dealer operator of the NMS Stock ATS or its affiliates. Some of the
settled enforcement actions against ATSs that trade NMS stocks
highlight this potential.\374\ Therefore, as

explained further below, the Commission proposes to require NMS Stock
ATSs to disclose information about certain aspects of the activities of
the NMS Stock ATS's broker-dealer operator, and its affiliates, in
connection with the NMS Stock ATS, to help market participants assess
potential conflicts of interest that may adversely impact their trading
on the NMS Stock ATS.
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    \373\ See, e.g., Nasdaq Affiliation Order, supra note 370, at
42151. The Commission's concern with respect to a national
securities exchange's affiliation with one of its members also
stemmed from the possible conflicts of interest that could arise
between a national securities exchange's self-regulatory obligations
and its commercial interest. See id. Because ATSs are not SROs, and
therefore do not have self-regulatory obligations, this particular
concern is not present in the context of ATSs.
    \374\ See, e.g., In the Matter of ITG Inc. and Alternet
Securities Inc., Securities Exchange Act Release No. 75672 (Aug. 12,
2015), https://www.sec.gov/litigation/admin/2015/33-9887.pdf (order
instituting administrative and cease-and-desist proceedings, making
findings, and imposing remedial sanctions and a cease-and-desist
order) (``ITG Settlement''); In the Matter of UBS Securities LLC,
Securities Exchange Act Release No. 74060 (Jan. 15, 2015), http://www.sec.gov/litigation/admin/2015/33-9697.pdf (order instituting
administrative and cease-and-desist proceedings, making findings,
and imposing remedial sanctions and a cease-and-desist order) (``UBS
Settlement''); In the Matter of Lavaflow, Inc., Securities Exchange
Act Release No. 72673 (Jul. 25, 2014), http://www.sec.gov/litigation/admin/2014/34-72673.pdf (order instituting administrative
and cease-and-desist proceedings, making findings, and imposing
remedial sanctions and a cease-and-desist order) (``LavaFlow
Settlement''); In the Matter of Liquidnet, Inc., Securities Exchange
Act Release No. 72339 (Jun. 6, 2014), http://www.sec.gov/litigation/admin/2014/33-9596.pdf (order instituting administrative and cease-
and-desist proceedings, making findings, and imposing remedial
sanctions and a cease-and-desist order) (``Liquidnet Settlement'');
In the Matter of eBX, LLC, Securities Exchange Act Release No. 67969
(Oct. 3, 2012), http://www.sec.gov/litigation/admin/2012/34-67969.pdf (order instituting administrative and cease-and-desist
proceedings, making findings, and imposing remedial sanctions and a
cease-and-desist order) (``LeveL Settlement''); In the Matter of
Pipeline Trading Systems LLC, Fred J. Federspiel, and Alfred R.
Berkeley III, Securities Exchange Act Release No. 9271 (Oct. 24,
2011) (order instituting administrative and cease-and-desist
proceedings, making findings, and imposing remedial sanctions and a
cease-and-desist order), https://www.sec.gov/litigation/admin/2011/33-9271.pdf (``Pipeline Settlement''); In the Matter of INET ATS,
Inc., Securities Exchange Act Release No. 53631 (Apr. 12, 2006),
https://www.sec.gov/litigation/admin/2006/34-53631.pdf (order
instituting administrative and cease-and-desist proceedings, making
findings, and imposing remedial sanctions and a cease-and-desist
order); and In the Matter of BRUT, LLC, Securities Exchange Act
Release No. 48718 (Oct. 30, 2003), http://www.sec.gov/litigation/admin/34-48718.htm (order instituting administrative and cease-and-
desist proceedings, making findings, and imposing remedial sanctions
and a cease-and-desist order).
---------------------------------------------------------------------------

    Finally, due to the overlap between the operation of NMS Stock ATSs
and the other operations of broker-dealer operators, the Commission is
concerned that market participants have limited information about how
the operations of the broker-dealer operator's business units or its
affiliates may give rise to information leakage of subscribers'
confidential trading information among those business units or
affiliates. For instance, if a proprietary trading desk of the broker-
dealer operator is able to enter orders or other trading interest to
the NMS Stock ATS, that trading desk may have means to see the incoming
order flow of unaffiliated subscribers to the NMS Stock ATS.
Furthermore, as demonstrated by several enforcement actions, a broker-
dealer operator may at times provide some subscribers--including its
business units or those of its affiliates--access to certain trading
information that it does not provide to others.\375\ Accordingly, the
Commission preliminarily believes that the disclosure of certain
information about the activities of the broker-dealer operator and its
affiliates with respect to the NMS Stock ATS would enable market
participants to better assess whether the potential for information
leakage exists. The Commission preliminarily believes that such
disclosures would help a market participant independently evaluate
whether submitting order flow to a particular NMS Stock ATS aligns with
its business interests and would help it achieve its investing or
trading objectives.
---------------------------------------------------------------------------

    \375\ See id.
---------------------------------------------------------------------------

B. Disclosures Required Under Part III of Proposed Form ATS-N

    Part III of proposed Form ATS-N would require that broker-dealer
operators of NMS Stock ATSs include, as applicable, disclosures that
pertain to the broker-dealer operator and its affiliates of an NMS
Stock ATS. The Commission preliminarily believes that these proposed
disclosure requirements would help ensure that market participants and
the Commission are adequately informed about: (1) The operation of the
NMS Stock ATS--regardless of the corporate structure of the NMS Stock
ATS and that of its broker-dealer operator, or any arrangements the
broker-dealer operator may have made, whether contractual or otherwise,
pertaining to the operation of its NMS Stock ATS; and (2) any potential
conflicts of interest the broker-dealer operator may have with respect
to the operation of its NMS Stock ATS.
    The Commission has also considered other alternatives to address
the potential conflicts of interest between NMS Stock ATSs and their
broker-dealer operators.\376\ For example, the Commission could require
an NMS Stock ATS to operate as a ``stand-alone'' entity having no
affiliation with any broker-dealer that seeks to execute proprietary or
agency orders in the NMS Stock ATS. This alternative would eliminate
any potential conflicts of interest by requiring a broker-dealer that
operates an NMS Stock ATS to have only a single business function--
operating the NMS Stock ATS--and eliminating any other functions, such
as trading on a proprietary basis or routing customer orders. As
another alternative, and short of requiring NMS Stock ATSs to operate
on a stand-alone basis, the Commission could continue to permit broker-
dealer operators to continue to act as a broker-dealer operator of an
NMS Stock ATS and engage in non-ATS functions while imposing new
requirements designed to limit potential conflicts.
---------------------------------------------------------------------------

    \376\ See infra Section XIII.D.7 for a further discussion of
alternatives to address potential conflicts of interest.
---------------------------------------------------------------------------

    The Commission preliminarily believes that the above alternatives
could be significantly more intrusive and substantially affect or limit
the current operations of ATSs that trade NMS stocks relative to
requiring additional disclosures about the operations of the broker-
dealer operator and its affiliates, and therefore is not proposing such
alternatives at this time. The Commission is instead proposing that NMS
Stock ATSs and their broker-dealer operators provide additional
disclosures, both to the Commission and the public, about how they
interact.
Request for Comment
    149. Do you believe that it is necessary to have some understanding
of the broader activities of the broker-dealer operator and its
affiliates in order to understand and evaluate the operation of an NMS
Stock ATS? Why or why not? Please support your arguments.
    150. Do you believe that conflicts of interest could arise from a
broker-dealer's operation of an NMS Stock ATS? Why or why not? If so,
please explain what these conflicts of interest are. Do you believe
that potential conflicts of interest should be disclosed to the public?
Why or why not? Please support your arguments.
    151. Do you believe that certain conflicts of interest arising out
of the broker-dealer's operation of the NMS Stock ATS should be
prohibited? Why or why not? Please support your arguments.
    152. Do you believe that the Commission should adopt an alternative
approach, either those described above or any other alternative, such
as a prohibition, regarding potential conflicts of interest arising
from a broker-dealer's operation of an NMS Stock ATS? Why or why not?
Please support your arguments. If so, what approach should the
Commission adopt? Please be specific.
    153. Do you believe that the Commission should require information
barriers between the ATS and non-ATS business units of the broker-
dealer operator? Why or why not? Please support your arguments.
    154. Do you believe that the Commission should require an NMS Stock
ATS to operate as a ``stand-alone'' entity and have no affiliation with
any broker-dealer that seeks to execute proprietary or agency orders in
the ATS? Why or why not? Please support your arguments. Do you believe
that the proposed disclosures on Form ATS-N would help broker-dealers
better assess whether the routing of their customers' orders to a
particular NMS Stock ATS fulfills the broker-dealer's duty of best

execution? \377\ Why or why not? Please support your arguments.
---------------------------------------------------------------------------

    \377\ See supra notes 36-40 and accompanying text (relating to
the duty of best execution).
---------------------------------------------------------------------------

    155. Do you believe that the proposed disclosures on Form ATS-N
would help customers of broker-dealers to better evaluate whether their
broker-dealer is fulfilling its duty of best-execution with respect to
orders routed to NMS Stock ATSs? Why or why not? Please support your
arguments.
1. Proposed Definitions of ``Affiliate'' and ``Control''
    For the purposes of the proposed disclosures regarding affiliates
of the broker-dealer operator, the Commission is proposing to define
the term ``affiliate'' 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.'' \378\ This
proposed definition is consistent with the definition of an
``affiliate'' for the purposes of Form 1 disclosures,\379\ and relates
closely to the definition of a similar term under Regulation ATS.\380\
---------------------------------------------------------------------------

    \378\ See Instruction G to proposed Form ATS-N.
    \379\ See Instruction B to Form 1; 17 CFR 249.1.
    \380\ See 17 CFR 242.300(c) (defining affiliate of a subscriber
as any person that, directly or indirectly, controls, is under
common control with, or is controlled by, the subscriber, including
any employee).
---------------------------------------------------------------------------

    The Commission also proposes to amend the existing definition of
the term ``control'' under Regulation ATS to add the phrase ``the
broker-dealer of'' before the two instances of the phrase ``an
alternative trading system'' and before the phrase ``the alternative
trading system'' in subsections (2) and (3) of the definition.\381\ As
proposed to be amended, ``control'' would mean ``the power, directly or
indirectly, to direct the management or policies of the broker-dealer
of an alternative trading system, whether through the ownership of
securities, by contract, or otherwise. A person is presumed to control
the broker-dealer of an alternative trading system, if that person (1)
is a director, general partner, or officer exercising executive
responsibility (or having similar status or performing similar
functions); (2) directly or indirectly has the right to vote 25% or
more of a class of voting securities or has the power to sell or direct
the sale of 25% or more of a class of voting securities of the broker-
dealer of the alternative trading system; or (3) in the case of a
partnership, has contributed, or has the right to receive, upon
dissolution, 25% or more of the capital of the broker-dealer of the
alternative trading system.'' \382\ The purpose of these amendments to
the definition of control under Regulation ATS is to make clear that,
because an ATS must register as a broker-dealer, control of the broker-
dealer of the ATS is control of the ATS, and that the broker-dealer
(also referred to as the broker-dealer operator) is legally responsible
for all operational aspects of the ATS and for ensuring that the ATS
complies with applicable federal securities laws and the rules and
regulations thereunder, including Regulation ATS.
---------------------------------------------------------------------------

    \381\ 17 CFR 242.300(f).
    \382\ See id. and Instruction G to proposed Form ATS-N.
---------------------------------------------------------------------------

    The proposed disclosures of affiliate activities under Part III of
proposed Form ATS-N are designed to provide market participants and the
Commission with a comprehensive understanding of the potential
conflicts of interest that may arise from the broker-dealer operator's
other business activities and its operation of the NMS Stock ATS. Under
the proposed definition of ``affiliate'' and amended definition of
``control,'' any affiliate of the broker-dealer operator of the NMS
Stock ATS would be an affiliate of the NMS Stock ATS.\383\ The
Commission preliminarily believes that the proposed definition of an
``affiliate'' and amended definition of ``control'' would cover
entities that have a close relationship with the broker-dealer operator
and whose activities could raise potential conflicts of interest, or
could otherwise be relevant to market participants in evaluating an NMS
Stock ATS. Extending the proposed disclosures to affiliates of the
broker-dealer operator could also reduce the potential for an entity to
structure its organization in a way that would not provide complete
disclosure of information in response to Part III of proposed Form ATS-
N. The Commission notes that the proposed disclosures related to
affiliates extends to persons that control, are controlled by, or are
under common control with the broker-dealer operator, and, as a result,
parallels the disclosures related to ``control affiliates'' that are
required in Form BD, to which broker-dealer operators are already
subject.\384\
---------------------------------------------------------------------------

    \383\ The instructions in proposed Form ATS-N would require an
NMS Stock ATS to provide the identity of affiliates and business
units of the broker-dealer operator, provide the name under which
each affiliate or business unit conducts business (e.g., the formal
name under which a proprietary trading desk of the broker-dealer
operator conducts business) and the applicable CRD number and
MPID(s) under which the affiliate or business unit conducts
business.
    \384\ See Form BD at 2 (defining ``control affiliate'').
---------------------------------------------------------------------------

Request for Comment
    156. Should the Commission adopt the proposal to define
``affiliate'' for purposes of proposed Form ATS-N 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?
Why or why not? Please support your arguments. Do you believe that the
Commission should adopt a more limited or expansive definition of an
``affiliate''? Why or why not? Please support your arguments. What
advantages or disadvantages might result from a more limited or
expansive definition of an affiliate? Please support your arguments.
    157. Do you believe that the Commission should use the definition
of an ``affiliated person'' as defined in the Exchange Act for purposes
of proposed Rule 304? \385\ Why or why not? Please support your
arguments. If so, do you believe that the Commission should require
disclosures about the activities of affiliated persons of the NMS Stock
ATS, and/or affiliated persons of an affiliated person of an NMS Stock
ATS? Why or why not? Please support your arguments.
---------------------------------------------------------------------------

    \385\ Under the Exchange Act, an ``affiliated person'' of
another person means: Any person directly or indirectly owning,
controlling, or holding with power to vote, 5 percent or more of the
outstanding voting securities of such other person; any person 5
percent or more of whose outstanding voting securities are directly
or indirectly owned, controlled, or held with power to vote, by such
other person; any person directly or indirectly controlling,
controlled by, or under common control with, such other person; any
officer, director, partner, copartner, or employee of such other
person; if such other person is an investment company, any
investment adviser thereof or any member of an advisory board
thereof; and if such other person is an unincorporated investment
company not having a board of directors, the depositor thereof. 15
U.S.C. 78c(a)(19); 15 U.S.C. 80a-2(a)(3).
---------------------------------------------------------------------------

    158. Do you believe that the proposed amendments to the definition
of ``control'' under Regulation ATS are appropriate in this context? Do
you believe the Commission should adopt a more limited or expansive
definition of ``control''? Why or why not? Please support your
arguments.
    159. Do you believe the voting interest or partnership interest
thresholds for ``control'' of an entity (i.e., 25% or more) should be
higher or lower for purposes of Rule 304? For example, should the
voting interest or partnership interest threshold for control of an
entity to be presumed be 5%, 10%, 15%, 30%, or 50% for purposes of Rule
304? If so, what is the appropriate percentage threshold and why would
such alternate percentage threshold be more appropriate? Please support
your arguments.

    160. Do you believe that the definition of ``control'' should deem
an affiliate of the broker-dealer of the NMS Stock ATS to be an
affiliate of the NMS Stock ATS, such that the ATS would be subject to
all of the proposed disclosures relating these entities? Should the
definition of ``control'' be amended? If so, how should it be amended?
Please support your arguments.
    161. Do you believe that the information required to be filed on
proposed Form ATS-N about affiliates of the NMS Stock ATS would provide
useful information to market participants? Why or why not? Please
support your arguments.
    162. Do you believe that the Commission should require that the
MPID and/or CRD number for affiliates and business units of the broker-
dealer operator be disclosed on proposed Form ATS-N? Would such
disclosure help market participants identify the broker-dealer
operator's affiliates and business units? Why or why not? Please
support your arguments.
2. Non-ATS Trading Centers of the Broker-Dealer Operator
    Part III, Item 1 of proposed Form ATS-N would require an NMS Stock
ATS to disclose whether the broker-dealer operator or any of its
affiliates operate or control any non-ATS trading center(s) \386\ that
is an OTC market maker or executes orders in NMS stocks internally by
trading as principal or crossing orders as agent (``non-ATS trading
centers''),\387\ and if so, to (1) identify the non-ATS trading
center(s); and (2) describe any interaction or coordination between the
identified non-ATS trading center(s) and the NMS Stock ATS including:
(i) Circumstances under which subscriber orders or other trading
interest (such as quotes, indications of interest (``IOI''),
conditional orders or messages (hereinafter collectively referred to as
``trading interest'')) sent to the NMS Stock ATS are displayed or
otherwise made known to the identified non-ATS trading center(s)
identified in Item 1(a) before entering the NMS Stock ATS; (ii)
circumstances under which subscriber orders or other trading interest
received by the broker-dealer operator or its affiliates may execute,
in whole or in part, in the identified non-ATS trading center
identified in Item 1(a) before entering the NMS Stock ATS; and (iii)
circumstances under which subscriber orders or other trading interest
are removed from the NMS Stock ATS and sent to the identified non-ATS
trading center(s).\388\
---------------------------------------------------------------------------

    \386\ A trading center is defined under Regulation NMS as a
national securities exchange or national securities association that
operates an SRO trading facility, an alternative trading system, an
exchange market maker, an OTC market maker, or any other broker or
dealer that executes orders internally by trading as principal or
crossing orders as agent. 17 CFR 242.600(b)(78). The Commission
preliminarily believes that the last two components of the
definition of a trading center (i.e., an OTC market maker and any
other broker or dealer that executes orders internally by trading as
principal or crossing orders as agent) are the trading centers for
which conflicts of interests of the broker-dealer operator and its
affiliates are relevant, as such trading centers operate as
competing venues for the execution of NMS stock over-the-counter.
    \387\ References to non-ATS trading centers, as used herein,
encompass all executions that occur off of an exchange and outside
of an ATS, including when a broker-dealer is acting as an OTC
market-maker, block positioner (i.e., any broker-dealer in the
business of executing, as principal or agent, block size trades for
its customers), or operation of an internal broker-dealer system.
See 17 CFR 242.600(b)(52) (defining ``OTC market maker'' as any
dealer that holds itself out as being willing to buy and sell to its
customers, or others, in the United States, an NMS stock for its own
account on a regular or continuous basis otherwise than on a
national securities exchange in amounts of less than block size); 17
CFR 242.600(b)(9) (defining ``block size'' as an order of at least
10,000 shares or for a quantity of stock having a market value of at
least $200,000); and 17 CFR 240.17a-3(a)(16)(ii)(A) (defining
``internal broker-dealer system'' as any facility, other than a
national securities exchange, an exchange exempt from registration
based on limited volume, or an alternative trading system as defined
in Regulation ATS that provides a mechanism, automated in full or in
part, for collecting, receiving, disseminating, or displaying system
orders and facilitating agreement to the basic terms of a purchase
or sale of a security between a customer and the sponsor, or between
two customers of the sponsor, through use of the internal broker-
dealer system or through the broker or dealer sponsor of such
system). See also 2010 Equity Market Structure Release, supra note
124, at 3599-3600.
    \388\ See Part III, Item 1 of proposed Form ATS-N.
---------------------------------------------------------------------------

    The Commission is aware that many broker-dealer operators of ATSs
that currently trade NMS stocks facilitate the execution of NMS stock
outside of their ATSs.\389\ As discussed above, a broker-dealer
operator is permitted to engage in broker or dealer activities
independent of its operation of an ATS, such as operating proprietary
trading desks; the proposed rules do not eliminate or otherwise
restrict such activities. The Commission, however, is proposing to
require the public disclosure on proposed Form ATS-N of such activities
as they relate to the NMS Stock ATS. As noted above, the Commission
preliminarily believes that circumstances could arise whereby a broker-
dealer operator of an NMS Stock ATS may place the interests of its or
its affiliates' non-ATS trading center ahead of the interests of the
operations of the NMS Stock ATS and its subscribers. The Commission
recognizes the sensitive nature of the confidential trading information
of subscribers to an ATS and the potential for its misuse. The
Commission preliminarily believes that non-ATS trading centers of a
broker-dealer operator of an NMS Stock ATS or its affiliates may have
incentives, and the opportunity to access, NMS Stock ATS subscriber
orders received by the broker-dealer operator, which may result in
information leakage.
---------------------------------------------------------------------------

    \389\ See, e.g., Laura Tuttle, Over-the-Counter Trading:
Description of Non-ATS OTC Trading in National Market System Stocks
(March 2014), http://www.sec.gov/dera/staff-papers/white-papers/otc-trading-white-paper-03-2014.pdf.
---------------------------------------------------------------------------

    Furthermore, the Commission preliminarily believes that subscribers
to NMS Stock ATSs currently have limited information about the various
non-ATS trading centers operated by an NMS Stock ATS broker-dealer
operator, or its affiliates, and the extent to which the operations of
these non-ATS trading centers may interact with subscriber orders or
other trading interest sent to the NMS Stock ATS. Orders or other
trading interest sent by subscribers to the NMS Stock ATS may pass
through the broker-dealer operator's systems or functionality before
being entered into the NMS Stock ATS. Such systems and functionalities,
which could include a common gateway function, algorithm, or smart
order router, may be used to support the broker-dealer operator's other
business units, including any non-ATS trading centers. The broker-
dealer operator typically controls the logic contained in these systems
or functionality that determines where an order that the broker-dealer
receives will be handled or sent. The Commission preliminarily believes
that it would be helpful for NMS Stock ATS subscribers to know the
extent to which subscriber orders received by the broker-dealer
operator may interact, or be handled in any coordinated manner, with a
non-ATS trading center of that broker-dealer operator or its
affiliates.\390\

In addition, Form ATS-N would require the disclosure of circumstances
under which subscriber orders or other trading interest received by the
broker-dealer operator may execute, in whole or in part, in a non-ATS
trading center(s) operated by the broker-dealer operator or its
affiliates before entering the NMS Stock ATS; the circumstances under
which subscriber orders or other trading interest would be displayed or
otherwise made known to the systems or personnel operating the non-ATS
trading center(s); and the circumstances under which subscriber orders
or other trading interest are removed from the NMS Stock ATS and sent
to the non-ATS trading center(s) for execution. To the extent that the
broker-dealer operator or its affiliates operate a non-ATS trading
center(s), but NMS Stock ATS subscribers' orders could not execute,
route, or otherwise be shared with that non-ATS trading center(s), the
NMS Stock ATS could note this fact in Part III, Item 1 of proposed Form
ATS-N.
---------------------------------------------------------------------------

    \390\ As noted above, the Commission is aware that most of the
broker-dealer operators of ATSs that currently trade NMS stocks also
facilitate the execution of NMS stocks in non-ATS trading centers
outside of the NMS Stock ATS. See supra note 364 and accompanying
text. In October of 2013, the Commission and its staff estimated
that about 16.99% of total dollar volume (18.75% of share volume) of
NMS stocks is executed over-the-counter (``OTC'') without the
involvement of an ATS. In contrast, the Commission and its staff
estimated that ATSs comprise 11.31% of total dollar volume (12.04%
of share volume). See Tuttle: ATS Trading in NMS Stocks, supra note
126, at 2. Given that a greater percentage of OTC executions in NMS
stock occur outside of ATSs rather than inside of ATSs, the
Commission preliminarily believes that some disclosure of the
presence of these non-ATS trading centers is appropriate.
Accordingly, to the extent that an NMS Stock ATS subscriber's orders
may execute, be displayed, or otherwise made known in a non-ATS
trading center operated by or affiliated with the broker-dealer
operator, the Commission preliminarily believes that disclosure of
such possibility would be relevant to market participants in
deciding whether to subscribe or route orders to a particular NMS
Stock ATS.
---------------------------------------------------------------------------

    The disclosures in Part III, Item 1 of proposed Form ATS-N are
designed to reduce information asymmetries between subscribers and the
broker-dealer operator regarding the operation of the NMS Stock ATS and
competing venues for the execution of NMS stock transactions (i.e.,
non-ATS trading centers) that the broker-dealer operator operates and
the circumstances in which the broker-dealer operator may handle or
choose to execute subscriber orders outside of the NMS Stock ATS that
might otherwise have been sent to the NMS Stock ATS.
Request for Comment
    163. Do you believe the Commission should require the disclosure of
the information on Part III, Item 1 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    164. Do you believe Part III, Item 1 of proposed Form ATS-N
captures the information regarding non-ATS trading centers operated or
controlled by the broker-dealer operator or any of its affiliates that
is most relevant to understanding the operations of the NMS Stock ATS?
Why or why not? Please support your arguments.
    165. Do you believe there is other information that market
participants might find relevant or useful regarding non-ATS trading
centers operated or controlled by the broker-dealer operator or any of
its affiliates? If so, describe such information and explain whether,
and if so why, such information should be required to be provided under
proposed Form ATS-N. Please support your arguments.
    166. Do you believe that Part III, Item 1 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required? If not, how should Part III, Item 1 of proposed Form ATS-N be
revised to provide additional clarity? Please explain in detail.
    167. Do you believe that the non-ATS trading centers operated by
the broker-dealer operator or its affiliates could raise potential
conflicts of interest? Why or why not? If so, do you believe that such
potential conflicts of interest should be disclosed? Please support
your arguments.
    168. Part III, Item 1 of proposed Form ATS-N would require
disclosure about the non-ATS trading center activities of affiliates of
the broker-dealer operator. Do you believe that disclosure about the
activities of the broker-dealer operator's affiliates in this context
is necessary? Why or why not? Should disclosure of non-ATS trading
center activities extend to more remote affiliates under a revised
definition of ``affiliate''? \391\ Should disclosure of non-ATS trading
center activities apply to a more limited set of affiliates? Why or why
not? Please support your arguments.
---------------------------------------------------------------------------

    \391\ See, e.g., supra note 385 and accompanying text.
---------------------------------------------------------------------------

    169. What are the potential costs and benefits of disclosing the
information required by Part III, Item 1 of proposed Form ATS-N? Do you
believe the proposed disclosures in Part III, Item 1 have the potential
to impact innovation? Why or why not? Do you believe that the proposed
disclosures in Part III, Item 1 of proposed Form ATS-N would require
broker-dealer operators of NMS Stock ATSs to reveal too much (or not
enough) information about their structure and operations? Why or why
not? Please support your arguments.
    170. Do you believe there is other information that market
participants might find relevant or useful regarding the disclosure of
non-ATS trading centers operated by the broker-dealer operator or its
affiliates? If so, describe such information and explain whether or not
such information should be required to be provided under proposed Form
ATS-N. Please support your arguments.
    171. Do you believe there is any information regarding the non-ATS
trading centers of the broker-dealer operator or its affiliates that
should not be required to be disclosed on proposed Form ATS-N due to
concerns regarding confidentiality, business reasons, trade secrets,
burden, or any other concerns? If so, what information and why? Please
support your arguments.
    172. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
1 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 1?
3. Multiple NMS Stock ATS Operations of the Broker-Dealer Operator
    Part III, Item 2 of proposed Form ATS-N would require an NMS Stock
ATS to state whether the broker-dealer operator, or any of its
affiliates, operates one or more NMS Stock ATSs other than the NMS
Stock ATS named on the Form ATS-N, and, if so, to (1) Identify the NMS
Stock ATS(s) and provide its MPID(s); and (2) describe any interaction
or coordination between the identified NMS Stock ATS(s) and the NMS
Stock ATS named on the Form ATS-N including: (i) The circumstances
under which subscriber orders or other trading interest received by the
broker-dealer operator or its affiliates to be sent to the NMS Stock
ATS named on the Form ATS-N may be sent to any identified NMS Stock
ATS(s); (ii) circumstances under which subscriber orders or other
trading interest to be sent to the NMS Stock ATS named on the Form ATS-
N are displayed or otherwise made known in any other identified NMS
Stock ATS(s); and (iii) the circumstances under which subscriber orders
or other trading interest received by the NMS Stock ATS named on the
Form ATS-N may be removed and sent to any other identified NMS Stock
ATS(s).\392\
---------------------------------------------------------------------------

    \392\ See Part III, Item 2 of proposed Form ATS-N.
---------------------------------------------------------------------------

    The Commission is aware that some broker-dealer operators operate
multiple ATSs that trade NMS stocks and that subscriber orders or other
trading interest received by such broker-dealer operators could be
routed between those NMS Stock ATSs. The Commission preliminarily
believes that--similar to the potential conflicts of interest that may
arise or information leakage that may occur when a broker-dealer
operator, or its affiliate, operates or controls a non-ATS trading
center--circumstances might arise whereby a broker-dealer that operates
multiple NMS Stock ATSs may place its interests ahead of the interests
of subscribers of

one or more of its NMS Stock ATSs.\393\ To the extent that the broker-
dealer operator or its affiliates operate multiple NMS Stock ATSs, but
the subscribers' orders of the NMS Stock ATS named in the Form ATS-N
filing could not execute, route, be displayed, or otherwise made known
to the NMS Stock ATS(s) identified in Item 2(a) of proposed Form ATS-N,
the NMS Stock ATS could note this fact in Part III, Item 2 of proposed
Form ATS-N.
---------------------------------------------------------------------------

    \393\ See supra note 368.
---------------------------------------------------------------------------

    Therefore, under Part III, Item 2 of proposed Form ATS-N, a broker-
dealer operator that operates multiple NMS Stock ATSs would be required
to disclose how these trading venues interact with one another, if at
all. To the extent that a broker-dealer operator could allocate
subscriber orders it receives among the various NMS Stock ATSs that it
or its affiliates operate, the broker-dealer operator would be required
to describe how it determines such allocation in response to Item 2.
For example, a broker-dealer operator may send all subscriber orders
that it receives first to one of its NMS Stock ATSs, and if there is no
execution after a certain period of time, the orders may then be routed
directly to a second NMS Stock ATS operated by the broker-dealer
operator or its affiliates, or may be returned to the broker-dealer
operator (or its SOR or similar functionality), and may then be routed
to a non-affiliated NMS Stock ATS for execution. Similarly, an NMS
Stock ATS would be required to describe the circumstances under which
subscriber orders on the NMS Stock ATS might be removed from the NMS
Stock ATS and routed to another NMS Stock ATS that is operated by that
broker-dealer operator or its affiliates.\394\
---------------------------------------------------------------------------

    \394\ As is the case with the proposed disclosures under Part
III, Item 1 of proposed Form ATS-N in regard to non-ATS trading
centers, Part III, Item 2 of proposed Form ATS-N would require an
NMS Stock ATS to disclose whether any affiliates of the broker-
dealer operator operates an NMS Stock ATS. This disclosure is
designed to elicit certain information about the relationship of
related NMS Stock ATSs, regardless of the organizational structure
of the broker-dealer operator and its affiliates.
---------------------------------------------------------------------------

    The Commission preliminarily believes that subscribers to NMS Stock
ATSs currently have limited information about the extent to which the
operations of other ATSs operated by the same broker-dealer operator,
or its affiliates, may interact with their orders sent to the NMS Stock
ATS. Specifically, because subscriber orders received by a broker-
dealer operator could be sent to multiple NMS Stock ATSs operated by
that broker-dealer operator, the Commission preliminarily believes that
subscribers should be provided with a better understanding of how their
orders may interact, if at all, with multiple NMS Stock ATSs operated
by the same broker-dealer operator or its affiliates. The proposed
disclosures in Part III, Item 2 of proposed Form ATS-N are designed to
help subscribers evaluate potential conflicts of interest for the
broker-dealer operator or the potential for information leakage in
connection with multiple NMS Stock ATSs that the broker-dealer
operator, or its affiliates, operates.\395\ Accordingly, the Commission
preliminary believes that the disclosures required under Part III, Item
2 of proposed Form ATS-N would provide market participants with better
information about how orders would be handled by a broker-dealer
operator that operates multiple NMS Stock ATSs and the potential
conflicts of interest and potential for information leakage that might
arise as a result of such a business structure.
---------------------------------------------------------------------------

    \395\ The Commission notes that a broker-dealer operator may
have valid business reasons for operating multiple NMS Stock ATSs,
and the Commission is not proposing to limit the ability for a
broker-dealer operator to operate multiple NMS Stock ATSs. For
example, the broker-dealer operator may establish several NMS Stock
ATSs so that each NMS Stock ATS offers subscribers specific trading
services (block order executions) or other particular trading
functionalities (e.g., an auction mechanism or a limit order book).
---------------------------------------------------------------------------

Request for Comment
    173. Do you believe the Commission should require the disclosure of
the information on Part III, Item 2 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    174. Do you believe Part III, Item 2 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS regarding any other NMS Stock ATSs
(other than the one named on the Form ATS-N) operated or controlled by
the broker-dealer operator or any of its affiliates? Why or why not?
Please support your arguments.
    175. Do you believe that Part III, Item 2 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required? If not, how should Part III, Item 2 of proposed Form ATS-N be
revised to provide additional clarity? Please explain.
    176. Do you believe that the operation of multiple NMS Stock ATSs
by the broker-dealer operator or its affiliates could raise potential
conflicts of interest? Why or why not? If so, do you believe that such
potential conflicts of interest should be disclosed? Please support
your arguments.
    177. Do you believe that the information that would be solicited by
Part III, Item 2 of proposed Form ATS-N would be useful to market
participants in deciding whether the participate on an NMS Stock ATS?
Why or why not? Please support your arguments.
    178. Part III, Item 2 of proposed Form ATS-N would require
disclosure of whether the affiliates of the broker-dealer operator
operate an NMS Stock ATS (other than the NMS Stock ATS filing the Form
ATS-N). Do you believe that disclosure about affiliates of the broker-
dealer operator in this context is necessary? Why or why not? Should
disclosure of affiliates that operate another NMS Stock ATS be extended
to more remote affiliates under a revised definition of ``affiliate''?
\396\ Should disclosure apply to a more limited set of affiliates? Why
or why not? Please support your arguments.
---------------------------------------------------------------------------

    \396\ See, e.g., supra note 385 and accompanying text.
---------------------------------------------------------------------------

    179. What are the potential costs and benefits of disclosing the
information required by Part III, Item 2 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 2 of proposed Form ATS-N
would have the potential to impact innovation? Why or why not? Would
the proposed disclosures in Part III, Item 2 of proposed Form ATS-N
require broker-dealer operators of NMS Stock ATSs to reveal too much
(or not enough) information about their structure and operations? Why
or why not? Please support your arguments.
    180. Do you believe there is other information that market
participants might find relevant or useful regarding the operation of
multiple NMS Stock ATSs by a broker-dealer operator or its affiliate?
If so, describe such information and explain whether, and if so why,
such information should be required to be provided under proposed Form
ATS-N. Please support your arguments.
    181. Do you believe that the Commission should require NMS Stock
ATSs to disclose the names of any non-NMS stock ATSs that are operated
by its broker-dealer operator or one of its broker-dealer operator's
affiliates? Why or why not? If so, what information should the NMS
Stock ATS be required to disclose about such non-NMS stock ATSs? Please
support your arguments.
    182. Do you believe there is any information regarding the multiple
NMS Stock ATS operations of a broker-dealer operator that the NMS Stock
ATS

should not be required to disclose on proposed Form ATS-N due to
concerns regarding confidentiality, business reasons, trade secrets,
burden, or any other concerns? If so, what information and why? Please
explain.
    183. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
2 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 2?
4. Products or Services Offered to Subscribers by the Broker-Dealer
Operator
    Part III, Item 3 of proposed Form ATS-N would require an NMS Stock
ATS to disclose whether the broker-dealer operator, or any of its
affiliates, offer subscribers of the NMS Stock ATS any products or
services used in connection with trading on the NMS Stock ATS (e.g.,
algorithmic trading products, market data feeds). If so, the NMS Stock
ATS would be required to describe the products and services and
identify the types of subscribers (e.g., retail, institutional,
professional) to which such services or products are offered, and if
the terms and conditions of the services or products are not the same
for all subscribers, describe any differences.\397\
---------------------------------------------------------------------------

    \397\ See Part III, Item 3 of proposed Form ATS-N.
---------------------------------------------------------------------------

    Based on the Commission's experience, broker-dealer operators of
NMS Stock ATSs may, directly or indirectly through an affiliate, offer
products or services to subscribers in addition to the trading services
of the NMS Stock ATS. For example, a broker-dealer operator may offer
subscribers the use of an order management system to allow them to
connect to or send orders or other trading interest to the NMS Stock
ATS. Some broker-dealer operators may also offer subscribers the use of
algorithmic trading strategies, which are computer assisted trading
tools that, for instance, may be used by or on behalf of institutional
investors to execute orders that are typically too large to be executed
all at once without excessive price impact, and divide the orders into
many small orders that are fed into the marketplace over time.\398\ In
some cases, a broker-dealer operator offering products or services in
connection with a subscriber's use of the NMS Stock ATS may result in
the subscribers receiving more favorable terms from the broker-dealer
operator with respect to their use of the NMS Stock ATS. For example,
if a subscriber purchases a service offered by the broker-dealer
operator of an NMS Stock ATS, the broker-dealer operator might also
provide that subscriber more favorable terms for their use of the NMS
Stock ATS than other subscribers who do not purchase the service. Such
favorable terms could include fee discounts or access to a faster
connection line to the NMS Stock ATS. Additionally, a broker-dealer
operator of an NMS Stock ATS may only offer certain products and
services to certain subscribers or may offer products and services on
different terms to different categories of subscribers. The Commission
preliminarily believes that market participants would want to know,
when assessing an NMS Stock ATS as a potential trading venue, the range
of services or products that the broker-dealer operator or its
affiliates may offer subscribers of the NMS Stock ATS because such
services or products may have an impact on the subscribers' access to,
or trading on, the NMS Stock ATS.
---------------------------------------------------------------------------

    \398\ See Staff of the Division of Trading and Markets,
Commission, ``Equity Market Structure Literature Review, Part II:
High Frequency Trading,'' at 5 (March 18, 2014), http://www.sec.gov/marketstructure/research/hft_lit_review_march_2014.pdf.
---------------------------------------------------------------------------

Request for Comment
    184. Do you believe the Commission should require the disclosure of
the information on Part III, Item 3 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    185. Do you believe Part III, Item 3 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS regarding other products or services
offered to subscribers used in connection with trading on the NMS Stock
ATS by the broker-dealer operator or any of its affiliates? Why or why
not? Please support your arguments.
    186. Do you believe that Part III, Item 3 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required? If not, how should Part III, Item 3 of proposed Form ATS-N be
revised to provide additional clarity? Please explain in detail.
    187. Do you believe there is other information that market
participants might find relevant or useful regarding other products and
services offered to subscribers by broker-dealer operators or their
affiliates? If so, describe such information and explain whether, and
if so why, such information should be required to be provided under
proposed Form ATS-N. Please support your arguments.
    188. Do you believe that the Commission should expand the proposed
disclosures in Part III, Item 3 of proposed Form ATS-N to products or
services offered by the broker-dealer operator or its affiliates that
are offered to subscribers, but not necessarily offered in connection
with transacting on the NMS Stock ATS? Why or why not? Please explain.
Do you believe there is other information that market participants
might find useful regarding the products or services offered to
subscribers by the broker-dealer operator or its affiliates? If so,
what information should be added to the disclosure requirements? Please
explain.
    189. What are the potential costs and benefits of disclosing the
information required by Part III, Item 3 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 3 of proposed Form ATS-N
would have the potential to impact innovation? Why or why not? Would
the proposed disclosures in Part III, Item 3 of proposed Form ATS-N
require broker-dealer operators of NMS Stock ATSs to reveal too much
(or not enough) information about their structure and operations? Why
or why not? Please support your arguments.
    190. Do you believe there is any information regarding the products
or services offered to subscribers by the broker-dealer operator that
the NMS Stock ATS should not be required to disclose on proposed Form
ATS-N due to concerns regarding confidentiality, business reasons,
trade secrets, burden, or any other concerns? If so, what information
and why? Please support your arguments.
    191. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
3 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 3?
5. Broker-Dealer Operator Arrangements With Unaffiliated Trading
Centers
    Part III, Item 4 of proposed Form ATS-N would require an NMS Stock
ATS to disclose whether the broker-dealer operator or any of its
affiliates have any formal or informal arrangement with an unaffiliated
person(s), or affiliate(s) of such person, that operates a trading
center \399\ regarding access to the NMS Stock ATS,

including preferential routing arrangements. If so, the NMS Stock ATSs
would be required to identify the person(s) and the trading center(s)
and to describe the terms of the arrangement(s).\400\
---------------------------------------------------------------------------

    \399\ See supra note 386 (defining trading center).
    \400\ See Part III, Item 4 of proposed Form ATS-N.
---------------------------------------------------------------------------

    Part III, Item 4 of proposed Form ATS-N is designed to inform
subscribers and the Commission about arrangements that may impact a
subscriber's experience on the NMS Stock ATS and allow market
participants to evaluate potential conflicts of interest of the broker-
dealer operator. For example, Part III, Item 4 of proposed Form ATS-N
would require an NMS Stock ATS to disclose whether its broker-dealer
operator has any arrangement with another unaffiliated NMS Stock ATS
pursuant to which the NMS Stock ATS would route orders or other trading
interest to the unaffiliated NMS Stock ATS for possible execution prior
to routing to any other destination. Similarly, Part III, Item 4 of
proposed Form ATS-N would require disclosure of an arrangement pursuant
to which any subscriber orders routed out of the unaffiliated NMS Stock
ATS would be routed first to the NMS Stock ATS before any other trading
center, and would also require disclosure of the terms of the
arrangement, for example, whether the NMS Stock ATS was providing
monetary compensation or some other brokerage service to the
unaffiliated NMS Stock ATS in exchange for the order flow.\401\
---------------------------------------------------------------------------

    \401\ The Commission notes that a broker-dealer operator may
have valid business reasons for it or its affiliates to have formal
or informal arrangements with an unaffiliated person(s), or
affiliate(s) of such person, that operates a trading center
regarding access to the NMS Stock ATS. The Commission is not
proposing to limit the ability for a broker-dealer operator to have
such arrangements.
---------------------------------------------------------------------------

    The Commission preliminarily believes that market participants
would consider information about any arrangements between a broker-
dealer operator of an NMS Stock ATS and other trading centers relevant
to their evaluation of an NMS Stock ATS as a potential trading venue.
The disclosure of such arrangements could reveal potential conflicts of
interest of the broker-dealer operator or could identify potential
sources of information leakage. For example, a potential conflict of
interest could arise where an NMS Stock ATS has a preferred routing
arrangement with an unaffiliated non-ATS trading center that provides
that all orders sent to the NMS Stock ATS would first be routed to the
unaffiliated non-ATS trading center before entering the NMS Stock ATS
in exchange for monetary compensation. Such an arrangement could also
pose a risk of information leakage in that the non-ATS trading center
would know that those orders that it does not execute would be routed
to the NMS Stock ATS.\402\ Part III, Item 4 of proposed Form ATS-N
would also require disclosure of mutual access arrangements between an
NMS Stock ATS and other trading centers whereby, for example, a broker-
dealer operator or its affiliates may offer access to its NMS Stock ATS
in exchange for access to the NMS Stock ATS of another broker-dealer
operator.
---------------------------------------------------------------------------

    \402\ Alternatively, if an arrangement between the NMS Stock ATS
and unaffiliated trading center provided that any subscriber orders
routed out of the NMS Stock ATS would be first routed to the
unaffiliated non-ATS trading center, the NMS Stock ATS may have an
incentive to remove subscribers' orders from the NMS Stock ATS and
allow the unaffiliated non-ATS trading center the opportunity to
execute those orders.
---------------------------------------------------------------------------

    The Commission notes that an NMS Stock ATS would not be prohibited
from establishing arrangements with other trading centers, provided
that such arrangements comply with other applicable laws and rules,
including applicable federal securities laws and Regulation ATS.
However, the Commission preliminarily believes that market participants
could benefit from disclosures about such arrangements and would use
such information when determining whether to subscribe, or route
orders, to a particular NMS Stock ATS. Additionally, the Commission
preliminarily believes that disclosure of such arrangements would help
the Commission perform its oversight functions by enabling it to better
evaluate an NMS Stock ATS's compliance with the requirements of
Regulation ATS, such as Rule 301(b)(10).
Request for Comment
    192. Do you believe the Commission should require the disclosure of
the information on Part III, Item 4 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    193. Do you believe Part III, Item 4 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS regarding any formal or informal
arrangement by the broker-dealer operator or any of its affiliates with
an unaffiliated person(s), or affiliate(s) of such person, that
operates a trading center \403\ regarding access to the NMS Stock ATS,
including preferential routing arrangements? Why or why not? Please
support your arguments.
---------------------------------------------------------------------------

    \403\ See supra note 386 (defining trading center).
---------------------------------------------------------------------------

    194. Do you believe that Part III, Item 4 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to access arrangements and preferred routing
arrangements with other unaffiliated trading centers? If not, how
should Part III, Item 4 of proposed Form ATS-N be revised to provide
additional clarity? Please explain.
    195. What are the potential costs and benefits of disclosing the
information required by Part III, Item 4 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 4 of proposed Form ATS-N
would have the potential to impact innovation? Why or why not? Would
the proposed disclosures in Part III, Item 4 of proposed Form ATS-N
require broker-dealer operators of NMS Stock ATSs to reveal too much
(or not enough) information about their structure and operations? Why
or why not? Please support your arguments.
    196. Do you believe that the Commission should include access
arrangements of affiliates of the broker-dealer operator in Part III,
Item 4 of proposed Form ATS-N? Why or why not? Please support your
arguments. Conversely, should disclosures of arrangements with other
trading centers by affiliates be extended to more remote affiliates
under a revised definition of ``affiliate''? \404\ Should disclosure
apply to a more limited set of affiliates? Why or why not? Please
support your arguments.
---------------------------------------------------------------------------

    \404\ See, e.g., supra note 385 and accompanying text.
---------------------------------------------------------------------------

    197. Do you believe that the Commission should expand the proposed
disclosure requirements to other arrangements beyond access and
preferred routing that the broker-dealer operator or its affiliates
might have with other trading centers? If so, what other arrangements
do you believe should be disclosed? Please explain in detail.
    198. Do you believe that the Commission should 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 centers and affiliates of those other
trading centers? Why or why not? Please support your arguments.
    199. Do you believe there is other information that market
participants might find relevant or useful regarding the broker-dealer
operator or its affiliates' arrangements with other trading centers? If
so, describe such information and explain whether, and if so why, such
information should be

required to be provided under proposed Form ATS-N. Please support your
arguments.
    200. Do you believe there is any information regarding the broker-
dealer operator or its affiliates' arrangements with other trading
centers that the NMS Stock ATS should not be required to disclose on
proposed Form ATS-N due to concerns regarding confidentiality, business
reasons, trade secrets, burden, or any other concerns? If so, what
information and why? Please support your arguments.
    201. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
4 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 4?
6. Trading on the NMS Stock ATS by the Broker-Dealer Operator and Its
Affiliates
    Part III, Item 5 of proposed Form ATS-N would require certain
disclosures related to the trading activity of the broker-dealer
operator or its affiliates on the NMS Stock ATS. Specifically, Part
III, Item 5 of proposed Form ATS-N would require the NMS Stock ATS to
disclose whether the broker-dealer operator, or any of its affiliates,
enters orders or other trading interest on the NMS Stock ATS. If so,
the NMS Stock ATS would be required to: (1) Identify each affiliate and
business unit of the broker-dealer operator that may enter orders or
other trading interest on the NMS Stock ATS; (2) describe the
circumstances and capacity (e.g., proprietary, agency) in which each
identified affiliate and business unit enters orders or other trading
interest on the NMS Stock ATS; (3) describe the means by which each
identified affiliate and business unit enters orders or other trading
interest on the NMS Stock ATS (e.g., directly through a FIX connection
to the NMS Stock ATS, or indirectly, by way of the broker-dealer
operator's SOR (or similar functionality), algorithm, intermediate
application, or sales desk); and (4) describe any means by which a
subscriber can be excluded from interacting or trading with orders or
other trading interest of the broker-dealer operator or its affiliates
on the NMS Stock ATS.\405\
---------------------------------------------------------------------------

    \405\ The Commission notes that a broker-dealer operator may
have valid business reasons for it or its affiliates to trade on the
NMS Stock ATS. The Commission is not proposing to limit the ability
for a broker-dealer operator to trade on any such NMS Stock ATS.
---------------------------------------------------------------------------

    As noted above, Part III, Item 5(a) of proposed Form ATS-N would
require the NMS Stock ATS to identify each affiliate and business unit
(e.g., a sales desk or proprietary trading unit) and affiliate of the
broker-dealer operator that can enter orders or other trading interest
on the NMS Stock ATS. The Commission preliminarily believes that
disclosure of whether a broker-dealer operator of an NMS Stock ATS or
its affiliates may trade on that NMS Stock ATS would be important to
subscribers with respect to the potential conflicts of interest that
may arise from the unique position the broker-dealer operator occupies
in relation to the NMS Stock ATS. If the person that operates and
controls a trading center is also able to trade on that trading center,
there may be an incentive to design the operations of the trading
center to favor the trading activity of the operator of the trading
center or affiliates of the operator.\406\ The operator of a trading
center that also trades on the trading center it operates would likely
have informational advantages over others trading on the trading center
such as a better understanding of the manner in which the system
operates or who is trading on the trading center. In the most egregious
case, the operator of the trading center might use the confidential
trading information of other traders to advantage its own trading on
that trading center, which, in context of an ATS, would violate Rule
301(b)(10). Accordingly, the Commission believes that subscribers would
benefit from knowing whether and how a broker-dealer operator or its
affiliates trade on the NMS Stock ATS to which they may route orders or
become a subscriber. Such information would allow market participants
to evaluate the extent of the potential conflicts of interest posed by
the broker-dealer operator or its affiliates' participation on the NMS
Stock ATS and to inquire further about such trading activity if they
choose.
---------------------------------------------------------------------------

    \406\ See supra note 370 and accompanying text.
---------------------------------------------------------------------------

    Part III, Item 5(b) of proposed Form ATS-N would require an NMS
Stock ATS to disclose the circumstances and capacity in which the
broker-dealer operator's business units or affiliates may trade on the
NMS Stock ATS, such as whether they are trading on a proprietary basis
(i.e., for their own accounts) or agency basis or both. This disclosure
is meant to provide insight as to the nature of the trading of the
broker-dealer operator and/or its affiliates. The Commission
preliminarily believes that market participants would find this
information useful in evaluating NMS Stock ATSs because they may
perceive agency trading by the broker-dealer operator or its affiliates
as posing less of a conflict of interest as compared to proprietary
trading. For example, market participants may perceive a lesser
potential for a conflict of interest if the broker-dealer operator
discloses that the broker-dealer operator or its affiliates trade on
its own NMS Stock ATS only in an agency capacity with its customers'
orders as opposed to trading on the NMS Stock ATS in a principal
capacity on a proprietary basis--where the broker-dealer operator or
its affiliates may have increased incentives to use their informational
advantage in operating the NMS Stock ATS to advance their trading
opportunities.\407\ Alternatively, market participants could conclude
that the broker-dealer operator's agency trading on its own NMS Stock
ATS could nevertheless pose an unacceptable conflict of interest as the
broker-dealer operator may be able to advantage its customers' orders
to the disadvantage of subscribers to the NMS Stock ATS. The Commission
proposes to provide market participants with information regarding the
nature of the trading activity of the broker-dealer operator and its
affiliates on the NMS Stock ATS so that subscribers (and potential
subscribers) can evaluate potential conflicts of interest that may
arise from that trading activity.
---------------------------------------------------------------------------

    \407\ See supra note 368.
---------------------------------------------------------------------------

    Part III, Item 5(c) of proposed Form ATS-N would require an NMS
Stock ATS to describe the means by which the business units of the
broker-dealer operator and its affiliates enter orders or other trading
interest into the NMS Stock ATS. Item 5(d) would require a description
of any means by which a subscriber can be excluded from interacting or
trading with orders or other trading interest of the broker-dealer
operator or its affiliates. Some NMS Stock ATSs that currently transact
in NMS stocks may provide both direct and indirect means for
subscribers to enter orders or other trading interest to the ATS. Based
on its experience, the Commission understands that subscribers to some
NMS Stock ATSs may enter orders or other trading interest directly to
the ATS using, for example, a direct FIX connection,\408\ while other
subscribers may enter

orders or other trading interest indirectly to the ATS using, for
example, an algorithm, the broker-dealer operator's smart order
router,\409\ or the broker-dealer operator's sales desks. As such,
there are a variety of means by which business units of the broker-
dealer operator or its affiliates of the broker-dealer operator may
connect to, and enter orders on, an NMS Stock ATS. The Commission
preliminarily believes that market participants evaluating NMS Stock
ATSs may find this information relevant in assessing any potential
advantages that the broker-dealer operator or its affiliates may have
over other subscribers to the NMS Stock ATS. For example, an NMS Stock
ATS may permit orders or other trading interest of all of its
affiliates that trade on the NMS Stock ATS to enter through a means
that can be used only by the broker-dealer operator or its affiliates
and not by non-affiliated subscribers to the NMS Stock ATS (e.g.,
bypassing the broker-dealer operator's SOR). The Commission
preliminarily believes that market participants would want to know
these circumstances, as the difference in access or order entry could
result in certain advantages, such as the speed at which orders could
be entered or cancelled. Moreover, the Commission preliminarily
believes that based on how a broker-dealer operator's business units or
affiliates access and trade on an NMS Stock ATS--or on other
considerations--certain subscribers may not wish to interact with the
order flow of the broker-dealer operator or its affiliates.
Accordingly, the Commission preliminarily believes that it is important
for market participants to have the information to elect whether and
how they may avoid trading against orders or other trading interest of
the broker-dealer operator or its affiliates on an NMS Stock ATS to
achieve their investing or trading objectives.
---------------------------------------------------------------------------

    \408\ To the extent that a subscriber to the NMS Stock ATS
directly sends an order to the NMS Stock ATS by way of FIX protocol,
the NMS Stock ATS should identify and describe any intermediate
functionality that the subscriber order may pass through on its way
to the NMS Stock ATS as part of the FIX process.
    \409\ See infra Section VII.B.7 (discussing the use of smart
order routers by broker-dealer operators of NMS Stock ATSs).
---------------------------------------------------------------------------

    Overall, the Commission preliminarily believes that the disclosures
required under Part III, Item 5 of proposed Form ATS-N would be useful
to many market participants. The Commission notes that market
participants may vary widely in their decision making process in
selecting a particular trading center to effect their trades or route
their orders, and therefore, the Commission preliminarily believes that
some market participants may not be concerned with the potential
conflicts of interest posed by the trading activity of the broker
dealer operator or its affiliates on the NMS Stock ATS. However, absent
disclosure of this trading activity of the broker-dealer operator or
its affiliates, subscribers and potential subscribers that take such
information into account when executing their trading or investment
strategies likely would neither be aware of such potential conflicts
nor able to assess whether the conflicts might impact those strategies.
Consequently, the Commission preliminary believes that it would be
useful to market participants for an NMS Stock ATS to be required to
disclose the information required in Part III, Item 5 of proposed Form
ATS-N.
Request for Comment
    202. Do you believe the Commission should require the disclosure of
the information on Part III, Item 5 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    203. Do you believe Part III, Item 5 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS related to the trading activity of the
broker-dealer operator or its affiliates on the NMS Stock ATS? Why or
why not? Please support your arguments.
    204. Do you believe that Part III, Item 5 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to the broker-dealer operator and its affiliates
trading on the NMS Stock ATS? If not, how should Part III, Item 5 of
proposed Form ATS-N be revised to provide additional clarity? Please
explain.
    205. Do you believe proposed disclosures in Part III, Item 5 of
proposed Form ATS-N should be applied to the trading activity on the
NMS Stock ATS of affiliates of the broker-dealer operator? Why or why
not? Should disclosures of affiliates trading on the NMS Stock ATS be
extended to more remote affiliates under a revised definition of
``affiliate''? \410\ Should disclosures apply to a more limited set of
affiliates? Why or why not? Please support your arguments.
---------------------------------------------------------------------------

    \410\ See, e.g., supra note 385 and accompanying text.
---------------------------------------------------------------------------

    206. Do you believe that the Commission should enhance measures to
prevent potential conflicts of interest posed by the broker-dealer
operator or its affiliates trading on its own NMS Stock ATS, such as
prohibiting proprietary trading by the broker-dealer operator or its
affiliates on the NMS Stock ATS? If no, why? If yes, what measures
should the Commission consider? Please explain in detail.
    207. What are the potential costs and benefits of disclosing the
information required by Part III, Item 5 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 5 of proposed Form ATS-N
would have the potential to impact innovation or discourage broker-
dealer operators or their affiliates from trading on their own NMS
Stock ATS? Why or why not? Would the proposed disclosures in Part III,
Item 5 of proposed Form ATS-N require broker-dealer operators of NMS
Stock ATSs to reveal too much (or not enough) information about their
structure and operations? Why or why not? Please support your
arguments.
    208. Do you believe there is other information that market
participants might find relevant or useful regarding the trading
activity on the NMS Stock ATS by the broker-dealer operator or its
affiliates? If so, describe such information and explain whether, and
if so why, such information should be required to be provided under
proposed Form ATS-N. Please support your arguments.
    209. Do you believe there is any information regarding the trading
activity on the NMS Stock ATS by the broker-dealer operator or its
affiliates that the NMS Stock ATS should not be required to disclose on
Form ATS-N due to concerns regarding confidentiality, business reasons,
trade secrets, burden, or any other concerns? If so, what information
and why? Please support your arguments.
    210. Should the Commission require separate disclosures for
different types of trading conducted by the broker-dealer operator on
the NMS Stock ATS, such as trading by the broker-dealer operator for
the purpose of correcting error trades executed on the ATS, as compared
to other types of proprietary trading? Why or why not? Please support
your arguments. If so, what types of proprietary trading should be
addressed separately and why? What disclosures should the Commission
require about these types of proprietary trading and why? Please
explain in detail.
    211. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
5 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 5?

7. Broker-Dealer Operator Smart Order Routers (or Similar
Functionalities) and Algorithms
    Part III, Item 6 of proposed Form ATS-N would require the NMS Stock
ATS to disclose whether the broker-dealer operator, or any of its
affiliates, use a SOR(s) (or similar functionality), an algorithm(s),
or both to send or receive subscriber orders or other trading interest
to or from the NMS Stock ATS, and if so, to: (1) Identify the SOR(s)
(or similar functionality) or algorithm(s) and identify the person(s)
that operates the SOR(s) (or similar functionality) or algorithm(s), if
other than the broker-dealer operator; \411\ and (2) describe the
interaction or coordination between the identified SOR(s) (or similar
functionality) or algorithm(s) and the NMS Stock ATS, including any
information or messages about orders or other trading interest (e.g.,
IOIs) that the SOR(s) (or similar functionality) or algorithm(s) send
or receive to or from the NMS Stock ATS and the circumstances under
which such information may be shared with any person.
---------------------------------------------------------------------------

    \411\ See supra note 362.
---------------------------------------------------------------------------

    Today, most broker-dealers that operate an NMS Stock ATS use some
form of SOR (or similar functionality) in connection with the NMS Stock
ATS. A SOR (or similar functionality) can generally be understood as an
automated system used to route orders or other trading interest among
trading centers, including proprietary non-ATS trading centers operated
by the broker-dealer operator, to carry out particular trading
instructions or strategies of a broker-dealer. Smart order routers (or
similar functionalities) have become an integral part of the business
of many multi-service broker-dealers, given the increase in the speed
of trading in today's equity markets and the large number of trading
centers, including national securities exchanges, ATSs, and non-ATS
trading centers, that have emerged since the adoption of Regulation
ATS. In addition to the SOR (or similar functionality), orders or other
trading interest may be entered on an NMS Stock ATS through the use of
a trading algorithm, which is a computer assisted trading tool that,
for instance, may be used by or on behalf of institutional investors to
execute orders that are typically too large to be executed all at once
without excessive price impact, and divide the orders into many small
orders that are fed into the marketplace over time.\412\
---------------------------------------------------------------------------

    \412\ See Staff of the Division of Trading and Markets,
Commission, ``Equity Market Structure Literature Review, Part II:
High Frequency Trading,'' at 5 (March 18, 2014), http://www.sec.gov/marketstructure/research/hft_lit_review_march_2014.pdf.
---------------------------------------------------------------------------

    Broker-dealer operators of NMS Stock ATSs or their affiliates may
use SORs (or similar functionality) or algorithms in a variety of
ways.\413\ For example, the broker-dealer operator may use the SOR (or
similar functionality) to route orders on behalf of its customers and
proprietary trading desks to different trading venues, or the broker-
dealer operator may use the SOR as the primary means of routing
subscriber orders or other trading interest to or from the NMS Stock
ATS. The Commission understands, based on experience, that for some
ATSs that currently transact in NMS stocks, the SOR (or similar
functionality) or algorithm of the broker-dealer operator or its
affiliates is the only means of access (i.e., all orders or other
trading interest entered on, or removed from, the ATS, must pass
through the SOR (or similar functionality) or algorithm). A broker-
dealer operator may also use a SOR (or similar functionality) or
algorithm to handle all order flow received by the broker-dealer
operator (or its affiliates), including both orders that a subscriber
has specifically directed to the NMS Stock ATS and orders that may not
be sent to the NMS Stock ATS, as well as the broker-dealer's own
proprietary orders and those of its affiliates. For many orders, the
SOR (or similar functionality) or algorithm determines whether to route
the order to the NMS Stock ATS, another NMS Stock ATS or non-ATS
trading center operated by the broker-dealer operator, another broker-
dealer, an unaffiliated NMS Stock ATS, or a national securities
exchange. The SOR (or similar functionality) may obtain knowledge of
subscriber orders or other trading interest that have been routed to
the NMS Stock ATS (and may now be resting on the NMS Stock ATS) and
subscriber orders that have been routed out of the NMS Stock ATS.
Similarly, the system operating an algorithm used by the broker-dealer
operator to enter subscriber orders based on the algorithm's trading
strategy may obtain information about subscriber orders sent to the NMS
Stock ATS. The broker-dealer operator (or its affiliates) programs and
operates the SOR (or similar functionality) and/or algorithm(s), unless
the broker-dealer operator contracts such functions to a third-party
vendor, in which case the broker-dealer operator or third-party vendor
may have access to information that passes through the SOR(s) (or
similar functionality), algorithm(s) or both.
---------------------------------------------------------------------------

    \413\ The Commission notes that, similar to legacy NMS Stock
ATSs, broker-dealer operators are likely to vary in their
organizational structures. Accordingly, the Commission proposes to
include affiliates of the broker-dealer operator that may operate a
SOR(s) (or similar functionality) or algorithm(s) in Part III, Item
6 of proposed Form ATS-N to ensure that SORs (or similar
functionalities) or algorithms used in connection with the NMS Stock
ATSs are disclosed regardless of whether the SOR(s) (or similar
functionality) or algorithm(s) is operated by an affiliate of the
broker-dealer operator.
---------------------------------------------------------------------------

    The Commission preliminarily believes that the high likelihood that
a SOR (or similar functionality) or algorithm could access subscribers'
confidential trading information necessitates disclosure of certain
information to subscribers about the use of a SOR (or similar
functionality) or algorithm by the broker-dealer operator or its
affiliates to route subscriber orders to or out of the NMS Stock ATS.
The Commission preliminarily believes that subscribers and the
Commission would benefit from increased disclosures about the use of a
SOR(s) (or similar functionality) or algorithm(s) by the broker-dealer
operator or its affiliates in connection with the NMS Stock ATS because
of the potential for information leakage. Existing Form ATS does not
specifically inquire about the use of a SOR (or similar functionality)
or algorithms in connection with an ATS and based on Commission
experience, the Commission is concerned that there is limited
information available to subscribers about the interaction between SORs
(or similar functionalities) or algorithms and affiliated ATSs that
trade NMS stocks, despite the importance of SORs (or similar
functionality) or algorithms to the functions and operations of such
ATSs. The Commission preliminarily believes that information provided
on Form ATS-N would allow market participants to better understand the
operation of an NMS Stock ATS and the circumstances that may give rise
to potential conflicts of interest and information leakage.
    Part III, Item 6(a) of proposed Form ATS-N would require an NMS
Stock ATS to identify the SOR(s) (or similar functionality) or
algorithm(s) and identify the person(s) that operates the SOR (or
similar functionality) and algorithm(s). Part III, Item 6(a) of
proposed Form ATS-N is designed to provide subscribers with information
about who operates the SOR(s) (or similar functionality) or
algorithm(s) used in connection with the NMS Stock ATS, which would
thereby inform subscribers about who may have access to their
confidential trading information or control over the entry and removal
of orders or other trading interest to and

from the NMS Stock ATS. Information about the persons who operate a
SOR(s) (or similar functionality) or algorithm(s) used in connection
with the NMS Stock ATS and how the SOR(s) (or similar functionality) or
algorithm(s) operates would allow subscribers to assess potential
sources of information leakage and conflicts of interest that may arise
from the operation of the SOR(s) (or similar functionality) and/or
algorithm(s).
    Part III, Item 6(b) of proposed Form ATS-N would require an NMS
Stock ATS to describe the interaction or coordination between the
identified SOR(s) (or similar functionality) or algorithm(s) and the
NMS Stock ATS, including any information or messages about orders or
other trading interest (e.g., IOIs) that the SOR(s) (or similar
functionality) or algorithm(s) send or receive to or from the NMS Stock
ATS and the circumstances under which such information may be shared
with any person. Because the SOR(s) (or similar functionality) or
algorithm(s) and NMS Stock ATS are typically operated by the same
broker-dealer operator (rather than a third-party vendor), the
Commission preliminarily believes subscribers to the NMS Stock ATS are
likely to find it important to understand what information about their
orders is obtained by a SOR(s) (or similar functionality) or
algorithm(s) and the circumstances under which that information may be
used by the broker-dealer operator of the NMS Stock ATS, its
affiliates, or other persons. The Commission is concerned that without
this information, subscribers that send orders to the NMS Stock ATS by
way of the broker-dealer operator's SOR (or similar functionality) or
algorithm may not be able to understand the conditions under which
information about their confidential trading information may be leaked.
    The interaction or coordination of the SOR(s) (or similar
functionality) or algorithm(s) with the NMS Stock ATS likely varies
across NMS Stock ATSs. For instance, a SOR (or similar functionality)
or algorithm may check for potential contra-side interest in a
particular symbol on the NMS Stock ATS prior to sending the subscriber
order or other trading interest into the NMS Stock ATS. Such protocol
carried out by the SOR (or similar functionality) or algorithm may send
only information about the symbol and side (i.e., buy or sell) of the
subscriber's order or other trading interest, but not the size, price,
identity of the subscriber or other information. As another example, an
NMS Stock ATS that uses IOIs as part of its platform may use its SOR
(or similar functionality) or an algorithm to facilitate the sending of
IOIs to relevant persons regarding orders or other trading interest
resting on the NMS Stock ATS. The Commission preliminarily believes
that the operations and functions of the SOR(s) (or similar
functionality) or algorithm(s) in these examples would be relevant to
subscribers and helpful in understanding how the NMS Stock ATS
operates.
    The Commission notes that an ATS may consist of various
functionalities or mechanisms that operate collectively as a Rule 3b-16
system to bring together the orders for securities of multiple buyers
and sellers using non-discretionary methods.\414\ Based on Commission
experience, most broker-dealer operators that use a SOR(s) (or similar
functionality) or algorithm operate the SOR(s) (or similar
functionality) or algorithm(s) separate and apart from their ATS.
However, to the extent that a SOR (or similar functionality) or
algorithm operates jointly with, or performs a function of, the NMS
Stock ATS to bring together the orders for securities of multiple
buyers and sellers using established nondiscretionary methods, the SOR
(or similar functionality) or algorithm may be considered part of the
NMS Stock ATS.\415\ For example, a SOR (or similar functionality) or
algorithm that is, based on the facts and circumstances, the exclusive
means for subscribers to access and enter orders or other trading
interest on NMS Stock ATS for execution would be regarded as part of
the operations of the NMS Stock ATS because the SOR (or similar
functionality) or algorithm would function as the mechanism for orders
or other trading interest to be brought together and interact in the
NMS Stock ATS. The Commission preliminarily believes that information
provided on proposed Form ATS-N about the use of a SOR (or similar
functionality) or algorithm under Part III, Item 6 of proposed Form
ATS-N would allow the Commission to better understand the operations
and scope of the NMS Stock ATS. That is, the proposed disclosures would
assist the Commission in determining if a SOR (or similar
functionality) or algorithm is facilitating the bringing together of
orders for securities of multiple buyers and sellers using established
nondiscretionary methods, and would consequently be part of the NMS
Stock ATS for the purposes of Regulation ATS.
---------------------------------------------------------------------------

    \414\ Under Rule 3b-16 an organization, association, or group of
persons shall be considered to constitute, maintain, or provide ``a
market place or facilities for bringing together purchasers and
sellers of securities or for otherwise performing with respect to
securities the functions commonly performed by a stock exchange,''
if such organization, association, or group of persons: (1) Brings
together the orders for securities of multiple buyers and sellers;
and (2) uses established, non-discretionary methods (whether by
providing a trading facility or by setting rules) under which such
orders interact with each other, and the buyers and sellers entering
such orders agree to the terms of a trade. 17 CFR 240.3b-16(a).
    \415\ The Commission noted in adopting Regulation ATS that the
Commission ``will attribute the activities of a trading facility to
a system if that facility is offered by the system directly or
indirectly'' and ``if an organization arranges for separate entities
to provide different pieces of a trading system, which together meet
the definition contained in paragraph (a) of Rule 3b-16, the
organization responsible for arranging the collective efforts will
be deemed to have established a trading facility.'' See Regulation
ATS Adopting Release, supra note 7, at 70852. If the SOR(s) (or
similar functionality) or algorithm(s) were operated by an affiliate
of the NMS Stock ATS or an entity unaffiliated with the NMS Stock
ATS, the SOR(s) (or similar functionality) or algorithm(s) could
still be considered a part of the NMS Stock ATS depending on the
facts and circumstances.
---------------------------------------------------------------------------

Request for Comment
    212. Do you believe the Commission should require the disclosure of
the information on Part III, Item 6 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    213. Do you believe Part III, Item 6 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS regarding the use of a SOR or algorithm
by the broker-dealer operators, or any of its affiliates, to send or
receive subscriber orders or other trading interest to or from the NMS
Stock ATS? Why or why not? Please support your arguments.
    214. Do you believe that Part III, Item 6 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to the broker-dealer operator and its affiliates' use
of SORs (or similar functionality) and algorithms in connection with
the NMS Stock ATS? If not, how should Part III, Item 6 of proposed Form
ATS-N be revised to provide additional clarity? Please explain in
detail.
    215. Do you believe it is appropriate for the Commission to require
disclosure about the use of SORs (or similar functionalities) and
algorithms by the broker-dealer operator, or its affiliates, to send or
receive orders or other trading interest to or from the NMS Stock ATS?
Why or why not? Please support your arguments. If so, what level of
detail should be disclosed about how SORs (or similar functionalities)
and algorithms determine whether to send or receive

orders or other trading interest to the NMS Stock ATS? Please be
specific.
    216. What are the potential costs and benefits of disclosing the
information required by Part III, Item 6 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 6 of proposed Form ATS-N
would have the potential to impact innovation? Why or why not? Would
the proposed disclosures in Part III, Item 6 of proposed Form ATS-N
require broker-dealer operators of NMS Stock ATSs to reveal too much
(or not enough) about their structure and operations? Why or why not?
Please support your arguments.
    217. Do you believe the proposed disclosures in Part III, Item 6 of
proposed Form ATS-N related to the use of SORs (or similar
functionality) and algorithms should be applied to affiliates of the
broker-dealer operator? Why or why not? Please support your arguments.
    218. Do you believe there is other information that market
participants might find relevant or useful regarding broker-dealer
operators or their affiliates' SORs (or similar functionalities) and
algorithms? If so, describe such information and explain whether, and
if so why, such information should be required to be provided under
proposed Form ATS-N. Please support your arguments.
    219. Do you believe there is any information regarding broker-
dealer operators or their affiliates' SORs (or similar functionality)
and algorithms that the NMS Stock ATS should not be required to
disclose on proposed Form ATS-N due to concerns regarding
confidentiality, business reasons, trade secrets, burden, or any other
concerns? If so, what information and why? Please support your
arguments.
    220. Do you believe that most subscribers to ATSs that transact in
NMS stock access the ATSs through the SOR (or similar functionality) or
algorithm of the broker-dealer operator (or its affiliates), or do they
connect directly to the ATS through some other means, or both? Please
explain in detail.
    221. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
6 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 6?
8. Shared Employees of NMS Stock ATS
    Part III, Item 7 of proposed Form ATS-N would require an NMS Stock
ATS to state whether any employee of the broker-dealer operator that
services the operations of the NMS Stock ATS also services any other
business unit(s) of the broker-dealer operator or any affiliate(s) of
the broker-dealer operator (``shared employee'') and, if so, to (1)
identify the business unit(s) and/or the affiliate(s) of the broker-
dealer operator to which the shared employee(s) provides services and
identify the position(s) or title(s) that the shared employee(s) holds
in the business unit(s) and/or affiliate(s) of the broker-dealer
operator; and (2) describe the roles and responsibilities of the shared
employee(s) at the NMS Stock ATS and the business unit(s) and/or
affiliate(s) of the broker-dealer operator.\416\
---------------------------------------------------------------------------

    \416\ See Part III, Item 7 of proposed Form ATS-N.
---------------------------------------------------------------------------

    Part III, Item 7 of proposed Form ATS-N is designed to provide
information to market participants and the Commission about
circumstances that might give rise to a potential conflict of interest
and potential information leakage involving shared employees of the
broker-dealer operator. Responses to Part III, Item 7 of proposed Form
ATS-N would require an NMS Stock ATS to describe the roles and
responsibilities of the shared employees with the NMS Stock ATS and the
other business units of the broker-dealer operator or affiliates.
Responses to Part III, Item 7 of proposed Form ATS-N would be required
to be sufficiently detailed to provide a comprehensive understanding of
the full range of the shared employee's responsibilities with the NMS
Stock ATS and each relevant entity, and include disclosure of
responsibilities that could enable the employee to view subscribers'
confidential trading information. The Commission preliminarily believes
that market participants would find information about the multiple
roles or functions of shared employees disclosed in Part III, Item 7 of
proposed Form ATS-N important in evaluating whether to route orders to
a particular ATS. For example, to identify and understand potential
sources of information leakage, market participants would likely want
to know if an employee of the broker-dealer operator that is
responsible for the operations of a system supporting the NMS Stock ATS
is also responsible for the proprietary trading activity of an
affiliate of the broker-dealer operator that trades on the NMS Stock
ATS. In this example, market participants might also be interested in
understanding conflicts of interest that may result from the shared
employee performing multiple roles, as the shared employee could have
an incentive to alter the operations of the NMS Stock ATS to benefit
the broker-dealer operator or an affiliate of the NMS Stock ATS.\417\
---------------------------------------------------------------------------

    \417\ The Commission notes that a broker-dealer operator may
have valid business reasons for it or its affiliates having shared
employees, and the Commission is not proposing to limit the ability
for a broker-dealer operator to have such arrangements.
---------------------------------------------------------------------------

    The Commission would preliminarily view any personnel that service
the trading functions of the NMS Stock ATS, such as those performing
information technology, programming, testing, or system design
functions as employees that ``service the operations of the NMS Stock
ATS.'' Other employees of the NMS Stock ATS that are otherwise
necessary for the trading functions of the NMS Stock ATS would also be
included in the disclosure requirement of Part III, Item 7 of proposed
Form ATS-N. Clerical employees or those performing solely
administrative duties such as the payroll functions for the employees
of the NMS Stock ATS would preliminarily not be included within the
proposed disclosure.
Request for Comment
    222. Do you believe the Commission should require the disclosure of
the information on Part III, Item 7 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    223. Do you believe Part III, Item 7 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS related to ``shared employees''? Why or
why not? Please support your arguments.
    224. Do you believe that Part III, Item 7 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to shared employees of the broker-dealer operator? If
not, how should Part III, Item 7 of proposed Form ATS-N be revised to
provide additional clarity? Please explain.
    225. Do you believe that it is sufficiently clear who would be
considered a ``shared employee'' under Part III, Item 7 of proposed
Form ATS-N? Why or why not? Is the scope of ``shared employees''
provided under Part III, Item 7 reasonable? Why or why not? Please
explain.
    226. Do you believe there is any information contained in the
proposed disclosures in Part III, Item 7 of proposed Form ATS-N
regarding shared employees of the broker-dealer operator that the NMS
Stock ATS should not be required to disclose on proposed Form ATS-N due
to concerns regarding confidentiality, business reasons, trade

secrets, burden, or any other concerns? If so, what information and
why? Please support your arguments.
    227. What are the potential costs and benefits of disclosing the
information required by Part III, Item 7 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 7 of proposed Form ATS-N
would have the potential to impact innovation or the manner in which
NMS Stock ATSs and broker-dealer operators use their employees? Why or
why not? Would the proposed disclosures in Part III, Item 7 of proposed
Form ATS-N require broker-dealer operators of NMS Stock ATSs to reveal
too much (or not enough) information about their structure and
operations? Why or why not? Please support your arguments.
    228. Do you believe there is other information that market
participants might find relevant or useful regarding shared employees
of the broker-dealer operator? If so, describe such information and
explain whether, and if so why, such information should be required to
be provided under proposed Form ATS-N. Please support your arguments.
    229. Do you believe that the Commission should expand the proposed
disclosures in Part III, Item 7 of proposed Form ATS-N to other
employees, personnel, or independent contractors of the broker-dealer
operator? Why or why not? If so, which employees, personnel, or
independent contractors should be included and what information about
such persons should be solicited? Please explain.
    230. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
7 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 7?
9. Service Providers to the NMS Stock ATS
    Part III, Item 8 of proposed Form ATS-N would require an NMS Stock
ATS to disclose whether any operation, service, or function of the NMS
Stock ATS is performed by any person(s) other than the broker-dealer
operator of the NMS Stock ATS, and if so to: (1) Identify the person(s)
(in the case of a natural person, to identify only the position or
title) performing the operation, service, or function and note whether
this service provider(s) is an affiliate of the broker-dealer, if
applicable; (2) describe the operation, service, or function that the
identified person(s) provides and describe the role and
responsibilities of that person(s); and (3) state whether the
identified person(s), or any of its affiliates, may enter orders or
other trading interest on the NMS Stock ATS and, if so, describe the
circumstances and means by which such orders or other trading interest
are entered on the NMS Stock ATS.\418\
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    \418\ See Part III, Item 8 of proposed Form ATS-N.
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    The Commission notes that Part III, Item 8 of proposed Form ATS-N
expands on the disclosure requirements of Exhibit E on current 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.\419\ Part III, Item 8 of proposed Form
ATS-N would require more detailed information about service providers
to the NMS Stock ATS than is currently required by Form ATS, including
whether affiliates of service providers may trade on the NMS Stock
ATS.\420\
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    \419\ See Item 7 of Form ATS (describing the requirements for
Exhibit E to Form ATS).
    \420\ The Commission notes that a broker-dealer operator may
have valid business reasons for it or its affiliates to have
functions of the NMS Stock ATS performed by person(s) other than the
broker-dealer operator of the NMS Stock ATS. The Commission is not
proposing to limit the ability for a broker-dealer operator to have
such arrangements.
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    Under Part III, Item 8(a) of proposed Form ATS-N, the NMS Stock-ATS
must identify any entity that performs any operation, service, or
function for the NMS Stock ATS.\421\ For example, an NMS Stock ATS may
engage a third-party service provider to provide market data for the
NMS Stock ATS to, among other things, calculate reference prices (such
as the NBBO). Responses to Part III, Item 8(a) of proposed Form ATS-N
would be required to include the name of the company that provides the
market data. Part III, Item 8(b) of proposed Form ATS-N would require
an NMS Stock ATS to provide, in detail, information about the
operations, service, or function of the NMS Stock ATS that is provided
by the identified third-party in Part III, Item 8(a) of proposed Form
ATS-N and its roles and responsibilities with respect to that
operation, service, or function. For example, a broker-dealer operator
may engage a third party to host and maintain the trading platform of
the NMS Stock ATS. Part III, Item 8(b) of proposed Form ATS-N would
require a description of those services and the specific role and
responsibilities of the company and its employees. Responses to Part
III, Item 8(b) of proposed Form ATS-N would be required to be
sufficiently detailed such that market participants and the Commission
could understand what functions are performed by a person other than an
employee of the broker-dealer operator and what those services include.
As guidance for completing this proposed disclosure item, the
Commission would view an NMS Stock ATS simply stating that a third-
party provides technology or hardware services to the NMS Stock ATS as
not sufficiently responsive to the required disclosure. Responses to
Part III, Item 8(b) of proposed Form ATS-N, in the example above, would
require a detailed description of information technology services,
including both hardware and software that may be provided, as well as
any programming, ongoing maintenance, monitoring, and other functions
the service provider would perform with respect to the NMS Stock ATS.
As additional guidance, responses to Item 8 would also be required to
include any service provider that provides, for example, such functions
as consulting relating to the trading systems or functionality, cyber
security, regulatory compliance, and record keeping services or
functions of the NMS Stock ATS. Additionally, an NMS Stock ATS would be
required to identify and describe the services of any service provider
engaged for the purposes of the clearance and settlement of trades for
the NMS Stock ATS.\422\
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    \421\ The Commission is not proposing to require than an NMS
Stock ATS provide any personally identifiable information about any
natural person in Part III, Item 8(a) of proposed Form ATS-N. Part
III, Item 8(a) of proposed Form ATS-N is designed to solicit
sufficient information to identify the entity or person providing
the service, operation, or function to the NMS Stock ATS, such as
the position or title in the case of a natural person acting as a
service provider.
    \422\ The Commission notes that the examples listed above are
not intended to be an exhaustive list of the types of services, and
the level of detail about those services, that would be required by
Part III, Item 8 of proposed Form ATS-N. The Commission
preliminarily believes that the appropriate disclosure would be
driven by the particular facts and circumstances of operational
structure of the NMS Stock ATS.
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    The Commission intends that the proposed disclosure requirements of
Items 8(a) and (b) of Part III of proposed Form ATS-N would apply to
any operation, service, or function performed by any person outside of
the NMS Stock ATS entity, including affiliates of the broker-dealer
operator.\423\ However, services provided

to the NMS Stock ATS by employees of the broker-dealer operator would
not need to be disclosed in Part III, Item 8 of proposed Form ATS-N.
The activities of such persons, to the extent they are shared
employees, would be disclosed pursuant to Part III, Item 7 of proposed
Form ATS-N.\424\ The Commission also notes that it does not intend that
the proposed disclosure requirements of Part III, Item 8 of proposed
Form ATS-N would extend to operations, services, or functions that are
administrative in nature and do not pose a significant risk of
information leakage of confidential trading information, such as
payroll functions servicing employees of the NMS Stock ATS or email
services provided by an outside provider, because the Commission
preliminarily believes that information about the services of such
third-party services providers and their employees would not be
relevant to market participants' evaluation of an NMS Stock ATS as a
trading venue and would not be necessary for the Commission's oversight
functions.
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    \423\ If, for example, the SOR of an affiliate of the broker-
dealer operator is used to route orders to and from the NMS Stock
ATS, the SOR would need to be disclosed in Part III, Item 8 of
proposed Form ATS-N and would likely also need to be disclosed in
Part III, Item 6 of proposed Form ATS-N, which relates to SORs used
by the broker-dealer operator or its affiliates.
    \424\ See supra Section VII.B.8 (discussing proposed
requirements for disclosure pertaining to NMS Stock ATS employees
that are shared employees with other business units of the broker-
dealer operator or its affiliates).
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    Items 8(a) and (b) of Part III of proposed Form ATS-N are designed
to provide market participants and the Commission with information
about how the NMS Stock ATS operates, potential conflicts of interest,
and the potential for information leakage. In particular, the
Commission preliminarily believes that this information would inform
market participants, as well as the Commission, about what aspects of
the NMS Stock ATS's operations are performed by third-parties that may
or may not be under the control of the broker-dealer operator. For
example, an NMS Stock ATS whose trading system is operated or supported
by a third-party service provider may have business interests that are
aligned with those of the service provider. Additionally, depending on
the role and responsibilities of the third-party service provider,
market participants may want to evaluate the robustness of the NMS
Stock ATS's safeguards and procedures to protect confidential
subscriber information.
    Lastly, Part III, Item 8(c) of proposed Form ATS-N would require an
NMS Stock ATS to state whether any person identified in Part III, Item
8(a) of proposed Form ATS-N or any of its affiliates may enter orders
or other trading interest on the NMS Stock ATS and if so, to describe
the circumstances and means by which such orders or other trading
interests are entered on the NMS Stock ATS. The purpose of these
disclosures is to provide market participants and the Commission with
information about the potential for conflicts of interest that may
result from a service provider, or its affiliates, trading on the NMS
Stock ATS and the potential for information leakage. For example, the
Commission preliminarily believes that a subscriber or potential
subscriber likely would want to know whether a person that is not an
employee of the broker-dealer operator, but is contracted to service
the trading platform that contains the NMS Stock ATS's book of orders,
could enter orders or other trading interest on the NMS Stock ATS.
Similarly, the Commission preliminarily believes that a subscriber or a
potential subscriber would also want to know whether an affiliate of
the service provider could enter orders or other trading interest on
the NMS Stock ATS as well and whether its means of access differ from
other subscribers. Under both of these scenarios, a potential conflict
of interest could result if the service provider has business interests
that compete with the trading interests of other subscribers to the NMS
Stock ATS.
Request for Comment
    231. Do you believe the Commission should require the disclosure of
the information on Part III, Item 8 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    232. Do you believe Part III, Item 8 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS regarding any operation, service, or
function of the NMS Stock ATS performed by any person other than the
broker-dealer operator? Why or why not? Please support your arguments.
    233. Do you believe that Part III, Item 8 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to service providers of the NMS Stock ATS? If not,
how should Part III, Item 8 of proposed Form ATS-N be revised to
provide additional clarity? Please explain.
    234. What are the potential costs and benefits of disclosing the
information required by Part III, Item 8 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 8 of proposed Form ATS-N
would have the potential to impact innovation or discourage
arrangements with other service providers? Why or why not? Would the
proposed disclosures in Part III, Item 8 of proposed Form ATS-N require
broker-dealer operators of NMS Stock ATSs to reveal too much (or not
enough) information about their structure and operations? Why or why
not? Please support your arguments.
    235. Do you believe that any of the information in the proposed
disclosure requirements of Part III, Item 8 of proposed Form ATS-N
regarding service providers to the NMS Stock ATS should not be required
to be disclosed on proposed Form ATS-N due to concerns regarding
confidentiality, business reasons, trade secrets, burden, or any other
concerns? If so, what information and why? Please support your
arguments.
    236. Do you believe the Commission should adopt a more limited or
expansive definition of ``affiliate'' for purposes of this disclosure
item? Why or why not? Please support your arguments.
    237. Do you believe there is other information that market
participants might find relevant or useful regarding any operation,
service, or function of the NMS Stock ATS performed by any person other
than the broker-dealer operator? If so, describe such information and
explain whether, and if so why, such information should be required to
be provided under proposed Form ATS-N. Please support your arguments.
    238. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
8 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 8?
10. Differences in Availability of Services, Functionality, or
Procedures
    Part III, Item 9 of proposed Form ATS-N would require an NMS Stock
ATS to identify and describe any service, functionality, or procedure
of the NMS Stock ATS that is available or applies to the broker-dealer
operator or its affiliates, that is not available or does not apply to
a subscriber(s) to the NMS Stock ATS. The purpose of this disclosure is
to alert market participants to the existence of system, functionality,
or trading features that the broker-dealer operator or its affiliates
may have that

other subscribers do not.\425\ For example, an NMS Stock ATS may employ
different procedures governing how orders entered on the NMS Stock ATS
by the broker-dealer operator's business units or affiliates are
segmented than it does for other subscribers. The Commission
preliminarily believes that the disclosure of those differences in
procedures would allow market participants to evaluate whether such
differences might put them at a disadvantage when competing against the
broker-dealer operator or its affiliates for an execution on the NMS
Stock ATS and thus, better enable market participants to decide whether
submitting order flow to that NMS Stock ATS aligns with their trading
or investment objectives.
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    \425\ The Commission notes that it is similarly proposing to
require NMS Stock ATSs to disclose differences in the treatment of
subscribers on the NMS Stock ATS in a number of proposed disclosure
requirements. See, e.g., proposed Items 1(a) and 1(b) of Part IV of
proposed Form ATS-N.
---------------------------------------------------------------------------

    The Commission notes that a significant difference between national
securities exchanges and NMS Stock ATSs is the extent to which each
trading center allows access to its services by its users. Section
6(b)(2) of the Exchange Act generally requires registered national
securities exchanges to allow any qualified and registered broker-
dealer to become a member of the exchange--a key element in assuring
fair access to national securities exchange services.\426\ In contrast,
the access requirements that apply to ATSs are much more limited.
Because NMS Stock ATSs are exempt from the definition of an
``exchange'' so long as they comply with Regulation ATS, and thus, are
not required to register as a national securities exchange pursuant to
Sections 5 and 6 of the Exchange Act, NMS Stock ATSs are not required
to provide fair access unless they reach a 5% trading volume threshold
in a stock, which almost all NMS Stock ATSs currently do not.\427\ As a
result, access to the services of NMS Stock ATSs is determined
primarily by private negotiation, and such access to services can
differ among persons that subscribe to the NMS Stock ATS.
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    \426\ 15 U.S.C. 78f(b)(2).
    \427\ See 17 CFR 242.301(b)(5). See also supra notes 92-95 and
accompanying text (discussing the fair access requirements of
Regulation ATS).
---------------------------------------------------------------------------

    While the Commission is not proposing to change the fair access
requirements applicable to NMS Stock ATSs in this proposal, the
Commission is proposing to require, among other things, disclosures on
Form ATS-N that identify and describe differences among subscribers (or
other persons) in the services, procedures or functionalities that an
NMS Stock ATS provides, as well as disclosures that identify and
describe any services, functionalities, or procedures of an NMS Stock
ATS that are available to the broker-dealer operator's affiliates, but
are not available to subscribers. The Commission preliminarily believes
that the disclosure of these differences would allow market
participants to evaluate whether such differences might put them at a
disadvantage when trading on a particular NMS Stock ATS and thus,
better enable market participants to decide whether submitting order
flow to that NMS Stock ATS aligns with their trading or investment
objectives.
    The Commission notes that ATSs may treat subscribers differently
with respect to the services offered by the ATS unless prohibited by
applicable federal securities laws or the rules and regulations
thereunder. For example, an ATS with at least 5% of the average daily
volume for any covered security during four of the preceding six months
is required to comply with fair access requirements under Rule
301(b)(5) of Regulation ATS,\428\ which, among other things, requires
an ATS to establish written standards for granting access to trading on
its system and not unreasonably prohibiting or limiting any person with
respect to access to services offered by the ATS by applying the
written standards in an unfair or discriminatory manner. Thus, for
example, an ATS that discloses a service to one class of subscribers
(or makes the associated functionality available to only one class of
subscribers) could not, if it were subject to the fair access
requirements, discriminate in this manner unless it had fair and non-
discriminatory reasons for doing so. The Commission further notes that,
even if an ATS is not subject to the fair access requirements,
inaccurate or misleading disclosures about an ATS's operations could
result in violations of the antifraud provisions of the federal
securities laws.\429\
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    \428\ See id.
    \429\ See, e.g., UBS Settlement at 14, ITG Settlement at 15,
Pipeline Settlement at 16, and Liquidnet Settlement at 14, supra
note 374 (all noting violations of Section 17(a)(2) of the
Securities Act, which prohibits, directly or indirectly, in the
offer or sale of securities, obtaining money or property by means of
any untrue statement of a material fact or any omission to state a
material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading.) 15 U.S.C. 77q(a)(2).
---------------------------------------------------------------------------

Request for Comment
    239. Do you believe the Commission should require the disclosure of
the information on Part III, Item 9 of Form ATS-N? Why or why not? If
so, what level of detail should be disclosed? Please be specific.
    240. Do you believe Part III, Item 9 of proposed Form ATS-N
captures the information that is most relevant to understanding the
operations of the NMS Stock ATS related to any service, functionality,
or procedure of the NMS Stock ATS that is available or applies to the
broker-dealer operator or its affiliates, that is not available or does
not apply to a subscriber(s) to the NMS Stock ATS? Why or why not?
Please support your arguments.
    241. Do you believe there is other information that market
participants might find relevant or useful regarding any service,
functionality, or procedure of the NMS Stock ATS that is available or
applies to the broker-dealer operator or its affiliates, that is not
available or does not apply to a subscriber(s) to the NMS Stock ATS? If
so, describe such information and explain whether, and if so why, such
information should be required to be provided under proposed Form ATS-
N. Please support your arguments.
    242. Do you believe that Part III, Item 9 of proposed Form ATS-N is
sufficiently clear with respect to the disclosures that would be
required relating to the differences in services provided to the
broker-dealer operator or its affiliates trading on the NMS Stock ATS?
If not, how should Part III, Item 9 of proposed Form ATS-N be revised
to provide additional clarity? Please explain.
    243. Do you believe that the proposed disclosures in Part III, Item
9 of proposed Form ATS-N that are intended to cover differences in
services, functionalities, or procedures should be applied to
affiliates of the broker-dealer operator? Why or why not? Conversely,
should such disclosures be extended to more remote affiliates under a
revised definition of ``affiliate''? \430\ Should disclosure apply to a
more limited set of affiliates? Why or why not? Please support your
arguments.
---------------------------------------------------------------------------

    \430\ See, e.g., supra note 385 and accompanying text.
---------------------------------------------------------------------------

    244. What are the potential costs and benefits of disclosing the
information required by Part III, Item 9 of proposed Form ATS-N? Do you
believe the disclosures in Part III, Item 9 of proposed Form ATS-N
would have the potential to impact innovation? Why or why not? Would
the proposed disclosures in Part III, Item 9 of proposed Form ATS-N
require broker-dealer operators of NMS Stock ATSs to

reveal too much (or not enough) information about their structure and
operations? Why or why not? Please support your arguments.
    245. Do you believe there is any information regarding differences
in services, functionalities, or procedures of the NMS Stock ATS that
are available to the broker-dealer operator or its affiliates and not
other subscribers that should not be required disclosures on Form ATS-N
due to concerns regarding confidentiality, business reasons, trade
secrets, burden, or any other concerns? If so, what information and
why? Please support your arguments.
    246. Do you believe that the Commission should propose amendments
to Rule 301(b)(5) of Regulation ATS to lower the trading volume
threshold in Regulation ATS that triggers the fair access requirement
from its current 5%? If so, what is the appropriate threshold? Please
support your arguments.
    247. Do you believe there are other ways to obtain the same
information as would be required from NMS Stock ATSs by Part III, Item
9 of proposed Form ATS-N other than through disclosure on proposed Form
ATS-N? If so, how else could this information be obtained and would
such alternative means be preferable to the proposed disclosures in
Part III, Item 9?
11. Confidential Treatment of Trading Information
    Part III, Item 10 of proposed Form ATS-N is based on the
requirements of Rule 301(b)(10) of Regulation ATS,\431\ and would
require an NMS Stock ATS to describe the written safeguards and written
procedures to protect the confidential trading information of
subscribers to the NMS Stock ATS. It would also require an NMS Stock
ATS to: (a) Describe the means by which a subscriber can consent or
withdraw consent to the disclosure of confidential trading information