compare such arrangements required across Covered ATSs.
    Proposed Part III, Item 21 is also designed to help market
participants understand the measures the Covered ATS takes to manage
post-trade processing, clearance, and/or settlement of transactions.
Market participants should know and be able to understand any
requirements a Covered ATS places on its subscribers, or other persons
whose trading interest is sent to the ATS, to receive certain post-
trade processing, clearance, and/or settlement services. The Commission
believes market participants would likely find the disclosures required
by this Item to be useful in understanding the measures undertaken by a
Covered ATS to manage post-trade processing, clearance, and/or
settlement of subscriber orders in the ATS and allow them to more
easily compare these arrangements across Covered ATSs as part of
deciding where to send their trading interest. The Commission believes
that these disclosures would assist the Commission in better
understanding the post-trade processing, clearance, and/or settlement
procedures of Covered ATSs and risks and trends in the market as part
of its overall review of market structure.
Request for Comment
    135. What aspects of the procedures and material arrangements
undertaken to manage the post-trade processing, clearance, and/or
settlement of transactions on Covered ATSs are important for ATSs to
disclose on Form ATS-N for the benefit of market participants?
v. Item 22: Market Data
    Part III, Item 22 \636\ of Form ATS-N is designed to solicit
information about the sources of market data used by the Covered ATS
and how the ATS uses that market data from these sources to provide the
services that it offers. As the Commission is proposing to apply Form
ATS-N to Government Securities ATSs, the Commission is proposing to add
to Part III, Item 22 to include ``feeds from trading venues'' in the
examples of sources of market data, which may be applicable to
Government Securities ATSs. Specifically, market participants would
likely find it useful to know the source and specific purpose for which
the market data is used by the Covered ATS, as the market data received
by the ATS might affect the price at which trading interest is
prioritized and executed, including trading interest that is pegged to
an outside reference price. An NMS Stock ATS, for example, would be
required to provide the names of national securities exchanges from
which the ATS receives direct market data feeds, either from a vendor
or directly from the exchange, in addition to the specific types of
market data received from each source. In addition, a Covered ATS would
be required to provide information about how the ATS uses market data
to provide the services it offers. To avoid duplicative disclosure,
market data reflecting options traded on government securities that is
used by the ATS could be discussed in response to proposed Part III,
Item 11. The Commission is proposing to include determining the best
bid or offer (BBO) as an example of how the ATS uses market data, which
could be applicable to Government Securities ATSs. Among other things,
Part III, Item 22 requires the disclosure of the use of market data to
display, price, prioritize, execute, and remove trading interest. As
part of this explanation, the Covered ATS would be required to specify,
if applicable, when the ATS may change sources of market data to
provide its services. A Covered ATS would also be required to explain
how market data is received by the ATS, compiled, and delivered to the
matching engine. For example, among other possible arrangements, a
Covered ATS could explain in response to the Item that market data is
received and assembled by the broker-dealer operator, and subsequently
delivered to the matching engine, or that market data is sent directly
to the matching engine, which normalizes the data for its use.
---------------------------------------------------------------------------

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

Request for Comment
    136. What are the sources of market data in NMS stocks, government
securities, and repos that are available to market participants as well
as to Covered ATSs and how do market participants and ATSs use this
information? What disclosures about an ATS's use of market data would
be important to market participants?
w. Item 23: Order Display and Execution Access
    Part III, Item 23 is designed to provide information about whether
an NMS Stock ATS is required to comply with Rule 301(b)(3)(ii) of
Regulation ATS.\637\ The Commission is not proposing to make changes to
this Item, other than specifying that this Item would be applicable to
NMS Stock ATSs, as the order display and execution access provisions
under Rule 301(b)(3) only apply to an ATS's NMS stock activities.\638\
---------------------------------------------------------------------------

    \637\ Part III, Item 23 of revised Form ATS-N (currently
numbered as Part III, Item 24 of current Form ATS-N) would be
required only for NMS Stock ATSs, as the associated rule is
inapplicable to government securities. See also NMS Stock ATS
Adopting Release, supra note 2, at Section V.D.24.
    \638\ 17 CFR 242.301(b)(3).
---------------------------------------------------------------------------

x. Item 24: Fair Access
    Part III, Item 24 of Form ATS-N would provide a mechanism under
which a Covered ATS would notify market participants whether it has
triggered the proposed fair access threshold and, if so, whether the
ATS is subject to the Fair Access Rule. As described above, the
Commission is proposing to require Government Securities ATSs to comply
with the Fair Access Rule if they meet the applicable thresholds.\639\
As a result, Part III, Item 24 would be applicable to both NMS Stock
ATSs and Government Securities ATSs that meet the applicable
thresholds. Pursuant to proposed Rule 301(b)(5)(ii), a Covered ATS
would aggregate the trading volume for a security or category of
securities for ATSs that are operated by a common broker-dealer, or
ATSs that are operated by affiliated broker-dealers for the purpose of
calculating the volume thresholds.\640\ In connection with proposed
Rule 301(b)(5)(ii), the Commission is proposing to require the Covered
ATS to indicate in Part III, Item 24(a) through (c) if the ATS crossed
the volume thresholds ``whether by itself or aggregated pursuant to
Rule 301(b)(5)(ii).''
---------------------------------------------------------------------------

    \639\ See supra Section III.D.
    \640\ The Commission is proposing changes to the Fair Access
Rule, which are discussed in detail below. See infra Section V.A.2.
---------------------------------------------------------------------------

    If a Covered ATS crosses the fair access thresholds, proposed Rule
301(b)(5)(iii)(A) \641\ requires the ATS to establish and apply
reasonable written standards for granting, limiting, and denying access
to the services of the ATS.\642\ If subject to the Fair Access Rule,
the Covered ATS would be required to describe the reasonable written
standards for granting, limiting, and denying access to the services of
the ATS pursuant to Rule 301(b)(5)(iii) of

Regulation ATS (as proposed to be applied herein).\643\ A description
of the Covered ATS's reasonable written standards in response to Part
III, Item 24 should be clear and comprehensive and should explain,
among other things, the objective and quantitative criteria upon which
the ATS's reasonable written standards are based, any differences in
access to the services of the ATS by applicant and current
participants, and why the standards including any differences in access
to the services of the ATS) are fair and not unreasonably
discriminatory. To the extent another person performs a function of the
ATS, the ATS would be required to provide reasonable written standards
for granting, limiting, or denying access to the services performed by
such person. In addition, an NMS Stock ATS must provide the ticker
symbol for each NMS stock for which the NMS Stock ATS has exceeded the
fair access threshold during each of the last 6 calendar months.
---------------------------------------------------------------------------

    \641\ See infra Sections V.A.3 through V.A.4.
    \642\ See 17 CFR 242.301(b)(5)(iii)(A). The Commission is
proposing that any change in a Covered ATS's response to Item 24
would be filed as a contingent amendment. See supra note 440 and
accompanying text.
    \643\ The Commission is proposing revisions to Part III, Item 24
(currently numbered as Part III, Item 25) to conform to the proposed
rule text of the Fair Access Rule, including rule re-numbering,
describing the required written standards as ``reasonable,'' and to
reference standards limiting and denying access to the services of
the ATS.
---------------------------------------------------------------------------

    The Commission believes that the proposed disclosures would
facilitate its oversight of Covered ATSs and their compliance with Rule
301(b)(5) as proposed herein. In addition, the proposed disclosures
would allow market participants to assess whether fair access is, in
fact, being applied by a Covered ATS that meets the fair access
threshold, in part by making publicly available a description of the
ATS's written standards for granting access.
Request for Comment
    137. Is there other information that market participants might find
important or useful regarding the reasonable written standards for
granting, denying, and limiting access to the services of a Covered ATS
that is subject to the Fair Access Rule? If so, describe such
information and explain whether, and if so, why, such information
should be required to be provided on Form ATS-N.
y. Item 25: Aggregate Platform-Wide Data; Trading Statistics
    Part III, Item 25 of Form ATS-N \644\ is designed to make public
aggregate, platform-wide statistics that a Covered ATS already
otherwise collects and publishes, or provides to one or more
subscribers to the ATS. The purpose of Item 25 is to place subscribers
on a level playing field with regard to aggregate, platform-wide
statistics about the Covered ATS that the ATS makes available.
---------------------------------------------------------------------------

    \644\ This Item is currently numbered as Part III, Item 26 of
current Form ATS-N.
---------------------------------------------------------------------------

    As explained above, the Commission is proposing to amend Form ATS-N
to solicit information about the use of non-firm trading interest in
the ATS, which relates to the proposed changes to Exchange Act Rule 3b-
16.\645\ Consistent with those proposed revisions, the Commission also
proposes to change the request for information on Part III, Item 25 to
require statistics beyond solely platform-wide order flow and execution
statistics. Specifically, the Commission proposes that Part III, Item
25 require a Covered ATS to disclose all aggregate, platform-wide
statistics that it publishes or provides to one or more subscribers.
Such statistics would include the order flow and execution data that is
currently solicited in Form ATS-N. In addition, the proposed disclosure
request would require a Covered ATS to disclose statistics related to
use of non-firm trading interest. On an RFQ system, such statistics
might include the percentage or total number of timed-out inquiries
(i.e., when a participant receives no prices or other responses after
posting an inquiry). With the use of a conditional order protocol, such
statistics could include market participants' firm-up rates (e.g., the
ATS sends a firm-up request to participants after their conditional
orders are matched).
---------------------------------------------------------------------------

    \645\ See supra Section II.C.
---------------------------------------------------------------------------

    While the Commission proposes to expand the scope of information
that this Item would solicit, the proposed disclosure request does not
require a Covered ATS to create, maintain, or publish any specific type
of statistic. As is the case with the current requirement, this
disclosure request only requires a Covered ATS to publicly disclose any
statistics within the scope of the question that it already discloses
to one or more subscribers. If a Covered ATS compiles a particular
statistic without distributing it (i.e., only uses it internally), it
would not be required to provide that statistic on Form ATS-N. Finally,
as with current Part III, Item 26 (proposed to be renumbered to Item
25), the proposed disclosure request does not require a Covered ATS to
provide on Form ATS-N any data that is otherwise required by Rule 605
of Regulation NMS.\646\ A Covered ATS may choose to create and publish
or provide to one or more subscribers or persons aggregate, platform-
wide statistics for different reasons. To the extent that a Covered ATS
has made a determination to create and publish or provide to
subscribers certain aggregate platform-wide data, the Commission
believes that others may also find such information useful when
evaluating the ATS as a possible venue for their trading interest.
---------------------------------------------------------------------------

    \646\ See 17 CFR 242.605.
---------------------------------------------------------------------------

    As with the current disclosure request, the proposed disclosure
request would not require a Covered ATS to amend its Form ATS-N every
time it receives a subscriber data request. To comply with the proposed
requirements under Part III, Item 25, Form ATS-N only requires a
Covered ATS to update its disclosures for Part III, Item 25 on a
quarterly basis.\647\ For instance, if a participant were to request
updated or new aggregate platform-wide statistics in January, the
Covered ATS would not be required to immediately file an updating
amendment containing these statistics after complying with the
participant's request. Rather, the ATS would need to file an updating
amendment within 30 days following the end of March. That updating
amendment must contain the most recently distributed version of these
statistics, as well as the most recently distributed version of all
other aggregate platform-wide data that was provided during that
quarter. The Commission notes that communications associated with the
responsive statistics are not required to be publicly filed. In the
prior example, for instance, if the statistics provided in the
quarterly amendment are the ones provided in January (i.e., those are
the latest version of those aggregate platform-wide statistics the ATS
distributed), the ATS would not (and should not) also attach to Form
ATS-N the participant's email requesting the statistics.
---------------------------------------------------------------------------

    \647\ If, for example, a Covered ATS publishes or provides a
particular statistic on a daily basis, the ATS would include in
Exhibit 4 of Form ATS-N the statistic that was published or provided
to one or more subscribers on the last trading day of the calendar
quarter (e.g., the statistic published or provided on June 30th or
last trading day prior to June 30th). If a Covered ATS publishes or
provides a particular statistic weekly, the ATS would be required to
include in Exhibit 4 of Form ATS-N the statistic that was published
or provided to one or more subscribers at the end of the week prior
to the end of the calendar quarter (e.g., the statistic published
for the last full week of June).
---------------------------------------------------------------------------

    Furthermore, Part III, Item 25 of Form ATS-N would only require a
Covered ATS to publicly disclose aggregate platform-wide data. As such,
a Covered ATS would not be required to disclose individualized or
custom reports containing data relating to that participant's specific
usage of the ATS. For example, an individual participant's trade
reports, order and execution quality statistics, and other statistics

specific to a participant's trading in the ATS would not be covered by
the disclosure request in Part III, Item 25. A Covered ATS would need
to independently evaluate any statistics that it compiles and
distributes to determine whether they are responsive to this disclosure
request.
    Part III, Item 25 would require the Covered ATS to attach both the
responsive statistics and its explanation of the categories or metrics
of the statistics and the criteria or methodology used to calculate
those statistics as Exhibits 4 and 5, respectively. Also, in lieu of
filing Exhibits 4 and 5, the Covered ATS could certify that the
information requested under Exhibits 4 and 5 is available at the
website provided in Part I, Item 6 of the form and is accurate as of
the date of the filing. The Commission is proposing to add to the
instruction that if the ATS selects the checkbox, the ATS will maintain
its website in accordance with the rules for amending Form ATS-N
pursuant to Rule 304(a)(2)(i) to reflect any changes to such
information. This would require an ATS checking the box to update its
website as if it were Form ATS-N, and therefore, to update the
information, as appropriate pursuant to the Commission's rules for
amending Form ATS-N.
Request for Comment
    138. Does Part III of Form ATS-N capture the information that is
most relevant to understanding the operations of the Government
Securities ATS and the use of non-firm trading interest on
Communication Protocol Systems? Are there any Items that commenters
believe are unnecessary? If so, why?
    139. Should the Commission expand what Covered ATSs must disclose
on Form ATS-N? Is there other information that market participants
might find relevant or useful regarding the operations of Covered ATSs
that should be publicly disclosed? If so, describe such information and
explain whether, and if so, why, such information should be required to
be provided under Form ATS-N.
    140. Is there any information related to repos that Form ATS-N
should require?
    141. Is there any information related to options on government
securities that Form ATS-N should require?
    142. Is there any information that would be required by Part III of
Form ATS-N that a Covered ATS should not be required to disclose due to
concerns regarding confidentiality, business reasons, trade secrets,
commercially sensitive information, burden, or any other concerns?
    143. Should the Commission adopt a more limited or expansive
definition of ``affiliate'' for purposes of Part III? \648\
---------------------------------------------------------------------------

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

    144. Would the disclosures under Part III of Form ATS-N help market
participants better evaluate trading opportunities and decide where to
send trading interest to reach their trading objectives?
    145. Would the proposed disclosures in Part III of Form ATS-N
require a Government Securities ATS to reveal too much (or not enough)
information about its structure and operations?
    146. Are there ways to obtain the same information as would be
required from Government Securities ATSs by Part III of Form ATS-N
other than through disclosure on Form ATS-N? If so, how else could this
information be obtained?
    147. Could the proposed requirement to disclose the information
that would be required by Part III of Form ATS-N impact innovation in
Government Securities ATSs?
    148. Are there any aggregate platform-wide statistics of the
Covered ATS that should not be required to be disclosed under Item 25?
    149. Has Form ATS-N allowed market participants to better evaluate
trading venues? If so, how? How do commenters believe the manner in
which NMS Stock ATSs currently disclose information on Form ATS-N could
be improved? Is the level of detail required appropriate? Are there any
aspects of Form ATS-N on which the Commission should provide further
guidance?
6. Part IV: Contact Information, Signature Block, and Consent to
Service
    Part IV of Form ATS-N would require a Covered ATS to provide
certain basic information about the point of contact for the ATS, such
as the point of contact's name, title, telephone number, and email
address. Part IV would also require the Covered ATS to consent to
service of any civil action brought by, or any notice of any proceeding
before, the Commission or an SRO in connection with the ATS's
activities. The Commission is proposing that Form ATS-N would be filed
electronically and require an electronic signature.\649\ The signatory
to each Form ATS-N filing would be required to represent that the
information and statements contained on the submitted Form ATS-N,
including exhibits, schedules, attached documents, and any other
information filed, are current, true, and complete. Given that market
participants would use information disclosed on Form ATS-N to evaluate
potential venues, and that the Commission intends to use the
information to monitor developments of Covered ATSs, it is important
that Form ATS-N contain disclosures that are current, true, and
complete, and therefore the Commission is proposing to require that the
signatory to Form ATS-N make such an attestation.
---------------------------------------------------------------------------

    \649\ To avoid confusion, the Commission is proposing to delete
language in the signature block in Part IV of Form ATS-N that refers
to the signatory as ``duly sworn.'' The Commission notes that unlike
Form ATS, Form ATS-N filings, which are submitted to EDGAR, are not
required to be notarized; instead, they are subject to the rules
governing electronic signatures set forth in Rule 302 of Regulation
S-T. See 17 CFR 232.302.
---------------------------------------------------------------------------

V. Proposed Amendments to Form ATS, Form ATS-R, and Other Conditions to
Regulation ATS

A. Proposed Amendments to the Fair Access Rule for all ATSs

    In addition to the amendments to the Fair Access Rule for
Government Securities ATSs,\650\ the Commission is proposing several
amendments to the Fair Access Rule that would apply to all ATSs that
are subject to the rule. The proposed amendments are discussed below.
---------------------------------------------------------------------------

    \650\ See supra Section III.B.4.
---------------------------------------------------------------------------

1. Rule Text Clarifications
    The Commission is re-proposing to amend the Fair Access Rule, as
well as the Capacity, Integrity, and Security Rule under Rule
301(b)(6), to specify the use of volume to calculate the relevant
thresholds under the rule. For purposes of determining whether an ATS
crossed the average daily volume thresholds for compliance with the
Fair Access Rule, Rule 301(b)(5)(i) does not specify whether the ATS's
transaction volume in an NMS stock or an equity security that is not an
NMS stock and for which transactions are reported to an SRO is
calculated using the dollar or the share volume.\651\ In the Regulation
ATS Adopting Release, when discussing the Fair Access Rule, the
Commission stated that for these two types of securities, the test
should be based on the share volume.\652\ Similarly, Rules 301(b)(5)(i)
and (b)(6)(i) do not specify whether, for purposes of determining
compliance with the Fair Access Rule and the

Capacity, Integrity, and Security Rule, the volume for municipal
securities or corporate debt securities is calculated based on the
dollar or the share volume.\653\ In the Regulation ATS Adopting
Release, the Commission intended the test applicable to debt securities
to be based on the dollar volume.\654\ To mitigate any potential
confusion, the Commission is adding these terms to Rules 301(b)(5)(i)
and (b)(6)(i) to align the rule text with the Regulation ATS Adopting
Release.\655\
---------------------------------------------------------------------------

    \651\ 17 CFR 242.301(b)(5)(i)(A)-(B).
    \652\ See Regulation ATS Adopting Release, supra note 31, at
70873 (``Accordingly, if an [ATS] accounted for twenty percent or
more of the share volume in any equity security, it must comply with
the fair access requirements in granting access to trading in that
security.'') (emphasis added).
    \653\ 17 CFR 242.301(b)(5)(i)(C)-(D); 17 CFR
242.301(b)(6)(i)(A)-(B).
    \654\ See Regulation ATS Adopting Release, supra note 31, at
70873, 70875 (requiring compliance with the Fair Access Rule and the
Capacity, Integrity, and Security Rule if an ATS accounted for more
than 20 percent of the total ``share volume'' in a security with
respect to equity securities, and for more than 20 percent of the
``volume'' in a security with respect to debt securities). While
Form ATS-R requires an ATS to report total volume in terms of both
units and dollars for equity securities, it requires an ATS to
report the total settlement value only in dollar terms for municipal
securities and corporate debt securities. See id. at 70878.
    \655\ See proposed Rule 301(b)(5)(i)(A)-(D); proposed Rule
301(b)(6)(i)(A)-(B).
---------------------------------------------------------------------------

    The Commission is also re-proposing to amend Rules 301(b)(5)(i)(C)
and (D) to clarify that the average daily dollar volume in municipal
securities is provided by the SRO to which such transactions are
reported and average daily dollar volume in corporate debt securities
is provided by the SRO to which such transactions are reported.\656\
When Regulation ATS was adopted, transaction reporting plans for
municipal securities and corporate debt securities were being
developed.\657\ Today, transactions in municipal securities are
reported to the MSRB and transactions in corporate debt securities are
reported to FINRA. These two SROs provide the information that can be
used by ATSs to determine whether the ATS is subject to the Fair Access
Rule for these two categories of securities.\658\ This amendment will
add clarity to the rule given the established transaction reporting
regimes for municipal securities and corporate debt securities.
---------------------------------------------------------------------------

    \656\ To the extent transactions are reported to multiple SROs,
the volume of transactions reported to such SROs would be combined
for the purpose of calculating whether the transactions meet the
threshold.
    \657\ See Regulation ATS Adopting Release, supra note 31, at
70873.
    \658\ See MSRB Rule G-14; FINRA Rule 6730. Electronic Municipal
Market Access (``EMMA''), which is a service operated by the MSRB,
and FINRA disseminate information on transactions in municipal
securities and corporate debt securities, respectively. See EMMA
Information Facility, available at http://www.msrb.org/Rules-and-Interpretations/MSRB-Rules/Facilities/EMMA-Facility.aspx; FINRA Rule
6750.
---------------------------------------------------------------------------

2. Aggregation of Volume Threshold for Affiliated ATSs
    The Commission is also proposing to amend the Rule 301(b)(5)(ii) of
the Fair Access Rule to aggregate the trading volume for a security or
category of securities for ATSs that are operated by a common broker-
dealer, or ATSs that are operated by affiliated broker-dealers, solely
for the purpose of calculating the average transaction volume under
Rule 301(b)(5)(i)(A) through (F).\659\ Today, there are single entities
that may be the registered broker-dealer operator for different types
of ATSs that trade different categories of securities (e.g., NMS Stock
ATS and non-NMS Stock ATS), and there are broker-dealers that may
operate multiple ATSs that trade the same type of securities with
different matching protocols (e.g., limit order book for one and
volume-weighted-average-price for the other). Likewise, there are
entities that control multiple subsidiary broker-dealers, each of which
operates one or more ATS or Communication Protocol System that trade
the same or different categories of securities.\660\ In these
instances, each ATS with a common broker-dealer operator--and each of
the affiliated Communication Protocol Systems that would be subject to
Regulation ATS under this proposal--must comply with Regulation
ATS.\661\
---------------------------------------------------------------------------

    \659\ For Rule 301(b)(5)(ii), the Commission would refer to the
definition of affiliate used for purposes of Form ATS-N. See NMS
Stock ATS Adopting Release, supra note 2, at 38818-19. Affiliate was
defined to mean ``with respect to a specified Person, any Person
that, directly or indirectly, controls, is under common control
with, or is controlled by, the specified Person.'' Id. The
Commission is proposing to include the definition of affiliate in
proposed Rule 300(c). The currently defined term ``affiliate of a
subscriber'' in Rule 300(c) is not currently used in Regulation ATS,
and the Commission is therefore replacing such term with the
definition of ``affiliate.'' The proposed amended definition of
``affiliate'' would help ATSs determine whether to aggregate the
trading volume of ATSs operated by affiliated broker-dealer
operators. The proposed definition of ``affiliate'' is identical to
the definition of affiliate in Form ATS-N Explanation of Terms. Like
the definition of ``affiliate of a subscriber'' under current Rule
300(c), the proposed definition of ``affiliate'' would include a
specified person that, directly or indirectly, controls, is under
common control with, or is controlled by, the specified person, and
therefore would include employees of the specified person.
    \660\ The term ``control'' is defined in Rule 300(f) of
Regulation ATS to mean: The power, directly or indirectly, to direct
the management or policies of the broker-dealer of an alternative
trading system, whether through ownership of securities, by
contract, or otherwise. A person is presumed to control the broker-
dealer of an alternative trading system if that person: Is a
director, general partner, or officer exercising executive
responsibility (or having similar status or performing similar
functions); directly or indirectly has the right to vote 25 percent
or more of a class of voting securities or has the power to sell or
direct the sale of 25 percent or more of a class of voting
securities of the broker-dealer of the alternative trading system;
or in the case of a partnership, has contributed, or has the right
to receive upon dissolution, 25 percent or more of the capital of
the broker-dealer of the alternative trading system. 17 CFR
242.300(f). See also NMS Stock ATS Adopting Release, supra note 2,
at 38818-19 (discussing definition of control).
    \661\ See Rule 3a1-1(a)(2) (providing that an organization,
association, or group of persons shall be exempt from the definition
of ``exchange'' if it is in compliance with Regulation ATS) and Rule
301(a) (providing that an ATS shall comply with the requirements of
Rule 301(b)).
---------------------------------------------------------------------------

    In response to the 2020 Proposal, one commenter stated that because
each ATS is unique, it believed that for purposes of determining
whether an ATS should be subject to the Fair Access Rule, volume should
be determined at an individual ATS level and not aggregated across
commonly controlled ATSs.\662\ The commenter stated that a broker-
dealer may choose to operate separate ATSs based on separate business
units within the broker-dealer, different technology backbones, or
different types of functionality, such as anonymous or fully disclosed
order books or auction-based offerings.\663\
---------------------------------------------------------------------------

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

    The Commission is concerned, however, that despite differences that
may exist between ATSs that are operated by a common broker-dealer or
ATSs operated by affiliated broker-dealers, there is a potential for a
broker-dealer operator or controlling entity for more than one broker-
dealer to structure its business to avoid triggering the fair access
thresholds, and thereby circumvent the Fair Access Rule. It could do
this by establishing multiple ATSs under one broker-dealer, or
establishing multiple broker-dealers that each operate an ATS, to trade
the same security or category of securities. The Fair Access Rule is
designed to ensure that market participants have reasonable access to
ATS market places that capture a significant percentage of national
trading volume for a security or type of security. When a single entity
operates multiple market places, that entity ultimately controls which
market participants have access to trading across those market places.
    When an organization, such as a broker-dealer, for example,
provides an exchange market place for the same security or category of
security but chooses to divide the market place into component parts by
filing multiple Forms ATS or Forms ATS-N rather than filing a single
form encompassing all the component market places, that organization is
still the exchange providing a market place to bring together buyers
and sellers of securities

and ultimately controls access to the entire security or category of
securities that it makes available for trading across its multiple
ATSs. In the Commission's experience, ATSs under common operation of a
broker-dealer generally are designed to function as complementary
products of a single business of the broker-dealer as opposed to
separate market places competing against each other for order flow in
the same security or types of securities. In the Commission's
experience, it is typical for a broker-dealer that operates multiple
ATSs for the same security or category of securities to use, for
example, the same operations, technology, and administrative personnel
for purposes of its ATSs' trading operations. Furthermore, a single
entity controlling multiple ATSs often applies similar standards for
granting access across all of its ATSs that trade the same security or
category of security and applies the same market data, clearance,
settlement, and trade reporting processes, and procedures for
protecting subscriber confidential trading information. Even in the
case of a single parent company, for example, which controls several
affiliated broker-dealers that each operate an ATS for the same
category of security, access to each ATS is obtained from the broker-
dealer operator, and each broker-dealer operator is subject to the
direction of the parent company. Ultimately, those ATSs serve the
business interests of, and are under common control by, the parent
company.
    Aggregating trading volume among ATS market places and
Communication Protocol Systems that would be subject to Regulation ATS
under this proposal--either operated by a common broker-dealer or by
affiliated broker-dealers--would help further the vital policy goal of
ensuring that no single entity is able to restrict fair access to a
security or type of security. As a result of this proposed change, if,
for example, a broker-dealer operated two NMS Stock ATSs that each
accounted for three percent of the average daily volume in an NMS stock
during at least four of the preceding six calendar months, both NMS
Stock ATSs would be subject to the Fair Access Rule for that security
because their aggregated volume exceeds the five percent threshold of
Rule 301(b)(5)(i)(A).\664\ If, instead, one of the ATSs had six percent
of the average daily volume for an NMS stock and the other ATS had one
percent, both NMS Stock ATSs would be subject to the Fair Access Rule
as a result of their common broker-dealer operator and aggregated
volume. In another example, if two broker-dealers that are subsidiaries
of the same parent company each operate an ATS for corporate bonds and
each ATS accounts for three percent of the average daily volume of
corporate bonds traded in the United States during at least four of the
preceding six calendar months, then both ATSs would be subject to the
Fair Access Rule. This result would be because the ATSs are operated by
affiliated broker-dealers and their aggregate volume exceeds the volume
threshold of Rule 301(b)(5)(i)(C).
---------------------------------------------------------------------------

    \664\ Also, if one of the ATSs operated by the common broker-
dealer operator accounted for five percent of the average daily
volume in an NMS stock for three months and the other ATS accounted
for five percent of the average daily volume in the same NMS stock
for the subsequent three months, then both ATSs would be subject to
the Fair Access Rule for that NMS stock because aggregated they
would have crossed the volume threshold for more than four of the
preceding six calendar months.
---------------------------------------------------------------------------

3. Reasonable Written Standards
    The Commission is proposing to amend the requirements related to
reasonable written standards.\665\ The Commission is proposing Rule
301(b)(5)(iii)(A) to provide that the ATS ``establish and apply
reasonable written standards for granting, limiting, and denying access
to the services of the alternative trading system.'' As discussed in
more detail below, the Commission is proposing to add the word
``reasonable'' before ``written standards'' to incorporate the concept
that is part of current Rule 301(b)(5)(ii)(B) (``not unreasonably
prohibit or limit'') and used in the Regulation ATS Adopting
Release.\666\ The Commission is also adding in the rule text, for the
removal of any doubt, that the ATS must ``apply'' the reasonable
written standards as established. For example, if an ATS establishes a
written standard that states subscribers' trading interest will not be
displayed to anyone, but the ATS in practice displays trading interest
to a subscriber, then the ATS would not be applying its established
written standards. Establishing the written standard is not sufficient
if the ATS is not following or applying them.
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    \665\ These requirements are currently in Rule 301(b)(5)(ii),
which the Commission is proposing to re-number as Rule
301(b)(5)(iii).
    \666\ See Regulation ATS Adopting Release, supra note 31, at
70872. The Commission believes that the addition of ``reasonable''
is consistent with its intent as expressed in the Regulation ATS
Adopting Release. Specifically, in discussing the Fair Access Rule,
the Commission stated that ``fair treatment . . . is particularly
important'' when ATSs reach significant volume in a security, and
the rule would serve to prohibit ``unreasonably'' discriminatory
denials of access.
---------------------------------------------------------------------------

    Also incorporated into proposed Rule 301(b)(5)(iii)(A), and taken
from current Rule 301(b)(5)(ii)(B), is that the written standards apply
to access of ``the services of the alternative trading system.'' This
addition to the rule text serves to emphasize that the Fair Access Rule
applies not only to the initial grant or denial of access to an
applicant of the ATS, but also to the services of the ATS that are
offered to current participants. ATS services, including, among others,
the provision of market data, order entry functionalities, priority
rules, segmentation procedures, negotiation features, communication
protocols, counterparty selection, and order types offered, would all
be subject to the provisions of the Fair Access Rule. The Commission is
also incorporating from current Rule 301(b)(5)(ii)(B) that the Fair
Access Rule applies when limiting and denying access to the ATS
services, not solely granting access.\667\ The application of the Fair
Access Rule to limitations and denials of access would help ensure that
market participants receive the full benefits of participation in an
ATS subject to the Fair Access Rule unless a limitation or denial of
access can be reasonably justified.
---------------------------------------------------------------------------

    \667\ Rule 301(b)(5)(ii)(B) states that the ATS shall not
``unreasonably prohibit or limit'' (emphasis added) any person with
respect to the services of the ATS.
---------------------------------------------------------------------------

    As indicated above, the Commission is making explicit in the text
of Rule 301(b)(5) that the written standards required under the Fair
Access Rule must be reasonable. An ATS subject to the Fair Access Rule
is not required to treat all participants the same in all instances;
however, the Fair Access Rule has always required that an ATS subject
to the rule provide reasonable access to ATS services.\668\ The
Commission is revising the rule text to make it clear that the written
standards must be reasonable. For an ATS's written standards to be
reasonable, the standards must be fair and not unreasonably
discriminatory. Some ATSs, for example, might offer different services,
or levels of a service, to one subscriber or among different classes of
subscribers. An ATS subject to the Fair Access Rule could not provide
services to one class of participants and not to other classes of
participants unless the ATS established standards with a reasonable
basis for treating the participant classes differently. For example, as
stated in the Regulation ATS Adopting Release, an ATS may establish a
standard that requires all participants be registered broker-dealers
and that ATS may deny access to the ATS to any applicant that is not a

registered broker-dealer.\669\ As part of its reasonable analysis, an
ATS subject to the Fair Access Rule must explain why the standard for
admitting registered broker-dealers rather than non-registered broker-
dealers is fair and not unreasonably discriminatory.\670\ Fees can be a
manner of limiting or denying services. In another example, an ATS that
charges certain fees to one class of participants but different fees to
another class of participants for the same service could not, if it
were subject to the Fair Access Rule, discriminate in this manner
unless it adopted reasonable written standards and applied them in a
fair and non-discriminatory manner. Also, to apply the standards fairly
and non-discriminatorily, the ATS's activities (or the activities of
persons performing a function of the ATS) must be carried out in
accordance with the established written standards of the ATS.
---------------------------------------------------------------------------

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

    When assessing the reasonableness of standards under the Fair
Access Rule, the Commission may consider principles applied in the
national securities exchange context to guide its analysis of whether
an ATS's written standards are fair and not unreasonably
discriminatory. Under Section 6(b)(5) of the Exchange Act, for example,
a national securities exchange must show that its rules are not
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.\671\ Sections 6(b)(2) and 6(c) of the Exchange Act
require national securities exchanges to consider the public interest
in administering their markets and to establish rules designed to admit
members fairly.\672\ National securities exchanges and ATSs are
regulated pursuant to separate statutory and rule provisions of the
Federal securities laws and there are different benefits and burdens
associated with each entity; however, as the Commission stated in the
Regulation ATS Adopting Release, fair access requirements are based on
the principle that qualified market participants should have fair
access to the U.S. securities markets, and such markets would include
ATSs subject to the Fair Access Rule.\673\
---------------------------------------------------------------------------

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

    The justification provided for why each written standard is fair
and not unreasonably discriminatory is an important aspect of an ATS's
compliance with the Fair Access Rule as proposed to be amended. The
same limitation or restriction on different ATSs may be unfair on one
ATS and not another depending on the design of the ATS and its
rationale for such a limitation. One commenter suggested that fair
access is not applicable to fixed income platforms where each
participant has discretion over which other participants they want to
trade with.\674\ Under these circumstances where ATS participants can
select their potential counterparties, the Commission would view an ATS
that implements the participant's choices as having adopted those as
ATS standards. As a result, the ATS subject to the Fair Access Rule
would need to establish reasonable written standards that, among other
things, justify why the differences in access between the selected and
not-selected counterparties are fair and non-discriminatory and thus
reasonable. For example, if subscribers selected their counterparties
based on the condition of the counterparty's balance sheet (e.g.,
totals for assets and liabilities), and the ATS implemented those
selections, then the ATS would need to include a justification in its
written standards for why implementing those selections is fair and not
unreasonably discriminatory.\675\ In cases where the Commission staff
reviews an ATS's fair access standards, whether in the description
provided under Item 24 of revised Form ATS-N for NMS Stock ATSs and
Government Securities ATSs (as proposed) or during an examination, the
Commission staff would review whether a given justification for the
standard is, for example, unreasonably discriminatory, or is pretextual
and, in fact, designed to thwart the goal of providing fair access to
qualified market participants.\676\
---------------------------------------------------------------------------

    \674\ See MarketAxess Letter at 10.
    \675\ In practice, the ATS participant making a selection of its
potential counterparties would need to provide the ATS with its
justification for selecting those counterparties, and the ATS would
need to evaluate whether the stated justification comports with the
Fair Access Rule, and if so, incorporate it into the ATS's
established written standards.
    \676\ Rule 301(b)(5)(ii)(D) requires ATSs to report to the
Commission information on Form ATS-R regarding grants, limitations,
and denial of access to an ATS subject to the Fair Access Rule.
Specifically, Form ATS-R, Exhibit C requires the ATS to list of all
persons granted, denied, or limited access to the ATS during the
period covered by the report, designating for each person whether
they were granted, denied, or limited access; the date the ATS took
such action; the effective date of such action; and the nature of
any denial on limitation of access. The Commission stated in the
Regulation ATS Adopting Release that the Commission intended to
enforce the Fair Access Rule by reviewing Form ATS-R reports and
investigating any possible violations of the rules. See Regulation
ATS Adopting Release, supra note 31, at 70874.
---------------------------------------------------------------------------

    Even if an ATS's written standard is equally applicable to all
participants, the ATS must nevertheless ensure the standard itself is
not unfair or unreasonably discriminatory or applied in an unfair or
unreasonably discriminatory manner. If an ATS included in its written
standards that it reserves the right to accept or deny applicants to
the ATS at its sole discretion, such standard may apply equally to all
applicants, but it would not be reasonable as it would contradict the
rule's goal of promoting fair access to the securities markets. In
another example, if an ATS adopts a written standard that it would only
accept participants with ``industry-leading reputations,'' such written
standard, depending on the justification, is unlikely to be considered
reasonable because of its subjectivity and potential substantial
limiting effect on market participants' access to the ATS. As stated in
the Regulation ATS Adopting Release, if an ATS applied its standards so
as to discriminate among similarly-situated participants, such actions
would be inconsistent with reasonable written standards because the ATS
would not be acting impartially. One example of this would be an ATS
that provides liquidity providers that met certain volume thresholds
with trading privileges, yet does not provide those privileges equally
to every qualifying liquidity provider. Another example would be a
Communication Protocol System that establishes a standard to track all
participants' ``firm up'' rates in response to requests for quotes but
subsequently denies or limits access to only certain subscribers that
exceed the firm-up threshold and not to other participants who likewise
exceeded the firm-up threshold.
    The Commission is also proposing Rule 301(b)(5)(iii)(A)(1) through
(5) to provide minimum requirements for the reasonable written
standards that must be established, and applied, by an ATS that is
subject to the Fair Access Rule. These minimum requirements for what
the written standards must include do not alter the substantive
requirement that the written standards be reasonable. Rather, they
explain in more granular detail what is required to be sufficient
written standards to facilitate compliance. First, the Commission is
proposing Rule 301(b)(5)(iii)(A)(1) to require that an ATS's reasonable
written standards provide the dates that each written standard is
adopted, effective, and, if applicable, modified. This proposed
requirement is designed to assist Commission examination staff in their
evaluation of the application of an ATS's written standards as well as
help the staff understand the written fair

access standards that were in place at a given time.
    Second, the Commission is proposing Rule 301(b)(5)(iii)(A)(2) to
require an ATS's reasonable written standards set forth any objective
and quantitative criteria upon which each standard is based.\677\
Objective or quantitative standards can help demonstrate an ATS's
compliance with the Fair Access Rule by limiting an ATS's discretion
and its ability to act arbitrarily with respect to an applicant to the
ATS or current participant. Nevertheless, an ATS's objective or
quantitative standards must still be fair and not unreasonably
discriminatory. An ATS could not, for example, establish, without
reasonable justification, a quantitative standard at such a high level
that it unfairly results in only a limited group of ATS participants
that can meet it. If an ATS, for example, sets its required firm up
rate on conditional orders at 95 percent, compliance with the Fair
Access Rule would depend on whether that standard was fair and whether
it unreasonably discriminated against those subscribers that did not
attain a 95 percent firm up rate.\678\
---------------------------------------------------------------------------

    \677\ See Regulation ATS Adopting Release, supra note 31, at
70874 (providing minimum capital or credit requirements for
subscribers as an example of objective standards).
    \678\ In assessing whether such a standard is reasonable, the
Commission could consider, among other things, the quantitative
criteria upon which the standard is based, the justification by the
ATS for why the standard is fair and not unreasonably
discriminatory, the differences in, and impact on, access to
services from the application of the standard, and other information
provided through discussions with the ATS.
---------------------------------------------------------------------------

    In the case of an ATS that segments the order flow of its
participants into certain categories based on quantitative metrics,
such as reversion rates,\679\ the ATS's standards generally should
include, among other things, the metrics and factors used to determine
the segmented categories and, as explained further below, how the
metrics and factors are fair and not unreasonably discriminatory, and
thus are reasonable. The presence of the objective and quantitative
thresholds limits the ATS's discretion in differentiating among
participants (in this example, by setting segmented categories for
order interaction and thus denying certain participants the ability to
interact with other participants on the ATS). The quantitative
threshold still must be reasonable; an objective or quantitative
standard would not by itself be sufficient to comply with fair access.
In cases where an ATS has a written standard for access that is not
based on objective or quantitative criteria, the ATS must still justify
why the standard is reasonable, and more specifically, how such
standard is fair and not unreasonably discriminatory.
---------------------------------------------------------------------------

    \679\ In the Commission's experience, a common method for ATSs
to segment order flow is to measure a security's change in price
within a certain (usually short) time period after an execution and,
based on that figure or reversion rate, assign a score to one or
both of the parties to the transaction. If a security's price moves
substantially after an execution, then that subscriber's (or
subscribers') score may cause it to be segmented into a class of
subscribers that is considered riskier to trade against and other
subscribers may select to not trade against that subscriber.
Subscribers are assigned scores based on their reversion rates and
segmented into classes or categories accordingly.
---------------------------------------------------------------------------

    Third, the Commission is proposing Rule 301(b)(5)(iii)(A)(3) to
require that an ATS's reasonable written standards identify any
differences in access to the services of the ATS by applicants and
current participants. The purpose of this provision is to highlight
each instance where an ATS treats participants differently under the
established written standards. Under the Fair Access Rule, ATSs may
provide different services to different subscribers, or may vary how
services are offered among ATS participants; however, the ATS must have
a reasonable basis for doing so. An ATS might, for example, segment
participant order flow into specific categories (i.e., based upon the
type of market participant generating the order flow) to determine
order interaction. As a result, some subscribers can only interact with
certain subscribers and not others. In such a case, the ATS would be
required to, among other things, identify the segmentation categories
and criteria used to set the categories. If, for example, an ATS grants
certain trading privileges, such as being able to view certain trading
interest, to a person classified as a liquidity provider, the ATS would
be required to describe any such differences in treatment for the
liquidity provider. The identification of differences in treatment
required would also include those applicable to applicants to the ATS.
For example, if an ATS had different minimum capital and credit
requirements for applicants to the ATS, the ATS would need to identify
the differences in its written standards. As described above,
differences in access must be reasonable and the ATS would be required
to justify how such differences in access are fair and not unreasonably
discriminatory pursuant to proposed Rule 301(b)(5)(iii)(A)(4).
    Fourth, the Commission is proposing Rule 301(b)(5)(iii)(A)(4) to
require that an ATS's reasonable written standards justify why each
standard, including any differences in access to the services of the
ATS, is fair and not unreasonably discriminatory. While the Fair Access
Rule does not require that the ATS treat all market participants
equally, the Fair Access Rule requires an ATS to have a reasonable
basis for not treating market participants equally. Accordingly, an ATS
would be required to justify in writing why its standards are fair and
not unreasonably discriminatory.\680\ Requiring an ATS to justify its
fair access standards in writing would facilitate Commission staff
review of those standards, whether by reviewing the standards in the
description provided under Item 24 of revised Form ATS-N for NMS Stock
ATSs and Government Securities ATSs (as proposed) or during an
examination of an ATS. Above, the Commission sets forth an example of
an ATS establishing different minimum capital and credit requirements
for applicants to the ATS. In addition to identifying that difference
in its written standards, the ATS would also be required to justify why
the difference is fair and not unreasonably discriminatory. The ATS
could, for instance, explain: (1) Objective or quantitative criteria
used to determine which minimum applies to which applicants and why the
ATS chose the objective and qualitative criteria that it did, which
would also meet the requirements of paragraph (b)(5)(iii)(A)(2)
outlined above; and (2) why those objective or quantitative criteria
are fair and not unreasonably discriminatory as applied to the ATS. If
there are no objective criteria, the ATS must explain why it is fair
and not unreasonably discriminatory to have and apply the capital and
credit requirements among applicants to the ATS.
---------------------------------------------------------------------------

    \680\ As the Commission is proposing to relocate these
requirements under the requirements for an ATS's written standards
under Rule 301(b)(5)(iii)(A), the Commission is proposing to delete
the rule text under current Rule 301(b)(5)(ii)(B) and renumber
current paragraphs (b)(5)(ii)(B) and (C) to paragraphs (b)(5)(ii)(C)
and (D), respectively.
---------------------------------------------------------------------------

    Finally, the Commission is proposing Rule 301(b)(5)(iii)(A)(5) to
require an ATS's reasonable written standards address any standard for
granting, limiting, or denying access to the services of the ATS
performed by persons other than the broker-dealer operator. From the
Commission's experience, persons other than the broker-dealer operator
may perform all or some functions of the ATS. In other cases, the
broker-dealer operator, or affiliate of the broker-dealer operator, may
direct the ATS participants to use the services of a person other than
the broker-dealer operator. In both such cases, the activities of those
persons can affect participants' access to the ATS,

and therefore, the ATS must ensure, through its written fair access
standards, that those persons have established reasonable written
standards for granting, denying, and limiting access to the ATS and are
applying those standards in a fair and non-discriminatory manner.
    For example, an ATS that arranges for an entity to provide order
entry services to the ATS would be required to ensure that the order
entry provider has reasonable standards for ATS participants to access
the order entry services, and thus the ATS. The ATS would be required
to address in its reasonable written standards how the provider ensures
that its standards are reasonable because the activities of the
provider can impact the ability of participants to access the ATS. In
addition, if the ATS broker-dealer operator, or affiliate of the
broker-dealer operator, directs participants to use the services of
another entity in connection with the ATS, that ATS would be
responsible to ensure that such entity establishes reasonable standards
for access. For example, if the broker-dealer operator, or affiliate of
the broker-dealer operator, directs participants to use the services of
a certain clearing broker, the ATS would be required to ensure that the
clearing broker has reasonable written standards and to include in the
ATS's written standards the clearing broker's written standards for
granting, denying, or limiting access to its clearing services as they
relate to the ATS. The Commission is concerned that an ATS may attempt
to use an affiliate or third party to perform ATS activities or
functions while avoiding the application of Regulation ATS to those
activities or functions.\681\ Requiring an ATS subject to the Fair
Access Rule to address in its written standards the activities or
functions performed by persons in conjunction with the ATS other than
the broker-dealer operator would help ensure fair access to the ATS by
investors.
---------------------------------------------------------------------------

    \681\ See Regulation ATS Adopting Release, supra note 31, at
70873, n.252.
---------------------------------------------------------------------------

4. Recordkeeping Requirements
    The Commission is also proposing changes to the ATS recordkeeping
requirements under Rule 301(b)(5)(iii)(B), as proposed to be
amended.\682\ The Commission is proposing to replace the reference to
records relating to grants of access to ``subscribers'' with references
to ``participants.'' In the Commission's experience, ATSs can grant
access to customers of subscribers who may not themselves be
subscribers to the ATS. This proposed change would clarify that records
related to such participants would need to be made and kept under the
rule. In addition, the Commission is proposing to add to the rule text
that the ATS must make and keep records related to denials or
limitations of access and reasons for each applicant ``and
participant.'' By adding ``participant,'' the Commission will reflect
that it requires an ATS subject to the rules to keep records of when it
limits access to existing participants (not only ``applicants'') to the
ATS system. This is a technical change, as the current rule requires
the ATS to make and keep all records related to limitations of access
and reasons for such limitations, which would apply to both existing
participants, as well as applicants upon entry to the ATS.
---------------------------------------------------------------------------

    \682\ This is currently in paragraph (b)(5)(iii)(C), but would
be renumbered to paragraph (b)(5)(iii)(B) under the proposed
changes.
---------------------------------------------------------------------------

    The Commission is also proposing to add language to Rule
301(b)(5)(iii)(B)(1) and (2) to reference that grants of access and
denials of limits of access and reasons for limitation and denying
access to the services of the ATS would be under the standards provided
in proposed Rule 301(b)(5)(iii)(A). Referencing the standards in Rule
301(b)(5)(iii)(A) would clarify that grants, limitations, and denials
of ATS services would be under the standards of the rule, as proposed
to be revised. The Commission is also proposing to amend Rule
303(a)(1)(iii) of Regulation ATS to require an ATS subject to the Fair
Access Rule, for a period of not less than three years, the first two
years in an easily accessible place, to preserve at least one copy,
including each version, of such ATS's written standards for access to
trading, all documents relevant to the ATS decision to grant, deny, or
limit access to any person, and all other documents made or received by
the ATS in complying with the Fair Access Rule.\683\ This change would
modify the current rule to specify that the standards are ``written''
and that the ATS must maintain ``each version'' of the written
standards required under Rule 301(b)(5), which is consistent with the
previous Commission guidance.\684\
---------------------------------------------------------------------------

    \683\ The Commission is also proposing to specify in Rule
303(a)(1)(iv) and (v) that an ATS must maintain ``each version'' of
copies of records made in the course of complying with Rule
301(b)(6) and copies of the written safeguards and written
procedures to protect subscribers' confidential trading information
and written oversight procedures created in the course of complying
with Rule 301(b)(10).
    \684\ See Regulation ATS Adopting Release, supra note 31, at
n.251 (stating that the Commission expects an ATS to maintain a
record of its standards at each point in time, and that if the ATS
amends or modifies its access standards, the records kept should
reflect historic standards, as well as current standards).
---------------------------------------------------------------------------

5. Removal of the Exclusion for Passive Systems From the Fair Access
Rule
    The Commission is re-proposing to remove an exclusion from
compliance with the Fair Access Rule under Rule 301(b)(5) and the
Capacity, Integrity, and Security Rule under Rule 301(b)(6) that is
applicable to ATSs that trade equities.\685\ An ATS is excluded from
complying with the requirements of the Fair Access Rule and the
Capacity, Integrity, and Security Rule if the ATS: (i) matches customer
orders for a security with other customer orders; (ii) such customers'
orders are not displayed to any person, other than employees of the
ATS; and (iii) such orders are executed at a price for such security
disseminated by an effective transaction reporting plan, or derived
from such prices.\686\ In adopting the exclusion, the Commission stated
that ATSs of this nature, the so-called ``passive systems,'' did not
contribute significantly to price discovery; however, the Commission
also stated that they had the potential to and frequently do affect the
markets from which their prices are derived, and thus, the Commission
would continue to monitor these systems and reconsider whether the
requirements should apply if concerns arise in the future.\687\
---------------------------------------------------------------------------

    \685\ When adopting the exclusion, the Commission contemplated
that it would apply only to ATSs that trade equity securities, as
one of the elements of the exclusion requires that the prices in the
ATS be based on the SIP. The third prong of each exception states
that if an ATS meets the requirement, among others, to execute
customer orders ``at a price for such security disseminated by an
effective transaction reporting plan, or derived from such prices,''
the ATS would not be subject to the Fair Access Rule or Capacity,
Integrity, and Security Rule, as applicable. 17 CFR
242.301(b)(5)(iii)(C); 17 CFR 242.301(b)(6)(iii)(C).
    \686\ 17 CFR 242.301(b)(5)(iii); 17 CFR 242.301(b)(6)(iii).
    \687\ Regulation ATS Adopting Release, supra note 31, at 70853.
---------------------------------------------------------------------------

    In the Regulation ATS Adopting Release, the Commission explained
that fair treatment by ATSs of subscribers is particularly important
when an ATS captures a large percentage of trading volume in a security
because investors lack access to viable alternatives to trading in the
ATS.\688\ Since the adoption of Regulation ATS, passive systems (as the
term is used in the Regulation ATS Adopting Release) for NMS stocks
have garnered a significant percentage of trading volume in securities
and have come to play an important role in matching buyers and sellers
of securities.\689\ Eliminating the

Rule 301(b)(5)(iii) exclusion would ensure that the Fair Access Rule is
applied as intended and help ensure fair treatment of applicants and
current subscribers by any type of ATS that captures a large percentage
of trading in a security or type of security.
---------------------------------------------------------------------------

    \688\ Id. at 70872.
    \689\ See NMS Stock ATS Adopting Release, supra note 2, at
38770-71.
---------------------------------------------------------------------------

    The Commission is also re-proposing to amend Rule 301(b)(6) to
remove the exclusion from compliance with the Capacity, Integrity, and
Security Rule under Rule 301(b)(6)(iii).\690\ As part of Regulation
SCI, Rule 301(b)(6) of Regulation ATS was amended to no longer apply to
ATSs that trade equities because Regulation SCI superseded and replaced
the requirements of the Capacity, Integrity, and Security Rule with
regard to ATSs that trade NMS stocks and non-NMS stocks.\691\
---------------------------------------------------------------------------

    \690\ 17 CFR 242.301(b)(6)(iii).
    \691\ See Regulation SCI Adopting Release, supra note 3, at
72252, 72267.
---------------------------------------------------------------------------

Request for Comment
    150. Should the Commission change the five percent fair access
threshold for NMS stocks, equity securities that are not NMS stocks,
corporate bonds, or municipal securities? If so, should the threshold
be changed higher or lower than the existing five-percent threshold
under Rule 301(b)(5)(i)? National securities exchanges are required to
have rules designed to prevent unfair discrimination \692\ and admit
members fairly.\693\ Because ATSs are operating pursuant to an
exemption from exchange registration, should the Commission eliminate
the volume threshold(s) for the Fair Access Rule and thus, require all
ATSs to provide fair access to their participants regardless of trading
volume? If yes, should the Commission eliminate the volume thresholds
for all categories of securities subject to the Fair Access Rule or
only specific categories?
---------------------------------------------------------------------------

    \692\ 15 U.S.C. 78f(b)(5).
    \693\ See 15 U.S.C. 78f(b)(2) and (c); 15 U.S.C. 78o-3(b)(8).
---------------------------------------------------------------------------

    151. Should the Commission change the look-back period for applying
the fair access thresholds from four out of the preceding six months to
something different? For example, should an ATS be subject to fair
access if its average daily trading volume in a subject security is
five percent over the prior quarter or the prior month? Should the
Commission change to the look-back period for all categories of
securities subject to the Fair Access Rule, or just specific
categories?
    152. Should the Commission allow or require ATSs to use sources of
market data other than published data provided by the SRO to which
trades are reported? If yes, which data sources?
    153. Should the Commission change the Fair Access Rule for it to
apply categorically to NMS stocks rather than on a security-by-security
basis? For example, should the Commission change the fair access
threshold for equity securities so that an ATS would only be subject to
the requirements of the Fair Access Rule if its average daily trading
volume is five percent across all NMS stocks? Should the Commission
change the Fair Access Rule to provide fair access in all NMS stocks if
it surpasses the fair access threshold in a single NMS stock?
    154. Should the Commission change the Fair Access Rule so that it
applies categorically, rather than on a security-by-security basis, to
equity securities that are not NMS stocks? For example, should the
Commission change the fair access threshold for equity securities so
that an ATS would only be subject to the requirements of the Fair
Access Rule if its average daily trading volume is five percent across
all equity securities that are not NMS stocks? Additionally, or
alternatively, should the Commission change the Fair Access Rule to
require an ATS to provide fair access in all NMS stocks if it surpasses
the fair access threshold in a single NMS stock?
    155. Should the Commission adopt rules to amend the Rule
301(b)(5)(ii) of the Fair Access Rule to aggregate the trading volume
for a security or category of securities for ATSs that are operated by
a common broker-dealer, or ATSs that are operated by affiliated broker-
dealers, solely for the purpose of calculating the average transaction
volume under Rule 301(b)(5)(i)(A) through (F)?
    156. Under Regulation ATS, an ATS would be subject to Rule
301(b)(3) (Order Display and Execution Rule) and Rule 301(b)(6)
(Capacity, Integrity and Security Rule) if the ATS exceeded certain
volume thresholds within a given period of time under the rules. Should
the Commission amend the Order Display and Execution Rule and the
Capacity, Integrity, and Security Rule to aggregate the trading volume
for a security or category of securities for ATSs that are operated by
a common broker-dealer, or ATSs that are operated by affiliated broker-
dealers, for the purpose of calculating the average transaction volume
under those rules?
    157. Instead of aggregating trading volume across multiple ATSs
operated by a common broker-dealer, should the Commission amend
Regulation ATS to require a broker-dealer to operate only one ATS for a
category of security? If no, why is it important for one broker-dealer
to be able to offer multiple ATS market places for the trading of the
same category of security?
    158. Should the Commission adopt the same standard of
reasonableness that is applied to national securities exchanges for
purposes of the Fair Access Rule? If not, what standard of
reasonableness should apply to ATSs that are subject to the Fair Access
Rule?
    159. Should the Commission adopt requirements in addition to the
reasonable written standards proposed in Rule 301(b)(5)(iii)(A)(1)
through (4)? Should any of those standards be amended?
    160. Should the Commission eliminate the exclusion from compliance
with the Fair Access Rule under Rule 301(b)(5)(iii) and with the
Capacity, Integrity, and Security Rule under Rule 301(b)(6)(iii)?
    161. Should the Commission adopt the changes to the recordkeeping
provisions of the Fair Access Rule? Are there any additional records
that an ATS should be required to keep?

B. Electronic Filing of and Other Changes to Form ATS and Form ATS-R

    The Commission is re-proposing revisions to Rule 301(b)(2), Form
ATS, and Form ATS-R to modernize Form ATS and Form ATS-R and to provide
that they are filed electronically. In addition, the Commission is
proposing to require ATSs to provide certain additional information on
Form ATS-R, including volume reporting for transactions in repurchase
and reverse repurchase agreements on the ATS. ATSs are required to file
the information required by Form ATS-R \694\ pursuant to Rule 301(b)(9)
within 30 calendar days after the end of each calendar quarter in which
the ATS has operated.\695\
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    \694\ See Form ATS-R. See also supra notes 144-147.
    \695\ See 17 CFR 242.301(b)(9)(i). An ATS must also file Form
ATS-R more frequently upon request of the Commission. See Form ATS-R
Instructions.
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    First, the Commission is re-proposing an amendment to Rule
301(b)(2)(vi), which currently states that ``[e]very notice or
amendment filed pursuant to this paragraph (b)(2) shall constitute a
`report''' within the meaning of applicable provisions of the Exchange
Act. The Commission proposes to add a reference to Rule 301(b)(9) to
state that Form ATS-R, as is the case with Form ATS, constitutes a
report within the meaning of applicable provisions of the Exchange
Act.\696\
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    \696\ This amendment would be consistent with Rule
301(b)(2)(vii), which states that ``[a]ll reports filed pursuant to
this paragraph (b)(2) and paragraph (b)(9)'' of Rule 301 are, as
proposed, accorded confidential treatment subject to applicable law.
See 17 CFR 242.301(b)(2)(vii). The instructions to Form ATS and Form
ATS-R require an ATS to submit one original and two copies of Form
ATS and Form ATS-R to the Commission. See Form ATS and Form ATS-R
Instructions. In addition, Rule 301(b)(2)(vii) requires that an ATS
file copies of its Form ATS filings with the examining authority of
the SRO with which it is registered (e.g., FINRA) at the same time
it files with the Commission, and upon request, the ATS must provide
its SRO's surveillance personnel with duplicate Form ATS-R filings.
See 17 CFR 242.301(b)(2)(vii).

---------------------------------------------------------------------------

    Next, the Commission is re-proposing to require that all Forms ATS
and ATS-R are filed with the Commission electronically. As proposed,
following the effective date of the proposed rule, all Form ATS filers
would be required to file an amendment on Form ATS in the electronic
format proposed herein that would also include all new information
required by revised Form ATS. Currently, ATSs are required to submit
paper submissions of Forms ATS and ATS-R to the Commission.\697\ The
Commission proposes to amend Rule 301(b)(2)(vii) to require that an ATS
must file a Form ATS or a Form ATS-R in accordance with the
instructions therein. The Commission is proposing to revise the
instructions to Form ATS and Form ATS-R to require that they be
submitted electronically via EDGAR.\698\ The Commission is also
proposing to require in Rule 301(b)(2)(vii) that reports provided for
in Rule 301(b)(2) and (9) shall be filed on Form ATS and Form ATS-R, as
applicable, and include all information as prescribed in Form ATS or
Form ATS-R, as applicable, and the instructions thereto.\699\ In
addition, the Commission is proposing to require that any Form ATS or
Form ATS-R shall be executed at, or prior to, the time Form ATS or Form
ATS-R is filed and shall be retained by the ATS in accordance with Rule
303 of Regulation ATS and Rule 302 of Regulation S-T, and the
instructions in Form ATS or Form ATS-R, as applicable.\700\ Among other
benefits, the electronic filing of Forms ATS and ATS-R would increase
efficiencies and decrease filing costs for ATSs (i.e., ATSs would no
longer be required to print and mail paper filings) and for Commission
staff when undertaking a review of these forms. Form ATS-N is required
to be filed in EDGAR. EDGAR is currently configured to support the
Commission's receipt and review of filings under Regulation ATS, and
requiring electronic Form ATS and Form ATS-R filings to be submitted
via EDGAR would be the most efficient way to facilitate their
electronic filing.
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    \697\ Rule 301(b)(2)(vii) of Regulation ATS specifies that
reports on Form ATS shall be considered filed upon receipt by the
Division of Trading and Markets, at the Commission's principal
office in Washington, DC See 17 CFR 242.301(b)(2)(vii).
    \698\ See infra note 701 and accompanying text.
    \699\ Accordingly, the Commission is proposing to delete the
provisions of Rule 301(b)(2)(vii) related to paper submission.
Specifically, the Commission is proposing to delete the sentence
that the reports shall be considered filed ``upon receipt by the
Division of Trading and Markets, at the Commission's principal
office in Washington, DC'' Additionally, although the Commission
would continue to require that duplicates of filings on Form ATS be
provided to the SRO that is the examining authority for each ATS,
and that duplicates of the Form ATS-R be made available to the
surveillance personnel of such SRO upon request, the Commission
proposes to eliminate the reference to ``originals'' in Rule
301(b)(2)(vii) because paper reports will no longer be furnished to
the Commission and there will therefore be no ``original'' version
of the reports.
    \700\ The Commission notes that the proposed provisions would
conform to similar provisions of Rule 304, which provide for the
electronic filing of Form ATS-N. See 17 CFR 242.304(c).
---------------------------------------------------------------------------

    To facilitate electronic filing, the Commission is proposing to
amend the text of General Instructions A.4 of Forms ATS and ATS-R to
require that all filings be submitted via EDGAR and prepared,
formatted, and submitted in accordance with Regulation S-T and the
EDGAR Filer Manual.\701\ The Commission also proposes to amend Forms
ATS and ATS-R General Instruction A.5 to state that a filing that is
defective may be rejected and not be accepted by the EDGAR system and
that any filing so rejected shall be deemed not filed. This is
consistent with the requirements of Regulation S-T, which provides the
rules for EDGAR submissions.\702\ The Commission also notes that the
instructions for current Form ATS contain similar language,\703\ but
the current instructions for Form ATS-R do not contain such language.
The Commission believes that it would be appropriate to reject a filing
as defective if it does not comply with the technical requirements of
the form, for example, if a Form ATS or Form ATS-R is missing exhibits,
or if the ATS does not provide a response to a Form ATS request or does
not comply with the electronic filing requirements. The Commission is
also proposing to amend General Instruction A.6 (``Recordkeeping'') of
both forms to reflect that records must be retained in accordance with
the EDGAR Filer Manual and Rule 303 of Regulation ATS and to conform to
the recordkeeping instructions on Form ATS-N, as revised.\704\
Instruction A.8 would also be revised to reflect updated Paperwork
Reduction Act estimates, and, to conform to changes the Commission is
proposing in Rule 301(b)(2)(vii),\705\ to state that types of
securities traded provided on Form ATS and Form ATS-R will not be
afforded confidential treatment. The Commission is also proposing to
add new Instruction A.8 to Form ATS to require that, for amendments,
the filer attach an Exhibit C marked to indicate additions to or
deletions from the disclosures in Items 1 through 6 of Form ATS. This
document would help enable the Commission to identify any changes to
the form more easily. Most ATSs currently provide such a marked
document to the Commission on a voluntary basis. The Commission is also
proposing to amend the instructions to Form ATS to state that Newly
Designated ATSs are required to file a Form ATS no later than the date
30 calendar days after the effective date of any final rule, if
adopted.\706\
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    \701\ The Commission proposes to eliminate the language in the
Form ATS instructions and Form ATS-R instructions requesting that an
ATS type all information because an ATS would not otherwise have the
option to handwrite any responses. The instructions for both forms
would be amended to eliminate the option to use a ``reproduction''
of the forms. The Commission also believes it is redundant to state
that the Form ATS or Form ATS-R must be the ``current version'' as
the ATS is required to attest that the form is ``current.'' The
Commission also proposes to delete the requirement to attach an
execution page with original manual signatures for Form ATS because,
as discussed above, Form ATS and Form ATS-R would be signed
electronically and thus there would be no need for an execution
page. The Commission also proposes to delete the instruction that
the name of the alternative trading system, CRD number, SEC file
number, and report period dates be listed on each page, as this
requirement will be unnecessary because the Form ATS or Form ATS-R
will be submitted as a single submission. Because Form ATS and Form
ATS-R would be submitted via EDGAR, the Commission is also proposing
to delete references to submitting the ``original'' and ``copies''
of the form to the Commission at the Commission's mailing address.
    \702\ 17 CFR part 232. This is also consistent with the
requirements for Form ATS-N.
    \703\ The Form ATS Instructions state that ``Form ATS shall not
be considered filed, unless it complies with applicable
requirements.''
    \704\ Rule 303 of Regulation ATS provides the record
preservation requirements for ATSs. See 17 CFR 242.303.
    \705\ See infra Section V.C.
    \706\ See supra note 180 and accompanying text.
---------------------------------------------------------------------------

    In addition, the Commission is re-proposing to amend Form ATS to
require an ATS filing an amendment on Form ATS to identify whether the
Form ATS filing is a material amendment under Rule 301(b)(2)(ii), a
periodic amendment under Rule 301(b)(2)(iii), or a correcting amendment
under Rule 301(b)(2)(iv).\707\ An ATS currently identifies an amendment
to current Form ATS by marking the ``Amendment to Initial Operation
Report'' box on Form ATS, and Form ATS currently does not ask the ATS
to specify whether the amendment to Form ATS is a material, periodic,
or correcting

amendment.\708\ Requiring an ATS to specify the type of amendment would
better enable the Commission to determine whether an ATS is in
compliance with Regulation ATS. The Commission also proposes requiring
an ATS that is filing a cessation of operations report to provide the
date that the ATS ceased to operate, which is not currently required on
Form ATS. The Commission believes that having information about the
date that the ATS ceased to operate would enable the Commission to
determine more readily whether an ATS is, or was, in compliance with
Regulation ATS.\709\
---------------------------------------------------------------------------

    \707\ See Rule 301(b)(2)(ii)-(iv).
    \708\ The Commission is also proposing to add cites to the
relevant rule text next to the check boxes on Form ATS identifying
whether the ATS is filing an Initial Operation Report (``IOR''),
amendment to IOR, or a cessation of operations report.
    \709\ See Rule 301(b)(2)(v) (requiring an ATS to promptly file a
cessation of operations report on Form ATS in accordance with the
instructions therein upon ceasing to operate as an ATS).
---------------------------------------------------------------------------

    The Commission is also re-proposing to amend Form ATS and Form ATS-
R to change the solicitation of information relating to the name of the
broker-dealer operator and the registration and contact information of
the broker-dealer operator. Because many broker-dealer operators of
ATSs engage in brokerage and/or dealing activities in addition to
operating an ATS, and some broker-dealers operate multiple ATSs, the
name of the broker-dealer operator of an ATS often differs from the
commercial name under which the ATS conducts business. To identify the
broker-dealer operator of an ATS and to assist the Commission in
collecting and organizing its filings and assessing whether the ATS has
met its requirement to register as a broker-dealer, Forms ATS and ATS-R
would require the ATS to indicate the full name of the broker-dealer
operator of the ATS, as it is stated on Form BD, in Item 1 of Form ATS
and Form ATS-R. To further facilitate compliance with the requirements
of Regulation ATS, as proposed, Form ATS and Form ATS-R would require
the ATS to indicate whether the filer is a broker-dealer registered
with the Commission and whether the broker-dealer operator has been
authorized by a national securities association to operate an ATS. Such
requirements would conform to the proposed requirements of Form ATS-
N.\710\ The Commission is proposing to conform Item 1 of Form ATS and
Form ATS-R \711\ to the requirements of Form ATS-N, which is currently
filed electronically. In addition, the Commission is proposing to add
to Item 1 of Form ATS and Form ATS-R a requirement that the ATS provide
the broker-dealer operator's LEI, if the broker-dealer operator has an
LEI,\712\ and the MPID of the broker-dealer operator.\713\ These
requests would help the Commission in identifying and corresponding
with ATSs and would conform to the identifying information on Form ATS-
N, as proposed to be revised.\714\ To determine whether the compliance
transition rules applicable to Newly Designated ATSs apply, the
Commission is also proposing to require the ATS to indicate if it is a
Newly Designated ATS in Item 2.
---------------------------------------------------------------------------

    \710\ See supra Section IV.D.3.
    \711\ Form ATS and Form ATS-R currently ask for the ATS's main
street address, mailing address, business telephone number and
facsimile number, and the contact information for the ATS's contact
person. The Commission is proposing to move the information requests
for the name and title and telephone number of the contact employee
to the signature block on the form, and to request an email address
for such person and not require the facsimile number. The proposed
signature block would ask for the primary street address and mailing
address of the ATS. The current certifications required in Form ATS
and Form ATS-R, including that the information filed is current,
true, and complete, would remain unchanged. However, the Commission
is proposing to delete the provision allowing for service of any
civil action pursuant to confirmed telegram and instead, permit
service of any civil action via email. The signature block on Form
ATS and Form ATS-R would conform to the signature block in Form ATS-
N, as proposed. See supra Section IV.D.6.
    \712\ See supra note 506.
    \713\ See supra Section IV.D.3 (proposing requiring the ATS to
disclose the MPID of its broker-dealer operator).
    \714\ The Commission proposes to replace in Item 1 of Form ATS
and Form ATS-R the requests for the ATS's main street address,
mailing address, and business telephone number and facsimile number
with a requirement that the ATS provide the primary, and if any,
secondary physical street address of the ATS's matching system, as
well as a URL address for its website if it has a website. Knowing
the location of the matching system address and secondary matching
system address could be useful to the Commission in the event of,
for instance, a natural disaster that could impact market
participants' ability to trade in the ATS and potential latency that
could be experienced due to the location of the secondary site of
the ATS. The Commission is also requesting the full name of the
national securities association of the broker-dealer operator, the
effective date of the broker-dealer operator's membership with the
national securities association, and MPID of the ATS. In addition,
because any current or former names of the ATS would be searchable
on EDGAR and there will be multiple identifiers included on the
form, including MPID, the Commission is proposing to delete the
requirement that the ATS indicate if it is changing its name and
list its former name.
---------------------------------------------------------------------------

    In addition, to facilitate the electronic filing of Form ATS, the
Commission is proposing to revise Form ATS to provide that the
narrative disclosures be included in a single document, rather than
multiple exhibits.\715\ The ATS would be required to provide the
information currently required in Exhibits A, B, C, E, F (other than a
copy of the ATS's subscriber manual and any other materials provided to
subscribers), G, H, and I in a single document. Because the subscriber
manual may be lengthy, it would be more efficient for the ATS to
provide a copy of its subscriber manual and any other materials
provided to subscribers, which are currently required to be included in
Exhibit F, as a separate, new Exhibit A. In addition, the Commission is
proposing new Exhibit B, which would include a copy of the
constitution, articles of incorporation or association, with all
amendments, and of the existing by-laws or corresponding rules or
instruments, whatever the name, of the alternative trading system.
Today, an ATS may, in lieu of attaching such documents, indicate that
the ATS makes such information publicly available on a continuous basis
on an internet site controlled by the ATS and indicate the website of
the ATS. Because the Commission is requiring the ATS to provide its
website in Part I,\716\ the Commission is proposing to include a
checkbox for the ATS to select if, in lieu of filing, the ATS certifies
that the information requested under the exhibit is available at the
website above and is maintained on a continuous basis and is accurate
as of the date of the filing.
---------------------------------------------------------------------------

    \715\ In response to the 2020 Proposal, one commenter stated
that current Form ATS Exhibit F, which requires the ATS to provide
certain specified information about its operations and procedures,
should be amended to follow the same structure as current Form ATS
Exhibit G, which requires a ``brief description'' of the ATS's
procedures for reviewing system capacity, security, and contingency
planning procedures to provide ATS operators with latitude in the
manner in which they provide information to the Commission. See ICE
Bonds Letter I at 6-7. The Commission is not proposing a change to
the structure of Exhibit F of Form ATS to conform to the structure
of Exhibit G. The structures of Exhibits F and G are not dissimilar
in that they both require an ATS to provide a description of ATS
policies and procedures and that the information solicited by
Exhibit F is important for the Commission to understand and oversee
ATSs.
    \716\ See supra note 714.
---------------------------------------------------------------------------

    The Commission is also re-proposing to amend Form ATS-R to make it
easier for the Commission staff to identify if the ATS has met its
reporting obligations. First, the Commission is proposing to require an
ATS to specify whether it is filing a quarterly report amendment under
Rule 301(b)(9)(i) or a report for an ATS that has ceased to operate
under Rule 301(b)(9)(ii) and, if the latter, to indicate the date the
ATS ceased to operate. Requiring an ATS to indicate its type of Form
ATS-R filing would enable the Commission to more effectively review
Form ATS-R submissions and determine whether an ATS is in compliance
with Regulation ATS. The Commission is also proposing

to amend Form ATS-R to ask whether the ATS was subject to the fair
access obligations under Sec.  242.301(b)(5) during any portion of the
period covered by the report by adding a corresponding box for the ATS
to check ``yes'' or ``no.'' Currently, Form ATS-R requires an ATS that
is subject to the Fair Access Rule to report a list of all persons for
whom access to the ATS was granted, denied, or limited during the
period covered by the Form ATS-R.\717\ Asking the ATS to indicate
whether the ATS was subject to the Fair Access Rule during any portion
of the period covered by the report would facilitate the Commission's
review of Form ATS-R submissions.
---------------------------------------------------------------------------

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

    The Commission is also proposing changes to the Form ATS-R
categories of securities to modernize them and add more specificity
with regard to all categories of securities. Form ATS-R currently
requires ATSs to indicate the total dollar volume of government
securities transactions in the period covered by the report. The
Commission is proposing to require that ATSs specify the total dollar
volume of transactions in ``U.S. Treasury Securities'' and ``Agency
Securities'' under the heading ``Government securities.'' \718\ As
currently, ATSs would also be required to indicate the total dollar
volume in government securities overall. This change would help the
Commission facilitate compliance with the thresholds for the Fair
Access Rule and Regulation SCI, which the Commission is proposing would
be based on trading volume in U.S. Treasury Securities and Agency
Securities.\719\ To avoid double-reporting of transactions in after-
hours trading (reported under Item 6), the Commission is proposing to
specify that Item 4 pertains to transactions ``other than those for
after-hours trading.'' In addition, the Commission is proposing to
amend Form ATS-R to update the descriptions of certain categories of
securities for which volume is required to be reported on Form ATS-R by
an ATS. Specifically, the Commission is proposing to delete the
categories of securities, ``Nasdaq National Market Securities'' and
``Nasdaq SmallCap Market Securities,'' reported in Items 4 and 6 of
Form ATS-R.\720\ The proposal to require ATSs to file Form ATS-R
electronically via EDGAR would allow the Commission staff to easily
ascertain on which national securities exchanges the equity securities
the ATS traded during the applicable period, as disclosed in Exhibit B,
are traded. Therefore, it would no longer be necessary to separate out
the total volume of securities traded on the Nasdaq markets from the
total volume of securities traded on other national securities
exchanges. The proposal would require ATSs to report the total volume
previously reported under the ``Nasdaq National Market Securities'' and
``Nasdaq SmallCap Market Securities'' categories under ``Listed Equity
Securities.''
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    \718\ The Commission is proposing to add to the Form ATS-R
instructions the definitions of U.S. Treasury Security and Agency
Security, which would conform to the definitions the Commission is
proposing in Rule 300(o) and (p), respectively.
    \719\ See supra Sections III.B.4 and III.C.
    \720\ Currently, any equity securities traded on the Nasdaq
Global Market are required to be reported under ``Nasdaq National
Market Securities,'' and any equity securities traded on the Nasdaq
Capital Market are required to be reported under ``Nasdaq SmallCap
Market Securities.'' ``Listed Equity Securities'' include all other
equity securities listed on any other markets or national securities
exchanges, including the Nasdaq Global Select Market. Any rights and
warrants are required to be reported under the ``Rights and
Warrants'' category even if they are listed on a national securities
exchange. As proposed, Items 4B, 4C, 6B, and 6C would be deleted,
and therefore, Items 4D through 4N and Item 6D would be re-numbered.
---------------------------------------------------------------------------

    The Commission is proposing to require ATSs to break down the
volume for corporate debt securities, currently reported in Item 4J, by
U.S. and non-U.S. corporate debt securities. Non-U.S. corporate debt
securities would include debt securities issued by a foreign issuer
(excluding a foreign government) in emerging markets as well as non-
emerging markets. In addition, the Commission is adding new Item 4L to
require ATSs to report total dollar volume for foreign sovereign debt
securities, which currently are required to be reported under other
debt securities in Item 4N. Foreign sovereign debt securities would be
defined in Instruction B of Form ATS-R as any security other than an
equity security, as defined in Sec.  240.3a11-1, issued or guaranteed
by a foreign government, as defined in Sec.  240.3b-4.\721\ Creating
subcategories of corporate debt securities and a reporting requirement
for foreign sovereign debt securities would improve the quality of data
that the Commission already gathers through Form ATS-R. In addition,
the proposed reporting requirements would help the Commission further
understand the amount of trading that occurs on the ATSs for corporate
bonds and foreign sovereign debt securities markets.
---------------------------------------------------------------------------

    \721\ ``Debt Securities'' is defined as ``any security other
than an equity security, as defined in Sec.  240.3a11-1'' in Form
ATS-R. See Instruction B of Form ATS-R. Section 240.3b-4 (Rule 3b-
4(a) under the Exchange Act) defines ``foreign government'' as the
government of any foreign country or of any political subdivision of
a foreign country. See 17 CFR 240.3b-4.
---------------------------------------------------------------------------

    The Commission is also proposing to add new Items 4N and 4O to Form
ATS-R, which would require ATSs to disclose the total unit and dollar
volume of transactions in repurchase agreements and reverse repurchase
agreements. Specifically, the Commission is proposing to require ATSs
to disclose the total unit \722\ and dollar volume of repurchase and
reverse repurchase transactions broken down by (1) whether the
transaction is overnight or term; \723\ (2) whether the transaction is
triparty \724\ or bilateral; \725\ and (3) the type of securities used
to finance the collateral--i.e., NMS stocks, U.S. Treasury Securities,
Federal Agency Securities, Agency Mortgage-Backed Securities, municipal
securities, U.S. and non-U.S. corporate debt securities, asset-backed
securities, foreign sovereign debt securities, and other
securities.\726\ If an ATS traded repurchase or reverse repurchase
agreements collateralized with other securities, the ATS would list the
other types of securities in proposed Item 4N or 4O. In the
Commission's experience, some ATSs that trade repurchase or reverse
repurchase agreements, which are currently required to be disclosed as
debt securities on Item 4N of Form ATS-R, currently provide in Item 5B
of

Form ATS-R on a voluntary basis a breakdown of nominal trade value of
each of these types of securities. Adding new Items 4N and 4O to Form
ATS-R to require that ATSs provide the total unit and dollar volume of
transactions in repurchase and reverse repurchase agreements would
require all ATSs that trade repurchase or reverse repurchase agreements
to take a consistent approach in providing this information. The
Commission understands that certain transaction information about
repurchase and reverse repurchase agreements is publicly
available.\727\ However, individual ATSs are not currently required to
provide the Commission with information breaking down the types of
transactions in repurchase and reverse repurchase agreements. In
addition, transactions in repurchase and reverse repurchase agreements
are not generally required to be reported to an SRO, and the absence of
information about the trading of repurchase and reverse repurchase
agreements that occur on ATSs impedes the Commission's oversight of
these markets. The proposed reporting requirement would enhance the
Commission's oversight of ATSs that trade repurchase and reverse
repurchase agreements.
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    \722\ For repurchase or reverse repurchase agreements
collateralized with a basket or group of securities, ``total unit
volume of transactions'' would mean the number of units within each
basket or group rather than the number of baskets or groups.
    \723\ Overnight repo trades end in one business day, whereas
term repos mature on a specific future business day that is more
than one business day. See, e.g., Office of Financial Research, U.S.
Repo Market Data Release Methodology for Tri-party Repo, available
at https://www.financialresearch.gov/data/files/2021-04-Methodology-TPR.pdf; Office of Financial Research, U.S. Repo Market Data Release
Methodology for DVP Cleared Repo, available at https://www.financialresearch.gov/data/files/2021-04-Methodology-DVP.pdf.
    \724\ See supra note 521. Triparty repurchase and reverse
repurchase transactions would include triparty trades between
members that participate in the Fixed Income Clearing Corporation's
(``FICC'') General Collateral Financing (GCF) Repo Service. On the
other hand, repurchase and reverse repurchase transactions in the
FICC's Delivery vs. Payment (``DVP'') Repo Service would be reported
under the bilateral category.
    \725\ See supra note 522.
    \726\ As a result, ATSs would report the total unit and dollar
volume of transactions for each of 80 categories of repos: 2 types
of agreements (repurchase or reverse repurchase) x 2 transaction
types (overnight or term) x 2 party types (bilateral or triparty) x
10 collateral types (NMS stocks, U.S. Treasury Securities, Federal
Agency Securities, Agency Mortgage-Backed Securities, municipal
securities, U.S. corporate debt securities, non-U.S. corporate debt
securities, asset-backed securities, foreign sovereign debt
securities, or other securities).
    \727\ For instance, the Treasury Department's Office of
Financial Research (``OFR'') collects data on repurchase agreements
cleared by triparty clearing banks and major central counterparties,
such as the FICC, and publishes aggregate statistics on these
transactions broken out by three venues--which are the triparty
market, FICC's DVP Service, and FICC's GCP Repo Service--collateral,
tenor, volume, and rates. See OFR, U.S. Repo Market Data Release,
available at https://www.financialresearch.gov/data/us-repo-data/.
---------------------------------------------------------------------------

    Finally, the Commission is proposing to add new Item 5C, which
would require an ATS to list the types of listed options reported in
Item 4F of Form ATS-R. Item 4F of Form ATS-R currently requires ATSs to
disclose the total unit volume and dollar volume of transactions in
listed options. Under new Item 5C, an ATS might indicate, for example,
that it trades equity options and options on government securities.
This would provide the Commission with more specific information about
the types of options that each ATS trades.
    In addition, because the Commission is proposing to change the
definition of ``exchange'' to include systems that use trading
interest, the Commission is proposing to revise Form ATS to require
information related to the entry of ``trading interest.'' Communication
Protocol Systems that transact in securities other than NMS stocks or
government securities or repos will be required to file Form ATS if
they choose to comply with Regulation ATS and the resulting disclosures
will help the Commission oversee these systems. In addition, the
Commission is proposing to include in Form ATS the definition of
``trading interest'' identical to that proposed in Rule 3b-16(e) and
Rule 300(q).\728\ The Commission is also proposing to change the
definition of ``subscriber'' to conform to the changes the Commission
is proposing in Rule 300(b).\729\ Form ATS Item 3.g (current Exhibit
F.a) requests that the ATS provide information about ``the manner of
operations of the alternative trading system.'' \730\ An ATS that
either operates a Communication Protocol System, or an order-driven
system, would be required to provide information about the manner of
operations on Form ATS that is akin to information provided in response
to in Part III of Form ATS-N (e.g., display, connectivity,
segmentation, market data, counterparty selection).\731\ For example,
ATSs that use orders generally should provide information about order
types and sizes, and the trading facilities and rules for bringing
together the orders of buyers and sellers on the ATS. ATSs that use
non-firm trading interest generally should provide information about
the communication protocols and functionalities of the ATS, including
the use of messages, requirements related to the size of trading
interest, and procedures governing the communication protocols.
---------------------------------------------------------------------------

    \728\ See supra note 98 and accompanying text.
    \729\ See id.
    \730\ See Item 4.g of Form ATS, as proposed to be revised.
    \731\ See NMS Stock ATS Adopting Release, supra note 2, at 38869
(describing that many of the disclosure items on Form ATS-N are also
required by respondents in whole or in part on current Form ATS).
See also NMS Stock ATS Proposing Release, supra note 29, at 81099-
102 (describing that some of the disclosures of Form ATS-N that the
Commission was proposing were already required under Form ATS).
---------------------------------------------------------------------------

Request for Comment
    162. Would the proposed changes to Form ATS and Form ATS-R enhance
the Commission's oversight of ATSs? Do commenters disagree with any of
the proposed modifications? If so, what alternatives should the
Commission implement?
    163. Form ATS-R requires an ATS to quarterly report volume of
transactions for certain securities, all subscribers that were
participants in the ATS, and securities that were traded in the ATS.
Should the Commission adopt amendments to Form ATS-R to add, change, or
modify any of the requests for information on Form ATS-R? Are the
current categories of securities and the proposed categories of
securities for reporting transaction volume to the Commission
appropriate?
    164. Should Form ATS-R require ATSs to disclose total unit volume
in government securities, U.S. Treasury Securities, and/or Agency
Securities?
    165. Proposed Items 4N and 4O of Form ATS-R would require ATSs to
report unit and dollar volume of transactions in repurchase and reverse
repurchase agreements broken down by, among other categories, whether
the transaction is triparty or bilateral. Do commenters believe that
categorizing repurchase and reverse repurchase agreements into these
two segments would yield useful information to the Commission? Do
commenters believe that the Commission should require ATSs to
separately report volumes for repurchase and reverse repurchase
agreements in the FICC's GCF Repo Service and FICC's DVP Service rather
than include them under volumes for triparty and bilateral,
respectively? Are there any types of securities, not otherwise covered
in proposed Items 4N and 4O, that are used as collateral in repurchase
and reverse repurchase agreements?
    166. Proposed Items 4N and 4O of Form ATS-R would require ATSs to
report transaction volumes of repurchase and reverse repurchase
agreements in total unit and dollar volume. Do commenters believe that
ATSs should be required to provide the unit volume as well as the
dollar volume?
    167. Are there characteristics unique to repurchase or reverse
repurchase agreements collateralized with a basket or group of
securities that would make reporting those repurchase or reverse
repurchase agreements in both unit and dollar volume in Form ATS-R
unduly burdensome or inappropriate for ATSs? For such basket repos, the
Commission is proposing to define ``total unit volume of transactions''
as the number of units within each basket or group rather than the
number of baskets or groups. Do commenters believe ``unit'' should be
defined differently for basket repos?
    168. Proposed Item 4J of Form ATS-R would require ATSs to report
dollar volume of transactions in U.S. and non-U.S. corporate debt
securities. Do commenters believe that the two subcategories would
yield useful information to the Commission? Non-U.S. corporate debt
securities would include debt securities issued by a foreign issuer in
emerging markets as well as non-emerging markets. Do commenters believe
that the Commission should require ATSs to

further break down the volume for non-U.S. corporate debt securities by
type of market--emerging and non-emerging? If so, how should ``emerging
markets'' be defined for the purpose of reporting on Form ATS-R? Do
commenters believe ``emerging markets'' should be defined by country or
region?
    169. Do commenters believe that the Commission should require ATSs
to report total dollar volume of foreign sovereign debt securities on
Form ATS-R, as proposed? Should the proposed definition of sovereign
debt securities be modified in any way?
    170. Instruction A.1 of Form ATS-R requires ATSs to file Form ATS-R
within 30 days after the end of each calendar quarter, or more
frequently upon the request of the Commission. Do commenters believe
that the Commission should request information from ATSs on Form ATS-R
on a more frequent basis (e.g., monthly)? Do commenters believe that
such request would be unduly burdensome for ATSs?
    171. Form ATS requires an ATS to report information to the
Commission about the ATS, including but not limited to, types of
subscribers and differential access to services, types of securities
traded, counsel, governance documents, service providers, manner of
operations, including entry of trading interest, order execution
procedures, clearance and settlement procedures, and trade reporting,
procedures for reviewing system capacity, security, and contingency
planning, procedures to safeguard subscriber funds and securities, and
direct owners. Should the Commission adopt amendments to Form ATS to
add, change, or modify any of the requests for information on Form ATS?
The proposed changes to Rule 3b-16 would require Communication Protocol
Systems that trade securities other than NMS stocks or government
securities or repos to file Form ATS. Are there any changes that the
Commission should make to Form ATS that would be relevant to
Communication Protocol Systems? If so, please identify the request and
explain how it should be amended.
    172. Should the Commission amend Form ATS to require disclosures
similar to disclosures required on Part II of Form ATS-N, which
requests information about ATS-related activities of the broker-dealer
operator and its affiliates?
    173. Should the Commission amend Form ATS to include questions
similar to those in Part III of Form ATS-N, which requests information
about the manner of the ATS's operations?
    174. Are there any specific items on Form ATS-N, currently or as
proposed to be revised, that the Commission should incorporate into
Form ATS?
    175. Should the Commission amend Rule 301(b)(2) and Form ATS to
provide that Form ATS is publicly disseminated? If so, should any of
the information on Form ATS be kept confidential?

C. Amendment to Rule 301(b)(2)(vii)

    Rule 301(b)(2)(vii) provides that all reports filed pursuant to
Rules 301(b)(2) and (9) are ``deemed confidential.'' \732\ As a result,
the Commission does not make Form ATS and Form ATS-R disclosures
available to the public, including the types of securities that the ATS
trades or intends to trade.\733\ Currently, the Commission makes public
on a monthly basis on the Commission website information about ATSs
that have a Form ATS on file with the Commission, which includes the
name of the ATS, any name(s) under which business is conducted, and the
location of each ATS. The list also identifies each ATS that filed a
cessation of operations report in the prior month. While the Commission
does not approve Form ATS filings, the list is designed to inform the
public about ATSs that have noticed their operations with the
Commission.
---------------------------------------------------------------------------

    \732\ See 17 CFR 242.301(b)(2)(vii).
    \733\ The Commission notes, however, that Form ATS and Form ATS-
R are available to the examination staff of state securities
authorities and SROs. See Instruction A.7 of Form ATS and Form ATS-
R. See also 17 CFR 242.301(b)(2)(vii) (requiring duplicate of
filings on Form ATS be provided to the surveillance personnel
designated by the SRO that is the examining authority for each ATS,
and that duplicates of the Form ATS-R be made available to the
surveillance personnel of such SRO upon request).
---------------------------------------------------------------------------

    The Commission is re-proposing to amend Rule 301(b)(2) to clarify
that being ``deemed confidential'' means receiving confidential
treatment under a relevant Commission regulation subject to applicable
law \734\ and to eliminate confidential treatment for information about
the type(s) of securities that the ATS trades as disclosed in the
Exhibit B, subpart (a) of Form ATS and Exhibit B of Form ATS-R. The
Commission does not believe that ATSs will be harmed by these
disclosures because a vast majority of ATSs currently publicize the
types of securities in which they transact, for example, on the website
for the ATS or the website of the ATS broker-dealer operator. The
Commission publishes on its website a list of ATSs that have an active
Form ATS on file with the Commission; however, information about types
of securities traded is not provided on that list and the Commission
frequently receives requests from the public and regulators for more
detail in the Commission's publication about the types of securities
traded by ATSs. Disclosing this information could help the public
understand a fundamental aspect of an ATS. To allow for this narrow
exception, the Commission is proposing to amend Rule 301(b)(2)(vii) of
Regulation ATS to state that the content of reports filed under Rule
301(b)(2) and (9) ``(except for types of securities traded provided on
Form ATS and Form ATS-R) will be accorded confidential treatment
subject to applicable law.''
---------------------------------------------------------------------------

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

Request for Comment
    176. Should the Commission amend Rule 301(b)(2)(vii) to make Form
ATS, Form ATS-R, or both public? Should the Commission amend Rule
301(b)(2)(vii) to make any other disclosures provided on Form ATS or
Form ATS-R public?
    177. Should the Commission eliminate confidential treatment for
information about the type(s) of securities that the ATS trades as
disclosed on Form ATS and Form ATS-R?

VI. General Request for Comment

    The Commission is requesting comments from all members of the
public. The Commission particularly requests comment from the point of
view of persons who operate ATSs that would meet the proposed
definition of Government Securities ATS, subscribers to those systems,
and investors. The Commission seeks comment on all aspects of the
proposed rule amendments and proposed form, particularly the specific
questions posed above. Commenters are requested to provide empirical
data in support of any arguments or analyses. With respect to any
comments, the Commission notes that they are of the greatest assistance
to its rulemaking initiative if accompanied by supporting data and
analysis of the issues addressed in those comments and by alternatives
to the Commission's proposals where appropriate.

VII. Paperwork Reduction Act

    Certain provisions of the proposed rule amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\735\ The Commission is
submitting these collections of information to the Office of Management
and Budget (``OMB'') for review in accordance with 44 U.S.C. 3507(d)
and 5 CFR 1320.11. An agency

may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless the agency displays a currently
valid control number. The Commission is proposing to alter seven
existing collections of information and apply such collections of
information to new categories of respondents. The titles of such
existing collections of information are:
---------------------------------------------------------------------------

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

------------------------------------------------------------------------
                                                            OMB control
              Rule                      Rule title              No.
------------------------------------------------------------------------
Rule 301 of Regulation ATS.....  Regulation ATS Rule 301       3235-0509
                                  Amendments.
Rule 302 of Regulation ATS.....  Rule 302 (17 CFR              3235-0510
                                  242.302) Recordkeeping
                                  Requirements for
                                  Alternative Trading
                                  Systems.
Rule 303 of Regulation ATS.....  Rule 303 (17 CFR              3235-0505
                                  242.303) Record
                                  Preservation
                                  Requirements for
                                  Alternative Trading
                                  Systems.
Rule 304 of Regulation ATS.....  Regulation ATS Rule 304       3235-0763
                                  and Form ATS-N.
17 CFR 240.15b1-1 (Rule 15b1-1   Form BD and Rule 15b1-1       3235-0012
 under the Exchange Act).         Application for
                                  Registration as a
                                  Broker-Dealer.
17 CFR 232.10(b) (Rule 10(b) of  Form ID................       3235-0328
 Regulation S-T).
Rules 1001 through 1007 of       Regulation SCI and Form       3235-0703
 Regulation SCI.                  SCI.
------------------------------------------------------------------------

A. Summary of Collection of Information

    The proposed amendments create burdens under the PRA by (1) adding
new categories of respondents to the seven existing collections of
information noted above and (2) modifying the requirements of two of
those collections, as noted below. The proposed amendments do not
create any new collections of information. The collections of
information and applicable categories of new respondents \736\ are
summarized in the following table: \737\
---------------------------------------------------------------------------

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

----------------------------------------------------------------------------------------------------------------
      Collection of information                  Rule              Burden description     Respondent categories
----------------------------------------------------------------------------------------------------------------
Rule 301 of Regulation ATS and Forms   Rule 301(b)(2).........  Revised Burden: File     Certain Communication
 ATS and ATS-R.                                                  initial operations       Protocol Systems.
                                                                 report using the        All Other Form ATS
                                                                 proposed modernized      Filers.
                                                                 Form ATS.
                                       Rule 301(b)(5).........  Comply with fair access  Certain Communication
                                                                 standards                Protocol Systems.
                                                                 recordkeeping and fair  Certain Legacy
                                                                 access notice            Government Securities
                                                                 requirements for         ATSs.
                                                                 certain securities,     Certain NMS Stock ATSs.
                                                                 including, as           Certain Other ATS
                                                                 proposed, U.S.           Filers.
                                                                 Treasury Securities
                                                                 and Agency Securities.
                                       Rule 301(b)(6).........  Comply with ATS-         Certain Communication
                                                                 specific systems         Protocol Systems.
                                                                 capacity, integrity
                                                                 and security
                                                                 recordkeeping and
                                                                 systems outages notice
                                                                 requirements.
                                       Rule 301(b)(9).........  Revised Burden: File     All Communication
                                                                 quarterly reports        Protocol Systems.
                                                                 using the proposed      All Legacy Government
                                                                 modernized Form ATS-R.   Securities ATSs.
                                                                                All NMS Stock ATSs.
                                                                                All Other Form ATS
                                                                                Filers.
                                       Rule 301(b)(10)........  Comply with written      All Communication
                                                                 safeguards and           Protocol Systems.
                                                                 procedures requirement. All Currently Exempted
                                                                                Government Securities
                                                                                ATSs.
Rule 302 of Regulation ATS...........  Rule 302...............  Comply with ATS          All Communication
                                                                 recordkeeping            Protocol Systems.
                                                                 requirements (required  All Currently Exempted