements for ATSs.  

See 17 CFR 242.303. 
705  See infra Section V.C. 



 

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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 re-proposing 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 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 

                                                
706  See supra note 180 and accompanying text. 
707  See Rule 301(b)(2)(ii)-(iv). 
708  The 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. 



 

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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 broker-dealers 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 

broker-dealer, 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 

                                                
709  See 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).  

710  See supra Section IV.D.3. 
711  Form 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 



 

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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, 

                                                
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. 

712  See supra note 506.  
713  See supra Section IV.D.3 (proposing requiring the ATS to disclose the MPID of its 

broker-dealer operator). 
714  The 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. 



 

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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 

                                                
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. 

716  See supra note 714. 



 

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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 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 

                                                
717  See Form ATS-R and Form ATS-R Instructions, No. 8. 
718       The 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.   



 

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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 non-U.S. corporate debt securities.  

                                                
719  See supra Sections III.B.4 and III.C. 
720  Currently, 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.   



 

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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 non-emerging 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 unit722 and dollar volume of repurchase and reverse repurchase 

transactions broken down by (1) whether the transaction is overnight or term;723 (2) whether the 

                                                
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. 

722  For 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.    

723  Overnight 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 



 

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transaction is triparty724 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 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 

                                                
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.  

724  See 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. 

725  See supra note 522. 
726  As 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) x 2 
transaction types (overnight or term) x 2 party types (bilateral or triparty) x 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). 



 

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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 

                                                
727  For 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/.  



 

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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? 

                                                
728  See supra note 98 and accompanying text. 
729  See id. 
730  See Item 4.g of Form ATS, as proposed to be revised. 
731  See 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). 



 

311 
 

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 



 

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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 non-U.S. corporate debt securities.  Do commenters believe that 

the two subcategories would yield useful information to the Commission?  Non-U.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 further break down the volume for non-U.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 



 

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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) 



 

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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 law734 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 

                                                
732  See 17 CFR 242.301(b)(2)(vii). 
733  The 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).   

734  See, e.g., 17 CFR 200.83, 240.24b-2. 



 

315 
 

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 



 

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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 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 
Number 

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 

                                                
735  44 U.S.C. 3501 et seq. 



 

317 
 

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 

                                                
736  See infra Section VII.C for a description of the categories of respondents. 
737  Unless otherwise described, none of the existing information collections are being revised 

with new requirements. 



 

318 
 

Collection of 
Information 

Rule Burden Description Respondent 
Categories 

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 

Regulation SCI Rules 1001-
1007 of 
Regulation SCI 

Comply with 
Regulation SCI 

Certain Communication 
Protocol Systems 



 

319 
 

Collection of 
Information 

Rule Burden Description Respondent 
Categories 

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.  



 

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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 

                                                
738  See supra Section V.A. 



 

321 
 

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 

                                                
739  See supra notes 165-166 and accompanying text. 



 

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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 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 

                                                
740  See supra Section IV.A. 



 

323 
 

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 

                                                
741  See supra Section IV.D.1. 
742  See supra Section IV.D.5. 
743  See supra Section IV.D. 



 

324 
 

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 proposed744 and that Current Government Securities ATSs will have to 

                                                
744  See supra Section III.B.2. 



 

325 
 

comply with the enhanced requirements for Government Securities ATSs.745  The Commission 

estimates the total number of Currently Exempted Government Securities ATSs to be 7746 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. 

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. 

                                                
745  See supra Section IV.A. 
746  The 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. 

747  As of September 30, 2021, 17 Government Securities ATSs currently operate pursuant to 
a Form ATS currently on file with the Commission. 



 

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Collection of 
Information 

Rule Number of 
Respondents 

Description 

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-



 

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Collection of 
Information 

Rule Number of 
Respondents 

Description 

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 

                                                
748  See supra Section II.D. 



 

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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. 

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 

                                                
749  Some 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. 

750  The 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. 



 

329 
 

Collection of 
Information 

Rule Number of 
Respondents 

Description 

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. 



 

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Collection of 
Information 

Rule Number of 
Respondents 

Description 

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 

                                                
751  See supra Section IV.D.1.   



 

331 
 

questions on Form ATS-N.752  The Commission estimates the total number of NMS Stock ATSs 

to be 34753 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. 

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. 

                                                
752  See 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. 

753  As 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. 



 

332 
 

 

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 exclusively754 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 59756 and that these respondents will be subject to the following collections of 

information as estimated below: 

                                                
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. 

755  See 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 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 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. 

756  As 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. 



 

333 
 

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 



 

334 
 

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 electronic758 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 hours759 and an annual burden of 5 hours760 

                                                
757  See supra Section II.D. 
758  The 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 broker-dealer 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. 

759 The 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). 

760 The 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) x 2 IOR amendments a year).  See Rule 301 PRA 



 

335 
 

per respondent for complying with Rule 301(b)(2) and the following total initial and annual 

burdens: 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent) 
 

Initial Communication 
Protocol Systems  

14 20.5 hours 287 hours  

Annual 5 hours 70 hours  

Initial Other Form ATS Filers 

 

59 20.5 hours 1,209.5 hours 

Annual 5 hours 295 hours 

 

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 

                                                
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 x 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). 

761  See supra Section II.D.2. 



 

336 
 

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 

respondent764 and the following total annual burdens: 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

8 37 hours 296 hours   

Legacy Government 
Securities ATSs 

7 37 hours 259 hours 

 

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 

                                                
762  See proposed Rule 301(b)(5)(ii).  See supra Section V.A.  
763 See Rule 301 PRA Supporting Statement, supra note 759. 
764 The 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 x 2 responses a year) + 27 hours for Fair Access notices (Attorney at 1 hour x 27 
responses a year).  See Rule 301 PRA Supporting Statement, supra note 759. 



 

337 
 

burden associated with the currently approved collection of information for this requirement.765   

The Commission estimates an annual compliance burden of 11 hours per respondent766 and the 

following total annual burden: 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

2 11.25 hours 22.5 hours   

 

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 electronic767 Form ATS-R.   

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 

                                                
765 See Rule 301 PRA Supporting Statement, supra note 759. 
766 The 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 x 5 systems outages a year).  See Rule 301 PRA Supporting Statement, supra 
note 759. 

767  As 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. 



 

338 
 

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 respondent770 and 3 

hours per existing Form ATS-R respondent;771 and the following total annual burdens: 

                                                
768  The 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). 

769 See Rule 301 PRA Supporting Statement, supra note 759. 
770 The annual burden per Currently Exempted Government Securities ATS or 

Communication Protocol System would be 4.75 hours x 4 quarterly filings annually = 19 
burden hours. 

771 The annual burden per existing Form ATS-R respondent would be 0.75 hours x 4 
quarterly filings annually = 3 burden hours. 



 

339 
 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

22 19 hours 418 hours   

Currently Exempted 
Government Securities ATSs 

7 19 hours 133 hours   

Current Government 
Securities ATSs 

17 3 hours 51 hours   

NMS Stock ATSs 34 3 hours 102 hours   

Other Form ATS Filers 59 3 hours 177 hours   

 

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 

                                                
772  The 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. 



 

340 
 

burden of 8 hours773 and an annual burden of 4 hours774 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 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent) 

Initial Communication 
Protocol Systems 

22 8 hours 176 hours  

Annual 4 hours 88 hours  

Initial Currently Exempted 
Government Securities 
ATSs 

7 8 hours 56 hours  

Annual 4 hours 28 hours  

 

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.  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 

                                                
773 The 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.     

774 The 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. 

775  The 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. 



 

341 
 

Commission estimates an annual burden of 45 hours per respondent to comply with Rule 302776 

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 

Total Annual 
Burden 
(Number of 
Respondents x 
Annual Burden 
per Respondent) 
  

Rule 302 Communication 
Protocol Systems 

22 45 hours 990 hours   

Rule 303 15 hours 330 hours   

Rule 302 Currently Exempted 
Government Securities 
ATSs 

7 45 hours 315 hours  

Rule 303 15 hours 105 hours 

 

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 

                                                
776 The 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. 

777 The 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. 

 



 

342 
 

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 

                                                
778  See supra Section II.D. 
779  See supra Section III. 
780  See supra Section IV. 
781 The 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/PRAViewICR?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). 



 

343 
 

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 annual785 burdens for each 

respondent type are as follows: 

                                                
782 The 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.  

783 The 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. 

784 The 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) x 5 amendments a year).  See Rule 304 PRA Supporting Statement, supra note 
781. 

785 The 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. 



 

344 
 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 hours)  
 

Initial Communication 
Protocol Systems 

8 136.4 hours 1,091 hours   

Annual 47 hours 376 hours   

Initial Currently Exempted 
Government 
Securities ATSs 

7 136.4 hours 955 hours 

Annual 47 hours 329 hours 

Initial Current Government 
Securities ATSs 

17 116.4 hours 1,979 hours   

Annual 47 hours 799 hours 

Initial NMS Stock ATSs 34 8 hours 272 hours   

 

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 broker-dealer 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 broker-dealers.786  The Commission estimates an initial burden of 2.75 

                                                
786  The 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. 



 

345 
 

hours787 and an annual burden of 1 hour788 per respondent for completing Form BD and the 

following total initial and annual burdens: 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 
hours) 
 

Initial Communication 
Protocol Systems  

6 2.75 hours 16.5 hours  

Annual .95 hours 5.5 hours  

Initial Currently Exempted 
Government Securities 
ATSs 

1 2.75 hours 3 hours 

Annual .95 hours 1 hour 

 

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 broker-dealers discussed above 

would also newly incur the currently-approved baseline burden of the Form ID collection of 

                                                
787 The 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”). 

788 The 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 x 2.87 amendments per year).  See Form BD PRA Supporting 
Statement, supra note 787. 



 

346 
 

information necessary to apply for EDGAR access.789  The Commission estimates an initial 

burden of 0.15 hours790 and no annual burden per respondent for completing Form ID, and the 

following total burdens: 

Respondent Type Number of 
Respondents 

Initial Burden 
per Respondent 

Total Initial Burden 
(Number of 
Respondents x Initial 
Burden per 
Respondent, rounded to 
nearest 0.5 hours)  
 

Communication Protocol 
Systems 

6 0.15 hours 1 hour   

Currently Exempted 
Government Securities ATSs 

1 0.15 hours 0 hours   

 

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 

                                                
789  As 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. 
790 See 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. 

791  See supra Section III.C. 



 

347 
 

if they 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 

                                                
792  The 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.” 

793 The 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”).     

794 The 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. 



 

348 
 

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 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 
hours) 

Initial Compliance with 
Regulation SCI (Legacy 
Government Securities 
ATSs that are existing 
SCI entities) 

1 1,017.15 
hours 

1,017 hours 

Annual 2,458.65 
hours 

2,458.5 hours  

Initial Compliance with 
Regulation SCI (Legacy 
Government Securities 
ATSs that are new SCI 
entities) 

1 2,034.3 hours 2,034.5 hours 

Annual 2,458.65 
hours 

2,458.5 hours 

Initial Compliance with 
Regulation SCI 
(Communication 
Protocol Systems that are 
new SCI entities) 

2 2,034.3 hours 4,068.5 hours 

Annual 2,458.65 
hours 

4,917.5 hours 

 

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; 

                                                
795 The 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. 



 

349 
 

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 



 

350 
 

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 

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.       

                                                
796  Exchange 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). 

 



 

351 
 

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, pre-selected.  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.  

                                                
797  See 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.  

798  See 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. 



 

352 
 

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 

                                                
799  See 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. 

800  See 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. 



 

353 
 

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 

                                                
801  This 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. 

802  The 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.   



 

354 
 

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 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 

                                                
803  See, 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. 
804  Bilateral voice trading refers to telephone calls, chat messages, etc. 
805  See supra note 58. 



 

355 
 

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. 



 

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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 

                                                
806  See 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. 



 

357 
 

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 non-bank dealers809 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 

                                                
807  See Financial Accounts of the United States Z.1 at 177, available at 

https://www.federalreserve.gov/releases/z1/20210311/z1.pdf. 
808  See 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.   

809  Absent 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).    

810  See 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.  



 

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Treasury or Agency securities, or both) that have a Form ATS on file.811  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, 

                                                
811  See supra Section VII.C.1.  The Commission estimates that some of these ATSs only 

support Treasuries trading to facilitate hedging in 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. 

812  As 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.   

813  TRACE 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 contra- party 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. 



 

359 
 

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. 

 Treasury 
Securities 

Agency 
Securities 

Num. 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% - - 

Above 2% Market Share: 



 

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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% - - 
Table VIII.1: ATS Market Share Analysis 
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 
a  Agency 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.” 

b The 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. 

c Trades 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 on-the-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 

                                                
814  See 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. 



 

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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 

on-the-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   

On-the-Run U.S. Treasury Securities Trading Volume 

  
Num. of 
Venues Volume 

Volume Share 
(%) 

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          0.0a 

Bilateral dealer-to-dealer trades 352 92,051 5.6 
                                                
815  See 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.  

816  See supra Section III.A. 
817  See October 15 Staff Report at 32, 35-36, 39.   
818  One 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. 



 

362 
 

Bilateral dealer-to-customer trades 333 604,823 37.0 
Bilateral dealer-to-PTF trades 97 7,250 0.4 
Total - 1,634,671 100.0 
Table VIII.2: On-the-run U.S. Treasury Securities Trading Volume 
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. 
a The percentage to the nearest non-zero is 0.02%. 
b See supra notes b and c in Table VIII.1  
c FINRA 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.     
e Total 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. 
f We 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 

                                                
819  All 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.   



 

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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.   

Off-the-Run U.S. Treasury Securities Trading Volume 

  
Num. of 
Venues Volume 

Volume Share 
(%) 

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 0.0a 

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 
Table VIII.3: Off-the-Run U.S. Treasury Securities Trading Volume 

                                                
820  One commenter referenced that market participants trading in less liquid off-the-run 

securities are better able to find liquidity in non-ATS trading methods.  See Bloomberg 
Letter at 5 and 21-22.   

821  See supra note 193. 



 

364 
 

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. 
a The percentage to the nearest non-zero is 0.009%. 
b See supra notes b and c of Table VIII.1  
c We 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. 

Agency Securities Trading Volume 
  Num. of Venues Volume Volume Share (%) 

                                                
822  Agency 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”).   



 

365 
 

ATSs 8 31,940 12.3 
Customer trades 7 6,767 2.6 
Dealer trades 7 25,173 9.7 
PTF trades 3 1 0.0a 

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 0.0b 

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 0.0c 
Total - 264,916 100.0 
Table VIII.4: Agency Securities Trading Volume 
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. 
a The percentage to the nearest non-zero is 0.0003%. 
b The percentage to the nearest non-zero is 0.00007%. 
c The percentage to the nearest non-zero is 0.001%. 
d See supra notes b and c of Table VIII.1  
e We 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. 

 

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 



 

366 
 

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 

                                                
823  One 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. 

824  The Commission may use this information in monitoring, examinations and enforcement. 
825  These 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. 



 

367 
 

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 bank-operated 

                                                
826  Currently 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. 

827  See FINRA Letter at 2-3, stating that nearly all Government Securities ATSs currently 
are FINRA members 



 

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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   

                                                
828  See supra note 228 and corresponding text discussing TRACE reporting requirements for 

U.S. Government securities.   
829  FINRA 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 TRACE-Eligible 
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 



 

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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 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 

                                                
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.  

830  For example, the ATS may disclose order execution statistics to some customers. 
831  See supra Section II.D.2, discussing the Fair Access Rule requirements.   
832  One commenter stated that registered investment companies generally are not able to 

directly access liquidity on most Treasury interdealer platforms.  See ICI Letter at 4. 
833  See 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. 



 

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 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 up-time,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   

                                                
834  Systems up-time is a measure of the time that a computer system is running and 

available. 
835  On January 11, 2019, the largest trading platform in on-the-run U.S. Treasury Securities, 

experienced a system outage approximately from 2pm to 3:30pm 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-suffers-outage. 

836  As 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. 



 

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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. 

                                                
837  See BrokerTec Letter at 6. 
838  A 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. 

839  See 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_0
71119.pdf. 



 

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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   

                                                
840  See 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.  
841  As 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. 

842  See supra Section VIII.B.1.a, discussing information leakage and RFQs. 



 

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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 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.   



 

374 
 

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.   

Limit Order Book RFQ Stream Axesa Voice 

26.3 29.9 10.4 33.4 
Table VIII.5: U.S. Treasury Securities Trading Protocol Market Share  
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.” 



 

375 
 

 

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. 

                                                
843  One 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. 

844  See supra Section VIII.B.2.a.i for additional discussion on the role of PTFs in the 
Treasury market. 



 

376 
 

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 

The primary customers of Communication Protocol Systems are those market 

participants in the dealer-to-customer market.  Customers seeking to trade government securities 

may find the sophistication and infrastructure required to trade on ATSs to not be cost-effective 

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 

                                                
845  See supra Section VIII.B.2.a.i 
846  See 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. 



 

377 
 

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 Systems847 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 non-ATS 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 

                                                
847  See 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. 

848  See 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. 

849  The 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 



 

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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 

                                                
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.  

850  See 
http://finramarkets.morningstar.com/BondCenter/TRACEMarketAggregateStats.jsp?bon
dType=C.  While there are many types of corporate bonds, most tend to fall within two 
categories: investment-grade 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 investment-grade bonds, but are also subject to a 
higher degree of risk.   



 

379 
 

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 investment-grade 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 can differ along 

                                                
851  See Healthy Markets Letter at 8. 
852  See id. 
853  See https://vegaeconomics.com/trends-in-the-us-corporate-bond-market-since-the-

financial-crisis.  
854  See 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/press-releases/documents/a-financial-system-capital-markets-final-final.pdf 
(“Treasury Report”) at 85. 

855  See Bloomberg Letter at 9, citing Financial Times at 
https://www.ft.com/content/3175772a-7ea0-3b61-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. 

856  See 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 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. 



 

380 
 

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 

                                                
857  See https://fredblog.stlouisfed.org/2015/10/illiquidity-in-the-bond-market/.  
858  See MarketAxess Letter at 3.   
859  One 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. 

860  See, 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. 

861  See 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-reveals-record-buy-side-acted-liquidity-
providers-covid-19-crisis/.  

862  See TRACE Monthly Volume Files, available at https://www.finra.org/finra-data/browse-
catalog/trace-volume-reports/trace-monthly-volume-files.  One commenter referenced 



 

381 
 

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 

non-displayed 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 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-
bond-exchange.  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/a-forgotten-investment-worth-considering-exchange-
traded-bonds-11578279781.  (Retrieved from Factiva database).   

864  See 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). 

865  See 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.  



 

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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 

broker-dealer.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 volume868 are required to comply with the requirements of 

the Fair Access Rule.869  Moreover, ATSs that trade in corporate debt must also comply with the 

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 

                                                
866  See 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.  
867  See supra Section VIII.B.2.b.ii for additional discussion on the effects of a lack of public 

disclosure. 
868  An 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. 

869  See supra Section II.D.2.  Also, see supra Section VIII.B.2.b.ii describing the impact of 
the Fair Access Rule. 

870  See 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. 

871  See 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 



 

383 
 

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 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 

                                                
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).   

872  See supra note 829 describing exemptions for ATS transaction reporting to TRACE.  
873  See, e.g., Edwards, A. K., Harris, L. E., & Piwowar, M. S. (2007). Corporate bond 

market transaction costs and transparency. The Journal of Finance, 62(3), 1421-1451. 
874  See 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.  



 

384 
 

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 pre-trade 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 

                                                
875  See Bloomberg Letter at 12. 
876  See 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-rewrites-the-corporate-bond-liquidity-playbook/.  

877  See McPartland, Kevin (2020), “All Electronic Trading is Not Created Equal,” 
Greenwich Associates, available at https://www.greenwich.com/fixed-income/all-
electronic-trading-not-created-equal. 

878  See McPartland, Kevin (2021), “Making the Case for Portfolio Trading,” Greenwich 
Associates, available at https://www.greenwich.com/fixed-income/making-case-
portfolio-trading.  



 

385 
 

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 

                                                
879  One commenter stated that submitting multiple securities as a portfolio of liquid and less-

liquid securities enables a liquidity provider to potentially offer better prices than trading 
each security individually.  See Bloomberg Letter at 13. 

880  See McPartland, Kevin (2020), “All Electronic Trading is Not Created Equal,” 
Greenwich Associates, available at https://www.greenwich.com/fixed-income/all-
electronic-trading-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-portfolio-
trading-rewrites-the-corporate-bond-liquidity-playbook/.  

881  See 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.”  



 

386 
 

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 

                                                
882  See “Net Spotting: Reducing Trading Costs for U.S. Corporate Bonds,” (2021), 

Tradeweb, available at https://www.tradeweb.com/newsroom/media-
center/insights/commentary/net-spotting-reducing-trading-costs-for-u.s.-corporate-
bonds/. 

883  See id. 
884  See 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.  
885  See, 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/9d6e520e-3ba8-11ea-b232-000f4477fbca.  

886  See supra Section VIII.B.2.b for a discussion of PTFs’ role in government securities 
ATSs.   



 

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ATS, such as requirements for robust systems.887  The Commission 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   

                                                
887  See 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 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. 

888  See 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. 

889  See, e.g., Bloomberg Letter at 18 and 23 and MarketAxess Letter at 12. 
890  One 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. 



 

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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-to-dealer 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 

                                                
891  One 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.  

892  See 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. 

893  One commenter stated that approximately 32 percent of investment-grade and 23 percent 
of high-yield corporate bond daily dollar volumes are executed electronically.  See BDA 
Letter at 1. 

894  See 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/market-transparency-
reporting/trace/faq/reporting-corporate-and-agencies-debt.  



 

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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 

                                                
895  See 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. 

896  See, e.g., ICI Letter at 6 and MarketAxess Letter at 3. 



 

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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. 

 

                                                
897  See 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). 

898  See Section VIII.B.1 for a discussion on the difference between disclosed and anonymous 
RFQs. 

Anonymous 
RFQ 

Disclosed 
RFQ 

Auction Limit 
Order 
Book 

Non-
Displayed 

Venuea 

Portfolio 
Trading 

Stream 
Axesb 

Voice 

4.8 13.9 3.0 2.4 0.1 2.2 2.2 71.4 

Table VIII.6: Corporate Debt Securities and Dollar Volume Share by Trading Protocol  
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.” 



 

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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 

                                                
899  See Hendershott, T., & Madhavan, A. (2015). Click or call? Auction versus search in the 

over-the‐counter market. The Journal of Finance, 70(1), 419-447. 
900  See Bloomberg Letter at 9 and10, citing Treasury Report.  
901  See supra Section VIII.B.2.d. 



 

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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, 

                                                
902  See Tradeweb Letter at 6.  
903  See Municipal Securities Rulemaking Board, Muni Facts, available at 

https://www.msrb.org/News-and-Events/Muni-Facts. 
904  See Municipal Securities Rulemaking Board, Municipal Trade Statistics, available at  

https://emma.msrb.org/MunicipalTradeStatistics/ByTradeCharacteristic.aspx.  
905  See “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. 



 

393 
 

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 around one million unique bonds valuing $3.9 

trillion.909   

                                                
906  See 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. 

907  See 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. 

908  See “2021 Municipal Market Trading Update,” (2021), Municipal Securities Rulemaking 
Board, available at https://www.msrb.org/Market-Topics/Reports. 

909  See 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 



 

394 
 

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 

                                                
municipal securities and one million unique municipal bonds, compared to 30,000 unique 
corporate bonds). 

910  See “Analysis of Municipal Securities Pre-Trade Data from Alternative Trading 
Systems” (2018), Municipal Securities Rulemaking Board, available at 
https://www.sec.gov/spotlight/fixed-income-advisory-committee/msrb-staff-analysis-of-
municipal-securities-pre-trade-data.pdf.  

911  See Li, D., & Schürhoff, N. (2019). Dealer networks. The Journal of Finance, 74(1), 91-
144. 

912  See Schultz, P. (2013). State taxes, limits to arbitrage and differences in municipal bond 
yields across states. Unpublished working paper. University of Notre Dame. 

913  See “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. 



 

395 
 

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, 

                                                
914  The 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.   

915  See SIFMA letter at 11. 
916  See “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. 

917  See 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. 

918  See id. 



 

396 
 

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 Rule923 and with the Capacity, Integrity, and Security Rule.924  

                                                
919  See id.  The paper defines institutional-size trades as trades greater than $100,000, and 

retail-size 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. 

920  See “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. 

921  See “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. 

922  See supra note 866 and Section VIII.B.2.a.ii for a discussion of the impact of some of the 
elements of Regulation ATS. 

923  An 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. 

924  See 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 

https://www.sec.gov/tm/faq-regulation-ats-fair-access-rule


 

397 
 

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 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 

                                                
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). 

925 The 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-the-MSRB. 

926  See 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. 

927  See 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. 

928  See Regulatory Notice 2015-07, Municipal Securities Rulemaking Board, May 26, 2015, 
available at https://www.msrb.org/Rules-and-Interpretations/Regulatory-
Notices?type=All&filter=2015.   



 

398 
 

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. 

                                                
929  See id. 
930  See Municipal Securities Rulemaking Board, MSRB Rule G-43.  
931  See SIFMA, “The Role of Municipal Securities Broker’s Brokers in the Municipal 

Markets,” 2017. 
932  See “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.  

933  See “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.  



 

399 
 

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 

                                                
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.  

935  See Regulatory Notice 2015-07, Municipal Securities Rulemaking Board, May 26, 2015, 
available at https://www.msrb.org/Rules-and-Interpretations/Regulatory-
Notices?type=All&filter=2015.   

936  One commenter estimated only 15 percent of daily dollar trading volume in municipal 
bonds is executed electronically.  See BDA Letter at 1. 

937  See 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. 



 

400 
 

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 

dealer-customer 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 MSRB-member 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 

                                                
938  See Harris, L. E., & Piwowar, M. S. (2006). Secondary trading costs in the municipal 

bond market. The Journal of Finance, 61(3), 1361-1397. 
939  See “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/Market-
Topics/~/link.aspx?_id=9089AC4BA1F144B388D090177FADCDD6&_z=z.  

940  See 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. 



 

401 
 

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 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.  

                                                
941  See “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.  

942  See “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.  

943  See id. 
944  See id. 
945  See Section VIII.B.3. 
946  See ICI Letter at 6-7. 



 

402 
 

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 

                                                
947  See 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. 

948 See “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. 



 

403 
 

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 

                                                
949  See Regulation NMS Rules 600(b)(46) and (47) (17 CFR 242.600(b)(46) and (47)).  
950 See 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).  

951  See CBOE Historical Market Volume Data, available at 
https://www.cboe.com/us/equities/market_statistics/historical_market_volume/market_hi
story_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).  

952  There 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. 

953  This 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. 



 

404 
 

issue shares that can be bought or sold throughout the day on securities exchanges in the 

secondary market at a market-determined 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  

                                                
954 See https://www.icifactbook.org/21_fb_ch4.html. 
955  See id.  
956  See id. 
957  The 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. 

958  See https://www.finra.org/filing-reporting/oats/oats-reportable-securities-list/. 
959  See “Unraveling the Mystery of Over-the-Counter Trading” (2016), FINRA, available at 

https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading. 
960  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.    



 

405 
 

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 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 placements964 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 

                                                
961  See Andrew Ang et al., Asset Pricing in the Dark: The Cross-Section of OTC Stocks, 26 

Rev. Fin. Studs. 2985–3028 (2013).  
962  See “Unraveling the Mystery of Over-the-Counter Trading” (2016), FINRA, available at 

https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading. 
963  See https://www.sec.gov/reportspubs/investor-

publications/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.   

964  Unregistered 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.   



 

406 
 

governed by 17 CFR 230.144 (Securities Act 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 off-exchange 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   

                                                
965  See https://www.sec.gov/reportspubs/investor-publications/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). 

966  See, e.g., Private Equity Exchange (http://peqx.com/); Nasdaq Private Market 
(https://www.nasdaq.com/secondmarket). 

967 See https://www.finra.org/filing-reporting/otc-transparency/ats-quarterly-statistics. 
968  See Market Data Infrastructure Final Rule, Release No. 90610 (Dec. 9, 2020), available 

at https://www.sec.gov/rules/final/2020/34-90610.pdf. 



 

407 
 

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 SCI970 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 

                                                
969  See SEC Release No. 34-83663, “Regulation of NMS Stock Alternative Trading 

Systems,” available at https://www.sec.gov/rules/final/2018/34-83663.pdf.  
970  An 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. 

971  An 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. 

972  These include FINRA/Nasdaq TRF Carteret, FINRA/Nasdaq TRF Chicago, and 
FINRA/NYSE TRF.  See https://www.finra.org/filing-reporting/trf/trf-exchange-
participants. 



 

408 
 

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 

Members974 that receive or originate orders975 in Eligible Securities976 are required to report any 

Reportable Event977 to the Consolidated Audit Trail (CAT), which is designed to capture 

customer and order event information from the time of order inception through routing, 

                                                
973 See 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).  

974  The 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).   

975  Section 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.   

976  Section 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 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. 

977  According 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. 



 

409 
 

cancellation, modification, or execution in a single, consolidated data source.  The Participants978 

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 

                                                
978  The Participants are the national securities exchanges and national securities associations 

who collectively control and operate the CAT.   
979  See 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. 

980 See https://www.finra.org/filing-reporting/otc-transparency/ats-quarterly-statistics.  Note 
that this dataset aggregates volume across two OTC Link LLC-operated ATSs under the 
label OTC LINK ECN ATS.   

981  Rule 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.” 

982  For 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; 



 

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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 FINRA-operated 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 

                                                
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 

983  See Cass Sanford, Understanding the Expert Market, OTC MARKETS BLOG (March 25, 
2021), available at https://blog.otcmarkets.com.  

984  See Brüggemann, 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. 

985 See https://www.finra.org/rules-guidance/notices/21-38.  
986  See 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.  



 

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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 SCI991 and the Fair Access Rule if volume thresholds are met.992  

                                                
987  See https://www.finra.org/rules-guidance/notices/21-28.  
988  FINRA Rule Series 6620 and 7300 govern OTC and restricted equity trade reporting to 

FINRA Facilities.  See https://www.finra.org/filing-reporting/market-transparency-
reporting/trade-reporting-faq.  

989  See supra note 973.  
990  See supra notes 974 to 979 and corresponding discussion. 
991  An 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 self-regulatory organization, such 
as FINRA. 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. 

992  An 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 



 

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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 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 

                                                
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.  

993  See 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. 

994  See 15 U.S.C. 78s(b)(1). 
995  See 15 U.S.C. 78s(b). 



 

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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 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.     

                                                
996  See, 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). 
997  See 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).  



 

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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 non-ATS 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   

                                                
998  On 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/icap-adds-to-
equity-rfqs/. 

999  See 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/nasdaqs-proposal-improve-trading-environment-small-
and-medium-growth-companies-and.   

1000  See “RFQ for Equities: One Year On,” (2019), Tradeweb, available at 
https://www.tradeweb.com/newsroom/media-center/insights/blog/rfq-for-equities-one-
year-on/.  

1001  See, e.g., McDowell, Hayley.  (2018, October 23).  “Buy-side throws doubt on RFQ for 
equities as ‘last chance saloon’ for liquidity,” THETRADE, available at 



 

415 
 

 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.  

                                                
https://www.thetradenews.com/buy-side-throws-doubt-rfq-equities-last-chance-saloon-
liquidity/.  

1002  See, 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-a3db-
1fe89bedc16e. 

1003  See, 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.  

1004  See supra Section VIII.B.3.b for a discussion of portfolio trading on Communication 
Protocol Systems in the corporate bond market. 



 

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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 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, 

                                                
1005  See CAT FAQ B3, available at https://www.catnmsplan.com/faq. 
1006  See CAT FAQ B45, available at https://www.catnmsplan.com/faq.  
1007  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.   



 

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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 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 non-broker-dealers, who therefore would not currently be subject to the 

                                                
1008  See supra note 982. 
1009  See 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.   



 

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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 

                                                
1012  See supra Section III.B.1.   
1013  See Tuttle, L. A. (2014). OTC trading: Description of non-ATS OTC trading in National 

Market System stocks. DERA White Paper. 
1014  See Market Data Infrastructure Final Rule, Release No. 90610 (Dec. 9, 2020), available 

at https://www.sec.gov/rules/final/2020/34-90610.pdf. 
1015  See 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.” 



 

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volume than ATS trading volume.1016  Additionally, single-dealer platforms (SDPs) accounted 

for nine percent of off-exchange 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 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.  

                                                
1016  See 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. 

1017  SDPs do not permit participants to post liquidity, but rather offer bilateral trading with 
the counterparty operating the venue.  See id. 

1018  See, 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-touch-execution-consulting-services-and-
performance-driving-technologies-spell.  



 

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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 off-exchange 

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, 

                                                
1020  See 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).  

1021  See id.  
1022  See, 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.  

1023  See, 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. 



 

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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 

                                                
1024  See OCC Monthly & Weekly Volume Statistics, available at 

https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-
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. 

1025  See Bennett, Jay, John Colon, and John Feng. (2010). FIA, available at 
https://secure.fia.org/files/css/magazinearticles/article-1446.pdf. 

1026  See Thyagaraju Adinarayan, “Retail trading fever drives U.S. equity option volumes to 
record monthly high”, Reuters,  (2021, February 3). (Retrieved from Factiva database). 

1027  See “What Is OCC?” The Options Clearing Corporation, available at 
https://www.theocc.com/Company-Information/What-Is-OCC. 



 

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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 

                                                
1028  See https://www.sec.gov/rules/final/34-43591.htm. 
1029  See “Liquidity Management Software For US Listed Options Market”, DASH Financial, 

available at https://dashfinancial.com/execution-services/dash-ats/. 



 

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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 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 

                                                
1030  See supra notes 974 to 979 and corresponding discussion. 
1031 See “Request-for-Quote Options Trading”, Tradeweb, available at 

https://www2.tradeweb.com/optionsweb. 



 

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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 agreements1033 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 

                                                
1032  See supra notes 1005 and 1006 and corresponding discussion. 
1033  See 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. 

1034  See 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. 

1035  See, 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/. 



 

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The Commission estimates that there are currently 4 ATSs1036 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 

                                                
1036  These ATSs are Current Government Securities ATSs.  See supra note 5. 
1037  See, 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-reports-
september-2021-total-volume-of-$21.7-trillion-and-average-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/media-
room/press-
releases/2021/7/02/cme_group_reportsq2andjune2021monthlymarketstatistics.html; 
“MarketAxess Announces Monthly Volume Statistics for September 2021,” (2021). 
MarketAxess, available at https://investor.marketaxess.com/news-releases/news-release-
details/marketaxess-announces-monthly-volume-statistics-september-2021; 
“MarketAxess 3Q21: Stat Sheet,” (2021), MarketAxess, available at 
https://www.marketaxess.com/pdf/match-repo-stat-sheet.pdf; “GLMX Gains ATS and 
Broker-Dealer Status,” (2018). THETRADE, available at 
https://www.thetradenews.com/glmx-gains-ats-broker-dealer-status/  

1038  See “Bloomberg launches electronic repo trading system,” (2005), Finextra, available at 
https://www.finextra.com/newsarticle/14580/bloomberg-launches-electronic-repo-
trading-system.  



 

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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   

                                                
1039  See supra note 521 defining triparty repos. 
1040  See 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.  

1041  See “6730. Transaction Reporting”, FINRA, available at https://www.finra.org/rules-
guidance/rulebooks/finra-rules/6730  

1042  See 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-centrally-cleared-transactions-in-the-us-repurchase-agreement-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 



 

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The Commission is unable to determine the full scope of the role 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 

                                                
agencies is consolidated and produced quarterly by the Federal Reserve Board in the 
form of the Financial Accounts of the United States (Z.1).    

1043  See https://www.greenwich.com/fixed-income-fx-cmds/understanding-us-fixed-income-
market.  

1044  See https://www.finra.org/finra-data/browse-catalog/trace-volume-reports/trace-monthly-
volume-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 



 

428 
 

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 

                                                
Securities (CMBS). See https://www.finra.org/finra-data/browse-catalog/trace-volume-
reports/about-trace-monthly-volume-reports for definitions. 

1045  See Bessembinder, H., Maxwell, W. F., & Venkataraman, K. (2013). Trading activity and 
transaction costs in structured credit products. Financial Analysts Journal, 69(6), 55-67.  

1046  See He, A., & Mizrach, B. (2017). Analysis of securitized asset liquidity. Research Note, 
FINRA Office of the Chief Economist. 

1047  See https://www.finra.org/finra-data/browse-catalog/trace-volume-reports/trace-monthly-
volume-files. 

1048  Note 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. 



 

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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 

                                                
1049  See “ABS East 2014: Securitization Shrugs off Electronic Trading,” (2014). American 

Banker, available at https://asreport.americanbanker.com/news/abs-east-2014-
securitization-shrugs-off-electronic-trading.  

1050  See 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). 

1051  See https://www.finra.org/media-center/news-releases/2015/finra-brings-transparency-
asset-backed-securities-market.  



 

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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 broker-dealer.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 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 

                                                
1052  As 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 note 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.  

1053  See supra Section II.A. 
1054  See Regulation ATS Adopting Release at 70903-07 for a discussion of benefits and costs 

for registering as a national securities exchange. 
1055  See generally supra Section II.D.1 (discussing the national securities exchange 

registration requirements under Sections 6 of the Exchange Act).    



 

431 
 

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 

                                                
1056  See supra Section II.B.3. 



 

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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., non-broker-dealer-

operated Communication Protocol Systems).1058  Registering as a broker-dealer would require, 

                                                
1057  The proposed amendments would enhance regulatory oversight and investor protection 

by requiring: non-broker-dealer-operated Communication Protocol Systems and bank-
operated 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. 

1058  Non-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-broker-dealer-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 



 

433 
 

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-dealer-operated 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 

                                                
about a bank-operated Currently Exempted Government Securities ATS and non-broker-
dealer-operated Communication Protocol Systems with a broker-dealer affiliate adopting 
a registered affiliate structure to comply with the proposed Rule 301(b)(1).  

1059  The 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. 

1060  FINRA 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 TRACE-Eligible Securities, which FINRA Rule 6710 defines to include 
any debt security that is U.S. dollar-denominated 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 Government-Sponsored 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.  



 

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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 non-broker-dealer-operated Communication Protocol Systems.1061  

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 

                                                
1061  The 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 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. 

1062  One 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. 



 

435 
 

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 recordkeeping1064 and reporting 

requirements1065 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 

                                                
1063  Although 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. 

1064  See supra Section II.D.2 for a discussion about the requirements of Rules 302 and 303. 
1065  Rule 301(b)(9) would require filing of Form ATS-R. 
1066  One 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. 



 

436 
 

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 ATSs1067 and 

Communication Protocol Systems that are NMS Stock ATSs1068 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.    

                                                
1067  Government Securities ATSs would include Currently Exempted Government Securities 

ATSs, Current Government Securities ATSs, and Communication Protocol Systems that 
trade government securities. 

1068  The 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. 



 

437 
 

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 

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 

                                                
1069  See SIFMA Letter at 4. 



 

438 
 

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 participants1071 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 

                                                
1070  Form 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. 

1071  Market 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.  

1072  One 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 



 

439 
 

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. 

                                                
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. 

1073  As 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.  



 

440 
 

Furthermore, the proposed requirement that Government Securities ATSs1074 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. 

                                                
1074  Government Securities ATSs would include Currently Exempted Government Securities 

ATSs, Current Government Securities ATSs, and Communication Protocol Systems that 
trade government securities. 

1075  For 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. 



 

441 
 

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 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 

                                                
1077  The 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. 



 

442 
 

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 thresholds1081 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  

                                                
1078  See also supra note 833 and accompanying text. 
1079  The 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. 

1080  See supra Section V.A.3. 
1081  See supra Section III.B.4 for discussion about volume thresholds. 
1082  One 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. 

1083  The 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. 



 

443 
 

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   

                                                
1084  Communication 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.   

1085  This 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 



 

444 
 

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-dealer-operated 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, bank-operated Currently Exempted 

Government Securities ATSs and non-broker-dealer-operated Communication Protocol Systems 

would be required to report certain transactions to an SRO for public dissemination, which 

would help enhance price discovery by providing the market with better post-trade price 

transparency in the government securities market and other securities markets in which the 

Communication Protocol Systems provide trading services.1087 

                                                
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. 

1086  The proposed amendments would help enhance the price discovery process and liquidity 
in securities markets through: applying the broker-dealer 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. 

1087  FINRA 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-dealer-



 

445 
 

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 

                                                
operated 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.  

1088  The 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. 

1089  See also supra note 838 and accompanying text. 



 

446 
 

price discovery1090 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 

                                                
1090  See 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.   

1091  See supra Section VIII.B.2.a.ii for a discussion of Government Securities ATSs of 
existing SCI entities. 



 

447 
 

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. 

                                                
1092  See Tradeweb Letter at 3.  
1093  See Tradeweb Letter at 3.  
1094      See 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-to-customer 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. 



 

448 
 

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 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 XML-based 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 

                                                
1095  The Commission estimates that no Communication Protocol System that trades NMS 

stocks would be subject to Regulation SCI. 
1096  See Regulation SCI Adopting Release, supra note 3. 
1097  See 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). 

1098  See supra Section V.B.  



 

449 
 

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 



 

450 
 

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 Costsa and Other Compliance Costsb 

 Number Aggregate Aggregate 
Type of Entity of Entities Initial Costs Ongoing Costs 
Communication Protocol 
Systems (Government 
Securities ATS) 

4 $2.4 million             
~ $6.6 millionc 

$2.4 million             
~ $5.1 milliond  

Currently Exempted 
Government Securities ATSs 

7 $1.5 million             
~ $3.5 millione 

$1.3 million             
~ $2.7 millionf 

Current Government Securities 
ATSs 

17 $1.4 million             
~ $3.5 milliong 

$1.3 million             
~ $2.6 millionh 

Communication Protocol 
Systems (NMS Stock ATS) 

4 $209,000i $59,000j 

Current NMS Stock ATSs 34 $77,000k $16,000l 
Other Communication 
Protocol Systems 

14 $2 millionm $660,000n 

Other Current ATSs 59 $374,000o $115,000p 
Subscriber -  $10,000q 
Total 139 $8 million                

~ $16 million 
$5.9 million             

~ $11 million 
                                                
1099  See id. 



 

451 
 

a See infra note 1127.    
b See id.    
c See infra Table VIII.9.    
d See id.    
e See infra Table VIII.10.    
f See id.    
g See infra Table VIII.11.    
h See id.    
i See infra Table VIII.12.    
j See id.    
k See infra Table VIII.13.    
l See id.    
m See infra Table VIII.14.    
n See id.    
o See infra Table VIII.15.    
p See id.    
q This figure represents costs per ATS subscriber.  See also infra note aa in Table VII.8.    

 

a. Compliance Costs1100 

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 

                                                
1100  Compliance costs consist of implementation costs, which are the monetized costs of PRA 

burdens and other compliance costs (non-PRA based costs).  
1101  The proposed requirements would include: broker-dealer registration requirements for 

non-broker-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 



 

452 
 

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 
Form ID filing 
Other compliance costs 
(non-PRA based) 

$900a 
$50b 

$316,000c 

$300d 
- 

$57,700e 

Reg ATS, 301(b)(2) Form ATS filing $6,400f $1,500g 

                                                
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. 

1102  The 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-the-
securities-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 x 1.1745), $570 ($485 x 1.1745) for chief compliance managers, 
$332 ($283 x 1.1745) for compliance managers, $305 ($260 x 1.1745) for senior systems 
analysts, $328 ($279 x 1.1745) for senior marketing manager, and $75 ($64 x 1.1745) for 
compliance clerks. 



 

453 
 

Reg ATS, 301(b)(5) Fair Access - $17,000h 
Reg ATS, 301(b)(6) Capacity, Integrity, and 

Security of automated 
systems 

- $5,000i 

Reg ATS, 301(b)(9) Form ATS-R filing - 
- 

$6,000j 
$500k 

Reg ATS, 301(b)(10) Written safeguards and 
procedures to protect 
subscribers’ trading 
information 

$3,200l $1,000m 

Reg ATS, 302 Recordkeeping - $3,400n 
Reg ATS, 303 Record preservation - $1,100o 
Reg ATS, 304 Form ATS-N filing $49,000p 

$43,000q 
$2,300r 

$3,300s 
$3,300t 

- 
Reg SCI Implementation costs 

(PRA based) 
$777,000u 
$388,000v 

$924,000w 
$924,000x 

Reg SCI Other compliance costs 
(non-PRA based) 

$320,000                   
~ $2.4 milliony 

$214,000              
~ $1.6 millionz 

Reg SCI Subscriber costs (non-
PRA based) 

 $10,000aa 

a Compliance Manager at $332 x 2.75 hours = $914.  See also supra note 787. 
b Compliance Manager at $332 x 0.15 hour = $50.  See also supra note 790. 
c See infra note 1120. 
d Compliance Manager at $332 x 0.95 hour = $316.  See also supra note 788. 
e See infra note 1120. 
f (Attorney at $446 x 13 hours) + (Compliance Clerk at $75 x 7.5 hours) = $6,366.  See also supra note 759. 
g (Attorney at $446 x 3 hours) + (Compliance Clerk at $75 x 2 hours) = $1,489.  See also supra note 760. 
h Attorney at $446 x 37 hours = $16,513.  See also supra note 764. 
i Attorney at $446 x 11.25 hours = $5,021.  See also supra note 766. 
j ((Attorney at $446 x 3 hours) + (Compliance Manager at $332 x 0.25 hour)) x 4 times = $6,114.  See also supra 

note 770. 
k ((Compliance Manager at $332 x 0.25 hour) + (Compliance Clerk at $75 x 0.5 hour)) x 4 times = $483.  See also 

supra note 771. 
l (Attorney at $446 x 7 hours) + (Compliance Clerk at $75 x 1 hour) = $3,199.  See also supra note 773. 
m (Attorney at $446 x 2 hours) + (Compliance Clerk at $75 x 2 hours) = $1,043.  See also supra note 774. 
n Compliance Clerk at $75 x 45 hours = $3,383.  See also supra note 776. 
o Compliance Clerk at $75 x 15 hours = $1,128.  See also supra note 777. 
p (Attorney at $446 x 57.1 hours) + (Chief Compliance Manager at $570 x 0.5 hour) + (Compliance Manager at 

$332 x 36.05 hours) + (Sr. Systems Analyst at $305 x 33.75 hours) + (Sr. Marketing Manager at $328 x 1 hour) 
+ (Compliance Clerk at $75 x 8 hours) = $48,987.  See also supra note 781. 

q (Attorney at $446 x 44.1 hours) + (Chief Compliance Manager at $570 x 0.5 hour) + (Compliance Manager at 
$332 x 36.05 hours) + (Sr. Systems Analyst at $305 x 33.75 hours) + (Sr. Marketing Manager at $328 x 1 hour) 
+ (Compliance Clerk at $75 x 1 hour) = $42,659.  See also supra note 782. 

r (Attorney at $446 x 2.5 hours) + (Compliance Manager at $332 x 1.5 hours) + (Sr. Systems Analyst at $305 x 1.5 
hours) + (Compliance Clerk at $75 x 2.5 hours) = $2,260.  See also supra note 783. 

s ((Attorney at $446 x 5.5 hours) + (Compliance Manager at $332 x 2 hours) + (Compliance Clerk at $75 x 1.9 
hours)) x 5 times = $3,262.  See also supra note 784. 

t See id. 
u The 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.   



 

454 
 

v See 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.   

x See id. 
y See infra Section VIII.C.2.a.vi for discussion about non-PRA based initial compliance costs per entity. 
z See infra Section VIII.C.2.a.vi for discussion about non-PRA based ongoing compliance costs per entity. 
aa See 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation 
SCI 

2 $2.2 million ~ $6.4 milliona $2.3 million ~ $5 millionb 

BD 
Registration 

- - - 

Fair Access 2 - $33,000c 
Other 4 $209,000d $59,000e 

Total 4 $2.4 million ~ $6.6 million $2.4 million ~ $5.1 million  
a This 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. 

b This 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. 

c This 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. 

d This 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. 

e This 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation SCI 1 $1.1 million ~ $3.2 milliona $1.1 million ~ $2.5 millionb 
BD 
Registration 

- - - 

Fair Access 3 - $50,000c 
Other 7 $365,000d $103,000e 

Total 7 $1.5 million ~ $3.5 million $1.3 million ~ $2.7 million 
a This 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. 

b This 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. 



 

455 
 

c This 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. 

d This 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. 

e This 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation 
SCI 

1 $708,000 ~ 2.8 milliona $1.1 million ~ $2.5 millionb 

Fair Access 3 - $50,000c 
Other 17 $725,000d $64,000e 

Total 17 $1.4 million ~ $3.5 million $1.3 million ~ $2.6 million 
a This 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. 

b This 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. 

c This 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. 

d This 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. 

e This 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. 

 

Table VIII.12: Communication Protocol Systems that are NMS Stock ATSs 

Compliance Num. of 
Entities 

Aggregate Initial 
Costs 

Aggregate Ongoing 
Costs 

Regulation SCI - - - 
Fair Access - - - 
BD Registration - - - 
Other 4 $209,000a $59,000b 

Total 4 $209,000 $59,000 
a This 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. 

 

b This 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 



 

456 
 

Regulation SCI - - - 
Fair Access - - - 
Other 34 $77,000a $16,000b 

Total 34 $77,000 $16,000 
a This 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. 
b This 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 
Rule 301(b)(6) 2 - $10,000a 
Fair Access 6 - $99,000b 
BD Registration 6 $1.9 millionc $360,000d 
Other 14 $133,000e $191,000f 

Total 14 $2 million $660,000 
a This 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. 
b This 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. 
c This 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. 

d This 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. 

e This 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. 

f This cost figure is obtained by summing the ongoing implementation costs associated with Rules 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 
Rule 301(b)(6) - - - 
Fair Access - - - 
Other 59 $374,000a $115,000b 

Total 59 $374,000 $115,000 
a This 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. 
b This 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. 

  



 

457 
 

 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 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 Costs1105 

 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 

                                                
1103  See 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.  

1104  See supra Section III.B.I. 
1105  Implementation costs are the monetized costs of PRA burdens.  See also supra note 1100. 
1106  See the implementation costs associated with Rule 301(b)(10) in supra Table VIII.8. 
1107  See the implementation costs associated with Rule 302 in supra Table VIII.8. 
1108  See the implementation costs associated with Rule 303 in supra Table VIII.8. 
1109  See the implementation costs associated with Rule 301(b)(9) in supra Table VIII.8. 



 

458 
 

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 non-NMS 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 

                                                
1110  See the implementation costs associated with Rule 301(b)(2) and Rule 304 in supra Table 

VIII.8. 
1111  The 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).  

1112  The 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. 

1113  The 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). 



 

459 
 

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 considered1115: 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.   

                                                
1114  See 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. 



 

460 
 

 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 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 



 

461 
 

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 



 

462 
 

Communication Protocol Systems that are non-broker-dealers (i.e., non-broker-dealer-operated 

Communication Protocol Systems) would be subject to broker-dealer registration requirements.       

 The Commission believes that non-broker-dealer-operated 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, compared to those 

operated by broker-dealers 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 rules1116 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 membership1117 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 

                                                
1116  See supra Section II.D.2 for a discussion about FINRA rules. 
1117  See https://www.finra.org/registration-exams-ce/classic-crd/fee-schedule#examfees for 

the schedule of FINRA registration fees. 
1118  FINRA 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 



 

463 
 

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 

                                                
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. 

1119  Fees 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/$1000) 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/rules-guidance/rulebooks/finra-rules/7730.   

1120  See 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. 

1121  See 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 



 

464 
 

Commission preliminarily believes that these costs related to broker-dealer registration and 

FINRA membership are relevant to non-broker-dealer-operated Communication Protocol 

Systems without a broker-dealer affiliate.  However, these cost estimates are uncertain because 

the Commission does not have information on the estimated 6 non-broker-dealer-operated 

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 obligations1122 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-broker-dealer-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 

                                                
ongoing annual implementation costs of $300 to amend Form BD tabulated in Table 
VIII.8.   

1122  See 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.  



 

465 
 

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-dealer-operated 

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-dealer-operated 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 broker-dealer 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 

                                                
1123  See 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. 
1124  Registered Broker-dealers would be subject to requirements under the rules, such as 17 

CFR 240.15c3-1, 240.17a-1, 240.17a-3, 240.17a-4, and 240.17a-5 (Rule 15c3-1, Rule 
17a-1, Rule 17a-3, Rule 17a-4, and Rule 17a-5).    



 

466 
 

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 bank-operated Currently Exempted Government 

Securities ATS or a non-broker-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-dealer-operated Communication 

Protocol System that is affiliated with an existing broker-dealer, it would be more cost-effective 

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 broker-dealer 

entity to comply with the broker-dealer registration requirements.  Thus, the Commission expects 

that such non-broker-dealer-operated Communication Protocol Systems would choose the more 

cost-effective way of moving its trading operations to its registered broker-dealer affiliate.  

                                                
1125  See supra Section III.B.2 for a discussion about ATSs that are banks. 



 

467 
 

 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-

broker-operated 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-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.   

                                                
1126  For 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. 

1127  See Rule 304(a)(1)(iv)(B). 



 

468 
 

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  

                                                
1128  See 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. 

1129  One 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. 



 

469 
 

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   

                                                
1130  See ICE Bonds Letter I at 5.     
1131  Smaller Government Securities ATSs and Communication Protocol Systems that trade 

NMS stocks 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 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.  



 

470 
 

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, non-NMS 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.  

                                                
1132  See supra Section V.A.3 for a discussion about reasonableness and fees under the 

proposed amendments to the Fair Access Rule. 



 

471 
 

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 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 thresholds1133 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 

                                                
1133  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. 

1134  See supra note 1085. 



 

472 
 

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 

                                                
1135  The 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. 

1136  See supra note 157. 
1137  See supra note 888 (discussing commenter statements on the extent to which fixed 

incomes systems already comply with the provisions of Rule 301(b)(6)). 



 

473 
 

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 

                                                
1138  For 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. 

1139  While 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.  

1140  See BrokerTec Letter at 7. 



 

474 
 

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 third-party vendors might incur 

higher compliance costs compared to those with lower dependency on third-party systems.1145   

                                                
1141  See supra note 374 and accompanying text. 
1142  See supra Table VIII.8 for the compliance costs associated with Regulation SCI.  
1143  See Regulation SCI Adopting Release, supra note 3.  In the Regulation SCI Adopting 

Release, fixed income ATSs are excluded from the regulation. 
1144  See 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. 

1145  See 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. 



 

475 
 

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 

                                                
1146  See 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. 



 

476 
 

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 



 

477 
 

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 

                                                
1147  See supra note 467 and accompanying text. 



 

478 
 

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 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 

                                                
1148  The 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.   



 

479 
 

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 broker-dealer or operated by 

affiliated broker-dealers 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 



 

480 
 

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 



 

481 
 

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 

                                                
1149  See 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. 

1150  The 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.  



 

482 
 

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.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 

                                                
1151  The 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. 



 

483 
 

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 non-ATS 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 non-ATS 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 

                                                
1152  See 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). 

1153  Under 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 non-
broker-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-broker-dealer-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.   

1154  See ICE Bonds Letter II at 2 and 3. 



 

484 
 

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 

ATSs1156 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 

                                                
1155  See 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.  

1156  Under the proposal, bank-operated Currently Exempted Government Securities ATSs 
would be subject to the same regulatory requirements as non-bank-operated Currently 
Exempted Government Securities ATSs and Current Government Securities ATSs.  The 
Commission estimates that 1 bank-operated Currently Exempted Government Securities 
ATS exists. 

1157  Current 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 



 

485 
 

The Commission acknowledges that some Government Securities ATSs and 

Communication Protocol Systems could restructure their operations to be non-ATSs 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 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 

                                                
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.  

1158  Additionally, 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. 

1159  See supra Section VIII.C.1 for a discussion about benefits from the requirements of 
Regulation ATS and Regulation SCI. 

1160  For the purpose of this discussion, financial technology firm is interpreted to be a type of 
Communication Protocol System (e.g., RFQ system). 

1161  See Bloomberg Letter at 10 and 17.    
1162  See Bloomberg Letter at 23. 



 

486 
 

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 costs1165 

                                                
1163  For 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 Section IV.A. 

1164  See supra Section VIII.C.1. 
1165  The 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 



 

487 
 

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 

                                                
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 broker-dealer registration 
requirements. 

1166  See supra Section VIII.2.a.i for a discussion about the impact of implementation costs for 
small ATSs.   

1167  Based 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. 

1168  See supra Section VIII.C.2. 
1169  See 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 



 

488 
 

Release stated that the changes contemplated to Rule 3b-16 could end up raising costs for new 

financial technology (i.e., fintech1170) 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 

                                                
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. 

1170  For the purpose of this discussion, fintech is interpreted to be a type of Communication 
Protocol System (e.g., RFQ system).  

1171  See 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. 

1172  See 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.   



 

489 
 

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 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-dealer-operated 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 

                                                
1173  See supra Section VIII.C.3.a.i.a). 
1174  See supra Section VIII.C.2.b.  
1175  The Commission estimates there are 6 non-broker-dealer-operated Communication 

Protocol Systems without a broker-dealer affiliate.  See supra Section VIII.C.2.a.ii. 



 

490 
 

entrants who are not broker-dealers 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-dealer-operated 

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 

                                                
1176  As 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 broker-dealer 
affiliate.  See id. 

1177  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 and an ongoing 
annual cost of approximately $58,000 to maintain the broker-dealer registration and 
FINRA membership.  See id. 

1178  See id. for a discussion about the costs associated with the broker-dealer registration 
requirements under Rule 301(b)(1). 

1179  See supra note 1151 and accompanying text. 



 

491 
 

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 operations1181 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 

                                                
1180  Unlike 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).  

1181  See Rule 304(a)(1)(iv)(B). 
1182  See id. 



 

492 
 

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 

                                                
1183  See 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). 

1184  See supra Section VIII.C.1.b. 
1185  One 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. 



 

493 
 

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 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-

                                                
1186  See supra Section VIII.C.2.b (discussing the indirect costs to market participants related 

to the requirements of the Fair Access Rule).  
1187  See supra Section VIII.C.2.b. 



 

494 
 

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 

                                                
1188  See id. 
1189  Under 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. 

1190  See supra Section VIII.C.1.b for a discussion about benefits from public disclosure of 
Form ATS-N. 



 

495 
 

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 

                                                
1191  See supra note 1151 and accompanying text for a discussion on the effects of ATSs 

exiting the market for trading services.  
1192  Under 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.   

1193  See supra Section IV.A for a discussion about fee amendments on Form ATS-N. 



 

496 
 

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   

The public disclosure of a Government Securities ATS’s or Communication Protocol 

System that trades NMS stock’s previously non-public 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 

                                                
1194  Under 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). 

1195  Currently, 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 change, bringing it more in line with the notice timeline in which 
exchanges can initiate fee changes. 



 

497 
 

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 

                                                
1196  See supra note 1151 and accompanying text for a discussion on the effects of ATSs 

exiting the market for trading services. 
1197  See supra note 467 and accompanying text. 
1198  See 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. 



 

498 
 

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 non-ATSs 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 

                                                
1199  See ICE Bonds Letter I at 5 and ICE Bonds Letter II at 4.   
1200  See supra Section VIII.C.3.a.i.a). 
1201  NMS 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 



 

499 
 

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 non-ATS 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 

                                                
Regulation SCI would affect competition as discussed in the Regulation SCI Adopting 
Release. 

1202  The 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. 



 

500 
 

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 systems1203 on behalf of SCI ATSs.1204  If Regulation SCI imposes 

compliance costs on such vendors, the compliance costs would affect the competition 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 third-party 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  

                                                
1203  See supra note 348 for the definition of indirect SCI systems.  
1204  See supra Section VIII.C.2.a.vi. 



 

501 
 

 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-time1209 for ATSs and would also promote more 

robust systems that directly support execution facilities, order matching, and the dissemination of 

                                                
1205  See 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).   

1206  See supra Section VIII.C.1.b. 
1207  See id. 
1208  See, 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). 

1209  Systems up-time is a measure of the time that a computer system is running and 
available. 



 

502 
 

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 

                                                
1210  See supra Section VIII.C.1.c.   
1211  Based 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. 

1212  See supra Section VIII.C.2.b. 



 

503 
 

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 



 

504 
 

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 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 

                                                
1213  As 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).  



 

505 
 

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 

                                                
1214  See supra Section VIII.C.1.b. 



 

506 
 

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 

                                                
1215  See 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. 

1216  As 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.  



 

507 
 

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 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 

                                                
1217  See supra Section VIII.C.1.c. 



 

508 
 

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.  

                                                
1218  See supra Section VIII.C.2.a. 
1219  See 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. 



 

509 
 

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 

                                                
1220  The 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 broker-dealers that already 
operate one or more ATSs.   

1221  See supra Sections VIII.C.2.a.iv and VIII.C.3.a.i.e.  



 

510 
 

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, 

                                                
1222  See 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. 
1223  See supra Section VIII.C.1.c. 



 

511 
 

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 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 



 

512 
 

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    

                                                
1224  As 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 broker-dealers, would appropriately regulate 
a market place that brings together buyers and sellers of securities.  See supra Section II. 

1225  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 national securities exchanges.  See supra note 1056 and 
accompanying text. 

1226  See supra Section VIII.C.1.a. 



 

513 
 

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 

                                                
1227  See 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. 

1228  See supra Section VIII.C.1.c. 
1229  See supra Section VIII.C.2.   



 

514 
 

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 human-readable.1232  This alternative might include numerical detail 

tagging of quantitative disclosures (e.g., platform-wide 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 

                                                
1230  See supra Section VIII.C.2.b. 
1231  See 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. 

1232  Such 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, 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. 

1233  See supra Sections IV.D.4.y and IV.D.4.t. 



 

515 
 

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 

                                                
1234  See 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. 



 

516 
 

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. 



 

517 
 

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. 



 

518 
 

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 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 mortgage-backed 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 broker-dealers would help lead to these benefits?  Do you believe that the proposed 

amendments would lead to improvements in the safeguarding of confidential information? 



 

519 
 

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 broker-dealer 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 



 

520 
 

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 



 

521 
 

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 



 

522 
 

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. 

X. Regulatory Flexibility Act Certification 

Section 3(a) of the Regulatory Flexibility Act of 19801236 (“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 17 CFR 240.17a-5(d) (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 

                                                
1235  5 U.S.C. 603. 
1236  5 U.S.C. 603(a). 
1237  5 U.S.C. 605(b). 
1238  Although 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). 



 

523 
 

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 broker-dealers, 

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 broker-dealers.1242  The Commission 

examined recent FOCUS data for the 17 broker-dealers 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 broker-dealer 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 

                                                
1240  See 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).  

1241  See supra Section III.B.2.  See also 17 CFR 242.301(b)(1).  
1242  See 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.  



 

524 
 

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 broker-dealer 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. 



 

525 
 

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   



 

526 
 

 (xxiii) Form ATS-R (§ 249.638 of this chapter).     

  *  *  *  *  * 

PART 240–GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1934 

3. The general authority citation for part 240 continues to read as follows: 

Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 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, non-discretionary 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)  *  *  *   



 

527 
 

(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 broker-dealer’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: 



 

528 
 

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]. 



 

529 
 

(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) introductory 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 paragraph (b)(5)(i)(C): 



 

530 
 

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); 

j. Removing paragraph (b)(5)(iii); 

k. Redesignating paragraph (b)(5)(ii) as paragraph (b)(5)(iii) and revising the newly 

redesignated 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”; 

p. In paragraph (b)(9)(ii):  

i. Removing the words “Separately file” and adding “File” in their place; and 

ii. Removing the phrase “for transactions in NMS stocks and transactions in 

securities other than NMS stocks”. 



 

531 
 

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 this chapter, 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]. 



 

532 
 

* * * * * 

 (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 self-regulatory 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 



 

533 
 

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.   



 

534 
 

(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 broker-dealer, 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 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. 

* * * * * 



 

535 
 

§ 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; 



 

536 
 

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):  



 

537 
 

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 paragraph heading and adding a period in its 

place; and 

ii.  Adding “, or any extended review period,” after “the expiration of the review period”; 

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 

its 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) 



 

538 
 

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 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 



 

539 
 

(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”; 



 

540 
 

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 



 

541 
 

(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 

iii.  “[OFFICIAL USE ONLY]”. 

i.  Revising Items 2 through 5. 

j.  Removing Items 6 through 11. 



 

542 
 

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:   CRD Number:    
Filing date:    SEC File Number: 8  

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. 

FORM ATS 

*     *     *     *     * 

A. GENERAL INSTRUCTIONS 

*     *     *     *     * 

3. CONTACT EMPLOYEE - The individual listed as the contact employee must be 
authorized to receive all contact information, communications and mailings and be 
responsible for disseminating that information within the alternative trading system’s 
organization. 

4. EDGAR FILING - Any report required to be submitted pursuant to Rule 301 of 
Regulation ATS shall be prepared, formatted, and submitted in accordance with 
Regulation S-T and the EDGAR Filer Manual. 

5. EDGAR ACCEPTANCE - A filing that is defective may be rejected and not be 
accepted by the EDGAR system. Any filing so rejected shall be deemed not to have been 
filed.  See generally Regulation S-T (17 CFR part 232). 



 

543 
 

6. RECORDKEEPING - A copy of this Form ATS must be retained by the ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request.  

7. PAPERWORK REDUCTION ACT DISCLOSURE  

• *    *    * 

• *    *    * 

• *    *    * 

• *    *    * 

• It is estimated that an alternative trading system will spend approximately 
20.5 hours completing the initial operation report on Form ATS, 
approximately 5 hours preparing each amendment to Form ATS, and 
approximately 2 hours preparing a cessation of operations report on Form 
ATS.  

• *    *    * 

• All reports provided to the Commission on Form ATS (except for types of 
securities traded provided on Form ATS and Form ATS-R) will be afforded 
confidential treatment and will be available only to the examination of 
Commission staff, state securities authorities, and the self-regulatory 
organizations. Subject to the provisions of the Freedom of Information Act, 5 
U.S.C. 522 (“FOIA”) and the Commission’s rules thereunder (17 CFR 
200.80(b)(4)(iii)), the Commission does not generally publish or make 
available information contained in any reports, summaries, analyses, letters, or 
memoranda arising out of, in anticipation of, or in connection with, an 
examination or inspection of the books and records of any person or any other 
investigation. 

8. For filings made pursuant to Rule 301(b)(2)(ii) through (iv) (i.e., Amendments to the 
Initial Operation Report), attach to the filing an Exhibit C marked to indicate additions to 
or deletions from Items 1 through 6, as applicable.  Do not include in Exhibit C Items that 
are not changing. 

 
B. EXPLANATION OF TERMS 

*     *     *     *     * 

NEWLY DESIGNATED ATS – Shall mean an alternative trading system operating as of 
[effective date of the final rule] that meets the criteria under 17 CFR 240.3b-16(a) as of 
[effective date of the final rule] but did not meet the criteria under 17 CFR 240.3b-16(a) in 
effect prior to [effective date of the final rule].  17 CFR 242.300(r). 
 

*     *     *     *     * 



 

544 
 

TRADING INTEREST – Shall mean order, as defined in 17 CFR 242.300(e), 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.  17 CFR 242.300(q). 
 

*     *     *     *     * 

WARNING: Failure to keep this form current and to file accurate supplementary information on 
a timely basis, or the failure to keep accurate books and records or otherwise to comply with the 
provisions of law applying to the conduct of alternative trading systems would violate the federal 
securities laws and may result in disciplinary, administrative or criminal action.  
 
INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACTS MAY CONSTITUTE 
CRIMINAL VIOLATIONS 
 

Type of Filing (select one): 

�   Initial operation report  Rule 301(b)(2)(i)  

�   Material amendment   Rule 301(b)(2)(ii) 

�   Periodic amendment  Rule 301(b)(2)(iii) 

�   Correcting amendment  Rule 301(b)(2)(iv) 

�   Cessation of operations report Rule 301(b)(2)(v)  

• Date the ATS will cease to operate:  mm/dd/yyyy 
 

1.  Provide the following identifying information: 
A. Indicate the following: 

i. Is the organization, association, Person, group of Persons, or system 
filing the Form ATS a broker-dealer registered with the 
Commission? 

Yes No 
ii. Is the registered broker-dealer authorized by a national securities 

association to operate an ATS? 
Yes No 

B. Full name of registered broker-dealer of the ATS (“Broker-Dealer 
Operator”) as stated on Form BD:_____________________________ 

C. Full name(s) of the ATS under which business is conducted, if 
different:______________________________________________ 

D. Provide the SEC file number, CRD number, Legal Entity Identifier (if 



 

545 
 

any), and Market Participant Identifier (“MPID”) of the Broker-Dealer 
Operator: 
i. SEC File No.:__________________ 

ii. CRD No.:_____________________ 
iii. Legal Entity Identifier:___________ 

E. Provide 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: 

i. National Securities Association:  ______________________ 
ii. Effective Date of Membership:  _______________________ 

iii. MPID of the ATS:  _________________________________ 
F. Provide, if any, the website URL of the ATS:________________ 

G. Provide the primary, and if any, secondary, physical street address(es) of 
the ATS matching system:  ______________________________ 

2.  
a. Is the ATS a Newly Designated ATS? 

 
Yes No 
 

b. If this is an initial operation report for an ATS other than a Newly Designated 
ATS, the date the alternative trading system expects to commence operation:  
_________________________________ 

 
3. In a single document, provide the following: 

a. A description of classes of subscribers (for example, broker -dealer, institution, or 
retail). Also describe any differences in access to the services offered by the 
alternative trading system to different groups or classes of subscribers.  

b. A list of the types of securities the alternative trading system trades (for example, 
debt, equity, listed), or if this is an initial operation report, the types of securities it 
expects to trade. Note whether any types of securities are not registered under 
Section 12(a) of the Exchange Act of 1934 (“Exchange Act”).  

c. A list of the securities the alternative trading system trades, or if this is an initial 
operation report, the securities it expects to trade. Note whether any securities are 
not registered under Section 12(a) of the Exchange Act.  

d. The name, address, and telephone number of counsel for the alternative trading 
system.  

e. A list providing the full legal name of those direct owners reported on Schedule A 
of Form BD. 



 

546 
 

 
f. The name of any entity, other than the alternative trading system, that will be 

involved in operation of the alternative trading system, including the execution, 
trading, clearing, and settling of transactions on behalf of the alternative trading 
system. Provide a description of the role and responsibilities of each entity.  

g. A description of the manner of operation of the alternative trading system. 

h. A description of the procedures governing entry of trading interest into the 
alternative trading system. 

i. A description of the means of access to the alternative trading system. 

j. A description of the procedures governing execution, reporting, clearance, and 
settlement of transactions effected through the alternative trading system. 

k. Procedures for ensuring subscriber compliance with system guidelines. 

l. A brief description of the alternative trading system’s procedures for reviewing 
system capacity, security, and contingency planning procedures.  

m. If any other entity, other than the alternative trading system, will hold or 
safeguard subscriber funds or securities on a regular basis, provide the name of 
such entity and a brief description of the controls that will be implemented to 
ensure the safety of such funds and securities.  

4. Attach as Exhibit A, a copy of the alternative trading system’s subscriber manual and 
any other materials provided to subscribers.  

5. Attach as Exhibit B, 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.  

 Select if, in lieu of filing, the ATS certifies that the information requested 
under this Exhibit is available at the website above and is maintained on a 
continuous basis and is accurate as of the date of this filing. 

 
CONTACT INFORMATION, SIGNATURE BLOCK, AND CONSENT TO SERVICE 

Provide the following information of the Person at {ATS} prepared to respond to questions for 
this submission: 

First Name:      Last Name: 

Title: 

Email:      Telephone: 

Primary Street Address of the ATS: 



 

547 
 

Mailing Address of the ATS (if different): 

The {ATS} consents that service of any civil action brought by, or notice of any proceeding 
before, the SEC or a self-regulatory organization in connection with the alternative trading 
system’s activities may be given by registered or certified mail to the contact employee at the 
primary street address or mailing address (if different) of the ATS, or via email, at the addresses 
provided on this Form ATS. The undersigned deposes and says that he/she has executed this 
form on behalf of, and with the authority of, said alternative trading system. The undersigned and 
{ATS} represent that the information and statements contained herein, including exhibits, 
schedules, or other documents attached hereto, and other information filed herewith, all of which 
are made a part hereof, are current, true, and complete. 

Date {auto fill} {ATS} 

By: _______________________ Title____________________________ 

 
* * * * * 

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]”. 



 

548 
 

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:   CRD Number:    
Filing date:    SEC File Number: 8  

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. 



 

549 
 

FORM ATS-R 

* * * * * 

A. GENERAL INSTRUCTIONS 

* * * * * 

3. CONTACT EMPLOYEE - The individual listed as the contact employee must be 
authorized to receive all contact information, communications and mailings and be 
responsible for disseminating that information within the alternative trading system’s 
organization. 

4. EDGAR FILING - Any report required to be submitted pursuant to Rule 301 of 
Regulation ATS shall be prepared, formatted, and submitted in accordance with 
Regulation S-T and the EDGAR Filer Manual. 

5. EDGAR ACCEPTANCE - A filing that is defective may be rejected and not be 
accepted by the EDGAR system. Any filing so rejected shall be deemed not to have been 
filed. See generally Regulation S-T (17 CFR part 232). 

6. RECORDKEEPING - A copy of this Form ATS-R must be retained by the ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request. 

7. PAPERWORK REDUCTION ACT DISCLOSURE 

• *    *    * 

• *    *    * 

• *    *    * 

• *    *    * 

• It is estimated that an alternative trading system will spend approximately 4.75 
hours completing Form ATS-R. 

 
• *    *    * 

• All reports provided to the Commission on Form ATS-R (except for types of 
securities traded provided on Form ATS and Form ATS-R) will be afforded 
confidential treatment and will be available only to the examination of 
Commission staff, state securities authorities and the self-regulatory 
organizations. Subject to the provisions of the Freedom of Information Act, 5 
U.S.C. 522 (“FOIA”) and the Commission’s rules thereunder (17 CFR 
200.80(b)(4)(iii)), the Commission does not generally publish or make available 
information contained in any reports, summaries, analyses, letters, or memoranda 



 

550 
 

arising out of, in anticipation of, or in connection with an examination or 
inspection of the books and records of any person or any other investigation. 

* * * * * 

B. EXPLANATION OF TERMS 

AGENCY SECURITIES – Shall 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). 
 

* * * * * 
 

FOREIGN SOVEREIGN DEBT SECURITIES - Shall mean 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. 
 

* * * * * 
 
SUBSCRIBER - Shall mean any person that has entered into a contractual agreement with an 
alternative trading system to access such alternative trading system for the purpose of effecting 
transactions in securities or to submit, disseminate, or display trading interest on such alternative 
trading system, including a customer, member, user, or participant in an alternative trading 
system. A subscriber, however, shall not include a national securities exchange or national 
securities association. 
 
TRADING INTEREST - Shall mean an order, as defined in 17 CFR 242.300(e), 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.  17 CFR 242.300(q). 
 

* * * * * 

U.S. TREASURY SECURITIES – Shall mean a security issued by the U.S. Department of the 
Treasury.  

 

* * * * * 

 

Alternative Trading System Name:______________________________ 

Period covered by this report: _________________ to ________________ 

Type of Filing (select one): 

�   Quarterly report       Rule 301(b)(9)(i) 



 

551 
 

�   Report for an ATS that has ceased to operate  Rule 301(b)(9)(ii) 

• Date the ATS ceased to operate: mm/dd/yyyy 

 

1. Provide the following identifying information: 
A. Full name of registered broker-dealer of the ATS (“Broker-Dealer 

Operator”) as stated on Form BD:_____________________________ 

B. Full name(s) of the ATS under which business is conducted, if 
different:_____________________________________________ 

C. Provide the SEC file number, CRD number, and Legal Entity Identifier 
(if any) of the Broker-Dealer Operator: 

i. SEC File No.:__________________ 
ii. CRD No.:_____________________ 

iii. Legal Entity Identifier:___________ 
D. Provide 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 Market 
Participant Identifier (“MPID”) of the ATS: 
i. National Securities Association:  ______________________ 

ii. Effective Date of Membership:  _______________________ 
iii. MPID of the ATS:  _________________________________ 

E. Provide, if any, the website URL of the ATS:________________ 
F. Provide the primary, and if any, secondary, physical street address(es) of 

the ATS matching system:  ______________________________ 

2. Attach as Exhibit A, a list of all subscribers that were participants of the alternative 
trading system at any time during the period covered by this report. 

 
3.  Attach as Exhibit B, a list of all securities that were traded on the alternative trading 

system at any time during the period covered by this report. 
 
4. Provide the total unit and dollar volume of transactions (other than those for after-hours 

trading) in the following securities.  For securities reported in 4H-4N, report total 
settlement value in U.S. Dollars.  Enter “None,” “N/A” or “0” where appropriate. 

 
Category of Securities Total Unit Volume of 

Transactions 

Total Dollar Volume of 

Transactions 



 

552 
 

A. Listed Equity Securities    

B. Equity securities issued pursuant 
to Rule 144A of the Securities 
Act of 1933 

  

C. Penny Stock, other than any 
securities included in Items 4A-
4D above 

  

D. Other equity securities not 
included in Items 4A-4C above 

  

E. Rights and warrants   

F. Listed options   

G. Unlisted options   

H. Government securities   

i. U.S. Treasury Securities   

ii. Agency Securities   

I. Municipal securities   

J. Corporate debt securities 
i. U.S. corporate debt 

securities 
ii. Non-U.S. corporate debt 

securities 

  

K. Mortgage related securities 

L. Foreign sovereign debt securities 

  

M. Debt securities other than any 
securities included in Items 4H-
4L above and 4N-4O below 

  

  

  

 

 

 

  

  

  

  

  

  

 

 

  

  

 

  

 

 

 

 

  



 

553 
 

      N.    Repurchase agreements 

Type of 
collateral 

Overnight triparty Term triparty Overnight bilateral Term bilateral 

 Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

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 

        

Other 
securities 

        

 
i. If other securities, please describe:  _____________________________________________________ 

       
O.    Reverse repurchase agreements 

Type of 
collateral 

Overnight triparty Term triparty Overnight bilateral Term bilateral 

 Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

NMS 
stocks 

        

U.S. 
Treasury 
Securities 

        



 

554 
 

 

5.  *  *  * 

C. List the types of listed options reported in Item 4F above:  __________________ 

6.         Provide the total unit and dollar volume of transactions for after-hours trading in the 
following securities.  Enter “None,” “N/A” or “0” where appropriate. 

 
Category of Securities Total Unit Volume of 

Transactions 

Total Dollar Volume of 

Transactions 

A. Listed Equity Securities    

B. Listed options   

 

* * * * * 

8. Was the ATS subject to the fair access obligations under Rule 301(b)(5) during any 
portion of the period covered by the report? 

 � Yes � No 

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 

        

Other 
securities 

        

 
i. If other securities, please describe:  _____________________________________________________ 

 

  



 

555 
 

CONTACT INFORMATION, SIGNATURE BLOCK, AND CONSENT TO SERVICE 

Provide the following information of the Person at {ATS} prepared to respond to questions for 
this submission: 

First Name:      Last Name: 

Title: 

Email:      Telephone: 

Primary Street Address of the ATS: 

Mailing Address of the ATS (if different): 

The {ATS} consents that service of any civil action brought by, or notice of any 
proceeding before, the SEC or a self-regulatory organization in connection with the 
alternative trading system’s activities may be given by registered or certified mail to the 
contact employee at the primary street address or mailing address (if different) of the 
ATS, or via email, at the addresses provided on this Form ATS-R. The undersigned 
deposes and says that he/she has executed this form on behalf of, and with the authority 
of, said alternative trading system. The undersigned and {ATS} represent that the 
information and statements contained herein, including exhibits, schedules, or other 
documents attached hereto, and other information filed herewith, all of which are made a 
part hereof, are current, true, and complete. 

Date {auto fill} {ATS} 

By: _______________________ Title____________________________    

* * * * * 

  



 

556 
 

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. 

 
  



 

557 
 

APPENDIX A – MARKED FORM ATS-N 
 
Deleted text is [bracketed]. New text is italicized. 
 
 

  
 

United States Securities and Exchange Commission 

Washington, DC   
 

FORM ATS-N 

Intentional Misstatements or Omissions of Facts May Constitute Criminal Violations 
See 18 U.S.C.1001 and 15 U.S.C. 78ff(a)

 
File No:  

{Covered[NMS Stock] ATS} is making this filing pursuant to the  
Rule 304 under the Securities Exchange Act of 1934 

 
Type of Covered ATS  

 NMS Stock ATS       

 Government Securities ATS 

 [Does the NMS Stock ATS currently operate pursuant to a Form ATS?]  Is the ATS a Legacy 
Government Securities ATS or Newly Designated ATS? 

 
Yes No 

Type of Filing (select one)  
 
 Initial Form ATS-N      Rule 304(a)(1)(i) 
 Material Amendment     Rule 304(a)(2)(i)(A)  
 Updating Amendment     Rule 304(a)(2)(i)(B)   
 Correcting Amendment       Rule 304(a)(2)(i)(C)   
 [Order Display and  

Fair Access]Contingent Amendment   Rule 304(a)(2)(i)(D) 
 Fee Amendment     Rule 304(a)(2)(i)(E) 
 

 Statement about the Form ATS-N Amendment pursuant to Instruction A.7([g]h) of this 
form:   

 
 
 

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE MERITS OR ACCURACY OF 
THE DISCLOSURES IN THIS FILING.   



 

558 
 

 
 
 

 Provide the EDGAR accession number for the Form ATS-N filing to be amended:    
 

 Notice of Cessation     Rule 304(a)(3)   
 

 Date the [NMS Stock]Covered ATS will cease to operate:  mm/dd/yyyy 
 
   Withdrawal of Form ATS-N filing 
 
Provide the EDGAR accession number for the Form ATS-N filing to be withdrawn:     



 

559 
 

Part I:  Identifying Information   
  
1. Indicate the following: 

 
a. Is the organization, association, Person, group of Persons, or system filing the Form 

ATS-N a broker-dealer registered with the Commission? 
 

Yes No 
 

b. Is the registered broker-dealer authorized by a national securities association to 
operate an ATS? 
 

Yes No 
 
2. Full name of registered broker-dealer, government securities broker, or government securities 

dealer of the [NMS Stock] ATS (“Broker-Dealer Operator”) as stated on Form BD:  
 

3. Full name(s) of [NMS Stock] ATS under which business is conducted, if different: 
 
4. Provide the SEC file number, [and] CRD number, the Legal Entity Identifier (if any), and 

Market Participant Identifier (“MPID”) of the Broker-Dealer Operator: 
 

a. SEC File No.: 
b. CRD No.: 
c. Legal Entity Identifier: 
d. MPID of the Broker-Dealer Operator:  

 
5. Provide 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 [Market Participant Identifier (“]MPID[”)] of the [NMS Stock] ATS: 

 
a. National Securities Association: 
b. Effective Date of Membership: 
c. MPID of the [NMS Stock] ATS:   

 
6. Provide, if any, the website URL of the [NMS Stock] ATS: 
 
7. Provide the primary[,] and [if any,] secondary[,] physical street address(es) of the [NMS 

Stock] ATS matching system: 
 

a. Primary address: 
 

b. Does the ATS have a secondary matching system? 
 
Yes No 
 
If yes, provide the secondary address: 

 



 

560 
 

8. Types of Securities Traded 
 

a. For an NMS Stock ATS, does the ATS make available for trading all NMS stocks?  If the 
ATS suspends trading in securities under certain circumstances, please indicate so under 
Part III, Item 20. 
 
 Yes  
 No 
 
If no, identify the securities or types of securities that the ATS does not make available 
for trading: 
 

b. For a Government Securities ATS, please indicate the types of government securities the 
ATS makes available for trading: 

 
  U.S. Treasury Securities 

  Bills:   On-the-run            Off-the-run            When-issued        
  Notes:   On-the-run            Off-the-run            When-issued 
  Bonds:   On-the-run            Off-the-run            When-issued 
  TIPS:   On-the-run            Off-the-run            When-issued 
  STRIPS:   On-the-run            Off-the-run            When-issued 
  Floating rate notes:   On-the-run            Off-the-run            When-issued 

 
  Agency Securities 

  Agency Mortgage-Backed Securities 
  Federal Agency Securities 

 
  Repurchase or Reverse Repurchase Agreements on Government Securities 

(“repos”) 
  Triparty:   Repurchase Agreement 

  Reverse Repurchase Agreement 
  Centrally Cleared 
  Non-Centrally Cleared         

  Bilateral:   Repurchase Agreement 
  Reverse Repurchase Agreement     
  Centrally Cleared 
  Non-Centrally Cleared             

  
  Other: 

If other, identify the types of government securities that the ATS makes available 
for trading: 

 
[8]9. Attach as Exhibit 1, the most recently filed or amended Schedule A of Form BD for the 

Broker-Dealer Operator disclosing information related to direct owners and executive 
officers. 

 
 Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 
filing, and that the ATS will maintain its website in accordance with the rules for 



 

561 
 

amending Form ATS-N pursuant to Rule 304(a)(2)(i) to reflect any changes to Schedule 
A of Form BD for the Broker-Dealer Operator.  
 

[9]10. Attach as Exhibit 2, the most recently filed or amended Schedule B of Form BD for the 
Broker-Dealer Operator disclosing information related to indirect owners. 

 
 Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 
filing, and that 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 
B of Form BD for the Broker-Dealer Operator. 

 
[10]11. For filings made pursuant to Rule 304(a)(2)(i)(A) through ([D]E) (i.e., Form ATS-N 

Amendments), attach as Exhibit 3 a document marked to indicate changes to “yes” or “no” 
answers or additions to or deletions from any Item in Part I, Part II, and Part III, as 
applicable, including Exhibits 1, 2, and 5.  Indicate both the Part and Item number for all 
Items that are changing.  Do not include in Exhibit 3 Items that are not changing. 

 
 
Part II: Activities of the Broker-Dealer Operator and its Affiliates 
 
Item 1:  Broker-Dealer Operator Trading Activities [on]in the ATS 

a. Are business units of the Broker-Dealer Operator permitted to enter or direct the entry of 
[orders and] trading interest [(e.g., quotes, conditional orders, or indications of interest)] 
into the [NMS Stock] ATS? 
 
Yes No 

 
If yes, name and describe each type of business unit of the Broker-Dealer Operator that 
enters or directs the entry of [orders and ]trading interest into the ATS (e.g., [NMS Stock 
]ATS, type of trading desks, market maker, sales or client desk) [and, for].  For each 
business unit, provide the applicable MPID and list the capacity of its [orders and] 
trading interest (e.g., principal, agency, riskless principal).  Explain any circumstance 
when the Broker-Dealer Operator would be a counterparty to an ATS trade.   
 

b. If yes to Item 1(a), are the services that the [NMS Stock] ATS offers and provides to the 
business units required to be identified in Item 1(a) the same for all Subscribers and 
Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 
Yes No 

 
If no, explain any differences in response to the applicable Item number in Part III of this 
form, as required, and list the applicable Item number here.  If there are differences that 
are not applicable to Part III, explain those differences here.  

 
c. Are there any formal or informal arrangements with any of the business units required to 

be identified in Item 1(a) to provide [orders or] trading interest to the [NMS Stock] ATS 
(e.g., undertaking to buy or sell continuously, or to meet specified thresholds of trading or 
quoting activity)?  
 
Yes No 



 

562 
 

 
If yes, identify the business unit and respond to the request in Part III, Item 12 of this 
form. 
 

[d. Can orders and trading interest in the NMS Stock ATS be routed to a Trading Center 
operated or controlled by the Broker-Dealer Operator? 

 
Yes No 

  
If yes, respond to request in Part III, Item 16 of this form.] 
 

Item 2:  Affiliates Trading Activities [on]in the ATS 

a. Are Affiliates of the Broker-Dealer Operator permitted to enter or direct the entry of 
[orders and] trading interest into the [NMS Stock] ATS? 

 
Yes No 
 
If yes, name and describe each type of Affiliate that enters or directs the entry of [orders 
and] trading interest into the ATS (e.g., broker-dealer, [NMS Stock ]ATS, investment 
company, hedge fund, market maker, principal trading firm)[ and, for].  For each 
Affiliate, provide the applicable MPID and list the capacity of its [orders and] trading 
interest (e.g., principal, agency, riskless principal).  Explain any circumstances when an 
Affiliate of the Broker-Dealer Operator would be a counterparty to an ATS trade.  

 
b. If yes[,] to Item 2(a), are the services that the [NMS Stock ]ATS offers and provides to 

the Affiliates required to be identified in Item 2(a) the same for all Subscribers and 
Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 
Yes No 
 
If no, explain any differences in response to the applicable Item number in Part III of this 
form, as required, and list the applicable Item number here.  If there are differences that 
are not applicable to Part III, explain those differences.  
 

c. Are there any formal or informal arrangements with an Affiliate required to be identified 
in Item 2(a) to provide [orders or] trading interest to the [NMS Stock] ATS (e.g., 
undertaking to buy or sell continuously, or to meet specified thresholds of trading or 
quoting activity)? 
 
Yes No 
 
If yes, identify the Affiliate and respond to the request in Part III, Item 12 of this form. 

 
[d. Can orders and trading interest in the NMS Stock ATS be routed to a Trading Center 

operated or controlled by an Affiliate of the Broker-Dealer Operator? 
 
Yes No  
 
If yes, respond to the request in Part III, Item 16 of this form.] 

  
Item 3: [Order] Interaction of Trading Interest with Broker-Dealer Operator; 
Affiliates 



 

563 
 

a. Can any Subscriber opt out from interacting with [orders and] trading interest of the 
Broker-Dealer Operator in the [NMS Stock] ATS? 
 
Yes No 
 
If yes, explain the opt-out process.   
 

b. Can any Subscriber opt out from interacting with the [orders and] trading interest of an 
Affiliate of the Broker-Dealer Operator in the [NMS Stock] ATS? 
 
Yes No 

If yes, explain the opt-out process.     
 

c. If yes to Item 3(a) or 3(b), are the [terms and conditions] requirements of the opt-out 
processes required to be identified in Item 3(a), 3(b), or both, the same for all 
Subscribers? 
 
Yes No 

 
If no, identify and explain any differences. 

 
Item 4: Arrangements with Trading [Centers] Venues  

a. Are there any formal or informal arrangements (e.g., mutual, reciprocal, or preferential 
access arrangements) between the Broker-Dealer Operator and a [Trading Center] trading 
venue to access the [NMS Stock ] ATS services (e.g., arrangements to effect transactions 
or to submit, disseminate, or display [orders and] trading interest in the ATS)? 
 
Yes No 
 
If yes, identify the [Trading Center] trading venue and the ATS services and provide a 
summary of the terms and conditions of the arrangement.  
 

b. [If yes to Item 4(a),] A[a]re there any formal or informal arrangements between an 
Affiliate of the Broker-Dealer Operator and a [Trading Center] trading venue to access 
the [NMS Stock] ATS services? 
 
Yes No 
 
If yes, identify the [Trading Center] trading venue and ATS services and provide a 
summary of the terms and conditions of the arrangement.  
  

Item 5: Other Products and Services 

a. Does the Broker-Dealer Operator offer [Subscribers] any products or services for the 
purpose of effecting transactions or submitting, disseminating, or displaying [orders] 
[and] trading interest in the [NMS Stock] 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)?   
 
Yes No 
 
If yes, identify the products or services offered, provide a summary of the [terms and 
conditions] requirements for use, and list here the applicable Item number in Part III of 



 

564 
 

this form where the use of the product or service is explained.  If there is no applicable 
Item in Part III, explain the use of the product or service with the ATS here.  
 

b. If yes to Item 5(a), are the [terms and conditions] requirements for use of the services or 
products required to be identified in Item 5(a) 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? 
 
Yes No 
 
If no, identify and explain any differences. 
 

c. Does any Affiliate of the Broker-Dealer Operator offer [Subscribers, the Broker-Dealer 
Operator, or both,] any products or services for the purpose of effecting transactions or 
submitting, disseminating, or displaying [orders or] trading interest in the [NMS Stock] 
ATS?    
 
Yes No 
 
If yes, identify the products or services offered, provide a summary of the [terms and 
conditions] requirements for use, and list here the applicable Item number in Part III of 
this form where the use of the product or service is explained.  If there is no applicable 
item in Part III, explain the use of the product or service with the ATS here.   
   

d. If yes to Item 5(c), are the [terms and conditions] requirements for use of the services or 
products required to be identified in Item 5(c) 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? 
 
Yes No 
 
If no, identify and explain any differences. 

 
Item 6: Activities of Service Providers 

[a. Does any employee of the Broker-Dealer Operator or its Affiliate that services both the 
operations of the NMS Stock ATS and any other business unit or any Affiliate of the 
Broker-Dealer Operator (“shared employee”) have access to confidential trading 
information on the NMS Stock ATS? 

 
Yes No 

 
If yes, identify the business unit, Affiliate, or both that the shared employee services, and 
provide a summary of the role and responsibilities of the shared employee at the ATS and 
the business unit, Affiliate, or both that the shared employee services.]  
 

[b]a. Does any entity, other than the Broker-Dealer Operator, support the services or 
functionalities of the [NMS Stock] ATS (“service provider”) that are required to be 
explained in Part III of this form? 
 
Yes No 
 
If yes, both identify the service provider and provide a summary of the role and 
responsibilities of the service provider in response to the applicable Item number in Part 
III of this form, as required.  List the applicable Item number here.  If there are services 
or functionalities that are not applicable to Part III, identify the service provider, the 



 

565 
 

services and functionalities, and also provide a summary of the role and responsibilities 
of the service provider here.  
 

[c]b. If yes to Item 6([b]a), does the service provider, or any of its Affiliates, use the 
[NMS Stock] ATS services? 
 
Yes No 
 
If yes, identify the service provider, or the Affiliate as applicable, and the ATS services 
that the service provider or its Affiliates use.   
 

[d]c. If yes to Item 6([c]b), are the services that the [NMS Stock] ATS offers and 
provides to the entity required to be identified in Item 6([c]b) the same for all Subscribers 
and Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 

    Yes No 

If no, identify and explain any differences. 

Item 7:  Protection of Confidential Trading Information 

a. Describe the written safeguards and written procedures to protect the confidential trading 
information of Subscribers to the [NMS Stock] ATS, including:  
 

i. 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.  If any employee of the Broker-
Dealer Operator or employee of its Affiliate that services both the operations of 
the ATS and any other business unit or any Affiliate of the Broker-Dealer 
Operator (“shared employee”) has access to confidential trading information in 
the ATS, identify the business unit, Affiliate or both that the shared employee 
services, and provide a summary of the role and responsibilities of the shared 
employee at the ATS and the business unit, Affiliate, or both, that the shared 
employee services; 

ii.   written standards controlling employees of the ATS that trade for employees’ 
accounts; and 

iii. written oversight procedures to ensure that the safeguards and procedures 
described above are implemented and followed. 

 
b. Can a Subscriber consent to the disclosure of its confidential trading information to any 

Person (not including those employees of the [NMS Stock] ATS who are operating the 
system or responsible for its compliance with applicable rules)?  
 
Yes No 
 
If yes, explain how and under what conditions.   
 

c. If yes to Item 7(b), can a Subscriber withdraw consent to the disclosure of its confidential 
trading information to any Person (not including those employees of the [NMS Stock] 
ATS who are operating the system or responsible for its compliance with applicable 
rules)?  
 
Yes No 
 



 

566 
 

If yes, explain how and under what conditions.   
 

[d. Provide a summary of the roles and responsibilities of any Persons that have access to 
confidential trading information, the confidential trading information that is accessible by 
them, and the basis for the access.]  

 
Part III: Manner of Operations 
 
For each narrative response in Part III, identify and explain any differences among and 
between any 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 Operator.     

Item 1: Types of ATS Subscribers 

Select the type(s) of Subscribers that can use the [NMS Stock] ATS services: 
 
  Investment Companies   Retail Investors   Issuers   Brokers 
 
[  NMS Stock ATSs]   Asset Managers   Principal Trading Firms 

  Hedge Funds    Market Makers   Banks   Dealers 

  Insurance Companies       Pension Funds   Corporations 

  Other  

If other, identify the type(s) of [s]Subscriber. 

Item 2:  Eligibility for ATS Services 

a. Does the [NMS Stock] ATS require Subscribers to be registered broker-dealers? 
 
Yes No 
 

b. Are there any [other] conditions that the [NMS Stock] ATS requires a Person to satisfy 
before accessing the ATS services? 
 
Yes No 
 
If yes, list and provide a summary of the conditions. 
 

[c. If yes to Item 2(b), are the conditions required to be identified in Item 2(b) the same for 
all Persons? 
 

    Yes No 
 

If no, identify and describe any differences.] 
 

[d]c. Does the [NMS Stock] ATS require Subscribers to enter a written agreement to 
use the ATS services?  
 
Yes No 
 



 

567 
 

Item 3: Exclusion from ATS Services 

[a.] Can the [NMS Stock] ATS exclude, in whole or in part, any Subscriber from the ATS 
services?     
 
Yes No 
 
If yes, list and provide a summary of the conditions for excluding, in whole or in part, a 
Subscriber from the ATS services.   
 

[b. If yes to Item 3(a), are the conditions required to be identified in Item 3(a) the same for 
all Subscribers?  

 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 4: Hours of Operations and Trading Outside of Regular Trading Hours 

a. Provide the days and hours of operations of the [NMS Stock] ATS, including the times 
when [orders or] trading interest can be entered [on] in the ATS[, and any hours of 
operation outside of regular trading hours].   

 
b. Are the ATS services available outside of its regular trading hours (e.g., after-hours 

trading)? 
 

Yes No 
 
c. If yes to Item 4(b), with respect to services available outside of the ATS’s regular trading 

hours, are there any differences between the services during the ATS’s regular trading 
hours and outside of the ATS’s regular trading hours?  
 
Yes No 
 
If yes, identify and explain the differences.  

 
[b. Are the hours of operations the same for all Subscribers and the Broker-Dealer Operator?     

 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 5: Means of Entry 

a. Does the [NMS Stock] ATS permit [orders and] trading interest to be entered directly 
into the ATS (e.g., via Financial Information eXchange (“FIX”) protocol, Binary)? 
 
Yes No 
 
If yes, explain the protocol that can be used to directly enter [orders and] trading interest 
into the ATS.  
 

[b. If yes to Item 5(a), are the protocols required to be identified in Item 5(a) the same for all 
Subscribers and the Broker-Dealer Operator?  
 
Yes No 



 

568 
 

 
If no, identify and explain any differences.] 

 
[c]b. Are there any [other] means of [for] entering [orders and] trading interest into the 

[NMS Stock] ATS not otherwise disclosed in Part III, Item 5(a) (e.g., smart order router, 
algorithm, order management system, sales desk, direct market access, web-enabled 
system, or aggregation functionality)? 
 
Yes No 
 
If yes, identify and explain the [other] means for entering [orders and] trading interest, 
including [indicate] whether the means are provided through the Broker-Dealer Operator, 
either by itself or through a third-party contracting with the Broker-Dealer Operator, or 
through an Affiliate of the Broker-Dealer Operator, and list and provide a summary of the 
[terms and conditions]requirements for entering [orders or] trading interest into the ATS 
through these means.   
 

[d. If yes to Item 5(c), are the terms and conditions required to be identified in Item 5(c) the 
same for all Subscribers and the Broker-Dealer Operator?  
 
Yes No 

 
If no, identify and explain any differences.] 

 
Item 6:  Connectivity and Co-location 

a. Does the [NMS Stock] ATS offer co-location and related services (e.g., cabinets and 
equipment, cross-connects)?  
 
Yes No 

 
If yes, provide a summary of the [terms and conditions] requirements for use for co-
location and related services, including the speed and connection (e.g., fiber, copper) 
options offered.   

 
[b. If yes to Item (6)(a), are the terms and conditions required to be identified in Item 6(a) the 

same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 

 
If no, identify and explain any differences.] 

 
[c]b. Does the [NMS Stock] ATS offer any other means besides co-location and related 

services required to be explained in this Item 6(a) to increase the speed of communication 
with the ATS?   
 
Yes No 
 
If yes, explain the means to increase the speed of communication with the ATS and 
provide a summary of the [terms and conditions] requirements for its use.   

 
[d. If yes to Item 6(c), are the terms and conditions required to be identified in Item 6(c) the 

same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 



 

569 
 

If no, identify and explain any differences.] 
 

[e]c. Does the[ NMS Stock] ATS offer any means to reduce the speed of 
communication with the ATS (e.g., speed bumps)? 
 
Yes No 
 
If yes, explain the methods to reduce the speed of communication with the ATS and 
provide a summary of the [terms and conditions] requirements for its use.   

 
[f. If yes to Item 6(e), are the terms and conditions required to be identified in Item 6(e) the 

same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences. 
 
Yes No] 

 
Item 7:  Order Types [and Attributes] and Sizes; Trading Facilities 
 

Does the ATS provide trading facilities or set rules for bringing together orders of buyers 
and sellers (e.g., crossing system, auction market, limit order matching book, click-to-
trade functionality)?  

 
Yes No 

 
If yes, explain the trading facilities and rules for bringing together the orders of buyers 
and sellers in the ATS, including:  
 

a. [Identify and explain] a description of each order type offered by the [NMS 
Stock] ATS[.  In your explanation, include the following], including: 
 
• [i.  priority, including] the order type’s priority upon order entry and any 

subsequent change to priority (if applicable); whether and when the order type 
can receive a new time stamp; the order type’s priority [vis-à-vis]in relation to 
other orders on the book due to changes in the NBBO or other reference price; 
and any instance in which the order type could lose execution priority to a 
later arriving order at the same price; 

 
• [ii.  ]conditions, including any price conditions (e.g., how price conditions 

affect the rank and price at which [it]the order type can be executed; 
conditions on the display or non-display of an order; or conditions on 
executability and routability); 

 
• [iii.   ]order types designed not to remove liquidity (e.g., post-only orders, 

store orders), including what occurs when such order is marketable against 
trading interest on the [NMS Stock] ATS when received; 

 
• [iv.  ]order types that adjust their price as changes to the order book occur 

(e.g., price sliding orders or pegged orders) or have a discretionary range, 
including an order’s rank and price upon order entry and whether such prices 
or rank may change based on the NBBO or other market conditions when 
using such order type; when the order type is executable and at what price the 
execution would occur; whether the price at which the order type can be 



 

570 
 

executed ever changes; and if the order type can operate in different ways, the 
default operation of the order type; 

 
• [v.  ] whether an order type is eligible for routing to other [Trading Centers] 

trading venues;  
 
• [vi.  ]the time-in-force instructions that can be used or not used with each 

order type;  
 

• [vii.  ]the circumstances under which order types may be combined with 
another order type, modified, replaced, canceled, rejected, or removed from 
the [NMS Stock] ATS; and 
 

• [viii.]the availability of order types across all forms of connectivity to the 
[NMS Stock] ATS and differences, if any, in the availability of an order type 
across those forms of connectivity. 

 
b. 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); 

 
c. rules governing order interaction, priority, pricing methodologies, allocation, 
matching, and execution of orders;  

 
d. how orders may interact with non-firm trading interest or separate trading 
functionalities within the ATS or offered by the Broker-Dealer Operator; 

 
e. procedures governing trading in the ATS, such as functionality or protocols that 
permit the selection of displayed orders to trade against, price improvement 
functionality, price protection mechanisms, short sales, functionality to adjust or 
hedge orders, locked-crossed markets, trading controls (e.g., fat finger checks, 
whether the ATS can employ a global kill switch), the handling of execution errors 
and trade breaks, and the time-stamping of messages and executions, and any 
conditions or processes for terminating a counterparty match.  

 
[b. Are the terms and conditions for each order type and attribute the same for all 

Subscribers and the Broker-Dealer Operator?  
 
Yes No 
 
If no, identify and explain any differences.] 
 
 

[Item 8:  Order Sizes   
 

a. Does the NMS Stock ATS require (e.g., minimum or maximum sizes for orders or 
trading interest)?  
 
Yes No 
 
If yes, specify any minimum or maximum order or trading interest size requirements and 
any related handling procedures.   
 

b. If yes to Item 8(a), are the requirements and procedures required to be identified in Item 
8(a) the same for all Subscribers and the Broker-Dealer Operator? 
 



 

571 
 

Yes No 
 
If no, identify and explain any differences. 

 
c. Does the NMS Stock ATS accept or execute odd-lot orders? 

 
Yes No 
 
If yes, specify any odd-lot order requirements and related handling procedures (e.g., odd 
lot treated the same as round lot).   
 

d. If yes to Item 8(c), are the requirements and procedures required to be identified in Item 
8(c) the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 

 
If no, identify and explain any differences. 

 
e. Does the NMS Stock ATS accept or execute mixed-lot orders? 

 
Yes No 
 
If yes, specify any mixed lot order requirements and related handling procedures (e.g., 
mixed lot treated the same as round lot).   
 

f. If yes, to Item 8(e), are the requirements and procedures required to be identified in 8(e) 
the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 
 

Item [9]8: Use of Non-Firm Trading Interest; Communication Protocols and 
Negotiation Functionality [Conditional Orders and Indications of Interest]  

[a.] Does the [NMS Stock ]ATS make available communication protocols for buyers and 
sellers to communicate non-firm trading interest or negotiate a trade [send or receive any 
messages indicating trading interest] (e.g., request-for-quote (RFQ) protocols, bids-
wanted or offers-wanted protocols, indications of interest mechanisms, conditional order 
functionalities[, IOIs, actionable IOIs, or conditional orders])?  
 
Yes No 

If yes, identify and explain [the use of the messages, including information contained in 
messages (e.g., price or size minimums), how the message is transmitted (e.g., order 
management system, smart order router, FIX), when the message is transmitted (e.g., 
automatically by the ATS, or upon the sender’s request), the type of Persons that receive 
the message (e.g., Subscribers, Trading Centers), responses to conditional orders or IOIs 
(e.g., submission to firm-up conditional orders), and the conditions under which the 
message might result in an execution in the ATS (e.g., response time parameters, 
interaction, and matching)] the protocols and functionalities, including: 
 
a.  the use of messages, including:  



 

572 
 

• types of messages that the ATS permits to be sent and received and the type of 
Persons that can send or receive messages (e.g., the ATS, types of 
Subscribers, specific Subscribers, customers of Subscribers, trading venues); 

• information contained in messages (e.g., symbol, price, direction, or size 
minimums) and whether the terms in the messages can vary based on potential 
recipients (e.g., different Subscribers may receive different prices for the same 
security);  

• how and when messages are transmitted (e.g., order management system, 
router, or FIX); 

• whether messages are attributed to their sender or anonymous, and whether a 
participant may elect to disclose its identity to other Subscribers, and if so, 
how, when, and what is disclosed; 

• processes to respond to messages (e.g., submission to firm-up conditional 
orders, response parameters for an RFQ, response to a request to negotiate, 
last look procedures); 

• time parameters applicable to messages (e.g., the time-in-force instructions 
that can be used with a message, or wire time or response time applied to a 
conditional order or RFQ); 

• information regarding the contra-party trading interest made known on the 
system (if trading interest is made known on the system, describe it in Part III, 
Item 15), including whether a Subscriber may elect whether to display only 
part of its trading interest (e.g., hidden size); 

• the circumstances under which messages may be modified, replaced, 
canceled, rejected, or removed from the ATS; 

• 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 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); 

• limits or requirements for multiple messages sent at the same time (e.g., 
whether the ATS prohibits a Subscriber from entering multiple buy or sell 
orders in the same security); 

• whether a message containing trading interest is eligible to be sent to 
destinations outside the ATS (if a message can be sent to a destination outside 
the ATS, describe it in Part III, Item 16); 

• the availability of message types across all forms of connectivity to the ATS 
and differences, if any, in the availability of an order type across those forms 
of connectivity. 

b.  any requirements relating to the size of trading interest (e.g., minimum or maximum 
size, message controls or throttling, odd-lot, mixed-lot, trading increments) and 
related handling procedures (e.g., handling of residual trading interest).  

c.  procedures governing communication protocols, including: 
• priority, including the 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 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 ATS permits or provides for Subscribers to vary 
pricing based on the identity of other Subscribers (e.g., preferred pricing feeds 



 

573 
 

or tiered pricing) and whether Subscribers can select counter-parties to 
interact with based on their identity;  

• rules for interaction, pricing methodologies, allocation, matching, and 
execution; 

• functionality or protocols for the auto-execution of non-firm trading interest, 
and how the ATS or a Subscriber can designate trading interest as 
automatically executable; 

• how non-firm trading interest may interact with orders or separate trading 
functionalities in the ATS or functionality offered by the Broker-Dealer 
Operator; 

• procedures governing trading in the ATS, such as functionality or protocols 
that permit a Subscriber to select displayed non-firm trading interest to trade 
against, price improvement functionality, price protection mechanisms, 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 time-stamping 
of trading interest messages and executions, any conditions or processes for 
terminating a counterparty match; 

• what information is made 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. 

 

[b. If yes to Item 9(a), are the terms and conditions governing conditional orders and 
indications of interest the same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.]  
 

Item 9: Monitoring and Surveillance 
 
a. Does the ATS 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)?  

 
Yes No 
 
If yes, provide a summary of the supervision activities, 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.   

 
b. Does the ATS monitor for certain trading behaviors or activities that may be detrimental 

to the ATS marketplace or trading (e.g., anti-gaming technology)? 
 
Yes No 
 
If yes, provide a summary the monitoring activities and the trading behaviors and 
activities that the ATS intends to detect, deter, or limit. 



 

574 
 

 
Item 10: Opening and Reopening 

a. Explain the processes and procedures related to how the [NMS Stock] ATS opens or re-
opens for trading, including when and how [orders and] trading interest [are] is priced, 
prioritized, matched, and executed; 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; whether there are any protocols at the open for buyers and sellers 
to send messages and negotiate a trade; [,] and identify any order types allowed prior to 
the start of its regular trading hours or following a stoppage of trading in a security during 
its regular trading hours.   
 

[b. Are the processes and procedures governing opening and re-opening the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences. 
 

c. Explain how unexecuted orders and trading interest are handled at the time the NMS 
Stock ATS begins regular trading at the start of regular trading hours or following a 
stoppage of trading in a security during regular trading hours.   
 

d. Are the processes or procedures governing unexecuted orders and trading at the time the 
NMS Stock ATS begins regular trading at the start of regular trading hours, or following 
a stoppage of trading in a security during regular trading hours, the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 

[e]b. Are there any differences between pre-opening executions, executions following a 
stoppage of trading in a security during the ATS’s regular trading hours, and/or 
executions during its regular trading hours? 
 
Yes No 
 
If yes, identify and explain the differences. 

 
Item 11: [Trading Services, Facilities and Rules] Interaction with Related Markets 

[a. Provide a summary of the structure of the NMS Stock ATS marketplace (e.g., crossing 
system, auction market, limit order matching book) and explain the means and facilities 
for bringing together the orders of multiple buyers and sellers on the NMS Stock ATS. 
  

b. Are the means and facilities required to be identified in Item 11(a) the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences. 

   
c. Explain the established, non-discretionary rules and procedures of the NMS Stock ATS, 

including order interaction rules for the priority, pricing methodologies, allocation, 



 

575 
 

matching, and execution of orders and trading interest, and other procedures governing 
trading, such as price improvement functionality, price protection mechanisms, short 
sales, locked-crossed markets, the handling of execution errors, and the time-stamping of 
orders and executions.  
 

d. Are the established, non-discretionary rules and procedures required to be identified in 
Item 11(c) the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 
Does the Broker-Dealer Operator or any of its Affiliates offer functionality, procedures, 
or protocols to facilitate trading or communication on, or source pricing for, the ATS 
using markets for financial instruments related to the securities that the ATS trades (e.g., 
futures, options, currencies, swap, fixed income markets), including offering order types 
to facilitate transactions on both markets, or procedures to allow Subscribers to perform 
multi-leg transactions involving the identified market(s)? 
 
Yes No 
 
If yes, (i) identify the functionality, procedures, protocols, and source of pricing and the 
related market; (ii) state whether the functionality, procedures, protocols, and source of 
pricing is provided or operated by the Broker-Dealer Operator or an affiliate of the 
Broker-Dealer Operator and whether the related market is provided or operated by the 
Broker-Dealer Operator or its affiliate; and (iii) 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.   

   
Item 12: Liquidity Providers 

Are there any formal or informal arrangements with any [Subscriber]Person or the 
Broker-Dealer Operator to display, enter, or trade against [provide orders or] trading 
interest in [to] the [NMS Stock] ATS (e.g., undertaking to buy or sell continuously, or to 
meet specified thresholds of trading or quoting activity)? 
 
Yes No 
 
If yes, identify the liquidity provider and describe the arrangement, including the terms 
and conditions.  

 
Item 13: Segmentation; Notice 

a. Is[Are] [orders and] trading interest in the [NMS Stock] ATS segmented into categories, 
classifications, tiers, or levels (e.g., segmented by type of participant, [order] trading 
interest size, duration, source, or nature of trading activity)?  
 
Yes No 
 
If yes, explain the segmentation procedures, including (i) [a description for] how and 
what [orders and] trading interest is [are] segmented, including 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); (ii) identify and describe any 
categories, classification, tiers, or levels and the types of [orders and] trading interest that 
are included in each; (iii) provide a summary of the parameters for each segmented 



 

576 
 

category and length of time each segmented category is in effect, including when such 
category is determined, reviewed, and can be changed; (iv) any procedures for overriding 
a determination of segmented category; and (v) how segmentation can affect 
[order]trading interest interaction.   
 

b. Can the ATS, in the absence of Subscriber direction, prevent a Subscriber or its potential 
counter-parties from viewing or interacting with certain trading interest (e.g., 
permissioning, filtering, or blocking)? 

 
Yes No 
 
If yes, explain such processes, including (i) 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); (ii) how and 
when the ATS prevents a Subscriber or its potential counter-party from viewing or 
interacting with certain trading interest; (iii) identify and describe any categories, 
classification, 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; (iv) a 
summary of the parameters for such processes and length of time any such parameter is 
in effect; (v) 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; (vi) how such processes can affect trading interest interaction; (vii) how a 
Subscriber can view filtered messages and any permissioning process and criteria for a 
Subscriber to send, receive, or interact with a message. 
 

[If yes to Item 13(a), is the segmentation of orders and trading interest the same for all 
Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

c. Does the [NMS Stock] ATS identify [orders or ]trading interest entered by a customer of 
a broker-dealer on the [NMS Stock] ATS as [a] customer [order] trading interest? 
 
Yes No 
 

d. If yes to Item 13(a) or 13(b), does the [NMS Stock ]ATS disclose to any Person the 
designated segmented or otherwise designated category, classification, tier, or level of 
[orders and ]trading interest?   
 
Yes No 
 
If yes, provide a summary of the content of the disclosure, when and how the disclosure 
is communicated, who receives it, and whether and how such designation can be 
contested.   
 

[e. If yes to Item 13(d), are the disclosures required to be identified in 13(d) the same for all 
Subscribers and the Broker-Dealer Operator?  
 
Yes No 
 
If no, identify and explain any differences.] 
 

Item 14: Counter-Party Selection 



 

577 
 

a. Can [orders or] trading interest be designated to interact or not interact with certain 
[orders or] trading interest in the [NMS Stock] ATS (e.g., designated to interact with or 
execute against a specific Subscriber’s [orders or] trading interest or prevent the trading 
interest of a Subscriber[’s order] from interacting with or executing against the trading 
interest of that Subscriber [itself])? 

 
Yes No 
 
 
If yes, explain the counter-party selection procedures, including how counter-parties can 
be selected, and whether the designations affect the trading rules (e.g., order interaction 
or priority) or communication protocols of [interaction and priority of trading interest in] 
the ATS.   

 
b. Can a Subscriber designate trading interest that the Subscriber or potential counter-parties 

can view (e.g., filtering, blocking, permissioning)? 
 

Yes No 
 

If yes, explain such processes, including (i) how and when a Subscriber can designate 
which trading interest it or a potential counter-party can view; (ii) any categories, 
classifications, or levels and the types of trading interest that Subscribers are able to 
designate; (iii) a summary of the parameters for such processes and length of time any 
such parameter is in effect; and (iv) how such processes can affect how trading interest 
interacts in the ATS. 

 
[b. If yes to Item 14(a), are the procedures for counter-party selection required to be 

identified in Item 14(a) the same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences.] 

   
Item 15: Display and Visibility of Trading Interest 

a. Does the ATS display trading interest to Subscribers or the public (e.g., ATS 
disseminates orders through market data feeds or a website or sends invitations or 
requests to Subscribers about potential counterparties)? 

 
 Yes No 
 
 If yes, 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.  Indicate whether a Subscriber can opt-out of the 
display of its trading interest, and if so the process for that Subscribers to do so.  
   

b. Can a Subscriber 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, indication 
of interest, conditional order, or invitation to negotiate to a Subscriber or the Broker-
Dealer Operator)?  
 
Yes No 



 

578 
 

 
If yes, 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.   
 

c. Is any trading interest bound for the ATS made known to any Person (not including 
employees of the ATS who are operating the system) (e.g., trading interest directed to the 
ATS by customers of the Broker-Dealer Operator that passes through a SOR or 
functionality of the Broker-Dealer Operator before entering the ATS), or is any ATS 
trading interest made known to any Person that is not otherwise disclosed in Part III, 
15(a) or (b) (e.g., displays orders to the Broker-Dealer Operator’s SOR or trading desk), 
or both? 
 
Yes No 

 
 If yes, 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. 
 

d[a]. Does the ATS operate as an Electronic Communication Network as defined in 
Rule 600(a)([23]31) of Regulation NMS? 

 
Yes No  

 
[b. Are Subscriber orders and trading interest bound for or resting in the NMS Stock ATS 

displayed or made known to any Person (not including those employees of the NMS 
Stock ATS who are operating the system)? 

 
Yes No  

 
If yes, explain the display procedures, including how and when Subscriber orders and 
trading interest are displayed, how long orders and trading interest are displayed, what 
information about orders and trading interest is displayed, and the functionality of the 
Broker-Dealer Operator and types of market participants that receive the displayed 
information. 

 
c. If yes to Item 15(b), are the display procedures required to be identified in 15(b) the same 

for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 16: Routing  

a. Can [orders and] trading interest in the [NMS Stock ] ATS be routed or sent to a 
destination outside the [NMS Stock] ATS? 
 
Yes No 

 
b. If yes to Item 16(a), must affirmative instructions from a Subscriber be obtained before 

its [orders or] trading interest can be routed or sent from the [NMS Stock] ATS? 



 

579 
 

 
Yes No 
 
If yes, describe the affirmative instruction and explain how the affirmative instruction is 
obtained.  If no, explain when [orders] trading interest in the [NMS Stock] ATS can be 
routed or sent from the ATS (e.g., at the discretion of the Broker-Dealer Operator).   
 

c. Can trading interest in the ATS be routed or sent to a destination operated or controlled 
by the Broker-Dealer Operator or an Affiliate of the Broker-Dealer Operator? 
 
Yes No 
 

 If yes, identify the destination and when and how trading interest is routed or sent from 
the ATS to the destination. 
 

 
Item 17: Closing 

[a.] Are there any differences between how [orders and] trading interest [are]is treated on the 
[NMS Stock ]ATS during its closing session(s) [the close] and how [orders and] trading 
interest [are] is treated during its regular trading hours?   
 
Yes No 
 
If yes, identify and explain the differences as compared to the information provided in the 
relevant Part III Items of this form. 
 

[b. Is the treatment of orders and trading interest during the close the same for all 
Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

[Item 18: Trading Outside of Regular Trading Hours 

a. Does the NMS Stock ATS conduct trading outside of its regular trading hours? 
 
Yes No 

 
b. If yes to Item 18(a), are there any differences between trading outside of regular trading 

hours and trading during regular trading hours in the NMS Stock ATS?  
 
Yes No 
 
If yes, identify and explain the differences.  
 

c. If yes to Item 18(a), is the treatment of orders and trading interest outside of regular 
trading hours the same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

Item [19]18: Fees 



 

580 
 

a. Identify and describe any fees or charges for use of the [NMS Stock] ATS services, 
including the type of fees (e.g., subscription, connectivity, market data), the structure of 
the fees (e.g., fixed, volume-based, transaction-based), variables that impact the fees 
(e.g., types of securities traded, block orders, form of connectivity to the ATS), 
differentiation among types of Subscribers (e.g., broker-dealers, institutional investors, 
retail), whether the fee is incorporated into the price displayed for a security (e.g., 
markups, markdowns), and range of fees (e.g., high and low).   
 

b. Identify and describe any fees or charges for use of the [NMS Stock] ATS services that 
are bundled with the Subscriber’s use of non-ATS services or products offered by the 
Broker-Dealer Operator or its Affiliates, including a summary of the bundled services 
and products, the structure of the fee, variables that impact the fee, differentiation among 
types of Subscribers, and range of fees.   
 

c. Identify and describe any rebate or discount of fees or charges required to be identified in 
Items [19]18(a) and [19]18(b), including the type of rebate or discount, structure of the 
rebate or discount, variables that impact the rebate or discount, differentiation among 
types of Subscribers, and range of rebate or discount. 
 

Item [20]19: Suspension of Trading  

[a.] Explain any procedures for suspending or stopping trading on the [NMS Stock] ATS, 
including the suspension of trading in individual NMS stocks, U.S. Treasury Securities, 
or in an Agency Security.   
 

[b. Are the procedures for suspending or stopping trading the same for all Subscribers and 
the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 

  
Item [21]20: Trade Reporting  

[a.] Explain any procedures and material arrangements for reporting transactions on the 
[NMS Stock] ATS, including where an ATS reports transactions and under what 
circumstances.   
 

[b. Are the procedures and material arrangements for reporting transactions on the NMS 
Stock ATS the same for all Subscribers and the Broker-Dealer Operator?  

 
Yes No 
 
If no, identify and explain any differences.] 
 

Item [22]21: Post-Trade Processing, Clearance and Settlement  

[a.]   Describe any procedures and material arrangements undertaken as a result of the 
contractual agreements between the Broker-Dealer Operator and the ATS participants to 
[facilitate]manage the post-trade processing (such as routing, enrichment, allocations, 
matching, confirmation, affirmation, notification), clearance, and/or settlement of 
transactions on the [NMS Stock] ATS (e.g., whether the ATS, Broker-Dealer Operator, or 
Affiliate of either:  becomes a counterparty[,]; [whether it] submits trades to a registered 
clearing agency[,]; [or whether it] requires Subscribers to have arrangements with a clearing 



 

581 
 

firm; or terminates trades).  Please include a description of any user requirements for such 
procedures and material arrangements, including the type and extent of connectivity (e.g., 
FIX), and whether connectivity is to an OMS, EMS, EOMS, clearinghouse/custodian, or 
other system. 

 
[b. Are the procedures and material arrangements undertaken to facilitate the clearance and 

settlement of transactions on the NMS Stock ATS the same for all Subscribers and the 
Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 

 

Item [23]22: Market Data 

[a.] Identify the sources of market data used by the [NMS Stock] ATS (e.g., proprietary feed 
from a national securities exchange, feed from the securities information processor 
(“SIP”), or feeds from trading venues), and how the ATS uses market data from these 
sources to provide the services that it offers, including how the ATS uses market data to 
determine the NBBO and protected quotes or BBO, and display, price, prioritize, execute, 
and remove [orders and] trading interest [on]in the ATS.   

 
[b. Are the sources of market data and how the NMS Stock ATS uses market data for the 

services that it offers the same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences.] 
 

   
Item [24]23: Order Display and Execution Access 

a. If an NMS Stock ATS, [H]has the [NMS Stock] ATS displayed Subscriber orders to any 
Person (other than NMS Stock ATS employees) and had an average daily share volume 
of 5% or more in that NMS stock as reported by an effective transaction reporting plan or 
disseminated through an automated quotation system during four of the preceding six 
calendar months? 
 
Yes No 
 

b. If yes to Item [24]23(a), is the NMS Stock ATS required to comply with Rule 
301(b)(3)(ii) of Regulation ATS? 
 
Yes No 

If yes,  

i. Provide the ticker symbol for each such NMS stock displayed during each of the 
last 6 calendar months;  

ii. Explain how the ATS displays such orders on a national securities exchange or 
through a national securities association; and  

iii. Explain how the ATS provides access to such orders displayed in the national 
market system equivalent to the access to other orders displayed on that national 



 

582 
 

securities exchange or through a national securities association pursuant to Rule 
301(b)(iii) of Regulation ATS. 
 

Item [25]24: Fair Access 

a. If an NMS Stock ATS, h[H]as the [NMS Stock ]ATS executed 5% or more of the average 
daily trading volume in an NMS stock, whether by itself or aggregated pursuant to Rule 
301(b)(5)(ii), as reported by an effective transaction reporting plan or disseminated through 
an automated quotation system during four of the preceding six calendar months? 
 
Yes No 
 

b. If a Government Securities ATS, has the ATS executed 3% or more of the average weekly 
trading volume in U.S. Treasury Securities, whether by itself or aggregated pursuant to 
Rule 301(b)(5)(ii), as reported to and disseminated by a self-regulatory organization during 
four of the preceding six calendar months? 

 

Yes No 
 

c. If a Government Securities ATS, has the ATS executed 5% or more of the average daily 
trading volume in Agency Securities, whether by itself or aggregated pursuant to Rule 
301(b)(5)(ii), as reported to and disseminated by a self-regulatory organization during four 
of the preceding six calendar months?  

 
Yes No 
 

d.[b.] If yes to Item [25]24 (a), (b), or (c), is the [NMS Stock] ATS required to comply with 
Rule 301(b)(5)(iii) of Regulation ATS? 

 
Yes No 

If yes,  

i. If an NMS Stock ATS, [P]provide the ticker symbol for each such NMS stock 
during each of the last 6 calendar months; and  

 
ii. Describe the reasonable written standards for granting, limiting, and denying 

access to the services of[trading on] the ATS pursuant to Rule 301(b)(5)(iii)(A) of 
Regulation ATS.  

 
Item [26]25: Aggregate Platform Data 

Does the [NMS Stock] ATS publish or otherwise provide to one or more Subscribers 
aggregate platform-wide [order flow and execution] statistics of the ATS that are not 
otherwise required disclosures under Rule 605 of Regulation NMS? 
 
Yes No 
 
If yes, 
 



 

583 
 

i. Attach, as Exhibit 4, the most recent disclosure of aggregate platform-wide [order 
flow and execution] statistics of the ATS that are not otherwise required 
disclosures under Rule 605 of Regulation NMS and that the ATS provided to one 
or more Subscribers as of the end of each calendar quarter. 

 
�  Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under Exhibit 4 is available at the website provided in Part I, Item 6 of this form and 
is accurate as of the date of this filing, and that 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. 

 
ii. Attach, as Exhibit 5, a list and explanation of the categories or metrics for the 

aggregate platform-wide [order flow and execution] statistics provided as Exhibit 
4 and explain the criteria or methodology used to calculate aggregate platform-
wide [order flow and execution] statistics.  

 
�  Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 
under Exhibit 5 is available at the website provided in Part I, Item 6 of this form and is 
accurate as of the date of this filing, and that 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. 
 
 

  



 

584 
 

Part IV:  Contact Information, Signature Block, and Consent to Service 
 
Provide the following information of the Person at {[NMS Stock] ATS} prepared to respond to 
questions for this submission: 
 
First Name:     Last Name: 
 
Title: 
 
E-Mail:     Telephone: 
 
Primary Street Address of the [NMS Stock] ATS: 
 
Mailing Address of the [NMS Stock] ATS (if different): 
 
 
The {[NMS Stock ]ATS} consents that service of any civil action brought by, or notice of any 
proceeding before, the SEC or a self-regulatory organization in connection with the alternative 
trading system’s activities may be given by registered or certified mail to the contact employee at 
the primary street address or mailing address (if different) of the [NMS Stock ]ATS, or via email, 
at the addresses provided on this Form ATS-N.  The undersigned[, being first duly sworn,] 
deposes and says that he/she has executed this form on behalf of, and with the authority of, said 
alternative trading system.  The undersigned and {[NMS Stock ]ATS} represent that the 
information and statements contained herein, including exhibits, schedules, or other documents 
attached hereto, and other information filed herewith, all of which are made a part hereof, are 
current, true, and complete. 
 
 
Date {auto fill}    {[NMS Stock] ATS} 
 

By: _______________________  Title____________________________ 
 
 
  



 

585 
 

FORM ATS-N INSTRUCTIONS 
 

A. FILING FORM ATS-N: 

1. Form ATS-N is a public reporting form that is designed to provide market participants 
and the Commission with information about the operations of [the NMS Stock] a 
Covered ATS and the ATS-related activities of its Broker-Dealer Operator and its 
Affiliates.  Among other things, [an NMS Stock] a Covered ATS must file Form ATS-N 
to be exempt from the definition of “exchange” pursuant to Exchange Act Rule 3a1-
1(a)(2).  
 

2. A separate Form ATS-N is required for each [NMS Stock] Covered ATS operated by the 
same Broker-Dealer Operator. 

 
3. [An NMS Stock] A Covered ATS must provide all the information required by Form 

ATS-N, including responses to each Item, as applicable, and the Exhibits, and disclose 
information that is accurate, current, and complete.   

 
4. [An NMS Stock] A Covered ATS must respond to each request in detail unless otherwise 

provided (i.e., where the request indicates that the ATS is required to disclose “summary” 
information).  
 

5. Any report required to be submitted pursuant to Rule 304 of Regulation ATS shall be 
prepared, formatted, and submitted in accordance with Regulation S-T and the EDGAR 
Filer Manual.  Filers have the option of submitting the information to EDGAR using the 
most recent version of the XML schema for Rule 304 as specified by the EDGAR Filer 
Manual, or submitting the information using the web-fillable form for Rule 304 in 
EDGAR.   
 

6. Initial Form ATS-N:  Prior to commencing operations, [an NMS Stock ]a Covered ATS 
shall file an initial Form ATS-N and the initial Form ATS-N must become effective.  If 
[an NMS Stock]a Government Securities ATS is currently operating pursuant to a Form 
ATS, it must indicate such on the Form ATS-N.  [If the NMS Stock ATS is operating 
pursuant to a previously filed initial operation report on Form ATS as of January 7, 2019, 
such NMS Stock ATS shall file with the Commission a Form ATS-N no earlier than 
January 7, 2019, and no later than February 8, 2019.]  A Legacy Government Securities 
ATS or Newly Designated ATS shall file with the Commission a Form ATS-N no later 
than [the date 90 calendar days after the effective date of the final rule].  

 
7. Form ATS-N Amendment  

 
a. [An NMS Stock ]A Covered ATS shall amend a Form ATS-N in accordance with the 

conditions of Rule 304. 
 

b. A Material Amendment, except as provided by Rule 304(a)(2)(i)(D) for [an Order 
Display and Fair Access Amendment] a Contingent Amendment or Rule 
304(a)(2)(i)(E) for a Fee Amendment, must be filed at least 30 calendar days, or the 
length of any extended Commission review period, prior to the date of 



 

586 
 

implementation of a material change to the operations of the [NMS Stock ]Covered 
ATS or to the activities of the Broker-Dealer Operator or its Affiliates that are subject 
to disclosure on Form ATS-N.   

 
c. An Updating Amendment must be filed no later than 30 calendar days after the end of 

each calendar quarter to correct any other information that has become inaccurate or 
incomplete for any reason and was not previously required to be reported to the 
Commission as a Form ATS-N Amendment pursuant to Rule 304(a)(2)(i)(A), Rule 
304(a)(2)(i)(C), [or] Rule 304(a)(2)(i)(D), or Rule 304(a)(2)(i)(E).  

 
d. A Correcting Amendment must be filed promptly to correct information in any 

previous disclosure on Form ATS-N, after discovery that any information previously 
filed on Form ATS-N was materially inaccurate or incomplete when filed.  

 
e. A[n Order Display and Fair Access] Contingent Amendment must be filed no later 

than seven calendar days after information required to be disclosed in Part III, Items 
[24]23 and [25]24 on Form ATS-N has become inaccurate or incomplete.    
 

f. A Fee Amendment must be filed no later than the date the information required to be 
disclosed in Part III, Item 18 on Form ATS-N has become inaccurate or incomplete. 

 
[f.]g. [An NMS Stock ATS]A Covered ATS must select only one “Type of 

Amendment” for each Form ATS-N Amendment filed with the Commission. 
 

[g]h. For each Amendment, 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) apply to:  (1) all Subscribers and the 
Broker-Dealer Operator; (2) only the Broker-Dealer Operator; (3) only Subscribers; 
(4) only certain Subscribers or subsets of Subscribers or customers of Subscribers and 
the Broker-Dealer Operator; or (5) only certain Subscribers or subsets of Subscribers 
or customers of Subscribers.  If the change(s) apply only to certain Subscribers, 
describe which Subscribers the change(s) apply to.  Do not describe any changes 
made to Part IV.  

[h]i. For each Amendment, provide the EDGAR accession number for the filing that is 
being amended. 

8. Notice of Cessation:  [An NMS Stock ]A Covered ATS shall notice its cessation of 
operations on Form ATS-N at least 10 business days prior to the date the [NMS Stock] 
Covered ATS will cease to operate as [an NMS Stock ] a Covered ATS.    
 

9. Withdrawal:  If [an NMS Stock] a Covered ATS determines to withdraw a filing, it must 
check the “Withdrawal of Form ATS-N filing” check box for the type of filing and 
provide the EDGAR accession number of the Form ATS-N filing that is being 
withdrawn.  [An NMS Stock] A Covered ATS may withdraw an initial Form ATS-N or 
an Amendment before the end of the applicable Commission review period.  [An NMS 
Stock] A Covered ATS may withdraw a notice of cessation of operations at any time 
before the date that the [NMS Stock] Covered ATS had indicated it intended to cease 



 

587 
 

operating.  A Legacy [NMS Stock ATS] Government Securities ATS or Currently 
Designated ATS may not withdraw its initial Form ATS-N at any time. 
 

10. A filing that is defective may be rejected and not be accepted by the EDGAR system.  
Any filing so rejected shall be deemed not to have been filed.  See generally Regulation 
S-T (17 CFR part 232). 

  



 

588 
 

B. CONTACT INFORMATION 

 The individual listed on the [NMS Stock ]ATS’s response to Part IV of Form ATS-N as 
the contact representative must be authorized to receive all incoming communications 
and be responsible for disseminating that information, as necessary, within the [NMS 
Stock] ATS.  The contact information provided in Part IV of Form ATS-N will not be 
made public.    
 

C. RECORDKEEPING 

 A copy of this Form ATS-N must be retained by the [NMS Stock] Covered ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request. 

 
D. PAPERWORK REDUCTION ACT DISCLOSURE 

 Form ATS-N requires [an NMS Stock] a Covered ATS to provide the Commission with 
certain information regarding: (1) the operation of the [NMS Stock] ATS and the ATS-
related activities of the Broker-Dealer Operator and its Affiliates; (2) material and other 
changes to the operations and disclosures of the [NMS Stock] ATS; and (3) notice upon 
ceasing operation of the [NMS Stock] ATS.  Form ATS-N is designed to provide the 
public with information to, among other things, help them make informed decisions about 
whether to participate on the [NMS Stock] Covered ATS.  In addition, the Form ATS-N 
is designed to provide the Commission with information to permit it to carry out its 
market oversight and investor protection functions. 

 
 The information provided on Form ATS-N will help the Commission to determine 

whether [an NMS Stock] a Covered ATS is in compliance with the federal securities laws 
and the rules or regulations thereunder, including Regulation ATS.  [An NMS Stock] A 
Covered ATS must: 

  
o File an initial Form ATS-N prior to commencing operations.  

 
o File a Form ATS-N Amendment:  (1) at least 30 calendar days prior to the date of 

implementation of a material change to the operations of the [NMS Stock ]Covered 
ATS or to the activities of the Broker-Dealer Operator or its Affiliates that are subject 
to disclosure on Form ATS-N (Material Amendment); (2) no later than 30 calendar 
days after the end of each calendar quarter to correct any other information that has 
become inaccurate or incomplete for any reason and was not previously required to 
be reported to the Commission as a Form ATS-N amendment pursuant to Rule 
304(a)(2)(i)(A), Rule 304(a)(2)(i)(C), [or] Rule 304(a)(2)(i)(D), or Rule 
304(a)(2)(i)(E) (Updating Amendment); (3) promptly, to correct information in any 
previous disclosure on Form ATS-N, after discovery that any information previously 
filed on Form ATS-N was materially inaccurate or incomplete when filed (Correcting 
Amendment); [or] (4) no later than seven calendar days after information required to 
be disclosed in Part III, Items [24]23 and [25]24 on Form ATS-N has become 
inaccurate or incomplete ([Order Display and Fair Access]Contingent Amendment); 
or (5) no later than the date the information required to be disclosed in Part III, Item 
18 on Form ATS-N has become inaccurate or incomplete (Fee Amendment).  During 



 

589 
 

the Commission review period of an initial Form ATS-N filing, [an NMS Stock] a 
Legacy Government Securities ATS or Newly Designated ATS [that is operating as 
of January 7, 2019] shall amend its filed Form ATS-N pursuant to these requirements, 
and [an NMS Stock ] a Covered ATS that [was not operating as of January 7, 2019] is 
not a Legacy Government Securities ATS or Newly Designated ATS shall amend its 
filed Form ATS-N pursuant to the requirements for Updating and Correcting 
Amendments.  During the Commission review period of an initial Form ATS-N 
filing, a[n] [NMS Stock] Covered ATS shall amend a filed Material Amendment 
pursuant to the requirements for Updating and Correcting Amendments. 
 

o Notice its cessation of operations at least 10 business days before the date the [NMS 
Stock] Covered ATS ceases to operate as [an NMS Stock] a Covered ATS.  
 

 This collection of information will be reviewed by the Office of Management and Budget 
in accordance with the clearance requirements of 44 U.S.C. 3507.  An agency may not 
conduct or sponsor, and a Person is not required to respond to, a collection of information 
unless it displays a currently valid control number.  We estimate that an [NMS Stock 
]ATS will spend approximately [127.4]136.4 hours completing the Form ATS-N, 
approximately 9.4 hours preparing each amendment to Form ATS-N, and approximately 
2 hours preparing a notice of cessation on Form ATS-N.  Any member of the public may 
direct to the Commission any comments concerning the accuracy of this burden estimate 
and any suggestions for reducing this burden. 
 

E. EXPLANATION OF TERMS 

The following terms are defined for purposes of Form ATS-N. 

 AFFILIATE:  Shall mean, with respect to a specified Person, any Person that, directly or 
indirectly, controls, is under common control with, or is controlled by, the specified 
Person. 

 
• AGENCY SECURITY:  Shall 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). 

 
 ALTERNATIVE TRADING SYSTEM:  Shall mean any organization, association, 

Person, group of Persons, or system: (1) that constitutes, maintains, or provides a market 
place or facilities for bringing together purchasers and sellers of securities or for 
otherwise performing with respect to securities the functions commonly performed by a 
stock exchange within the meaning of Rule 3b-16 under the Exchange Act; and (2) that 
does not (i) set rules governing the conduct of subscribers other than the conduct of such 
subscribers’ trading on such organization, association, Person, group of Persons, or 
system, or (ii) discipline subscribers other than by exclusion from trading. 17 CFR 
242.300(a). 

 
 BROKER-DEALER OPERATOR:  Shall mean the registered broker-dealer or 

government securities broker or government securities dealer of the [NMS Stock] ATS 
pursuant to 17 CFR 242.301(b)(1). 

 



 

590 
 

 CONTROL:  Shall 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: (1) is a director, general partner, or 
officer exercising executive responsibility (or having similar status or performing similar 
functions); (2) directly or indirectly has the right to vote 25 percent or more of a class of 
voting securities or has the power to sell or direct the sale of 25 percent or more of a class 
of voting securities of the broker-dealer of the alternative trading system; or (3) in the 
case of a partnership, has contributed, or has the right to receive upon dissolution, 25 
percent or more of the capital of the broker-dealer of the alternative trading system.  17 
CFR 242.300(f). 

 
• GOVERNMENT SECURITY:  Shall mean securities defined in section 3(a)(42) of the 

Exchange Act.  15 U.S.C. 78c(a)(42).   
 

• GOVERNMENT SECURITIES ATS:  Shall mean an alternative trading system that 
trades government securities 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. 

 
• LEGACY GOVERNMENT SECURITIES ATS:  Shall mean a Government Securities 

ATS operating as of [effective date of the final rule] that was either:  (1) formerly not 
required to comply with Regulation ATS (§ 242.300 through 242.304) pursuant to the 
exemption under § 240.3a1-1(a)(3) 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]. 

• NEWLY DESIGNATED ATS – Shall mean an alternative trading system operating as 
of [effective date of the final rule] that meets the criteria under 17 CFR 240.3b-16(a) as 
of [effective date of the final rule] but did not meet the criteria under 17 CFR 240.3b-
16(a) in effect prior to [effective date of the final rule].  17 CFR 242.300(r). 

 
 NMS SECURITY:  Shall mean any security or class of securities for which transaction 

reports are collected, processed, and made available pursuant to an effective transaction 
reporting plan, or an effective national market system plan for reporting transactions in 
listed options.  17 CFR 242.600(b)(46). 
 

 NMS STOCK:  Shall mean any NMS security other than an option.  17 CFR 
242.600(b)(47). 
 

 NMS STOCK ATS:  Shall mean an alternative trading system, as defined in Rule 300(a) 
under the Exchange Act, that trades NMS stocks, as defined in Rule 300(g) under the 
Exchange Act.  An NMS Stock ATS shall not trade securities other than NMS stocks.  17 
CFR 242.300(k).  
 

 ORDER:  Shall mean any firm indication of a willingness to buy or sell a security, as 
either principal or agent, including any bid or offer quotation, market order, limit order, 
or other priced order.  17 CFR 242.300(e). 



 

591 
 

 
 PERSON:  [Shall mean a natural person or a company.  15 U.S.C. 80a-2(a)(28).]Shall 

mean a natural person, company, government, or political subdivision, agency, or 
instrumentality of a government.  15 U.S.C. 78c(a)(9). 
 

 SUBSCRIBER:  Shall mean any Person that has entered into a contractual agreement 
with an alternative trading system to access an alternative trading system for the purpose 
of effecting transactions in securities, or for submitting, disseminating or displaying 
[orders]trading interest on such alternative trading system, including a customer, 
member, user, or participant in an alternative trading system.  A subscriber, however, 
shall not include a national securities exchange or association.  17 CFR 242.300(b). 

 
• TRADING INTEREST:  Shall mean an order 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.  17 CFR 240.300(q). 
 

 TRADING [CENTER]VENUE:  Shall mean a national securities exchange or national 
securities association that operates an SRO trading facility, an alternative trading system, 
an exchange market maker, an OTC market maker, a future or options market, or any 
other broker- or dealer-operated platform for executing trading interest [that 
executes orders] internally by trading as principal or crossing orders as agent.  [17 CFR 
242.600(b)(78).]

1 
 

Conformed to the Federal Register Version 

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 re-proposing 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 re-proposing, 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 



 

2 
 

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-submit-comments); or  

• Send an e-mail to [email protected].  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 e-mail 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.  



 

3 
 

 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 e-mail. 

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 

                                                
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. 



 

4 
 

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 example, an ATS that limits its securities activities to government securities or 

                                                
2  The 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”). 

3  The Commission adopted 17 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”). 

4  See Securities Exchange Act Release No. 90019 (September 28, 2020), 85 FR 87106 
(December 31, 2020). 

5  For 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. 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 



 

5 
 

repurchase and reverse repurchase agreements on government securities (“repos”) and registers 

as a broker-dealer 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 non-discriminatory manner pursuant Rule 301(b)(5) of Regulation ATS (“Fair Access 

                                                
the use of non-firm 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). 



 

6 
 

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, 

                                                
6  The 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 non-displayed 
customer orders using prices disseminated by an effective transaction reporting plan. 

7  See 2020 Proposal, supra note 4. 
8  These comment letters are available at https://www.sec.gov/comments/s7-12-

20/s71220.htm and discussed throughout this proposal. 
9  See, 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 



 

7 
 

some commenters expressed concern regarding aspects of the 2020 Proposal, including the 

proposed enhanced disclosure requirements and effectiveness regime10 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 

                                                
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. 

10  See letter from Robert Laorno, General Counsel, ICE Bonds Securities Corporation, 
dated March 8, 2021(“ICE Bonds Letter I”) at 5. 

11  See 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. 

12  See, 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. 

13  See, 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 



 

8 
 

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 199816 

have changed the methods by which securities markets bring together buyers and sellers of 

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, 

                                                
(“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.  

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

16  See Regulation ATS Adopting Release, infra note 31. 



 

9 
 

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.  

                                                
17  See infra Section VIII.C.3.a. 
18  17 CFR 240.3b-16(a). 



 

10 
 

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 re-proposing 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) re-

proposing, 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) 

                                                
19  U.S. Treasury Securities and Agency Securities are not classes of securities for purposes 

of Exchange Act Rule 3a1-1(b). 
20  The 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 



 

11 
 

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   

                                                
to Form ATS-N.  The Commission believes that this would limit the number of unique 
forms and simplify filing requirements. 

22  The 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.   

23  See infra Section V.A. 
24  See infra Section V.B. 
25  See 15 U.S.C. 78c(a)(1). 



 

12 
 

Section 5 of the Exchange Act26 requires an organization, association, or 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 

                                                
26  15 U.S.C. 78e. 
27  See 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.    
29  Section 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). 

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

32 See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

13 
 

recognized that advances in technology had increasingly blurred the line between exchange and 

broker-dealer activities33 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 terms35 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 

                                                
33  See id. at 70847. 
34  See id. 
35  The 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). 
36  See 17 CFR 240.3b-16(a). 
37  See 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.   



 

14 
 

Rule 3b-16; or (3) the Commission otherwise conditionally or unconditionally exempts38 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 

                                                
38  See 17 CFR 240.3b-16(e).   
39  See 17 CFR 240.3a1-1(a)(2).   
40  See 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. 

41  See 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.”   



 

15 
 

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 

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 

                                                
42  See 17 CFR 242.300(a).   
43  See Regulation ATS Adopting Release, supra note 31, at 70859.   
44  See id.   
45  See generally Sections 5, 6, and 19 of the Exchange Act, 15 U.S.C. 78e, 78f, and 78s. 
46  See 15 U.S.C. 78e.   
47  See Regulation ATS Adopting Release, supra note 31, at 70900. 



 

16 
 

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, non-discretionary 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  

                                                
48  See id. at 70848.   
49  See id. at 70900. 
50  For 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. 

51  See id. at 70900. 
52  See id. at 70899-900, n.536. 



 

17 
 

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, non-firm trading interest54 or did not establish rules or operate a trading 

facility55 would not fall within Rule 3b-16(a).    

2. Prevalence of Systems Offering Non-Firm 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-for-Quote” (“RFQ”) 

system.  RFQ systems are designed to allow market participants to obtain quotes for a particular 

                                                
53  See id. at 70899, n.525. 
54  See id. at 70850.  In the Regulation ATS Adopting Release, the Commission stated that 

generally, 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.   

55  See 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.  

56  See id. at 70848. 



 

18 
 

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 ldentification 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 

                                                
57  Communication 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. 

58  An 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. 



 

19 
 

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 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 

                                                
59  Based 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. 



 

20 
 

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 contra-party’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 pre-approved 

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 

                                                
60  An 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.   
61  Many 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”).21 
 

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 

                                                
62  See Citadel Letter at 1-2.   
63  See 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. 

64  Tradeweb Investor Presentation, July 2021, available at: 
https://investors.tradeweb.com/static-files/e63caabf-d71d-46c0-9589-353fb8b93388. 



 

22 
 

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, 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 



 

23 
 

participants can use non-firm trading interest as a tool to avoid the risk of double-execution.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.  

                                                
65  For 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. 

66  See 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-income-advisory-
committee/fimsac-electronic-trading-platforms-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). 



 

24 
 

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 exchanges67 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   

                                                
67  See infra Section II.D.1. 
68  See infra Section II.D.2. 
69  See infra Section II.D. 
70  See infra Section VIII.C.3.a. 
71  See supra Section II.A. 
72  The 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 broker-
dealer’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 



 

25 
 

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 information76 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 

                                                
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. 

73  See infra Section II.D. 
74  See infra Section II.D.1. 
75  See infra Section II.D.2. 
76  See infra note 170 and accompanying text. 
77  See 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. 

78  See infra notes 154-155 and accompanying text. 



 

26 
 

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 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 non-ATS trading platforms, which are not subject to the same regulatory obligations designed 

                                                
79  See infra notes 131-133 and accompanying text. 
80  See infra Section VIII.C.3.a. 
81  See, 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). 

82  See supra note 66.  The FIMSAC concerns were highlighted by the Commission in the 
Concept Release. 



 

27 
 

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 broker-dealer 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.   

                                                
83  See 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).   
84  See 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). 

85  See 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.   

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



 

28 
 

Amending Exchange Act Rule 3b-16(a) to include non-firm trading interest would 

eliminate the possibility that systems may offer the use of non-firm 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 firm-up 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 

                                                
87  See Regulation ATS Adopting Release, supra note 31, at 70850. 
88  See supra Section II.B.2. 



 

29 
 

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 Regulation ATS and 

the current exchange framework on existing and emerging electronic trading protocols and 

                                                
89  See Bloomberg Letter at 17-20.  This commenter specifically cited RFQs as a new 

protocol that has helped in discovering less liquid instruments. 
90  See 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. 



 

30 
 

functionalities that do not meet the existing definition of an ATS or an exchange91 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 

                                                
91  See 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. 

92  See id. at 8. 
93  See MarketAxess Letter at 2-4. 
94  See id. 
95  See Bloomberg Letter at 17-20. 
96  See ICI Letter at 8. 



 

31 
 

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, non-discretionary methods (whether by providing a trading facility or by setting 

                                                
97  See Regulation ATS Adopting Release, supra note 31, at 70846. 



 

32 
 

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, non-discretionary 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 



 

33 
 

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 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 

                                                
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. 

99  See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

34 
 

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 non-firm trading interest allow participants to 

communicate their trading intentions, either on a bilateral or multilateral basis, to negotiate a 

trade.  Unlike orders, non-firm trading interest typically does not interact with other non-firm 

                                                
100  A 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, non-discretionary 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.” 



 

35 
 

trading interest without further action by the potential counterparties.  Rather, the potential 

counterparties submitting non-firm 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 Release101 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  

                                                
101  See id. at 70849. 



 

36 
 

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 transaction-by-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 

                                                
102  See id. 
103  One 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.    

104  The 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 



 

37 
 

systems have more than one buyer and more than one seller, such systems do not have a single 

counterparty and thus 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 

                                                
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. 

105  The 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. 

106  See supra note 102 and accompanying text.   



 

38 
 

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 non-

discretionary 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 

                                                
107  See Regulation ATS Adopting Release, supra note 31, at 70852. 
108  See NMS Stock ATS Adopting Release, supra note 2, at 38844 (citing Regulation ATS 

Adopting Release, 63 FR 70852). 



 

39 
 

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 “non-discretionary” 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 interests111 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   

                                                
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. 

110   See Regulation ATS Adopting Release, supra note 31, at 70863. 
111  See id. at 70851. 
112  See 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). 



 

40 
 

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, non-discretionary 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 

“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 

                                                
114  One commenter on the 2020 Proposal and Concept Release stated their belief that “unlike 

an ATS on which trading takes place on a non-discretionary 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 non-discretionary 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 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 broker-dealer is unlikely to be viewed as using discretionary methods 
in handling the order.  See Regulation ATS Adopting Release, supra note 31, at 70851.   

115  See 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).41 
 

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.  



 

42 
 

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 

                                                
116  One 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.     

117  To 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. 



 

43 
 

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 

                                                
118  See 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). 

119  See 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). 

120  See Regulation ATS Adopting Release, supra note 31, at 70850. 



 

44 
 

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 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   

                                                
121  ATSs 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. 



 

45 
 

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 

                                                
122  Section 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. 

123  See, 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). 

124  See 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)). 



 

46 
 

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 broker-dealer 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 

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

127  See Section 6(b) of the Exchange Act.   
128  See generally Section 19(b) of the Exchange Act, 15 U.S.C. 78s(b).   



 

47 
 

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., the Consolidated Tape Association 

(CTA)/Consolidated Quotation (CQ) Plans and the Joint Self-Regulatory Organization Plan 

Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction 

Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading 

Privileges Basis (Nasdaq/UTP) Plan),129 among others.  

2. Regulation ATS Exemption; Broker-Dealer 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 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 

                                                
129  Details and the history of each plan can be found at https://www.ctaplan.com/plans; and 

https://www.utpplan.com.  



 

48 
 

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-the-counter (“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 ATS133 at least 20 days before commencing operations or, 

                                                
130 The 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. 

131  See Section 15(b)(8) of the Exchange Act; 15 U.S.C. 78o(b)(8). 
132  See Regulation ATS Adopting Release, supra note 31, at 70903.   
133  Form 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 



 

49 
 

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   

                                                
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). 

135  See 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”). 

136  See Regulation ATS Adopting Release, supra note 31, at 70864.   
137  Form 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). 



 

50 
 

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 

                                                
138  See 17 CFR 242.301(b)(2)(vii); Form ATS at 3, General Instructions A.7.  
139  See proposed changes to 17 CFR 242.304. 
140  See infra Section IV.A. 
141  See Rule 304(a)(1)(i). 
142  See infra Section IV.A. 
143  See infra Section IV. 



 

51 
 

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 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 

obligations149 under Rule 301(b)(3) if the ATS displays subscriber orders in an NMS stock to 

                                                
144  See 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). 

145  See 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. 

146  Form ATS-R also requires an ATS that is subject to the fair access obligations under 
Rule 301(b)(5) of Regulation ATS to provide 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). 

147  See 17 CFR 242.301(b)(2)(vii); Form ATS-R at 2, General Instruction A.7. 
148  See Regulation ATS Adopting Release, supra note 31, at 70874 and 70878. 
149  An 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 17 CFR 
242.602 (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 



 

52 
 

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 

Rule154 under Rule 301(b)(5) if the ATS meets volume thresholds in NMS stocks, equity 

                                                
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). 

150  An 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). 

151  See Regulation ATS Adopting Release, supra note 31, at 70867. 
152  See 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. 

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



 

53 
 

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 standards157 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. 

                                                
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. 

155  See 17 CFR 242.301(b)(5). 
156  See infra Section III.B.4.   
157  An 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). 

158  See 17 CFR 242.301(b)(6)(i). 



 

54 
 

 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 ATS163 and preserve the records specified in 17 CFR 

242.303.164  The Commission is proposing to amend Rule 302 of Regulation ATS to require 

                                                
159  Regulation 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.   

160  See infra Section III.C. 
161  See 17 CFR 242.301(b)(7). 
162  See 17 CFR 242.301(b)(8).   
163  See 17 CFR 242.302.  Rule 302 requires all ATSs to make and keep current certain 

records, including:  a record of subscribers to the ATS; daily summaries of trading in the 
ATS; and time-sequenced records of order information in the ATS.  See 17 CFR 242.302. 

164  See Rule 303 of Regulation ATS.  In the Regulation ATS Adopting Release, the 
Commission stated that these requirements to make, keep, and preserve records are 



 

55 
 

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 

procedures168 to protect confidential trading information and to separate ATS functions from 

                                                
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. 

165  See supra note 98 and accompanying text. 
166  Specifically, 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). 

167  See Regulation ATS Adopting Release, supra note 31, at 70878. 
168  These 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 



 

56 
 

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 

                                                
rules; and implementing standards controlling employees of the ATS trading for their 
own accounts. 

169  See 17 CFR 242.301(b)(10); NMS Stock ATS Adopting Release, supra note 2, Section 
VI.  

170  See 17 CFR 242.301(b)(10)(ii). 
171  See NMS Stock ATS Adopting Release, supra note 2, at 38864. 
172  See 17 CFR 242.301(b)(11); Regulation ATS Adopting Release, supra note 31, Section 

II.C.   
173  See Securities Exchange Act Release No. 39884 (April 17, 1998), 63 FR 23504, 23523 

(April 29, 1998) (“Regulation ATS Proposing Release”). 
174  For purposes of the rule text, the Commission is proposing to apply the transitional rules 

to “Newly Designated ATSs.” 
175  A 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. 



 

57 
 

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, 

                                                
176  After 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-become-member-membership-application-time-frames.  See also 
FINRA Rule 1014. 

177  See 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 broker-dealer.  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). 



 

58 
 

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 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?  

                                                
179  The rule text uses the term “Covered Newly Designated ATS.” 
180  See proposed changes to Rule 301(b)(2)(i).  
181  See infra note 300 and Section IV.A. 



 

59 
 

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 



 

60 
 

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 broker-dealer?  If not, what, if any, transition period would be appropriate and why? 

 

III. Proposed Changes Applicable to Government Securities ATSs61 
 

A. ATS Markets for Government Securities  

Government securities182 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  

                                                
182  Under 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).   

183  See 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. 

184  See 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/IAWG-
Treasury-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. 



 

62 
 

Specifically, most interdealer trading takes place on electronic platforms provided by interdealer 

brokers that operate limit order books, with electronic interdealer trading being 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  

                                                
185  See id. at 3. 
186  See 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. 

187  See 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. 

188 See 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/treasury-market-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 



 

63 
 

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-the-run189 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 

                                                
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.  

189  See infra note 193 for a description of “off-the-run” securities.   
190  See 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-market-structure-
treasuries-vs-agency-mbs-20200825.htm (“August 25th FEDS Notes”) (explaining the 
recent evolution of the government securities market structure).  

191  STRIPS 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. 



 

64 
 

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-to-customer 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, 

                                                
192  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.  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. 

193  Off-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. 

194  See id. 
195  See id. 



 

65 
 

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 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 

                                                
196  See 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.  

197  See 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.     

198  The 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 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. 

199  See infra Table VIII.2 and accompanying text. 



 

66 
 

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 voice-assisted interdealer broker platforms and Communication Protocol Systems that 

offer various trading protocols to bring together buyers and sellers,202 though some interdealer 

trading of off-the-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 

                                                
200  For 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.  
201  Also, 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. 

202  See 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. 

203  While 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. 

204 See U.S. Department of the Treasury Resource Center, “Fixed Income: Agency 
Securities,” available at https://www.treasury.gov/resource-
center/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.  



 

67 
 

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-

                                                
205  Additionally, repos on government securities are also traded on some ATSs.   
206  PTFs 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.”). 



 

68 
 

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 

                                                
207  See 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 
US Treasury Market Structure Conference (September 23, 2019), available at 
https://home.treasury.gov/news/press-releases/sm782.  

208  See infra Table VIII.2.  (ATS PTF volume / ATS volume) x 100 = PTF share of ATS 
volume (%).  

209  See October 15 Staff Report, supra note 188, at 32, 35-36, 39.   
210  See November 2021 IAWG Report, supra note 184, at 5; October 15 Staff Report, supra 

note 188, at 38.  
211  See October 15 Staff Report, supra note 188, at 37. 



 

69 
 

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 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/broker-dealer 

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   

                                                
212  See, e.g., BrokerTec Letter, SIFMA Letter, AFREF Letter. 
213  See FINRA Letter. 
214  See SIFMA Letter at 2. 
215  See also MFA Letter at 4. 
216  See AFREF Letter at 1. 
217  See id. 
218  See 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-



 

70 
 

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 ATS221 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 

                                                
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). 
222  See 15 U.S.C. 78o(b) (pertaining to the registration and regulation of brokers and 

dealers). 
223  See 15 U.S.C. 78o-5 (pertaining to the registration and regulation of government 

securities brokers and dealers).  
224 See 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 



 

71 
 

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 

                                                
automated quotation system operated by a registered securities association.  See supra 
note 182.   

225  See 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.  

226  Some 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.   

227  See supra notes 130-131 and accompanying text. 
228  See 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); 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.  



 

72 
 

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 government securities.233  The Capacity, Integrity, 

                                                
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). 

229  FINRA 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). 

230  See 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.   
232 See 17 CFR 242.301(b)(5). 
233  See infra Section III.C (describing the types of entities that are currently subject to the 

requirements of Regulation SCI).   



 

73 
 

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 

                                                
234  17 CFR 242.301(b)(6). 
235  See supra notes 157-158 and accompanying text. 
236  17 CFR 242.304.  See also supra notes 139-143 and accompanying text. 
237  See supra notes 149-151 and accompanying text. 
238  See supra note 152 and accompanying text. 
239  See supra Section II.A. 



 

74 
 

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 repos244 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 

                                                
240  See, e.g., 2020 Proposal, supra note 4, at 87125.  
241  See id. at Section III.B.4 (discussing the Fair Access Rule) and III.C (discussing 

Regulation SCI). 
242  See proposed Rule 300(l). 
243  17 CFR 242.300(a).  See Regulation ATS Adopting Release, supra note 31, at 70851-52. 
244  See proposed Rule 300(l). 
245  An 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. 



 

75 
 

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 non-government 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 non-

Government 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 

                                                
246  Broker-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. 

247  See ICE Bonds Letter I at 5. 
248  See 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., 17 
CFR 240.15c3-5).  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 



 

76 
 

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 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 broker-dealer 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 

                                                
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. 

249  See id. 
250  See id. 
251  See supra note 246. 



 

77 
 

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 non-

government 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 

                                                
252  See infra Section IV.D.4.f. 
253  See infra Section IV.D.5.k. 
254  See proposed Rule 300(k). 
255  See current Rule 301(b)(2)(viii).   



 

78 
 

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   

                                                
256  See 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. 

257  See proposed Rule 300(m). 
258  See proposed Rule 300(s). 
259  See proposed Rule 300(o)-(p). 
260  See infra Section III.B.4.  The proposed definitions are similar to those in FINRA’s rules.  

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



 

79 
 

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? 



 

80 
 

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 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 

                                                
261  See 17 CFR 240.3a1-1(a)(3) and 17 CFR 242.301(a)(4).   
262  The 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.81 
 

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 broker-dealers 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 broker-dealers, stating that such requirement would provide regulatory oversight with regard 

to risk management and regulatory controls.268   

                                                
263  See Regulation ATS Adopting Release, supra note 31, at 70878.  See also infra notes 

287-297 and accompanying text.   
264  See, 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. 

265  See 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). 

266  See Citadel Letter. 
267  See MFA Letter at 3. 
268  See SIFMA Letter at 2. 



 

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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 

                                                
269  See Bloomberg Letter at 4. 
270  See id. 
271  See, 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. 



 

83 
 

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

government securities brokers and dealers other than registered broker-dealers 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 self-

regulatory 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 

                                                
273  See 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. 

274  Broker-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.   

275  See 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 self-regulatory 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. 

276  See, e.g., FINRA Rule 1000 Series, FINRA Rules 4140, 4510, 4520, 4530, and 8210.  
277  See, e.g., FINRA Rule 6730. 
278  See, e.g., FINRA Rules 3110, 4370, 5210, 5220, 5230, 5310, and 5340. 



 

84 
 

securities dealer under Section 15C(a)(1)(A) would be subject to oversight and market 

surveillance by an SRO.279   

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   

                                                
279  See Regulation ATS Adopting Release, supra note 31, at 70863. 
280  Unlike 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). 

281  Exchange 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). 

282  See Exchange Act Sections 3(a)(6) (defining “bank”) and 3(a)(46) (defining “financial 
institution”). 



 

85 
 

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 

                                                
283  See 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 
broker-dealer 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.   

284  See 17 CFR 242.301(b)(3)-(4). 



 

86 
 

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 re-proposing 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 

                                                
285  See infra Section III.B.4. 
286  See infra Section III.C. 
287  See 17 CFR 242.301(b)(7).  See also Regulation ATS Adopting Release, supra note 31, 

Section IV.A.2.f.  
288  See Regulation ATS Adopting Release, supra note 31, at 70877. 



 

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• Make and keep certain records specified in Rule 302289 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 

                                                
289  See supra note 163.   
290  See supra notes 164 and 166. 
291  See 17 CFR 242.301(b)(8).  See also Regulation ATS Adopting Release, supra note 31, 

Section IV.A.2.g.  
292  See Regulation ATS Adopting Release, supra note 31, at 70878. 
293  See 17 CFR 242.301(b)(9).  See also supra notes 144-148 and infra Section III.B.4. 
294  See Regulation ATS Adopting Release, supra note 31, at 70874 and 70878. 
295  See 17 CFR 242.301(b)(10); infra note 168; NMS Stock ATS Adopting Release, supra 

note 2, Section VI. 



 

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Exempted Government Securities ATSs will help prevent the potential for abuse 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)?  

                                                
296  See NMS Stock ATS Adopting Release, supra note 2, at 38864. 
297  See 17 CFR 242.301(b)(11); Regulation ATS Adopting Release, supra note 31, Section 

II.C.   
298  See Regulation ATS Proposing Release, supra note 173. 



 

89 
 

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?   



 

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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 Broker-Dealers that Operate ATSs that Trade 
Government Securities and Non-Government 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 

                                                
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. 



 

91 
 

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 broker-dealer 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 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 

                                                
300  The Commission is also proposing to amend Rule 301(b)(2)(viii) to state that Covered 

Newly Designated ATSs will be subject to Rule 304. 
301  The 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. 

302  See 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)).   



 

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ATS that noticed on its initial operation report on Form ATS that the ATS trades government 

securities and corporate debt securities would be the broker-dealer 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 

                                                
303  Under 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).    

304  See supra note 246 and accompanying text. 
305  See 17 CFR 242.301(b)(9). 
306  The 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. 



 

93 
 

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 broker-dealer that is also the registered 

broker-dealer 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 non-government securities 

                                                
307  See supra notes 244 and 254 and accompanying text. 
308  See NMS Stock ATS Adopting Release, supra note 2, Section III.B.5. 



 

94 
 

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 

                                                
309  See infra Section V.A.  See also proposed Rule 301(b)(5)(iii).   
310  See 17 CFR 242.301(b)(5)(i). 



 

95 
 

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 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. 

                                                
311  See Regulation ATS Adopting Release, supra note 31, at 70872. 
312  See id. 
313  Under 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.  



 

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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 

                                                
314  See, e.g., SIFMA Letter; MFA Letter; ICE Bonds Letter I; and Healthy Markets Letter. 
315  See 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). 

316  See 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). 

317  See 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. 

318  See 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-to-dealer and dealer-to-customer 
transactions). 



 

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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 

                                                
319  See supra note 229. 
320  The 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.   



 

98 
 

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 Securities and Agency Securities are 

                                                
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. 

323  For 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.  



 

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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 security-by-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 

                                                
One commenter stated that Commission should not, for example, distinguish between on-
the-run and off-the-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.   

325  However, 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. 



 

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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 on-the-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 

                                                
326  See AFREF Letter at 3. 
327  See Bloomberg Letter at 6. 
328  See SIFMA Letter at 5. 
329  See 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.101 
 

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-by-security 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 

                                                
330  See 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.   

331  Based 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. 



 

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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 

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 re-proposing for Agency Securities a five percent threshold that 

                                                
332  See 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 
“grouped-affiliated ATSs” would be affected) has been adjusted based on the 
Commission’s knowledge of current ATS operations.   

333  See id. 
334  Data is based on the regulatory version of TRACE for U.S. Treasury Securities from 

April 1, 2021 through September 30, 2021. 



 

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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 one-month 

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 

                                                
335  See Rule 301(b)(5)(i)(A)-(D). 
336  This ATS would also meet the proposed threshold for trading in U.S. Treasury Securities. 
337 See 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.   

338  See infra Section V.A.3. 



 

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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. 



 

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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 non-FINRA 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 



 

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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. 

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 

                                                
339  See supra Section II.  



 

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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 

                                                
340  A 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. 

341  See Regulation SCI Adopting Release, supra note 3, at 72252-56 for a discussion of the 
background of Regulation SCI. 



 

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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 

                                                
342  See id. at 72253-56.  
343  See id. at 72277-79. 
344  Id. at 72253, 72256. 
345 See 17 CFR 242.1000.   
346  See 17 CFR 242.1001; infra notes 397-398. 



 

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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 

                                                
347  See 17 CFR 242.1002-1007; infra notes 400-411. 
348 See 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”). 



 

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debt.351  Explaining this departure, the Commission differentiated ATSs trading 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 

                                                
351  See Regulation SCI Proposing Release, Securities Exchange Act Release No. 69077 

(Mar. 8, 2013), 78 FR 18084, 18093-95 (Mar. 25, 2013). 
352  See Regulation SCI Adopting Release, supra note 3, at 72270. 
353  See id. 
354  See id. 
355  See 2020 Proposal, supra note 4, at 87152.  See also supra Section II.B; Regulation SCI 

Adopting Release, supra note 3, at 72253. 



 

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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 

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

358  See SIFMA Letter at 5; MFA Letter at 5; AFREF Letter at 2, 4; and Healthy Markets 
Letter at 10-11. 

359  See MFA Letter at n.13. 
360  See MFA Letter at 5; and Healthy Markets Letter at 9. 



 

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“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 

                                                
361  See 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).  

362  See AFREF Letter at 2. 
363  See 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. 

364  See Tradeweb Letter at 11; BrokerTec Letter at 5-9; and MarketAxess Letter at 11. 
365  See Tradeweb Letter at 3, 11; and BrokerTec Letter at 8-9. 
366  See Tradeweb Letter at 3, 11. 



 

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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 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 

                                                
367  See MarketAxess Letter at 11. 
368  Some 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. 

369  As 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.  

370  See Regulation SCI Adopting Release, supra note 3, at 72270. 



 

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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 that371 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     

                                                
371  See generally SIFMA Letter at 5, MFA Letter at 5, and AFREF Letter at 2. 
372  See Regulation SCI Adopting Release, supra note 3, at 72264.  
373  See 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 



 

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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 re-proposing 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 

                                                
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. 

374  See BrokerTec Letter at 6. 
375  Specifically, 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. 

376  See Regulation SCI Adopting Release, supra note 3, at 72259-60, 72290-91. 
377 See paragraphs (3) and (4) of the definition of “SCI ATS” under Rule 1000 of Regulation 

SCI.   



 

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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 

                                                
378  See AFREF Letter at 2 and 4. 
379  Specifically, 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). 



 

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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   

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 

                                                
380  See ICE Bonds Letter II at 5. 
381  See Tradeweb Letter at 3, 11.  This commenter stated that the threshold should be raised 

to a “more material percentage” such as 25 percent. 
382  See Bloomberg Letter at 5. 
383  Regulation 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, 



 

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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 

                                                
including repos on U.S. Treasury Securities and Agency Securities should be subject to 
Regulation SCI.  

384  See 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. 



 

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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 off-the-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 

                                                
385  See Regulation SCI Adopting Release, supra note 3, at 72270. 
386  See id.  
387  See supra notes 187-190 and accompanying text. 
388  See 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. 



 

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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 systems issues that cause widespread systemic 

                                                
389  The 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.   

390  See Tradeweb Letter at 3, 11.121 
 

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 

                                                
391  See Regulation SCI Adopting Release, supra note 3, at 72263. 



 

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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 

                                                
392  See supra note 379. 
393  See BrokerTec Letter at 9-10. 
394  As 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. 



 

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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 six-month 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 

                                                
395  See 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. 



 

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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 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 

                                                
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). 
400 See 17 CFR 242.1002(a) (Rule 1002(a) of Regulation SCI). 



 

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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 

                                                
401 See 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. 

402  See 17 CFR 242.1002(c). 
403  See id. 
404  See 17 CFR 242.1003(a) (Rule 1003(a) of Regulation SCI). 
405  See 17 CFR 242.1003(b). 
406 See 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 



 

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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 SCI409 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. 

                                                
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). 

407 See 17 CFR 242.1003(b)(2)-(3). 
408 See 17 CFR 242.1004 (Rule 1004 of Regulation SCI). 
409  See 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. 

410  See 17 CFR 242.1006 (Rule 1006 of Regulation SCI). 
411  See 17 CFR 242.1007 (Rule 1007 of Regulation SCI). 



 

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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 



 

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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 on-

the-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 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 



 

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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?  



 

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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 broker-dealer, or operated by affiliated broker-dealers?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?  

                                                
412  See Section V.A.2, infra, discussing the proposed aggregation of volume of affiliated 

ATSs for purposes of application of the Fair Access Rule.  



 

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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 



 

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commenters believe that different or unique requirements should apply to 

Communication Protocol Systems?  What should they be and why? 

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 

                                                
413  As 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. 

414  See infra Section IV.D. 
415  See infra Section IV.D.1. 



 

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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 

                                                
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.   

417  See, 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. 

418  See ICE Bonds Letter I at 4-5. 



 

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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: 

                                                
419  See MFA Letter at 5. 
420  See 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.   
421  See NMS Stock ATS Adopting Release, supra note 2, at 38782.   



 

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• 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 amendments425 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 ineffective if it finds, 

after notice and opportunity for hearing, that such action is necessary or appropriate 

                                                
422  The Commission staff may reject a Form ATS-N filing that is defective because, for 

example, it is missing sections or missing responses to any sub-questions, 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. 

423  See Rule 304(a)(1)(i). 
424  See proposed Rule 304(a)(1)(ii).  See also infra note 430. 
425  See infra note 451. 
426  As 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). 

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



 

136 
 

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 

                                                
428  Like 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.   

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



 

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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 

                                                
authorized representative of the Form ATS-N agrees in writing.  See Rule 
304(a)(1)(ii)(A)(2). 

431  See 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. 

433  See 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 



 

138 
 

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 

                                                
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. 



 

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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 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 days436 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 

                                                
434  See supra note 424 and accompanying text. 
435  See supra notes 430-432 and accompanying text. 
436  Consistent 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. 



 

140 
 

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: 

                                                
437  See 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.   

438  See 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). 

439  See NMS Stock ATS Adopting Release, supra note 2, Section IV.A.3.141 
 

• 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 

                                                
440  See 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.   

441  See Rule 304(a)(2)(i)(B).  See also infra note 451. 
442  See 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. 



 

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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 broker-dealer 

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 

                                                
443  The 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. 

444  See 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. 



 

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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 firm-up trading interest) and priority 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 



 

144 
 

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 

                                                
446  For 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. 

448  See infra Section IV.D.5.r. 



 

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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 

                                                
449  15 U.S.C. 78s(b). 
450  17 CFR 240.19b-4(f)(2). 



 

146 
 

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 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 

                                                
451  See 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). 

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



 

147 
 

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 

                                                
453  See 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). 



 

148 
 

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 

                                                
454  See infra note 463 and accompanying text. 
455  See Rule 304(a)(3). 
456  The 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.  

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



 

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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? 

                                                
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.  

459  Pursuant 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). 



 

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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 (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?  



 

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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?   



 

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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:   

                                                
460  See 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). 



 

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• 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. 

                                                
461  See Rule 304(b)(1). 
462  See Rule 304(b)(2). 
463  See proposed Rule 304(b)(2)(iii). 



 

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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 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   

                                                
464  See, 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).   

465  See FINRA Letter at 2. 
466  See 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).   



 

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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 

                                                
468  See 17 CFR 240.301(b)(2)(vii). 
469  See Alternative Trading System List, https://www.sec.gov/foia/docs/atslist.htm. 



 

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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 

                                                
470  Unlike 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.  



 

157 
 

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-N472 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 

                                                
471  See Item A.3 of the Instructions to Form ATS-N (as revised). 
472  See NMS Stock ATS Adopting Release, supra note 2, Section VII.   



 

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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. 

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 broker-dealer 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 

                                                
473  See Regulation ATS Adopting Release, supra note 31, at 70877-78. 
474  See 2020 Proposal, supra note 4. 



 

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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” 

                                                
475  See infra Section IV.D.5.k. 
476  See infra Section IV.D.5.i. 
477  See FINRA Letter at 4. 



 

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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 sub-questions 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 broker-dealer 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 

                                                
478  The 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.   

479  See 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. 

480  See supra notes 563-564 and accompanying text. 
481  See infra note 565. 
482  See infra note 497 and accompanying text.  See proposed revisions to Form ATS-N Part 

II, Item 4 and Part III, Item 7.161 
 

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, 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 

                                                
483  See proposed changes to Part II, Items 1 and 2 and Part III, Items 4(a), Item 22(a), Item 

24(d)(ii). 
484  See infra Section IV.  See also supra note 467. 
485  See Instruction A.3 of Form ATS-N (requiring that a Form ATS-N filing is accurate, 

current, and complete). 



 

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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 after-hours 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 broker-dealer 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 



 

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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 

                                                
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). 
488  The 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. 

489  See supra note 254 and accompanying text. 
490  See supra note 242 and accompanying text. 
491  See supra note 259 and accompanying text. 
492  See id. 
493  See supra note 256 and accompanying text. 



 

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“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 

                                                
494  See supra Section II.C.1. 
495  See supra note 273 and accompanying text. 
496  See proposed Rule 3b-16(e) and Rule 300(q). 
497  See revised Form ATS-N, Explanation of Terms. 
498  This 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.”   



 

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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 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 

                                                
499  See Rule 304(a)(1)(iv), as proposed to be revised. 
500  The 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.   

501  The 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. 

502  See 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 broker-dealer operator 
equally.  If a change would apply differently among subscribers or types of subscribers, 
between subscribers and the broker-dealer 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 



 

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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 

                                                
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.   

503  See Instruction A.9 of Form ATS-N. 



 

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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 broker-dealer 

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 broker-dealer 

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 

                                                
504  See 15 U.S.C. 78o(b)(8).  See also NMS Stock ATS Adopting Release, supra note 2, at 

38773. 
505  As 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. 

506  Current 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 



 

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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   

                                                
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 broker-dealer 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.  

507  The 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%209-12-14_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 



 

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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 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 

                                                
the ATS, such activities and functionality would be subject to Regulation ATS, including 
the disclosure requirements of Form ATS-N. 

508  See FINRA Rules 6160, 6170, 6480, and 6720.  



 

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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 notes517 and indicate whether each type of security traded is on-the-run, off-the-run, 

                                                
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. 
510  The 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.   
511  The types of securities traded would be limited to government securities (15 U.S.C. 

78c(a)(42)) and repos.  See proposed Rule 300(l).   
512  Treasury 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). 

513  Treasury 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.  

514  Treasury 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. 

515  Treasury 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. 

516  See supra note 191. 
517  A 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 



 

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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 Securities519 and/or Federal 

Agency Securities.520  In addition, if the Government Securities ATS trades repos, the ATS 

would indicate whether it trades triparty521 and/or bilateral repos,522 and whether such securities 

are repurchase agreements or reverse repurchase agreements and are centrally cleared523 or non-

                                                
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. 

518  A “when-issued” transaction is a transaction in a U.S. Treasury Security that is executed 
before the issuance of the security. 

519  Agency 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).   

520  Federal Agency Securities include all Agency Securities except Agency Mortgage-
Backed Securities.  See supra note 519.   

521 A 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”). 

522  A 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. 

523  Centrally 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).  



 

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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 10525 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 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 

                                                
524  Non-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.   
525  These items are numbered as Part I, Items 8 and 9 in current Form ATS-N, but would be 

renumbered as Items 9 and 10.  
526  Part 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. 



 

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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 broker-dealer that is not 

the ATS’s current broker-dealer operator, the new broker-dealer 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 broker-dealer 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” 

                                                
527  See supra note 455 and accompanying text. 
528  See 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.  

529  This 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.   



 

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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 



 

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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 non-ATS 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 

                                                
530  See infra Section IV.D.4. 
531  See NMS Stock ATS Proposing Release, supra note 29, at 81010, 81041. 
532  See id. at 81010. 



 

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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 broker-dealer operator has the opportunity to place its interest 

ahead of participants trading in the ATS that the broker-dealer 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 

                                                
533  Form 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 



 

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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 

                                                
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. 

534  See 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.   



 

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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 broker-dealer 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 broker-dealer 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 broker-dealer 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 broker-dealer, and that third-party broker-dealer, 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 

                                                
536  For 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. 

537  As explained above, Form ATS-N will remove references to “orders,” and its disclosures 
will focus on “trading interest.” 



 

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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 understand both the types of broker-dealer operator 

business units and affiliates that can trade in a Covered ATS, and their trading activities.538  

                                                
538  Although 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. 



 

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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 

                                                
539  Depending on how the Covered ATS operates, it is possible that disclosures about the 

broker-dealer 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 (Post-Trade 
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 broker-dealer 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.  

540  The 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 broker-dealer 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.181 
 

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 

broker-dealer 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 

                                                
541  This request is contained in Part III, Item 12.  See infra Section V.D.5.l. 



 

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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?  



 

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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 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 broker-dealer 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) 



 

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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 requirements543 of the opt-out 

processes for the broker-dealer operator and affiliates required to be identified in Items 3(a) and 

(b) are the same for all subscribers.  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 

                                                
542  For example, if a broker-dealer operator uses algorithms to submit subscriber orders into 

the Covered ATS, any steps that either the broker-dealer 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.   

543 The 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.   

544  See supra Section IV.D.3.a. 



 

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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 

                                                
545  See 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 



 

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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 

                                                
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.   



 

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functionality, post-trade processing),548 and if applicable, to indicate whether the requirements of 

use549 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 

                                                
548  In Part II, Item 5, the Commission is proposing to add “order hedging or aggregation 

functionality” and “post-trade processing” as examples of 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.   

549  The 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). 

550  For 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. 



 

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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, over-the-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 

                                                
551  See 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 broker-dealer 
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. 



 

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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 broker-

dealer 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 broker-dealer 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. 

                                                
552  See infra Section IV.D.5.l.   
553  Services 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. 



 

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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 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. 



 

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Request for Comment 

95. What types of products and services do broker-dealer operators of Covered ATSs or 

affiliates of broker-dealer 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 broker-dealer 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 broker-dealer 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 

                                                
554  As 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. 

555  Legacy 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 



 

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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 

                                                
Exhibit E of Form ATS).  Proposed Part II, Item 6(b) would expand upon this 
requirement. 

556  See 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). 



 

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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.     

                                                
558  See 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. 

560  See supra note 109.   



 

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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 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, 

                                                
561  The 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). 



 

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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 broker-dealer 



 

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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.   



 

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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 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 

                                                
562  See Regulation ATS Adopting Release, supra note 31, at 70879. 



 

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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?   

                                                
563  See 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.   



 

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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 broker-dealer 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 



 

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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 

                                                
564  For 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).201 
 

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 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.   

                                                
565 See 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. 



 

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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 non-exhaustive 

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 

                                                
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-to-read 
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 broker-dealer 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. 

567  See NMS Stock ATS Adopting Release, supra note 2, at 38820-21 (discussing the 
definition of “subscriber” and the persons encompassed thereunder).     



 

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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” 

                                                
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).  

569  For 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”).       



 

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of those conditions.  Some Covered ATSs may only have the eligibility requirement that a person 

be a client of the broker-dealer 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 

                                                
570  These limitations can result in some subscribers having different levels of functionality or 

more favorable terms of access than others.  For example, in the Commission 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. 



 

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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 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 

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



 

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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.   

                                                
572  The 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.   



 

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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 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).  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, web-enabled 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, web-

enabled 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 



 

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operator,573 and list and provide a summary of the requirements574 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 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 

                                                
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.”  

574  Current 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. 



 

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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 

                                                
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.     



 

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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 broker-dealer 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 

                                                
577  See supra note 564 and accompanying text.   
578  Covered ATSs would not be required to calculate and disclose precise latencies for each 

means of entry for purposes of Form ATS-N.  



 

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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   

                                                
579  See 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. 

580  See Regulation ATS Adopting Release, supra note 31, at 70873.  See infra Section 
V.A.3.a.   



 

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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 co-location 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 III, Item 6(b) of Form ATS-N581 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 

                                                
581  The 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).  
582  To 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. 

583  See 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 



 

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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 

                                                
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. 



 

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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 



 

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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 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 

                                                
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.   



 

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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.  Broker-dealer 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.   

                                                
585  As 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.   



 

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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 

                                                
586  See Regulation ATS Adopting Release, supra note 31, at 70849 n.37. 
587  The 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. 

588  The 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-à-vis”) other orders on the book due to changes in the 
NBBO or other reference price. 



 

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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 

                                                
589  This non-exhaustive list is the same as what is in current Form ATS-N, Part III, Item 11. 
590  Part 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.   



 

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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 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? 



 

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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 IOIs,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 IOIs, 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 IOIs 

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 non-firm trading interest, solicit interest to buy or sell a security, discover prices, 

                                                
591  Part III, Item 9 of current Form ATS-N asks about conditional orders and IOIs.  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.221 
 

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 

                                                
592  See supra Section II.B.2. 



 

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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 pre-selected 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 ATS discloses subscribers’ identities and how and when messages are 

transmitted (e.g., order management system, router, or FIX). 



 

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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, good-til-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 



 

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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 



 

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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 



 

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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 non-

exhaustive 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 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 broker-dealer 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 non-firm trading interest may interact with firm trading interest 

and may cross-reference 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 



 

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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 time-stamping 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?   



 

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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 

                                                
593  Section 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). 

594  See 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 



 

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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 

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 

                                                
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. 

595  See FINRA Regulatory Notice, supra note 594, at 3. 
596  See NMS Stock ATS Adopting Release, supra note 2, at 38850. 



 

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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 anti-gaming technology and other subscriber-

related 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 

                                                
597  See Letter from David W. Blass, General Counsel, Investment Company Institute, dated 

February 25, 2016, at 9-10.   
598  See id. 
599  See id. 
600  See 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). 

601  See NMS Stock ATS Adopting Release, supra note 2, 83 FR 38850. 



 

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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 



 

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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 



 

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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 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 affiliates603 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 

                                                
602  The 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.   

603  Among 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. 



 

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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 non-government securities markets that 

trade futures, currencies, fixed income, and swaps, for example.  Markets for financial 

instruments related to NMS stocks could include, for example, non-NMS 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 non-government security.  A Covered 

ATS could offer, for example, Exchange-for-Physical (“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 



 

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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. 

                                                
604  To 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. 



 

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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 

                                                
607  See, e.g., NYSE Guide Rule 104 (Dealings and Responsibilities of DMMs), Nasdaq  

Rule Equity 2, Section 5 (Market Maker Obligations). 



 

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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 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 liquidity-provider 

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 

                                                
608  These 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. 

609  See Part II, Items 1(c) and 2(c) of Form ATS-N. 
610  See NMS Stock ATS Adopting Release, supra note 2, at 38829. 



 

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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 person611 or the broker-dealer operator 

                                                
611  The 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 



 

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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 

                                                
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. 



 

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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 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241 
 

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 

                                                
612  See Bloomberg Letter at 8. 



 

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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 

                                                
613  The 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 (Counter-Party 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.   



 

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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 broker-dealer 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 



 

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disclosure, when and how the disclosure is communicated, who receives it, and whether and how 

such designation can 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 



 

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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-by-order basis or a participant-by-participant 

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-

                                                
614  The 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. 



 

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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 



 

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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 broker-dealer 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 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 

                                                
615  See supra Section IV.D.5.m. 



 

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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 

                                                
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., real-time, 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.   



 

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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 broker-dealer 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 



 

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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 

participant618 that receives the displayed information.  If, for instance, the ATS displays orders to 

                                                
617  The 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.   

618  See Part III, Item 1 of Form ATS-N (providing examples of types of market participants). 



 

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the broker-dealer operator’s SOR or trading desk, the ATS would indicate “yes” to this 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 broker-dealer 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-ATS-systems 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, 



 

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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 17 CFR 242.600(a)(31) (Rule 

600(a)(31) of Regulation NMS).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.   

                                                
619  Covered 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). 

620  Part 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). 



 

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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 



 

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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 broker-dealer 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 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? 

                                                
621  As 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. 



 

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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 

                                                
622  The 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. 

623  The 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.   



 

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Part III, Item 18 of Form ATS-N624 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.   

                                                
624  As 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. 

625  The 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 



 

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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., 

                                                
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. 



 

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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 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 

                                                
626  The 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). 

627  See NMS Stock ATS Adopting Release, supra note 2, at 38858 (discussing what fees 
should be categorized as for use of the ATS’s services).  



 

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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? 

                                                
628  See 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). 



 

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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 

                                                
629  The 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. 

630  See Regulation SCI Adopting Release, supra note 3, at 72254-55 n.28.   
631  See id. at 72255 n.29.261 
 

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 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   

                                                
632  This question is substantially the same as Part III, Item 21 of current Form ATS-N. 
633  See supra notes 228-229 and accompanying text. 



 

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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 ATS634 and the ATS’s participants to manage the post-trade processing, 

                                                
634  The 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. 



 

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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 straight-through 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 broker-dealer 

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), 



 

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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 

                                                
635  See 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-DraftPaper-
071218.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. 



 

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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 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.   



 

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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 22636 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 

                                                
636  This Item is currently numbered as Part III, Item 23 of current Form ATS-N. 



 

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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 

                                                
637  Part 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). 



 

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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 Regulation ATS (as 

proposed to be applied herein).643  A description of the Covered ATS’s reasonable written 

                                                
639  See supra Section III.D.     
640  The Commission is proposing changes to the Fair Access Rule, which are discussed in 

detail below.  See infra Section V.A.2. 
641  See infra Sections V.A.3 through V.A.4. 
642  See 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. 

643  The 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 



 

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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 

                                                
re-numbering, describing the required written standards as “reasonable,” and to reference 
standards limiting and denying access to the services of the ATS. 



 

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Part III, Item 25 of Form ATS-N644 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 non-firm 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 

                                                
644  This Item is currently numbered as Part III, Item 26 of current Form ATS-N. 
645  See supra Section II.C. 



 

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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 17 CFR 242.605 (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 

                                                
646   See 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).  



 

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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 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, 



 

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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   

                                                
648  See supra note 533 for the definition of affiliate under Form ATS-N. 



 

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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 platform-wide 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 



 

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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) 

                                                
649  To 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 17 CFR 232.302 (Rule 302 of Regulation S-T).  See 17 
CFR 232.302. 

650  See supra Section III.B.4. 



 

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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 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 

                                                
651  17 CFR 242.301(b)(5)(i)(A)-(B).  
652  See 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). 

653  17 CFR 242.301(b)(5)(i)(C)-(D); 17 CFR 242.301(b)(6)(i)(A)-(B). 
654  See 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.     

655  See proposed Rule 301(b)(5)(i)(A)-(D); proposed Rule 301(b)(6)(i)(A)-(B). 



 

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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 

                                                
656  To 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. 

657  See Regulation ATS Adopting Release, supra note 31, at 70873. 
658  See 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 https://www.msrb.org/Rules-
and-Interpretations/MSRB-Rules/Facilities/EMMA-Facility.aspx; FINRA Rule 6750. 

659  For 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 



 

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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 

volume-weighted-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    

                                                
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. 

660  The 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). 

661  See 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)).   



 

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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 auction-based 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 broker-

dealers, there is a potential for a broker-dealer 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 

                                                
662  See ICE Bonds Letter I at 6. 
663  See id. 



 

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providing a market place to bring together buyers and sellers of securities 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 broker-dealers 

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 broker-dealers – 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281 
 

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 

                                                
664  Also, 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. 

665  These requirements are currently in Rule 301(b)(5)(ii), which the Commission is 
proposing to re-number as Rule 301(b)(5)(iii). 

666  See 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 



 

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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, 

                                                
significant volume in a security, and the rule would serve to prohibit “unreasonably” 
discriminatory denials of access. 

667  Rule 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.   



 

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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 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 

non-registered 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.     

                                                
668  See supra notes 666-667. 
669  See Regulation ATS Adopting Release, supra note 31, at 70874. 
670  See proposed Rule 301(b)(5)(iii)(A)(4). 



 

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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 

                                                
671  15 U.S.C. 78f(b)(5). 
672  15 U.S.C. 78f(b)(2) and (c). 
673  See Regulation ATS Adopting Release, supra note 31, at 70874. 
674  See MarketAxess Letter at 10. 



 

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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 

                                                
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. 

676  Rule 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.   



 

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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 similarly-situated 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 



 

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application of an ATS’s written standards as well as help the staff understand the written fair 

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 

                                                
677  See 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 



 

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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 

                                                
not trade against that subscriber.  Subscribers are assigned scores based on their reversion 
rates and segmented into classes or categories accordingly.   



 

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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 

                                                
680  As 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. 



 

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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, 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 non-discriminatory 

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, 



 

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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 

                                                
681  See Regulation ATS Adopting Release, supra note 31, at 70873, n.252. 
682  This is currently in paragraph (b)(5)(iii)(C), but would be renumbered to paragraph 

(b)(5)(iii)(B) under the proposed changes.   



 

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“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 

                                                
683  The 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).   

684  See 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).  



 

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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 

                                                
685  When 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).   
687  Regulation ATS Adopting Release, supra note 31, at 70853. 
688  Id. at 70872.  



 

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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 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 discrimination692 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 

                                                
689  See NMS Stock ATS Adopting Release, supra note 2, at 38770-71. 
690  17 CFR 242.301(b)(6)(iii).   
691  See Regulation SCI Adopting Release, supra note 3, at 72252, 72267. 
692  15 U.S.C. 78f(b)(5).    
693  See 15 U.S.C. 78f(b)(2) and (c); 15 U.S.C. 78o–3(b)(8). 



 

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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 security-by-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 



 

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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 broker-

dealers, 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 the order display and execution 

access provisions under Rule 301(b)(3) 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 

access provisions 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 

broker-dealer 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? 



 

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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 

                                                
694  See Form ATS-R.  See also supra notes 144-147. 

695  See 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. 



 

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case with Form ATS, constitutes a report within the meaning of applicable provisions of the 

Exchange Act.696   

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 

                                                
696  This amendment would be consistent with Rule 301(b)(2)(vii), which states that “[a]ll 

reports filed pursuant to this paragraph (b)(2) and 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). 

697  Rule 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, D.C.  See 17 CFR 242.301(b)(2)(vii).   

698  See infra note 701 and accompanying text. 
699  Accordingly, 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 



 

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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 

                                                
Trading and Markets, at the Commission’s principal office in Washington, D.C.”  
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. 

700  The 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).  

701  The 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 



 

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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 

                                                
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.  
703  The Form ATS Instructions state that “Form ATS shall not be considered filed, unless it 

complies with applicable requirements.” 
704  Rule 303 of Regulation ATS provides the record preservation requirements for ATSs.  

See 17 CFR 242.303. 
705  See infra Section V.C.301 
 

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 re-proposing 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 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 

                                                
706  See supra note 180 and accompanying text. 
707  See Rule 301(b)(2)(ii)-(iv). 
708  The 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. 



 

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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 broker-dealers 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 

broker-dealer, 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 

                                                
709  See 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).  

710  See supra Section IV.D.3. 
711  Form 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 



 

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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, 

                                                
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. 

712  See supra note 506.  
713  See supra Section IV.D.3 (proposing requiring the ATS to disclose the MPID of its 

broker-dealer operator). 
714  The 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. 



 

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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 

                                                
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. 

716  See supra note 714. 



 

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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 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 

                                                
717  See Form ATS-R and Form ATS-R Instructions, No. 8. 
718       The 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.   



 

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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 non-U.S. corporate debt securities.  

                                                
719  See supra Sections III.B.4 and III.C. 
720  Currently, 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.   



 

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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 non-emerging 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 unit722 and dollar volume of repurchase and reverse repurchase 

transactions broken down by (1) whether the transaction is overnight or term;723 (2) whether the 

                                                
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. 

722  For 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.    

723  Overnight 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 



 

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transaction is triparty724 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 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 

                                                
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.  

724  See 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. 

725  See supra note 522. 
726  As 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) x 2 
transaction types (overnight or term) x 2 party types (bilateral or triparty) x 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). 



 

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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 

                                                
727  For 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/.  



 

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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? 

                                                
728  See supra note 98 and accompanying text. 
729  See id. 
730  See Item 4.g of Form ATS, as proposed to be revised. 
731  See 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). 



 

311 
 

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 



 

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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 non-U.S. corporate debt securities.  Do commenters believe that 

the two subcategories would yield useful information to the Commission?  Non-U.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 further break down the volume for non-U.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 



 

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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) 



 

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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 law734 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 

                                                
732  See 17 CFR 242.301(b)(2)(vii). 
733  The 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).   

734  See, e.g., 17 CFR 200.83, 240.24b-2. 



 

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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 



 

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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 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 
Number 

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 

                                                
735  44 U.S.C. 3501 et seq. 



 

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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 

                                                
736  See infra Section VII.C for a description of the categories of respondents. 
737  Unless otherwise described, none of the existing information collections are being revised 

with new requirements. 



 

318 
 

Collection of 
Information 

Rule Burden Description Respondent 
Categories 

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 

Regulation SCI Rules 1001-
1007 of 
Regulation SCI 

Comply with 
Regulation SCI 

Certain Communication 
Protocol Systems 



 

319 
 

Collection of 
Information 

Rule Burden Description Respondent 
Categories 

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.  



 

320 
 

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 

                                                
738  See supra Section V.A.321 
 

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 

                                                
739  See supra notes 165-166 and accompanying text. 



 

322 
 

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 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 

                                                
740  See supra Section IV.A. 



 

323 
 

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 

                                                
741  See supra Section IV.D.1. 
742  See supra Section IV.D.5. 
743  See supra Section IV.D. 



 

324 
 

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 proposed744 and that Current Government Securities ATSs will have to 

                                                
744  See supra Section III.B.2. 



 

325 
 

comply with the enhanced requirements for Government Securities ATSs.745  The Commission 

estimates the total number of Currently Exempted Government Securities ATSs to be 7746 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. 

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. 

                                                
745  See supra Section IV.A. 
746  The 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. 

747  As of September 30, 2021, 17 Government Securities ATSs currently operate pursuant to 
a Form ATS currently on file with the Commission. 



 

326 
 

Collection of 
Information 

Rule Number of 
Respondents 

Description 

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-



 

327 
 

Collection of 
Information 

Rule Number of 
Respondents 

Description 

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 

                                                
748  See supra Section II.D. 



 

328 
 

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. 

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 

                                                
749  Some 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. 

750  The 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. 



 

329 
 

Collection of 
Information 

Rule Number of 
Respondents 

Description 

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. 



 

330 
 

Collection of 
Information 

Rule Number of 
Respondents 

Description 

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 

                                                
751  See supra Section IV.D.1.   



 

331 
 

questions on Form ATS-N.752  The Commission estimates the total number of NMS Stock ATSs 

to be 34753 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. 

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. 

                                                
752  See 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. 

753  As 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. 



 

332 
 

 

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 exclusively754 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 59756 and that these respondents will be subject to the following collections of 

information as estimated below: 

                                                
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. 

755  See 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 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 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. 

756  As 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. 



 

333 
 

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 



 

334 
 

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 electronic758 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 hours759 and an annual burden of 5 hours760 

                                                
757  See supra Section II.D. 
758  The 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 broker-dealer 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. 

759 The 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). 

760 The 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) x 2 IOR amendments a year).  See Rule 301 PRA 



 

335 
 

per respondent for complying with Rule 301(b)(2) and the following total initial and annual 

burdens: 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent) 
 

Initial Communication 
Protocol Systems  

14 20.5 hours 287 hours  

Annual 5 hours 70 hours  

Initial Other Form ATS Filers 

 

59 20.5 hours 1,209.5 hours 

Annual 5 hours 295 hours 

 

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 

                                                
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 x 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). 

761  See supra Section II.D.2. 



 

336 
 

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 

respondent764 and the following total annual burdens: 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

8 37 hours 296 hours   

Legacy Government 
Securities ATSs 

7 37 hours 259 hours 

 

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 

                                                
762  See proposed Rule 301(b)(5)(ii).  See supra Section V.A.  
763 See Rule 301 PRA Supporting Statement, supra note 759. 
764 The 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 x 2 responses a year) + 27 hours for Fair Access notices (Attorney at 1 hour x 27 
responses a year).  See Rule 301 PRA Supporting Statement, supra note 759. 



 

337 
 

burden associated with the currently approved collection of information for this requirement.765   

The Commission estimates an annual compliance burden of 11 hours per respondent766 and the 

following total annual burden: 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

2 11.25 hours 22.5 hours   

 

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 electronic767 Form ATS-R.   

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 

                                                
765 See Rule 301 PRA Supporting Statement, supra note 759. 
766 The 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 x 5 systems outages a year).  See Rule 301 PRA Supporting Statement, supra 
note 759. 

767  As 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. 



 

338 
 

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 respondent770 and 3 

hours per existing Form ATS-R respondent;771 and the following total annual burdens: 

                                                
768  The 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). 

769 See Rule 301 PRA Supporting Statement, supra note 759. 
770 The annual burden per Currently Exempted Government Securities ATS or 

Communication Protocol System would be 4.75 hours x 4 quarterly filings annually = 19 
burden hours. 

771 The annual burden per existing Form ATS-R respondent would be 0.75 hours x 4 
quarterly filings annually = 3 burden hours. 



 

339 
 

Respondent Type Number of 
Respondents 

Annual Burden 
per Respondent 

Total Annual Burden 
(Number of 
Respondents x Annual 
Burden per 
Respondent)  
 

Communication Protocol 
Systems 

22 19 hours 418 hours   

Currently Exempted 
Government Securities ATSs 

7 19 hours 133 hours   

Current Government 
Securities ATSs 

17 3 hours 51 hours   

NMS Stock ATSs 34 3 hours 102 hours   

Other Form ATS Filers 59 3 hours 177 hours   

 

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 

                                                
772  The 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. 



 

340 
 

burden of 8 hours773 and an annual burden of 4 hours774 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 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent) 

Initial Communication 
Protocol Systems 

22 8 hours 176 hours  

Annual 4 hours 88 hours  

Initial Currently Exempted 
Government Securities 
ATSs 

7 8 hours 56 hours  

Annual 4 hours 28 hours  

 

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.  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 

                                                
773 The 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.     

774 The 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. 

775  The 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.341 
 

Commission estimates an annual burden of 45 hours per respondent to comply with Rule 302776 

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 

Total Annual 
Burden 
(Number of 
Respondents x 
Annual Burden 
per Respondent) 
  

Rule 302 Communication 
Protocol Systems 

22 45 hours 990 hours   

Rule 303 15 hours 330 hours   

Rule 302 Currently Exempted 
Government Securities 
ATSs 

7 45 hours 315 hours  

Rule 303 15 hours 105 hours 

 

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 

                                                
776 The 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. 

777 The 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. 

 



 

342 
 

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 

                                                
778  See supra Section II.D. 
779  See supra Section III. 
780  See supra Section IV. 
781 The 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/PRAViewICR?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). 



 

343 
 

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 annual785 burdens for each 

respondent type are as follows: 

                                                
782 The 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.  

783 The 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. 

784 The 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) x 5 amendments a year).  See Rule 304 PRA Supporting Statement, supra note 
781. 

785 The 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. 



 

344 
 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 hours)  
 

Initial Communication 
Protocol Systems 

8 136.4 hours 1,091 hours   

Annual 47 hours 376 hours   

Initial Currently Exempted 
Government 
Securities ATSs 

7 136.4 hours 955 hours 

Annual 47 hours 329 hours 

Initial Current Government 
Securities ATSs 

17 116.4 hours 1,979 hours   

Annual 47 hours 799 hours 

Initial NMS Stock ATSs 34 8 hours 272 hours   

 

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 broker-dealer 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 broker-dealers.786  The Commission estimates an initial burden of 2.75 

                                                
786  The 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. 



 

345 
 

hours787 and an annual burden of 1 hour788 per respondent for completing Form BD and the 

following total initial and annual burdens: 

Burden Type Respondent Type Number of 
Respondents 

Burden per 
Respondent 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 
hours) 
 

Initial Communication 
Protocol Systems  

6 2.75 hours 16.5 hours  

Annual .95 hours 5.5 hours  

Initial Currently Exempted 
Government Securities 
ATSs 

1 2.75 hours 3 hours 

Annual .95 hours 1 hour 

 

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 broker-dealers discussed above 

would also newly incur the currently-approved baseline burden of the Form ID collection of 

                                                
787 The 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”). 

788 The 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 x 2.87 amendments per year).  See Form BD PRA Supporting 
Statement, supra note 787. 



 

346 
 

information necessary to apply for EDGAR access.789  The Commission estimates an initial 

burden of 0.15 hours790 and no annual burden per respondent for completing Form ID, and the 

following total burdens: 

Respondent Type Number of 
Respondents 

Initial Burden 
per Respondent 

Total Initial Burden 
(Number of 
Respondents x Initial 
Burden per 
Respondent, rounded to 
nearest 0.5 hours)  
 

Communication Protocol 
Systems 

6 0.15 hours 1 hour   

Currently Exempted 
Government Securities ATSs 

1 0.15 hours 0 hours   

 

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 

                                                
789  As 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. 
790 See 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. 

791  See supra Section III.C. 



 

347 
 

if they 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 

                                                
792  The 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.” 

793 The 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”).     

794 The 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. 



 

348 
 

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 

Total Burden 
(Number of 
Respondents x 
Burden per 
Respondent, 
rounded to 
nearest 0.5 
hours) 

Initial Compliance with 
Regulation SCI (Legacy 
Government Securities 
ATSs that are existing 
SCI entities) 

1 1,017.15 
hours 

1,017 hours 

Annual 2,458.65 
hours 

2,458.5 hours  

Initial Compliance with 
Regulation SCI (Legacy 
Government Securities 
ATSs that are new SCI 
entities) 

1 2,034.3 hours 2,034.5 hours 

Annual 2,458.65 
hours 

2,458.5 hours 

Initial Compliance with 
Regulation SCI 
(Communication 
Protocol Systems that are 
new SCI entities) 

2 2,034.3 hours 4,068.5 hours 

Annual 2,458.65 
hours 

4,917.5 hours 

 

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; 

                                                
795 The 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. 



 

349 
 

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 



 

350 
 

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 

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.       

                                                
796  Exchange 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). 

 



 

351 
 

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, pre-selected.  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.  

                                                
797  See 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.  

798  See 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. 



 

352 
 

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 

                                                
799  See 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. 

800  See 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. 



 

353 
 

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 

                                                
801  This 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. 

802  The 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.   



 

354 
 

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 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 

                                                
803  See, 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. 
804  Bilateral voice trading refers to telephone calls, chat messages, etc. 
805  See supra note 58. 



 

355 
 

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. 



 

356 
 

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 

                                                
806  See 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. 



 

357 
 

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 non-bank dealers809 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 

                                                
807  See Financial Accounts of the United States Z.1 at 177, available at 

https://www.federalreserve.gov/releases/z1/20210311/z1.pdf. 
808  See 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.   

809  Absent 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).    

810  See 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.  



 

358 
 

Treasury or Agency securities, or both) that have a Form ATS on file.811  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, 

                                                
811  See supra Section VII.C.1.  The Commission estimates that some of these ATSs only 

support Treasuries trading to facilitate hedging in 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. 

812  As 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.   

813  TRACE 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 contra- party 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. 



 

359 
 

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. 

 Treasury 
Securities 

Agency 
Securities 

Num. 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% - - 

Above 2% Market Share: 



 

360 
 

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% - - 
Table VIII.1: ATS Market Share Analysis 
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 
a  Agency 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.” 

b The 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. 

c Trades 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 on-the-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 

                                                
814  See 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.361 
 

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 

on-the-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   

On-the-Run U.S. Treasury Securities Trading Volume 

  
Num. of 
Venues Volume 

Volume Share 
(%) 

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          0.0a 

Bilateral dealer-to-dealer trades 352 92,051 5.6 
                                                
815  See 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.  

816  See supra Section III.A. 
817  See October 15 Staff Report at 32, 35-36, 39.   
818  One 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. 



 

362 
 

Bilateral dealer-to-customer trades 333 604,823 37.0 
Bilateral dealer-to-PTF trades 97 7,250 0.4 
Total - 1,634,671 100.0 
Table VIII.2: On-the-run U.S. Treasury Securities Trading Volume 
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. 
a The percentage to the nearest non-zero is 0.02%. 
b See supra notes b and c in Table VIII.1  
c FINRA 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.     
e Total 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. 
f We 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 

                                                
819  All 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.   



 

363 
 

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.   

Off-the-Run U.S. Treasury Securities Trading Volume 

  
Num. of 
Venues Volume 

Volume Share 
(%) 

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 0.0a 

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 
Table VIII.3: Off-the-Run U.S. Treasury Securities Trading Volume 

                                                
820  One commenter referenced that market participants trading in less liquid off-the-run 

securities are better able to find liquidity in non-ATS trading methods.  See Bloomberg 
Letter at 5 and 21-22.   

821  See supra note 193. 



 

364 
 

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. 
a The percentage to the nearest non-zero is 0.009%. 
b See supra notes b and c of Table VIII.1  
c We 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. 

Agency Securities Trading Volume 
  Num. of Venues Volume Volume Share (%) 

                                                
822  Agency 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”).   



 

365 
 

ATSs 8 31,940 12.3 
Customer trades 7 6,767 2.6 
Dealer trades 7 25,173 9.7 
PTF trades 3 1 0.0a 

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 0.0b 

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 0.0c 
Total - 264,916 100.0 
Table VIII.4: Agency Securities Trading Volume 
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. 
a The percentage to the nearest non-zero is 0.0003%. 
b The percentage to the nearest non-zero is 0.00007%. 
c The percentage to the nearest non-zero is 0.001%. 
d See supra notes b and c of Table VIII.1  
e We 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. 

 

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 



 

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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 

                                                
823  One 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. 

824  The Commission may use this information in monitoring, examinations and enforcement. 
825  These 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. 



 

367 
 

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 bank-operated 

                                                
826  Currently 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. 

827  See FINRA Letter at 2-3, stating that nearly all Government Securities ATSs currently 
are FINRA members 



 

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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   

                                                
828  See supra note 228 and corresponding text discussing TRACE reporting requirements for 

U.S. Government securities.   
829  FINRA 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 TRACE-Eligible 
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 



 

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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 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 

                                                
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.  

830  For example, the ATS may disclose order execution statistics to some customers. 
831  See supra Section II.D.2, discussing the Fair Access Rule requirements.   
832  One commenter stated that registered investment companies generally are not able to 

directly access liquidity on most Treasury interdealer platforms.  See ICI Letter at 4. 
833  See 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. 



 

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 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 up-time,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   

                                                
834  Systems up-time is a measure of the time that a computer system is running and 

available. 
835  On January 11, 2019, the largest trading platform in on-the-run U.S. Treasury Securities, 

experienced a system outage approximately from 2pm to 3:30pm 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-suffers-outage. 

836  As 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. 



 

371 
 

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. 

                                                
837  See BrokerTec Letter at 6. 
838  A 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. 

839  See 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_0
71119.pdf. 



 

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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   

                                                
840  See 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.  
841  As 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. 

842  See supra Section VIII.B.1.a, discussing information leakage and RFQs. 



 

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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 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.   



 

374 
 

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.   

Limit Order Book RFQ Stream Axesa Voice 

26.3 29.9 10.4 33.4 
Table VIII.5: U.S. Treasury Securities Trading Protocol Market Share  
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.” 



 

375 
 

 

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. 

                                                
843  One 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. 

844  See supra Section VIII.B.2.a.i for additional discussion on the role of PTFs in the 
Treasury market. 



 

376 
 

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 

The primary customers of Communication Protocol Systems are those market 

participants in the dealer-to-customer market.  Customers seeking to trade government securities 

may find the sophistication and infrastructure required to trade on ATSs to not be cost-effective 

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 

                                                
845  See supra Section VIII.B.2.a.i 
846  See 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. 



 

377 
 

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 Systems847 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 non-ATS 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 

                                                
847  See 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. 

848  See 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. 

849  The 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 



 

378 
 

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 

                                                
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.  

850  See 
http://finramarkets.morningstar.com/BondCenter/TRACEMarketAggregateStats.jsp?bon
dType=C.  While there are many types of corporate bonds, most tend to fall within two 
categories: investment-grade 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 investment-grade bonds, but are also subject to a 
higher degree of risk.   



 

379 
 

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 investment-grade 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 can differ along 

                                                
851  See Healthy Markets Letter at 8. 
852  See id. 
853  See https://vegaeconomics.com/trends-in-the-us-corporate-bond-market-since-the-

financial-crisis.  
854  See 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/press-releases/documents/a-financial-system-capital-markets-final-final.pdf 
(“Treasury Report”) at 85. 

855  See Bloomberg Letter at 9, citing Financial Times at 
https://www.ft.com/content/3175772a-7ea0-3b61-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. 

856  See 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 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. 



 

380 
 

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 

                                                
857  See https://fredblog.stlouisfed.org/2015/10/illiquidity-in-the-bond-market/.  
858  See MarketAxess Letter at 3.   
859  One 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. 

860  See, 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. 

861  See 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-reveals-record-buy-side-acted-liquidity-
providers-covid-19-crisis/.  

862  See TRACE Monthly Volume Files, available at https://www.finra.org/finra-data/browse-
catalog/trace-volume-reports/trace-monthly-volume-files.  One commenter referenced381 
 

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 

non-displayed 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 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-
bond-exchange.  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/a-forgotten-investment-worth-considering-exchange-
traded-bonds-11578279781.  (Retrieved from Factiva database).   

864  See 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). 

865  See 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.  



 

382 
 

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 

broker-dealer.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 volume868 are required to comply with the requirements of 

the Fair Access Rule.869  Moreover, ATSs that trade in corporate debt must also comply with the 

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 

                                                
866  See 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.  
867  See supra Section VIII.B.2.b.ii for additional discussion on the effects of a lack of public 

disclosure. 
868  An 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. 

869  See supra Section II.D.2.  Also, see supra Section VIII.B.2.b.ii describing the impact of 
the Fair Access Rule. 

870  See 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. 

871  See 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 



 

383 
 

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 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 

                                                
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).   

872  See supra note 829 describing exemptions for ATS transaction reporting to TRACE.  
873  See, e.g., Edwards, A. K., Harris, L. E., & Piwowar, M. S. (2007). Corporate bond 

market transaction costs and transparency. The Journal of Finance, 62(3), 1421-1451. 
874  See 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.  



 

384 
 

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 pre-trade 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 

                                                
875  See Bloomberg Letter at 12. 
876  See 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-rewrites-the-corporate-bond-liquidity-playbook/.  

877  See McPartland, Kevin (2020), “All Electronic Trading is Not Created Equal,” 
Greenwich Associates, available at https://www.greenwich.com/fixed-income/all-
electronic-trading-not-created-equal. 

878  See McPartland, Kevin (2021), “Making the Case for Portfolio Trading,” Greenwich 
Associates, available at https://www.greenwich.com/fixed-income/making-case-
portfolio-trading.  



 

385 
 

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 

                                                
879  One commenter stated that submitting multiple securities as a portfolio of liquid and less-

liquid securities enables a liquidity provider to potentially offer better prices than trading 
each security individually.  See Bloomberg Letter at 13. 

880  See McPartland, Kevin (2020), “All Electronic Trading is Not Created Equal,” 
Greenwich Associates, available at https://www.greenwich.com/fixed-income/all-
electronic-trading-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-portfolio-
trading-rewrites-the-corporate-bond-liquidity-playbook/.  

881  See 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.”  



 

386 
 

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 

                                                
882  See “Net Spotting: Reducing Trading Costs for U.S. Corporate Bonds,” (2021), 

Tradeweb, available at https://www.tradeweb.com/newsroom/media-
center/insights/commentary/net-spotting-reducing-trading-costs-for-u.s.-corporate-
bonds/. 

883  See id. 
884  See 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.  
885  See, 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/9d6e520e-3ba8-11ea-b232-000f4477fbca.  

886  See supra Section VIII.B.2.b for a discussion of PTFs’ role in government securities 
ATSs.   



 

387 
 

ATS, such as requirements for robust systems.887  The Commission 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   

                                                
887  See 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 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. 

888  See 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. 

889  See, e.g., Bloomberg Letter at 18 and 23 and MarketAxess Letter at 12. 
890  One 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. 



 

388 
 

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-to-dealer 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 

                                                
891  One 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.  

892  See 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. 

893  One commenter stated that approximately 32 percent of investment-grade and 23 percent 
of high-yield corporate bond daily dollar volumes are executed electronically.  See BDA 
Letter at 1. 

894  See 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/market-transparency-
reporting/trace/faq/reporting-corporate-and-agencies-debt.  



 

389 
 

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 

                                                
895  See 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. 

896  See, e.g., ICI Letter at 6 and MarketAxess Letter at 3. 



 

390 
 

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. 

 

                                                
897  See 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). 

898  See Section VIII.B.1 for a discussion on the difference between disclosed and anonymous 
RFQs. 

Anonymous 
RFQ 

Disclosed 
RFQ 

Auction Limit 
Order 
Book 

Non-
Displayed 

Venuea 

Portfolio 
Trading 

Stream 
Axesb 

Voice 

4.8 13.9 3.0 2.4 0.1 2.2 2.2 71.4 

Table VIII.6: Corporate Debt Securities and Dollar Volume Share by Trading Protocol  
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.” 



 

391 
 

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 

                                                
899  See Hendershott, T., & Madhavan, A. (2015). Click or call? Auction versus search in the 

over-the‐counter market. The Journal of Finance, 70(1), 419-447. 
900  See Bloomberg Letter at 9 and10, citing Treasury Report.  
901  See supra Section VIII.B.2.d. 



 

392 
 

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, 

                                                
902  See Tradeweb Letter at 6.  
903  See Municipal Securities Rulemaking Board, Muni Facts, available at 

https://www.msrb.org/News-and-Events/Muni-Facts. 
904  See Municipal Securities Rulemaking Board, Municipal Trade Statistics, available at  

https://emma.msrb.org/MunicipalTradeStatistics/ByTradeCharacteristic.aspx.  
905  See “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. 



 

393 
 

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 around one million unique bonds valuing $3.9 

trillion.909   

                                                
906  See 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. 

907  See 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. 

908  See “2021 Municipal Market Trading Update,” (2021), Municipal Securities Rulemaking 
Board, available at https://www.msrb.org/Market-Topics/Reports. 

909  See 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 



 

394 
 

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 

                                                
municipal securities and one million unique municipal bonds, compared to 30,000 unique 
corporate bonds). 

910  See “Analysis of Municipal Securities Pre-Trade Data from Alternative Trading 
Systems” (2018), Municipal Securities Rulemaking Board, available at 
https://www.sec.gov/spotlight/fixed-income-advisory-committee/msrb-staff-analysis-of-
municipal-securities-pre-trade-data.pdf.  

911  See Li, D., & Schürhoff, N. (2019). Dealer networks. The Journal of Finance, 74(1), 91-
144. 

912  See Schultz, P. (2013). State taxes, limits to arbitrage and differences in municipal bond 
yields across states. Unpublished working paper. University of Notre Dame. 

913  See “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. 



 

395 
 

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, 

                                                
914  The 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.   

915  See SIFMA letter at 11. 
916  See “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. 

917  See 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. 

918  See id. 



 

396 
 

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 Rule923 and with the Capacity, Integrity, and Security Rule.924  

                                                
919  See id.  The paper defines institutional-size trades as trades greater than $100,000, and 

retail-size 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. 

920  See “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. 

921  See “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. 

922  See supra note 866 and Section VIII.B.2.a.ii for a discussion of the impact of some of the 
elements of Regulation ATS. 

923  An 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. 

924  See 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 

https://www.sec.gov/tm/faq-regulation-ats-fair-access-rule


 

397 
 

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 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 

                                                
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). 

925 The 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-the-MSRB. 

926  See 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. 

927  See 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. 

928  See Regulatory Notice 2015-07, Municipal Securities Rulemaking Board, May 26, 2015, 
available at https://www.msrb.org/Rules-and-Interpretations/Regulatory-
Notices?type=All&filter=2015.   



 

398 
 

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. 

                                                
929  See id. 
930  See Municipal Securities Rulemaking Board, MSRB Rule G-43.  
931  See SIFMA, “The Role of Municipal Securities Broker’s Brokers in the Municipal 

Markets,” 2017. 
932  See “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.  

933  See “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.  



 

399 
 

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 

                                                
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.  

935  See Regulatory Notice 2015-07, Municipal Securities Rulemaking Board, May 26, 2015, 
available at https://www.msrb.org/Rules-and-Interpretations/Regulatory-
Notices?type=All&filter=2015.   

936  One commenter estimated only 15 percent of daily dollar trading volume in municipal 
bonds is executed electronically.  See BDA Letter at 1. 

937  See 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. 



 

400 
 

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 

dealer-customer 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 MSRB-member 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 

                                                
938  See Harris, L. E., & Piwowar, M. S. (2006). Secondary trading costs in the municipal 

bond market. The Journal of Finance, 61(3), 1361-1397. 
939  See “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/Market-
Topics/~/link.aspx?_id=9089AC4BA1F144B388D090177FADCDD6&_z=z.  

940  See 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.401 
 

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 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.  

                                                
941  See “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.  

942  See “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.  

943  See id. 
944  See id. 
945  See Section VIII.B.3. 
946  See ICI Letter at 6-7. 



 

402 
 

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 

                                                
947  See 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. 

948 See “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. 



 

403 
 

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 

                                                
949  See Regulation NMS Rules 600(b)(46) and (47) (17 CFR 242.600(b)(46) and (47)).  
950 See 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).  

951  See CBOE Historical Market Volume Data, available at 
https://www.cboe.com/us/equities/market_statistics/historical_market_volume/market_hi
story_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).  

952  There 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. 

953  This 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. 



 

404 
 

issue shares that can be bought or sold throughout the day on securities exchanges in the 

secondary market at a market-determined 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  

                                                
954 See https://www.icifactbook.org/21_fb_ch4.html. 
955  See id.  
956  See id. 
957  The 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. 

958  See https://www.finra.org/filing-reporting/oats/oats-reportable-securities-list/. 
959  See “Unraveling the Mystery of Over-the-Counter Trading” (2016), FINRA, available at 

https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading. 
960  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.    



 

405 
 

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 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 placements964 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 

                                                
961  See Andrew Ang et al., Asset Pricing in the Dark: The Cross-Section of OTC Stocks, 26 

Rev. Fin. Studs. 2985–3028 (2013).  
962  See “Unraveling the Mystery of Over-the-Counter Trading” (2016), FINRA, available at 

https://www.finra.org/investors/insights/unraveling-mystery-over-counter-trading. 
963  See https://www.sec.gov/reportspubs/investor-

publications/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.   

964  Unregistered 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.   



 

406 
 

governed by 17 CFR 230.144 (Securities Act 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 off-exchange 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   

                                                
965  See https://www.sec.gov/reportspubs/investor-publications/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). 

966  See, e.g., Private Equity Exchange (http://peqx.com/); Nasdaq Private Market 
(https://www.nasdaq.com/secondmarket). 

967 See https://www.finra.org/filing-reporting/otc-transparency/ats-quarterly-statistics. 
968  See Market Data Infrastructure Final Rule, Release No. 90610 (Dec. 9, 2020), available 

at https://www.sec.gov/rules/final/2020/34-90610.pdf. 



 

407 
 

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 SCI970 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 

                                                
969  See SEC Release No. 34-83663, “Regulation of NMS Stock Alternative Trading 

Systems,” available at https://www.sec.gov/rules/final/2018/34-83663.pdf.  
970  An 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. 

971  An 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. 

972  These include FINRA/Nasdaq TRF Carteret, FINRA/Nasdaq TRF Chicago, and 
FINRA/NYSE TRF.  See https://www.finra.org/filing-reporting/trf/trf-exchange-
participants. 



 

408 
 

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 

Members974 that receive or originate orders975 in Eligible Securities976 are required to report any 

Reportable Event977 to the Consolidated Audit Trail (CAT), which is designed to capture 

customer and order event information from the time of order inception through routing, 

                                                
973 See 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).  

974  The 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).   

975  Section 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.   

976  Section 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 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. 

977  According 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. 



 

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cancellation, modification, or execution in a single, consolidated data source.  The Participants978 

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 

                                                
978  The Participants are the national securities exchanges and national securities associations 

who collectively control and operate the CAT.   
979  See 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. 

980 See https://www.finra.org/filing-reporting/otc-transparency/ats-quarterly-statistics.  Note 
that this dataset aggregates volume across two OTC Link LLC-operated ATSs under the 
label OTC LINK ECN ATS.   

981  Rule 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.” 

982  For 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; 



 

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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 FINRA-operated 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 

                                                
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 

983  See Cass Sanford, Understanding the Expert Market, OTC MARKETS BLOG (March 25, 
2021), available at https://blog.otcmarkets.com.  

984  See Brüggemann, 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. 

985 See https://www.finra.org/rules-guidance/notices/21-38.  
986  See 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.  



 

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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 SCI991 and the Fair Access Rule if volume thresholds are met.992  

                                                
987  See https://www.finra.org/rules-guidance/notices/21-28.  
988  FINRA Rule Series 6620 and 7300 govern OTC and restricted equity trade reporting to 

FINRA Facilities.  See https://www.finra.org/filing-reporting/market-transparency-
reporting/trade-reporting-faq.  

989  See supra note 973.  
990  See supra notes 974 to 979 and corresponding discussion. 
991  An 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 self-regulatory organization, such 
as FINRA. 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. 

992  An 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 



 

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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 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 

                                                
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.  

993  See 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. 

994  See 15 U.S.C. 78s(b)(1). 
995  See 15 U.S.C. 78s(b). 



 

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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 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.     

                                                
996  See, 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). 
997  See 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).  



 

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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 non-ATS 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   

                                                
998  On 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/icap-adds-to-
equity-rfqs/. 

999  See 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/nasdaqs-proposal-improve-trading-environment-small-
and-medium-growth-companies-and.   

1000  See “RFQ for Equities: One Year On,” (2019), Tradeweb, available at 
https://www.tradeweb.com/newsroom/media-center/insights/blog/rfq-for-equities-one-
year-on/.  

1001  See, e.g., McDowell, Hayley.  (2018, October 23).  “Buy-side throws doubt on RFQ for 
equities as ‘last chance saloon’ for liquidity,” THETRADE, available at 



 

415 
 

 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.  

                                                
https://www.thetradenews.com/buy-side-throws-doubt-rfq-equities-last-chance-saloon-
liquidity/.  

1002  See, 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-a3db-
1fe89bedc16e. 

1003  See, 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.  

1004  See supra Section VIII.B.3.b for a discussion of portfolio trading on Communication 
Protocol Systems in the corporate bond market. 



 

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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 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, 

                                                
1005  See CAT FAQ B3, available at https://www.catnmsplan.com/faq. 
1006  See CAT FAQ B45, available at https://www.catnmsplan.com/faq.  
1007  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.   



 

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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 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 non-broker-dealers, who therefore would not currently be subject to the 

                                                
1008  See supra note 982. 
1009  See 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.   



 

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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 

                                                
1012  See supra Section III.B.1.   
1013  See Tuttle, L. A. (2014). OTC trading: Description of non-ATS OTC trading in National 

Market System stocks. DERA White Paper. 
1014  See Market Data Infrastructure Final Rule, Release No. 90610 (Dec. 9, 2020), available 

at https://www.sec.gov/rules/final/2020/34-90610.pdf. 
1015  See 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.” 



 

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volume than ATS trading volume.1016  Additionally, single-dealer platforms (SDPs) accounted 

for nine percent of off-exchange 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 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.  

                                                
1016  See 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. 

1017  SDPs do not permit participants to post liquidity, but rather offer bilateral trading with 
the counterparty operating the venue.  See id. 

1018  See, 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-touch-execution-consulting-services-and-
performance-driving-technologies-spell.  



 

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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 off-exchange 

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, 

                                                
1020  See 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).  

1021  See id.  
1022  See, 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.  

1023  See, 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.421 
 

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 

                                                
1024  See OCC Monthly & Weekly Volume Statistics, available at 

https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-
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. 

1025  See Bennett, Jay, John Colon, and John Feng. (2010). FIA, available at 
https://secure.fia.org/files/css/magazinearticles/article-1446.pdf. 

1026  See Thyagaraju Adinarayan, “Retail trading fever drives U.S. equity option volumes to 
record monthly high”, Reuters,  (2021, February 3). (Retrieved from Factiva database). 

1027  See “What Is OCC?” The Options Clearing Corporation, available at 
https://www.theocc.com/Company-Information/What-Is-OCC. 



 

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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 

                                                
1028  See https://www.sec.gov/rules/final/34-43591.htm. 
1029  See “Liquidity Management Software For US Listed Options Market”, DASH Financial, 

available at https://dashfinancial.com/execution-services/dash-ats/. 



 

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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 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 

                                                
1030  See supra notes 974 to 979 and corresponding discussion. 
1031 See “Request-for-Quote Options Trading”, Tradeweb, available at 

https://www2.tradeweb.com/optionsweb. 



 

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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 agreements1033 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 

                                                
1032  See supra notes 1005 and 1006 and corresponding discussion. 
1033  See 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. 

1034  See 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. 

1035  See, 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/. 



 

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The Commission estimates that there are currently 4 ATSs1036 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 

                                                
1036  These ATSs are Current Government Securities ATSs.  See supra note 5. 
1037  See, 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-reports-
september-2021-total-volume-of-$21.7-trillion-and-average-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/media-
room/press-
releases/2021/7/02/cme_group_reportsq2andjune2021monthlymarketstatistics.html; 
“MarketAxess Announces Monthly Volume Statistics for September 2021,” (2021). 
MarketAxess, available at https://investor.marketaxess.com/news-releases/news-release-
details/marketaxess-announces-monthly-volume-statistics-september-2021; 
“MarketAxess 3Q21: Stat Sheet,” (2021), MarketAxess, available at 
https://www.marketaxess.com/pdf/match-repo-stat-sheet.pdf; “GLMX Gains ATS and 
Broker-Dealer Status,” (2018). THETRADE, available at 
https://www.thetradenews.com/glmx-gains-ats-broker-dealer-status/  

1038  See “Bloomberg launches electronic repo trading system,” (2005), Finextra, available at 
https://www.finextra.com/newsarticle/14580/bloomberg-launches-electronic-repo-
trading-system.  



 

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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   

                                                
1039  See supra note 521 defining triparty repos. 
1040  See 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.  

1041  See “6730. Transaction Reporting”, FINRA, available at https://www.finra.org/rules-
guidance/rulebooks/finra-rules/6730  

1042  See 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-centrally-cleared-transactions-in-the-us-repurchase-agreement-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 



 

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The Commission is unable to determine the full scope of the role 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 

                                                
agencies is consolidated and produced quarterly by the Federal Reserve Board in the 
form of the Financial Accounts of the United States (Z.1).    

1043  See https://www.greenwich.com/fixed-income-fx-cmds/understanding-us-fixed-income-
market.  

1044  See https://www.finra.org/finra-data/browse-catalog/trace-volume-reports/trace-monthly-
volume-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 



 

428 
 

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 

                                                
Securities (CMBS). See https://www.finra.org/finra-data/browse-catalog/trace-volume-
reports/about-trace-monthly-volume-reports for definitions. 

1045  See Bessembinder, H., Maxwell, W. F., & Venkataraman, K. (2013). Trading activity and 
transaction costs in structured credit products. Financial Analysts Journal, 69(6), 55-67.  

1046  See He, A., & Mizrach, B. (2017). Analysis of securitized asset liquidity. Research Note, 
FINRA Office of the Chief Economist. 

1047  See https://www.finra.org/finra-data/browse-catalog/trace-volume-reports/trace-monthly-
volume-files. 

1048  Note 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. 



 

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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 

                                                
1049  See “ABS East 2014: Securitization Shrugs off Electronic Trading,” (2014). American 

Banker, available at https://asreport.americanbanker.com/news/abs-east-2014-
securitization-shrugs-off-electronic-trading.  

1050  See 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). 

1051  See https://www.finra.org/media-center/news-releases/2015/finra-brings-transparency-
asset-backed-securities-market.  



 

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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 broker-dealer.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 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 

                                                
1052  As 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 note 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.  

1053  See supra Section II.A. 
1054  See Regulation ATS Adopting Release at 70903-07 for a discussion of benefits and costs 

for registering as a national securities exchange. 
1055  See generally supra Section II.D.1 (discussing the national securities exchange 

registration requirements under Sections 6 of the Exchange Act).    



 

431 
 

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 

                                                
1056  See supra Section II.B.3. 



 

432 
 

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., non-broker-dealer-

operated Communication Protocol Systems).1058  Registering as a broker-dealer would require, 

                                                
1057  The proposed amendments would enhance regulatory oversight and investor protection 

by requiring: non-broker-dealer-operated Communication Protocol Systems and bank-
operated 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. 

1058  Non-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-broker-dealer-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 



 

433 
 

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-dealer-operated 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 

                                                
about a bank-operated Currently Exempted Government Securities ATS and non-broker-
dealer-operated Communication Protocol Systems with a broker-dealer affiliate adopting 
a registered affiliate structure to comply with the proposed Rule 301(b)(1).  

1059  The 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. 

1060  FINRA 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 TRACE-Eligible Securities, which FINRA Rule 6710 defines to include 
any debt security that is U.S. dollar-denominated 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 Government-Sponsored 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.  



 

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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 non-broker-dealer-operated Communication Protocol Systems.1061  

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 

                                                
1061  The 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 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. 

1062  One 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. 



 

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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 recordkeeping1064 and reporting 

requirements1065 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 

                                                
1063  Although 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. 

1064  See supra Section II.D.2 for a discussion about the requirements of Rules 302 and 303. 
1065  Rule 301(b)(9) would require filing of Form ATS-R. 
1066  One 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. 



 

436 
 

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 ATSs1067 and 

Communication Protocol Systems that are NMS Stock ATSs1068 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.    

                                                
1067  Government Securities ATSs would include Currently Exempted Government Securities 

ATSs, Current Government Securities ATSs, and Communication Protocol Systems that 
trade government securities. 

1068  The 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. 



 

437 
 

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 

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 

                                                
1069  See SIFMA Letter at 4. 



 

438 
 

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 participants1071 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 

                                                
1070  Form 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. 

1071  Market 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.  

1072  One 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 



 

439 
 

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. 

                                                
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. 

1073  As 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.  



 

440 
 

Furthermore, the proposed requirement that Government Securities ATSs1074 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. 

                                                
1074  Government Securities ATSs would include Currently Exempted Government Securities 

ATSs, Current Government Securities ATSs, and Communication Protocol Systems that 
trade government securities. 

1075  For 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.441 
 

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 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 

                                                
1077  The 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. 



 

442 
 

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 thresholds1081 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  

                                                
1078  See also supra note 833 and accompanying text. 
1079  The 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. 

1080  See supra Section V.A.3. 
1081  See supra Section III.B.4 for discussion about volume thresholds. 
1082  One 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. 

1083  The 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. 



 

443 
 

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   

                                                
1084  Communication 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.   

1085  This 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 



 

444 
 

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-dealer-operated 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, bank-operated Currently Exempted 

Government Securities ATSs and non-broker-dealer-operated Communication Protocol Systems 

would be required to report certain transactions to an SRO for public dissemination, which 

would help enhance price discovery by providing the market with better post-trade price 

transparency in the government securities market and other securities markets in which the 

Communication Protocol Systems provide trading services.1087 

                                                
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. 

1086  The proposed amendments would help enhance the price discovery process and liquidity 
in securities markets through: applying the broker-dealer 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. 

1087  FINRA 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-dealer-



 

445 
 

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 

                                                
operated 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.  

1088  The 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. 

1089  See also supra note 838 and accompanying text. 



 

446 
 

price discovery1090 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 

                                                
1090  See 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.   

1091  See supra Section VIII.B.2.a.ii for a discussion of Government Securities ATSs of 
existing SCI entities. 



 

447 
 

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. 

                                                
1092  See Tradeweb Letter at 3.  
1093  See Tradeweb Letter at 3.  
1094      See 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-to-customer 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. 



 

448 
 

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 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 XML-based 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 

                                                
1095  The Commission estimates that no Communication Protocol System that trades NMS 

stocks would be subject to Regulation SCI. 
1096  See Regulation SCI Adopting Release, supra note 3. 
1097  See 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). 

1098  See supra Section V.B.  



 

449 
 

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 



 

450 
 

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 Costsa and Other Compliance Costsb 

 Number Aggregate Aggregate 
Type of Entity of Entities Initial Costs Ongoing Costs 
Communication Protocol 
Systems (Government 
Securities ATS) 

4 $2.4 million             
~ $6.6 millionc 

$2.4 million             
~ $5.1 milliond  

Currently Exempted 
Government Securities ATSs 

7 $1.5 million             
~ $3.5 millione 

$1.3 million             
~ $2.7 millionf 

Current Government Securities 
ATSs 

17 $1.4 million             
~ $3.5 milliong 

$1.3 million             
~ $2.6 millionh 

Communication Protocol 
Systems (NMS Stock ATS) 

4 $209,000i $59,000j 

Current NMS Stock ATSs 34 $77,000k $16,000l 
Other Communication 
Protocol Systems 

14 $2 millionm $660,000n 

Other Current ATSs 59 $374,000o $115,000p 
Subscriber -  $10,000q 
Total 139 $8 million                

~ $16 million 
$5.9 million             

~ $11 million 
                                                
1099  See id. 



 

451 
 

a See infra note 1127.    
b See id.    
c See infra Table VIII.9.    
d See id.    
e See infra Table VIII.10.    
f See id.    
g See infra Table VIII.11.    
h See id.    
i See infra Table VIII.12.    
j See id.    
k See infra Table VIII.13.    
l See id.    
m See infra Table VIII.14.    
n See id.    
o See infra Table VIII.15.    
p See id.    
q This figure represents costs per ATS subscriber.  See also infra note aa in Table VII.8.    

 

a. Compliance Costs1100 

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 

                                                
1100  Compliance costs consist of implementation costs, which are the monetized costs of PRA 

burdens and other compliance costs (non-PRA based costs).  
1101  The proposed requirements would include: broker-dealer registration requirements for 

non-broker-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 



 

452 
 

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 
Form ID filing 
Other compliance costs 
(non-PRA based) 

$900a 
$50b 

$316,000c 

$300d 
- 

$57,700e 

Reg ATS, 301(b)(2) Form ATS filing $6,400f $1,500g 

                                                
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. 

1102  The 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-the-
securities-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 x 1.1745), $570 ($485 x 1.1745) for chief compliance managers, 
$332 ($283 x 1.1745) for compliance managers, $305 ($260 x 1.1745) for senior systems 
analysts, $328 ($279 x 1.1745) for senior marketing manager, and $75 ($64 x 1.1745) for 
compliance clerks. 



 

453 
 

Reg ATS, 301(b)(5) Fair Access - $17,000h 
Reg ATS, 301(b)(6) Capacity, Integrity, and 

Security of automated 
systems 

- $5,000i 

Reg ATS, 301(b)(9) Form ATS-R filing - 
- 

$6,000j 
$500k 

Reg ATS, 301(b)(10) Written safeguards and 
procedures to protect 
subscribers’ trading 
information 

$3,200l $1,000m 

Reg ATS, 302 Recordkeeping - $3,400n 
Reg ATS, 303 Record preservation - $1,100o 
Reg ATS, 304 Form ATS-N filing $49,000p 

$43,000q 
$2,300r 

$3,300s 
$3,300t 

- 
Reg SCI Implementation costs 

(PRA based) 
$777,000u 
$388,000v 

$924,000w 
$924,000x 

Reg SCI Other compliance costs 
(non-PRA based) 

$320,000                   
~ $2.4 milliony 

$214,000              
~ $1.6 millionz 

Reg SCI Subscriber costs (non-
PRA based) 

 $10,000aa 

a Compliance Manager at $332 x 2.75 hours = $914.  See also supra note 787. 
b Compliance Manager at $332 x 0.15 hour = $50.  See also supra note 790. 
c See infra note 1120. 
d Compliance Manager at $332 x 0.95 hour = $316.  See also supra note 788. 
e See infra note 1120. 
f (Attorney at $446 x 13 hours) + (Compliance Clerk at $75 x 7.5 hours) = $6,366.  See also supra note 759. 
g (Attorney at $446 x 3 hours) + (Compliance Clerk at $75 x 2 hours) = $1,489.  See also supra note 760. 
h Attorney at $446 x 37 hours = $16,513.  See also supra note 764. 
i Attorney at $446 x 11.25 hours = $5,021.  See also supra note 766. 
j ((Attorney at $446 x 3 hours) + (Compliance Manager at $332 x 0.25 hour)) x 4 times = $6,114.  See also supra 

note 770. 
k ((Compliance Manager at $332 x 0.25 hour) + (Compliance Clerk at $75 x 0.5 hour)) x 4 times = $483.  See also 

supra note 771. 
l (Attorney at $446 x 7 hours) + (Compliance Clerk at $75 x 1 hour) = $3,199.  See also supra note 773. 
m (Attorney at $446 x 2 hours) + (Compliance Clerk at $75 x 2 hours) = $1,043.  See also supra note 774. 
n Compliance Clerk at $75 x 45 hours = $3,383.  See also supra note 776. 
o Compliance Clerk at $75 x 15 hours = $1,128.  See also supra note 777. 
p (Attorney at $446 x 57.1 hours) + (Chief Compliance Manager at $570 x 0.5 hour) + (Compliance Manager at 

$332 x 36.05 hours) + (Sr. Systems Analyst at $305 x 33.75 hours) + (Sr. Marketing Manager at $328 x 1 hour) 
+ (Compliance Clerk at $75 x 8 hours) = $48,987.  See also supra note 781. 

q (Attorney at $446 x 44.1 hours) + (Chief Compliance Manager at $570 x 0.5 hour) + (Compliance Manager at 
$332 x 36.05 hours) + (Sr. Systems Analyst at $305 x 33.75 hours) + (Sr. Marketing Manager at $328 x 1 hour) 
+ (Compliance Clerk at $75 x 1 hour) = $42,659.  See also supra note 782. 

r (Attorney at $446 x 2.5 hours) + (Compliance Manager at $332 x 1.5 hours) + (Sr. Systems Analyst at $305 x 1.5 
hours) + (Compliance Clerk at $75 x 2.5 hours) = $2,260.  See also supra note 783. 

s ((Attorney at $446 x 5.5 hours) + (Compliance Manager at $332 x 2 hours) + (Compliance Clerk at $75 x 1.9 
hours)) x 5 times = $3,262.  See also supra note 784. 

t See id. 
u The 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.   



 

454 
 

v See 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.   

x See id. 
y See infra Section VIII.C.2.a.vi for discussion about non-PRA based initial compliance costs per entity. 
z See infra Section VIII.C.2.a.vi for discussion about non-PRA based ongoing compliance costs per entity. 
aa See 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation 
SCI 

2 $2.2 million ~ $6.4 milliona $2.3 million ~ $5 millionb 

BD 
Registration 

- - - 

Fair Access 2 - $33,000c 
Other 4 $209,000d $59,000e 

Total 4 $2.4 million ~ $6.6 million $2.4 million ~ $5.1 million  
a This 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. 

b This 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. 

c This 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. 

d This 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. 

e This 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation SCI 1 $1.1 million ~ $3.2 milliona $1.1 million ~ $2.5 millionb 
BD 
Registration 

- - - 

Fair Access 3 - $50,000c 
Other 7 $365,000d $103,000e 

Total 7 $1.5 million ~ $3.5 million $1.3 million ~ $2.7 million 
a This 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. 

b This 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. 



 

455 
 

c This 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. 

d This 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. 

e This 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 Num. of 
Entities 

Aggregate Initial Costs Aggregate Ongoing Costs 

Regulation 
SCI 

1 $708,000 ~ 2.8 milliona $1.1 million ~ $2.5 millionb 

Fair Access 3 - $50,000c 
Other 17 $725,000d $64,000e 

Total 17 $1.4 million ~ $3.5 million $1.3 million ~ $2.6 million 
a This 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. 

b This 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. 

c This 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. 

d This 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. 

e This 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. 

 

Table VIII.12: Communication Protocol Systems that are NMS Stock ATSs 

Compliance Num. of 
Entities 

Aggregate Initial 
Costs 

Aggregate Ongoing 
Costs 

Regulation SCI - - - 
Fair Access - - - 
BD Registration - - - 
Other 4 $209,000a $59,000b 

Total 4 $209,000 $59,000 
a This 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. 

 

b This 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 



 

456 
 

Regulation SCI - - - 
Fair Access - - - 
Other 34 $77,000a $16,000b 

Total 34 $77,000 $16,000 
a This 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. 
b This 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 
Rule 301(b)(6) 2 - $10,000a 
Fair Access 6 - $99,000b 
BD Registration 6 $1.9 millionc $360,000d 
Other 14 $133,000e $191,000f 

Total 14 $2 million $660,000 
a This 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. 
b This 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. 
c This 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. 

d This 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. 

e This 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. 

f This cost figure is obtained by summing the ongoing implementation costs associated with Rules 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 Num. of Entities Aggregate Initial Costs Aggregate Ongoing Costs 
Rule 301(b)(6) - - - 
Fair Access - - - 
Other 59 $374,000a $115,000b 

Total 59 $374,000 $115,000 
a This 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. 
b This 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. 

  



 

457 
 

 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 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 Costs1105 

 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 

                                                
1103  See 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.  

1104  See supra Section III.B.I. 
1105  Implementation costs are the monetized costs of PRA burdens.  See also supra note 1100. 
1106  See the implementation costs associated with Rule 301(b)(10) in supra Table VIII.8. 
1107  See the implementation costs associated with Rule 302 in supra Table VIII.8. 
1108  See the implementation costs associated with Rule 303 in supra Table VIII.8. 
1109  See the implementation costs associated with Rule 301(b)(9) in supra Table VIII.8. 



 

458 
 

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 non-NMS 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 

                                                
1110  See the implementation costs associated with Rule 301(b)(2) and Rule 304 in supra Table 

VIII.8. 
1111  The 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).  

1112  The 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. 

1113  The 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). 



 

459 
 

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 considered1115: 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.   

                                                
1114  See 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. 



 

460 
 

 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 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461 
 

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 



 

462 
 

Communication Protocol Systems that are non-broker-dealers (i.e., non-broker-dealer-operated 

Communication Protocol Systems) would be subject to broker-dealer registration requirements.       

 The Commission believes that non-broker-dealer-operated 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, compared to those 

operated by broker-dealers 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 rules1116 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 membership1117 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 

                                                
1116  See supra Section II.D.2 for a discussion about FINRA rules. 
1117  See https://www.finra.org/registration-exams-ce/classic-crd/fee-schedule#examfees for 

the schedule of FINRA registration fees. 
1118  FINRA 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 



 

463 
 

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 

                                                
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. 

1119  Fees 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/$1000) 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/rules-guidance/rulebooks/finra-rules/7730.   

1120  See 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. 

1121  See 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 



 

464 
 

Commission preliminarily believes that these costs related to broker-dealer registration and 

FINRA membership are relevant to non-broker-dealer-operated Communication Protocol 

Systems without a broker-dealer affiliate.  However, these cost estimates are uncertain because 

the Commission does not have information on the estimated 6 non-broker-dealer-operated 

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 obligations1122 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-broker-dealer-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 

                                                
ongoing annual implementation costs of $300 to amend Form BD tabulated in Table 
VIII.8.   

1122  See 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.  



 

465 
 

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-dealer-operated 

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-dealer-operated 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 broker-dealer 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 

                                                
1123  See 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. 
1124  Registered Broker-dealers would be subject to requirements under the rules, such as 17 

CFR 240.15c3-1, 240.17a-1, 240.17a-3, 240.17a-4, and 240.17a-5 (Rule 15c3-1, Rule 
17a-1, Rule 17a-3, Rule 17a-4, and Rule 17a-5).    



 

466 
 

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 bank-operated Currently Exempted Government 

Securities ATS or a non-broker-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-dealer-operated Communication 

Protocol System that is affiliated with an existing broker-dealer, it would be more cost-effective 

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 broker-dealer 

entity to comply with the broker-dealer registration requirements.  Thus, the Commission expects 

that such non-broker-dealer-operated Communication Protocol Systems would choose the more 

cost-effective way of moving its trading operations to its registered broker-dealer affiliate.  

                                                
1125  See supra Section III.B.2 for a discussion about ATSs that are banks. 



 

467 
 

 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-

broker-operated 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-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.   

                                                
1126  For 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. 

1127  See Rule 304(a)(1)(iv)(B). 



 

468 
 

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  

                                                
1128  See 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. 

1129  One 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. 



 

469 
 

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   

                                                
1130  See ICE Bonds Letter I at 5.     
1131  Smaller Government Securities ATSs and Communication Protocol Systems that trade 

NMS stocks 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 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.  



 

470 
 

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, non-NMS 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.  

                                                
1132  See supra Section V.A.3 for a discussion about reasonableness and fees under the 

proposed amendments to the Fair Access Rule. 



 

471 
 

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 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 thresholds1133 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 

                                                
1133  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. 

1134  See supra note 1085. 



 

472 
 

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 

                                                
1135  The 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. 

1136  See supra note 157. 
1137  See supra note 888 (discussing commenter statements on the extent to which fixed 

incomes systems already comply with the provisions of Rule 301(b)(6)). 



 

473 
 

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 

                                                
1138  For 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. 

1139  While 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.  

1140  See BrokerTec Letter at 7. 



 

474 
 

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 third-party vendors might incur 

higher compliance costs compared to those with lower dependency on third-party systems.1145   

                                                
1141  See supra note 374 and accompanying text. 
1142  See supra Table VIII.8 for the compliance costs associated with Regulation SCI.  
1143  See Regulation SCI Adopting Release, supra note 3.  In the Regulation SCI Adopting 

Release, fixed income ATSs are excluded from the regulation. 
1144  See 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. 

1145  See 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. 



 

475 
 

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 

                                                
1146  See 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. 



 

476 
 

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 



 

477 
 

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 

                                                
1147  See supra note 467 and accompanying text. 



 

478 
 

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 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 

                                                
1148  The 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.   



 

479 
 

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 broker-dealer or operated by 

affiliated broker-dealers 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 



 

480 
 

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481 
 

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 

                                                
1149  See 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. 

1150  The 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.  



 

482 
 

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.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 

                                                
1151  The 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. 



 

483 
 

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 non-ATS 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 non-ATS 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 

                                                
1152  See 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). 

1153  Under 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 non-
broker-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-broker-dealer-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.   

1154  See ICE Bonds Letter II at 2 and 3. 



 

484 
 

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 

ATSs1156 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 

                                                
1155  See 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.  

1156  Under the proposal, bank-operated Currently Exempted Government Securities ATSs 
would be subject to the same regulatory requirements as non-bank-operated Currently 
Exempted Government Securities ATSs and Current Government Securities ATSs.  The 
Commission estimates that 1 bank-operated Currently Exempted Government Securities 
ATS exists. 

1157  Current 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 



 

485 
 

The Commission acknowledges that some Government Securities ATSs and 

Communication Protocol Systems could restructure their operations to be non-ATSs 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 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 

                                                
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.  

1158  Additionally, 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. 

1159  See supra Section VIII.C.1 for a discussion about benefits from the requirements of 
Regulation ATS and Regulation SCI. 

1160  For the purpose of this discussion, financial technology firm is interpreted to be a type of 
Communication Protocol System (e.g., RFQ system). 

1161  See Bloomberg Letter at 10 and 17.    
1162  See Bloomberg Letter at 23. 



 

486 
 

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 costs1165 

                                                
1163  For 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 Section IV.A. 

1164  See supra Section VIII.C.1. 
1165  The 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 



 

487 
 

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 

                                                
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 broker-dealer registration 
requirements. 

1166  See supra Section VIII.2.a.i for a discussion about the impact of implementation costs for 
small ATSs.   

1167  Based 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. 

1168  See supra Section VIII.C.2. 
1169  See 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 



 

488 
 

Release stated that the changes contemplated to Rule 3b-16 could end up raising costs for new 

financial technology (i.e., fintech1170) 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 

                                                
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. 

1170  For the purpose of this discussion, fintech is interpreted to be a type of Communication 
Protocol System (e.g., RFQ system).  

1171  See 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. 

1172  See 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.   



 

489 
 

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 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-dealer-operated 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 

                                                
1173  See supra Section VIII.C.3.a.i.a). 
1174  See supra Section VIII.C.2.b.  
1175  The Commission estimates there are 6 non-broker-dealer-operated Communication 

Protocol Systems without a broker-dealer affiliate.  See supra Section VIII.C.2.a.ii. 



 

490 
 

entrants who are not broker-dealers 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-dealer-operated 

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 

                                                
1176  As 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 broker-dealer 
affiliate.  See id. 

1177  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 and an ongoing 
annual cost of approximately $58,000 to maintain the broker-dealer registration and 
FINRA membership.  See id. 

1178  See id. for a discussion about the costs associated with the broker-dealer registration 
requirements under Rule 301(b)(1). 

1179  See supra note 1151 and accompanying text. 



 

491 
 

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 operations1181 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 

                                                
1180  Unlike 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).  

1181  See Rule 304(a)(1)(iv)(B). 
1182  See id. 



 

492 
 

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 

                                                
1183  See 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). 

1184  See supra Section VIII.C.1.b. 
1185  One 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. 



 

493 
 

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 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-

                                                
1186  See supra Section VIII.C.2.b (discussing the indirect costs to market participants related 

to the requirements of the Fair Access Rule).  
1187  See supra Section VIII.C.2.b. 



 

494 
 

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 

                                                
1188  See id. 
1189  Under 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. 

1190  See supra Section VIII.C.1.b for a discussion about benefits from public disclosure of 
Form ATS-N. 



 

495 
 

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 

                                                
1191  See supra note 1151 and accompanying text for a discussion on the effects of ATSs 

exiting the market for trading services.  
1192  Under 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.   

1193  See supra Section IV.A for a discussion about fee amendments on Form ATS-N. 



 

496 
 

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   

The public disclosure of a Government Securities ATS’s or Communication Protocol 

System that trades NMS stock’s previously non-public 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 

                                                
1194  Under 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). 

1195  Currently, 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 change, bringing it more in line with the notice timeline in which 
exchanges can initiate fee changes. 



 

497 
 

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 

                                                
1196  See supra note 1151 and accompanying text for a discussion on the effects of ATSs 

exiting the market for trading services. 
1197  See supra note 467 and accompanying text. 
1198  See 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. 



 

498 
 

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 non-ATSs 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 

                                                
1199  See ICE Bonds Letter I at 5 and ICE Bonds Letter II at 4.   
1200  See supra Section VIII.C.3.a.i.a). 
1201  NMS 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 



 

499 
 

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 non-ATS 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 

                                                
Regulation SCI would affect competition as discussed in the Regulation SCI Adopting 
Release. 

1202  The 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. 



 

500 
 

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 systems1203 on behalf of SCI ATSs.1204  If Regulation SCI imposes 

compliance costs on such vendors, the compliance costs would affect the competition 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 third-party 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  

                                                
1203  See supra note 348 for the definition of indirect SCI systems.  
1204  See supra Section VIII.C.2.a.vi.501 
 

 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-time1209 for ATSs and would also promote more 

robust systems that directly support execution facilities, order matching, and the dissemination of 

                                                
1205  See 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).   

1206  See supra Section VIII.C.1.b. 
1207  See id. 
1208  See, 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). 

1209  Systems up-time is a measure of the time that a computer system is running and 
available. 



 

502 
 

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 

                                                
1210  See supra Section VIII.C.1.c.   
1211  Based 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. 

1212  See supra Section VIII.C.2.b. 



 

503 
 

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 



 

504 
 

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 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 

                                                
1213  As 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).  



 

505 
 

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 

                                                
1214  See supra Section VIII.C.1.b. 



 

506 
 

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 

                                                
1215  See 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. 

1216  As 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.  



 

507 
 

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 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 

                                                
1217  See supra Section VIII.C.1.c. 



 

508 
 

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.  

                                                
1218  See supra Section VIII.C.2.a. 
1219  See 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. 



 

509 
 

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 

                                                
1220  The 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 broker-dealers that already 
operate one or more ATSs.   

1221  See supra Sections VIII.C.2.a.iv and VIII.C.3.a.i.e.  



 

510 
 

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, 

                                                
1222  See 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. 
1223  See supra Section VIII.C.1.c. 



 

511 
 

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 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 



 

512 
 

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    

                                                
1224  As 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 broker-dealers, would appropriately regulate 
a market place that brings together buyers and sellers of securities.  See supra Section II. 

1225  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 national securities exchanges.  See supra note 1056 and 
accompanying text. 

1226  See supra Section VIII.C.1.a. 



 

513 
 

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 

                                                
1227  See 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. 

1228  See supra Section VIII.C.1.c. 
1229  See supra Section VIII.C.2.   



 

514 
 

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 human-readable.1232  This alternative might include numerical detail 

tagging of quantitative disclosures (e.g., platform-wide 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 

                                                
1230  See supra Section VIII.C.2.b. 
1231  See 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. 

1232  Such 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, 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. 

1233  See supra Sections IV.D.4.y and IV.D.4.t. 



 

515 
 

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 

                                                
1234  See 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. 



 

516 
 

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. 



 

517 
 

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. 



 

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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 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 mortgage-backed 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 broker-dealers would help lead to these benefits?  Do you believe that the proposed 

amendments would lead to improvements in the safeguarding of confidential information? 



 

519 
 

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 broker-dealer 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 



 

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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521 
 

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 



 

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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. 

X. Regulatory Flexibility Act Certification 

Section 3(a) of the Regulatory Flexibility Act of 19801236 (“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 17 CFR 240.17a-5(d) (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 

                                                
1235  5 U.S.C. 603. 
1236  5 U.S.C. 603(a). 
1237  5 U.S.C. 605(b). 
1238  Although 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). 



 

523 
 

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 broker-dealers, 

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 broker-dealers.1242  The Commission 

examined recent FOCUS data for the 17 broker-dealers 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 broker-dealer 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 

                                                
1240  See 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).  

1241  See supra Section III.B.2.  See also 17 CFR 242.301(b)(1).  
1242  See 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.  



 

524 
 

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 broker-dealer 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. 



 

525 
 

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   



 

526 
 

 (xxiii) Form ATS-R (§ 249.638 of this chapter).     

  *  *  *  *  * 

PART 240–GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1934 

3. The general authority citation for part 240 continues to read as follows: 

Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 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, non-discretionary 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)  *  *  *   



 

527 
 

(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 broker-dealer’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: 



 

528 
 

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]. 



 

529 
 

(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) introductory 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 paragraph (b)(5)(i)(C): 



 

530 
 

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); 

j. Removing paragraph (b)(5)(iii); 

k. Redesignating paragraph (b)(5)(ii) as paragraph (b)(5)(iii) and revising the newly 

redesignated 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”; 

p. In paragraph (b)(9)(ii):  

i. Removing the words “Separately file” and adding “File” in their place; and 

ii. Removing the phrase “for transactions in NMS stocks and transactions in 

securities other than NMS stocks”. 



 

531 
 

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 this chapter, 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]. 



 

532 
 

* * * * * 

 (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 self-regulatory 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 



 

533 
 

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.   



 

534 
 

(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 broker-dealer, 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 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. 

* * * * * 



 

535 
 

§ 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; 



 

536 
 

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):  



 

537 
 

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 paragraph heading and adding a period in its 

place; and 

ii.  Adding “, or any extended review period,” after “the expiration of the review period”; 

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 

its 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) 



 

538 
 

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 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 



 

539 
 

(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”; 



 

540 
 

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541 
 

(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 

iii.  “[OFFICIAL USE ONLY]”. 

i.  Revising Items 2 through 5. 

j.  Removing Items 6 through 11. 



 

542 
 

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:   CRD Number:    
Filing date:    SEC File Number: 8  

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. 

FORM ATS 

*     *     *     *     * 

A. GENERAL INSTRUCTIONS 

*     *     *     *     * 

3. CONTACT EMPLOYEE - The individual listed as the contact employee must be 
authorized to receive all contact information, communications and mailings and be 
responsible for disseminating that information within the alternative trading system’s 
organization. 

4. EDGAR FILING - Any report required to be submitted pursuant to Rule 301 of 
Regulation ATS shall be prepared, formatted, and submitted in accordance with 
Regulation S-T and the EDGAR Filer Manual. 

5. EDGAR ACCEPTANCE - A filing that is defective may be rejected and not be 
accepted by the EDGAR system. Any filing so rejected shall be deemed not to have been 
filed.  See generally Regulation S-T (17 CFR part 232). 



 

543 
 

6. RECORDKEEPING - A copy of this Form ATS must be retained by the ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request.  

7. PAPERWORK REDUCTION ACT DISCLOSURE  

• *    *    * 

• *    *    * 

• *    *    * 

• *    *    * 

• It is estimated that an alternative trading system will spend approximately 
20.5 hours completing the initial operation report on Form ATS, 
approximately 5 hours preparing each amendment to Form ATS, and 
approximately 2 hours preparing a cessation of operations report on Form 
ATS.  

• *    *    * 

• All reports provided to the Commission on Form ATS (except for types of 
securities traded provided on Form ATS and Form ATS-R) will be afforded 
confidential treatment and will be available only to the examination of 
Commission staff, state securities authorities, and the self-regulatory 
organizations. Subject to the provisions of the Freedom of Information Act, 5 
U.S.C. 522 (“FOIA”) and the Commission’s rules thereunder (17 CFR 
200.80(b)(4)(iii)), the Commission does not generally publish or make 
available information contained in any reports, summaries, analyses, letters, or 
memoranda arising out of, in anticipation of, or in connection with, an 
examination or inspection of the books and records of any person or any other 
investigation. 

8. For filings made pursuant to Rule 301(b)(2)(ii) through (iv) (i.e., Amendments to the 
Initial Operation Report), attach to the filing an Exhibit C marked to indicate additions to 
or deletions from Items 1 through 6, as applicable.  Do not include in Exhibit C Items that 
are not changing. 

 
B. EXPLANATION OF TERMS 

*     *     *     *     * 

NEWLY DESIGNATED ATS – Shall mean an alternative trading system operating as of 
[effective date of the final rule] that meets the criteria under 17 CFR 240.3b-16(a) as of 
[effective date of the final rule] but did not meet the criteria under 17 CFR 240.3b-16(a) in 
effect prior to [effective date of the final rule].  17 CFR 242.300(r). 
 

*     *     *     *     * 



 

544 
 

TRADING INTEREST – Shall mean order, as defined in 17 CFR 242.300(e), 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.  17 CFR 242.300(q). 
 

*     *     *     *     * 

WARNING: Failure to keep this form current and to file accurate supplementary information on 
a timely basis, or the failure to keep accurate books and records or otherwise to comply with the 
provisions of law applying to the conduct of alternative trading systems would violate the federal 
securities laws and may result in disciplinary, administrative or criminal action.  
 
INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACTS MAY CONSTITUTE 
CRIMINAL VIOLATIONS 
 

Type of Filing (select one): 

�   Initial operation report  Rule 301(b)(2)(i)  

�   Material amendment   Rule 301(b)(2)(ii) 

�   Periodic amendment  Rule 301(b)(2)(iii) 

�   Correcting amendment  Rule 301(b)(2)(iv) 

�   Cessation of operations report Rule 301(b)(2)(v)  

• Date the ATS will cease to operate:  mm/dd/yyyy 
 

1.  Provide the following identifying information: 
A. Indicate the following: 

i. Is the organization, association, Person, group of Persons, or system 
filing the Form ATS a broker-dealer registered with the 
Commission? 

Yes No 
ii. Is the registered broker-dealer authorized by a national securities 

association to operate an ATS? 
Yes No 

B. Full name of registered broker-dealer of the ATS (“Broker-Dealer 
Operator”) as stated on Form BD:_____________________________ 

C. Full name(s) of the ATS under which business is conducted, if 
different:______________________________________________ 

D. Provide the SEC file number, CRD number, Legal Entity Identifier (if 



 

545 
 

any), and Market Participant Identifier (“MPID”) of the Broker-Dealer 
Operator: 
i. SEC File No.:__________________ 

ii. CRD No.:_____________________ 
iii. Legal Entity Identifier:___________ 

E. Provide 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: 

i. National Securities Association:  ______________________ 
ii. Effective Date of Membership:  _______________________ 

iii. MPID of the ATS:  _________________________________ 
F. Provide, if any, the website URL of the ATS:________________ 

G. Provide the primary, and if any, secondary, physical street address(es) of 
the ATS matching system:  ______________________________ 

2.  
a. Is the ATS a Newly Designated ATS? 

 
Yes No 
 

b. If this is an initial operation report for an ATS other than a Newly Designated 
ATS, the date the alternative trading system expects to commence operation:  
_________________________________ 

 
3. In a single document, provide the following: 

a. A description of classes of subscribers (for example, broker -dealer, institution, or 
retail). Also describe any differences in access to the services offered by the 
alternative trading system to different groups or classes of subscribers.  

b. A list of the types of securities the alternative trading system trades (for example, 
debt, equity, listed), or if this is an initial operation report, the types of securities it 
expects to trade. Note whether any types of securities are not registered under 
Section 12(a) of the Exchange Act of 1934 (“Exchange Act”).  

c. A list of the securities the alternative trading system trades, or if this is an initial 
operation report, the securities it expects to trade. Note whether any securities are 
not registered under Section 12(a) of the Exchange Act.  

d. The name, address, and telephone number of counsel for the alternative trading 
system.  

e. A list providing the full legal name of those direct owners reported on Schedule A 
of Form BD. 



 

546 
 

 
f. The name of any entity, other than the alternative trading system, that will be 

involved in operation of the alternative trading system, including the execution, 
trading, clearing, and settling of transactions on behalf of the alternative trading 
system. Provide a description of the role and responsibilities of each entity.  

g. A description of the manner of operation of the alternative trading system. 

h. A description of the procedures governing entry of trading interest into the 
alternative trading system. 

i. A description of the means of access to the alternative trading system. 

j. A description of the procedures governing execution, reporting, clearance, and 
settlement of transactions effected through the alternative trading system. 

k. Procedures for ensuring subscriber compliance with system guidelines. 

l. A brief description of the alternative trading system’s procedures for reviewing 
system capacity, security, and contingency planning procedures.  

m. If any other entity, other than the alternative trading system, will hold or 
safeguard subscriber funds or securities on a regular basis, provide the name of 
such entity and a brief description of the controls that will be implemented to 
ensure the safety of such funds and securities.  

4. Attach as Exhibit A, a copy of the alternative trading system’s subscriber manual and 
any other materials provided to subscribers.  

5. Attach as Exhibit B, 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.  

 Select if, in lieu of filing, the ATS certifies that the information requested 
under this Exhibit is available at the website above and is maintained on a 
continuous basis and is accurate as of the date of this filing. 

 
CONTACT INFORMATION, SIGNATURE BLOCK, AND CONSENT TO SERVICE 

Provide the following information of the Person at {ATS} prepared to respond to questions for 
this submission: 

First Name:      Last Name: 

Title: 

Email:      Telephone: 

Primary Street Address of the ATS: 



 

547 
 

Mailing Address of the ATS (if different): 

The {ATS} consents that service of any civil action brought by, or notice of any proceeding 
before, the SEC or a self-regulatory organization in connection with the alternative trading 
system’s activities may be given by registered or certified mail to the contact employee at the 
primary street address or mailing address (if different) of the ATS, or via email, at the addresses 
provided on this Form ATS. The undersigned deposes and says that he/she has executed this 
form on behalf of, and with the authority of, said alternative trading system. The undersigned and 
{ATS} represent that the information and statements contained herein, including exhibits, 
schedules, or other documents attached hereto, and other information filed herewith, all of which 
are made a part hereof, are current, true, and complete. 

Date {auto fill} {ATS} 

By: _______________________ Title____________________________ 

 
* * * * * 

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]”. 



 

548 
 

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:   CRD Number:    
Filing date:    SEC File Number: 8  

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. 



 

549 
 

FORM ATS-R 

* * * * * 

A. GENERAL INSTRUCTIONS 

* * * * * 

3. CONTACT EMPLOYEE - The individual listed as the contact employee must be 
authorized to receive all contact information, communications and mailings and be 
responsible for disseminating that information within the alternative trading system’s 
organization. 

4. EDGAR FILING - Any report required to be submitted pursuant to Rule 301 of 
Regulation ATS shall be prepared, formatted, and submitted in accordance with 
Regulation S-T and the EDGAR Filer Manual. 

5. EDGAR ACCEPTANCE - A filing that is defective may be rejected and not be 
accepted by the EDGAR system. Any filing so rejected shall be deemed not to have been 
filed. See generally Regulation S-T (17 CFR part 232). 

6. RECORDKEEPING - A copy of this Form ATS-R must be retained by the ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request. 

7. PAPERWORK REDUCTION ACT DISCLOSURE 

• *    *    * 

• *    *    * 

• *    *    * 

• *    *    * 

• It is estimated that an alternative trading system will spend approximately 4.75 
hours completing Form ATS-R. 

 
• *    *    * 

• All reports provided to the Commission on Form ATS-R (except for types of 
securities traded provided on Form ATS and Form ATS-R) will be afforded 
confidential treatment and will be available only to the examination of 
Commission staff, state securities authorities and the self-regulatory 
organizations. Subject to the provisions of the Freedom of Information Act, 5 
U.S.C. 522 (“FOIA”) and the Commission’s rules thereunder (17 CFR 
200.80(b)(4)(iii)), the Commission does not generally publish or make available 
information contained in any reports, summaries, analyses, letters, or memoranda 



 

550 
 

arising out of, in anticipation of, or in connection with an examination or 
inspection of the books and records of any person or any other investigation. 

* * * * * 

B. EXPLANATION OF TERMS 

AGENCY SECURITIES – Shall 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). 
 

* * * * * 
 

FOREIGN SOVEREIGN DEBT SECURITIES - Shall mean 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. 
 

* * * * * 
 
SUBSCRIBER - Shall mean any person that has entered into a contractual agreement with an 
alternative trading system to access such alternative trading system for the purpose of effecting 
transactions in securities or to submit, disseminate, or display trading interest on such alternative 
trading system, including a customer, member, user, or participant in an alternative trading 
system. A subscriber, however, shall not include a national securities exchange or national 
securities association. 
 
TRADING INTEREST - Shall mean an order, as defined in 17 CFR 242.300(e), 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.  17 CFR 242.300(q). 
 

* * * * * 

U.S. TREASURY SECURITIES – Shall mean a security issued by the U.S. Department of the 
Treasury.  

 

* * * * * 

 

Alternative Trading System Name:______________________________ 

Period covered by this report: _________________ to ________________ 

Type of Filing (select one): 

�   Quarterly report       Rule 301(b)(9)(i) 



 

551 
 

�   Report for an ATS that has ceased to operate  Rule 301(b)(9)(ii) 

• Date the ATS ceased to operate: mm/dd/yyyy 

 

1. Provide the following identifying information: 
A. Full name of registered broker-dealer of the ATS (“Broker-Dealer 

Operator”) as stated on Form BD:_____________________________ 

B. Full name(s) of the ATS under which business is conducted, if 
different:_____________________________________________ 

C. Provide the SEC file number, CRD number, and Legal Entity Identifier 
(if any) of the Broker-Dealer Operator: 

i. SEC File No.:__________________ 
ii. CRD No.:_____________________ 

iii. Legal Entity Identifier:___________ 
D. Provide 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 Market 
Participant Identifier (“MPID”) of the ATS: 
i. National Securities Association:  ______________________ 

ii. Effective Date of Membership:  _______________________ 
iii. MPID of the ATS:  _________________________________ 

E. Provide, if any, the website URL of the ATS:________________ 
F. Provide the primary, and if any, secondary, physical street address(es) of 

the ATS matching system:  ______________________________ 

2. Attach as Exhibit A, a list of all subscribers that were participants of the alternative 
trading system at any time during the period covered by this report. 

 
3.  Attach as Exhibit B, a list of all securities that were traded on the alternative trading 

system at any time during the period covered by this report. 
 
4. Provide the total unit and dollar volume of transactions (other than those for after-hours 

trading) in the following securities.  For securities reported in 4H-4N, report total 
settlement value in U.S. Dollars.  Enter “None,” “N/A” or “0” where appropriate. 

 
Category of Securities Total Unit Volume of 

Transactions 

Total Dollar Volume of 

Transactions 



 

552 
 

A. Listed Equity Securities    

B. Equity securities issued pursuant 
to Rule 144A of the Securities 
Act of 1933 

  

C. Penny Stock, other than any 
securities included in Items 4A-
4D above 

  

D. Other equity securities not 
included in Items 4A-4C above 

  

E. Rights and warrants   

F. Listed options   

G. Unlisted options   

H. Government securities   

i. U.S. Treasury Securities   

ii. Agency Securities   

I. Municipal securities   

J. Corporate debt securities 
i. U.S. corporate debt 

securities 
ii. Non-U.S. corporate debt 

securities 

  

K. Mortgage related securities 

L. Foreign sovereign debt securities 

  

M. Debt securities other than any 
securities included in Items 4H-
4L above and 4N-4O below 

  

  

  

 

 

 

  

  

  

  

  

  

 

 

  

  

 

  

 

 

 

 

  



 

553 
 

      N.    Repurchase agreements 

Type of 
collateral 

Overnight triparty Term triparty Overnight bilateral Term bilateral 

 Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

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 

        

Other 
securities 

        

 
i. If other securities, please describe:  _____________________________________________________ 

       
O.    Reverse repurchase agreements 

Type of 
collateral 

Overnight triparty Term triparty Overnight bilateral Term bilateral 

 Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

Total Unit 
Volume of 
Transactions 

Total Dollar 
Volume of 
Transactions 

NMS 
stocks 

        

U.S. 
Treasury 
Securities 

        



 

554 
 

 

5.  *  *  * 

C. List the types of listed options reported in Item 4F above:  __________________ 

6.         Provide the total unit and dollar volume of transactions for after-hours trading in the 
following securities.  Enter “None,” “N/A” or “0” where appropriate. 

 
Category of Securities Total Unit Volume of 

Transactions 

Total Dollar Volume of 

Transactions 

A. Listed Equity Securities    

B. Listed options   

 

* * * * * 

8. Was the ATS subject to the fair access obligations under Rule 301(b)(5) during any 
portion of the period covered by the report? 

 � Yes � No 

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 

        

Other 
securities 

        

 
i. If other securities, please describe:  _____________________________________________________ 

 

  



 

555 
 

CONTACT INFORMATION, SIGNATURE BLOCK, AND CONSENT TO SERVICE 

Provide the following information of the Person at {ATS} prepared to respond to questions for 
this submission: 

First Name:      Last Name: 

Title: 

Email:      Telephone: 

Primary Street Address of the ATS: 

Mailing Address of the ATS (if different): 

The {ATS} consents that service of any civil action brought by, or notice of any 
proceeding before, the SEC or a self-regulatory organization in connection with the 
alternative trading system’s activities may be given by registered or certified mail to the 
contact employee at the primary street address or mailing address (if different) of the 
ATS, or via email, at the addresses provided on this Form ATS-R. The undersigned 
deposes and says that he/she has executed this form on behalf of, and with the authority 
of, said alternative trading system. The undersigned and {ATS} represent that the 
information and statements contained herein, including exhibits, schedules, or other 
documents attached hereto, and other information filed herewith, all of which are made a 
part hereof, are current, true, and complete. 

Date {auto fill} {ATS} 

By: _______________________ Title____________________________    

* * * * * 

  



 

556 
 

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. 

 
  



 

557 
 

APPENDIX A – MARKED FORM ATS-N 
 
Deleted text is [bracketed]. New text is italicized. 
 
 

  
 

United States Securities and Exchange Commission 

Washington, DC   
 

FORM ATS-N 

Intentional Misstatements or Omissions of Facts May Constitute Criminal Violations 
See 18 U.S.C.1001 and 15 U.S.C. 78ff(a)

 
File No:  

{Covered[NMS Stock] ATS} is making this filing pursuant to the  
Rule 304 under the Securities Exchange Act of 1934 

 
Type of Covered ATS  

 NMS Stock ATS       

 Government Securities ATS 

 [Does the NMS Stock ATS currently operate pursuant to a Form ATS?]  Is the ATS a Legacy 
Government Securities ATS or Newly Designated ATS? 

 
Yes No 

Type of Filing (select one)  
 
 Initial Form ATS-N      Rule 304(a)(1)(i) 
 Material Amendment     Rule 304(a)(2)(i)(A)  
 Updating Amendment     Rule 304(a)(2)(i)(B)   
 Correcting Amendment       Rule 304(a)(2)(i)(C)   
 [Order Display and  

Fair Access]Contingent Amendment   Rule 304(a)(2)(i)(D) 
 Fee Amendment     Rule 304(a)(2)(i)(E) 
 

 Statement about the Form ATS-N Amendment pursuant to Instruction A.7([g]h) of this 
form:   

 
 
 

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE MERITS OR ACCURACY OF 
THE DISCLOSURES IN THIS FILING.   



 

558 
 

 
 
 

 Provide the EDGAR accession number for the Form ATS-N filing to be amended:    
 

 Notice of Cessation     Rule 304(a)(3)   
 

 Date the [NMS Stock]Covered ATS will cease to operate:  mm/dd/yyyy 
 
   Withdrawal of Form ATS-N filing 
 
Provide the EDGAR accession number for the Form ATS-N filing to be withdrawn:     



 

559 
 

Part I:  Identifying Information   
  
1. Indicate the following: 

 
a. Is the organization, association, Person, group of Persons, or system filing the Form 

ATS-N a broker-dealer registered with the Commission? 
 

Yes No 
 

b. Is the registered broker-dealer authorized by a national securities association to 
operate an ATS? 
 

Yes No 
 
2. Full name of registered broker-dealer, government securities broker, or government securities 

dealer of the [NMS Stock] ATS (“Broker-Dealer Operator”) as stated on Form BD:  
 

3. Full name(s) of [NMS Stock] ATS under which business is conducted, if different: 
 
4. Provide the SEC file number, [and] CRD number, the Legal Entity Identifier (if any), and 

Market Participant Identifier (“MPID”) of the Broker-Dealer Operator: 
 

a. SEC File No.: 
b. CRD No.: 
c. Legal Entity Identifier: 
d. MPID of the Broker-Dealer Operator:  

 
5. Provide 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 [Market Participant Identifier (“]MPID[”)] of the [NMS Stock] ATS: 

 
a. National Securities Association: 
b. Effective Date of Membership: 
c. MPID of the [NMS Stock] ATS:   

 
6. Provide, if any, the website URL of the [NMS Stock] ATS: 
 
7. Provide the primary[,] and [if any,] secondary[,] physical street address(es) of the [NMS 

Stock] ATS matching system: 
 

a. Primary address: 
 

b. Does the ATS have a secondary matching system? 
 
Yes No 
 
If yes, provide the secondary address: 

 



 

560 
 

8. Types of Securities Traded 
 

a. For an NMS Stock ATS, does the ATS make available for trading all NMS stocks?  If the 
ATS suspends trading in securities under certain circumstances, please indicate so under 
Part III, Item 20. 
 
 Yes  
 No 
 
If no, identify the securities or types of securities that the ATS does not make available 
for trading: 
 

b. For a Government Securities ATS, please indicate the types of government securities the 
ATS makes available for trading: 

 
  U.S. Treasury Securities 

  Bills:   On-the-run            Off-the-run            When-issued        
  Notes:   On-the-run            Off-the-run            When-issued 
  Bonds:   On-the-run            Off-the-run            When-issued 
  TIPS:   On-the-run            Off-the-run            When-issued 
  STRIPS:   On-the-run            Off-the-run            When-issued 
  Floating rate notes:   On-the-run            Off-the-run            When-issued 

 
  Agency Securities 

  Agency Mortgage-Backed Securities 
  Federal Agency Securities 

 
  Repurchase or Reverse Repurchase Agreements on Government Securities 

(“repos”) 
  Triparty:   Repurchase Agreement 

  Reverse Repurchase Agreement 
  Centrally Cleared 
  Non-Centrally Cleared         

  Bilateral:   Repurchase Agreement 
  Reverse Repurchase Agreement     
  Centrally Cleared 
  Non-Centrally Cleared             

  
  Other: 

If other, identify the types of government securities that the ATS makes available 
for trading: 

 
[8]9. Attach as Exhibit 1, the most recently filed or amended Schedule A of Form BD for the 

Broker-Dealer Operator disclosing information related to direct owners and executive 
officers. 

 
 Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 
filing, and that the ATS will maintain its website in accordance with the rules for561 
 

amending Form ATS-N pursuant to Rule 304(a)(2)(i) to reflect any changes to Schedule 
A of Form BD for the Broker-Dealer Operator.  
 

[9]10. Attach as Exhibit 2, the most recently filed or amended Schedule B of Form BD for the 
Broker-Dealer Operator disclosing information related to indirect owners. 

 
 Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under this Exhibit is available at the website above and is accurate as of the date of this 
filing, and that 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 
B of Form BD for the Broker-Dealer Operator. 

 
[10]11. For filings made pursuant to Rule 304(a)(2)(i)(A) through ([D]E) (i.e., Form ATS-N 

Amendments), attach as Exhibit 3 a document marked to indicate changes to “yes” or “no” 
answers or additions to or deletions from any Item in Part I, Part II, and Part III, as 
applicable, including Exhibits 1, 2, and 5.  Indicate both the Part and Item number for all 
Items that are changing.  Do not include in Exhibit 3 Items that are not changing. 

 
 
Part II: Activities of the Broker-Dealer Operator and its Affiliates 
 
Item 1:  Broker-Dealer Operator Trading Activities [on]in the ATS 

a. Are business units of the Broker-Dealer Operator permitted to enter or direct the entry of 
[orders and] trading interest [(e.g., quotes, conditional orders, or indications of interest)] 
into the [NMS Stock] ATS? 
 
Yes No 

 
If yes, name and describe each type of business unit of the Broker-Dealer Operator that 
enters or directs the entry of [orders and ]trading interest into the ATS (e.g., [NMS Stock 
]ATS, type of trading desks, market maker, sales or client desk) [and, for].  For each 
business unit, provide the applicable MPID and list the capacity of its [orders and] 
trading interest (e.g., principal, agency, riskless principal).  Explain any circumstance 
when the Broker-Dealer Operator would be a counterparty to an ATS trade.   
 

b. If yes to Item 1(a), are the services that the [NMS Stock] ATS offers and provides to the 
business units required to be identified in Item 1(a) the same for all Subscribers and 
Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 
Yes No 

 
If no, explain any differences in response to the applicable Item number in Part III of this 
form, as required, and list the applicable Item number here.  If there are differences that 
are not applicable to Part III, explain those differences here.  

 
c. Are there any formal or informal arrangements with any of the business units required to 

be identified in Item 1(a) to provide [orders or] trading interest to the [NMS Stock] ATS 
(e.g., undertaking to buy or sell continuously, or to meet specified thresholds of trading or 
quoting activity)?  
 
Yes No 



 

562 
 

 
If yes, identify the business unit and respond to the request in Part III, Item 12 of this 
form. 
 

[d. Can orders and trading interest in the NMS Stock ATS be routed to a Trading Center 
operated or controlled by the Broker-Dealer Operator? 

 
Yes No 

  
If yes, respond to request in Part III, Item 16 of this form.] 
 

Item 2:  Affiliates Trading Activities [on]in the ATS 

a. Are Affiliates of the Broker-Dealer Operator permitted to enter or direct the entry of 
[orders and] trading interest into the [NMS Stock] ATS? 

 
Yes No 
 
If yes, name and describe each type of Affiliate that enters or directs the entry of [orders 
and] trading interest into the ATS (e.g., broker-dealer, [NMS Stock ]ATS, investment 
company, hedge fund, market maker, principal trading firm)[ and, for].  For each 
Affiliate, provide the applicable MPID and list the capacity of its [orders and] trading 
interest (e.g., principal, agency, riskless principal).  Explain any circumstances when an 
Affiliate of the Broker-Dealer Operator would be a counterparty to an ATS trade.  

 
b. If yes[,] to Item 2(a), are the services that the [NMS Stock ]ATS offers and provides to 

the Affiliates required to be identified in Item 2(a) the same for all Subscribers and 
Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 
Yes No 
 
If no, explain any differences in response to the applicable Item number in Part III of this 
form, as required, and list the applicable Item number here.  If there are differences that 
are not applicable to Part III, explain those differences.  
 

c. Are there any formal or informal arrangements with an Affiliate required to be identified 
in Item 2(a) to provide [orders or] trading interest to the [NMS Stock] ATS (e.g., 
undertaking to buy or sell continuously, or to meet specified thresholds of trading or 
quoting activity)? 
 
Yes No 
 
If yes, identify the Affiliate and respond to the request in Part III, Item 12 of this form. 

 
[d. Can orders and trading interest in the NMS Stock ATS be routed to a Trading Center 

operated or controlled by an Affiliate of the Broker-Dealer Operator? 
 
Yes No  
 
If yes, respond to the request in Part III, Item 16 of this form.] 

  
Item 3: [Order] Interaction of Trading Interest with Broker-Dealer Operator; 
Affiliates 



 

563 
 

a. Can any Subscriber opt out from interacting with [orders and] trading interest of the 
Broker-Dealer Operator in the [NMS Stock] ATS? 
 
Yes No 
 
If yes, explain the opt-out process.   
 

b. Can any Subscriber opt out from interacting with the [orders and] trading interest of an 
Affiliate of the Broker-Dealer Operator in the [NMS Stock] ATS? 
 
Yes No 

If yes, explain the opt-out process.     
 

c. If yes to Item 3(a) or 3(b), are the [terms and conditions] requirements of the opt-out 
processes required to be identified in Item 3(a), 3(b), or both, the same for all 
Subscribers? 
 
Yes No 

 
If no, identify and explain any differences. 

 
Item 4: Arrangements with Trading [Centers] Venues  

a. Are there any formal or informal arrangements (e.g., mutual, reciprocal, or preferential 
access arrangements) between the Broker-Dealer Operator and a [Trading Center] trading 
venue to access the [NMS Stock ] ATS services (e.g., arrangements to effect transactions 
or to submit, disseminate, or display [orders and] trading interest in the ATS)? 
 
Yes No 
 
If yes, identify the [Trading Center] trading venue and the ATS services and provide a 
summary of the terms and conditions of the arrangement.  
 

b. [If yes to Item 4(a),] A[a]re there any formal or informal arrangements between an 
Affiliate of the Broker-Dealer Operator and a [Trading Center] trading venue to access 
the [NMS Stock] ATS services? 
 
Yes No 
 
If yes, identify the [Trading Center] trading venue and ATS services and provide a 
summary of the terms and conditions of the arrangement.  
  

Item 5: Other Products and Services 

a. Does the Broker-Dealer Operator offer [Subscribers] any products or services for the 
purpose of effecting transactions or submitting, disseminating, or displaying [orders] 
[and] trading interest in the [NMS Stock] 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)?   
 
Yes No 
 
If yes, identify the products or services offered, provide a summary of the [terms and 
conditions] requirements for use, and list here the applicable Item number in Part III of 



 

564 
 

this form where the use of the product or service is explained.  If there is no applicable 
Item in Part III, explain the use of the product or service with the ATS here.  
 

b. If yes to Item 5(a), are the [terms and conditions] requirements for use of the services or 
products required to be identified in Item 5(a) 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? 
 
Yes No 
 
If no, identify and explain any differences. 
 

c. Does any Affiliate of the Broker-Dealer Operator offer [Subscribers, the Broker-Dealer 
Operator, or both,] any products or services for the purpose of effecting transactions or 
submitting, disseminating, or displaying [orders or] trading interest in the [NMS Stock] 
ATS?    
 
Yes No 
 
If yes, identify the products or services offered, provide a summary of the [terms and 
conditions] requirements for use, and list here the applicable Item number in Part III of 
this form where the use of the product or service is explained.  If there is no applicable 
item in Part III, explain the use of the product or service with the ATS here.   
   

d. If yes to Item 5(c), are the [terms and conditions] requirements for use of the services or 
products required to be identified in Item 5(c) 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? 
 
Yes No 
 
If no, identify and explain any differences. 

 
Item 6: Activities of Service Providers 

[a. Does any employee of the Broker-Dealer Operator or its Affiliate that services both the 
operations of the NMS Stock ATS and any other business unit or any Affiliate of the 
Broker-Dealer Operator (“shared employee”) have access to confidential trading 
information on the NMS Stock ATS? 

 
Yes No 

 
If yes, identify the business unit, Affiliate, or both that the shared employee services, and 
provide a summary of the role and responsibilities of the shared employee at the ATS and 
the business unit, Affiliate, or both that the shared employee services.]  
 

[b]a. Does any entity, other than the Broker-Dealer Operator, support the services or 
functionalities of the [NMS Stock] ATS (“service provider”) that are required to be 
explained in Part III of this form? 
 
Yes No 
 
If yes, both identify the service provider and provide a summary of the role and 
responsibilities of the service provider in response to the applicable Item number in Part 
III of this form, as required.  List the applicable Item number here.  If there are services 
or functionalities that are not applicable to Part III, identify the service provider, the 



 

565 
 

services and functionalities, and also provide a summary of the role and responsibilities 
of the service provider here.  
 

[c]b. If yes to Item 6([b]a), does the service provider, or any of its Affiliates, use the 
[NMS Stock] ATS services? 
 
Yes No 
 
If yes, identify the service provider, or the Affiliate as applicable, and the ATS services 
that the service provider or its Affiliates use.   
 

[d]c. If yes to Item 6([c]b), are the services that the [NMS Stock] ATS offers and 
provides to the entity required to be identified in Item 6([c]b) the same for all Subscribers 
and Persons whose trading interest is entered into the ATS by a Subscriber or the Broker-
Dealer Operator?   
 

    Yes No 

If no, identify and explain any differences. 

Item 7:  Protection of Confidential Trading Information 

a. Describe the written safeguards and written procedures to protect the confidential trading 
information of Subscribers to the [NMS Stock] ATS, including:  
 

i. 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.  If any employee of the Broker-
Dealer Operator or employee of its Affiliate that services both the operations of 
the ATS and any other business unit or any Affiliate of the Broker-Dealer 
Operator (“shared employee”) has access to confidential trading information in 
the ATS, identify the business unit, Affiliate or both that the shared employee 
services, and provide a summary of the role and responsibilities of the shared 
employee at the ATS and the business unit, Affiliate, or both, that the shared 
employee services; 

ii.   written standards controlling employees of the ATS that trade for employees’ 
accounts; and 

iii. written oversight procedures to ensure that the safeguards and procedures 
described above are implemented and followed. 

 
b. Can a Subscriber consent to the disclosure of its confidential trading information to any 

Person (not including those employees of the [NMS Stock] ATS who are operating the 
system or responsible for its compliance with applicable rules)?  
 
Yes No 
 
If yes, explain how and under what conditions.   
 

c. If yes to Item 7(b), can a Subscriber withdraw consent to the disclosure of its confidential 
trading information to any Person (not including those employees of the [NMS Stock] 
ATS who are operating the system or responsible for its compliance with applicable 
rules)?  
 
Yes No 
 



 

566 
 

If yes, explain how and under what conditions.   
 

[d. Provide a summary of the roles and responsibilities of any Persons that have access to 
confidential trading information, the confidential trading information that is accessible by 
them, and the basis for the access.]  

 
Part III: Manner of Operations 
 
For each narrative response in Part III, identify and explain any differences among and 
between any 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 Operator.     

Item 1: Types of ATS Subscribers 

Select the type(s) of Subscribers that can use the [NMS Stock] ATS services: 
 
  Investment Companies   Retail Investors   Issuers   Brokers 
 
[  NMS Stock ATSs]   Asset Managers   Principal Trading Firms 

  Hedge Funds    Market Makers   Banks   Dealers 

  Insurance Companies       Pension Funds   Corporations 

  Other  

If other, identify the type(s) of [s]Subscriber. 

Item 2:  Eligibility for ATS Services 

a. Does the [NMS Stock] ATS require Subscribers to be registered broker-dealers? 
 
Yes No 
 

b. Are there any [other] conditions that the [NMS Stock] ATS requires a Person to satisfy 
before accessing the ATS services? 
 
Yes No 
 
If yes, list and provide a summary of the conditions. 
 

[c. If yes to Item 2(b), are the conditions required to be identified in Item 2(b) the same for 
all Persons? 
 

    Yes No 
 

If no, identify and describe any differences.] 
 

[d]c. Does the [NMS Stock] ATS require Subscribers to enter a written agreement to 
use the ATS services?  
 
Yes No 
 



 

567 
 

Item 3: Exclusion from ATS Services 

[a.] Can the [NMS Stock] ATS exclude, in whole or in part, any Subscriber from the ATS 
services?     
 
Yes No 
 
If yes, list and provide a summary of the conditions for excluding, in whole or in part, a 
Subscriber from the ATS services.   
 

[b. If yes to Item 3(a), are the conditions required to be identified in Item 3(a) the same for 
all Subscribers?  

 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 4: Hours of Operations and Trading Outside of Regular Trading Hours 

a. Provide the days and hours of operations of the [NMS Stock] ATS, including the times 
when [orders or] trading interest can be entered [on] in the ATS[, and any hours of 
operation outside of regular trading hours].   

 
b. Are the ATS services available outside of its regular trading hours (e.g., after-hours 

trading)? 
 

Yes No 
 
c. If yes to Item 4(b), with respect to services available outside of the ATS’s regular trading 

hours, are there any differences between the services during the ATS’s regular trading 
hours and outside of the ATS’s regular trading hours?  
 
Yes No 
 
If yes, identify and explain the differences.  

 
[b. Are the hours of operations the same for all Subscribers and the Broker-Dealer Operator?     

 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 5: Means of Entry 

a. Does the [NMS Stock] ATS permit [orders and] trading interest to be entered directly 
into the ATS (e.g., via Financial Information eXchange (“FIX”) protocol, Binary)? 
 
Yes No 
 
If yes, explain the protocol that can be used to directly enter [orders and] trading interest 
into the ATS.  
 

[b. If yes to Item 5(a), are the protocols required to be identified in Item 5(a) the same for all 
Subscribers and the Broker-Dealer Operator?  
 
Yes No 



 

568 
 

 
If no, identify and explain any differences.] 

 
[c]b. Are there any [other] means of [for] entering [orders and] trading interest into the 

[NMS Stock] ATS not otherwise disclosed in Part III, Item 5(a) (e.g., smart order router, 
algorithm, order management system, sales desk, direct market access, web-enabled 
system, or aggregation functionality)? 
 
Yes No 
 
If yes, identify and explain the [other] means for entering [orders and] trading interest, 
including [indicate] whether the means are provided through the Broker-Dealer Operator, 
either by itself or through a third-party contracting with the Broker-Dealer Operator, or 
through an Affiliate of the Broker-Dealer Operator, and list and provide a summary of the 
[terms and conditions]requirements for entering [orders or] trading interest into the ATS 
through these means.   
 

[d. If yes to Item 5(c), are the terms and conditions required to be identified in Item 5(c) the 
same for all Subscribers and the Broker-Dealer Operator?  
 
Yes No 

 
If no, identify and explain any differences.] 

 
Item 6:  Connectivity and Co-location 

a. Does the [NMS Stock] ATS offer co-location and related services (e.g., cabinets and 
equipment, cross-connects)?  
 
Yes No 

 
If yes, provide a summary of the [terms and conditions] requirements for use for co-
location and related services, including the speed and connection (e.g., fiber, copper) 
options offered.   

 
[b. If yes to Item (6)(a), are the terms and conditions required to be identified in Item 6(a) the 

same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 

 
If no, identify and explain any differences.] 

 
[c]b. Does the [NMS Stock] ATS offer any other means besides co-location and related 

services required to be explained in this Item 6(a) to increase the speed of communication 
with the ATS?   
 
Yes No 
 
If yes, explain the means to increase the speed of communication with the ATS and 
provide a summary of the [terms and conditions] requirements for its use.   

 
[d. If yes to Item 6(c), are the terms and conditions required to be identified in Item 6(c) the 

same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 



 

569 
 

If no, identify and explain any differences.] 
 

[e]c. Does the[ NMS Stock] ATS offer any means to reduce the speed of 
communication with the ATS (e.g., speed bumps)? 
 
Yes No 
 
If yes, explain the methods to reduce the speed of communication with the ATS and 
provide a summary of the [terms and conditions] requirements for its use.   

 
[f. If yes to Item 6(e), are the terms and conditions required to be identified in Item 6(e) the 

same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences. 
 
Yes No] 

 
Item 7:  Order Types [and Attributes] and Sizes; Trading Facilities 
 

Does the ATS provide trading facilities or set rules for bringing together orders of buyers 
and sellers (e.g., crossing system, auction market, limit order matching book, click-to-
trade functionality)?  

 
Yes No 

 
If yes, explain the trading facilities and rules for bringing together the orders of buyers 
and sellers in the ATS, including:  
 

a. [Identify and explain] a description of each order type offered by the [NMS 
Stock] ATS[.  In your explanation, include the following], including: 
 
• [i.  priority, including] the order type’s priority upon order entry and any 

subsequent change to priority (if applicable); whether and when the order type 
can receive a new time stamp; the order type’s priority [vis-à-vis]in relation to 
other orders on the book due to changes in the NBBO or other reference price; 
and any instance in which the order type could lose execution priority to a 
later arriving order at the same price; 

 
• [ii.  ]conditions, including any price conditions (e.g., how price conditions 

affect the rank and price at which [it]the order type can be executed; 
conditions on the display or non-display of an order; or conditions on 
executability and routability); 

 
• [iii.   ]order types designed not to remove liquidity (e.g., post-only orders, 

store orders), including what occurs when such order is marketable against 
trading interest on the [NMS Stock] ATS when received; 

 
• [iv.  ]order types that adjust their price as changes to the order book occur 

(e.g., price sliding orders or pegged orders) or have a discretionary range, 
including an order’s rank and price upon order entry and whether such prices 
or rank may change based on the NBBO or other market conditions when 
using such order type; when the order type is executable and at what price the 
execution would occur; whether the price at which the order type can be 



 

570 
 

executed ever changes; and if the order type can operate in different ways, the 
default operation of the order type; 

 
• [v.  ] whether an order type is eligible for routing to other [Trading Centers] 

trading venues;  
 
• [vi.  ]the time-in-force instructions that can be used or not used with each 

order type;  
 

• [vii.  ]the circumstances under which order types may be combined with 
another order type, modified, replaced, canceled, rejected, or removed from 
the [NMS Stock] ATS; and 
 

• [viii.]the availability of order types across all forms of connectivity to the 
[NMS Stock] ATS and differences, if any, in the availability of an order type 
across those forms of connectivity. 

 
b. 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); 

 
c. rules governing order interaction, priority, pricing methodologies, allocation, 
matching, and execution of orders;  

 
d. how orders may interact with non-firm trading interest or separate trading 
functionalities within the ATS or offered by the Broker-Dealer Operator; 

 
e. procedures governing trading in the ATS, such as functionality or protocols that 
permit the selection of displayed orders to trade against, price improvement 
functionality, price protection mechanisms, short sales, functionality to adjust or 
hedge orders, locked-crossed markets, trading controls (e.g., fat finger checks, 
whether the ATS can employ a global kill switch), the handling of execution errors 
and trade breaks, and the time-stamping of messages and executions, and any 
conditions or processes for terminating a counterparty match.  

 
[b. Are the terms and conditions for each order type and attribute the same for all 

Subscribers and the Broker-Dealer Operator?  
 
Yes No 
 
If no, identify and explain any differences.] 
 
 

[Item 8:  Order Sizes   
 

a. Does the NMS Stock ATS require (e.g., minimum or maximum sizes for orders or 
trading interest)?  
 
Yes No 
 
If yes, specify any minimum or maximum order or trading interest size requirements and 
any related handling procedures.   
 

b. If yes to Item 8(a), are the requirements and procedures required to be identified in Item 
8(a) the same for all Subscribers and the Broker-Dealer Operator? 
 



 

571 
 

Yes No 
 
If no, identify and explain any differences. 

 
c. Does the NMS Stock ATS accept or execute odd-lot orders? 

 
Yes No 
 
If yes, specify any odd-lot order requirements and related handling procedures (e.g., odd 
lot treated the same as round lot).   
 

d. If yes to Item 8(c), are the requirements and procedures required to be identified in Item 
8(c) the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 

 
If no, identify and explain any differences. 

 
e. Does the NMS Stock ATS accept or execute mixed-lot orders? 

 
Yes No 
 
If yes, specify any mixed lot order requirements and related handling procedures (e.g., 
mixed lot treated the same as round lot).   
 

f. If yes, to Item 8(e), are the requirements and procedures required to be identified in 8(e) 
the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 
 

Item [9]8: Use of Non-Firm Trading Interest; Communication Protocols and 
Negotiation Functionality [Conditional Orders and Indications of Interest]  

[a.] Does the [NMS Stock ]ATS make available communication protocols for buyers and 
sellers to communicate non-firm trading interest or negotiate a trade [send or receive any 
messages indicating trading interest] (e.g., request-for-quote (RFQ) protocols, bids-
wanted or offers-wanted protocols, indications of interest mechanisms, conditional order 
functionalities[, IOIs, actionable IOIs, or conditional orders])?  
 
Yes No 

If yes, identify and explain [the use of the messages, including information contained in 
messages (e.g., price or size minimums), how the message is transmitted (e.g., order 
management system, smart order router, FIX), when the message is transmitted (e.g., 
automatically by the ATS, or upon the sender’s request), the type of Persons that receive 
the message (e.g., Subscribers, Trading Centers), responses to conditional orders or IOIs 
(e.g., submission to firm-up conditional orders), and the conditions under which the 
message might result in an execution in the ATS (e.g., response time parameters, 
interaction, and matching)] the protocols and functionalities, including: 
 
a.  the use of messages, including:  



 

572 
 

• types of messages that the ATS permits to be sent and received and the type of 
Persons that can send or receive messages (e.g., the ATS, types of 
Subscribers, specific Subscribers, customers of Subscribers, trading venues); 

• information contained in messages (e.g., symbol, price, direction, or size 
minimums) and whether the terms in the messages can vary based on potential 
recipients (e.g., different Subscribers may receive different prices for the same 
security);  

• how and when messages are transmitted (e.g., order management system, 
router, or FIX); 

• whether messages are attributed to their sender or anonymous, and whether a 
participant may elect to disclose its identity to other Subscribers, and if so, 
how, when, and what is disclosed; 

• processes to respond to messages (e.g., submission to firm-up conditional 
orders, response parameters for an RFQ, response to a request to negotiate, 
last look procedures); 

• time parameters applicable to messages (e.g., the time-in-force instructions 
that can be used with a message, or wire time or response time applied to a 
conditional order or RFQ); 

• information regarding the contra-party trading interest made known on the 
system (if trading interest is made known on the system, describe it in Part III, 
Item 15), including whether a Subscriber may elect whether to display only 
part of its trading interest (e.g., hidden size); 

• the circumstances under which messages may be modified, replaced, 
canceled, rejected, or removed from the ATS; 

• 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 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); 

• limits or requirements for multiple messages sent at the same time (e.g., 
whether the ATS prohibits a Subscriber from entering multiple buy or sell 
orders in the same security); 

• whether a message containing trading interest is eligible to be sent to 
destinations outside the ATS (if a message can be sent to a destination outside 
the ATS, describe it in Part III, Item 16); 

• the availability of message types across all forms of connectivity to the ATS 
and differences, if any, in the availability of an order type across those forms 
of connectivity. 

b.  any requirements relating to the size of trading interest (e.g., minimum or maximum 
size, message controls or throttling, odd-lot, mixed-lot, trading increments) and 
related handling procedures (e.g., handling of residual trading interest).  

c.  procedures governing communication protocols, including: 
• priority, including the 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 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 ATS permits or provides for Subscribers to vary 
pricing based on the identity of other Subscribers (e.g., preferred pricing feeds 



 

573 
 

or tiered pricing) and whether Subscribers can select counter-parties to 
interact with based on their identity;  

• rules for interaction, pricing methodologies, allocation, matching, and 
execution; 

• functionality or protocols for the auto-execution of non-firm trading interest, 
and how the ATS or a Subscriber can designate trading interest as 
automatically executable; 

• how non-firm trading interest may interact with orders or separate trading 
functionalities in the ATS or functionality offered by the Broker-Dealer 
Operator; 

• procedures governing trading in the ATS, such as functionality or protocols 
that permit a Subscriber to select displayed non-firm trading interest to trade 
against, price improvement functionality, price protection mechanisms, 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 time-stamping 
of trading interest messages and executions, any conditions or processes for 
terminating a counterparty match; 

• what information is made 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. 

 

[b. If yes to Item 9(a), are the terms and conditions governing conditional orders and 
indications of interest the same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.]  
 

Item 9: Monitoring and Surveillance 
 
a. Does the ATS 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)?  

 
Yes No 
 
If yes, provide a summary of the supervision activities, 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.   

 
b. Does the ATS monitor for certain trading behaviors or activities that may be detrimental 

to the ATS marketplace or trading (e.g., anti-gaming technology)? 
 
Yes No 
 
If yes, provide a summary the monitoring activities and the trading behaviors and 
activities that the ATS intends to detect, deter, or limit. 



 

574 
 

 
Item 10: Opening and Reopening 

a. Explain the processes and procedures related to how the [NMS Stock] ATS opens or re-
opens for trading, including when and how [orders and] trading interest [are] is priced, 
prioritized, matched, and executed; 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; whether there are any protocols at the open for buyers and sellers 
to send messages and negotiate a trade; [,] and identify any order types allowed prior to 
the start of its regular trading hours or following a stoppage of trading in a security during 
its regular trading hours.   
 

[b. Are the processes and procedures governing opening and re-opening the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences. 
 

c. Explain how unexecuted orders and trading interest are handled at the time the NMS 
Stock ATS begins regular trading at the start of regular trading hours or following a 
stoppage of trading in a security during regular trading hours.   
 

d. Are the processes or procedures governing unexecuted orders and trading at the time the 
NMS Stock ATS begins regular trading at the start of regular trading hours, or following 
a stoppage of trading in a security during regular trading hours, the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 

[e]b. Are there any differences between pre-opening executions, executions following a 
stoppage of trading in a security during the ATS’s regular trading hours, and/or 
executions during its regular trading hours? 
 
Yes No 
 
If yes, identify and explain the differences. 

 
Item 11: [Trading Services, Facilities and Rules] Interaction with Related Markets 

[a. Provide a summary of the structure of the NMS Stock ATS marketplace (e.g., crossing 
system, auction market, limit order matching book) and explain the means and facilities 
for bringing together the orders of multiple buyers and sellers on the NMS Stock ATS. 
  

b. Are the means and facilities required to be identified in Item 11(a) the same for all 
Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences. 

   
c. Explain the established, non-discretionary rules and procedures of the NMS Stock ATS, 

including order interaction rules for the priority, pricing methodologies, allocation, 



 

575 
 

matching, and execution of orders and trading interest, and other procedures governing 
trading, such as price improvement functionality, price protection mechanisms, short 
sales, locked-crossed markets, the handling of execution errors, and the time-stamping of 
orders and executions.  
 

d. Are the established, non-discretionary rules and procedures required to be identified in 
Item 11(c) the same for all Subscribers and the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 
 
Does the Broker-Dealer Operator or any of its Affiliates offer functionality, procedures, 
or protocols to facilitate trading or communication on, or source pricing for, the ATS 
using markets for financial instruments related to the securities that the ATS trades (e.g., 
futures, options, currencies, swap, fixed income markets), including offering order types 
to facilitate transactions on both markets, or procedures to allow Subscribers to perform 
multi-leg transactions involving the identified market(s)? 
 
Yes No 
 
If yes, (i) identify the functionality, procedures, protocols, and source of pricing and the 
related market; (ii) state whether the functionality, procedures, protocols, and source of 
pricing is provided or operated by the Broker-Dealer Operator or an affiliate of the 
Broker-Dealer Operator and whether the related market is provided or operated by the 
Broker-Dealer Operator or its affiliate; and (iii) 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.   

   
Item 12: Liquidity Providers 

Are there any formal or informal arrangements with any [Subscriber]Person or the 
Broker-Dealer Operator to display, enter, or trade against [provide orders or] trading 
interest in [to] the [NMS Stock] ATS (e.g., undertaking to buy or sell continuously, or to 
meet specified thresholds of trading or quoting activity)? 
 
Yes No 
 
If yes, identify the liquidity provider and describe the arrangement, including the terms 
and conditions.  

 
Item 13: Segmentation; Notice 

a. Is[Are] [orders and] trading interest in the [NMS Stock] ATS segmented into categories, 
classifications, tiers, or levels (e.g., segmented by type of participant, [order] trading 
interest size, duration, source, or nature of trading activity)?  
 
Yes No 
 
If yes, explain the segmentation procedures, including (i) [a description for] how and 
what [orders and] trading interest is [are] segmented, including 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); (ii) identify and describe any 
categories, classification, tiers, or levels and the types of [orders and] trading interest that 
are included in each; (iii) provide a summary of the parameters for each segmented 



 

576 
 

category and length of time each segmented category is in effect, including when such 
category is determined, reviewed, and can be changed; (iv) any procedures for overriding 
a determination of segmented category; and (v) how segmentation can affect 
[order]trading interest interaction.   
 

b. Can the ATS, in the absence of Subscriber direction, prevent a Subscriber or its potential 
counter-parties from viewing or interacting with certain trading interest (e.g., 
permissioning, filtering, or blocking)? 

 
Yes No 
 
If yes, explain such processes, including (i) 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); (ii) how and 
when the ATS prevents a Subscriber or its potential counter-party from viewing or 
interacting with certain trading interest; (iii) identify and describe any categories, 
classification, 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; (iv) a 
summary of the parameters for such processes and length of time any such parameter is 
in effect; (v) 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; (vi) how such processes can affect trading interest interaction; (vii) how a 
Subscriber can view filtered messages and any permissioning process and criteria for a 
Subscriber to send, receive, or interact with a message. 
 

[If yes to Item 13(a), is the segmentation of orders and trading interest the same for all 
Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

c. Does the [NMS Stock] ATS identify [orders or ]trading interest entered by a customer of 
a broker-dealer on the [NMS Stock] ATS as [a] customer [order] trading interest? 
 
Yes No 
 

d. If yes to Item 13(a) or 13(b), does the [NMS Stock ]ATS disclose to any Person the 
designated segmented or otherwise designated category, classification, tier, or level of 
[orders and ]trading interest?   
 
Yes No 
 
If yes, provide a summary of the content of the disclosure, when and how the disclosure 
is communicated, who receives it, and whether and how such designation can be 
contested.   
 

[e. If yes to Item 13(d), are the disclosures required to be identified in 13(d) the same for all 
Subscribers and the Broker-Dealer Operator?  
 
Yes No 
 
If no, identify and explain any differences.] 
 

Item 14: Counter-Party Selection 



 

577 
 

a. Can [orders or] trading interest be designated to interact or not interact with certain 
[orders or] trading interest in the [NMS Stock] ATS (e.g., designated to interact with or 
execute against a specific Subscriber’s [orders or] trading interest or prevent the trading 
interest of a Subscriber[’s order] from interacting with or executing against the trading 
interest of that Subscriber [itself])? 

 
Yes No 
 
 
If yes, explain the counter-party selection procedures, including how counter-parties can 
be selected, and whether the designations affect the trading rules (e.g., order interaction 
or priority) or communication protocols of [interaction and priority of trading interest in] 
the ATS.   

 
b. Can a Subscriber designate trading interest that the Subscriber or potential counter-parties 

can view (e.g., filtering, blocking, permissioning)? 
 

Yes No 
 

If yes, explain such processes, including (i) how and when a Subscriber can designate 
which trading interest it or a potential counter-party can view; (ii) any categories, 
classifications, or levels and the types of trading interest that Subscribers are able to 
designate; (iii) a summary of the parameters for such processes and length of time any 
such parameter is in effect; and (iv) how such processes can affect how trading interest 
interacts in the ATS. 

 
[b. If yes to Item 14(a), are the procedures for counter-party selection required to be 

identified in Item 14(a) the same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences.] 

   
Item 15: Display and Visibility of Trading Interest 

a. Does the ATS display trading interest to Subscribers or the public (e.g., ATS 
disseminates orders through market data feeds or a website or sends invitations or 
requests to Subscribers about potential counterparties)? 

 
 Yes No 
 
 If yes, 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.  Indicate whether a Subscriber can opt-out of the 
display of its trading interest, and if so the process for that Subscribers to do so.  
   

b. Can a Subscriber 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, indication 
of interest, conditional order, or invitation to negotiate to a Subscriber or the Broker-
Dealer Operator)?  
 
Yes No 



 

578 
 

 
If yes, 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.   
 

c. Is any trading interest bound for the ATS made known to any Person (not including 
employees of the ATS who are operating the system) (e.g., trading interest directed to the 
ATS by customers of the Broker-Dealer Operator that passes through a SOR or 
functionality of the Broker-Dealer Operator before entering the ATS), or is any ATS 
trading interest made known to any Person that is not otherwise disclosed in Part III, 
15(a) or (b) (e.g., displays orders to the Broker-Dealer Operator’s SOR or trading desk), 
or both? 
 
Yes No 

 
 If yes, 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. 
 

d[a]. Does the ATS operate as an Electronic Communication Network as defined in 
Rule 600(a)([23]31) of Regulation NMS? 

 
Yes No  

 
[b. Are Subscriber orders and trading interest bound for or resting in the NMS Stock ATS 

displayed or made known to any Person (not including those employees of the NMS 
Stock ATS who are operating the system)? 

 
Yes No  

 
If yes, explain the display procedures, including how and when Subscriber orders and 
trading interest are displayed, how long orders and trading interest are displayed, what 
information about orders and trading interest is displayed, and the functionality of the 
Broker-Dealer Operator and types of market participants that receive the displayed 
information. 

 
c. If yes to Item 15(b), are the display procedures required to be identified in 15(b) the same 

for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 

 
Item 16: Routing  

a. Can [orders and] trading interest in the [NMS Stock ] ATS be routed or sent to a 
destination outside the [NMS Stock] ATS? 
 
Yes No 

 
b. If yes to Item 16(a), must affirmative instructions from a Subscriber be obtained before 

its [orders or] trading interest can be routed or sent from the [NMS Stock] ATS? 



 

579 
 

 
Yes No 
 
If yes, describe the affirmative instruction and explain how the affirmative instruction is 
obtained.  If no, explain when [orders] trading interest in the [NMS Stock] ATS can be 
routed or sent from the ATS (e.g., at the discretion of the Broker-Dealer Operator).   
 

c. Can trading interest in the ATS be routed or sent to a destination operated or controlled 
by the Broker-Dealer Operator or an Affiliate of the Broker-Dealer Operator? 
 
Yes No 
 

 If yes, identify the destination and when and how trading interest is routed or sent from 
the ATS to the destination. 
 

 
Item 17: Closing 

[a.] Are there any differences between how [orders and] trading interest [are]is treated on the 
[NMS Stock ]ATS during its closing session(s) [the close] and how [orders and] trading 
interest [are] is treated during its regular trading hours?   
 
Yes No 
 
If yes, identify and explain the differences as compared to the information provided in the 
relevant Part III Items of this form. 
 

[b. Is the treatment of orders and trading interest during the close the same for all 
Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

[Item 18: Trading Outside of Regular Trading Hours 

a. Does the NMS Stock ATS conduct trading outside of its regular trading hours? 
 
Yes No 

 
b. If yes to Item 18(a), are there any differences between trading outside of regular trading 

hours and trading during regular trading hours in the NMS Stock ATS?  
 
Yes No 
 
If yes, identify and explain the differences.  
 

c. If yes to Item 18(a), is the treatment of orders and trading interest outside of regular 
trading hours the same for all Subscribers and the Broker-Dealer Operator? 
 
Yes No 
 
If no, identify and explain any differences.] 
 

Item [19]18: Fees 



 

580 
 

a. Identify and describe any fees or charges for use of the [NMS Stock] ATS services, 
including the type of fees (e.g., subscription, connectivity, market data), the structure of 
the fees (e.g., fixed, volume-based, transaction-based), variables that impact the fees 
(e.g., types of securities traded, block orders, form of connectivity to the ATS), 
differentiation among types of Subscribers (e.g., broker-dealers, institutional investors, 
retail), whether the fee is incorporated into the price displayed for a security (e.g., 
markups, markdowns), and range of fees (e.g., high and low).   
 

b. Identify and describe any fees or charges for use of the [NMS Stock] ATS services that 
are bundled with the Subscriber’s use of non-ATS services or products offered by the 
Broker-Dealer Operator or its Affiliates, including a summary of the bundled services 
and products, the structure of the fee, variables that impact the fee, differentiation among 
types of Subscribers, and range of fees.   
 

c. Identify and describe any rebate or discount of fees or charges required to be identified in 
Items [19]18(a) and [19]18(b), including the type of rebate or discount, structure of the 
rebate or discount, variables that impact the rebate or discount, differentiation among 
types of Subscribers, and range of rebate or discount. 
 

Item [20]19: Suspension of Trading  

[a.] Explain any procedures for suspending or stopping trading on the [NMS Stock] ATS, 
including the suspension of trading in individual NMS stocks, U.S. Treasury Securities, 
or in an Agency Security.   
 

[b. Are the procedures for suspending or stopping trading the same for all Subscribers and 
the Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 

  
Item [21]20: Trade Reporting  

[a.] Explain any procedures and material arrangements for reporting transactions on the 
[NMS Stock] ATS, including where an ATS reports transactions and under what 
circumstances.   
 

[b. Are the procedures and material arrangements for reporting transactions on the NMS 
Stock ATS the same for all Subscribers and the Broker-Dealer Operator?  

 
Yes No 
 
If no, identify and explain any differences.] 
 

Item [22]21: Post-Trade Processing, Clearance and Settlement  

[a.]   Describe any procedures and material arrangements undertaken as a result of the 
contractual agreements between the Broker-Dealer Operator and the ATS participants to 
[facilitate]manage the post-trade processing (such as routing, enrichment, allocations, 
matching, confirmation, affirmation, notification), clearance, and/or settlement of 
transactions on the [NMS Stock] ATS (e.g., whether the ATS, Broker-Dealer Operator, or 
Affiliate of either:  becomes a counterparty[,]; [whether it] submits trades to a registered 
clearing agency[,]; [or whether it] requires Subscribers to have arrangements with a clearing581 
 

firm; or terminates trades).  Please include a description of any user requirements for such 
procedures and material arrangements, including the type and extent of connectivity (e.g., 
FIX), and whether connectivity is to an OMS, EMS, EOMS, clearinghouse/custodian, or 
other system. 

 
[b. Are the procedures and material arrangements undertaken to facilitate the clearance and 

settlement of transactions on the NMS Stock ATS the same for all Subscribers and the 
Broker-Dealer Operator? 

 
Yes No 
 
If no, identify and explain any differences.] 

 

Item [23]22: Market Data 

[a.] Identify the sources of market data used by the [NMS Stock] ATS (e.g., proprietary feed 
from a national securities exchange, feed from the securities information processor 
(“SIP”), or feeds from trading venues), and how the ATS uses market data from these 
sources to provide the services that it offers, including how the ATS uses market data to 
determine the NBBO and protected quotes or BBO, and display, price, prioritize, execute, 
and remove [orders and] trading interest [on]in the ATS.   

 
[b. Are the sources of market data and how the NMS Stock ATS uses market data for the 

services that it offers the same for all Subscribers and the Broker-Dealer Operator? 
 

Yes No 
 
If no, identify and explain any differences.] 
 

   
Item [24]23: Order Display and Execution Access 

a. If an NMS Stock ATS, [H]has the [NMS Stock] ATS displayed Subscriber orders to any 
Person (other than NMS Stock ATS employees) and had an average daily share volume 
of 5% or more in that NMS stock as reported by an effective transaction reporting plan or 
disseminated through an automated quotation system during four of the preceding six 
calendar months? 
 
Yes No 
 

b. If yes to Item [24]23(a), is the NMS Stock ATS required to comply with Rule 
301(b)(3)(ii) of Regulation ATS? 
 
Yes No 

If yes,  

i. Provide the ticker symbol for each such NMS stock displayed during each of the 
last 6 calendar months;  

ii. Explain how the ATS displays such orders on a national securities exchange or 
through a national securities association; and  

iii. Explain how the ATS provides access to such orders displayed in the national 
market system equivalent to the access to other orders displayed on that national 



 

582 
 

securities exchange or through a national securities association pursuant to Rule 
301(b)(iii) of Regulation ATS. 
 

Item [25]24: Fair Access 

a. If an NMS Stock ATS, h[H]as the [NMS Stock ]ATS executed 5% or more of the average 
daily trading volume in an NMS stock, whether by itself or aggregated pursuant to Rule 
301(b)(5)(ii), as reported by an effective transaction reporting plan or disseminated through 
an automated quotation system during four of the preceding six calendar months? 
 
Yes No 
 

b. If a Government Securities ATS, has the ATS executed 3% or more of the average weekly 
trading volume in U.S. Treasury Securities, whether by itself or aggregated pursuant to 
Rule 301(b)(5)(ii), as reported to and disseminated by a self-regulatory organization during 
four of the preceding six calendar months? 

 

Yes No 
 

c. If a Government Securities ATS, has the ATS executed 5% or more of the average daily 
trading volume in Agency Securities, whether by itself or aggregated pursuant to Rule 
301(b)(5)(ii), as reported to and disseminated by a self-regulatory organization during four 
of the preceding six calendar months?  

 
Yes No 
 

d.[b.] If yes to Item [25]24 (a), (b), or (c), is the [NMS Stock] ATS required to comply with 
Rule 301(b)(5)(iii) of Regulation ATS? 

 
Yes No 

If yes,  

i. If an NMS Stock ATS, [P]provide the ticker symbol for each such NMS stock 
during each of the last 6 calendar months; and  

 
ii. Describe the reasonable written standards for granting, limiting, and denying 

access to the services of[trading on] the ATS pursuant to Rule 301(b)(5)(iii)(A) of 
Regulation ATS.  

 
Item [26]25: Aggregate Platform Data 

Does the [NMS Stock] ATS publish or otherwise provide to one or more Subscribers 
aggregate platform-wide [order flow and execution] statistics of the ATS that are not 
otherwise required disclosures under Rule 605 of Regulation NMS? 
 
Yes No 
 
If yes, 
 



 

583 
 

i. Attach, as Exhibit 4, the most recent disclosure of aggregate platform-wide [order 
flow and execution] statistics of the ATS that are not otherwise required 
disclosures under Rule 605 of Regulation NMS and that the ATS provided to one 
or more Subscribers as of the end of each calendar quarter. 

 
�  Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 

under Exhibit 4 is available at the website provided in Part I, Item 6 of this form and 
is accurate as of the date of this filing, and that 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. 

 
ii. Attach, as Exhibit 5, a list and explanation of the categories or metrics for the 

aggregate platform-wide [order flow and execution] statistics provided as Exhibit 
4 and explain the criteria or methodology used to calculate aggregate platform-
wide [order flow and execution] statistics.  

 
�  Select if, in lieu of filing, {[NMS Stock] ATS} certifies that the information requested 
under Exhibit 5 is available at the website provided in Part I, Item 6 of this form and is 
accurate as of the date of this filing, and that 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. 
 
 

  



 

584 
 

Part IV:  Contact Information, Signature Block, and Consent to Service 
 
Provide the following information of the Person at {[NMS Stock] ATS} prepared to respond to 
questions for this submission: 
 
First Name:     Last Name: 
 
Title: 
 
E-Mail:     Telephone: 
 
Primary Street Address of the [NMS Stock] ATS: 
 
Mailing Address of the [NMS Stock] ATS (if different): 
 
 
The {[NMS Stock ]ATS} consents that service of any civil action brought by, or notice of any 
proceeding before, the SEC or a self-regulatory organization in connection with the alternative 
trading system’s activities may be given by registered or certified mail to the contact employee at 
the primary street address or mailing address (if different) of the [NMS Stock ]ATS, or via email, 
at the addresses provided on this Form ATS-N.  The undersigned[, being first duly sworn,] 
deposes and says that he/she has executed this form on behalf of, and with the authority of, said 
alternative trading system.  The undersigned and {[NMS Stock ]ATS} represent that the 
information and statements contained herein, including exhibits, schedules, or other documents 
attached hereto, and other information filed herewith, all of which are made a part hereof, are 
current, true, and complete. 
 
 
Date {auto fill}    {[NMS Stock] ATS} 
 

By: _______________________  Title____________________________ 
 
 
  



 

585 
 

FORM ATS-N INSTRUCTIONS 
 

A. FILING FORM ATS-N: 

1. Form ATS-N is a public reporting form that is designed to provide market participants 
and the Commission with information about the operations of [the NMS Stock] a 
Covered ATS and the ATS-related activities of its Broker-Dealer Operator and its 
Affiliates.  Among other things, [an NMS Stock] a Covered ATS must file Form ATS-N 
to be exempt from the definition of “exchange” pursuant to Exchange Act Rule 3a1-
1(a)(2).  
 

2. A separate Form ATS-N is required for each [NMS Stock] Covered ATS operated by the 
same Broker-Dealer Operator. 

 
3. [An NMS Stock] A Covered ATS must provide all the information required by Form 

ATS-N, including responses to each Item, as applicable, and the Exhibits, and disclose 
information that is accurate, current, and complete.   

 
4. [An NMS Stock] A Covered ATS must respond to each request in detail unless otherwise 

provided (i.e., where the request indicates that the ATS is required to disclose “summary” 
information).  
 

5. Any report required to be submitted pursuant to Rule 304 of Regulation ATS shall be 
prepared, formatted, and submitted in accordance with Regulation S-T and the EDGAR 
Filer Manual.  Filers have the option of submitting the information to EDGAR using the 
most recent version of the XML schema for Rule 304 as specified by the EDGAR Filer 
Manual, or submitting the information using the web-fillable form for Rule 304 in 
EDGAR.   
 

6. Initial Form ATS-N:  Prior to commencing operations, [an NMS Stock ]a Covered ATS 
shall file an initial Form ATS-N and the initial Form ATS-N must become effective.  If 
[an NMS Stock]a Government Securities ATS is currently operating pursuant to a Form 
ATS, it must indicate such on the Form ATS-N.  [If the NMS Stock ATS is operating 
pursuant to a previously filed initial operation report on Form ATS as of January 7, 2019, 
such NMS Stock ATS shall file with the Commission a Form ATS-N no earlier than 
January 7, 2019, and no later than February 8, 2019.]  A Legacy Government Securities 
ATS or Newly Designated ATS shall file with the Commission a Form ATS-N no later 
than [the date 90 calendar days after the effective date of the final rule].  

 
7. Form ATS-N Amendment  

 
a. [An NMS Stock ]A Covered ATS shall amend a Form ATS-N in accordance with the 

conditions of Rule 304. 
 

b. A Material Amendment, except as provided by Rule 304(a)(2)(i)(D) for [an Order 
Display and Fair Access Amendment] a Contingent Amendment or Rule 
304(a)(2)(i)(E) for a Fee Amendment, must be filed at least 30 calendar days, or the 
length of any extended Commission review period, prior to the date of 



 

586 
 

implementation of a material change to the operations of the [NMS Stock ]Covered 
ATS or to the activities of the Broker-Dealer Operator or its Affiliates that are subject 
to disclosure on Form ATS-N.   

 
c. An Updating Amendment must be filed no later than 30 calendar days after the end of 

each calendar quarter to correct any other information that has become inaccurate or 
incomplete for any reason and was not previously required to be reported to the 
Commission as a Form ATS-N Amendment pursuant to Rule 304(a)(2)(i)(A), Rule 
304(a)(2)(i)(C), [or] Rule 304(a)(2)(i)(D), or Rule 304(a)(2)(i)(E).  

 
d. A Correcting Amendment must be filed promptly to correct information in any 

previous disclosure on Form ATS-N, after discovery that any information previously 
filed on Form ATS-N was materially inaccurate or incomplete when filed.  

 
e. A[n Order Display and Fair Access] Contingent Amendment must be filed no later 

than seven calendar days after information required to be disclosed in Part III, Items 
[24]23 and [25]24 on Form ATS-N has become inaccurate or incomplete.    
 

f. A Fee Amendment must be filed no later than the date the information required to be 
disclosed in Part III, Item 18 on Form ATS-N has become inaccurate or incomplete. 

 
[f.]g. [An NMS Stock ATS]A Covered ATS must select only one “Type of 

Amendment” for each Form ATS-N Amendment filed with the Commission. 
 

[g]h. For each Amendment, 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) apply to:  (1) all Subscribers and the 
Broker-Dealer Operator; (2) only the Broker-Dealer Operator; (3) only Subscribers; 
(4) only certain Subscribers or subsets of Subscribers or customers of Subscribers and 
the Broker-Dealer Operator; or (5) only certain Subscribers or subsets of Subscribers 
or customers of Subscribers.  If the change(s) apply only to certain Subscribers, 
describe which Subscribers the change(s) apply to.  Do not describe any changes 
made to Part IV.  

[h]i. For each Amendment, provide the EDGAR accession number for the filing that is 
being amended. 

8. Notice of Cessation:  [An NMS Stock ]A Covered ATS shall notice its cessation of 
operations on Form ATS-N at least 10 business days prior to the date the [NMS Stock] 
Covered ATS will cease to operate as [an NMS Stock ] a Covered ATS.    
 

9. Withdrawal:  If [an NMS Stock] a Covered ATS determines to withdraw a filing, it must 
check the “Withdrawal of Form ATS-N filing” check box for the type of filing and 
provide the EDGAR accession number of the Form ATS-N filing that is being 
withdrawn.  [An NMS Stock] A Covered ATS may withdraw an initial Form ATS-N or 
an Amendment before the end of the applicable Commission review period.  [An NMS 
Stock] A Covered ATS may withdraw a notice of cessation of operations at any time 
before the date that the [NMS Stock] Covered ATS had indicated it intended to cease 



 

587 
 

operating.  A Legacy [NMS Stock ATS] Government Securities ATS or Currently 
Designated ATS may not withdraw its initial Form ATS-N at any time. 
 

10. A filing that is defective may be rejected and not be accepted by the EDGAR system.  
Any filing so rejected shall be deemed not to have been filed.  See generally Regulation 
S-T (17 CFR part 232). 

  



 

588 
 

B. CONTACT INFORMATION 

 The individual listed on the [NMS Stock ]ATS’s response to Part IV of Form ATS-N as 
the contact representative must be authorized to receive all incoming communications 
and be responsible for disseminating that information, as necessary, within the [NMS 
Stock] ATS.  The contact information provided in Part IV of Form ATS-N will not be 
made public.    
 

C. RECORDKEEPING 

 A copy of this Form ATS-N must be retained by the [NMS Stock] Covered ATS in 
accordance with the EDGAR Filer Manual and Rule 303 of Regulation ATS and must be 
made available for inspection upon a regulatory request. 

 
D. PAPERWORK REDUCTION ACT DISCLOSURE 

 Form ATS-N requires [an NMS Stock] a Covered ATS to provide the Commission with 
certain information regarding: (1) the operation of the [NMS Stock] ATS and the ATS-
related activities of the Broker-Dealer Operator and its Affiliates; (2) material and other 
changes to the operations and disclosures of the [NMS Stock] ATS; and (3) notice upon 
ceasing operation of the [NMS Stock] ATS.  Form ATS-N is designed to provide the 
public with information to, among other things, help them make informed decisions about 
whether to participate on the [NMS Stock] Covered ATS.  In addition, the Form ATS-N 
is designed to provide the Commission with information to permit it to carry out its 
market oversight and investor protection functions. 

 
 The information provided on Form ATS-N will help the Commission to determine 

whether [an NMS Stock] a Covered ATS is in compliance with the federal securities laws 
and the rules or regulations thereunder, including Regulation ATS.  [An NMS Stock] A 
Covered ATS must: 

  
o File an initial Form ATS-N prior to commencing operations.  

 
o File a Form ATS-N Amendment:  (1) at least 30 calendar days prior to the date of 

implementation of a material change to the operations of the [NMS Stock ]Covered 
ATS or to the activities of the Broker-Dealer Operator or its Affiliates that are subject 
to disclosure on Form ATS-N (Material Amendment); (2) no later than 30 calendar 
days after the end of each calendar quarter to correct any other information that has 
become inaccurate or incomplete for any reason and was not previously required to 
be reported to the Commission as a Form ATS-N amendment pursuant to Rule 
304(a)(2)(i)(A), Rule 304(a)(2)(i)(C), [or] Rule 304(a)(2)(i)(D), or Rule 
304(a)(2)(i)(E) (Updating Amendment); (3) promptly, to correct information in any 
previous disclosure on Form ATS-N, after discovery that any information previously 
filed on Form ATS-N was materially inaccurate or incomplete when filed (Correcting 
Amendment); [or] (4) no later than seven calendar days after information required to 
be disclosed in Part III, Items [24]23 and [25]24 on Form ATS-N has become 
inaccurate or incomplete ([Order Display and Fair Access]Contingent Amendment); 
or (5) no later than the date the information required to be disclosed in Part III, Item 
18 on Form ATS-N has become inaccurate or incomplete (Fee Amendment).  During 



 

589 
 

the Commission review period of an initial Form ATS-N filing, [an NMS Stock] a 
Legacy Government Securities ATS or Newly Designated ATS [that is operating as 
of January 7, 2019] shall amend its filed Form ATS-N pursuant to these requirements, 
and [an NMS Stock ] a Covered ATS that [was not operating as of January 7, 2019] is 
not a Legacy Government Securities ATS or Newly Designated ATS shall amend its 
filed Form ATS-N pursuant to the requirements for Updating and Correcting 
Amendments.  During the Commission review period of an initial Form ATS-N 
filing, a[n] [NMS Stock] Covered ATS shall amend a filed Material Amendment 
pursuant to the requirements for Updating and Correcting Amendments. 
 

o Notice its cessation of operations at least 10 business days before the date the [NMS 
Stock] Covered ATS ceases to operate as [an NMS Stock] a Covered ATS.  
 

 This collection of information will be reviewed by the Office of Management and Budget 
in accordance with the clearance requirements of 44 U.S.C. 3507.  An agency may not 
conduct or sponsor, and a Person is not required to respond to, a collection of information 
unless it displays a currently valid control number.  We estimate that an [NMS Stock 
]ATS will spend approximately [127.4]136.4 hours completing the Form ATS-N, 
approximately 9.4 hours preparing each amendment to Form ATS-N, and approximately 
2 hours preparing a notice of cessation on Form ATS-N.  Any member of the public may 
direct to the Commission any comments concerning the accuracy of this burden estimate 
and any suggestions for reducing this burden. 
 

E. EXPLANATION OF TERMS 

The following terms are defined for purposes of Form ATS-N. 

 AFFILIATE:  Shall mean, with respect to a specified Person, any Person that, directly or 
indirectly, controls, is under common control with, or is controlled by, the specified 
Person. 

 
• AGENCY SECURITY:  Shall 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). 

 
 ALTERNATIVE TRADING SYSTEM:  Shall mean any organization, association, 

Person, group of Persons, or system: (1) that constitutes, maintains, or provides a market 
place or facilities for bringing together purchasers and sellers of securities or for 
otherwise performing with respect to securities the functions commonly performed by a 
stock exchange within the meaning of Rule 3b-16 under the Exchange Act; and (2) that 
does not (i) set rules governing the conduct of subscribers other than the conduct of such 
subscribers’ trading on such organization, association, Person, group of Persons, or 
system, or (ii) discipline subscribers other than by exclusion from trading. 17 CFR 
242.300(a). 

 
 BROKER-DEALER OPERATOR:  Shall mean the registered broker-dealer or 

government securities broker or government securities dealer of the [NMS Stock] ATS 
pursuant to 17 CFR 242.301(b)(1). 

 



 

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 CONTROL:  Shall 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: (1) is a director, general partner, or 
officer exercising executive responsibility (or having similar status or performing similar 
functions); (2) directly or indirectly has the right to vote 25 percent or more of a class of 
voting securities or has the power to sell or direct the sale of 25 percent or more of a class 
of voting securities of the broker-dealer of the alternative trading system; or (3) in the 
case of a partnership, has contributed, or has the right to receive upon dissolution, 25 
percent or more of the capital of the broker-dealer of the alternative trading system.  17 
CFR 242.300(f). 

 
• GOVERNMENT SECURITY:  Shall mean securities defined in section 3(a)(42) of the 

Exchange Act.  15 U.S.C. 78c(a)(42).   
 

• GOVERNMENT SECURITIES ATS:  Shall mean an alternative trading system that 
trades government securities 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. 

 
• LEGACY GOVERNMENT SECURITIES ATS:  Shall mean a Government Securities 

ATS operating as of [effective date of the final rule] that was either:  (1) formerly not 
required to comply with Regulation ATS (§ 242.300 through 242.304) pursuant to the 
exemption under § 240.3a1-1(a)(3) 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]. 

• NEWLY DESIGNATED ATS – Shall mean an alternative trading system operating as 
of [effective date of the final rule] that meets the criteria under 17 CFR 240.3b-16(a) as 
of [effective date of the final rule] but did not meet the criteria under 17 CFR 240.3b-
16(a) in effect prior to [effective date of the final rule].  17 CFR 242.300(r). 

 
 NMS SECURITY:  Shall mean any security or class of securities for which transaction 

reports are collected, processed, and made available pursuant to an effective transaction 
reporting plan, or an effective national market system plan for reporting transactions in 
listed options.  17 CFR 242.600(b)(46). 
 

 NMS STOCK:  Shall mean any NMS security other than an option.  17 CFR 
242.600(b)(47). 
 

 NMS STOCK ATS:  Shall mean an alternative trading system, as defined in Rule 300(a) 
under the Exchange Act, that trades NMS stocks, as defined in Rule 300(g) under the 
Exchange Act.  An NMS Stock ATS shall not trade securities other than NMS stocks.  17 
CFR 242.300(k).  
 

 ORDER:  Shall mean any firm indication of a willingness to buy or sell a security, as 
either principal or agent, including any bid or offer quotation, market order, limit order, 
or other priced order.  17 CFR 242.300(e). 



 

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 PERSON:  [Shall mean a natural person or a company.  15 U.S.C. 80a-2(a)(28).]Shall 

mean a natural person, company, government, or political subdivision, agency, or 
instrumentality of a government.  15 U.S.C. 78c(a)(9). 
 

 SUBSCRIBER:  Shall mean any Person that has entered into a contractual agreement 
with an alternative trading system to access an alternative trading system for the purpose 
of effecting transactions in securities, or for submitting, disseminating or displaying 
[orders]trading interest on such alternative trading system, including a customer, 
member, user, or participant in an alternative trading system.  A subscriber, however, 
shall not include a national securities exchange or association.  17 CFR 242.300(b). 

 
• TRADING INTEREST:  Shall mean an order 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.  17 CFR 240.300(q). 
 

 TRADING [CENTER]VENUE:  Shall mean a national securities exchange or national 
securities association that operates an SRO trading facility, an alternative trading system, 
an exchange market maker, an OTC market maker, a future or options market, or any 
other broker- or dealer-operated platform for executing trading interest [that 
executes orders] internally by trading as principal or crossing orders as agent.  [17 CFR 
242.600(b)(78).]