(5) changed the proposed language that the Commission will make
public each ``Order of ineffectiveness of a Form ATS-N'' to ``Order
of ineffective initial Form ATS-N''; (6) changed references to
uppercase ``Amendment'' in adopted Rule 304(b)(2)(iii) and (iv) to
lowercase; (7) changed the language in adopted Rule 304(b)(2)(iv)
from describing an ``Order of ineffectiveness of a'' Form ATS-N
amendment to a ``Order of ineffective'' Form ATS-N amendment; and
(8) modified language in the rule to state that the order
suspending, limiting, or revoking the exemption in adopted Rule
304(b)(2)(vi) will apply to the exemption for an ``NMS Stock ATS.''
We are adopting these changes to simplify and improve the clarity of
the rule text and we do not believe that these changes impact the
operation of the proposed rules. Because we are providing a process
for NMS Stock ATSs to amend their initial Forms ATS-N during the
Commission review period, we are also revising proposed Rule
304(b)(2)(iii) (renumbered as Rule 304(b)(2)(i)) to state that the
Commission will publish initial Form ATS-N, ``as amended,'' to
specify that the initial Form ATS-N will reflect amendments made
during the Commission review period. See supra Section IV.A.2 and
Section IV.A.4.b. In addition, in response to comments, we are
adopting a modified requirement that for material amendments, the
cover page of the material amendment will be made public upon filing
and the entirety of the material amendment, as amended, will be made
public upon the expiration of the Commission review period. See
infra Section IV.E.2.c. We are also adding to Rule 304(b)(2)(iii)(B)
that the Commission will make public each updating or correcting
amendment filed to a material amendment following the expiration of
the review period for the material amendment pursuant to Rule
304(a)(2)(ii). See id. We are also adopting Rule 304(b)(2)(iii)(B)
to provide that the Commission will make the entirety of order
display and fair access amendments, as well as updating amendments
and correcting amendments, public upon filing. See id. We are also
adopting Rule 304(b)(2)(iii)(A) to specify that the Commission will
not make public the entirety of a material amendment that it
declares ineffective. See id.
---------------------------------------------------------------------------

    As discussed above, many commenters support making Form ATS-N
public, observing that market participants do not currently have access
to sufficient, standardized information about the operations and
ownership of NMS Stock ATSs.\553\ Nearly all commenters agree with the
Commission's stated goal of enhancing transparency.\554\ Although many
commenters express general support for public disclosure of Form ATS-N,
many commenters recommend certain modifications or clarifications.
---------------------------------------------------------------------------

    \553\ See supra note 93 and accompanying text.
    \554\ See supra note 108.
---------------------------------------------------------------------------

    We continue to believe that making Form ATS-N filings publicly
available is important because most market participants have limited
access to information that permits them to adequately compare and
contrast how an NMS Stock ATS would handle its orders with how a
national securities exchange or other NMS Stock ATS would handle its
orders.\555\ Currently, a Form ATS filed with the Commission by an ATS
that trades NMS stocks is ``deemed confidential when filed'' under Rule
301(b)(2)(vii) of Regulation ATS,\556\ whereas a national securities
exchange is required to both (1) make available to the public its
entire rulebook and (2) publicly file all proposed rule changes
pursuant to Section 19(b) of the Exchange Act.\557\ The only
information the Commission currently makes publicly available regarding
ATSs is a list of the names and locations of ATSs with a Form ATS on
file with the Commission, which is updated monthly.\558\ Unless an NMS
Stock ATS voluntarily publicizes how its functionalities operate,
market participants have limited information to adequately compare and
contrast the operation of the ATS with that of a national securities
exchange or another NMS Stock ATS. And when NMS Stock ATSs voluntarily
make their Forms ATS-N public, the lack of uniformity or
standardization makes it difficult to compare disclosures across ATSs.
Currently, approximately 20 NMS Stock ATSs voluntarily post a Form ATS
on their website. Some commenters, however, observe that in the absence
of mandatory and uniform disclosure requirements, Forms ATS vary in
content and the level of detail disclosed, and are therefore difficult
to compare.\559\ Accordingly, through Form ATS-N, we are adopting
disclosures that will provide information that market participants can
use to perform these comparisons as they evaluate the ATS as a
potential destination for their orders.
---------------------------------------------------------------------------

    \555\ See Proposal, supra note 2, at 81035.
    \556\ See 17 CFR 240.301(b)(2)(vii).
    \557\ See 15 U.S.C. 78s(b).
    \558\ See Alternative Trading System (``ATS'') List, http://www.sec.gov/foia/docs/atslist.htm.
    \559\ See, e.g., Consumer Federation of America Letter at 3; HMA
Letter at 2; Morgan Stanley Letter at 1.
---------------------------------------------------------------------------

    We are adopting Rule 304(b)(2), with the modifications to address
commenters' concerns, to mandate greater public disclosure of NMS Stock
ATS operations through the publication of Form ATS-N. Adopted Rule
304(b)(2) provides that the Commission will make Form ATS-N and related
filings available via posting on the Commission's website. NMS Stock
ATS broker-dealer operators will submit Form ATS-N filings via EDGAR,
and the Commission will make such filings available on its website.
a. Public Disclosure of Effective Initial Form ATS-N, As Amended
    Several commenters express support for proposed Rule
304(b)(2)(iii), which would make public an effective Form ATS-N.\560\
Four commenters agree with the Commission's approach of making initial
Forms ATS-N publicly available once the Commission declared such forms
effective.\561\ One commenter asserts that publishing a filing that is
not yet effective, and may ultimately not be ``approved,'' will cause
confusion among market participants regarding the manner of operation
of the NMS Stock ATS.\562\ Another commenter states that requiring
disclosure of Forms ATS-N that the Commission has declared ineffective
``may place undue suspicion from market participants on ATSs that fail
to gain exemption status on the first

attempt.'' \563\ The Commission will make only effective Forms ATS-N
public because this would be less confusing for market participants. We
expect that in the course of reviewing an initial Form ATS-N,
Commission staff would likely engage in discussions with the entity
regarding its disclosures and could request the entity to revise or
augment its disclosures to cure deficiencies and provide market
participants with greater clarity regarding the entity's operations.
Accordingly, we continue to believe that it would be premature to make
publicly available an initial Form ATS-N filing before it becomes
effective because of the potential confusion that may result from
making public disclosures on an initial Form ATS-N that is not
effective. Therefore, under adopted Rule 304(b)(2)(i), the Commission
will make public an effective initial Form ATS-N, as amended.
---------------------------------------------------------------------------

    \560\ See supra notes 110-123 and accompanying text.
    \561\ See CFA Institute Letter at 6; BIDS Letter at 3; UBS
Letter at 3; LeveL ATS Letter at 7.
    \562\ See LeveL ATS Letter at 7.
    \563\ See CFA Institute Letter at 6.
---------------------------------------------------------------------------

    Adopted Rule 304(a)(1)(ii)(B) and Rule 304(a)(1)(iv)(C) provide
processes for NMS Stock ATSs to amend their initial Forms ATS-N during
the Commission review period. If, for example, the Commission staff
provides comments to a broker-dealer operator suggesting modifications
designed to enhance the completeness and comprehensibility of its
initial Form ATS-N disclosures, the NMS Stock ATS would have the
opportunity to file an amendment to respond to such comments during the
Commission review period. We believe that it is appropriate to make
public initial Form ATS-N, as revised by any such amendments (except
for material amendments during the Commission review period),\564\ when
the initial Form ATS-N becomes effective. Accordingly, we are revising
proposed Rule 304(b)(2)(iii) (renumbered as Rule 304(b)(2)(i)) to state
that the Commission will publish initial Form ATS-N, ``as amended.''
---------------------------------------------------------------------------

    \564\ Material amendments filed by Legacy NMS Stock ATSs during
the Commission review period are subject to Rule 304(b)(2)(iii)(A),
which provides that the entirety of a material amendment will not be
made public until the expiration of the Commission's 30-calendar day
review period. Therefore, under Rule 304(b)(2)(iii)(A), material
amendments filed during the final 30 calendar days of the Commission
review period would not be made public until the 30-calendar day
Commission review period for such amendments has expired. For
example, if an NMS Stock ATS files a material amendment on calendar
day 230 of the Commission review period, and the Form ATS-N becomes
effective on calendar day 240, the material amendment would remain
subject to the Commission's review, and not publicly disclosed, for
an additional 20 calendar days--until the Commission's 30-calendar
day review period has expired. Under Rule 304(b)(2)(iii)(A), the
cover page for any material amendments during the Commission review
would be made public when the initial Form ATS-N becomes effective.
---------------------------------------------------------------------------

    Some commenters express concerns regarding the timing of publicly
disclosing a filed Form ATS-N.\565\ One commenter states its view that
for Legacy NMS Stock ATSs that are filing Form ATS-N for the first
time, the Commission should not make any Forms ATS-N public until the
date on which the Commission has completed the review of the initial
Form ATS-N filings for all Legacy NMS Stock ATSs, so that a Legacy NMS
Stock ATS is not disadvantaged by making its Form ATS-N public prior to
other Legacy NMS Stock ATSs.\566\ As we stated in the Proposal, and as
many commenters have agreed,\567\ the public has a strong interest in
public disclosure about the operations of NMS Stock ATSs. For some
Legacy NMS Stock ATSs, the review period may be extended pursuant to
Rule 304(a)(1)(iv)(B). We believe that disclosure of all Legacy NMS
Stock ATSs' Forms ATS-N should not be delayed during any extended
review period that may be necessary for the Commission to review any
Legacy NMS Stock ATS's initial Form ATS-N that raises novel or complex
issues and therefore requires additional time for review.\568\
Additionally, some NMS Stock ATSs may not wish to delay public
disclosure once their Forms ATS-N become effective, and it is neither
in the public interest nor in the interest of those NMS Stock ATSs to
withhold effective Forms ATS-N from the public.
---------------------------------------------------------------------------

    \565\ See Liquidnet Letter at 3; SSGA Letter at 2; Fidelity
Letter at 7-8; STANY Letter at 3; UBS Letter at 6-8; Luminex Letter
at 2,4; PDQ Letter at 2; SIFMA Letter at 4.
    \566\ See Liquidnet Letter at 3.
    \567\ See, e.g., MFA/AIMA Letter at 2; Schneiderman Letter at 2;
ICI Letter at 1; CFA Institute Letter at 3; Consumer Federation of
America Letter at 6.
    \568\ See Rule 304(a)(1)(ii).
---------------------------------------------------------------------------

    Several commenters suggest that the Commission should make certain
information required by Form ATS-N available only to the
Commission.\569\ Some commenters state that the scope of items required
for public disclosure, particularly those related to the administration
of the ATS, is too detailed and may not be helpful to market
participants in making routing decisions.\570\ We believe that Form
ATS-N, as adopted, solicits the appropriate level of information about
NMS Stock ATSs that would be useful to subscribers and market
participants.\571\ In response to commenters, we have revised proposed
Form ATS-N to remove certain requests that commenters believe are not
relevant to subscribers, limited the scope of certain requests that
commenters believe to be too broad, and narrowed certain requests to
only require summary information or specific information to avoid the
disclosure of commercially sensitive information.\572\ We nevertheless
believe that responses to Form ATS-N requests must be sufficiently
detailed for subscribers and market participants to adequately
understand the operations of an NMS Stock ATS and the ATS-related
activities of the broker-dealer operator and its affiliates.
---------------------------------------------------------------------------

    \569\ See SSGA Letter at 2; Fidelity Letter at 7-8; STANY Letter
at 3; UBS Letter at 6-8; Luminex Letter at 2,4; PDQ Letter at 2;
SIFMA Letter at 4.
    \570\ See Luminex Letter at 2; SIFMA Letter at 4; KCG Letter at
6.
    \571\ See infra Section V.
    \572\ See id.
---------------------------------------------------------------------------

    Other commenters express concern that publicly disclosing Form ATS-
N could result in the disclosure of an NMS Stock ATS's proprietary or
commercially sensitive information.\573\ In particular, and as
discussed further below, commenters express concern about disclosing
information regarding classification of subscribers,\574\ details about
administrative operations of broker-dealer operators,\575\ and
contractual agreements between broker-dealer operators and their
clients,\576\ and NMS Stock ATSs and their vendors.\577\ One commenter
raises concern about customer confidentiality.\578\ We have determined
not to adopt the proposed Exhibit 1 requirements \579\ and have revised
the Form ATS-N requests to not seek disclosure of certain information
that could be proprietary or commercially sensitive, such as routing
tables or numerical order flow segmentation metrics.\580\ We do not
believe that the vast majority of information responsive to adopted
Form ATS-N would be proprietary or commercially sensitive. Furthermore,
we do not believe that the requests of adopted Form ATS-N, as modified,
would require NMS Stock

ATSs to compromise customer confidentiality when making thorough and
accurate disclosures.
---------------------------------------------------------------------------

    \573\ See Fidelity Letter at 8; UBS Letter at 7; Luminex Letter
at 2-4; SIFMA Letter at 16.
    \574\ See Fidelity Letter at 8; UBS Letter at 7.
    \575\ See Fidelity Letter at 4; Luminex Letter at 2-4.
    \576\ See UBS Letter at 7.
    \577\ See SIFMA Letter at 16.
    \578\ See PDQ Letter at 2.
    \579\ See infra Section V.B.2. Exhibit 1 would have required NMS
Stock ATSs to attach a copy of any materials currently provided to
subscribers or other persons related to the operations of the NMS
Stock ATS or the disclosures on Form ATS-N. The determination not to
adopt this proposed requirement renders irrelevant the comment
regarding allowing NMS Stock ATSs to post updated marketing
materials on their websites. See infra note 705 and accompanying
text.
    \580\ See infra Sections V.D.5, V.D.13, V.D.16.
---------------------------------------------------------------------------

    Some commenters that believe that Form ATS-N disclosures may be too
detailed to be helpful to market participants \581\ or that they may
disclose proprietary or commercially sensitive information suggest that
the Commission make only parts of Form ATS-N public, or delay public
disclosure of certain parts of Form ATS-N.\582\ Specifically, one
commenter suggests that the Commission require NMS Stock ATSs to submit
a full Form ATS-N to the Commission, but only provide that a selected
sub-set of fields be publicly disclosed.\583\ We are not adopting the
commenters' suggestions to limit public disclosures because the vast
majority of adopted Form ATS-N will not require the disclosure of
proprietary or commercially sensitive information.\584\ In addition,
not making certain items public would undercut the transparency that is
the primary purpose of this rulemaking.\585\ Another commenter suggests
that the Commission should consider ``tiering'' proprietary information
by first making it only available to the Commission and subscribers,
and after a ``reasonable'' time lag, further disseminating such
information to the general public.\586\ In response to commenter
concerns, the cover page of the filed material amendment will be made
public by the Commission upon filing and, unless the Commission
declares the material amendment ineffective, the entirety of the
material amendment, as amended, will be made public by the Commission
following the Commission's 30-calendar day review period.\587\
---------------------------------------------------------------------------

    \581\ See SSGA Letter at 2.
    \582\ See T. Rowe Price Letter at 2.
    \583\ See SSGA Letter at 2.
    \584\ See infra Sections V.C.6, V.D.6, V.D.13, V.D.23.
    \585\ One commenter believes that an ATS should have the ability
to file supplemental materials with the Commission that are not part
of the public filing as long as the ATS's public filing accurately
responds to all questions on the Form ATS-N. See Liquidnet Letter at
9. We have determined not to adopt a formal process through which
broker-dealer operators can disclose supplemental information for
Commission review alone. We believe that the primary purpose of Form
ATS-N is to provide the public with critical information regarding
NMS Stock ATS operations and affiliate relationships.
    \586\ See T. Rowe Price Letter at 2.
    \587\ See Section IV.E.2.c.
---------------------------------------------------------------------------

    Another commenter states that, although the Commission should not
address commenters' concerns regarding disclosure of sensitive or
proprietary information,\588\ by automatically making any portion of
Form ATS-N confidential, if a ``genuine need for confidentiality
exists,'' the broker-dealer can obtain confidential treatment under
Commission Rule 24b-2, and suggests that the Commission provide
guidance around the use of this limited exception.\589\ We believe that
questions on adopted Form ATS-N, as modified, do not solicit the type
of information that typically would constitute confidential
information.\590\ The existing processes for obtaining confidential
treatment will remain available to broker-dealer operators.\591\
Furthermore, the purpose of Form ATS-N is to create a public
transparency regime for NMS Stock ATSs, with commensurate benefits, and
allowing disclosures to be made only to the Commission would be
contrary to the purposes of this rulemaking.
---------------------------------------------------------------------------

    \588\ See supra notes 574-578 and accompanying text.
    \589\ See Investor Advocate Letter at 10-11.
    \590\ See supra note 584 and accompanying text.
    \591\ See 17 CFR. 240.24b-2.
---------------------------------------------------------------------------

    In addition, FINRA requests that the Commission require NMS Stock
ATSs to file duplicate copies of Form ATS-N submissions with FINRA so
that FINRA has access to these filings before they become effective, or
in the event that they are deemed ineffective and thus never made
public.\592\ Requiring an NMS Stock ATS to provide Form ATS-N filings
to the SRO of which the ATS is a member before the filings become
effective or are declared ineffective would place additional
administrative burdens on the NMS Stock ATS, particularly in the event
the NMS Stock ATS amends its Form ATS-N during discussion with the
Commission staff. We continue to believe that making Form ATS-N public
will enhance the information available to market participants and
benefit the marketplace, and therefore are adopting Rule 304(b)(2)(i),
to provide that the Commission will make public each effective initial
Form ATS-N, as amended.\593\
---------------------------------------------------------------------------

    \592\ See FINRA Letter at 2-3.
    \593\ See supra note 552.
---------------------------------------------------------------------------

b. Public Disclosure of Orders of an Ineffective Initial Form ATS-N
    Because the Commission will not issue orders of effective initial
Forms ATS-N, adopted Rule 304(b)(2) does not include each ``Order of
effectiveness of a Form ATS-N.'' We continue to believe that it is
appropriate to make public each order of ineffective Form ATS-N,
substantially as proposed,\594\ to provide the public with notice
regarding the regulatory status of potential trading venues; if a Form
ATS-N is declared ineffective, the ATS may not operate pursuant to the
exemption from the definition of ``exchange,'' and the public should be
aware of such regulatory status.
---------------------------------------------------------------------------

    \594\ We proposed this requirement as Rule 304(b)(2)(i) and are
adopting this requirement as Rule 304(b)(2)(ii).
---------------------------------------------------------------------------

    Other than the comment about orders of ineffectiveness relating to
a Legacy NMS Stock ATS's initial Form ATS-N, which is discussed
above,\595\ we received no comments on making public orders of
effective or ineffective Form ATS-N. We continue to believe that it is
necessary to make public an order of ineffective Form ATS-N for market
participants to be informed of the operating status of an NMS Stock
ATS. Therefore, we are adopting Rule 304(a)(2)(ii) to provide that
orders of ineffective initial Form ATS-N will be made public, with
modifications to reduce any potential ambiguity and improve readability
of the rule text.\596\
---------------------------------------------------------------------------

    \595\ See supra note 433 and accompanying text.
    \596\ Adopted Rule 304(b)(2)(ii) states that this provision
applies to each ``[o]rder of ineffective initial Form ATS-N''
instead of the proposed language, which stated that the provision
would apply to each ``[o]rder of ineffectiveness of a Form ATS-N.''
As discussed above, the Commission will, by order, declare
ineffective an initial Form ATS-N if it finds, after notice and
opportunity for hearing, that such action is necessary or
appropriate in the public interest, and is consistent with the
protection of investors. See supra Section IV.A.3. We believe that
the revised rule text reduces any potential ambiguity by specifying
that the public disclosure requirement applies to orders related to
``initial'' Form ATS-N and simplifying the rule language.
---------------------------------------------------------------------------

c. Public Disclosure of Form ATS-N Amendments
    We proposed, in Rule 304(a)(2)(iv), making all filed amendments to
Form ATS-N public; as proposed, Form ATS-N amendments would have been
public during the Commission review period and prior to the
Commission's determination of whether a Form ATS-N amendment should be
declared ineffective.
    In the Proposal, we asked whether commenters believe that the
Commission should make public on its website upon filing a Form ATS-N
amendment for a material change, and whether there should be a delay in
when the Form ATS-N for a material change is made public.\597\ We
received several comments on this aspect of the Proposal.\598\ Although
one commenter agrees with our proposal to make Form ATS-N amendments
public upon filing because it would keep market participants informed
about changes to

potential trading venues,\599\ several other commenters express
concerns about making Form ATS-N amendments public upon filing or argue
that the Commission should make amendments public only once the related
changes are operative.\600\ Some of these commenters state that public
disclosure of changes to ATS operations at least 30 calendar days
before such changes are implemented may burden the ability of NMS Stock
ATSs to act competitively, or may reduce the competitive advantage
associated with being the first to innovate.\601\ In addition,
commenters assert that making public Form ATS-N amendments that may
never be implemented could be confusing or misleading to market
participants; \602\ one commenter states that publicly disclosing
material changes in advance of implementation could cause market
participants to not understand current operations of an NMS Stock ATS
versus its proposed, future operations.\603\ One commenter asserts that
immediate publication of amendments would stifle dialogue between the
NMS Stock ATS and Commission staff.\604\ Another commenter states that
it does not believe that making Form ATS-N amendments public upon
filing would provide a benefit to market participants as ``existing
documents'' should be adequate for market participants considering
whether to use a particular NMS Stock ATS.\605\
---------------------------------------------------------------------------

    \597\ See Proposal, supra note 2, at 81028.
    \598\ See ICI Letter at 3; Liquidnet Letter at 6; SIFMA Letter
at 31; UBS Letter at 3; BIDS Letter at 4; STA Letter at 5; STANY
Letter at 2; CFA Institute Letter at 6; LeveL ATS Letter at 7.
    \599\ See ICI Letter at 3, n.3.
    \600\ See Liquidnet Letter at 6; SIFMA Letter at 31; UBS Letter
at 3; BIDS Letter at 4; STA Letter at 5; STANY Letter at 2; CFA
Institute Letter at 6; LeveL ATS Letter at 7. Some commenters state
that an amendment to Form ATS-N should not be made public until it
is declared effective. See, e.g., SIFMA Letter at 31; UBS Letter at
3. We, however, did not propose, and are not adopting, a process for
declaring amendments to Form ATS-N effective. The Commission will
have a 30-calendar day review period to declare amendments to Form
ATS-N ineffective. See supra Section IV.B.2.
    \601\ See LeveL ATS Letter at 7-8. See also SIFMA Letter at 31;
STANY Letter at 2.
    \602\ See BIDS Letter at 4; UBS Letter at 3; LeveL ATS Letter at
7.
    \603\ See UBS Letter at 3.
    \604\ See Liquidnet Letter at 6-7.
    \605\ See BIDS Letter at 4.
---------------------------------------------------------------------------

    We are modifying the proposed rules for making Form ATS-N
amendments to an effective Form ATS-N public. In response to
commenters' concerns, we are adding new subparagraph (b)(2)(iii)(A) to
Rule 304 to provide that, for material amendments (as defined by Rule
304(a)(2)(i)(A)) to an effective Form ATS-N, the cover page of the
filed material amendment will be made public by the Commission upon
filing and, unless the Commission declares the material amendment
ineffective, the entirety of the material amendment, as amended, will
be made public by the Commission following the Commission's 30-calendar
day review period. In addition, we are adding new subparagraph
(b)(2)(iii)(B) to Rule 304 to provide that, for updating, correcting,
and order display and fair access amendments (as defined by Rule
304(a)(2)(i)(B), (C), and (D), respectively) to an effective Form ATS-
N, the entirety of the updating, correcting, or order display and fair
access amendment will be made public by the Commission upon filing. We
are also adding to subparagraph (b)(2)(iii)(B) that an updating or
correcting amendment filed to a material amendment will be made public
by the Commission following the expiration of the review period for
such material amendment pursuant to paragraph (a)(2)(ii) of Rule 304.
    We share the commenters' concerns that making public Form ATS-N
material amendments before expiration of the Commission's 30-day
calendar review period could be confusing or misleading to the public,
particularly in the event the material amendment is declared
ineffective and the related change is never implemented. One commenter
asserts that advance disclosure of Form ATS-N amendments may burden
market participants who feel obligated to review premature disclosures
for possible effects on them and their underlying customers.\606\ We
believe that publicly disclosing the cover page to a Form ATS-N
material amendment during the review period, and disclosing the entire
material amendment following the expiration of 30-calendar day
Commission review period, when the related changes can be implemented,
will reduce any potential for confusion and will not pose an undue
burden on market participants.
---------------------------------------------------------------------------

    \606\ See SIFMA Letter at 32.
---------------------------------------------------------------------------

    In addition, we share the commenters' concerns that providing
advance public notice of material changes to NMS Stock ATSs could
burden ATSs, which would be required to provide at least 30-calendar
day advance notice of material changes to all market participants,
including their competitors. Requiring such advance public notice of
material changes before they are implemented could reduce incentives
for NMS Stock ATSs to innovate.
    However, we continue to believe that market participants that are
planning routing strategies would benefit from advance notice that the
NMS Stock ATS is planning changes to its operations or conflicts of
interest. To minimize the potential competitive harm of advance public
notice, while also providing the benefits of immediate public
transparency, the Commission will make public the cover page of a
material amendment to an effective Form ATS-N upon filing of such
amendment. The cover page will indicate that the NMS Stock ATS has
filed a material amendment and provide a brief narrative about the
content of the amendment. An NMS Stock ATS is required to indicate the
part and item number of Form ATS-N that is subject to the change, state
whether or not such change will apply to all subscribers and the
broker-dealer operator, and provide a brief summary of the changes. For
example, if an NMS Stock ATS is introducing a new order type, the brief
narrative might state: ``The ATS is amending Part III, Item 7(a) of
Form ATS-N to include a new order type, which will be available to all
subscribers.''
    In addition, we are adding, in new subparagraph (b)(2)(iii)(A) to
Rule 304, that the Commission will, following the expiration of the 30-
calendar day Commission review period pursuant to Rule 304(a)(2)(ii),
make public the entirety of the material amendment ``as amended.'' We
are providing a process, under Rule 304(a)(2)(ii), for NMS Stock ATSs
to file updating and correcting amendments under Rule 304(a)(2)(i)(B)
and (C), respectively, to material amendments during the Commission
review period. In addition, Rule 304(b)(2)(iii)(B) provides that an
updating or correcting amendment filed to a material amendment will be
made public by the Commission following the expiration of the review
period for such material amendment pursuant to Rule 304(a)(2)(ii). We
believe that disclosing updating and correcting amendments to material
amendments before expiration of the Commission's 30-day calendar review
period for the material amendment (and before the material amendment is
made public) could be confusing or misleading to the public as the
underlying material amendment would not yet be public or operative. We
will make public material amendments ``as amended;'' material
amendments will reflect any updating and correcting amendments filed
during the Commission review period. Such amended disclosures could
provide market participants with more complete and comprehensible
information about NMS Stock ATS operations and the activities of their
broker-dealer operators and affiliates. Accordingly, Rule
304(b)(2)(iii)(B) provides that an updating or correcting amendment
filed to a material amendment will be made public by the Commission
following the

expiration of the review period for such material amendment pursuant to
Rule 304(a)(2)(ii), and Rule 304(b)(2)(iii)(A) provides that a material
amendment will be made public, as amended, which would incorporate any
amendments that were filed to the material amendment during the
Commission review period.
    The change to delay making the entirety of Form ATS-N material
amendments, as amended, public until after the Commission has completed
the review will not impact the manner in which we proposed to make
public updating, correcting, and order display and fair access
amendments. Form ATS-N updating amendments require NMS Stock ATSs to,
no later than 30 calendar days after the end of a calendar quarter,
correct information that has become inaccurate or incomplete for any
reason and was not required to be reported to the Commission as a Form
ATS-N amendment pursuant to Rules 304(a)(2)(i)(A), (C), or (D).\607\
NMS Stock ATSs are required to correct information in any previous
disclosure on Form ATS-N through a correcting amendment after discovery
that any material information previously filed on Form ATS-N was
inaccurate or incomplete when filed.\608\ Order display and fair access
amendments are required to be filed no later than seven calendar days
after information required to be disclosed in Part III, Items 24 and 25
on Form ATS-N has become inaccurate or incomplete.\609\ We proposed
that all amendments, which include Form ATS-N updating and correcting
amendments (as well as material amendments), be made public upon
filing. Two commenters assert that publicly disclosing changes that the
Commission could later declare ineffective could create confusion among
market participants.\610\ Although, as adopted, the Commission would
not make the entirety of material amendments public until after its 30-
calendar day review period expires, because correcting, updating, and
order display and fair access amendments would be made public upon
filing, the Commission could declare such an amendment ineffective
after it has been made public. We continue to believe that, even with
the risk of some confusion if updating, correcting, and order display
and fair access amendments later were declared ineffective, it is
appropriate to make updating, correcting, and order display and fair
access amendments to an effective Form ATS-N public upon filing because
the related changes, any inaccurate or incomplete disclosures about the
operation of the NMS Stock ATS, or triggering of the order display and
execution access and fair access thresholds, may have been implemented
at or before the time of filing, and we believe that it is crucial that
market participants have updated information about current NMS Stock
ATS operations.\611\
---------------------------------------------------------------------------

    \607\ See Rule 304(a)(2)(i)(B) and supra Section IV.B.1.b.
    \608\ See Rule 304(a)(2)(i)(C).
    \609\ See Rule 304(a)(2)(i)(D).
    \610\ See LeveL ATS Letter at 7; UBS Letter at 3.
    \611\ An updating or correcting amendment to a material
amendment during Commission review will not be made public until the
material amendment that is amended becomes public. We believe this
is appropriate because updating and correcting amendments to a
material amendment during Commission review would amend a material
amendment that is not yet public or operative.
---------------------------------------------------------------------------

    With respect to amendments declared ineffective, one commenter
states that such amendments should be returned to the NMS Stock ATS and
not be made publicly accessible.\612\ Under Rule 304(b)(2)(iii)(A), as
adopted, the Commission is specifying that it will not make public the
entirety of a material amendment that it declares ineffective. The
Commission would, however, upon filing, make public on its website the
cover page of the material amendment, and subsequently, any order of
ineffectiveness related to such material amendment. In addition,
because the Commission will make public updating, correcting, and order
display and fair access amendments to an effective Form ATS-N upon
filing, such amendments will be publicly available even if the
Commission declares such amendments ineffective during its 30-calendar
day review period. We believe that it is appropriate to make public
updating, correcting, and order display and fair access amendments upon
filing, even if the Commission could later declare them ineffective,
because, unlike material amendments, the disclosures included in
updating, correcting, and order display and fair access amendments have
been implemented and reflect an NMS Stock ATS's current operations and
affiliate relationships. If the Commission later declares an updating,
correcting, or order display and fair access amendment ineffective, it
will issue an order of ineffectiveness, which the Commission will make
public to notify market participants that such change is no longer in
effect.
---------------------------------------------------------------------------

    \612\ See SIFMA Letter at 31.
---------------------------------------------------------------------------

    Three commenters state that by making pending amendments public,
the Commission may incidentally turn the process into a review, notice,
and comment period.\613\ Under the adopted rule, the Commission will
not make material amendments to Form ATS-N public until the Commission
review period has expired. Further, the Commission does not believe
that publicly disclosing the brief description of a material amendment
on the cover page of Form ATS-N or publicly disclosing correcting,
updating, and order display and fair access amendments upon filing will
create a public notice, comment, and review period, as the Commission
is not soliciting public comments on amendments.\614\ This process will
be distinct from the proposed rule filing process for national
securities exchanges, in which the Commission solicits comment for
proposed rule changes and considers whether rule changes are consistent
with the Exchange Act.
---------------------------------------------------------------------------

    \613\ See SIFMA Letter at 32; Morgan Stanley Letter at 4; KCG
Letter at 4.
    \614\ See supra Section IV.B.2.
---------------------------------------------------------------------------

    Two commenters suggest that material amendments should be made
public after the Commission has completed its review, but prior to
implementation.\615\ We are not adopting this suggestion because doing
so would require that, to provide additional time for public disclosure
after the end of the Commission review period, either the Commission
truncate the period for Commission review from the entire 30-calendar
day advance notice period, which we believe is necessary for the
review,\616\ to a shorter segment of the total 30-calendar day advance
notice period, or require that NMS Stock ATSs disclose changes further
in advance, which could potentially be burdensome for NMS Stock ATSs.
---------------------------------------------------------------------------

    \615\ See UBS Letter at 3; STA Letter at 5.
    \616\ See supra Section IV.A.2.
---------------------------------------------------------------------------

    In addition, we received comments asking for clarification
regarding the process for a Legacy NMS Stock ATS to file amendments to
its Form ATS while the Commission is reviewing the ATS's initial Form
ATS-N.\617\ In response, we are requiring that a Legacy NMS Stock ATSs
amend only its initial Form ATS-N, and not its Form ATS, during the
Commission review period.\618\ Further, a Legacy NMS Stock ATS's Form
ATS-N will not be made public until the end of the Commission review
period under Rule 304(a)(1)(iv)(B). Rule 304(b)(2)(iii) provides that
amendments to an effective Form ATS-N will be made public. Accordingly,
amendments to a Form ATS-N filed by a Legacy NMS Stock ATS during the
Commission review period will not be made public until after the
Commission review period has ended and the Form ATS-N

becomes effective. We believe that making Form ATS-N amendments public
before the initial Form ATS-N is public would provide little utility,
and would likely only confuse market participants. At the end of the
Commission review period, a Legacy NMS Stock ATS's initial Form ATS-N
will be made public, along with all filed correcting, updating, and
order display and fair access amendments, material amendments for which
the Commission's 30-calendar day review period has expired, and the
cover pages to any material amendments during the Commission review
period.
---------------------------------------------------------------------------

    \617\ See supra note 438 and accompanying text.
    \618\ See supra Section IV.A.4.
---------------------------------------------------------------------------

d. Public Disclosure of Orders of Ineffective Form ATS-N Amendment
    Under Rule 304(b)(2)(iv), the Commission will make public each
order of ineffective Form ATS-N amendment. This would provide notice to
market participants that the Commission had declared a Form ATS-N
amendment ineffective. We received no comments on making public orders
of ineffective Form ATS-N amendments. We are adopting proposed Rule
304(b)(2)(v) as adopted Rule 304(b)(2)(iv).\619\
---------------------------------------------------------------------------

    \619\ See supra note 552.
---------------------------------------------------------------------------

e. Public Disclosure of Notices of Cessation
    Under Rule 304(b)(2)(v) (which was proposed as Rule
304(b)(2)(vi)),\620\ the Commission will make public each notice of
cessation of a Form ATS-N filed pursuant to Rule 304(a)(3). One
commenter states that it supports our proposal to make notices of
cessation publicly available.\621\ No commenters express opposition to
such requirement. We continue to believe that making public each
properly filed Form ATS-N notice of cessation will provide the public
with notice that the NMS Stock ATS will cease operations and that the
organization, association, or group of persons no longer operates
pursuant to the exemption provided under Exchange Act Rule 3a1-1(a)(2).
The notice of cessation will provide market participants with the date
that the NMS Stock ATS will cease operations, as designated by the NMS
Stock ATS, and allow them to make arrangements to select alternative
routing destinations for their orders. Therefore, we are adopting as
proposed the requirement for public disclosure of notices of cessation.
---------------------------------------------------------------------------

    \620\ See id.
    \621\ See ICI Letter at 11.
---------------------------------------------------------------------------

f. Public Disclosure of Each Order Suspending, Limiting, or Revoking
the Rule 3a1-1(a)(2) Exemption
    Under proposed Rule 304(b)(2)(vii), the Commission would make
public each order suspending, limiting, or revoking the exemption
provided pursuant to Rule 3a1-1(a)(2). We did not receive any comments
on this requirement. We believe that it is important for market
participants to be aware of whether an NMS Stock ATS is subject to an
order suspending, limiting, or revoking the exemption from the
definition of ``exchange'' when they are making their routing decisions
because such an order could prevent an NMS Stock ATS from operating, or
it could limit its functionality. Therefore, we are adopting
substantially as proposed the requirement that the Commission make
public each order suspending limiting, or revoking the exemption from
the definition of ``exchange,'' as renumbered Rule 304(b)(2)(vi).\622\
---------------------------------------------------------------------------

    \622\ See supra note 552. We are making one modification to
specify that this applies to the exemption ``for an NMS Stock ATS.''
---------------------------------------------------------------------------

3. Rule 304(b)(3): Disclosure of Form ATS-N on the NMS Stock ATS's
Website
    Proposed Rule 304(b)(3) required each NMS Stock ATS to make public
via posting on its website a direct URL hyperlink to the Commission's
website that contains the documents enumerated in proposed Rule
304(b)(2).
    We received two comments on proposed Rule 304(b)(3).\623\ One
commenter supports adding a requirement for NMS Stock ATSs to post the
effective Forms ATS-N on their own websites and not simply provide
links to the Commission's website.\624\ Another commenter requests that
rather than requiring materials to be posted centrally through the
Commission, the Commission should allow an NMS Stock ATS to post its
disclosure materials on its public website.\625\ We are not adopting a
requirement that an NMS Stock ATS post its filings on its own website
because it believes that requiring each NMS Stock ATS to provide a link
to the Commission's website, which will link to Form ATS-N filings in
EDGAR, will provide market participants easy and uniform access to Form
ATS-N filings. The link to the Commission website would provide users
with access to all new filings available in EDGAR.
---------------------------------------------------------------------------

    \623\ See CFA Institute Letter at 6; UBS Letter at 3.
    \624\ See CFA Institute Letter at 6.
    \625\ See UBS Letter at 3.
---------------------------------------------------------------------------

    We are adopting, with modifications, the requirement that each NMS
Stock ATS make public via posting on its website a direct URL hyperlink
to the Commission's website that contains the documents enumerated in
proposed Rule 304(b)(2). We continue to believe that the requirement of
posting on the NMS Stock ATS's website a direct URL hyperlink to the
Commission's website would make it easier for market participants to
review an NMS Stock ATS's Form ATS-N filings by providing an additional
means for market participants to locate Form ATS-N filings that are
made available through the Commission's website.\626\
---------------------------------------------------------------------------

    \626\ See Proposal, supra note 2, at 81035.
---------------------------------------------------------------------------

V. Form ATS-N Disclosures

A. Form ATS-N Disclosure Requirements and Definitions

1. Rule 304(c): Disclosure Requirements
    Proposed Rule 304(c)(1) required NMS Stock ATSs to respond to each
item on Form ATS-N, as applicable, in detail, and disclose information
that is accurate, current, and complete. Unlike proposed Rule
304(c)(2), reports required under Rule 304 must be filed electronically
on Form ATS-N, include all information as prescribed in Form ATS-N and
the Instructions thereto, and contain an electronic signature that is
authenticated by manual signature. Further, proposed Rule 304(c)(2)
required that such document be executed before or at the time Form ATS-
N is electronically filed and be retained by the NMS Stock ATS in
accordance with Rule 303.\627\ The proposed Form ATS-N required the
signator to represent that the information and statements in the
applicable Form ATS-N, including exhibits, schedules, or other
documents attached to the Form ATS-N, and other information filed with
the Form ATS-N, are current, true, and complete.\628\
---------------------------------------------------------------------------

    \627\ See id.
    \628\ See Proposed Form ATS-N, Part V.
---------------------------------------------------------------------------

    We are adopting Rule 304(c)(2), with technical and non-substantive
modifications to reduce redundancy and reduce potential ambiguity about
the filing requirements for Form ATS-N.\629\

In the Proposal, the Commission stated that Regulation ATS requires NMS
Stock ATSs to register as broker-dealers with the Commission, which
entails becoming a member of an SRO, such as FINRA, and fully complying
with the broker-dealer regulatory regime.\630\ The Commission requested
comment on whether the certification under FINRA Rule 3130 would help
ensure an NMS Stock ATS's compliance with proposed Rule 304, including
the requirement that disclosures on Form ATS-N be accurate, current,
and complete.\631\ The Commission received two comment letters
regarding the requirement that an authorized person certify that the
form is ``current, true, and complete.'' \632\ One commenter supports
the certification requirement.\633\ Another commenter expresses concern
about immaterial errors being a basis for liability.\634\
---------------------------------------------------------------------------

    \629\ The Commission is deleting the word ``electronically'' and
the language ``and contain an electronic signature'' in the first
sentence of proposed Rule 304(c)(2). All NMS Stock ATSs are required
to file Form ATS-N through EDGAR. Therefore, we believe that
referencing the term ``electronic'' and ``electronic signature'' is
redundant because all filings are electronically submitted through
EDGAR. We are deleting the second sentence (regarding manually
signing a signature page or document) and instead adding a reference
to 232.302 of Regulation S-T, which includes the general rules for
electronic filings, including rules governing electronic signatures.
We are also modifying the third sentence of Rule 304(c)(2) to state
that any report filed under Rule 304 shall be executed ``at, or
prior to,'' the time the Form ATS-N is filed (instead of ``before or
at''). We are also adding a reference to the Instructions in Form
ATS-N, which includes the requirement for NMS Stock ATSs to maintain
a paper copy with original manual signatures, instead of including a
reference to retaining Form ATS-N in accordance with Sec.  242.303,
as proposed.
    \630\ See Proposal, supra note 2, at 81005.
    \631\ See id. at 81037.
    \632\ See SIFMA Letter at 33; Better Markets Letter at 7.
    \633\ See Better Markets Letter at 7.
    \634\ See SIFMA Letter at 33.
---------------------------------------------------------------------------

    The Commission continues to believe that it is appropriate to
require authorized persons to certify that the Form ATS-N is ``current,
true, and complete.'' We believe that market participants will rely on
Form ATS-N disclosures to understand the operations of an NMS Stock ATS
and ATS-related activities of the broker-dealer operator, and decide
whether that trading center would be a desirable venue for their
orders. The information contained on Form ATS-N will also be available
for Commission use, including as part of its oversight functions.
Further, existing Form ATS also requires authorized persons to certify
that the information and statements in the form, exhibits, schedules
and other documents attached are ``current, true, and complete.'' \635\
In addition, Form 1, the application for registration or exemption from
registration as a national securities exchange, requires a similar
certification.\636\ Neither of these certifications includes a
materiality qualifier, and the Commission does not believe that it
would be appropriate to include a materiality qualifier in Form ATS-N.
---------------------------------------------------------------------------

    \635\ See Form ATS at 1.
    \636\ See Form 1 at 1.
---------------------------------------------------------------------------

    We are adopting Rule 304(c)(1) with certain modifications.\637\
Specifically, adopted Rule 304(c)(1) requires that ``[a]n NMS Stock ATS
must file a Form ATS-N in accordance with the Instructions therein.''
\638\ The adopted Instructions to Form ATS-N require, among other
things, that ``[a]n NMS Stock ATS must provide all the information
required by Form ATS-N, including responses to each Item, as
applicable, and the Exhibits, and disclose information that is
accurate, current, and complete.'' \639\ Similar to the Instructions of
proposed Form ATS-N, the Instructions to adopted Form ATS-N asks an NMS
Stock ATS to respond to each item ``in detail.'' In response to
comments, we revised some of the requests on Form ATS-N to solicit ``a
summary of information'' to tailor further, as appropriate, the
required disclosure or avoid requiring the disclosure of personal or
commercially sensitive information.\640\ Accordingly, we are revising
the Instructions to require that ``unless otherwise provided'' (i.e.,
where the request indicates that the ATS is required to disclose
``summary'' information), the NMS Stock ATS respond to each request in
detail.\641\
---------------------------------------------------------------------------

    \637\ We changed the heading of proposed Rule 304(c) from ``Form
ATS-N filing requirements'' to ``Form ATS-N disclosure
requirements,'' which we believe more accurately describes the
purpose and content of the paragraph.
    \638\ See Rule 304(c)(1).
    \639\ See Instructions to Form ATS-N.
    \640\ See, e.g., Form ATS-N Part III, Item 13(a) (instructing
NMS Stock ATS to provide a summary of the parameters for each
segmented order category).
    \641\ In addition, to avoid potential confusion, we are removing
``in detail'' from Rule 304(c)(1) and instead, specifying that the
Form ATS-N must be filed ``in accordance with the instructions
therein.'' See Rule 304(c)(1).
---------------------------------------------------------------------------

    One commenter suggests that an NMS Stock ATS should be permitted to
disclose additional information to its subscribers and potential
customers, outside of the Form ATS-N process, or respond to requests
for information from market participants.\642\ Similarly, one commenter
states that NMS Stock ATSs should be allowed to separately disclose
information, upon request, regarding order segmentation to subscribers
who require such information from a ``due diligence perspective'' and
who, due to the nature of their trading, would not present gaming
concerns.\643\ We believe that it would be inconsistent with the goals
of this rulemaking were its adoption to chill communication between
broker-dealer operators and subscribers about the NMS Stock ATS. The
adopted enhanced disclosure requirements do not prohibit broker-dealer
operators from communicating with subscribers and other market
participants about information not otherwise required by Form ATS-N in
a manner that is consistent with federal securities laws and the rules
or regulations thereunder. A broker-dealer operator responding to a
request for information from a subscriber or market participant
generally should evaluate whether the information provided in response
to these requests must be disclosed on Form ATS-N if the information
does not already appear in its Form ATS-N.
---------------------------------------------------------------------------

    \642\ See T. Rowe Price Letter at 2.
    \643\ See Fidelity Letter at 8.
---------------------------------------------------------------------------

    The Commission received several comments on the general format of
the Form ATS-N. Several commenters suggest that the Commission modify
Form ATS-N so that the requests for information result in disclosures
that are more standardized and allow market participants to more easily
compare Form ATS-N filings.\644\ Some commenters express concern that
requesting what they characterize as ``extraneous'' information could
obscure the information that market participants would find the most
relevant.\645\ Some of these commenters also express concern that the
volume of data that NMS Stock ATSs would provide in response to
questions that require narrative responses would make it difficult for
participants to understand ATS operations \646\ or conduct due
diligence.\647\
---------------------------------------------------------------------------

    \644\ See SSGA Letter at 2-3; BIDS Letter at 4-5; Fidelity
Letter at 5; STANY Letter at 5; UBS Letter at 2-3; KCG Letter at 8-
9, 11; Morgan Stanley Letter at 1; STA Letter at 2; SIFMA Letter at
9; LeveL ATS Letter at 6-7.
    \645\ See STANY Letter at 3; Luminex Letter at 4; KCG Letter at
4; SSGA Letter at 2; SIFMA Letter at 7.
    \646\ See STA Letter at 2; KCG Letter at 3-4; SIFMA Letter at 9.
    \647\ See SSGA Letter at 2.
---------------------------------------------------------------------------

    Although one commenter expressly agrees with the Commission's
approach of requiring summaries of amendments,\648\ several commenters
state that narrative responses on Form ATS-N are likely to vary widely,
and could make comparing multiple platforms difficult.\649\ Multiple
commenters advocate for replacing some of the proposed narrative
responses to Form ATS-N with ``yes'' or ``no'' responses.\650\ One
commenter states that requiring ATSs to respond in a ``yes'' or ``no''
format would support

more fulsome disclosure and create a universal standard of review, as
allowing narrative responses may allow ATSs to disclose only the
information that they deem appropriate.\651\ Some commenters recognize
that ``yes'' or ``no'' information may need to be supplemented by short
narrative responses.\652\ One commenter suggests introducing a tabular
format, where reasonable, to capture the disclosures required by Forms
ATS-N would facilitate comparison of Forms ATS-N.\653\
---------------------------------------------------------------------------

    \648\ See Liquidnet Letter at 18.
    \649\ See SSGA Letter at 2; Fidelity Letter at 5; STA Letter at
2; BIDS Letter at 4-5; KCG Letter at 8-9; Morgan Stanley Letter at
1.
    \650\ See SSGA Letter at 2; BIDS Letter at 4; STANY Letter at 5;
STA Letter at 2; UBS Letter at 2-3; KCG Letter at 8-11; SIFMA Letter
at 9; LeveL ATS Letter at 6.
    \651\ See LeveL ATS Letter at 7.
    \652\ See BIDS Letter at 4; SIFMA Letter at 12; LeveL ATS Letter
at 7.
    \653\ See BIDS Letter at 5.
---------------------------------------------------------------------------

    The Commission has revised the format of proposed Form ATS-N to
further standardize the form's requests, better organize questions by
subject matter, reduce redundancy, reduce ambiguity, make more explicit
requests on Form ATS-N to facilitate complete responses, and achieve
the appropriate balance between yes/no and narrative responses. For
instance, the adopted format of Form ATS-N changes several questions
from proposed Form ATS-N for certain subject matters (e.g., order
display, co-location services, and segmentation) to require ``yes'' or
``no'' responses with further narrative disclosure required in
connection with ``yes'' responses. We believe that adding more ``yes''
or ``no'' questioning in Form ATS-N will help standardize responses and
address commenters' concerns about facilitating market participants'
review and comparisons of Form ATS-N disclosures. We continue to
believe, however, that narrative responses enable market participants
to understand the operations of the NMS Stock ATS and the ATS-related
activities of the broker-dealer operator, particularly in light of the
different trading functionalities, options, and procedures that are
offered across NMS Stock ATSs, and provide NMS Stock ATSs with the
flexibility to communicate required information to the public that is
required by the form.
    Also, certain requests have been amended to only require summary
information. We believe that requiring summaries for certain
disclosures could help reduce potential extraneous information.
2. Terminology
a. Definitions for Form ATS-N
(i) Proposed Defined Terms
    As proposed, Form ATS-N would have set forth definitions of the
following terms: (1) Affiliate; (2) alternative trading system; (3)
broker-dealer operator; (4) control; (5) NMS security; (6) NMS Stock;
(7) NMS Stock ATS; (8) order; (9) person; and (10) subscriber.
    The Commission received several comments regarding the proposed
definitions of ``affiliate.'' The Commission is adopting the definition
of the term ``affiliate,'' with a technical change,\654\ 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.'' One commenter states that the proposed definition
of ``affiliate'' would include, among others, owners of the ATS
operator, without regard for whether the affiliate is separately
registered as a broker-dealer and therefore subject to the Commission's
jurisdiction.\655\ The commenter notes that the definition of
``affiliate'' would include persons ``under common control with'' the
NMS Stock ATS operator, with control meaning at least 25% ownership,
such that the threshold would capture entities that operate
independently from one another.\656\ Similarly, another commenter
points out that although the Proposal contains a customary definition
of the term ``affiliate,'' the definition is not limited in any way
that focuses on direct interactions or relationships with the NMS Stock
ATS.\657\
---------------------------------------------------------------------------

    \654\ The Commission is making one technical change to the
proposed term ``affiliate'' by capitalizing the defined term
``Person.'' This change is meant to identify the term Person as a
defined term for purposes of the Form ATS-N.
    \655\ See LeveL ATS Letter at 3, n.5.
    \656\ See id. at 4, n.7.
    \657\ See UBS Letter at 4. This commenter states that the
broker-dealer operator of its ATS has well over 300 global
affiliates under the definition set forth in the Proposal, and that
not all such affiliates are users of the ATS; only orders routed by
a small number of affiliates end up in its ATS. See id. The
commenter also points out that as proposed, it would need to
disclose every affiliate regardless of whether it has any
interactions with the ATS. See id.
---------------------------------------------------------------------------

    We do not believe that the status of an affiliate's registration
with the Commission should limit the scope of the disclosures about
that affiliate in Form ATS-N. However, the adopted Form ATS-N
conflicts-of-interest disclosures are tailored to inform market
participants about how affiliates of the broker-dealer operator trade
on the NMS Stock ATS and how the use of the ATS by affiliates may
affect the handling and execution of orders from unaffiliated parties.
While the definition of ``affiliate'' in Form ATS-N may encompass a
large number of entities for some ATSs, Form ATS-N is designed to
solicit information that is relevant to a market participant's
evaluation of an NMS Stock ATS as a potential trading venue. Therefore,
while we have not amended the proposed definition of ``affiliate,'' the
disclosures about affiliate activity on an NMS Stock ATS are not
designed to require information about affiliates that the Commission
and commenters believe would be extraneous to a market participant's
evaluation of conflicts of interest and information leakage on the ATS.
    We received two comments regarding the proposed definition of
``control.'' After carefully considering these comments, we are
adopting the definition of ``control,'' as proposed, to mean:

the power, directly or indirectly, to direct the management or
policies of the broker-dealer of an alternative trading system,
whether through the ownership of securities, by contract, or
otherwise. A Person is presumed to control the broker-dealer of an
alternative trading system, if that Person (1) is a director,
general partner, or officer exercising executive responsibility (or
having similar status or performing similar functions); (2) directly
or indirectly has the right to vote 25% or more of a class of voting
securities or has the power to sell or direct the sale of 25% or
more of a class of voting securities of the broker-dealer of the
alternative trading system; or (3) in the case of a partnership, has
contributed, or has the right to receive, upon dissolution, 25% or
more of the capital of the broker-dealer of the alternative trading
system.

    One commenter expresses support for the Commission's proposal that
the definition of control contain a 25% ownership threshold that the
commenter states currently serves as a presumption of control and is
consistent with that used in other areas of the securities laws.\658\
Another commenter states, however, that the proposed definition of
``control'' provides that certain persons are presumed to control the
broker-dealer operator of an NMS Stock ATS, but that there is no
corresponding safe harbor whereby persons are presumed not to control
an NMS Stock ATS.\659\ Accordingly, the commenter opines that an NMS
Stock ATS operator may feel obligated to provide overly broad
disclosures, which could confuse subscribers regarding potential
conflicts.\660\
---------------------------------------------------------------------------

    \658\ See HMA Letter at 15.
    \659\ See LeveL ATS Letter at 3, n.6.
    \660\ See id.
---------------------------------------------------------------------------

    Disclosures related to affiliates extend to persons that control,
are controlled by, or are under common control with the broker-dealer
operator, and, as a result, parallel the disclosures related to
``control affiliates'' that broker-dealer

operators must make on Form BD.\661\ The Commission disagrees that an
NMS Stock ATS operator may feel obligated to provide unnecessarily
broad disclosures regarding potential conflicts of interest due to the
proposed definition of ``control.'' The presumed control tests set
forth in the adopted definition of ``control'' are meant to provide
clarity to NMS Stock ATSs as to when an entity and the broker-dealer
operator are defined as ``affiliated,'' which would trigger the NMS
Stock ATSs' disclosure duties under Part II of adopted Form ATS-N. We
believe that the enumerated circumstances under which there is presumed
control involve factors (such as a shared executive or 25% ownership)
that would likely result in one entity or person having the power,
directly or indirectly, to direct the management or policies of the
broker-dealer operator of an ATS. Therefore, in such situations, a
presumption of control is appropriate. On the other hand, because
control can manifest itself in several ways under the adopted
definition, the Commission does not feel that there are certain facts
that would warrant a presumption of no control. For example, the unique
facts and circumstances of several different ownership structures could
result in different conclusions regarding control, even though the
various structures contain some similarities. Accordingly, the
Commission has not added provisions setting forth circumstances under
which there would be a presumption of no control.
---------------------------------------------------------------------------

    \661\ See Form BD at 2 (defining ``control affiliate'').
---------------------------------------------------------------------------

    The Commission is adopting as proposed the changes to the
definition of ``control'' under Rule 300(f) in Regulation ATS. The
definition of the term control being adopted herein contains the
additional phrase ``the broker-dealer of'' before the two instances of
the phrase ``an alternative trading system'' and before the phrase
``the alternative trading system'' in subsections (2) and (3) of the
definition.\662\ As discussed in the Proposal, the purpose of this
difference is to make clear that, because an ATS must register as a
broker-dealer, control of the broker-dealer of the ATS is control of
the ATS, and that the broker-dealer operator is legally responsible for
all operational aspects of the ATS and for ensuring that the ATS
complies with applicable federal securities laws and the rules and
regulations thereunder, including Regulation ATS.\663\
---------------------------------------------------------------------------

    \662\ 17 CFR 242.300(f).
    \663\ See Proposal, supra note 1, at 81044.
---------------------------------------------------------------------------

    The disclosures of ATS-related activities of the broker-dealer
operator's affiliates in Part II of adopted Form ATS-N are designed to
provide subscribers and market participants with a comprehensive
understanding of the conflicts of interest that may arise from the
broker-dealer operator's other business activities and its operation of
the NMS Stock ATS. Under the adopted definitions of ``affiliate'' and
``control,'' any affiliate of the broker-dealer operator of the NMS
Stock ATS would be an affiliate of the NMS Stock ATS. These definitions
are designed to cover entities that have a close relationship with the
broker-dealer operator and whose activities could raise conflicts of
interest concerns, or could otherwise be relevant to market
participants when evaluating an NMS Stock ATS.
    Furthermore, in Part III, Item 1 of proposed Form ATS-N, the
Commission used the term ``non-ATS trading center.'' A commenter
requests that the Commission define the term ``non-ATS trading center''
so that broker-dealer operators can better focus on making proper
disclosures.\664\ As further explained below, in response to comments,
the Commission is reorganizing and changing Part III, Item 1 of
proposed Form ATS-N to request information about the trading activities
of the broker-dealer operator and its affiliates, irrespective of
whether the broker-dealer operator's business units and/or affiliates
are non-ATS trading centers.\665\ Given the revisions the Commission is
making to Part III, Item 1, we believe that the defined term is no
longer necessary, and the Commission is, therefore, eliminating the
term from adopted Form ATS-N.
---------------------------------------------------------------------------

    \664\ See SIFMA Letter at 10.
    \665\ See infra Section V.C.1.
---------------------------------------------------------------------------

    Another commenter agrees with the goal of highlighting potential
conflicts of interest faced by broker-dealer operators of NMS Stock
ATSs and their affiliates in connection with the ATS.\666\ The
commenter endorses the proposed requirement to identify non-ATS trading
centers managed by the ATS operator or its affiliates that interact
with the ATS. The commenter also states that disclosures related to
non-ATS trading centers should be limited to non-ATS trading centers
that interact with or exchange information with the ATS.\667\ The
Commission also believes that public disclosure of non-ATS trading
centers managed by the broker-dealer operator or its affiliates that
interact with the ATS furthers the stated goal of helping market
participants evaluate potential conflicts of interest on an NMS Stock
ATS. The requests in Part II of adopted Form ATS-N are tailored to
elicit such information without burdening NMS Stock ATSs with a
requirement to list the non-ATS trading centers of the broker-dealer
operator or its affiliates that do not interact with the NMS Stock ATS.
---------------------------------------------------------------------------

    \666\ See KCG Letter at 8.
    \667\ See id. at 8-9. This commenter also asserts that it is
imperative for the Commission to clarify that the interaction
between the NMS Stock ATS and any non[hyphen]ATS trading center may
be subject to change and the ATS operator does not need file and
receive Commission approval before implementation. See id. We note
that the materiality of any changes to the interaction and
coordination between non-ATS trading centers and the NMS Stock ATS
that would require disclosure on Form ATS-N should be evaluated
based on the facts and circumstances related to each change.
---------------------------------------------------------------------------

(ii) New Defined Terms
    The Commission is adding the term ``trading center'' to the
definitions set forth in the Instructions to adopted Form ATS-N to
define that term for purposes of its use in Part II and Part III of
adopted Form ATS-N. The term ``trading center'' was used in proposed
Form ATS-N with regard to arrangements with other trading centers--Part
III, Item 4 of proposed Form ATS-N--and is used in adopted Form ATS-N's
requests regarding the routing of orders from the NMS Stock ATS to
business units or affiliates of the broker-dealer operator (adopted
Part II, Items 1 and 2) and the NMS Stock ATS's arrangements with other
trading centers (adopted Part II, Item 4).
    The definition of the term ``trading center'' used for purposes of
adopted Form ATS-N is the same as that currently set forth in
Regulation NMS Rule 600(b)(78).\668\ The adopted definition is ``a
national securities exchange or national securities association that
operates an SRO trading facility, an alternative trading system, an
exchange market maker, an OTC market maker, or any other broker or
dealer that executes orders internally by trading as principal or
crossing orders as agent.'' While we believe that the scope of the term
``trading center'' in Form ATS-N would likely be understood by NMS
Stock ATSs, we believe that adding a definition to the Form ATS-N will
reduce any potential ambiguity with regard to those requests in Part
II, Items 1, 2, and 4 of adopted Form ATS-N.
---------------------------------------------------------------------------

    \668\ See 17 CFR 242.600(b)(78).
---------------------------------------------------------------------------

    One commenter states that the Commission should add additional
definitions for certain terms to promote consistency throughout Forms
ATS-N, which the commenter believes could ultimately facilitate
comparison among

Forms ATS-N.\669\ Another commenter emphasizes that the Commission
should establish fundamental uniformity in the way information is
defined and disclosed.\670\ We have structured adopted Form ATS-N to
allow market participants to better compare disclosures among NMS Stock
ATSs. We do not, however, believe that it should establish standardized
terms to be used by NMS Stock ATSs when completing their disclosures on
Form ATS-N. We do not desire to impose substantive standards for how
disclosures should be written by adopting and defining terms to be used
by all NMS Stock ATSs to describe the functionalities, operations, or
procedures of their systems. The operations of NMS Stock ATSs vary,
and, apart from some common terms, many NMS Stock ATSs use different
terminology to describe their operations and functionalities. Based on
our review of Form ATS filings, we believe that NMS Stock ATSs may use
differing terms and definitions to describe functionalities,
operations, or procedures, even if a particular function, operation, or
procedure on one ATS may resemble that on another. We do not believe
that it would be very helpful to define terms for functionalities,
operations, or procedures across NMS Stock ATSs because doing so may
not result in complete or comprehensible disclosures due to these
substantive and semantical differences in the operations of NMS Stock
ATSs. We believe that adopting standardized, substantive terms for Form
ATS-N disclosures may limit the ability of an NMS Stock ATS to
completely and clearly describe its system, which we believe could
reduce the utility of Form ATS-N disclosures for market participants.
We also believe that such defined terminology would limit the
flexibility of NMS Stock ATSs to name or market new services of the
ATS.
---------------------------------------------------------------------------

    \669\ See BIDS Letter at 5.
    \670\ See UBS Letter at 2.
---------------------------------------------------------------------------

b. Comments on the Definition of ``Subscriber''
    When seeking disclosures regarding how an NMS Stock ATS operates
and the ATS-related activities of the broker-dealer operator and its
affiliates, proposed Form ATS-N used the terms ``subscriber'' and
``person(s).'' One commenter believes that Form ATS-N should instead
focus on the term ``user'' rather than ``subscriber.'' \671\ This
commenter states that the term ``subscriber'' can be disparately
interpreted and applied by broker-dealer operators of ATSs and would
inhibit uniform application across ATSs in terms of disclosure, access,
priority, and other purposes. This commenter further states that the
current definition in Regulation ATS fails to adequately define
``subscriber'' in the case of an ATS that is part of a larger broker-
dealer operation, leading to inconsistencies in the application of the
requirements applicable to subscribers across ATSs. The commenter
believes that disclosures in Form ATS-N should not depend on whether a
broker-dealer operator has a contractual agreement with a user for
accessing the ATS, but should be consistent for all users that access
an ATS whether such users are internal or external and whether such
users access the ATS directly or indirectly.
---------------------------------------------------------------------------

    \671\ See Morgan Stanley Letter at 4.
---------------------------------------------------------------------------

    Similarly, another commenter believes the phrase ``subscriber
orders or other trading interest'' as used in proposed Part III, Item
1--which would have required the NMS Stock ATS to disclose information
about the interaction and coordination between non-ATS trading centers
operated by the broker-dealer operator or its affiliates and the NMS
Stock ATS--should be read as ``subscriber orders or subscriber trading
interest.'' \672\ This commenter believes that the alternative reading
would potentially capture all trading interest sent to the broker-
dealer operator of the NMS Stock ATS.
---------------------------------------------------------------------------

    \672\ See UBS Letter at 5.
---------------------------------------------------------------------------

    We agree that responses to questions in Form ATS-N should be
uniformly applied by NMS Stock ATSs regardless of the source of orders
(e.g., principal trading desks of the broker-dealer operator, third
parties using direct connectivity, affiliates of the broker-dealer
operator, customers of the broker-dealer operator whose orders are
submitted to the ATS through a functionality of the broker-dealer
operator, such as a smart order router (``SOR'')). We have revised
several requests on proposed Form ATS-N to help facilitate a uniform
application of responses by NMS Stock ATSs and, in response to
commenters' concerns, are providing guidance regarding the definition
of ``subscriber'' under Regulation ATS and in the context of Form ATS-N
disclosures.
    First, we believe that the term ``subscriber'' sufficiently
captures the vast majority of market participants whose orders or
trading interest are submitted to and executed in an NMS Stock ATS.
Regulation ATS defines subscriber ``[a]s any person that has entered
into a contractual agreement with an ATS to access such ATS for the
purpose of effecting transactions in securities or submitting,
disseminating, or displaying orders on such ATS, including a customer,
member, user, or participant in an ATS.'' \673\ In the Proposal, as the
Commission discussed, the broker-dealer operator of an NMS Stock ATS is
legally responsible for, and controls all aspects of, the ATS
operation, including, among other things, providing access to the
ATS.\674\ Based on our experience, persons seeking to use an ATS's
services enter into agreements with the broker-dealer operator, and
these agreements could cover services in addition to the ATS services.
These agreements may take a variety of forms, and may or may not be
written.\675\ If a market participant has an agreement--written or
unwritten--with a broker-dealer that allows the market participant to
enter orders directly into an ATS operated by the broker-dealer, that
market participant is a subscriber of the ATS for purposes of
Regulation ATS and Form ATS-N.
---------------------------------------------------------------------------

    \673\ 17 CFR 242.300(b) (emphasis added). Additionally, the
definition of the term ``subscriber'' under Regulation ATS states
that a subscriber shall not include a national securities exchange
or national securities association. See id.
    \674\ See Proposal, supra note 2, at 81041 (discussing the
relationship between the broker-dealer operator's operation of the
NMS Stock ATS and its other operations).
    \675\ For example, third-party market participants--including,
potentially, affiliates and non-affiliates of the broker-dealer
operator--may enter into subscriber agreements or some other form of
contract with the broker-dealer operator to connect directly to the
ATS to submit or display orders. We note that a determination as to
who may be a ``subscriber'' to the ATS would depend upon the facts
and circumstances of the relationship between the ATS and the
broker-dealer operator, so the preceding examples are not
exhaustive.
---------------------------------------------------------------------------

    Another example of a subscriber would include a customer of the
broker-dealer operator whose orders are submitted to the ATS by the
broker-dealer operator. Many NMS Stock ATSs are operated by broker-
dealers that offer their customers a wide range of order handling and
execution services in addition to the execution services of their NMS
Stock ATSs.\676\ These services typically involve functionality such as
an SOR or other types of trading algorithms. In cases where a customer
uses this wider range of services of the broker-dealer, the customer
would not

send its orders directly to the ATS, but rather, send its orders to
some functionality external to the ATS, which could be the SOR or
algorithm itself or a client service desk that submits the customer
orders into the broker-dealer's SOR or trading algorithms. A SOR or
trading algorithm typically has the capability to route customer orders
to a number of execution venues, including the broker-dealer operator's
own ATS. We note that such commercial relationships may be governed by
formal or informal agreements. To the extent a person enters into a
contract, written or unwritten, to use the broker-dealer operator's
order routing and execution services, and those services could include
routing to and executing in the broker-dealer operator's own ATS, that
agreement would fall within the contractual agreements under the
definition of ``subscriber'' under Regulation ATS and the person would
be a subscriber to the ATS. On the other hand, a customer's order
routed by the broker-dealer operator's SOR or trading algorithm to an
external market for execution would not be a subscriber order because
the order was not destined or entered into the ATS.\677\
---------------------------------------------------------------------------

    \676\ See UBS Letter at 5 (noting that market participants may
maintain a commercial relationship with the broker-dealer operator
for purposes other than accessing the broker-dealer operator's ATS,
such as to use the broker-dealer's high touch block trading desk or
to use the broker-dealer's trading algorithms); Morgan Stanley
Letter at 1-2 (explaining that full service broker-dealers may
provide clients with a broad, integrated electronic offering of
trading services, which might include ATS services).
    \677\ We do not intend for Form ATS-N to require disclosures
about aspects of a market participant's other commercial
relationships with a broker-dealer operator that do not pertain to
the NMS Stock ATS. We believe that the adopted Form ATS-N disclosure
requests are tailored so that operations of the broker-dealer
operator not housed within the NMS Stock ATS--and that do not
otherwise pertain to the functions of the ATS--would not be subject
to disclosure on Form ATS-N.
---------------------------------------------------------------------------

    Second, as noted above, a commenter believes that Regulation ATS
does not adequately define the term ``subscriber'' in the case of an
ATS that is part of a larger broker-dealer operation, which the
commenter believes could lead to inconsistencies in the application of
the requirements applicable to subscribers across ATSs.\678\ While we
believe that the term ``subscriber'' sufficiently captures the vast
majority of market participants whose orders or trading interest are
submitted to and executed in an NMS Stock ATS, we also acknowledge that
business units of multi-service broker-dealer operators, in many cases,
participate in the ATS of that broker-dealer operator and submit
principal orders to the ATS. Despite participating in the ATS, these
business units might not always meet the definition of ``subscriber''
because an ATS may not have a contractual agreement with a business
unit that is part of the same entity.
---------------------------------------------------------------------------

    \678\ See Morgan Stanley Letter at 4.
---------------------------------------------------------------------------

    Adopted Form ATS-N uses the term ``subscriber'' throughout, and, in
certain Items, specifically states the type of ATS-related activities
of, or information about, the broker-dealer operator that must be
disclosed. For example, Part III, Item 5(b) of adopted Form ATS-N
requires the NMS Stock ATS to state whether the terms and conditions to
directly enter orders and trading interest into the NMS Stock ATS are
the same for all subscribers and the broker-dealer operator. We believe
that drafting the Form ATS-N requests in this manner will help ensure
that the scope of information solicited encompasses all relevant users
of the ATS services (i.e., subscribers, and to the extent such users do
not meet the definition of ``subscriber,'' the business units of the
broker-dealer operator). We believe that adopted Form ATS-N is not
designed to solicit disparate disclosures among NMS Stock ATS due to
varying interpretations of the term ``subscriber'' by individual ATSs.

B. Cover Page and Part I of Form ATS-N: Identifying Information

1. Cover Page
    In response to concerns from commenters that the public may be led
to believe that the Commission is conducting a merit-based review of
Form ATS-N disclosures filed with the Commission, we are including on
the cover page of Form ATS-N a legend stating that the Commission has
not passed upon the merits or accuracy of the disclosures in the
filing.
    On the cover page of adopted Form ATS-N, the responding entity is
required to identify the type of filing \679\ by marking the
appropriate checkbox.\680\ We are also adopting, as proposed, a
requirement that NMS Stock ATSs file a notice of cessation of
operations on Form ATS-N and provide the date that the NMS Stock ATS
will cease to operate. We are also adopting a check box that allows a
Form ATS-N filer to withdraw a previously filed Form ATS-N filing.\681\
The Instructions to Form ATS-N state that an NMS Stock ATS may withdraw
an initial Form ATS-N or an amendment before the end of the applicable
Commission review period. Because its initial Form ATS-N supersedes and
replaces a Legacy NMS Stock ATS's Form ATS for purposes of the
exemption and the initial Form ATS-N can be amended, a Legacy NMS Stock
ATS may not withdraw its initial Form ATS-N at any time. Once the
Commission review period has expired or a Legacy NMS Stock ATS has
filed its initial Form ATS-N, the Legacy NMS Stock ATS cannot withdraw
the filing and must file a notice of cessation pursuant to Rule
304(a)(3) if it intends to cease to operate or file an amendment to its
Form ATS-N, as appropriate. In addition, an NMS Stock ATS may withdraw
a notice of cessation of operations at any time before the date that
the NMS Stock ATS had indicated it intended to cease operating.
---------------------------------------------------------------------------

    \679\ Proposed Form ATS-N would have required NMS Stock ATSs to
check the ``Submission Type.'' Adopted Form ATS-N requires NMS Stock
ATSs to check the ``Type of Filing.'' This is a non-substantive
change.
    \680\ Adopted Form ATS-N's cover page provides that a filing may
be an initial Form ATS-N, or a Form ATS-N material amendment,
updating amendment, correcting amendment, or order display and fair
access amendment. Proposed Form ATS-N included a check box above the
``Submission Type'' menu, where an NMS Stock ATS could indicate if
the filing was an ``Initial Form Filing.'' In addition, in the
proposed Form ATS-N ``Submission Type'' menu, an NMS Stock ATS could
check whether its submission was a ``Form ATS-N.'' Adopted Form ATS-
N does not include a check box to indicate whether the filing is an
``Initial Form Filing,'' and revises the proposed check box under
the ``Type of Filing'' menu to state ``Initial Form ATS-N''
(emphasis added).
    \681\ Proposed Form ATS-N included a check box, above the
``Submission Type'' menu, where an NMS Stock ATS could indicate that
a filing was a ``Withdrawal of Initial Form Filing.'' Adopted Form
ATS-N relocates this check box to the ``Type of Filing'' menu and
revises it to say ``Withdrawal of Form ATS-N filing'' so that such
check box can accommodate withdrawals of different types of filings,
and not just a withdrawal of an initial Form ATS-N. Adopted Form
ATS-N provides a space for the EDGAR accession number for the Form
ATS-N filing to be withdrawn, which will enable market participants
to identify the prior filing that is being withdrawn.
---------------------------------------------------------------------------

    In the cover page of proposed Form ATS-N, the Commission sought a
brief narrative description for Form ATS-N amendments so market
participants could quickly understand the nature of the amendment.\682\
We are modifying this requirement to be more specific as to what
information is required in this narrative. Adopted Form ATS-N requires
the NMS Stock ATS to indicate

the part and item number of the Form ATS-N that is the subject of the
change, provide a brief summary of the changes, and state whether or
not the changes apply to all subscribers and the broker-dealer
operator.\683\ In addition, the NMS Stock ATS is required to provide
the EDGAR accession number for the Form ATS-N filing to be amended,
which will allow market participants to identify the filing that is
being amended.
---------------------------------------------------------------------------

    \682\ An NMS Stock ATS is required to attach a document marked
to indicate changes for a Form ATS-N amendment to Form ATS-N Part,
I, Part II, and Part III, as applicable, and to highlight changes to
``yes'' or ``no'' answers or additions or deletions from its prior
Form ATS-N filing. We believe that marked documents will help market
participants and the Commission review Form ATS-N amendments in an
efficient manner. We have changed the marked document requirement
that was proposed. In the proposal the marked document was referred
to a redline. We proposed for an NMS Stock ATS to submit two
redlines--Exhibit 3A to show changes to Part III of proposed Form
ATS-N and Exhibit 4A to show changes to Part IV of proposed Form
ATS-N. We are adopting a requirement that ATSs provide a single
exhibit, Exhibit 3, that contains a marked document to indicate
changes to Parts I, II, and III. We believe that only requiring a
single document may reduce the filing burden on ATSs. We believe
that the marked documents will be helpful for market participants to
review changes to Part I. In addition, to reflect the use of ``yes''
or ``no'' questions in adopted Form ATS-N, we are specifying that
the marked document would be required to indicate changes in ``yes''
or ``no'' answers.
    \683\ Accordingly, the adopted Instructions have been enhanced
from the proposed Instructions so that they provide more guidance to
an NMS Stock ATS drafting the narrative. The proposed Instructions
would have asked an NMS Stock ATS to ``[p]rovide a brief narrative
description of the Amendment.'' See Proposal, supra note 2, at
81138.
---------------------------------------------------------------------------

    Furthermore, in response to comments, we are adopting Rule
304(b)(2)(iii), which provides that it will make public the cover page
of a filed Form ATS-N material amendment upon filing and then make
public the entirety of the material amendment following the expiration
of the review period pursuant to Rule 304(a)(2)(ii).\684\ In connection
with this change, we are adopting Instructions that we believe will
better solicit information that will notify market participants of the
general subject matter of a Form ATS-N amendment, as well as the
subscribers that would be affected by the amendment. For updating and
correcting amendments, which will be made public upon filing, we
believe that the information in the narrative can assist market
participants in understanding the general nature of the change that the
NMS Stock ATS is implementing.
---------------------------------------------------------------------------

    \684\ See supra Section IV.E.2.c.
---------------------------------------------------------------------------

    In addition, we are making a technical change to relocate the check
box indicating whether an initial Form ATS-N is being filed by a Legacy
NMS Stock ATS operating pursuant to a Form ATS.\685\
---------------------------------------------------------------------------

    \685\ Proposed Form ATS-N set forth this check box in Part I,
Item 4, whereas adopted Form ATS-N sets forth this check box on the
cover page.
---------------------------------------------------------------------------

2. Part I of Form ATS-N: Identifying Information
a. Part I: Identifying Information
    Part I of adopted Form ATS-N combines the requests set forth in
Parts I and II of proposed Form ATS-N, which covered, among other
things, the name of the NMS Stock ATS and the NMS Stock ATS's broker-
dealer operator's registration and contact information.\686\ We are
adding to Part I, Item 1 of adopted Form ATS-N, a new requirement,
which was not proposed, that the filer check a box indicating whether
the filer is a registered broker-dealer with the Commission to readily
notify the Commission whether the filer is eligible to operate as an
NMS Stock ATS pursuant to Regulation ATS.
---------------------------------------------------------------------------

    \686\ The subsequent sections of adopted Form ATS-N have been
renumbered accordingly. The disclosures regarding the ATS-related
activities of the broker-dealer operator and its affiliates on the
NMS Stock ATS are contained in Part II, the manner of operations
disclosures are contained in Part III, and the contact information,
signature block, and consent to service are contained in Part IV of
adopted Form ATS-N.
---------------------------------------------------------------------------

    To assist the Commission in more easily assessing whether the NMS
Stock ATS has registered as a broker-dealer pursuant to Rule 301(b)(1)
of Regulation ATS, we are adopting the proposed requirement that the
NMS Stock ATS provide the name of the registered broker-dealer for the
NMS Stock ATS (i.e., the broker-dealer operator), as it is stated on
Form BD, in Part I, Item 2 of adopted Form ATS-N. To the extent that a
commercial or ``DBA'' (doing business as) name or names \687\ are used
to identify the NMS Stock ATS to the public, the Commission, or its
SRO, or if a registered broker-dealer operates multiple NMS Stock ATSs,
adopted Form ATS-N would require the full name(s) of the NMS Stock ATS
under which business is conducted, if different,\688\ in Part I, Item 3
of adopted Form ATS-N. We are also adopting Part II, Items 2 and 3 of
proposed Form ATS-N as Part I, Item 4 \689\ of adopted Form ATS-N to
require the NMS Stock ATS to provide the broker-dealer operator's SEC
File Number and Central Registration Depository (``CRD'') Number.
---------------------------------------------------------------------------

    \687\ In some instances, an NMS Stock ATS may have several
commercial or doing-business-as names, such as a name the ATS uses
in its filings to the Commission, or to FINRA pursuant to FINRA Rule
6110. Adopted Form ATS-N requires the ATS to list all names under
which it conducts business in Part I, Item 2.
    \688\ Part I, Item 2 of proposed Form ATS-N would have required
an NMS Stock ATS to disclose the full name of the NMS Stock ATS
under which its business is conducted, ``if any.'' Part I, Item 3 of
adopted Form ATS-N only requires this disclosure ``if different.''
    \689\ The requirements of Part II, Items 2 and 3 of proposed
Form ATS-N are consolidated into Part I, Item 4 of adopted Form ATS-
N, and divided into two subparts.
---------------------------------------------------------------------------

    We are not, however, including in adopted Part I the proposed
requests that the NMS Stock ATS provide the effective date of its
broker-dealer operator's registration with the Commission, the broker-
dealer operator's legal status (e.g., sole proprietorship,
corporation), information about its date and place of formation if the
broker-dealer operator is other than a sole proprietor, and the mailing
address of the NMS Stock ATS (if not the same as the physical address).
This identifying information is disclosed on Form BD or otherwise made
available to the public and the Commission.\690\ We do not believe that
it is necessary to require the NMS Stock ATS to provide this
information on Form ATS-N because other information requests about the
registration status of the broker-dealer operator will inform the
Commission about whether the NMS Stock ATS has met the condition of
Rule 301(b)(1) of Regulation ATS.
---------------------------------------------------------------------------

    \690\ The mailing address for registered broker-dealers is
available to the Commission via EDGAR. The mailing address, type of
entity, and date when established for each broker-dealer is
available to the public through FINRA.
---------------------------------------------------------------------------

    We are adopting Part II, Item 4 of proposed Form ATS-N as Part I,
Item 5 of adopted Form ATS-N to require the NMS Stock ATS to provide
the full name of the national securities association of the broker-
dealer operator and the effective date of the broker-dealer operator's
membership with the national securities association. We are adding to
Part I, Item 4 of adopted Form ATS-N the proposed requirement for an
NMS Stock ATS to provide its Market Participant Identifier
(``MPID'').\691\ Providing the name of the NMS Stock ATS or DBAs and
its MPID would identify the ATS to the public and Commission. One
commenter states that the name, identity of the broker-dealer operator,
any ``doing business as'' name, and the ATS's MPID are basic
information critical to market participants and should be
disclosed.\692\
---------------------------------------------------------------------------

    \691\ This requirement was previously a stand-alone request and
has been moved to Part I, Item 5 of adopted Form ATS-N, which asks
the NMS Stock ATS to disclose its national securities association,
which would issue the MPID to the ATS. An MPID, or other mechanism
or mnemonic, is used to identify a market participant for the
purposes of electronically accessing a national securities exchange
or an ATS. See, e.g., Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15, 2010). ATSs are
required to use a unique MPID when reporting trade information to
FINRA. See FINRA ATS Reporting Approval, supra note 15.
    \692\ See HMA Letter at 10.
---------------------------------------------------------------------------

    Also, as was proposed, adopted Form ATS-N requires the NMS Stock
ATS to provide a URL address for the website of the ATS, and in the
signature block in Part IV of adopted Form ATS-N, the representative of
the broker-dealer operator will also be required to provide his or her
business contact information, including the person's name and title,
telephone number, email address, and primary street address and mailing
address (if different) of the NMS Stock ATS.\693\ This information will
facilitate

communication with the broker-dealer operator during the Commission
review period of a Form ATS-N and later as necessary as part of the
Commission's ongoing monitoring of the NMS Stock ATS.
---------------------------------------------------------------------------

    \693\ Contact information of the broker-dealer operator's
representative in Part IV of Form ATS-N will not be made public. In
addition, consistent with the requirements of proposed Form ATS-N,
the signature block in Part IV of adopted Form ATS-N requires the
NMS Stock ATS to consent that service of any civil action brought
by, or notice of any proceeding before, the Commission or a SRO in
connection with the ATS's activities may be given by registered or
certified mail to the contact employee at the primary street address
or mailing address, if different, of the NMS Stock ATS, or via
email, at the addresses provided on this Form ATS-N.
---------------------------------------------------------------------------

    We are modifying the proposed request for the physical street
address of the NMS Stock ATS to also require the ATS to provide the
physical street address, if any, of a secondary location for the ATS
that may be used in the event that the primary physical location is not
available. The location of an NMS Stock ATS, including its matching
system, may differ from the main physical or mailing address of the
broker-dealer operator. We believe that it is important for both the
Commission and market participants to know where the NMS Stock ATS is
located in the event of, for instance, a natural disaster that could
impact market participants' ability to trade on the ATS and potential
latency that could be experienced due to the location of the secondary
site of the NMS Stock ATS. Also, we are concerned that market
participants could be harmed from systems problems that necessitate a
suspension or halt to trading at an NMS Stock ATS. Thus, we believe it
is important to fully understand what, if any, trading procedures an
NMS Stock ATS would follow if trading is suspended or stopped, which
would be disclosed under Part III, Item 20 of adopted Form ATS-N. We
believe that knowing any secondary location(s) for the NMS Stock ATS
would be relevant to both the Commission's and market participants'
understanding of how the ATS handles certain contingencies.
    The main physical address and mailing address of the broker-dealer
operator are provided on Form BD, so we do not believe it is necessary
to publicly disclose this information on Form ATS-N.\694\ Part II, Item
6 of proposed Form ATS-N provided that the NMS Stock ATS could indicate
by check box that the broker-dealer operator is a sole proprietor and
that the physical street address is a private residence, and that in
such case, the private residential address would not be included in the
publicly available version of the form.\695\ One commenter asserts that
Form ATS-N should require disclosure of all relevant addresses, and
states its view that we should eliminate the proposed exception for NMS
Stock ATSs out of a personal residence.\696\ In light of this comment,
we are not including in adopted Form ATS-N the proposed check box
noting that the physical address of the matching system is at a sole
proprietor's private residence. We agree that market participants
should be aware of the physical addresses of the matching systems for
all NMS Stock ATSs, regardless of whether they are at a sole
proprietor's private residence. In addition, based on Commission
experience, NMS Stock ATSs generally do not operate out of a sole
proprietor's residence, and the Commission does not believe that the
exception is necessary. We will therefore make the physical address of
the matching system available for every Form ATS-N.\697\
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    \694\ Part IV of adopted Form ATS-N, which will not be made
public, requires the primary street address and mailing address of
the NMS Stock ATS in order to facilitate the Commission contacting
the NMS Stock ATS. See supra note 693.
    \695\ See Part II, Item 6 of proposed Form ATS-N.
    \696\ See HMA Letter at 11.
    \697\ Part I, Item 7 of adopted Form ATS-N.
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    Also, as was proposed, the Part I, Items 8 and 9 require an NMS
Stock ATS to attach its most recently filed or amended Schedule A of
the broker-dealer operator's Form BD disclosing information related to
direct owners and executive officers, and its most recently filed or
amended Schedule B of the broker-dealer operator's Form BD disclosing
information related to indirect owners as Exhibits 1 and 2,
respectively. In lieu of attaching those schedules, the NMS Stock ATS
can indicate, via a checkbox, that the information under those
schedules is available on its website and is accurate as of the date of
the filing of the Form ATS-N. We continue to believe that these
exhibits will help market participants identify the persons and
entities that directly and indirectly own the broker-dealer operator
and any potential associated conflicts of interest. We are requiring
the NMS Stock ATS to provide this information on Form ATS-N, even
though the same information is provided on Form BD, because information
about ownership of the broker-dealer operator will enable market
participants to better understand conflicts of interest that may arise
therefrom, which is one of the central purposes of the form. As such,
an NMS Stock ATS must file this information on Form ATS-N. We also
continue to believe that it is appropriate for an NMS Stock ATS to
provide this information using a URL address for these documents in
lieu of attaching the actual documents to their Form ATS-N filings
because the ATS's disclosures on Form ATS-N will provide the public
with the required information. Part I, Item 10 of adopted Form ATS-N
requires the NMS Stock ATS, for filings made pursuant to Rule
304(a)(2)(i) (i.e., Form ATS-N amendments), to attach as Exhibit 3 a
marked document to indicate changes to ``yes'' or ``no'' answers or
additions or deletions from any item in Part I, Part II, Part III, as
applicable.
b. Comments on Proposed Exhibit 1
    We proposed to require that NMS Stock ATSs provide, in Exhibit 1 to
Form ATS-N, a copy of any materials currently provided to subscribers
or other person related to the operations of the NMS Stock ATS or the
disclosures on Form ATS-N (e.g., FIX protocol procedures, rules of
engagement/manuals, frequently asked questions, marketing materials).
We received several comments regarding Exhibit 1.\698\ We are not
adopting the proposed Exhibit 1 requirements to Form ATS-N.
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    \698\ See SIFMA Letter at 7; Liquidnet Letter at 8; KCG Letter
at 6; HMA Letter at 11; STANY Letter at 3; UBS Letter at 3; Level
ATS Letter at 5.
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    Commenters express concerns that the requirements of Exhibit 1 are
broad,\699\ not relevant for purposes of facilitating ATS comparisons
by market participants,\700\ and would require unnecessarily cumbersome
amount of disclosure.\701\ Three commenters express concern about the
requirement to make subscriber materials attached to Form ATS-N as
exhibits public on the grounds that such documents may include
confidential information.\702\ Commenters propose that as an
alternatives to the Exhibit 1 requirements, the Commission could make
exhibits public only when they are responsive to certain categories of
documents made available to users (such as FIX protocol procedures,
rules of engagement, user manuals, frequently asked questions, and
marketing materials) or are required to accurately respond to the
questions on Form ATS-N,\703\ or not make public certain

information (such as electronic trading protocols or other customer
agreements) and provide other ``proprietary'' information only to
regulators upon request.\704\ Another commenter suggests that rather
than requiring formal amendments to Form ATS-N every time an ATS wishes
to change or enhance marketing materials and similar disclosures, the
Commission should allow an NMS Stock ATS to post the most recent
versions of its marketing materials on its website.\705\
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    \699\ See SIFMA Letter at 7; Liquidnet Letter at 8; KCG Letter
at 6.
    \700\ See KCG Letter at 6.
    \701\ See SIFMA Letter at 7.
    \702\ See Liquidnet Letter at 8; KCG Letter at 6; Level ATS
Letter at 5. One of these commenters also expresses concern that the
proposed requirement would require disclosure of subscriber
agreements, which are individually negotiated and confidential. See
Level ATS Letter at 5-6. Another one of these commenters is
concerned that NMS Stock ATS operators would limit the amount of
information shared with subscribers in order to avoid sharing that
information with the public and its competitors. See Liquidnet
Letter at 8.
    \703\ See Liquidnet Letter at 8.
    \704\ See SIFMA Letter at 7-8.
    \705\ See UBS Letter at 3.
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    We are not adopting the proposed requirement that NMS Stock ATSs
provide a copy of any materials currently provided to subscribers or
other persons related to the operations of the NMS Stock ATS or the
disclosures on Form ATS-N. We recognize that some of such materials
could contain proprietary or other information that NMS Stock ATSs
would not wish to make public due to confidentiality or competitive
concerns. With respect to the comments in support of requiring
subscriber materials to be made public,\706\ or in support of a limited
version of the Exhibit 1 requirements,\707\ we believe that Form ATS-N
is designed to elicit meaningful disclosures about how the NMS Stock
ATS operates and the ATS-related activities of the broker-dealer
operator and its affiliate. We believe that the vast amount of
information that would have been contained in the Exhibit 1 materials
will be disclosed in response to the request in Form ATS-N and that no
longer requiring NMS Stock ATSs to produce these materials will reduce
their burden and the potential disclosure of redundant information to
the public.
---------------------------------------------------------------------------

    \706\ See HMA Letter at 12 (supporting the adoption of a revised
Exhibit 1 because it would enhance consistency of information to
subscribers and the public and would be valuable to those seeking to
evaluate NMS Stock ATSs). See infra note 709.
    \707\ See KCG Letter at 5-6 (supporting a requirement that
information be made available to all market participants, and not
selectively disclosed, but asserting that as drafted, Exhibit 1 is
overly broad).
---------------------------------------------------------------------------

    One commenter states that while it does not support a requirement
for public filing of exhibits, it supports requiring these exhibits to
be filed with the Commission.\708\ We are not adopting this suggestion.
As discussed above, the purpose of this rulemaking is to expand the
public transparency of NMS Stock ATSs; providing the proposed Exhibit 1
information to only the Commission would not serve this purpose.
---------------------------------------------------------------------------

    \708\ See Liquidnet Letter at 9.
---------------------------------------------------------------------------

    Another commenter states that to the extent that ATSs would
disclose statistics or data that had been requested by firms to help
with their cost and best execution analysis, such an approach would be
less helpful than a greatly enhanced, comprehensive disclosure for this
information.\709\ The commenter states that this information is
essential. However, this commenter expresses concern that as a
consequence of the Exhibit 1 requirements, NMS Stock ATSs may cease to
provide subscribers with information and statistics to avoid having to
make such information public. This commenter suggests that Exhibit 1 be
revised to include all marketing materials, manuals, and fee
information, but not customized statistics and information, provided
that such statistics and information are otherwise publicly disclosed.
We are not expanding market statistics that NMS Stock ATSs are
currently required to disclose as part of this rulemaking.
---------------------------------------------------------------------------

    \709\ See HMA Letter at 12.
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c. ATS Governance Structure and Compliance Programs and Controls
    In the Proposal, we asked if NMS Stock ATSs should be required to
provide disclosure about their governance structure and compliance
programs and controls to comply with Regulation ATS.\710\ In response,
we received one comment, which states that governance structures are
likely to vary materially among ATSs, and that the Commission's goals
in this area would best be served through the Commission's Office of
Compliance Inspections and Examination's regular examination
efforts.\711\ We did not receive comments supporting a request for such
information. We believe that it is appropriate to take an incremental
approach to this topic and intends to monitor the effectiveness of the
disclosures on adopted Form ATS-N. Should the Commission decide to take
further action with regard to Form ATS-N's disclosure requirements,
including adding requests about NMS Stock ATS governance structure and
compliance programs and controls, the Commission would do so in a
separate rulemaking in the future.
---------------------------------------------------------------------------

    \710\ See Proposal, supra note 2, at 81041.
    \711\ See UBS Letter at 4.
---------------------------------------------------------------------------

C. Part II of Form ATS-N: ATS-Related Activities of the Broker-Dealer
Operator and Affiliates

    We believe that the interests of the broker-dealer operator or its
affiliates sometimes compete against the interest of those that use the
ATS's services. These competing interests, at times, may give rise to
conflicts of interests for the broker-dealer operator and its
affiliates or the potential for information leakage of subscribers'
confidential trading information. As such, Part II of Form ATS-N is
designed to provide subscribers and market participants with
information about these competing interests, and in doing so, inform
them about: (1) The operation of the NMS Stock ATS--regardless of the
corporate structure of the NMS Stock ATS--and of its broker-dealer
operator, or any arrangements the broker-dealer operator may have made,
whether contractual or otherwise, pertaining to the operation of its
NMS Stock ATS; and (2) ATS-related activities of the broker-dealer
operator and its affiliates that may give rise to conflicts of interest
for the broker-dealer operator and its affiliates or the potential for
information leakage of subscribers' confidential trading information.
    Commenters generally support disclosing information about potential
conflicts of interest and information leakage, and we did not receive
any comments opposing the principle that information related to
conflicts of interest or information leakage on an NMS Stock ATS should
be publicly disclosed.\712\ Several commenters, however, state general
concerns that the scope of the requests in Part III of proposed Form
ATS-N is too broad.\713\ A number of commenters believe that the
requests regarding affiliates should be limited to descriptions of how
the broker-dealer operator and its affiliates or business units
directly interact with or affect the operations of the NMS Stock
ATS.\714\ For example, one commenter argues that proposed Form ATS-N
would have required disclosures that are not meaningful to market
participants and could possibly inhibit useful comparison of NMS Stock
ATSs.\715\
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    \712\ As discussed further below, several commenters suggest how
to refine the specific requests proposed for Part III of Form ATS-N.
    \713\ See, e.g., STA Letter at 4; KCG Letter at 8-9; SIFMA
Letter at 4-8; Luminex Letter at 2-3; Fidelity Letter at 5; STANY
Letter at 5; UBS Letter at 6; Morgan Stanley Letter at 5.
    \714\ See Fidelity Letter at 2 and 4; UBS Letter at 2-4; SIFMA
Letter at 4, 8; Luminex Letter at 3; Markit Letter at 7-8.
    \715\ See Morgan Stanley Letter at 5.
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    Furthermore, a commenter argues that the proposed conflicts of
interest requests regarding affiliates of the broker-dealer operator
would have placed a significant burden on multi-service broker-dealers
with a large number of affiliates, sometimes numbering in the
hundreds.\716\ Similarly, another commenter states that an NMS Stock
ATS's broker-dealer operator may not be privy to certain

information about its affiliates for valid compliance reasons.\717\
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    \716\ See UBS Letter at 2-5.
    \717\ See Fidelity Letter at 4.
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    As outlined below in more detail--and in response to both these
general commenter concerns and commenter concerns that are more
specific to particular disclosure requests, which are explained below--
we are modifying the conflicts of interest requests to focus on: (1)
The ability of business units or affiliates of the broker-dealer
operator to enter, or direct the entry of, orders into the NMS Stock
ATS and whether such business units or affiliates actually trade on the
NMS Stock ATS; and (2) whether those business units and affiliates that
do trade on the NMS Stock ATS receive any preferential treatment with
respect to the services offered by the NMS Stock ATS.
    We continue to believe that disclosures regarding the ATS-related
activities of the broker-dealer operator and its affiliates will help
enable market participants to assess potential conflicts of interest
that may impact their trading on the ATS and assess the potential for
information leakage. At the same time, we also believe that Form ATS-N
should not require public disclosure of activities or affiliate
relationships of the broker-dealer operator that do not relate to the
NMS Stock ATS and thus, do not present a potential conflict of
interest. We believe that the revisions to the proposed disclosure
requests are responsive to commenters' concerns about the scope of the
form's affiliate disclosures.
    Furthermore, the burden of responding to the affiliate requests has
been reduced from that which was proposed. First, the adopted affiliate
disclosure requests focus on substantive information about how
affiliated entities interact with the ATS and differences in how the
ATS treats affiliates' orders. As such, frequent updates to Part II for
ministerial or minor administrative changes by the ATS would not
normally be necessary.\718\ To the extent a ministerial or
administrative change affects a disclosure on Form ATS-N in a non-
material way, the NMS Stock ATS would, in most instances, only be
required to file a quarterly updating amendment. Additionally, an NMS
Stock ATS likely already has the necessary information about the
services that it offers affiliates that trade on the ATS because of its
current recordkeeping requirements,\719\ and we believe that
maintaining up-to-date Part II disclosures is justified by the benefit
to market participants from public disclosure of conflicts of interest
information.
---------------------------------------------------------------------------

    \718\ Updating amendments for non-material changes may be
required, as appropriate.
    \719\ See 17 CFR 242.302.
---------------------------------------------------------------------------

    Another commenter expresses concern that the proposed conflicts of
interest requests would seek public disclosure of proprietary or
confidential information that would pose unintended consequences or
security risks to ATS operators.\720\ We are sensitive to concerns
about the burden of providing disclosures of potentially commercially
sensitive information. In response to these commenter concerns, we have
revised the wording of relevant requests to mitigate such concerns or
provided guidance regarding the scope of certain disclosure requests,
as further explained below.\721\ We believe that in the vast majority
of cases, the level of detail required by Form ATS-N should not require
the public disclosure of commercially sensitive information. In the
Proposal, we did not intend to require NMS Stock ATSs to publicly
disclose such information.
---------------------------------------------------------------------------

    \720\ See SIFMA Letter at 6, 9.
    \721\ For example, in the request under Part II, Item 5 of
adopted Form ATS-N, an NMS Stock ATS is only required to provide a
summary of the terms and conditions for the use of products or
services offered by the ATS.
---------------------------------------------------------------------------

    We also note that the disclosure requests on Form ATS-N seek
information that the Commission and some commenters believe to be
important to market participants when evaluating an NMS Stock ATS as a
potential trading venue. We believe that the disclosures on adopted
Form ATS-N will provide market participants with information necessary
to evaluate potential conflicts of interest and information leakage
while not requiring NMS Stock ATSs to provide granular details about
aspects of the ATS that it might consider to be commercially sensitive.
Accordingly, to the extent an NMS Stock ATS believes that Form ATS-N
requires the disclosure of what it believes to be commercially
sensitive information, we believe that such disclosure is justified by
the public benefit of the information required on Form ATS-N becoming
publicly available.
    On the other hand, one commenter expresses a specific concern that
narrowing the universe of affiliates subject to disclosure could result
in less relevant information being provided to the Commission and the
public, as NMS Stock ATSs could structure their legal affiliations and
operations to take advantage of unanticipated gaps in the rule.\722\
This commenter states that the Commission should draw exemptions for
certain affiliate relationships very narrowly and provide ``bright
lines'' to help ensure that the requirements are clear and unambiguous,
so that ATSs would not be permitted to determine whether to disclose an
affiliate. This commenter also states that it recognizes that
information on certain affiliates required by Form ATS-N may have
little relevance to the Commission's review of the broker-dealer
operator's Form ATS-N.\723\ This commenter believes that rather than
modifying the Proposal, this issue could be addressed by an NMS Stock
ATS seeking relief tailored to its unique facts and circumstances
pursuant to Section 36(a)(1) of the Exchange Act,\724\ which permits
the Commission to grant exemptions from any provision of a rule, to the
extent such exemption is necessary or appropriate in the public
interest and consistent with the protection of investors.\725\
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    \722\ See Investor Advocate Letter at 8.
    \723\ See id. at 9.
    \724\ See 15 U.S.C. 78mm(a)(1).
    \725\ See Investor Advocate Letter at 9.
---------------------------------------------------------------------------

    We agree with this commenter that Form ATS-N requests regarding the
ATS-related activities of the broker-dealer operator and its affiliates
should provide clear and unambiguous requirements for NMS Stock ATSs.
We also agree that Form ATS-N should be comprehensive enough to
preclude an NMS Stock ATS from finding ``unanticipated gaps'' in the
language to avoid disclosing critical aspects of its operations. We
believe that the refinements to adopted Form ATS-N, as outlined above
and further explained below, strike the appropriate balance between
providing market participants with relevant information about potential
conflicts of interest information and information leakage and the
burden that Form ATS-N will place on NMS Stock ATSs. We do not believe
that it is necessary to adopt all of the conflicts of interest requests
as proposed and require NMS Stock ATSs to seek exemptive relief from
certain disclosure requirements. Furthermore, the adopted definitions
of ``affiliate'' and ``control'' are intended to encompass all relevant
affiliate relationships between the broker-dealer operator and other
entities that we believe would help market participants' evaluation of
potential conflicts of interest.
1. Broker-Dealer Operator and its Affiliate Trading Activities on the
NMS Stock ATS
a. Proposed Requests and Response to Comments
    Part III, Item 1 of proposed Form ATS-N would have required
disclosures

regarding non-ATS trading centers operated or controlled by the NMS
Stock ATS's broker-dealer operator or any of its affiliates. Part III,
Item 2 of proposed Form ATS-N would have required disclosures about the