centralizing time-stamped trade records in this way allows DTC and
settlement agents to more efficiently and effectively settle trades
that have failed to settle on the scheduled date while allowing market
participants to reconstruct trades or unwind positions as appropriate.
DTCC notes that the time-stamped audit trail has allowed DTC and its
affiliates to reconstruct trades after September 11, 2001, the
bankruptcy of Lehman Brothers in 2008, and the ``flash crash'' in 2010,
among other significant market events. DTCC also states that this
centralized record allows DTC, market participants, and regulators to
piece together events that cause market stress and has provided
enormous benefit to regulators in examining trading history among
investment managers and broker dealers.\158\ DTCC states that, under a
multiple access model, these efforts would be severely hampered,
perhaps even lost.\159\ It states that, because DTCC's audit records
are centralized, the industry can evaluate affirmation and settlement
rates industry-wide because only a single entity has the records of all
institutional trades from execution through settlement. Bifurcating
this process, according to DTCC, would make it more difficult to
monitor improvements and spot trends in affirmation and settlement
rates, including, in particular, spotting the points in transactions
where failure is most likely to occur.\160\
---------------------------------------------------------------------------

    \156\ See id. at 15.
    \157\ See id.
    \158\ See DTCC April letter at 7.
    \159\ See id. at 8.
    \160\ See id.
---------------------------------------------------------------------------

    BSTP acknowledges that, ideally, there should be one issuer of
control numbers and that, because it is essential to the safe and sound
settlement of securities transactions, it is the responsibility of DTC
to provide control numbers as a registered clearing agency.\161\ BSTP
states that the creation of control numbers, the transmission of
control numbers to the parties involved in settlement, and the
transmission of settlement instructions to DTC are critical components
of post-trade processing and, as such, are elements of the national
clearance and settlement system that must be provided on a fair

and non-discriminatory basis by DTC.\162\
---------------------------------------------------------------------------

    \161\ See BSTP May letter at 14.
    \162\ See BSTP August letter at 5 (citing statements regarding
the issuance of control numbers made in the Cornerstone Report at
21).
---------------------------------------------------------------------------

    BSTP explains that, contrary to DTCC's claim that a specific time
for obtaining a control number should be incorporated into BSTP's
application, incorporating a control number in the matching process is
well understood. BSTP cites the Matching Release in explaining that the
control number is obtained from DTC during the process of confirming
the terms of a trade with the broker-dealer involved in the trade.\163\
As mentioned above in Part III.B.2.iii, BSTP notes that DTC could
ensure that control numbers generated by BSTP are distinguishable from
those generated by Omgeo.\164\ BSTP also notes that a control number is
required to be obtained by qualified vendors of ETC services, and notes
that FINRA Rule 11860 does not require the use of the Omgeo-centric
existing infrastructure by qualified vendors.\165\
---------------------------------------------------------------------------

    \163\ See id. at 14 n.42 (citing 63 FR at 17944-45).
    \164\ See id. at 14 n.41.
    \165\ See id. at 14 n.40. BSTP also clarifies that it will be
authorized under FINRA Rule 11860 to be utilized for the electronic
confirmation and affirmation of all depository-eligible transactions
if the Commission grants an exemption. See id. at 25-26. In the
Matching Release, the Commission stated that, in the process of
considering whether to grant an exemption, an entity would have to
meet the requirements to become a qualified vendor under the
relevant SRO rules because they are necessary elements in providing
a matching service. See Matching Release, supra note 13, at 17947
n.27.
---------------------------------------------------------------------------

    The Commission has previously addressed the concerns regarding
issuance and management of control numbers above in Part III.B.2.iii,
including DTCC's concerns regarding centralization of trade data. The
Commission does not view the prospect of a multiple access model as
being inconsistent with the ability to have a centralized source of
control numbers. Consequently, the Commission finds the systemic risk
concerns cited by DTCC on this matter to be unpersuasive.
    Lastly, the Cornerstone Report raises concerns that, because of the
potential increase in systemic risk resulting from the approval of
multiple matching service providers, market participants' ability to
comply with Regulation SCI may be impaired.\166\ The Commission views
this argument as speculative and unpersuasive. Neither DTCC nor the
Cornerstone Report identify how a market participant, or even which
market participant, might find it harder to comply with Regulation SCI
in the wake of the Commission approving new matching service providers.
Neither DTCC nor the Cornerstone Report estimate any costs that might
result from such changes either. Further, the Commission notes that
industry-wide testing required under Regulation SCI should not be
negatively impacted by whether the number of participants in any
particular market segment ebbs and flows from one year to the next. The
Commission believes the benefit of removing a single point of
dependency, as discussed above, is consistent with the public interest
and the protection of investors and supports the approval of new
matching service providers.
---------------------------------------------------------------------------

    \166\ See Cornerstone Report at 32-35, 36-37. The Commission
notes that this particular issue raised in the Cornerstone Report is
directed at whether BSTP and SS&C specifically can comply with
Regulation SCI. Concerns regarding general compliance by exempt
clearing agencies with Regulation SCI related are addressed in Part
III.B.8.
---------------------------------------------------------------------------

ii. Solvency of Applicants
    DTCC raises concerns about how the sudden insolvency of either BSTP
or SS&C might raise systemic risk concerns in the event that market
participants, who had come to rely on the availability of BSTP and SS&C
as matching service providers, were no longer able to use their
matching services.\167\ DTCC states that the benefits of the BSTP and
SS&C applications may ultimately be fleeting because BSTP and SS&C are
private companies that may become insolvent or choose to forego or
discontinue providing matching services after a short time if providing
such services does not prove to be profitable or otherwise
advisable.\168\ DTCC suggests that insolvency is more likely for BSTP
and SS&C because they are for-profit companies, and notes that the
potential insolvency of either of their parent or affiliate companies
could raise the same concerns. DTCC implies that, as an industry-owned
utility, Omgeo does not carry the same level of risk. DTCC states that
if either BSTP or SS&C ceased to provide matching services after the
industry had become reliant on it to perform such services, the
likelihood of failed trades could increase and the industry may need to
undergo an extensive reintegration period to onboard market
participants. Accordingly, DTCC believes that BSTP, SS&C, and their
parent and affiliate companies should each be required to provide
additional assurances regarding insolvency.
---------------------------------------------------------------------------

    \167\ See DTCC April letter at 17-18 (as to BSTP); DTCC May
letter at 15 (as to SS&C).
    \168\ See id. at 12 n.37.
---------------------------------------------------------------------------

    BSTP responds that it has devoted substantial resources to
developing its matching service, is committed to that matching service,
and is adequately capitalized. In addition, BSTP states that, as part
of obtaining an exemption from registration as a clearing agency, BSTP
has agreed to provide the Commission annual audited financial
statements, and states that no additional assurances regarding
financial strength should be necessary.\169\ Similarly, SS&C responds
that DTCC's concerns are speculative and unfounded. SS&C notes that it
is a public company and therefore publishes audited financial
statements which are also supplied to the Commission. SS&C states that
no further assurances regarding financial strength are necessary.\170\
---------------------------------------------------------------------------

    \169\ See BSTP May letter at 20.
    \170\ See SS&C letter at 4.
---------------------------------------------------------------------------

    With respect to the future potential insolvency of the applicants,
their parents, and their affiliates, the Commission believes such
speculation does not merit denial or modification of the applications
at this time. DTCC provides no rationale for why, as for-profit
entities, BSTP and SS&C, or their parent companies or affiliates, are
more likely to become insolvent than Omgeo or DTCC. Indeed, the
Commission notes that DTCC's own Cornerstone Report suggests that, in a
market with multiple matching service providers, Omgeo may find itself
no longer financially viable.\171\ Should the prospect of insolvency of
a matching service provider materialize, the Commission can consider
modifying or revoking an exemption from registration under certain
procedures, addressing the specific conditions as they arise.
---------------------------------------------------------------------------

    \171\ See Cornerstone Report at 22.
---------------------------------------------------------------------------

    Further, the Commission is mindful that, during an extended service
outage, the failure of a single matching service provider could cause
significant disruption to the financial markets. In this regard,
denying the BSTP and SS&C applications would preserve such risk and
leave it concentrated in a single entity because Omgeo is currently the
only matching service provider for the U.S. equity markets. The
Commission believes that approving the BSTP and SS&C applications could
help mitigate this risk.
iii. Resiliency of Applicants
    DTCC expressed concerns regarding whether BSTP and SS&C systems
would have the capacity to handle the significant amount of potential
order flow, particularly during the high volumes that can occur during
times of market stress or volatility, noting that Omgeo has developed
with its customers both direct proprietary links to existing systems as
well as web-based linkages and interfaces hosted by third party order
management systems and

vendors.\172\ DTCC states that the proprietary linkages can handle
tremendous trading volumes, as has been demonstrated repeatedly in the
past, including during the 2010 ``flash crash.'' \173\
---------------------------------------------------------------------------

    \172\ See DTCC May letter at 17; DTCC April letter at 22.
    \173\ See DTCC May letter at 17 & n.42.
---------------------------------------------------------------------------

    The Commission is satisfied that both the BSTP and SS&C
applications provide sufficient assurances regarding their proposed
risk management framework. First, as SS&C notes in its comment letter,
SS&C Canada and SSCNet have represented that they are staffed
adequately with qualified and experienced industry veterans that have
been in the post-trade services industry for decades and notes that it
has long advocated for responsible growth when it comes to staffing
numbers, facilities, and infrastructure. SS&C also represented that it
has consistently applied stress and capacity disciplines during its
history to ensure the soundness of its post-trade application.\174\
Similarly, BSTP represented that it has planned for adequate systems
capacity and conducts stress testing. It also represented that BSTP and
its affiliates have a comprehensive business continuity management
program to ensure a timely response to, and effective recovery from,
unanticipated business interruptions that may affect facilities,
technology, and/or people. BSTP represented that, to minimize business
interruption events, BSTP will undertake continuous monitoring and
identification of potential risks and take action designed to mitigate
the impact of these risks.\175\
---------------------------------------------------------------------------

    \174\ See SS&C letter at 5.
    \175\ See BSTP May letter at 22.
---------------------------------------------------------------------------

    The Commission discusses concerns specific to BSTP and SS&C's
operational risk management frameworks below in Part III.B.5. Concerns
raised by DTCC in response to the cross-border nature of the SS&C
application are addressed in Part III.B.5.i below as well.
iv. Volume Limits in the SS&C Application
    DTCC notes that the SS&C application represents that SS&C will only
match up to one percent of the U.S. aggregate daily volume of
securities trades and would seek an amendment 180 days prior to
exceeding that limit, which means that SS&C may have to refuse to
provide matching services to some trades in some instances, which may
create problems for market participants that are uncertain whether
their trades would be accepted for matching by SS&C.\176\ The
Commission is mindful of this concern, and requested an amendment,
which SS&C submitted on November 9, 2015 to remove the representation
regarding volume limits. The Commission agrees that volume limitations
may create uncertainty as to whether SS&C's matching service is able to
match trades, increasing the risk that a trade may fail in the event
that SS&C has unexpectedly exceeded the volume limits represented in
its application. Therefore, the Commission does not believe that volume
limitations are necessary for the SS&C application to be consistent
with the public interest, the protection of investors, and the purposes
of Section 17A of the Exchange Act.
---------------------------------------------------------------------------

    \176\ See DTCC May letter at 17 n.41.
---------------------------------------------------------------------------

5. Operational Risk
    Under Section 17A of the Exchange Act, applicants must demonstrate
that they are so organized and have the capacity to be able to
facilitate the prompt and accurate clearance and settlement of
securities transactions. Questions of capacity have previously been
addressed in Parts III.B.2.ii, in connection with facilitating access
to DTC, and III.B.4.iii, in connection with questions about the
applicants' resiliency. Nevertheless, several comments raised concerns
related to particular operational risks, and the Commission considers
such concerns below.
    With respect to operational risk management, DTCC notes that its
own regulated affiliates have each been subject to business continuity
standards higher than those set forth in Regulation SCI.\177\ DTCC
states that BSTP, SS&C, and their parent companies should be held to
the same standard. DTCC also states that the Commission should also
hold the parents and affiliates of BSTP and SS&C to the same standards
of internal controls, security, and business continuity as the
Commission holds other critical participants in the national clearance
and settlement system to the extent those parents and affiliates are
relied upon to perform matching services because that would best serve
the public interest and the protection of investors.\178\ In addition,
because BSTP seeks to license from BLP the operations and systems to
conduct its matching service, DTCC states that both BSTP and BLP should
be subject to the full panoply of legal and regulatory requirements
under Regulation SCI, and that BLP should be required to make available
its books and records, as well as its operating systems, to inspection
by the Commission upon request.\179\ Similarly, because SS&C seeks to
rely on SS&C Canada for the operations and systems to conduct central
matching, DTCC states that both SS&C and SS&C Canada should be subject
to the full panoply of legal and regulatory requirements under
Regulation SCI and ARP.\180\ DTCC notes that both BSTP and SS&C would
have relatively small staffs to oversee their matching services.\181\
---------------------------------------------------------------------------

    \177\ See infra note 246.
    \178\ See DTCC May letter at 3; DTCC April letter at 7, 21-22.
    \179\ See DTCC June letter at 4-5; DTCC April letter at 21-22 &
n.67.
    \180\ See DTCC September letter at 3; DTCC May letter at 17.
    \181\ See DTCC April letter at 21; DTCC May letter at 16-17.
---------------------------------------------------------------------------

    BSTP responds that it is staffed with an adequate number of
qualified and experienced personnel to operate BSTP. BSTP notes that
its staff includes industry veterans who know the marketplace and are
well suited to operate BSTP and ensure that BSTP complies with all
applicable regulatory standards, including stringent business
continuity, information security, and capacity testing plans and
procedures.\182\ With respect to Regulation SCI, BSTP notes that DTCC's
regulated affiliates (namely, DTC, NSCC, and FICC) are subject to high
standards because they are registered clearing agencies and have been
designated as systemically important under Title VIII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act. BSTP notes that Omgeo
is not a registered clearing agency and has not been designated
systemically important, and therefore the standards applicable to
DTCC's registered clearing agency subsidiaries do not apply to
Omgeo.\183\
---------------------------------------------------------------------------

    \182\ See BSTP May letter at 21.
    \183\ See id. at 25.
---------------------------------------------------------------------------

    SS&C responds that, if granted an exemption, all parts of the
SSCNet matching service would be subject to Regulation SCI. SS&C states
that there is no legal basis for Regulation SCI to apply to the broader
SS&C complex, however, because those affiliates and subsidiaries are
not within the scope of entities subject to Regulation SCI under the
conditions proposed in the SS&C notice. SS&C further states that SSCNet
will be subject to and intends to comply with all of the standards
specified by the Commission that are applicable to exempt clearing
agencies.\184\ SS&C also adds that DTCC's proposed single access model
would pose greater security and confidentiality risks than a multiple
access model because transactions involving non-Omgeo clients would
have to be routed through the existing

Omgeo infrastructure, thereby exposing confidential information to a
competitor (Omgeo) that otherwise is not a party to the
transaction.\185\
---------------------------------------------------------------------------

    \184\ See SS&C letter at 5.
    \185\ See SS&C letter at 4-5.
---------------------------------------------------------------------------

    The Commission addresses concerns specific to the cross-border
nature of SS&C's operations below. More generally, the Commission notes
that there has been a long history of parent and affiliate companies
providing facilities management and operational support for clearing
entities, and this has been accepted by the Commission in the past. For
example, in 1972 the New York Stock Exchange and Amex founded the
Securities Industry Automation Corporation (``SAIC'') to handle such
services for their clearinghouses.\186\ SAIC later became the
facilities manager for NSCC, which is now a clearing agency within the
DTCC complex. In this regard, BSTP's staffing arrangements and reliance
on affiliates are similar to Omgeo and the other registered clearing
agencies within the DTCC complex. The Commission also believes that
subjecting BSTP and SS&C to Regulation SCI pursuant to the conditions
in this order addresses the concern about business continuity standards
and is consistent with Regulation SCI's approach to exempt clearing
agencies subject to ARP. The Commission also believes that whether
Regulation SCI should apply to such affiliates and/or parent companies
is a function of the provisions and definitions in Regulation SCI
considered and adopted by the Commission.
---------------------------------------------------------------------------

    \186\ See Bradford Nat'l Clearing Corp. v. SEC, 590 F.2d 1085,
1097 (D.C. Cir. 1978).
---------------------------------------------------------------------------

    Further, as noted elsewhere in this order,\187\ the Commission
believes that BSTP and SS&C should be held to the same regulatory
requirements as Omgeo because each entity is providing the same type of
service. That the DTCC complex as a whole may be subject to heightened
standards for, in this case, resiliency and business continuity under
Section 17A of the Exchange Act and Regulation SCI stems from, among
other things, its role as holding company for three registered clearing
agencies that provide CCP and CSD services.\188\ As previously
mentioned and discussed further in Part III.B.8, BSTP and SS&C, like
Omgeo, are exempt clearing agencies subject to the Commission's ARP and
therefore SCI entities under Regulation SCI. The Commission believes
that the requirements under Regulation SCI are sufficient to help
ensure that BSTP and SS&C are held to high standards for internal
controls, redundancy, security, and business continuity.
---------------------------------------------------------------------------

    \187\ See, e.g., supra notes 110-112 and accompanying text.
    \188\ See, e.g., supra note 65-66 and accompanying text.
---------------------------------------------------------------------------

    DTCC states that BLP's historic treatment of intellectual property
raises concerns regarding BSTP's safeguards in this area, as well as in
maintaining the privacy of users and the confidentiality of data within
its databases. DTCC notes that BSTP plans to license its software,
hardware, administrative, operational, and other support services from
BLP, and therefore stated that the Commission should require extensive
firewalls and other internal controls to prevent the misuse of clearing
data obtained through BSTP's ETC and matching service.\189\ BSTP
responds that, in raising concerns about BSTP's ability to maintain
privacy of users and confidentiality of data, DTCC cites to BLP's
enhancement of access controls to prevent inappropriate access to BLP's
client data. BSTP states that, if anything, these enhanced access
controls provide added assurance that BSTP data will be held securely.
BSTP notes that BLP is a preeminent data service provider, and that BLP
and BSTP have information security policies and procedures in place
that meet or exceed industry standards.\190\
---------------------------------------------------------------------------

    \189\ See DTCC April letter at 18.
    \190\ See BSTP May letter at 22.
---------------------------------------------------------------------------

    The Commission has evaluated the aspects of the BSTP application
relating to operational risk management and internal controls. DTCC's
arguments made about the prospect of confidentiality or privacy
breaches are speculative and unsubstantiated by any past conduct or
previous violations. The BSTP application indicates that BSTP has
planned for adequate systems capacity and that it conducts stress
testing. The Commission notes that BSTP and its affiliates have a
business continuity management program to ensure a timely response to,
and effective recovery from, unanticipated business interruptions that
may affect facilities, technology, and/or people. The Commission also
notes that the BSTP application indicates BSTP staff includes industry
veterans knowledgeable of the marketplace and well suited to operate
BSTP.
    As with BSTP, the Commission has reviewed the staffing, reliance on
affiliates for operational systems, internal controls, and related
aspects of the SS&C application. Again, DTCC's arguments made about the
prospect of confidentiality or privacy breaches are speculative and
unsubstantiated by any past conduct or previous violations, and SS&C
has been providing local and centralized matching facilities and ETC
services for twenty years.\191\ SSCNet is currently operating as a real
time and batch-based system, so its proposed functionality under the
SS&C application is not purely hypothetical. Further, as mentioned
above, requiring trade data from SS&C customers to pass through Omgeo
in order to arrive at DTC, as contemplated by DTCC's suggested single
access model, could create conditions more favorable for
confidentiality breaches than if such data was not routed through a
competitor.
---------------------------------------------------------------------------

    \191\ See SS&C letter at 4.
---------------------------------------------------------------------------

    In addition, as discussed above, BSTP and SS&C, as SCI entities,
will be subject to Regulation SCI. For example, Rule 1001(b) of
Regulation SCI requires an SCI entity to have policies and procedures
reasonably designed to ensure that their SCI systems operate in a
manner that complies with the Exchange Act and rule and regulations
thereunder and the entity's rules and governing documents, as
applicable.\192\
---------------------------------------------------------------------------

    \192\ See id. at 72437-38.
---------------------------------------------------------------------------

i. Cross-Border Aspects of the SS&C Application
    DTCC notes that the SS&C application indicates all matching service
activities will be performed by SS&C Canada. DTCC states that SS&C's
reliance on a foreign subsidiary to perform critical functions
distinguishes the SS&C application from the circumstances underlying,
and the regulatory impact of, Omgeo's current exempt status, and raises
concerns for the safety and soundness of the national clearance and
settlement system.\193\
---------------------------------------------------------------------------

    \193\ See DTCC September letter at 3; DTCC May letter at 10.
---------------------------------------------------------------------------

    On a general level, DTCC states that the Commission must satisfy
itself of the following: (i) that the role of SS&C Canada would not
weaken the regulatory framework applicable to SS&C's activities; and
(ii) that the proposed framework in which SS&C is the regulated entity
but SS&C Canada performs the actual matching function would not create
a risk of disconnectedness or regulatory impairment with respect to the
Commission's oversight of the national clearance and settlement system.
In addition, DTCC states that the Commission should carefully
scrutinize SS&C's undertakings with respect to operational,
interoperability, and access matters, and its own ability to monitor
the effects of SS&C's overall activities on the national system for
clearance and settlement.\194\
---------------------------------------------------------------------------

    \194\ See DTCC May letter at 11.

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

    On a more specific level, DTCC states several concerns relating to
choice of law, jurisdiction, privacy of information, and timely access
to records.\195\ One concern is that the Commission should require SS&C
to demonstrate that applicable Canadian employment law would not impede
or impair SS&C's ability to perform the undertakings provided in the
SS&C application, including with respect to access to SS&C Canada
employees.\196\ DTCC also raises concerns with respect to conflicts
between U.S. and Canadian privacy and securities laws and states that
SS&C should be required to employ Connecticut counsel to offer its
views on whether Connecticut law would interpret the Canadian privacy
statutes to permit SS&C Canada to provide trade information to SS&C
daily without concerns about being in violation of those statutes.\197\
DTCC also states that SS&C needs to demonstrate that Canadian law
applicable to the treatment and production of relevant data and client
information would not impede or impair the production and provision of
information required by regulators.\198\
---------------------------------------------------------------------------

    \195\ See DTCC September letter at 3.
    \196\ See DTCC May letter at 12.
    \197\ See id. at 13. DTCC notes that the intercompany agreement
between SS&C and SS&C Canada described in the SS&C application
states that SS&C shall provide the Commission with access to
information relating to SS&C Canada's matching system and electronic
confirmation services, including all documents it receives from SS&C
Canada. DTCC further notes that the SS&C application states that
SS&C has confirmed with external counsel that implementation of the
intercompany agreement would not violate the Canadian privacy
statutes, which specifically are the Canadian Personal Information
Protection and Electronic Document Act and the Ontario Business
Records Protection Act. DTCC also states that, according to the SS&C
application, because the intercompany agreement is governed by
Connecticut law and SS&C's external counsel are not qualified to
practice in Connecticut, SS&C has only assumed that Connecticut
courts would interpret the intercompany agreement the same as the
applicable Canadian courts. DTCC explains that if SS&C's external
counsel were incorrect in their assumption, a Canadian customer
might be able to sue SS&C to prevent SS&C Canada from providing SS&C
with daily trade information, including confirmations, which would
make it difficult for SS&C to oversee SS&C Canada's operations and
may prevent the Commission from having ready access to trade
records. See id.
    \198\ See id. DTCC says that, given the importance of this
issue, the opinion of qualified legal counsel concerning whether
local Ontario privacy and business record laws would be breached by
the intercompany agreement seems insufficient and further due
diligence is warranted. In addition, DTCC says that SS&C should
address whether other Canadian law could result in the unanticipated
disclosure of customer information or could provide the basis for a
Canadian customer asserting that data held by SS&C Canada should not
be provided to SS&C or to regulators. See id.
---------------------------------------------------------------------------

    Further, DTCC states that it understands that certain activities of
SS&C Canada are regulated by the Ontario Securities Commission
(``OSC'') and the Autorit[eacute] des march[eacute]s financiers
(``AMF''), and therefore SS&C should demonstrate that its reliance on
SS&C Canada for the purposes contemplated in the SS&C application are
not in conflict or inconsistent with existing requirements under
applicable Canadian provincial securities laws.\199\ DTCC also notes
that SS&C's Form 10-K indicates that SS&C has recognized that a
substantial portion of its operations are conducted outside of the
United States and that it is subject to a variety of related risks,
including the potential difficulty to enforce third-party contractual
obligations and intellectual property rights. DTCC states that the
Commission should therefore require further due diligence by SS&C in
this area.\200\
---------------------------------------------------------------------------

    \199\ See id.
    \200\ See id. at 14.
---------------------------------------------------------------------------

    In addition, DTCC states that the SS&C application does not discuss
any due diligence performed by SS&C with respect to SS&C Canada and
SS&C Canada's capabilities in supporting SS&C or its abilities to
discharge the services and obligations contemplated in the intercompany
agreement.\201\ In this regard, DTCC cites the IOSCO Principles on
Outsourcing of Financial Services for Market Intermediaries (2005) as
noting various risks related to cross-border outsourcing, for which
financial institutions should conduct enhanced due diligence.\202\ DTCC
states that the Commission should require SS&C to demonstrate that it
has conducted such enhanced due diligence, including the written
documentation of the results of such due diligence.\203\
---------------------------------------------------------------------------

    \201\ See id. at 11.
    \202\ See id. at 11-12. DTCC notes, for instance, that when
considering cross-border outsourcing, the outsourcing firm should
conduct enhanced due diligence that focuses on special compliance
risks, including the ability to effectively monitor the foreign
service provider, the ability to maintain the confidentiality of
firm and customer information, and the ability to execute
contingency plans and exit strategies where the service is being
performed on a cross-border basis. See id. at 11. DTCC states that
special outsourcing risks also include individual firm concentration
risk and the associated exit strategy risk (e.g., over-reliance on
the outsourced provider and a lack of relevant skills within SS&C
itself), that concentration risk includes the potential sale of SS&C
Canada by SS&C, and that access risk includes both the risk of
timely access by SS&C and its auditors and regulators to data,
records, or assets and conversely risk of access by SS&C Canada
employees to SS&C client account data, records, and assets. See id.
at 11-12.
    \203\ See id. at 12.
---------------------------------------------------------------------------

    Finally, DTCC notes that, pursuant to the SS&C application, SS&C
Canada will operate the matching and ETC service on behalf of SS&C.
DTCC believes operational support may be provided to an exempt clearing
agency by a non-U.S. affiliate but states that the SS&C application
raises issues related to such support. DTCC states, for example, that
pursuant to its application, the policies and procedures of SS&C Canada
are overseen by its officers and directors and subject to control by
SS&C Holdings. DTCC believes that SS&C Canada's policies and operations
related to matching should be overseen by SS&C itself.\204\
---------------------------------------------------------------------------

    \204\ See id. at 14.
---------------------------------------------------------------------------

    DTCC notes, in particular, the integral role played by SS&C Canada
suggests that extra scrutiny be placed on cross-border issues to the
extent they could delay or impede the proper functionality of trade
matching and settlement, as previously noted above.\205\ Specifically,
DTCC says that SS&C's plan to rely on SS&C Canada and other off-shore
affiliates within the SS&C complex for operational performance of its
matching and ETC service, along with other related services, raises
concerns about SS&C's ability to appropriately protect its intellectual
property and to maintain the privacy of users and confidentiality of
data within its databases. DTCC says that the Commission should require
extensive firewalls and other internal controls to prevent the misuse
of clearing data obtained through SS&C's electronic confirmation and
matching service, including the misuse of such data in providing other
services within the SS&C complex.\206\
---------------------------------------------------------------------------

    \205\ See id. at 3.
    \206\ See id at 15.
---------------------------------------------------------------------------

    SS&C responds that the various assertions described above regarding
the oversight of SS&C Canada by SS&C are unfounded and that SS&C has
complete oversight of and visibility into the operations of SSCNet.
SS&C further states that SS&C Canada and the SSCNet application fall
under the scrutiny and review of a number of SS&C's U.S.-based
executive committees providing direct oversight, including its
Operating Committee, its Security Committee, and a U.S.-based internal
audit department that reports to the U.S.-based Audit Committee. It
also states that the SSCNet division reports to the U.S.-based Senior
Vice President, Institutional and Investment Management; its
development division reports to the U.S.-based Senior Vice President,
Chief Development Officer; and its Information Technology Services
division reports to the U.S.-based Chief Technology Officer. SS&C also
notes that Omgeo operates in many

jurisdictions outside the United States, including Canada, on the same
basis.\207\
---------------------------------------------------------------------------

    \207\ See SS&C letter at 4.
---------------------------------------------------------------------------

    SS&C also responds that DTCC incorrectly asserts that some or all
applications offered by SS&C are comingled with each other and that
intellectual property, privacy of users, and confidentiality of data is
lacking. SS&C states that it is a leading global data service provider
that deploys information security policies, procedures, and controls
that meet or exceed industry standards and that SS&C has never
experienced a breach of security or privacy.
    The Commission is satisfied that the cross-border aspects of the
SS&C application have been sufficiently addressed without requiring
denial or modification of the application. First, as described in Part
II.B, the SS&C application includes a series of representations
designed to ensure that the Commission can fulfill its regulatory
obligations with respect to SS&C. SS&C is a U.S. person incorporated in
Delaware with a Connecticut business registration that dates back to
1996. According to its application, SS&C will enter into an
intercompany agreement with SS&C Canada governing the availability of
information related to matching services. As a subsidiary of SS&C, SS&C
Canada will be subject to the control of its parent company. Further,
as described in the SS&C letter, SS&C's executive committees such as
the Operating Committee and the Security Committee provide direct
oversight of SSCNet.\208\ The Commission believes that control of SS&C
Canada by a U.S. parent and the contractual arrangements outlined in
SS&C's application are sufficient to allow the Commission to exercise
oversight of SS&C consistent with the Exchange Act.
---------------------------------------------------------------------------

    \208\ See SS&C letter at 4.
---------------------------------------------------------------------------

    Second, the Commission has entered into a memorandum of
understanding concerning consultation, cooperation, and the exchange of
information related to the supervision of cross-border regulated
entities with the AMF and the OSC. The MOU notes that it is intended to
express each authority's willingness to cooperate with each other in
the interest of fulfilling their respective regulatory mandates,
particularly in the areas of investor protection, fostering the
integrity of and maintaining confidence in the capital markets, and
reducing systemic risk.\209\
---------------------------------------------------------------------------

    \209\ See Memorandum of Understanding Concerning Consultation,
Cooperation and the Exchange of Information Related to the
Supervision of Cross-Border Regulated Entities, Sept. 2011,
available at http://www.sec.gov/about/offices/oia/oia_bilateral/canada_regcoop.pdf.
---------------------------------------------------------------------------

    More generally, as previously discussed, the Commission is familiar
with arrangements whereby a registered entity contracts out functions
to other entities that may or may not be directly regulated by the
Commission, and may or may not be located within the U.S. In the
absence of a concrete obstacle--for example, a specific foreign statute
blocking access currently in effect, or a history of instances of non-
compliance by an entity--DTCC's arguments about cross-border risks
depend on purely speculative concerns. For example, such prospects are
not grounded in a particular fact pattern identified by DTCC or other
commenters, and do not demonstrate that SS&C is hindered in its ability
to comply with the conditions below.
    Finally, we note that as with the Omgeo order, this order includes
provisions for modification if necessary or appropriate in the public
interest, the protection of investors, or otherwise in furtherance of
the purposes of the Exchange Act.\210\ The Commission may also limit,
suspend, or revoke this exemption if it finds that SS&C has violated or
is unable to comply with any of the provisions set forth in this order
if such action is necessary or appropriate in the public interest, for
the protection of investors, or otherwise in furtherance of the
purposes of the Exchange Act.\211\ Thus, should concerns about SS&C
arise in the future, the Commission retains sufficient tools to ensure
that SS&C acts consistent with the public interest, the protection of
investors, and the purposes of Section 17A of the Exchange Act.
---------------------------------------------------------------------------

    \210\ See infra Parts IV.A.3 (for BSTP) and IV.B.3 (for SS&C).
    \211\ See id.
---------------------------------------------------------------------------

6. Governance of BSTP
    DTCC states that the composition of BSTP's board of directors as
described in the BSTP application raises concerns about the overlap
between BSTP and its for-profit parent BLP because only one of the
board's four members is an industry representative, which could
compromise BSTP's independence from BLP and the extent to which BSTP is
capable of playing a neutral role as an industry utility.\212\
---------------------------------------------------------------------------

    \212\ See DTCC April letter at 17.
---------------------------------------------------------------------------

    According to BSTP, while BSTP's parent, BLP, will provide BSTP with
software, hardware, administrative, operational, and other support
services, BSTP has established a separate board of directors to oversee
its operations and will hold ultimate legal responsibility over its
operations.\213\ BSTP states that its governance arrangements are
designed to help ensure that BSTP will be operated in a manner that is
consistent with the public interest and the protection of investors by
establishing specific governance principles and fitness standards for
qualification of each member of the board of directors.\214\ BSTP also
states that it intends to establish an advisory board consisting of
industry members and users of BSTP, including representatives from
broker-dealers, investment managers, and custodians, and that it
intends to continue engaging with the securities industry and market
participants as a further means of ensuring that BSTP operates in a
manner that is consistent with the public interest and the protection
of investors.\215\
---------------------------------------------------------------------------

    \213\ See BSTP May letter at 20.
    \214\ See id.
    \215\ See id. at 20-21. Specifically, BSTP stated that, in
designing BSTP's matching service, BSTP met with over 30 investment
managers, created and obtained input from two working groups (one
comprised of representatives from seven industry-leading custodians
and one comprised of representatives from fifteen prominent broker-
dealers). See id. at 20 n.62.
---------------------------------------------------------------------------

    The Commission is mindful of DTCC's concerns but disagrees. As BSTP
notes, DTCC provides no support from the Omgeo order that matching
service providers be non-profit entities or that for-profit entities be
subject to special controls by virtue of that status.\216\ Omgeo itself
was 49.9-percent owned by a for-profit entity at its formation.\217\
The Commission recognizes that, as originally conceived, five of nine
voting managers on Omgeo's board of managers were industry
representatives,\218\ which reflects a higher ratio of industry
representatives than BSTP's board of directors. The Commission also
notes that BSTP has represented that it will make efforts to
incorporate industry representatives into BSTP's decision-making
process. Specifically, the Commission believes that the advisory board
would provide useful industry input into the decisions made by BSTP's
board of directors. In addition, the Commission believes that BSTP's
proposed industry working group will help ensure that the users of
BSTP's matching service will have significant input into BSTP's service
offerings and operations. Further, as with the Omgeo order and as noted
above with respect to SS&C, this order includes provisions for
modification if necessary or appropriate in the public interest, the
protection of investors, or

otherwise in furtherance of the purposes of the Exchange Act. The
Commission may also limit, suspend, or revoke this exemption if it
finds that BSTP has violated or is unable to comply with any of the
provisions set forth in this order if such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Exchange Act. Thus,
should concerns about BSTP arise in the future, the Commission retains
sufficient tools to ensure that BSTP acts consistent with the public
interest, the protection of investors, and the purposes of Section 17A
of the Exchange Act.
---------------------------------------------------------------------------

    \216\ See id. at 19.
    \217\ See Omgeo order, supra note 37, at 20495.
    \218\ See id.
---------------------------------------------------------------------------

    DTCC additionally states that BSTP should be subject to stricter
corporate governance controls similar to those imposed on Omgeo, and
that BSTP's board should be required to maintain fair representation of
its ETC and matching service customers.\219\ The Commission disagrees
and continues to believe that an entity such as BSTP that limits its
clearing agency functions only to providing matching services need not
be subject to the full panoply of clearing agency regulation.\220\ This
includes the requirement that the rules of the clearing agency assure a
fair representation of its shareholders and participants in the
selection of its directors.\221\
---------------------------------------------------------------------------

    \219\ See DTCC April letter at 17; Cornerstone Report at 29.
    \220\ See Matching Release, supra note 13, at 17947.
    \221\ See 15 U.S.C. 78q-1(b)(3)(C).
---------------------------------------------------------------------------

    In response to DTCC's suggestion that Omgeo is subject to
heightened governance requirements, the Commission believes it is
appropriate to highlight several reasons for the various legal and
other regulatory requirements to which the entities within the DTCC
complex are subject, as follows. First, Omgeo is an exempt clearing
agency subject to the terms and conditions of the Omgeo order. Second,
DTC, by contrast, is a registered clearing agency subject to the full
panoply of clearing agency regulation. Accordingly, when the Commission
approved transfer of the TradeSuite ID system from DTC to Omgeo, it
highlighted the statutory requirement that DTC provide equitable
allocation of dues, fees, and other charges among its participants and
refrain from imposing any burden on competition not necessary or
appropriate in furtherance of the purposes of Section 17A of the
Exchange Act.\222\ These requirements are obligations of DTC, not
Omgeo, and the Commission finds no basis for imposing obligations on
BSTP and SS&C that have not been imposed on Omgeo.
---------------------------------------------------------------------------

    \222\ See Omgeo order, supra note 37, at 20498 n.39.
---------------------------------------------------------------------------

7. Interoperability Among Matching Service Providers
i. Sufficiency of the Interoperability Conditions
    Several commenters expressed views on the need for interoperability
to ensure that a market structure with multiple matching service
providers can facilitate the anticipated benefits described above.
Specifically, four commenters emphasized the importance of facilitating
interoperability between matching services. Two commenters stated that
interoperability is vital to ensure that industry participants may
choose their service providers free of any dependency and to support
use by the full spectrum of potential users.\223\ Another similarly
stated that interoperability must be mandatory given the number of
institutions active in this space while also noting that it may result
in increased implementation costs to current and future matching
services.\224\ A fourth stated that, in its experience connecting to
securities and derivatives clearing and settlement services globally,
fair and open approaches have been valuable in encouraging continued
investments by market participants and vendors, reinforcing the cycle
of innovation and meaningful cost reduction in global markets.\225\ Two
commenters further stated that the conditions proposed in the BSTP
notice, which are the same as those proposed in the SS&C notice (and
substantially the same as those contained in the Omgeo order),\226\
were appropriate and adequate to facilitate interoperability and
regulatory oversight.\227\
---------------------------------------------------------------------------

    \223\ See Citi at 2; Fidessa.
    \224\ See Northern Trust.
    \225\ See Traiana.
    \226\ See generally Omgeo order, supra note 37.
    \227\ See SIFMA AMF at 1-3; Northern Trust.
---------------------------------------------------------------------------

    The Commission agrees that interoperability among matching service
providers is critical to facilitating the establishment of linked and
coordinated facilities for the clearance and settlement of securities
transactions. In 2001, the Commission issued the Omgeo order mindful of
concerns about interoperability. Accordingly, the Omgeo order included
interoperability conditions designed to address concerns that, as the
sole provider of matching services, Omgeo could improperly gain a
monopoly in post-trade processing.\228\ The interoperability conditions
were designed to address these competition concerns and help ensure
that Omgeo's exemption was consistent with the public interest, the
protection of investors, and the purposes of Section 17A of the
Exchange Act.\229\ In particular, the Commission notes that the
conditions set forth in the Omgeo order help facilitate the
establishment of linked and coordinated facilities for the clearance
and settlement of securities transactions, ensure choice among service
providers, reduce costs to the users of matching service providers, and
facilitate the entry of new matching service providers that might
encourage innovation in the provision of matching services.
---------------------------------------------------------------------------

    \228\ See Omgeo order, supra note 37, at 20496-97, 20498.
    \229\ See id. at 20498.
---------------------------------------------------------------------------

    The Commission is satisfied that the BSTP and SS&C applications,
which include substantially the same interoperability provisions as
those set forth in the Omgeo order, will continue to facilitate these
same goals. The Commission notes that both BSTP and SS&C expressed
support for interoperability in their comment letters,\230\ and that
BSTP and SS&C also state that their applications will promote linkages
and standardization, consistent with Section 17A(a)(1)(D) of the
Exchange Act.\231\ Specifically, SS&C states that it has a long history
of linking with upstream accounting and order management systems used
by institutional customers, service bureaus used by broker-dealers, and
direct linkages into custodian platforms for those banks directly on
its platform. It has also created interfaces with services that are
seen as competitors such as SWIFT, SCRL, FX matching platforms, and
vendors offering local matching engines. SS&C states it was also a
charter member of ISITC North America (then the Financial Models
Company) and that the promotion of standards and interoperability has
long been a cornerstone of the company's philosophy.\232\ Similarly,
BSTP states that it will use industry standard communication protocols
(e.g., TCP/IP, SNA) and message and file transfer protocols (e.g., FIX,
WebSphere MQ), as well as support the FIX global post-trade processing
guidelines. BSTP states that, as a result, it will be able to accept a
market participant's preferred means of

sending and receiving data, thereby minimizing the development cost
needed to use BSTP's matching service.\233\
---------------------------------------------------------------------------

    \230\ See BSTP May letter at 4 (citing interoperability as one
way in which the BSTP application promotes standards and linkages
consistent with Section 17A of the Exchange Act); SS&C letter at 3
(stating that the promotion of uniform standards and
interoperability have long been cornerstones of SS&C's company
philosophy).
    \231\ See BSTP May letter at 4; SS&C letter at 2-3; see also 15
U.S.C. 78q-1(a)(1)(D).
    \232\ See SS&C letter at 3.
    \233\ See BSTP May letter at 4.
---------------------------------------------------------------------------

ii. Timeframes for Building and Operating Interfaces
    DTCC states that the timeframes for building and operating
interfaces, as set forth in the Omgeo order and included for BSTP and
SS&C as part of this order, do not take into account the amount and
complexity of the work that would need to be done to accommodate BSTP
and/or SS&C's entry into the market structure for matching services and
likely would be insufficient to enable the operational accuracy and
reliability for the proper operation of an interface.\234\ DTCC states
that it would need to analyze requirements for and provide
interoperability specifications to BSTP and/or SS&C to facilitate the
formation of an interface, but such specifications cannot be determined
until a functioning interface has been designed, developed, and
tested.\235\ DTCC further states that because functionality related to
central matching interoperability does not currently exist within Omgeo
or elsewhere within DTCC, DTCC would need to analyze its existing
systems to ensure those systems, processes, and workflows would not be
compromised by connecting to BSTP and/or SS&C.\236\ DTCC indicates that
the functionality to be considered would include, among others, (i)
matching rules, (ii) reconciliation routines, (iii) exception
management, (iv) control number assignments, and (v) account matter
file requirements.\237\
---------------------------------------------------------------------------

    \234\ See DTCC September letter at 2; DTCC June letter at 4;
DTCC April letter at 15.
    \235\ See DTCC April letter at 15.
    \236\ See id. at 15-16.
    \237\ See id. at 16.
---------------------------------------------------------------------------

    DTCC further states that because it does not know the nature of the
BSTP and/or SS&C systems, if any, and whether or on what terms BSTP
and/or SS&C might be eligible for an exemption from the Commission, it
would be unreasonable to expect DTCC to devote resources to such issues
until it has sufficient certainty about the nature of the interfaces
that would need to be developed, if any.\238\ DTCC also notes that
additional time would also be needed if multiple matching service
providers are simultaneously developing interfaces with each other,
adding another layer of complexity that would need to be addressed in a
risk-mitigating manner.\239\
---------------------------------------------------------------------------

    \238\ See DTCC June letter at 4; DTCC May letter at 10; DTCC
April letter at 15-16.
    \239\ See DTCC May letter at 10.
---------------------------------------------------------------------------

    BSTP responds that there is no justification to delay
interoperability of Omgeo with other matching services. BSTP notes
that, in the fourteen years since the Commission issued the Omgeo
order, neither DTCC nor Omgeo has raised any concerns regarding the
terms of that exemption. BSTP notes that the need for DTCC and its
subsidiaries to devote resources to comply with the conditions in the
Omgeo order is not a valid reason to modify the provisions found in the
Omgeo order.\240\ Further, BSTP notes that technological improvements
since 2001 have increased the ease of establishing safe and secure
communication links, suggesting that technological developments do not
support modifying or extending the timeframes in the Omgeo order.\241\
---------------------------------------------------------------------------

    \240\ See BSTP May letter at 17-18; BSTP August letter at 6.
    \241\ See BSTP May letter at 11.
---------------------------------------------------------------------------

    SS&C acknowledges that there could be other appropriate timeframes
for building and operating interfaces, and SS&C also states that the
interoperability conditions contained within the Omgeo order already
provide the means for extending those timeframes. SS&C further states
that the conditions proposed in the SS&C notice (the same as those
contained in the Omgeo order) provide the appropriate mechanisms to
allow parties to extend the timeframes, and accordingly SS&C sees no
issue with the conditions proposed in the SS&C notice as they relate to
timeframes for building and operating interfaces.\242\ The Commission
agrees with SS&C's observations inasmuch as interoperability condition
(6), which appears in the Omgeo order and is applied to BSTP and SS&C
below,\243\ gives each matching service provider the flexibility to
negotiate and determine appropriate timeframes beyond what the orders
prescribe, as well as specified channels for appropriate resolution of
disputes in certain instances.
---------------------------------------------------------------------------

    \242\ See SS&C letter at 4.
    \243\ See Omgeo order, supra note 37, at 20499; infra Parts
IV.A.2.ii (for BSTP) and IV.B.2.ii (for SS&C).
---------------------------------------------------------------------------

    Further, the Commission is mindful that Omgeo, BSTP, and SS&C will
need time to develop the appropriate interfaces to ensure that their
systems are interoperable consistent with the conditions set forth in
the Omgeo order and this order below. The Commission agrees with SS&C
that, while other timeframes may also be appropriate to build and
operate interfaces, the interoperability conditions provide a mechanism
for extending time on which the parties must agree, mitigating the
concerns raised by DTCC. Indeed, the conditions help ensure that no one
party can unnecessarily delay the process of building and operating
interfaces for interoperability. In that regard, to the extent that
DTCC was hesitant to devote resources to building and operating
interfaces with other matching service providers because of questions
as to whether and on what terms BSTP and SS&C would be eligible for an
exemption to provide matching services, those questions are fully
resolved in this order.
8. Application of Regulation SCI to Exempt Clearing Agencies
    DTCC requests that the Commission clarify whether and to what
extent Regulation SCI has superseded reporting requirements for system
outages and other events in the Omgeo order. Specifically, DTCC notes
that Rule 1003(a) of Regulation SCI requires SCI entities to report
material system changes, including submitting to the Commission a
report within thirty calendar days after the end of each calendar
quarter describing completed, ongoing, and planned material changes to
SCI systems and the security of indirect SCI systems.\244\ DTCC
requests clarification of the relationship between this requirement and
the requirement in operational condition (4) of the Omgeo order
requiring Omgeo to provide twenty-days advance notice of material
system changes to the Commission.\245\
---------------------------------------------------------------------------

    \244\ Rule 1003(a)(1) requires an SCI entity to provide
quarterly reports to the Commission, describing completed, ongoing,
and planned material systems changes to its SCI systems and the
security of indirect SCI systems, during the prior, current, and
subsequent calendar quarters. Rule 1003(a)(1) also requires an SCI
entity to establish reasonable written criteria for identifying a
change to its SCI systems and the security of its indirect SCI
systems as material.
    In addition Rule 1003(a)(2) requires an SCI entity to promptly
submit a supplemental report to notify the Commission of a material
error in or material omission from a previously submitted report.
See 17 CFR 242.1003.
    \245\ See id at 17-18 & n.43; DTCC April letter at 22 & n.69.
---------------------------------------------------------------------------

    On November 19, 2014, the Commission adopted Regulation SCI, which
requires SCI entities to comply with requirements for policies and
procedures with respect to their automated systems that support the
performance of their regulated activities.\246\ Regulation SCI became
effective on February 3, 2015, and, with some exceptions, the
compliance date

was November 3, 2015.\247\ In relevant part, Rule 1000 of Regulation
SCI defines an SCI entity to include, among other things, a registered
clearing agency and an exempt clearing agency subject to ARP.\248\ In
particular, the term ``exempt clearing agency subject to ARP'' includes
an entity that has received from the Commission an exemption from
registration as a clearing agency under Section 17A of the Exchange
Act, and whose exemption contains conditions that relate to the
Commission's ARP Policies, or any Commission regulation that supersedes
or replaces such policies.\249\ As set forth below, operational
condition (1) to this order requires an audit report that addresses all
areas discussed in ARP.\250\ Accordingly, BSTP and SS&C are each an
exempt clearing agency subject to ARP and therefore SCI entities
subject to Regulation SCI. Because the Omgeo order contains the same
condition,\251\ it also is an exempt clearing agency subject to ARP and
therefore an SCI entity subject to Regulation SCI.
---------------------------------------------------------------------------

    \246\ See Regulation SCI, supra note 70, at 72271.
    \247\ See id. at 72366.
    \248\ See Regulation SCI, supra note 70, at 72437.
    \249\ See id. at 72271.
    \250\ See infra Part IV.A.2.i (for BSTP) and Part IV.B.2.i (for
SS&C).
    \251\ See Omgeo order, supra note 37, at 20498.
---------------------------------------------------------------------------

    In response to DTCC's comment, the Commission notes that
operational condition (4) was not a component of the ARP policy
statements and therefore has not been superseded by Regulation SCI.
Operational condition (4) ensures that the Commission receives 20-days
advance notice of systems changes, which the Commission believes is
necessary for matching service providers in light of the potential for
linkages between matching service providers and the corresponding need
for matching service providers to maintain interoperability pursuant to
the interoperability conditions of the Omgeo order and this order.\252\
Because the ARP policy statements did not explicitly contemplate
advance notice of material systems changes, the requirement in
operational condition (4) has not been superseded. In light of the
similarity between the requirements in operational condition (4) and
Rule 1003(a) of Regulation SCI, however, if any matching service
provider believes that operational condition (4) should be modified or
removed, the proper mechanism for modifying the condition is to file an
amendment to the matching service provider's Form CA-1. The Commission
notes that operational condition (4) is applied to both BSTP and SS&C
below.\253\
---------------------------------------------------------------------------

    \252\ See id.
    \253\ See infra Parts IV.A.2.i (for BSTP) and IV.B.2.i (for
SS&C).
---------------------------------------------------------------------------

    In addition, because Regulation SCI has superseded the requirements
in ARP, the Commission is providing clarification as to the
requirements in operational conditions (1) and (2), which appear in the
Omgeo order and are applied to BSTP and SS&C below.\254\ Operational
condition (1) states that before beginning the commercial operation of
its matching service, an exempt clearing agency shall provide the
Commission with an audit report that addresses all the areas discussed
in the Commission's ARP. Operational condition (2) states, in relevant
part, that an exempt clearing agency shall provide the Commission with
annual reports and any associated field work prepared by competent,
independent audit personnel that are generated in accordance with the
annual risk assessment of the areas set forth in ARP and that an exempt
clearing agency shall provide the Commission (beginning in its first
year of operation) with annual audited financial statements prepared by
competent independent audit personnel. The Commission finds that Rule
1003(b) of Regulation SCI has superseded these requirements.\255\
Accordingly, pursuant to operational condition (1), BSTP and SS&C are
required to submit an annual SCI review prior to beginning the
commercial operation of their matching services. Pursuant to
operational condition (2), Omgeo, BSTP, and SS&C, as SCI entities, are
each required to submit an annual SCI review each calendar year
consistent with Regulation SCI.
---------------------------------------------------------------------------

    \254\ See id.; Omgeo order, supra note 37, at 20498.
    \255\ See Regulation SCI, supra note 70, at 72439. Rule
1003(b)(1) of Regulation SCI requires an SCI entity to conduct an
``SCI review'' of the SCI entity's compliance with Regulation SCI
not less than once per calendar year. An SCI review must contain (i)
a risk assessment with respect to an SCI entity's SCI systems and
indirect SCI systems, and (ii) an assessment of internal control
design and effectiveness of such systems to include logical and
physical security controls, development processes, and information
technology governance, consistent with industry standards.
    Pursuant to Rule 1003(b)(2), an SCI entity must submit a report
of the SCI review to senior management of the SCI entity for review
no more than 30 calendar days after completion of such a review.
Moreover, under Rule 1003(b)(3), an SCI entity must submit to the
Commission, and to the board of directors of the SCI entity or the
equivalent of such board, a report of the SCI review and any
response by senior management within 60 calendar days after its
submission to senior management.
---------------------------------------------------------------------------

IV. Evaluation of the Applications

A. BSTP

    In evaluating the BSTP application, the Commission has been guided
by the requirements of Section 17A of the Exchange Act. Among other
factors, the Commission has considered BSTP's risk management
procedures, operational capacity and safeguards, organizational
structure, and ability to operate in a manner that will satisfy the
fundamental goals of Section 17A. The Commission has also carefully
considered the comments received in response to the BSTP application,
as discussed above. The Commission believes that the BSTP application
supports the establishment of linked and coordinated facilities for the
clearance and settlement of securities transactions.
    Accordingly, for the reasons discussed throughout this order, the
Commission finds that the BSTP application, including the terms and
conditions set forth in the application and reproduced below, is
consistent with the public interest, the protection of investors, and
the purposes of Section 17A of the Exchange Act, and that BSTP is so
organized and has the capacity to be able to facilitate prompt and
accurate matching services.
    Below are the terms and conditions of BSTP's exemption.
1. Scope of Exemption
    This order grants BSTP an exemption from registration as a clearing
agency under Section 17A of the Exchange Act to provide an ETC and
matching service. The exemption is granted subject to conditions that
the Commission believes are necessary and appropriate in light of the
statutory requirements of Section 17A.\256\ This order and the
conditions and limitations contained in it are consistent with the
Commission's statement in the Matching Release that an entity that
limits its clearing agency functions to providing matching services
does not have to be subject to the full range of clearing agency
regulation.
---------------------------------------------------------------------------

    \256\ The Commission is granting BSTP an exemption from clearing
agency registration, so it will not be considered a self-regulatory
organization under Section 3(a)(26) and therefore will not be
required to file rule changes in accordance with Section 19(b) of
the Exchange Act. The Commission is also not imposing a rule change
filing requirement as a condition of the exemption.
---------------------------------------------------------------------------

2. Conditions of Exemption
    The Commission is including specific conditions to this exemption
designed to facilitate the establishment of a national system for the
prompt and

accurate clearance and settlement of securities transactions and the
establishment of linked and coordinated facilities for the clearance
and settlement of securities transactions. The conditions are designed
to promote competition, transparency, consistency, and interoperability
in the market for matching services.
i. Operational Conditions
    (1) Before beginning the commercial operation of its matching
service, BSTP shall provide the Commission with an audit report that
addresses all the areas discussed in the Commission's Automation Review
Policies (``ARP'').\257\
---------------------------------------------------------------------------

    \257\ See Exchange Act Release Nos. 27445 (Nov. 16, 1989), 54 FR
48703 (Nov. 24, 1989) (``ARP I''), and 29185 (May 9, 1991), 56 FR
22490 (May 15, 1991) (``ARP II''); see also Memorandum from the
Securities and Exchange Commission Division of Market Regulation to
SROs and NASDAQ (June 1, 2001) (``Guidance for Systems Outages and
System Change Notifications''), available at http://www.sec.gov/divisions/marketreg/sro-guidance-for-systems-outage-06-01-2001.pdf.
---------------------------------------------------------------------------

    (2) BSTP shall provide the Commission with annual reports and any
associated field work prepared by competent, independent audit
personnel that are generated in accordance with the annual risk
assessment of the areas set forth in the ARP. BSTP shall provide the
Commission (beginning in its first year of operation) with annual
audited financial statements prepared by competent independent audit
personnel.
    (3) BSTP shall report all significant systems outages to the
Commission. If it appears that the outage may extend for thirty minutes
or longer, BSTP shall report the systems outage immediately. If it
appears that the outage will be resolved in less than thirty minutes,
BSTP shall report the systems outage within a reasonable time after the
outage has been resolved.
    (4) BSTP shall provide the Commission with 20 business days advance
notice of any material changes that BSTP makes to the matching service
or ETC service. These changes will not require the Commission's
approval before they are implemented.
    (5) BSTP shall respond and require its service providers (including
BLP) to respond to requests from the Commission for additional
information relating to the matching service and ETC service, and
provide access to the Commission to conduct on-site inspections of all
facilities (including automated systems and systems environment),
records, and personnel related to the matching service and the ETC
service. The requests for information shall be made and the inspections
shall be conducted solely for the purpose of reviewing the matching
service's and the ETC service's operations and compliance with the
federal securities laws and the terms and conditions in any exemptive
order issued by the Commission with respect to BSTP's matching service
and the ETC service.
    (6) BSTP shall supply the Commission or its designee with periodic
reports regarding the affirmation rates for institutional transactions
effected by institutional investors that utilize its matching service
and ETC service.
    (7) BSTP shall preserve a copy or record of all trade details,
allocation instructions, central trade matching results, reports and
notices sent to customers, service agreements, reports regarding
affirmation rates that are sent to the Commission or its designee, and
any complaint received from a customer, all of which pertain to the
operation of its matching service and ETC service. BSTP shall retain
these records for a period of not less than five years, the first two
years in an easily accessible place.
    (8) BSTP shall not perform any clearing agency function (such as
net settlement, maintaining a balance of open positions between buyers
and sellers, or marking securities to the market) other than as
permitted in an exemption issued by the Commission.
    (9) Before beginning the commercial operation of its matching
service, BSTP shall provide the Commission with copies of the service
agreement between BLP and BSTP and shall notify the Commission of any
material changes to the service agreement.
ii. Interoperability Conditions
    (1) BSTP shall develop, in a timely and efficient manner, fair and
reasonable linkages between BSTP's matching service and other matching
services that are registered with the Commission or that receive or
have received from the Commission an exemption from clearing agency
registration that, at a minimum, allow parties to trades that are
processed through one or more matching services to communicate through
one or more appropriate effective interfaces with other matching
services.
    (2) BSTP shall devise and develop interfaces with other matching
services that enable end-user clients or any service that represents
end-user clients to BSTP (``end-user representative'') to gain a single
point of access to BSTP and other matching services. Such interfaces
must link with each other matching service so that an end-user client
of one matching service can communicate with all end-user clients of
all matching services, regardless of which matching service completes
trade matching prior to settlement.
    (3) If any intellectual property proprietary to BSTP is necessary
to develop, build, and operate links or interfaces to BSTP's matching
service, as described in these conditions, BSTP shall license such
intellectual property to other matching services seeking linkage to
BSTP on fair and reasonable terms for use in such links or interfaces.
    (4) BSTP shall not engage in any activity inconsistent with the
purposes of Section 17A(a)(2) of the Exchange Act,\258\ which section
seeks the establishment of linked or coordinated facilities for
clearance and settlement of transactions. In particular, BSTP will not
engage in activities that would prevent any other matching service from
operating a matching service that it has developed independently from
BSTP's matching service.
---------------------------------------------------------------------------

    \258\ 15 U.S.C. 78q-1(a)(2)(A)(ii).
---------------------------------------------------------------------------

    (5) BSTP shall support industry standards in each of the following
categories: communication protocols (e.g., TCP/IP, SNA); message and
file transfer protocols and software (e.g., FIX, WebSphere MQ, SWIFT);
message format standards (e.g., FIX); and message languages and
metadata (e.g., XML). However, BSTP need not support all existing
industry standards or those listed above by means of example. Within
three months of regulatory approval, BSTP shall make publicly known
those standards supported by BSTP's matching service. To the extent
that BSTP decides to support other industry standards, including new
and modified standards, BSTP shall make these standards publicly known
upon making such decision or within three months of updating its system
to support such new standards, whichever is sooner. Any translation to/
from these published standards necessary to communicate with BSTP's
system shall be performed by BSTP without any significant delay or
service degradation of the linked parties' services.
    (6) BSTP shall make all reasonable efforts to link with each other
matching service in a timely and efficient manner, as specified below.
Upon written request, BSTP shall negotiate with each other matching
service to develop and build an interface that allows the two to link
matching services (``interface''). BSTP shall involve neutral industry
participants in all negotiations to build or develop interfaces and, to
the extent feasible, incorporate input from such

participants in determining the specifications and architecture of such
interfaces. Absent adequate business or technological
justification,\259\ BSTP and the requesting other matching service
shall conclude negotiations and reach a binding agreement to develop
and build an interface within 120 calendar days of BSTP's receipt of
the written request. This 120-day period may be extended upon the
written agreement of both BSTP and the other matching service engaged
in negotiations. For each other matching service with whom BSTP reaches
a binding agreement to develop and build an interface, BSTP shall begin
operating such interface within 90 days of reaching a binding agreement
and receiving all the information necessary to develop and operate it.
This 90-day period may be extended upon the written agreement of both
BSTP and the other matching service. For each interface and within the
same time BSTP must negotiate and begin operating each interface, BSTP
and the other matching service shall agree to ``commercial rules'' for
coordinating the provision of matching services through their
respective interfaces, including commercial rules: (A) Allocating
responsibility for performing matching services; and (B) allocating
liability for service failures. BSTP shall also involve neutral
industry participants in negotiating applicable commercial rules and,
to the extent feasible, take input from such participants into account
in agreeing to commercial rules. At a minimum, each interface shall
enable BSTP and the other matching service to transfer between them all
trade and account information necessary to fulfill their respective
matching responsibilities as set forth in their commercial rules
(``trade and account information''). Absent an adequate business or
technological justification, BSTP shall develop and operate each
interface without imposing conditions that negatively impact the other
matching service's ability to innovate its matching service or develop
and offer other value-added services relating to its matching service
or that negatively impact the other matching service's ability to
compete effectively against BSTP.
---------------------------------------------------------------------------

    \259\ The failure of neutral industry participants to be
available or to submit their input within the 120 day or 90 day time
periods set forth in this paragraph shall not constitute an adequate
business or technological justification for failing to adhere to the
requirements set forth in this paragraph.
---------------------------------------------------------------------------

    (7) In order to facilitate fair and reasonable linkages between
BSTP and other matching services, BSTP shall publish or make available
to any other matching service the specifications for any interface and
its corresponding commercial rules that are in operation within 20 days
of receiving a request for such specifications and commercial rules.
Such specifications shall contain all the information necessary to
enable any other matching services not already linked to BSTP through
an interface to establish a linkage with BSTP through an interface or a
substantially similar interface. BSTP shall link to any other matching
service, if the other matching service so opts, through an interface
substantially similar to any interface and its corresponding commercial
rules that BSTP is currently operating. BSTP shall begin operating such
substantially similar interface and commercial rules with the other
matching service within 90 days of receiving all the information
necessary to operate that link. This 90-day period may be extended upon
the written agreement of both BSTP and the other matching service that
plans to use that link.
    (8) BSTP and respective other matching services shall bear their
own costs of building and maintaining an interface, unless otherwise
negotiated by the parties.
    (9) BSTP shall provide to all other matching services and end-user
representatives that maintain linkages with BSTP sufficient advance
notice of any material changes, updates, or revisions to its interfaces
to allow all parties who link to BSTP through affected interfaces to
modify their systems as necessary and avoid system downtime,
interruption, or system degradation.
    (10) BSTP and each other matching service shall negotiate fair and
reasonable charges and terms of payment for the use of their interface
with respect to the sharing of trade and account information
(``interface charges''). In any fee schedule adopted under conditions
A.2.ii(10), A.2.ii(11), or A.2.ii(12) herein, BSTP's interface charges
shall be equal to the interface charges of the respective other
matching service.
    (11) If BSTP and the other matching service cannot reach agreement
on fair and reasonable interface charges within 60 days of receipt of
the written request, BSTP and the other matching service shall submit
to binding arbitration under the rules promulgated by the American
Arbitration Association. The arbitration panel shall have 60 days to
establish a fee schedule. The arbitration panel's establishment of a
fee schedule shall be binding on BSTP and the other matching service
unless and until the fee schedule is subsequently modified or abrogated
by the Commission or BSTP and the other matching service mutually agree
to renegotiate.
    (12)(A) The following parameters shall be considered in determining
fair and reasonable interface charges: (i) The variable cost incurred
for forwarding trade and account information to other matching
services; (ii) the average cost associated with the development of
links to end-users and end-user representatives; and (iii) BSTP's
interface charges to other matching services. (B) The following factors
shall not be considered in determining fair and reasonable interface
charges: (i) The respective cost incurred by BSTP or the other matching
service in creating and maintaining interfaces; (ii) the value that
BSTP or the other matching service contributes to the relationship;
(iii) the opportunity cost associated with the loss of profits to BSTP
that may result from competition from other matching services; (iv) the
cost of building, maintaining, or upgrading BSTP's matching service; or
(v) the cost of building, maintaining, or upgrading value added
services to BSTP's matching service. (C) In any event, the interface
charges shall not be set at a level that unreasonably deters entry or
otherwise diminishes price or non-price competition with BSTP by other
matching services.
    (13) BSTP shall not charge its customers more for use of its
matching service when one or more counterparties are customers of other
matching services than BSTP charges its customers for use of its
matching service when all counterparties are customers of BSTP. BSTP
shall not charge customers any additional amount for forwarding to or
receiving trade and account information from other matching services
called for under applicable commercial rules.
    (14) BSTP shall maintain its quality, capacity, and service levels
in the interfaces with other matching services (``matching services
linkages'') without bias in performance relative to similar
transactions processed completely within BSTP's service. BSTP shall
preserve and maintain all raw data and records necessary to prepare
reports tabulating separately the processing and response times on a
trade-by-trade basis for (A) completing its matching service when all
counterparties are customers of BSTP; (B) completing its matching
service when one or more counterparties are customers of other matching
services; or (C) forwarding trade information to other matching
services called for under applicable commercial rules. BSTP shall
retain the data and records for a period not less than six years.
Sufficient information

shall be maintained to demonstrate that the requirements of condition
A.2.ii(15) below are being met. BSTP and its service providers shall
provide the Commission with reports regarding the time it takes BSTP to
process trades and forward information under various circumstances
within thirty days of the Commission's request for such reports.
However, BSTP shall not be responsible for identifying the specific
cause of any delay in performing its matching service where the fault
for such delay is not attributable to BSTP.
    (15) BSTP shall process trades or facilitate the processing of
trades by other matching services on a first-in-time priority basis.
For example, if BSTP receives trade and account information that BSTP
is required to forward to other matching services under applicable
commercial rules (``pass-through information'') prior to receiving
trade and account information from BSTP's customers necessary to
provide matching services for a trade in which all parties are
customers of BSTP (``intra-hub information''), BSTP shall forward the
pass-through information to the designated other matching service prior
to processing the intra-hub information. If, on the other hand, the
information were to come in the reverse order, BSTP shall process the
intra-hub information before forwarding the pass-through information.
    (16) BSTP shall sell access to its databases, systems or
methodologies for transmitting settlement instructions (including
settlement instructions from investment managers, broker-dealers, and
custodian banks) and/or transmitting trade and account information to
and receiving authorization responses from settlement agents on fair
and reasonable terms to other matching services and end-user
representatives. Such access shall permit other matching services and
end-user representatives to draw information from those databases,
systems, and methodologies for transmitting settlement instructions
and/or transmitting trade and account information to and receiving
authorization responses from settlement agents for use in their own
matching services or end-user representatives' services. The links
necessary for other matching services and end-user representatives to
access BSTP's databases, systems or methodologies for transmitting
settlement instructions and/or transmitting trade and account
information to and receiving authorization responses from settlement
agents will comply with conditions A.2.ii(3), A.2.ii(5), A.2.ii(9),
A.2.ii(14) and A.2.ii(15) above.
    (17) For the first five years from the date of an exemptive order
issued by the Commission with respect to BSTP's matching service, BSTP
shall provide the Commission with reports every six months sufficient
to document BSTP's adherence to the obligations relating to interfaces
set forth in conditions A.2.ii(6) through A.2.ii(13) and A.2.ii(16)
above. BSTP shall incorporate into such reports information including
but not limited to: (A) All other matching services linked to BSTP; (B)
the time, effort, and cost required to establish each link between BSTP
and other matching services; (C) any proposed links between BSTP and
other matching services as well as the status of such proposed links;
(D) any failure or inability to establish such proposed links or fee
schedules for interface charges; (E) any written complaint received
from other matching services relating to its established or proposed
links with BSTP; and (F) if BSTP failed to adhere to any of the
obligations relating to interfaces set forth in conditions A.2.ii(6)
through A.2.ii(13) and A.2.ii(16) above, its explanation for such
failure. The Commission shall treat information submitted in accordance
with this condition as confidential, non-public information, subject to
the provisions of applicable law. If any other matching service seeks
to link with BSTP more than five years after issuance of an exemptive
order issued by the Commission with respect to BSTP's matching service,
BSTP shall notify the Commission of the other matching service's
request to link with BSTP within ten days of receiving such request. In
addition, BSTP shall provide reports to the Commission in accordance
with this paragraph commencing six months after the initial request for
linkage is made until one year after BSTP and the other matching
service begin operating their interface. The Commission reserves the
right to request reports from BSTP at any time. BSTP shall provide the
Commission with such updated reports within thirty days of the
Commission's request.
    (18) BSTP shall also publish or make available upon request to any
end-user representative the necessary specifications, protocols, and
architecture of any interface created by BSTP for any end-user
representative.
3. Modifications to Exemption
    BSTP is required to file with the Commission amendments to its
application for exemption on Form CA-1 if it makes any material change
affecting its ETC or matching service--as summarized in this order, in
its Form CA-1 dated March 15, 2013, or in any subsequently filed
amendments to its Form CA-1--that would make such previously provided
information incomplete or inaccurate.
    In addition, the Commission may modify by order the terms, scope,
or conditions of BSTP's exemption from registration as a clearing
agency if it determines that such modification is necessary or
appropriate in the public interest, the protection of investors, or
otherwise in furtherance of the purposes of the Exchange Act.
Furthermore, the Commission may limit, suspend, or revoke this
exemption if it finds that BSTP has violated or is unable to comply
with any of the provisions set forth in this order if such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Exchange
Act.

B. SS&C

    In evaluating the SS&C application, the Commission has been guided
by the requirements of Section 17A of the Exchange Act. Among other
factors, the Commission has considered SS&C's risk management
procedures, operational capacity and safeguards, organizational
structure, and ability to operate in a manner that will satisfy the
fundamental goals of Section 17A. The Commission has also carefully
considered the comments received in response to the SS&C application,
as discussed above. The Commission believes that the SS&C application
supports the establishment of linked and coordinated facilities for the
clearance and settlement of securities transactions.
    Accordingly, for the reasons discussed throughout this order, the
Commission finds that the SS&C application, including the terms and
conditions set forth in the application and reproduced below, is
consistent with the public interest, the protection of investors, and
the purposes of Section 17A of the Exchange Act, and that SS&C is so
organized and has the capacity to be able to facilitate prompt and
accurate matching services.
    Below are the terms and conditions of SS&C's exemption.
1. Scope of Exemption
    This order grants SS&C an exemption from registration as a clearing
agency under Section 17A of the Exchange Act to provide an ETC and
matching service. The exemption is granted subject to conditions that
the Commission believes are necessary and appropriate in light of the
statutory requirements of Section

17A.\260\ This order and the conditions and limitations contained in it
are consistent with the Commission's statement in the Matching Release
that an entity that limits its clearing agency functions to providing
matching services does not have to be subject to the full range of
clearing agency regulation.
---------------------------------------------------------------------------

    \260\ The Commission is granting SS&C an exemption from clearing
agency registration, so it will not be considered a self-regulatory
organization under Section 3(a)(26) and therefore will not be
required to file rule changes in accordance with Section 19(b) of
the Exchange Act. The Commission is also not imposing a rule change
filing requirement as a condition of the exemption.
---------------------------------------------------------------------------

2. Conditions of Exemption
    The Commission is including specific conditions to this exemption
designed to facilitate the establishment of a national system for the
prompt and accurate clearance and settlement of securities transactions
and the establishment of linked and coordinated facilities for the
clearance and settlement of securities transactions. The conditions are
designed to promote competition, transparency, consistency, and
interoperability in the market for matching services.
i. Operational Conditions
    (1) Before beginning the commercial operation of its matching
service, SS&C shall provide the Commission with an audit report that
addresses all the areas discussed in the Commission's Automation Review
Policies (``ARP'').\261\
---------------------------------------------------------------------------

    \261\ See Exchange Act Release Nos. 27445 (Nov. 16, 1989), 54 FR
48703 (Nov. 24, 1989) (``ARP I''), and 29185 (May 9, 1991), 56 FR
22490 (May 15, 1991) (``ARP II''); see also Memorandum from the
Securities and Exchange Commission Division of Market Regulation to
SROs and NASDAQ (June 1, 2001) (``Guidance for Systems Outages and
System Change Notifications''), available at http://www.sec.gov/divisions/marketreg/sro-guidance-for-systems-outage-06-01-2001.pdf.
---------------------------------------------------------------------------

    (2) SS&C shall provide the Commission with annual reports and any
associated field work prepared by competent, independent audit
personnel that are generated in accordance with the annual risk
assessment of the areas set forth in the ARP. SS&C shall provide the
Commission (beginning in its first year of operation) with annual
audited financial statements prepared by competent independent audit
personnel.
    (3) SS&C shall report all significant systems outages to the
Commission. If it appears that the outage may extend for thirty minutes
or longer, SS&C shall report the systems outage immediately. If it
appears that the outage will be resolved in less than thirty minutes,
SS&C shall report the systems outage within a reasonable time after the
outage has been resolved.
    (4) SS&C shall provide the Commission with 20 business days advance
notice of any material changes that SS&C makes to the matching service
or ETC service. These changes will not require the Commission's
approval before they are implemented.
    (5) SS&C shall respond and require its service providers to respond
to requests from the Commission for additional information relating to
the matching service and ETC service, and provide access to the
Commission to conduct on-site inspections of all facilities (including
automated systems and systems environment), records, and personnel
related to the matching service and the ETC service. The requests for
information shall be made and the inspections shall be conducted solely
for the purpose of reviewing the matching service's and the ETC
service's operations and compliance with the federal securities laws
and the terms and conditions in any exemptive order issued by the
Commission with respect to SS&C's matching service and the ETC service.
    (6) SS&C shall supply the Commission or its designee with periodic
reports regarding the affirmation rates for institutional transactions
effected by institutional investors that utilize its matching service
and ETC service.
    (7) SS&C shall preserve a copy or record of all trade details,
allocation instructions, central trade matching results, reports and
notices sent to customers, service agreements, reports regarding
affirmation rates that are sent to the Commission or its designee, and
any complaint received from a customer, all of which pertain to the
operation of its matching service and ETC service. SS&C shall retain
these records for a period of not less than five years, the first two
years in an easily accessible place.
    (8) SS&C shall not perform any clearing agency function (such as
net settlement, maintaining a balance of open positions between buyers
and sellers, or marking securities to the market) other than as
permitted in an exemption issued by the Commission.
    (9) Before beginning the commercial operation of its matching
service, SS&C shall provide the Commission with copies of the
intercompany agreement between SS&C and SS&C Canada and shall notify
the Commission of any material changes to the service agreement.
ii. Interoperability Conditions
    (1) SS&C shall develop, in a timely and efficient manner, fair and
reasonable linkages between SS&C's matching service and other matching
services that are registered with the Commission or that receive or
have received from the Commission an exemption from clearing agency
registration that, at a minimum, allow parties to trades that are
processed through one or more matching services to communicate through
one or more appropriate effective interfaces with other matching
services.
    (2) SS&C shall devise and develop interfaces with other matching
services that enable end-user clients or any service that represents
end-user clients to SS&C (``end-user representative'') to gain a single
point of access to SS&C and other matching services. Such interfaces
must link with each other matching service so that an end-user client
of one matching service can communicate with all end-user clients of
all matching services, regardless of which matching service completes
trade matching prior to settlement.
    (3) If any intellectual property proprietary to SS&C is necessary
to develop, build, and operate links or interfaces to SS&C's matching
service, as described in these conditions, SS&C shall license such
intellectual property to other matching services seeking linkage to
SS&C on fair and reasonable terms for use in such links or interfaces.
    (4) SS&C shall not engage in any activity inconsistent with the
purposes of Section 17A(a)(2) of the Exchange Act,\262\ which section
seeks the establishment of linked or coordinated facilities for
clearance and settlement of transactions. In particular, SS&C will not
engage in activities that would prevent any other matching service from
operating a matching service that it has developed independently from
SS&C's matching service.
---------------------------------------------------------------------------

    \262\ 15 U.S.C. 78q-1(a)(2)(A)(ii).
---------------------------------------------------------------------------

    (5) SS&C shall support industry standards in each of the following
categories: communication protocols (e.g., TCP/IP, SNA); message and
file transfer protocols and software (e.g., FIX, WebSphere MQ, SWIFT);
message format standards (e.g., FIX); and message languages and
metadata (e.g., XML). However, SS&C need not support all existing
industry standards or those listed above by means of example. Within
three months of regulatory approval, SS&C shall make publicly known
those standards supported by SS&C's matching service. To the extent
that SS&C decides to support other

industry standards, including new and modified standards, SS&C shall
make these standards publicly known upon making such decision or within
three months of updating its system to support such new standards,
whichever is sooner. Any translation to/from these published standards
necessary to communicate with SS&C's system shall be performed by SS&C
without any significant delay or service degradation of the linked
parties' services.
    (6) SS&C shall make all reasonable efforts to link with each other
matching service in a timely and efficient manner, as specified below.
Upon written request, SS&C shall negotiate with each other matching
service to develop and build an interface that allows the two to link
matching services (``interface''). SS&C shall involve neutral industry
participants in all negotiations to build or develop interfaces and, to
the extent feasible, incorporate input from such participants in
determining the specifications and architecture of such interfaces.
Absent adequate business or technological justification,\263\ SS&C and
the requesting other matching service shall conclude negotiations and
reach a binding agreement to develop and build an interface within 120
calendar days of SS&C's receipt of the written request. This 120-day
period may be extended upon the written agreement of both SS&C and the
other matching service engaged in negotiations. For each other matching
service with whom SS&C reaches a binding agreement to develop and build
an interface, SS&C shall begin operating such interface within 90 days
of reaching a binding agreement and receiving all the information
necessary to develop and operate it. This 90-day period may be extended
upon the written agreement of both SS&C and the other matching service.
For each interface and within the same time SS&C must negotiate and
begin operating each interface, SS&C and the other matching service
shall agree to ``commercial rules'' for coordinating the provision of
matching services through their respective interfaces, including
commercial rules: (A) Allocating responsibility for performing matching
services; and (B) allocating liability for service failures. SS&C shall
also involve neutral industry participants in negotiating applicable
commercial rules and, to the extent feasible, take input from such
participants into account in agreeing to commercial rules. At a
minimum, each interface shall enable SS&C and the other matching
service to transfer between them all trade and account information
necessary to fulfill their respective matching responsibilities as set
forth in their commercial rules (``trade and account information'').
Absent an adequate business or technological justification, SS&C shall
develop and operate each interface without imposing conditions that
negatively impact the other matching service's ability to innovate its
matching service or develop and offer other value-added services
relating to its matching service or that negatively impact the other
matching service's ability to compete effectively against SS&C.
---------------------------------------------------------------------------

    \263\ The failure of neutral industry participants to be
available or to submit their input within the 120 day or 90 day time
periods set forth in this paragraph shall not constitute an adequate
business or technological justification for failing to adhere to the
requirements set forth in this paragraph.
---------------------------------------------------------------------------

    (7) In order to facilitate fair and reasonable linkages between
SS&C and other matching services, SS&C shall publish or make available
to any other matching service the specifications for any interface and
its corresponding commercial rules that are in operation within 20 days
of receiving a request for such specifications and commercial rules.
Such specifications shall contain all the information necessary to
enable any other matching services not already linked to SS&C through
an interface to establish a linkage with SS&C through an interface or a
substantially similar interface. SS&C shall link to any other matching
service, if the other matching service so opts, through an interface
substantially similar to any interface and its corresponding commercial
rules that SS&C is currently operating. SS&C shall begin operating such
substantially similar interface and commercial rules with the other
matching service within 90 days of receiving all the information
necessary to operate that link. This 90-day period may be extended upon
the written agreement of both SS&C and the other matching service that
plans to use that link.
    (8) SS&C and respective other matching services shall bear their
own costs of building and maintaining an interface, unless otherwise
negotiated by the parties.
    (9) SS&C shall provide to all other matching services and end-user
representatives that maintain linkages with SS&C sufficient advance
notice of any material changes, updates, or revisions to its interfaces
to allow all parties who link to SS&C through affected interfaces to
modify their systems as necessary and avoid system downtime,
interruption, or system degradation.
    (10) SS&C and each other matching service shall negotiate fair and
reasonable charges and terms of payment for the use of their interface
with respect to the sharing of trade and account information
(``interface charges''). In any fee schedule adopted under conditions
B.2.ii(10), B.2.ii(11), or B.2.ii(12) herein, SS&C's interface charges
shall be equal to the interface charges of the respective other
matching service.
    (11) If SS&C and the other matching service cannot reach agreement
on fair and reasonable interface charges within 60 days of receipt of
the written request, SS&C and the other matching service shall submit
to binding arbitration under the rules promulgated by the American
Arbitration Association. The arbitration panel shall have 60 days to
establish a fee schedule. The arbitration panel's establishment of a
fee schedule shall be binding on SS&C and the other matching service
unless and until the fee schedule is subsequently modified or abrogated
by the Commission or SS&C and the other matching service mutually agree
to renegotiate.
    (12)(A) The following parameters shall be considered in determining
fair and reasonable interface charges: (i) The variable cost incurred
for forwarding trade and account information to other matching
services; (ii) the average cost associated with the development of
links to end-users and end-user representatives; and (iii) SS&C's
interface charges to other matching services. (B) The following factors
shall not be considered in determining fair and reasonable interface
charges: (i) The respective cost incurred by SS&C or the other matching
service in creating and maintaining interfaces; (ii) the value that
SS&C or the other matching service contributes to the relationship;
(iii) the opportunity cost associated with the loss of profits to SS&C
that may result from competition from other matching services; (iv) the
cost of building, maintaining, or upgrading SS&C's matching service; or
(v) the cost of building, maintaining, or upgrading value added
services to SS&C's matching service. (C) In any event, the interface
charges shall not be set at a level that unreasonably deters entry or
otherwise diminishes price or non-price competition with SS&C by other
matching services.
    (13) SS&C shall not charge its customers more for use of its
matching service when one or more counterparties are customers of other
matching services than SS&C charges its customers for use of its
matching service when all counterparties are customers of SS&C. SS&C
shall not charge customers any additional amount for forwarding to or
receiving trade and account information from other matching

services called for under applicable commercial rules.
    (14) SS&C shall maintain its quality, capacity, and service levels
in the interfaces with other matching services (``matching services
linkages'') without bias in performance relative to similar
transactions processed completely within SS&C's service. SS&C shall
preserve and maintain all raw data and records necessary to prepare
reports tabulating separately the processing and response times on a
trade-by-trade basis for (A) completing its matching service when all
counterparties are customers of SS&C (B) completing its matching
service when one or more counterparties are customers of other matching
services; or (C) forwarding trade information to other matching
services called for under applicable commercial rules. SS&C shall
retain the data and records for a period not less than six years.
Sufficient information shall be maintained to demonstrate that the
requirements of condition B.2.ii(15) below are being met. SS&C and its
service providers shall provide the Commission with reports regarding
the time it takes SS&C to process trades and forward information under
various circumstances within 30 days of the Commission's request for
such reports. However, SS&C shall not be responsible for identifying
the specific cause of any delay in performing its matching service
where the fault for such delay is not attributable to SS&C.
    (15) SS&C shall process trades or facilitate the processing of
trades by other matching services on a first-in-time priority basis.
For example, if SS&C receives trade and account information that SS&C
is required to forward to other matching services under applicable
commercial rules (``pass-through information'') prior to receiving
trade and account information from SS&C's customers necessary to
provide matching services for a trade in which all parties are
customers of SS&C (``intra-hub information''), SS&C shall forward the
pass-through information to the designated other matching service prior
to processing the intra-hub information. If, on the other hand, the
information were to come in the reverse order, SS&C shall process the
intra-hub information before forwarding the pass-through information.
    (16) SS&C shall sell access to its databases, systems or
methodologies for transmitting settlement instructions (including
settlement instructions from investment managers, broker-dealers, and
custodian banks) and/or transmitting trade and account information to
and receiving authorization responses from settlement agents on fair
and reasonable terms to other matching services and end-user
representatives. Such access shall permit other matching services and
end-user representatives to draw information from those databases,
systems, and methodologies for transmitting settlement instructions
and/or transmitting trade and account information to and receiving
authorization responses from settlement agents for use in their own
matching services or end-user representatives' services. The links
necessary for other matching services and end-user representatives to
access SS&C's databases, systems or methodologies for transmitting
settlement instructions and/or transmitting trade and account
information to and receiving authorization responses from settlement
agents will comply with conditions B.2.ii(3), B.2.ii(5), B.2.ii(9),
B.2.ii(14) and B.2.ii(15) above.
    (17) For the first five years from the date of an exemptive order
issued by the Commission with respect to SS&C's matching service, SS&C
shall provide the Commission with reports every six months sufficient
to document SS&C's adherence to the obligations relating to interfaces
set forth in conditions B.2.ii(6) through B.2.ii(13) and B.2.ii(16)
above. SS&C shall incorporate into such reports information including
but not limited to (A) all other matching services linked to SS&C (B)
the time, effort, and cost required to establish each link between SS&C
and other matching services; (C) any proposed links between SS&C and
other matching services as well as the status of such proposed links;
(D) any failure or inability to establish such proposed links or fee
schedules for interface charges; (E) any written complaint received
from other matching services relating to its established or proposed
links with SS&C and (F) if SS&C failed to adhere to any of the
obligations relating to interfaces set forth in conditions B.2.ii(6)
through B.2.ii(13) and B.2.ii(16) above, its explanation for such
failure. The Commission shall treat information submitted in accordance
with this condition as confidential, non-public information, subject to
the provisions of applicable law. If any other matching service seeks
to link with SS&C more than five years after issuance of an exemptive
order issued by the Commission with respect to SS&C's matching service,
SS&C shall notify the Commission of the other matching service's
request to link with SS&C within ten days of receiving such request. In
addition, SS&C shall provide reports to the Commission in accordance
with this paragraph commencing six months after the initial request for
linkage is made until one year after SS&C and the other matching
service begin operating their interface. The Commission reserves the
right to request reports from SS&C at any time. SS&C shall provide the
Commission with such updated reports within thirty days of the
Commission's request.
    (18) SS&C shall also publish or make available upon request to any
end-user representative the necessary specifications, protocols, and
architecture of any interface created by SS&C for any end-user
representative.
3. Modifications to Exemption
    SS&C is required to file with the Commission amendments to its
application for exemption on Form CA-1 if it makes any material change
affecting its ETC or matching service--as summarized in this order, in
its Form CA-1 dated April 15, 2013, or in any subsequently filed
amendments to its Form CA-1--that would make such previously provided
information incomplete or inaccurate.
    In addition, the Commission may modify by order the terms, scope,
or conditions of SS&C's exemption from registration as a clearing
agency if it determines that such modification is necessary or
appropriate in the public interest, the protection of investors, or
otherwise in furtherance of the purposes of the Exchange Act.
Furthermore, the Commission may limit, suspend, or revoke this
exemption if it finds that SS&C has violated or is unable to comply
with any of the provisions set forth in this order if such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Exchange
Act.

V. Conclusion

    The Commission believes that the BSTP and SS&C applications
demonstrate that BSTP and SS&C will have sufficient operational and
processing capabilities to facilitate prompt and accurate matching
services and to support the establishment of linked and coordinated
facilities for the clearance and settlement of securities transactions.
The Commission also notes that BSTP and SS&C's exemptions will be
subject to conditions that are designed to enable the Commission to
monitor BSTP and SS&C's risk management procedures, operational
capacity and safeguards, corporate structure, and ability to operate in
a manner to further the fundamental goals of Section 17A of the
Exchange Act. Therefore, for the reasons discussed

throughout this order, the Commission finds that the BSTP and SS&C
applications are consistent with the public interest, the protection of
investors, and the purposes of Section 17A of the Exchange Act.
    IT IS HEREBY ORDERED, pursuant to Section 17A(b)(1) of the Exchange
Act, that the applications for exemption from registration as a
clearing agency under Section 17A(b)(1) filed by Bloomberg STP LLC
(File No. 600-33) and SS&C Technologies, Inc. (File No. 600-34) be, and
hereby are, approved within the scope described in this order and
subject to the terms and conditions contained in this order.

    By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30412 Filed 11-30-15; 8:45 am]
 BILLING CODE 8011-01-P