Government Securities ATSs where an intermediate functionality or
entity is used by the ATS as the primary means to bring together the
orders for securities of multiple buyers and sellers using established
nondiscretionary methods (such as providing the means to enter, display
or execute orders) and in this manner may be considered part of the ATS
for purposes of Regulation ATS and Form ATS-G.\237\
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    \237\ See NMS Stock ATS Adopting Release, supra note 1, at 38832
and 38844.
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Request for Comment
    75. Are there any means for entering orders and trading interest
into the Government Securities ATS where a higher level of detail
should be required to explain their operation? Are there any aspects of
those means of entry that are particularly important?
6. Connectivity and Co-Location
    Part III, Item 6(a) of Form ATS-G would ask whether the Government
Securities ATS offers co-location and related services, and if so,
would require a summary of the terms and conditions for such services,
including the speed and connection (e.g., fiber, copper) options
offered. Part III, Item 6(c) of Form ATS-G would require a Government
Securities ATS to indicate whether it provides any other means besides
co-location and related services described in the Item to increase the
speed of communication with the ATS, and if so, to explain the means
and offer a summary of the terms and conditions for its use. The
Commission is also proposing to require in Part III, Item 6(e) the
Government Securities ATS to indicate whether it offers any means to
reduce the speed of communication with the ATS and if so, to provide a
summary of the terms and conditions for its use.
    Latency is an important feature of trading in certain government
securities and market participants are interested in understanding the
functionalities employed by Government Securities ATSs to influence
it.\238\ The Item would require a summary of the terms and conditions
where a trading venue employs mechanisms to increase the latency or the
length of time for orders, trading interest, or other information to
travel from a user to the system. Subscribers of co-location services
can experience faster or slower connection speeds to a Government
Securities ATS depending on factors such as the distance of the
customer servers from the matching engine, or the use or non-use of
``coiling'' to its matching engine to equalize connection speeds among
subscribers, among others. Such differences in connection speed or
latency would be required to be disclosed under Part III, Item 6(b).
The Commission believes that the information disclosed in Item 6 would
help market participants understand their connectivity options to the
ATS and expedite the order entry process for subscribers.
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    \238\ See October 15 Staff Report, supra note 14, at 36-37;
Treasury Request for Information, supra note 10, at 3928. See also
Letter from Dan Cleaves, Chief Executive Officer, BrokerTec
Americas, and Jerald Irving, President, ICAP Securities USA LLC, to
David R. Pearl, Office of the Executive Secretary, Treasury
Department, dated April 22, 2016 (``BrokerTec/ICAP Letter''), at 3-
4, available at https://www.treasurydirect.gov/instit/statreg/gsareg/ICAPTreasuryRFILetter.pdf; Letter from C. Thomas Richardson,
Managing Director, Head of Electronic Trading Service, Wells Fargo
Securities, and Cronin McTigue, Managing Director, Head of Liquid
Products, Wells Fargo Securities, to Treasury Department, dated
April 21, 2016, at 6-7, available at https://www.treasurydirect.gov/instit/statreg/gsareg/RFIcommentWellsFargo.pdf.
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Request for Comment
    76. Are there any aspects of the means for increasing or reducing
the speed of communication with Government Securities ATSs that the
Commission should specifically require under this Item?
7. Order Types and Attributes
    Part III, Item 7 would require a Government Securities ATS to
identify and explain each order type offered by the ATS. To provide
transparency to market participants and the Commission, the Item would
require a complete and detailed description of the order types
available on the Government Securities ATS, their characteristics,
operations, and how they are handled. The Commission believes that all
market participants should have full information about the operations
of order types available on a Government Securities ATS for market
participants to comprehensively understand how their orders and trading
interest will be handled and executed on the ATS. Order types are a
primary means by which users of a Government Securities ATS communicate
their instructions for handling their trading interest to the ATS.
Given the importance, diversity, and complexity of order types, the
Commission is proposing to require Government Securities ATSs to
disclose the information called for by Part III, Item 7 on proposed
Form ATS-G.
    The Commission believes that market participants should have
sufficient information about all aspects of the operations of order
types available on a Government Securities ATS to understand how to use
order types to achieve their trading objectives, as well as to
understand how order types used by other market participants could
affect their trading interest. The Commission believes that a detailed
description of the characteristics of the order types of a Government
Securities ATS would assist subscribers in better understanding how
their orders would function and interact with other orders

on the ATS. It also would allow market participants to see what order
types could be used by other market participants, which could affect
the probability, timing, and quality of their own executions. For
example, if the time priority of a pegged order changes in response to
changes in the reference price, that would affect the likelihood of
execution for such an order.
Request for Comment
    77. What are the most prevalent order types on Government
Securities ATSs? Are there more important means than order types for
subscribers to communicate the handling of their trading interest on
Government Securities ATSs? Does Form ATS-G capture all of the means
for subscribers to communicate the handling of their trading interest?
Are there any aspects of order types on Government Securities ATSs that
should be specifically addressed in the Item? If yes, please explain.
8. Order Sizes
    Part III, Item 8 would require a Government Securities ATS to
provide information about any requirements related to the permissible
size of trading interest (e.g., minimum or maximum size, odd-lot,
mixed-lot, trading increments) and specify any trading interest size
requirements and any related handling procedures.\239\ This information
would inform subscribers about the permissible size of orders and
trading interest that a subscriber could enter on the ATS. For example,
if a Government Securities ATS has minimum or maximum order sizes, or a
minimum increment size requirement for order modifications, those
requirements and related handling procedures would be responsive to the
Item. Broker-dealer operators employ market access and risk management
controls and procedures that prevent the entry of erroneous orders and
orders that are above a subscriber's predetermined threshold. If order
size requirements are imposed on subscribers as part of a risk
management procedure, an explanation of those procedures as they relate
to the ATS would be responsive to this Item. An explanation of how a
Government Securities ATS's requirements and conditions related to the
size of trading interest differ among subscribers and persons would
also provide a market participant with information regarding how its
trading interest would be handled vis-[agrave]-vis other market
participants. The information that would be required by Item 8 would
also be useful to the Commission's monitoring of developments in market
structure.
---------------------------------------------------------------------------

    \239\ The Commission is consolidating the information requested
in Part III, Item 8(a)-8(f) of Form ATS-N into 2 subparts (Part III,
Item 8(a) and 8(b)) in Form ATS-G to streamline the format of
responses. The Commission believes the information requested is the
same.
---------------------------------------------------------------------------

Request for Comment
    78. Are there any operations or procedures, either of an ATS or a
broker-dealer operator, that could limit the entry, or size of, a
subscriber's orders submitted to the ATS? If so, please describe these
operations or procedures and explain why they are important to
subscribers.
9. Indications of Interest
    Part III, Item 9 of proposed Form ATS-G is designed to provide
information about whether the Government Securities ATS sends or
receives any messages indicating trading interest, and if so, to
identify and explain the use of the messages, including information
contained in messages, how and when messages are transmitted, the type
of persons that receive the message, the possible responses to IOIs by
recipients, and the conditions under which the messages might result in
an execution in the ATS.\240\
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    \240\ See NMS Stock ATS Adopting Release, supra note 1, at 38847
for additional discussion of IOIs, actionable IOIs, conditional
orders, and similar functionalities. The Commission removed the
terms ``conditional orders'' and ``actionable IOIs'' that were
included on the corresponding item on Form ATS-N. These terms appear
to be less prevalent in the government securities market. However,
the Commission believes the term ``IOI'' used herein would encompass
both conditional orders and actionable IOIs.
---------------------------------------------------------------------------

    Government Securities ATSs use IOIs to convey trading interest
available on those trading venues. Understanding the manner in which
Government Securities ATSs use messages that convey trading interest,
such as IOIs and similar functionalities, could be useful to market
participants for finding a contra-party as well as understanding
potential information leakage. In the Commission's experience, the
information that Government Securities ATS include in IOIs can vary,
including different combinations of symbol, size, and/or price, and the
Commission believes that this information would be relevant to market
participants when understanding what information about their orders and
trading interest is communicated to others and assessing potential
information leakage. Identifying the type of persons that receive the
message and possible responses, moreover, could help market
participants understand when an IOI would result in a match, how market
participants can use the ATS, who will see their trading interest, how
their trading interest will be executed, and the potential for
information leakage. If a Government Securities ATS employs a
negotiation functionality that begins with IOIs to arrive at matches
between subscribers, the ATS would describe the steps undertaken by the
ATS from the initial IOI to the eventual match of trading interest.
Request for Comment
    79. Are there aspects of IOIs as they are used in Government
Securities ATSs that are not covered by this Item? What information
about IOIs or the process for transmitting IOIs are important to
subscribers?
10. Opening and Reopening
    Part III, Item 10 of proposed Form ATS-G is designed to provide
information about whether a Government Securities ATS uses any special
procedures to match orders at the opening, or to set a single opening
or reopening price to, for example, maximize liquidity and accurately
reflect market conditions at the opening or reopening of trading. The
Commission believes that market participants would likely want to know
about any special opening or reopening processes employed by a
Government Securities ATS, including which order types participate in
the ATS's opening or reopening processes.
    Information about when the Government Securities ATS will price and
prioritize orders and trading interest during the opening or reopening
of the ATS would provide market participants with the information they
need to plan and execute their trading strategies during these periods.
The Item would also, for example, require disclosure of any procedures
to match orders to set a single opening or reopening price to maximize
liquidity and accurately reflect market conditions at the opening or
reopening of trading. For any orders allowed to be submitted before an
ATS opens for trading, the Item would require an explanation of what
priority rules would apply to those orders. The Commission believes
most participants consider important the procedures for the pricing and
priority of orders and trading interest, and the order types allowed
because these rules and procedures can directly impact their execution
price.

11. Trading Services, Facilities and Rules
    Part III, Item 11(a) would require a Government Securities ATS to
provide a summary of the structure of the ATS marketplace and explain
the means and facilities for bringing together the orders of multiple
buyers and sellers on the ATS. Part III, Item 11(c) would require a
Government Securities ATS to explain the established, non-discretionary
rules and procedures of the ATS. Part III, Item 11 is designed to
solicit disclosures about the facilities, functionalities, and
mechanisms that the Government Securities ATS uses to match the orders
and trading interest of counterparties and facilitate transactions on
the ATS and to inform market participants and the Commission about the
type of marketplace the ATS provides (e.g., crossing system, auction
market, limit order matching book, voice).
    An ATS brings together orders when orders entered into the system
for a given security have the opportunity to interact with other orders
entered into the system for the same security.\241\ An ATS can bring
together orders through various methods. For instance, an organization,
association, or group of persons brings together orders if it displays,
or otherwise represents, trading interests entered on the system, such
as a consolidated quote screen, to users.\242\ The bringing together of
orders can also occur if subscribers' orders are centrally collected
for future processing and execution through, for example, a limit order
matching book that allows subscribers to display buy and sell orders in
particular securities and to obtain execution against matching orders
contemporaneously entered or stored in the system.\243\ As explained
above, to qualify for the Exchange Act Rule 3a1-1(a)(2) exemption from
the statutory definition of ``exchange,'' an ATS must, among other
things, bring together the orders of multiple buyers and sellers.\244\
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    \241\ See Regulation ATS Adopting Release, supra note 35, at
70849.
    \242\ See id.
    \243\ See id.
    \244\ See id. As explained in the Regulation ATS Adopting
Release, systems in which there is only a single seller, such as
systems that permit issuers to sell their own securities to
investors, would not be included within Rule 3b-16. See id. at
70849. The Commission emphasized in the Regulation ATS Adopting
Release that the mere interpositioning of a designated counterparty
as riskless principal for settlement purposes after the purchasing
and selling counterparties to a trade have been matched would not,
by itself, mean that the system does not have multiple buyers and
sellers. See id.
---------------------------------------------------------------------------

    Government Securities ATSs may offer subscribers various types of
trading mechanisms to bring together orders that would be disclosed
under Part III, Item 11. For example, many ATSs bring together multiple
buyers and sellers using limit order matching systems. Other ATSs use
crossing mechanisms that allow participants to enter unpriced orders to
buy and sell securities, with the ATS's system crossing orders at
specified times at a price derived from another market.\245\ Some ATSs
use an auction mechanism (or similar workup functionality) that matches
multiple buyers and sellers by first pausing execution in a certain
security for a set amount of time, during which the ATS's system seeks
out and/or concentrates liquidity for the auction; after the trading
pause, orders will execute at either a single auction price or
according to the priority rules for the auction's execution. In a
workup, an ATS may have a private phase, where the two original contra
parties submitting orders can negotiate, and a public phase where all
subscribers can submit orders at the workup price. Some ATSs use a
blotter scraping functionality, which may inform the ATS about trading
interest residing on a participant's order management system but not
yet entered into the ATS; the ATS or broker-dealer operator oftentimes
can automatically generate orders from the trading interest and enter
them into the ATS on behalf of the subscriber, in accordance with the
relevant terms and conditions, when certain contra-side trading
interest exists in the ATS. Certain ATSs may use a voice system to
bring together orders as well, or a combination of voice and electronic
systems. A Government Securities ATS could also offer services or
functionalities to facilitate trading on, or source pricing for, the
Government Securities ATS in conjunction with related markets for
government securities that would be encompassed under this Item.\246\
---------------------------------------------------------------------------

    \245\ See id. at 70849 n.37.
    \246\ If a Government Securities ATS offers subscribers a
functionality, for example, in conjunction with a non-government
securities market, the Government Securities ATS would provide
information about the use of the functionality with the ATS and non-
government securities market in Part III, Item 16 of proposed Form
ATS-G.
---------------------------------------------------------------------------

    The Commission believes that information about the trading
facilities, functionalities, and mechanisms offered by a Government
Securities ATS would help market participants evaluate whether the
operations of the ATS comports with their trading strategies. Part III,
Item 11(a) of proposed Form ATS-G would require Government Securities
ATSs to provide a summary of the structure of the ATS marketplace,
which would describe the type of market the ATS operates, such as a
limit order book, auction market, or crossing system, in a more concise
manner. This Item would require more detailed responses when explaining
the means and facilities for bringing together the orders of multiple
buyers and sellers on the Government Securities ATS. The Commission is
also proposing to request information on whether the means and
facilities are the same for all subscribers and the broker-dealer
operator in Part III, 11(b) and is formatting the subpart request as a
``yes'' or ``no'' question.
    Part III, Item 11(c) is designed to inform market participants
about the rules and procedures used to determine how orders and trading
interest may interact upon being entered into a Government Securities
ATS.\247\ The Commission previously explained in the Regulation ATS
Adopting Release that use of established, non-discretionary methods
could include operation of a trading facility or the setting of rules
governing subscribers' trading.\248\ For example, the Commission
considers the use of an algorithm by an electronic trading system,
which sets trading procedures and priorities, to be a trading facility
that uses established, non-discretionary methods.\249\ Similarly, the
Commission has previously stated that rules imposing execution
priorities, such as time and price priority rules, would be
``established, non-discretionary methods.'' \250\ As proposed, a
Government Securities ATS would be required to address each aspect of
the non-discretionary rules and procedures that are specifically listed
as being included in Part III, Item 11(c).
---------------------------------------------------------------------------

    \247\ As compared to Part III, Item 11(c) of Form ATS-N, the
Commission has added examples of functionalities used in the
government securities market for which the Government Securities ATS
would be required to explain the non-discretionary rules and
procedures, if applicable.
    \248\ See Regulation ATS Adopting Release, supra note 35, at
70851-52.
    \249\ See id. at 70851.
    \250\ See id. at 70852.
---------------------------------------------------------------------------

    The Commission is also proposing that a Government Securities ATS
disclose pricing methodologies used for each type of security traded by
the ATS under Part III, Item 11(c). For example, orders may be priced
using spreads off of a benchmark price, or spreads between two
different maturities of a security. An ATS may also restrict the
allowable deviation from a benchmark price, or allow for indicative
pricing of certain securities. If a transaction has more than one leg,
the ATS may price both legs according to a price derived

from one of the securities traded. In response to this request, a
Government Securities ATS would be required to describe the ATS's
procedures for determining all pricing methodologies and to the extent
the pricing methodologies differ among subscribers and the broker-
dealer operator, the ATS must disclose those differences.
    Item 11 would require Government Securities ATSs to disclose the
various terms and conditions under which orders interact and match.
Some Government Securities ATSs may offer price-time priority to
determine how to match orders (potentially with various exceptions),
while others may offer midpoint-only matching with time priority. Some
Government Securities ATSs might also take into account other factors
to determine priority. For example, a Government Securities ATS may
assign either a lower or higher priority to an order entered by a
subscriber in a certain class (e.g., orders of principal traders or
retail investors) or sent from a particular source (e.g., orders sent
by an algorithm or similar functionality) when compared to an equally
priced order entered by a different subscriber or via a different
source. Furthermore, a Government Securities ATS might elect to apply
different priority rules for matching IOIs than it does for matching
orders. An ATS may also have rules concerning how the ATS would handle
the order of a subscriber who seeks to execute at a size larger than
what is available at the existing workup price. Also, if applicable,
the Item would require an explanation of which party to a trade would
receive any price improvement depending on the priority, order type,
and prices of the matched orders and the percentage of price
improvement the party would receive. A broker-dealer operator could
also act as the counterparty for each side of a transaction that
matches on its ATS. These disclosures would allow the Commission to
better evaluate whether the entity that filed a proposed Form ATS-G
meets the criteria of Exchange Act Rule 3b-16 and the definition of a
Government Securities ATS.
    A description of the ``established, non-discretionary rules and
procedures'' of the Government Securities ATS is a principal
requirement of Item 11(c), and the Commission is proposing to require
that any differences among subscribers and the broker-dealer operator
related to these methods be identified and explained in Part III, Item
11(d).
Request for Comment
    80. Are there any specific means or facilities used to bring
together multiple buyers and sellers on ATSs that trade government
securities and repos that should be specifically included as an example
in this Item? Are there any rules and procedures that govern trading of
government securities and repos that should be specifically included as
examples in this Item?
12. Liquidity Providers
    Part III, Item 12 would request information about any formal or
informal arrangements with any subscriber or the broker-dealer operator
to provide orders or trading interest to the Government Securities ATS.
The Item is designed to provide information about arrangements whereby
a liquidity provider undertakes to buy or sell continuously, or to meet
specified thresholds of trading or quoting activity. A Government
Securities ATS may want to ensure that there is sufficient liquidity in
a particular government security to incentivize market participants to
send order flow in that government security to the ATS. To do this, the
ATS may engage certain subscribers to provide liquidity to the
Government Securities ATS and perform similar functions to that of a
market maker on a national securities exchange.\251\ The obligations
required of liquidity providers and the benefits that they provide
could vary across Government Securities ATSs. The Commission believes
that information about liquidity providers would be useful to
subscribers and market participants who, for example, may want their
orders to only interact with agency orders (and not with those of a
liquidity provider), or, conversely, may themselves want to become
liquidity providers on the Government Securities ATS. The Commission
believes that such arrangement could take many forms and the function
of the liquidity provider on an ATS could depend on the structure and
trading protocols of the ATS. Therefore, this Item could cover, for
example, arrangements or agreements between the broker-dealer operator
and another party to trade on the Government Securities ATS. The
proposed Item does not cover agreements with a subscriber that has no
obligation to buy or sell government securities or repos on the ATS.
---------------------------------------------------------------------------

    \251\ These liquidity providers may quote in a particular
government security on the ATS during trading hours and may receive
a benefit for performing this function, such as discounts on fees,
rebates, or the opportunity to execute with a particular type of
segmented order flow.
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Request for Comment
    81. Are there any arrangements between Government Securities ATSs
and market participants to provide orders or trading interest to the
Government Securities ATS that may not be required by this Item but
should be? If any, what is the nature of those arrangements and why are
they important to disclose publicly on Form ATS-G?
13. Segmentation; Notice
    Part III, Item 13 of proposed Form ATS-G would require a Government
Securities ATS to disclose information about how orders and trading
interest in the ATS can be segmented into categories, classifications,
tiers, or levels. This Item would provide market participants with an
understanding of the categories of order flow or types of market
participants with which they may interact. In addition, the information
provided would allow them to both assess the consistency of a segmented
group and determine whether the manner in which the trading interest is
segmented comports with their views of how certain trading interest
should be categorized. Disclosure of the procedures and parameters used
to segment categories would allow a market participant to determine
whether its view of what constitutes certain trading interest it wants
to seek or avoid is classified in the same way by the Government
Securities ATS. For example, a subscriber may find it useful to
understand the standards a Government Securities ATS uses to categorize
high frequency trading firms so that it can compare the criteria used
by the ATS with its view of what constitutes a high frequency trading
firm, and thus be able to successfully trade against or avoid such
trading interest. Similarly, information regarding the procedures
applicable to trading among segmented categories would allow market
participants to evaluate whether they can successfully trade against or
avoid the segments of trading interest.
    Some Government Securities ATSs segment order flow entered in the
ATS according to various categories for purposes of order interaction.
For example, a Government Securities ATS could elect to segment trading
interest by type of participant (e.g., buy-side or sell-side firms,
PTFs, agency-only firms, firms above or below certain assets under
management thresholds). When segmenting order flow in the ATS, a
Government Securities ATS might look to the underlying source of the
trading interest such as the trading interest of retail customers. Some
Government Securities ATSs segment by the nature of the trading
activity, which could include segmenting by patterns of

behavior, time horizons of traders, or the passivity or aggressiveness
of trading strategies. Government Securities ATSs might use some
combination of these criteria or other criteria altogether. The ATS
might use these segmented categories to design its order interaction
rules, allowing only orders from certain categories to interact with
each other.
    The Commission recognizes the potential concern that describing the
precise criteria used by the ATS to segment orders and trading interest
could result in gaming by subscribers of those criteria and thus, the
reduction of the effectiveness of segmentation as a control. On the
other hand, the Commission believes that market participants are
interested in understanding how their orders and trading interest are
categorized on the ATS and the types of market participants that would
interact with those orders and trading interest. The Commission
believes that Part III, Item 13 of proposed Form ATS-G appropriately
balances these competing interests by soliciting a summary of the
parameters for each segmented category. By requiring Government
Securities ATSs to provide a summary of these parameters on Form ATS-G,
rather than a detailed analysis of the parameters and how they are
calculated, this Item is designed to avoid responses that could allow
the gaming or manipulation of segmentation criteria.
    The Commission believes disclosing the origin of a customer order
of a broker-dealer could be a form of segmentation because it can
facilitate users restricting their trading to only certain types of
market participants and it can contribute to information leakage and
adverse selection of orders of institutional investors, who generally
trade passively. Accordingly, the Commission is proposing to require a
Government Securities ATS to disclose if it identifies orders or
trading interest entered by a customer of a broker-dealer on the ATS as
a customer order.
Request for Comment
    82. What information about the segmentation of order flow by a
Government Securities ATS would be important to persons that use the
services of the ATS?
14. Counter-Party Selection
    Part III, Item 14 of proposed Form ATS-G would require Government
Securities ATSs to provide information about whether orders or trading
interest can be designated to interact or not interact with certain
orders or trading interest in the ATS. To analyze whether the ATS is an
appropriate venue to accomplish their trading objectives, market
participants have an interest in knowing whether--and how--they may
designate their orders or trading interest to interact or avoid
interacting with specific orders, trading interest, or persons on the
ATS. Part III, Item 14 is designed to require disclosure of such
information.
    For instance, the disclosures proposed under this Item would allow
a participant in the Government Securities ATS to know whether it can
interact with certain categories of orders and trading interest on the
ATS or can designate an order submitted to the ATS to interact only
with orders of certain other types of ATS participants. For example,
the ATS might allow subscribers to choose from categories of orders or
categories of subscribers that the broker-dealer operator segments in
the ATS. For example, buy-side or institutional subscribers might seek
to trade only against other buy-side or institutional order flow, or
might seek to avoid trading against PTFs or so-called high frequency
trading firms. Also, it would also be responsive to this Item for an
ATS to state whether a subscriber can restrict interacting with its own
orders, whether such restrictions are by default or only upon
subscriber request, and any applicable limitations on such
restrictions. This Item would require description of any procedures
allowing a subscriber to limit its counterparty on an order-by-order
basis or a participant-by-participant basis, how it would go about
doing so, and how such selection would affect the interaction and
priority of trading interest. For example, an ATS would include in its
response to this Item whether a participant can select a category of
orders or category of subscribers for counterparty designation by
marking its order to interact with them or whether the broker-dealer
operator performs the action, and also, whether the broker-dealer
operator implements the counterparty designation during the same
trading day as the subscriber's selection or on a date thereafter.
Request for Comment
    83. Should proposed Form ATS-G request more or less information
about how orders or trading interest can be designated to interact or
not interact with certain orders or trading interest in the Government
Securities ATS? Are there important forms of counter-party selection
that the Commission should address?
15. Display
    Part III, Item 15 of proposed Form ATS-G would require a Government
Securities ATS to disclose how and when orders and trading interest
bound for or resting in the ATS may be displayed or made known to any
person. The Commission believes that many market participants are
sensitive to precisely how and when their trading interest is displayed
or otherwise made known both inside and outside the Government
Securities ATS as such information could result in other market
participants trading ahead of their positions, and thus in inferior
execution prices. These participants could use these disclosures to
evaluate whether sending orders to a particular Government Securities
ATS would achieve their trading strategies.
    The display of subscriber orders and trading interest can occur in
a number of ways. For instance, a Government Securities ATS may offer a
direct data feed from the ATS that contains real-time order
information.\252\ Some ATSs have arrangements, whether formal or
informal (oral or written) with third parties to display the Government
Securities ATS's trading interest outside of the ATS, such as IOIs from
the subscribers being displayed on vendor systems, or arrangements with
third parties to transmit IOIs between subscribers. An ATS would be
required to include this type of information in its response to this
Item.
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    \252\ In the case of a Government Securities ATS offering a
direct data feed with information about orders or trading interest
in the ATS, the ATS would be required to disclose under Part III,
Item 15 what information the data feed provides about the orders and
trading interest, the associated timing in receiving the feed (e.g.,
real-time, delayed), how a subscriber would receive the feed (e.g.,
connectivity), and if all subscribers are treated the same in
receiving the feed, including whether all subscribers are eligible
to receive it and any differences in latency receiving the feed.
---------------------------------------------------------------------------

    The Commission believes that subscribers that use the services of
the Government Securities ATSs, including customers of the broker-
dealer operator, have limited information about the extent to which
their orders and trading interest sent to the ATS could be displayed
outside the ATS. For instance, when a Government Securities ATS sends
electronic messages outside of the ATS that expose the presence of
orders or other trading interest on the ATS, it is displaying or making
known orders or other trading interest on the ATS. An ATS would be
required to disclose the circumstances under which the ATS sends these
messages, the types of market participants that received them, and the
information contained in the messages, including the exact

content of the information, such as symbol, price, size, attribution,
or any other information made known. In another example of display,
subscribers' orders or trading interests directed to the Government
Securities ATS could pass through the broker-dealer operator's non-ATS
systems or functionalities before entering the ATS, such as an
algorithm or a SOR. Such non-ATS systems and functionalities could be
used to support the broker-dealer operator's other business units,
including any trading venues.\253\ Proposed Part III, Item 15(b) would
also require the ATS to describe differences in latencies with the
Government Securities ATS displaying subscribers' orders and trading
interest due to a functionality of the ATS. For example, if a
Government Securities ATS transmits and displays its proprietary data
feed to certain subscribers faster than to other subscribers as a
result of the alternative means offered by the ATS to connect, such
information would be responsive.
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    \253\ The broker-dealer operator typically controls the logic
contained in these systems or functionality that determines where an
order that the broker-dealer operator receives will be handled or
sent.
---------------------------------------------------------------------------

    In response to this Item, the Commission is proposing that a
Government Securities ATS identify the recipient of displayed
information by identifying the functionality of the broker-dealer
operator (e.g., SOR, algorithm) or the type of market participant,\254\
or both, that receives the displayed information. For example, if
orders bound for the Government Securities ATS pass through the broker-
dealer operator's common gateway, or algorithm, the ATS would need to
disclose these functionalities as the order was displayed to a
functionality of the broker-dealer operator that would likely be
outside the ATS. If orders resting in the Government Securities ATS are
displayed to certain subscribers or one or more of the broker-dealer
operator business units, the ATS would need to identify these types of
subscribers and business units of the broker-dealer operator by type of
market participant (e.g., institutional investors, PTFs, market makers,
affiliates, trading desks at the broker-dealer operator, market data
vendors, clearing entities, and potential subscribers, among others).
The Item would also require a Government Securities ATS that offers
workups to match orders to disclose the information that is displayed
to all subscribers or certain subscribers in public or private phases
of the workup, as well as what characteristics of the orders are
displayed.
---------------------------------------------------------------------------

    \254\ See Part III, Item 1 of proposed Form ATS-G (providing
examples of types of market participants).
---------------------------------------------------------------------------

    The proposed Item would not require information about employees of
the Government Securities ATS in non-trading related roles, such as
technical, quality assurance, compliance or accounting roles, among
others, that support the ATS's operations and to whom orders and
trading interest are made known in the performance of their
duties.\255\
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    \255\ The Government Securities ATS, as proposed, would be
subject to the requirements of Rule 301(b)(10) and would be required
to establish adequate safeguards and procedures to protect
subscribers' confidential trading information, which must include:
Limiting access to the confidential trading information of
subscribers to those employees of the ATS who are operating the
system or responsible for its compliance with these or any other
applicable rules; and implementing standards controlling employees
of the ATS trading for their own accounts. See 17 CFR
242.301(b)(10).
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Request for Comment
    84. What information involving government securities and repos does
an ATS display? Are there levels of displayed information that an ATS
may offer to market participants? If so, what are the levels and are
there any specific terms and conditions for a market participant to
access that information? What functionalities does the ATS use to
display information in government securities and repos? Please explain
the purpose and operation of any such functionality.
    85. For Government Securities ATSs that display trading interest
both on the ATS and outside the ATS, what is the process for market
participants to submit orders to interact with the trading interest
that is displayed outside the ATS?
    86. Are there any aspects in relation to the display of trading
interest on the Government Securities ATS that should be specifically
addressed in the Item? Are there any aspects of display that are unique
to Government Securities ATSs?
16. Interaction With Related Markets
    Part III, Item 16 of proposed Form ATS-G would require a Government
Securities ATS to provide information about any functionality or
procedure to facilitate trading on, or source pricing for, the
Government Securities ATS that is offered by the broker-dealer operator
or its affiliates \256\ and used in conjunction with markets for
financial instruments related to government securities. Markets for
financial instruments related to government securities could include
those non-government securities markets that trade futures, currencies,
fixed income, and swaps, for example (``Related Markets''). If
applicable, the Government Securities ATS would: (i) Identify the
functionality, procedures, and source of pricing and the Related
Market; (ii) state whether the functionality, procedure, and source of
pricing is provided or operated by the broker-dealer operator or its
affiliate, and whether the Related Market is provided or operated by
the broker-dealer operator or its affiliate; (iii) explain the use of
the functionality, procedures, and source of pricing with regard to the
Related Market and the Government Securities ATS, including how and
when the functionality, procedures, and source of pricing can be used,
by whom, and with what markets; and (iv) state whether the
functionality, procedures, and source of pricing identified are the
same for all subscribers and the broker-dealer operator.
---------------------------------------------------------------------------

    \256\ Services to facilitate trading or source pricing for the
Government Securities ATS in conjunction with non-government
securities markets that are offered by a third-party in contract
with the broker-dealer operator or affiliates would also be required
to be disclosed under this Item.
---------------------------------------------------------------------------

    Item 16 requires the Government Securities ATS to disclose how the
broker-dealer operator and subscribers may use a functionality or
procedure with the Government Securities ATS and a Related Market. Such
functionalities or procedures could include, for example, offering
order types to facilitate transactions on the ATS and the Related
Market, or procedures to allow subscribers to perform multi-leg
transactions involving another market and the ATS. A Government
Securities ATS could offer, for example, Exchange-for-Physical
(``EFP'') transactions that can involve markets in addition to the ATS.
An EFP transaction where ATS subscribers agree to exchange a financial
product, such as a futures contract on a government security, for the
underlying related government security, would be responsive to this
Item. The Commission believes that it would be important to subscribers
to understand functionality and procedures offered such as these, as
they can impact subscribers' experience on the ATS.\257\
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    \257\ To the extent that a Government Securities ATS offers
subscribers a functionality or procedure that the subscriber can use
on the ATS in conjunction with a market for government securities
(e.g., trading venue for U.S. Treasury Securities or options), the
Government Securities ATS should disclose information about that
functionality and procedure in Part III, Item 11 of proposed Form
ATS-G.
---------------------------------------------------------------------------

    A Government Securities ATS would also be required to provide
information about how the ATS uses market data from a Related Market,
through an aggregator or otherwise, to provide the

services it offers.\258\ Among other things, for example, the
Government Securities ATS would need to disclose in response to this
Item its use of such market data to display, price, prioritize,
execute, and remove trading interest on the ATS.\259\ As part of this
explanation, the Government Securities ATS would specify, if
applicable, when the ATS may change between its use of different
sources of market data to provide its services. In response to Part
III, Item 16 of proposed Form ATS-G, the Government Securities ATS
would explain how, for example, market data from a Related Market, is
received by the ATS, compiled, and delivered to the matching engine.
For example, among other possible arrangements, the Government
Securities ATS could explain that market data from a Related Market is
received by the broker-dealer operator and assembled there, and
subsequently delivered to the matching engine, or that market data is
sent directly to the matching engine, which normalizes the data for its
use. For example, a Government Securities ATS would disclose whether it
uses market data from the futures market to price and execute EFP
transactions and describe how it uses that market data under this Item.
---------------------------------------------------------------------------

    \258\ If a Government Securities ATS uses market data from
another market that trades government securities, that information
would be disclosed under Part III, Item 23 of proposed Form ATS-G.
    \259\ Disclosure of any market data used by the Government
Securities ATS for government securities, including market data for
options and repos on government securities, would be required under
Part III, Item 23 of proposed Form ATS-G.
---------------------------------------------------------------------------

    A broker-dealer operator's activities in financial instruments
related to government securities or offerings of a Related Market, such
as a futures exchange, along with its operation of an ATS, raise the
potential for information leakage of a subscriber's confidential
trading information, or the broker-dealer operator could provide
certain advantages to subscribers that use a Related Market that it
operates. As such, Item 16 would require information about whether the
functionality, procedures, and source of pricing on the Government
Securities ATS or the Related Markets are provided or operated by the
broker-dealer operator or its affiliates. Finally, the Government
Securities ATS would be required to indicate whether the functionality,
procedure, and source of pricing are the same for all subscribers and
the broker-dealer operator, and if not, to explain any differences.
Request for Comment
    87. What are commenters' views on the relationship between markets
for government securities and Related Markets and how investors may use
these markets together with a Government Securities ATS to achieve
their trading objectives?
    88. What aspects of government securities markets and Related
Markets, such as the futures markets, do market participants use for
trading on a Government Securities ATS? What information about those
markets might be useful to a subscriber and why?
    89. Trading in NMS stocks can involve other markets for financial
instruments that are not NMS stocks, such as options or futures on NMS
stocks, and an NMS Stock ATS that offers a functionality or procedure
that subscribers could use with the ATS and another market would be
required to explain it under Part II, Item 5 and Part III, Item 11 on
Form ATS-N. Should the Commission adopt amendments to Form ATS-N to
include an item similar to proposed Item 16 in Form ATS-G to separate
and highlight disclosures about such a functionality?
17. Closing
    Part III, Item 17 of proposed Form ATS-G would require Government
Securities ATSs to disclose information about differences between how
orders and trading interest are treated on the ATS during any closing
session(s) and during regular trading hours established by the ATS. The
Item is designed to provide market participants with information about
processes the Government Securities ATS uses to transition to the next
trading day, including whether the ATS offers any particular order
types during a closing session(s) or has different procedures for
closing trading for a particular trading session and transitioning
trading to the next trading day. The vast majority of requests in Part
III of proposed Form ATS-G relate to trading during the Government
Securities ATS's regular hours. Therefore, when discussing differences
between trading during the Government Securities ATS's closing
session(s) and during regular hours set by the ATS, the Government
Securities ATS would be required to discuss differences as compared to
relevant information disclosed in Part III Items, including, among
others, order types (Item 7), order interaction, priority, matching,
and execution procedures (Item 11), segmentation (Item 13), and display
(Item 15). The Commission believes this information would be important
for market participants to understand the closing procedures around a
particular trading session, if any, to carry out their trading
objectives.\260\
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    \260\ The Item would, for example, require disclosure of any
procedures to match orders to set a single closing price to maximize
liquidity and accurately reflect market conditions at the close of
trading in the ATS.
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18. Trading Outside of Regular Trading Hours
    Part III, Item 18(a) of proposed Form ATS-G would require a
Government Securities ATS to provide information about its procedures
for trading outside its regular trading hours, and subpart (b) would
require the ATS indicate whether there are any differences between
trading outside of its regular trading hours and trading during its
regular hours. To the extent that there are differences, the Government
Securities ATS must describe those differences. Similar to Item 17
(requesting differences between any closing session(s) and regular
trading hours), a Government Securities ATS would be required to
disclose differences between trading outside of its regular trading
hours and during regular trading hours with respect to the relevant
information disclosed in Part III Items, including, among others, order
types (Item 7), order interaction, priority, matching, and execution
procedures (Item 11), segmentation (Item 13), and display (Item 15).
Many of the disclosures discussed elsewhere in Form ATS-G will relate
to the ATS's regular trading hours so the ATS can simply discuss any
differences between trading during its regular hours and trading
outside its regular trading hours in Part III, Item 18(b), if
applicable. The Commission believes that market participants would
likely want to understand unique trading procedures that the Government
Securities ATS offers outside its regular trading hours to assess
whether participating in such trading would help accomplish their
trading objectives.
19. Fees
    Part III, Item 19 of proposed Form ATS-G would require a Government
Securities ATS to provide information on any fees or charges for use of
the ATS's services, including any fees or charges for use of the ATS's
services that are bundled with the subscriber's use of non-ATS services
or products offered by the broker-dealer operator or its affiliates,
and any rebate or discount of fees or charges. The Commission believes
that disclosures regarding fees on proposed Form ATS-G are necessary
and important, and should not be voluntary for Government Securities

ATSs. Fee disclosures on proposed Form ATS-G are designed to allow all
market participants to analyze the fee structures across Government
Securities ATSs in an expedited manner and decide which ATS offers them
the best pricing according to the characteristics of their order flow,
the type of participant they are (if relevant), or any other aspects of
an ATS's fee structure that serves to provide incentives or
disincentives for specific market participants or trading behaviors.
Requiring disclosures of ATS fees is warranted as, in the Commission's
experience, fees can be a primary factor for market participants in
deciding where to send their orders and trading interest.
    Part III, Item 19 would request that Government Securities ATSs
include in their descriptions the structure of the fee, variables that
impact the fee, and differentiation among types of subscribers, and the
Commission provided examples of responsive information included in a
parenthetical in the text of each subpart.\261\ The Item also would
require a range for each type of fee (e.g., subscription, connectivity,
and market data \262\) charged on the Government Securities ATS. With
regard to the variables that impact the fees set, ATSs would be
required to be specific and delineate how a given variable would likely
impact the fee level (e.g., higher or lower).
---------------------------------------------------------------------------

    \261\ The Commission is including non-exhaustive lists of
examples of responsive information in parentheticals in the text of
the Item. For instance, for descriptions of the structure of the
fee, the Commission is providing as examples a fixed fee, volume-
based and transaction-based fee structures. For the description of
variables that may impact the fee, the Commission is providing as
examples: The types of securities traded, block orders, and the form
of connectivity to the ATS. For the description of the
differentiation among types of subscribers for the fee, the
Commission is providing as examples of the types of subscribers:
Broker-dealers, institutional investors, and retail investors.
    \262\ For example, if a Government Securities ATS distributed a
market data feed and charged a fee for it, the ATS would be required
to provide the information responsive to Item 19 regarding that fee.
---------------------------------------------------------------------------

    The Commission recognizes that the fee structures of Government
Securities ATSs can vary and that not all Government Securities ATSs
apply set tiers or categories of fees for subscribers; however, the
Commission believes that a market participant should have sufficient
information to understand the fees for using the services of the
Government Securities ATS. Recognizing the various fees that can be
charged by Government Securities ATSs, the Commission is specifying in
the fee request the types of information that a Government Securities
ATS must provide in response to the Commission's proposed request to
describe its fees (e.g., the structure of the fees, variables that
impact each fee, differentiation among types of subscribers, and the
range of fees). These disclosures are designed to provide market
participants with more insight regarding the fees charged so that they
can better understand how fees may apply to them and assess how such
fees may impact their trading strategies. Although the fees charged for
Government Securities ATS services may be individually negotiated
between the broker-dealer operator and the subscriber, the disclosures
about the type of fees charged by the Government Securities ATS are
designed to help market participants discern how the ATS's fees are
organized and compare that information across Government Securities
ATSs, which could reduce the search costs of market participants in
deciding where to send their orders and trading interest. The
Commission believes that Government Securities ATSs should be required
to disclose differences in the treatment among ``types of
subscribers.'' This information would allow subscribers to observe
whether a Government Securities ATS is offering preferential treatment
for certain types of subscribers with respect to fees.
    Part III, Item 19(b) of proposed Form ATS-G would require a
description of any bundled fees, including a summary of the bundled
services and products offered by the broker-dealer operator or its
affiliates, the structure of the fee, variables that impact the fee
(including, for example, whether the particular broker-dealer services
selected would impact the fee), differentiation among types of
subscribers, and range of fees. Part III, Item 19(b) is designed to
allow market participants to better evaluate fees for bundled services
that include access to the Government Securities ATS. Government
Securities ATSs would be required to provide information, including the
relevant services and products offered by the broker-dealer operator
and its affiliates for each bundled fee offered, that will provide
context to market participants with which to assess how bundled fees
could apply to them as subscribers.\263\
---------------------------------------------------------------------------

    \263\ See NMS Stock ATS Adopting Release, supra note 1, at 38858
(discussing responses to Item 19(b) depending on whether there is an
explicit fee for the ATS as part of any bundled services).
---------------------------------------------------------------------------

    Part III, Item 19(a) of proposed Form ATS-G covers charges to
subscribers for their ``use of the Government Securities ATS services''
\264\ and does not request information on fees charged for non-ATS
services by a third party not in contract with the broker-dealer
operator.\265\ The disclosure requests under proposed Part III, Item 19
contain a stand-alone Item--Item 19(c)--which requests information
about rebates and discounts of fees that are identified in subparts (a)
and (b) of Item 19. Item 19(c) would require information about rebates
and discounts that is similar to that which is required for fees (e.g.,
the structure of the rebate or discount, variables that impact the
rebate or discount, differentiation among types of subscribers, and
range of rebate or discount).
---------------------------------------------------------------------------

    \264\ The NMS Stock ATS services generally include those
services used for the purpose of effecting transactions in NMS
Stock, or for submitting, disseminating or displaying orders on the
ATS. See 17 CFR 242.300(b).
    \265\ See NMS Stock ATS Adopting Release, supra note 1, at 38858
(discussing what fees should be categorized as for use of the ATS's
services).
---------------------------------------------------------------------------

Request for Comment
    90. An ATS that is subject to the Fair Access Rule for a covered
security is required to comply with fair access requirements under Rule
301(b)(5) of Regulation ATS, which, among other things, requires an ATS
to establish written standards for granting access to trading on its
system and not unreasonably prohibit or limit any person with respect
to access to services offered by the ATS by applying the written
standards in an unfair or discriminatory manner. An ATS that charges
certain fees to one class of subscribers but different fees to other
classes of subscribers for the same services could not, if it were
subject to the Fair Access Rule, discriminate in this manner unless it
adopted written reasonable standards and applied them in a fair and
non-discriminatory manner. Should an ATS that is subject to the Fair
Access Rule and is a meaningful source of orders and trading interest
for NMS stocks or government securities be required to disclose the
fees that the ATS charges for access to its services on Form ATS-N and
proposed Form ATS-G? Would such a disclosure of the fees of an ATS that
is subject to the Fair Access Rule provide additional transparency to
subscribers and market participants and help ensure that the ATS does
not unreasonably prohibit or limit any person with respect to access to
the ATS's services by applying the written standards in an unfair or
discriminatory manner?
    91. In the alternative, should the Commission require NMS Stock
ATSs and Government Securities ATSs that are subject to the Fair Access
Rule and that exceed even higher volume thresholds to disclose their
fee schedule

on Form ATS-N and Form ATS-G? For example, should only an NMS Stock ATS
and a Government Securities ATS that exceeds 10 percent, 20 percent, 30
percent, or 40 percent average weekly or daily trading volume in NMS
stocks, U.S. Treasury Securities, or Agency Securities, respectively,
be required to publicly disclose their fee schedule on Form ATS-N and
Form ATS-G as applicable?
    92. What fees should the Commission require an ATS subject to the
Fair Access Rule to disclose on Form ATS-N or Form ATS-G?
20. Suspension of Trading
    Part III, Item 20 of proposed Form ATS-G would require a Government
Securities ATS to provide information about any procedures for
suspending or stopping trading on the ATS, including the suspension of
trading in a U.S. Treasury Security or an Agency Security. This Item is
designed to, for example, inform market participants of whether, among
other things, a Government Securities ATS will continue to accept
orders and trading interest after a suspension or stoppage occurs,
whether the ATS cancels, holds, or executes orders and trading interest
that were resting in the ATS before the suspension or stoppage was
initiated, and what type of notice the ATS provides to subscribers
regarding a suspension or stoppage. Examples of system disruptions
would include, but are not limited to, internal software problems that
prevent the Government Securities ATS's system from opening or
continuing trading,\266\ a significant increase in volume that exceeds
the ability of the trading system of the ATS to process incoming
orders,\267\ and the failure of the ability of the trading system of
the ATS to receive external pricing information that is used in the
system's pricing methodology. The Commission believes that information
regarding a Government Securities ATS's procedures about how orders and
trading interest might be handled by the ATS during a suspension or
stoppage of trading would be useful to market participants because an
ATS's procedures might require the cancelation of existing orders or
preclude the acceptance or execution of orders or trading interest
during a suspension, both of which would impact a subscriber's orders
or its ability to trade on the ATS. This information would better
inform a subscriber's trading decisions at the time of such an event
and thus help that subscriber accomplish its trading objectives. If a
Government Securities ATS establishes different procedures for
suspending or stopping trading on the ATS depending on whether the
source of the disruption is internal or external, a description of both
procedures would be responsive to this request. In addition, this Item
would require disclosure of procedures whereby a Government Securities
ATS suspends trading in U.S. Treasury Securities or Agency Securities
so that it does not cross the relevant volume thresholds and become
subject to the Fair Access Rule under Regulation ATS, or Regulation SCI
(as proposed herein).
---------------------------------------------------------------------------

    \266\ See Regulation SCI Adopting Release, supra note 2, at
72254-55 n.28.
    \267\ See id. at 72255 n.29.
---------------------------------------------------------------------------

    The Commission also believes that information regarding the
procedures for how a Government Securities ATS would handle orders
during a suspension of trading or system disruption or malfunction
would help the Commission better monitor the securities markets.
Request for Comment
    93. Should proposed Form ATS-G request more or less information
about any procedures for suspending or stopping trading on the
Government Securities ATS?
21. Trade Reporting
    Part III, Item 21 of proposed Form ATS-G would require a Government
Securities ATS to provide information on any procedures and material
arrangements for reporting transactions on the ATS. Trade reporting
furthers the transparent, efficient, and fair operation of the
securities markets.\268\ FINRA member firms are required to report
transactions in U.S. Treasury Securities and Agency Securities to
TRACE.\269\
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    \268\ See Regulation ATS Adopting Release, supra note 35, at
70887 (stating the market-wide transaction and quotation reporting
plans operated by the registered national securities exchanges are
responsible for the transparent, efficient, and fair operations of
the securities markets).
    \269\ See supra notes 50-51 and accompanying text.
---------------------------------------------------------------------------

    Part III, Item 21 would require a Government Securities ATS to
disclose its trade reporting procedures for reporting transactions in
government securities on the ATS to an SRO. For example, it would be
responsive to Item 21 for a Government Securities ATS to disclose
whether the ATS has a specific procedure for reporting transactions in
a government security to the SRO at different times based on, for
example, a subscriber's use of a particular order type, or the type of
subscriber involved in the transaction. Government Securities ATSs
would also be required to disclose ``material'' arrangements for
reporting transactions on the ATS. The Commission recognizes that there
could be arrangements relevant to trade reporting, such as the specific
software used to report, that play a minor role in the ATS's trade
reporting and need not be disclosed. On the other hand, if an ATS uses
a third party to report transactions occurring on the ATS or has a
backup facility that it uses for trade reporting, that information is
likely to be responsive as a material arrangement. By proposing to
require reporting only of material arrangements, the Commission hopes
to reduce potential burdens on Government Securities ATSs while
providing market participants with sufficient information to understand
how their trade information will be reported. Also, the Commission
believes the proposed disclosure of the trade reporting procedures
would allow the Commission to more easily review the compliance of the
Government Securities ATS with its applicable trade reporting
obligations as a registered broker-dealer (as proposed herein).
22. Clearance and Settlement
    Part III, Item 22 is designed to provide information on any
procedures and material arrangements undertaken to facilitate the
clearance and settlement of transactions on the Government Securities
ATS. The integrity of the trading markets depends on the prompt and
accurate clearance and settlement of securities transactions. For
example, counterparties to a trade face counterparty credit risk,
regardless of whether they choose to clear and settle bilaterally or
through a central counterparty, and therefore knowledge of the clearing
process promotes market integrity.\270\ As a preliminary matter,
``clearance and settlement'' refers generally to the activities that
occur following the execution of a trade. These post-trade processes
are critical to ensuring that a buyer receives securities and a seller
receives proceeds in accordance with the agreed-upon terms of the trade
by settlement date. The disclosures required by this Item are intended
to cover each of the steps in the post-trade process from the time of
execution (including whether the Government Securities ATS is a
counterparty to a transaction and

whether the obligations of a counterparty are ever assigned or
novated), through trade matching and other clearing procedures
(including whether the Government Securities ATS requires its
participants to be a member of a registered clearing agency, whether
participants have any particular clearing obligations, and whether
transactions are--wholly or partially--submitted to a registered
clearing agency or cleared bilaterally using clearing banks or clearing
agents), until settlement of the transaction (including whether
counterparties make use of custodians, settlement banks, or a
registered clearing agency). If the Government Securities ATS has
adopted clearing and settlement processes or imposes any obligations on
its participants in the event of a disruption (for example, a
settlement fail, counterparty default, or liquidity shortfall), this
proposed Item should include a discussion of these processes and any
resulting participant obligations.
---------------------------------------------------------------------------

    \270\ See Treasury Market Practices Group (TMPG), White Paper on
Clearing and Settlement in the Secondary Market for U.S. Treasury
Securities (July 12, 2018), available at https://www.newyorkfed.org/medialibrary/Microsites/tmpg/files/CS-DraftPaper-071218.pdf. ``The
TMPG found that many market participants do not understand the role
of the [interdealer brokers] platform in terms of who their
counterparty credit risk was to and the roles of various market
participants in settlement and clearing.'' Id. at 27.
---------------------------------------------------------------------------

    The Item requires the disclosure of ``material'' arrangements to
facilitate the clearance and settlement of transactions on the
Government Securities ATS. For example, an arrangement under which a
third party would have a role in clearance and settlement may
constitute a material arrangement that could trigger the disclosure
requirement under Part III, Item 22. Limiting the explanation required
to material arrangements would reduce the burden on Government
Securities ATSs while at the same time still allowing market
participants to understand and more easily compare clearing
arrangements required across Government Securities ATSs.
    Part III, Item 22 is designed to help market participants
understand the measures the Government Securities ATS takes to
facilitate clearance and settlement of transactions. Market
participants should know and be able to understand any requirements a
Government Securities ATS places on its subscribers, or other persons
whose orders are sent to the ATS, to have clearance and settlement
systems and/or arrangements with a clearing firm. The Commission
believes market participants would likely find the disclosures required
by this Item to be useful in understanding the measures undertaken by a
Government Securities ATS to facilitate clearance and settlement of
subscriber orders on the ATS and allow them to more easily compare the
clearance arrangements required across Government Securities ATSs as
part of deciding where to send their trading interest. The Commission
believes that these disclosures may assist the Commission in better
understanding the clearance and settlement procedures of Government
Securities ATSs and risks and trends in the market as part of its
overall review of market structure.
Request for Comment
    94. What aspects of the procedures and material arrangements
undertaken to facilitate the clearance and settlement of transactions
on Government Securities ATSs are important for ATSs to disclose on
proposed Form ATS-G for the benefit of market participants?
23. Market Data
    Part III, Item 23 of proposed Form ATS-G would require a Government
Securities ATS to provide information about the sources of market data
in government securities and repos used by the ATS and how the ATS uses
that market data from these sources to provide the services that it
offers. The Commission believes that market participants would likely
find it useful to know the source and specific purpose of the market
data that the Government Securities ATS might use as the market data
received by the ATS might affect the price at which orders and trading
interest are prioritized and executed in the ATS, including orders that
are pegged to an outside reference price. A Government Securities ATS
would also be required to provide information about how the ATS uses
market data in government securities and repos to provide the services
it offers.\271\ Among other things, for example, proposed Part III,
Item 23 would require the disclosure of the use of market data to
display, price, prioritize, execute, and remove trading interest. As
part of this explanation, the ATS would be required to specify, if
applicable, when the ATS may change sources of market data to provide
its services. A Government Securities ATS would also be required to
explain how market data is received by the ATS, compiled, and delivered
to the matching engine. For example, among other possible arrangements,
the Government Securities ATS could explain in response to the Item
that market data in government securities or repos is received by the
broker-dealer operator and assembled there, and subsequently delivered
to the matching engine, or that market data is sent directly to the
matching engine, which normalizes the data for its use.
---------------------------------------------------------------------------

    \271\ Market data reflecting options traded on government
securities that is used by the ATS should be discussed in response
to Part III, Item 16.
---------------------------------------------------------------------------

Request for Comment
    95. What are the sources of market data in government securities
and repos that are available to market participants as well as to
Government Securities ATSs and how do market participants and ATSs use
this information? What disclosures about an ATS's use of market data
would be important to market participants?
24. Fair Access
    Part III, Item 24 of proposed Form ATS-G would provide a mechanism
under which a Government Securities ATS would notify market
participants whether it has triggered the proposed fair access
threshold and, if so, whether the ATS is subject to the Fair Access
Rule. If subject to the Fair Access Rule, the Government Securities ATS
would be required to describe the written standards for granting access
to trading required to comply with Rule 301(b)(5)(ii) of Regulation ATS
(as proposed to be applied herein).
    If an ATS crosses the fair access thresholds, Rule 301(b)(5)(ii)(B)
requires the ATS to ``not unreasonably prohibit or limit any person in
respect to access to services offered by such alternative trading
system by applying the [written] standards . . . in an unfair or
discriminatory manner.'' \272\ The Commission believes that the
proposed disclosures would facilitate its oversight of Government
Securities ATSs and their compliance with Rule 301(b)(5) (as proposed
herein). In addition, the proposed disclosures would allow market
participants to assess whether fair access is in fact being applied by
a Government Securities ATS that meet the fair access threshold, in
part by making publicly available a description of the ATS's written
standards for granting access.\273\
---------------------------------------------------------------------------

    \272\ See 17 CFR 242.301(b)(5)(ii)(B). The Commission is
proposing that any change in a Government Securities ATS's response
to Item 24 would be filed as a contingent amendment. See supra note
176 and accompanying text.
    \273\ The Commission is not including an item similar to Part
III, Item 24 of Form ATS-N (Order Display and Execution Access)
because Rule 301(b)(3) of Regulation ATS, which forms the basis for
the item, only applies to an ATS's NMS stock activities.
---------------------------------------------------------------------------

Request for Comment
    96. Is there other information that market participants might find
important or useful regarding the written standards for granting access
to trading on an ATS that is subject to the Fair Access Rule? If so,
describe such information and explain whether, and if so why, such
information should be required to be provided under proposed Form ATS-
G, Form ATS-N, or both.

25. Aggregate Platform-Wide Data; Trading Statistics
    Part III, Item 25 of proposed Form ATS-G is designed to make public
aggregate, platform-wide order flow and execution statistics that a
Government Securities ATS already otherwise collects and publishes, or
provides to one or more subscribers to the ATS. The Commission believes
that a Government Securities ATS may choose to create and publish or
provide to one or more subscribers or persons information concerning
order flow and execution quality for different reasons. To the extent
that a Government Securities ATS has made a determination to create and
publish or provide to subscribers certain aggregate platform-wide order
flow and execution quality statistics, the Commission believes that
others may also find such information useful when evaluating the ATS as
a possible venue for their orders. Proposed Part III, Item 25 would
impose the same disclosure requirement as Part III, Item 26 of Form
ATS-N for NMS Stock ATSs.\274\
---------------------------------------------------------------------------

    \274\ See NMS Stock ATS Adopting Release, supra note 1, at
38861-63.
---------------------------------------------------------------------------

    Item 25 would not require a Government Securities ATS to amend its
Form ATS-G every time it receives a data request. To comply with the
requirements under Part III, Item 25, Form ATS-G only requires a
Government Securities ATS that supplies aggregate platform-wide data to
update its disclosures for this Item on a quarterly basis.\275\ For
instance, if a participant were to request updated or new aggregate
platform-wide statistics in January, the Government Securities ATS
would not be required to immediately file an updating amendment
containing these statistics after complying with the participant's
request. Rather, the ATS would need to file an updating amendment
within 30 days following the end of the quarter. That updating
amendment must contain the most recently distributed version of these
statistics, as well as the most recently distributed version of all
other aggregate platform-wide data that is provided during that
quarter. The Commission notes that communications associated with the
responsive statistics are not required to be publicly filed. In the
prior example, for instance, if the statistics provided in the
quarterly amendment are the ones provided in January (i.e., those are
the latest version of those aggregate platform-wide statistics the ATS
distributed), the ATS would not (and should not) also attach to Form
ATS-G the participant's email requesting the statistics.
---------------------------------------------------------------------------

    \275\ If, for example, a Government Securities ATS publishes or
provides a particular statistic on a daily basis, the ATS would
include in Exhibit 4 of proposed Form ATS-G the statistic that was
published or provided to one or more subscribers on the last trading
day of the calendar quarter (e.g., the statistic published or
provided on June 30th or last trading day prior to June 30th). If a
Government Securities ATS publishes or provides a particular
statistic weekly, the ATS would be required to include in Exhibit 4
of proposed Form ATS-G the statistic that was published or provided
to one or more subscribers at the end of the week prior to the end
of the calendar quarter (e.g., the statistic published for the last
full week of June).
---------------------------------------------------------------------------

    Furthermore, Part III, Item 25 of proposed Form ATS-G would only
require a Government Securities ATS to publicly disclose aggregate
platform-wide data. As such, a Government Securities ATS would not be
required to disclose individualized or custom reports containing data
relating to that participant's specific usage of the ATS. For example,
an individual participant's trade reports, order and execution quality
statistics, and other statistics specific to a participant's trading on
the ATS would not be covered by the disclosure request in Part III,
Item 25. Whether a specific type of statistic should be categorized as
an order and execution statistic or considered aggregate, platform-wide
data will depend on the nature of the specific statistics being
compiled by the Government Securities ATS. A Government Securities ATS
would independently evaluate any statistics that it compiles and
distributes to determine whether they are responsive to this disclosure
request.
    Part III, Item 25 would require the Government Securities ATS to
attach both the responsive statistics and its explanation of the
categories or metrics of those statistics as Exhibits 4 and 5,
respectively. Also, in lieu of filing Exhibits 4 and 5, the Government
Securities ATS could certify that the information requested under
Exhibits 4 and 5 is available at the website provided in Part I, Item 7
of the form and is accurate as of the date of the filing.
Request for Comment
    97. Does Part III of proposed Form ATS-G capture the information
that is most relevant to understanding the operations of the Government
Securities ATS? Are there any Items that commenters believe are
unnecessary? If so, why?
    98. Is there other information that market participants might find
relevant or useful regarding the operations of Government Securities
ATSs? If so, describe such information and explain whether, and if so
why, such information should be required to be provided under proposed
Form ATS-G.
    99. Is there any information related to repos that Form ATS-G
should require?
    100. Is there any information related to options on government
securities that Form ATS-G should require?
    101. Is there any information that would be required by Part III of
proposed Form ATS-G that a Government Securities ATS that should not be
required to disclose due to concerns regarding confidentiality,
business reasons, trade secrets, commercially sensitive information,
burden, or any other concerns?
    102. Should the Commission adopt a more limited or expansive
definition of ``affiliate'' for purposes of Part III? \276\
---------------------------------------------------------------------------

    \276\ See supra note 211 for the definition of affiliate under
Form ATS-G.
---------------------------------------------------------------------------

    103. Would the disclosures under Part III of proposed Form ATS-G
help market participants better evaluate trading opportunities and
decide where to send orders to reach their trading objectives?
    104. Would the proposed disclosures in Part III of proposed Form
ATS-G require a Government Securities ATS to reveal too much (or not
enough) information about its structure and operations?
    105. Are there ways to obtain the same information as would be
required from Government Securities ATSs by Part III of proposed Form
ATS-G other than through disclosure on proposed Form ATS-G? If so, how
else could this information be obtained?
    106. Could the proposed requirement to disclose the information
that would be required by Part III of proposed Form ATS-G impact
innovation on Government Securities ATSs?
    107. Are there any aggregate platform-wide order flow and execution
statistics of the Government Securities ATS that should not be required
to be disclosed under Item 25?

D. Part IV of Proposed Form ATS-G

    Part IV of proposed Form ATS-G would require a Government
Securities ATS to provide certain basic information about the point of
contact for the ATS, such as the point of contact's name, title,
telephone number, and email address. Part IV would also require the
Government Securities ATS to consent to service of any civil action
brought by, or any notice of any proceeding before, the Commission or
an SRO in connection with the ATS's activities. The Commission is
proposing that Form ATS-G would be filed electronically and require an
electronic signature. The signatory to each Form ATS-G filing would be
required to represent that the information and

statements contained on the submitted Form ATS-G, including exhibits,
schedules, attached documents, and any other information filed, are
current, true, and complete. Given that the Commission believes market
participants would use information disclosed on Form ATS-G to evaluate
potential venues, and that the Commission intends to use the
information to monitor developments of Government Securities ATSs, the
Commission believes it is important that Form ATS-G contain disclosures
that are current, true, and complete, and therefore is proposing to
require that the signatory to Form ATS-G make such an attestation.

IV. EDGAR Filing Requirements; Structured Data

    The Commission is proposing that Form ATS-G be filed electronically
in a structured format through EDGAR. By filing in EDGAR, Government
Securities ATSs would be given the option of filing using a web-
fillable Form ATS-G that will render into XML in EDGAR, or to file
directly in XML using the XML schema for ATSs as published on the
Commission's website. With both options, the Commission would receive
the Form ATS-G disclosures in XML format. All Form ATS-G filings made
public will be centrally located on EDGAR for the public to access in
the same XML format in which the Commission received the Form ATS-G
filing. Form ATS-G would be filed in the same format as current Form
ATS-N.\277\ The Commission believes, as discussed in the NMS Stock ATS
Adopting Release, its XML schema and architecture for the web-fillable
Form ATS-G would incorporate certain validations to ensure consistency
and completeness among filings.\278\ The Commission is also proposing
that Form ATS and Form ATS-R be filed electronically through EDGAR
\279\ and both forms would be available only to the Commission staff
with the exceptions discussed below.
---------------------------------------------------------------------------

    \277\ See NMS Stock ATS Adopting Release, supra note 1, at
Section VII.
    \278\ See id.
    \279\ See infra Section V.C.
---------------------------------------------------------------------------

Request for Comment

    108. Are the proposed EDGAR filing requirements for Form ATS-G,
Form ATS, and Form ATS-R appropriate? Should the Commission adopt an
alternative means by which NMS Stock ATSs file Form ATS-N instead of
EDGAR? As an alternative, should filers be required to submit Form ATS-
G, Form ATS, and/or Form ATS-R to the Commission through another means,
such as the Commission's SRO Rule Tracking System/Electronic Form
Filing System (``SRTS/EFFS'') or email?
    109. Should the Commission adopt the proposal that Form ATS-G be
filed with the Commission in a structured format? If so, what standards
of structuring should be used for information to be provided on
proposed Form ATS-G? If not, what format should proposed Form ATS-G
take? Please identify the format and explain.
    110. Should the Commission require filers to submit Form ATS-G,
Form ATS, and/or Form ATS-R in the Inline XBRL format?

V. Amendments to Regulation ATS, Form ATS, Form ATS-R, and Form ATS-N

A. Amendments to Rules 301(b)(5) and 301(b)(6) of Regulation ATS

    The Commission is also proposing to remove an exclusion for
compliance with the Fair Access Rule that is applicable to ATSs that
trade equities \280\ under Rule 301(b)(5) and the Capacity, Integrity,
and Security Rule under Rule 301(b)(6). An ATS is excluded from
complying with the requirements of the Fair Access Rule and the
Capacity, Integrity, and Security Rule if the ATS: (a) Matches customer
orders for a security with other customer orders; (b) such customers'
orders are not displayed to any person, other than employees of the
ATS; and (c) such orders are executed at a price for such security
disseminated by an effective transaction reporting plan, or derived
from such prices.\281\ In adopting the exclusion, the Commission stated
that ATSs of this nature, the so-called ``passive systems,'' did not
contribute significantly to price discovery; however, the Commission
also stated that they had the potential to and frequently do affect the
markets from which their prices are derived, and thus, the Commission
would continue to monitor these systems and reconsider whether the
requirements should apply if concerns arise in the future.\282\
---------------------------------------------------------------------------

    \280\ When adopting the exclusion, the Commission contemplated
that it would apply only to ATSs that trade equity securities, as
one of the elements of the exclusion requires that the prices on the
ATS be based on the SIP. The third prong of each exception states
that if an ATS meets the requirement, among others, to execute
customer orders ``at a price for such security disseminated by an
effective transaction reporting plan, or derived from such prices,''
the ATS would not be subject to the Fair Access Rule or Capacity,
Integrity, and Security Rule, as applicable. 17 CFR
242.301(b)(5)(iii)(c); 17 CFR 242.301(b)(6)(iii)(c).
    \281\ 17 CFR 242.301(b)(5)(iii); 17 CFR 242.301(b)(6)(iii).
    \282\ Regulation ATS Adopting Release, supra note 35, at 70853.
---------------------------------------------------------------------------

    The Commission has reconsidered the exclusion for passive systems
to compliance with the Fair Access Rule and believes it should be
removed. In the Regulation ATS Adopting Release, the Commission
explained that fair treatment by ATSs of subscribers is particularly
important when an ATS captures a large percentage of trading volume in
a security because investors lack access to viable alternatives to
trading on the ATS.\283\ Since the adoption of Regulation ATS, passive
systems (as the term is used in the Regulation ATS Adopting Release)
for NMS stocks have garnered a significant percentage of trading volume
in securities and have come to play an important role in matching
buyers and sellers of securities.\284\ The Commission believes that
eliminating the Rule 301(b)(5)(iii) exclusion would ensure that the
Fair Access Rule is applied as intended and help ensure fair treatment
of potential and current subscribers by any type of ATS that captures a
large percentage of trading in a security or type of security.
---------------------------------------------------------------------------

    \283\ Id. at 70872.
    \284\ See NMS Stock ATS Adopting Release, supra note 1, at
38770-71.
---------------------------------------------------------------------------

    The Commission is also proposing to amend Rule 301(b)(6) to remove
the exclusion for compliance with the Capacity, Integrity, and Security
Rule under Rule 301(b)(6)(iii).\285\ As part of Regulation SCI, Rule
301(b)(6) of Regulation ATS was amended to no longer apply to ATSs that
trade equities because Regulation SCI superseded and replaced the
requirements of the Capacity, Integrity, and Security Rule with regard
to ATSs that trade NMS stocks and non-NMS stocks.\286\
---------------------------------------------------------------------------

    \285\ 17 CFR 242.301(b)(6)(iii). See supra note 56 and
accompanying text.
    \286\ See Regulation SCI Adopting Release, supra note 2, at
72252, 72267.
---------------------------------------------------------------------------

    In addition, the Commission is proposing to amend Rules 301(b)(5)
and 301(b)(6) to clarify the rule text. For purposes of determining
whether an ATS crossed the average daily volume thresholds for
compliance with the Fair Access Rule, Rule 301(b)(5)(i) does not
specify whether the ATS's transaction volume in an NMS stock or an
equity security that is not an NMS stock and for which transactions are
reported to an SRO is calculated using the dollar or the share
volume.\287\ In the Regulation ATS Adopting Release, when discussing
the Fair Access Rule, the Commission stated that for these two types of
securities, the test should be based on the share volume.\288\
Similarly, Rules 301(b)(5)(i)

and 301(b)(6)(i) do not specify whether, for purposes of determining
compliance with the Fair Access Rule and the Capacity, Integrity, and
Security Rule, the volume for municipal securities or corporate debt
securities is calculated based on the dollar or the share volume.\289\
In the Regulation ATS Adopting Release, the Commission intended the
test applicable to debt securities to be the dollar volume.\290\ To
mitigate any potential confusion, the Commission is adding these terms
to Rules 301(b)(5)(i) and 301(b)(6)(i) to align the rule text with the
Regulation ATS Adopting Release.\291\ Furthermore, the Commission is
proposing to amend Rules 301(b)(5)(i)(C) and (D) to clarify that the
average daily dollar volume in municipal securities and corporate debt
securities is provided by the self-regulatory organization to which
such transactions are reported. When Regulation ATS was adopted,
transaction reporting plans for municipal securities and corporate debt
securities were being developed.\292\ Today, transactions in municipal
securities are reported to the Municipal Securities Rulemaking Board
(``MSRB'') and transactions in corporate debt securities are reported
to FINRA. These two SROs provide the information that can be used by
ATSs to determine whether the ATS is subject to the Fair Access Rule
for these two categories of securities.\293\ The Commission believes
that this amendment will add clarity to the rule given the established
transaction reporting regimes for municipal securities and corporate
debt securities.
---------------------------------------------------------------------------

    \287\ 17 CFR 242.301(b)(5)(i)(A)-(B).
    \288\ See Regulation ATS Adopting Release, supra note 35, at
70873 (``Accordingly, if an [ATS] accounted for twenty percent or
more of the share volume in any equity security, it must comply with
the fair access requirements in granting access to trading in that
security.'') (emphasis added).
    \289\ 17 CFR 242.301(b)(5)(i)(C)-(D); 17 CFR
242.301(b)(6)(i)(A)-(B).
    \290\ See Regulation ATS Adopting Release, supra note 35, at
70873, 70875 (requiring compliance with the Fair Access Rule and the
Capacity, Integrity, and Security Rule if an ATS accounted for more
than 20 percent of the total ``share volume'' in a security with
respect to equity securities, and for more than 20 percent of the
``volume'' in a security with respect to debt securities). While
Form ATS-R requires an ATS to report total volume in terms of both
units and dollars for equity securities, it requires an ATS to
report the total settlement value only in dollar terms for debt
securities, which include municipal securities and corporate debt
securities. See id. at 70878.
    \291\ See proposed Rule 301(b)(5)(i)(A)-(D); proposed Rule
301(b)(6)(i)(A)-(B).
    \292\ See Regulation ATS Adopting Release, supra note 35, at
70873.
    \293\ See MSRB Rule G-14; FINRA Rule 6730. Electronic Municipal
Market Access (``EMMA''), which is a service operated by the MSRB,
and FINRA disseminate information on transactions in municipal
securities and corporate debt securities, respectively. See EMMA
Information Facility, available at http://www.msrb.org/Rules-and-Interpretations/MSRB-Rules/Facilities/EMMA-Facility.aspx; FINRA Rule
6750.
---------------------------------------------------------------------------

    The Commission is also proposing to amend Rule 301(b)(5)(ii)(A) of
Regulation ATS to add the word ``reasonable'' before the word ``written
standards,'' to clarify that ATSs subject to the Fair Access Rule are
required to have ``reasonable written standards'' for granting access
to trading on its system. The Commission believes that the addition is
consistent with its intent as expressed in the Regulation ATS Adopting
Release. Specifically, in discussing the Fair Access Rule, the
Commission stated that ``fair treatment . . . is particularly
important'' when ATSs reach significant volume in a security, and the
rule would serve to prohibit ``unreasonably'' discriminatory denials of
access.\294\ The Commission believes that adding the word
``reasonable'' to the rule text will help make clear that the written
standards the ATS must apply in a fair and non-discriminatory manner
(pursuant to Rule 301(b)(5)(ii)(B)) must be reasonable in the first
instance.
---------------------------------------------------------------------------

    \294\ See Regulation ATS Adopting Release, supra note 35, at
70872, 70874.
---------------------------------------------------------------------------

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

    Rule 301(b)(2)(vii) provides that all reports filed pursuant to
Rules 301(b)(2) and 301(b)(9) are ``deemed confidential'' and
``available only to the examination of Commission staff, state
securities authorities, and the self-regulatory organizations.'' \295\
As a result, the Commission does not make Form ATS and Form ATS-R
disclosures available to the public, including the types of securities
that the ATS trades or intends to trade. Currently, the Commission
makes public on a monthly basis on the Commission website information
about ATSs that have a Form ATS on file with the Commission, which
includes the name of the ATS, any name(s) under which business is
conducted, and the location of each ATS. The list also identifies each
ATS that filed a cessation of operations report in the prior month.
While the Commission does not approve Form ATS filings, the list is
designed to inform the public about ATSs that have noticed their
operations with the Commission.
---------------------------------------------------------------------------

    \295\ See 17 CFR 242.301(b)(2)(vii).
---------------------------------------------------------------------------

    The Commission is proposing to amend Rule 301(b)(2) to clarify that
being ``deemed confidential'' means receiving confidential treatment
under a relevant Commission regulation subject to applicable law \296\
and to eliminate confidential treatment for information about the
type(s) of securities that the ATS trades as disclosed in the Exhibit
B, subpart (a) of Form ATS and Form ATS-R. The Commission does not
believe that ATSs will be harmed by these disclosures because a vast
majority of ATSs currently publicize the types of securities in which
they transact, for example, on the website for the ATS or the website
of the ATS broker-dealer operator. The Commission publishes on its
website a list of ATSs that have an active Form ATS on file with the
Commission; however, information about types of securities traded is
not provided on that list and the Commission frequently receives
requests from the public and regulators for more detail in the
Commission's publication about the types of securities traded by ATSs.
The Commission believes that disclosing this information could help the
public understand a fundamental aspect of an ATS. To allow for this
narrow exception, the Commission is proposing to amend Rule
301(b)(2)(vii) of Regulation ATS to state that the content of reports
filed under Rule 301(b)(2) and Rule 301(b)(9) ``(except for types of
securities traded provided on Form ATS and Form ATS-R) will be accorded
confidential treatment subject to applicable law.''
---------------------------------------------------------------------------

    \296\ See, e.g., 17 CFR 200.83, 240.24b-2.
---------------------------------------------------------------------------

Request for Comment
    111. Should the Commission eliminate the exclusion from compliance
with the Fair Access Rule under Rule 301(b)(5)(iii) and with the
Capacity, Integrity, and Security Rule under Rule 301(b)(6)(iii)?
    112. Should the Commission amend Rule 301(b)(2)(vii) to make Form
ATS, Form ATS-R, or both public? Should the Commission amend Rule
301(b)(2)(vii) to make any other disclosures provided on Form ATS or
Form ATS-R public?
    113. Should the Commission eliminate confidential treatment for
information about the type(s) of securities that the ATS trades as
disclosed on Form ATS and Form ATS-R?

C. Modernization and Electronic Filing of Form ATS and Form ATS-R

    The Commission is proposing revisions to Rule 301(b)(2), Form ATS,
and Form ATS-R to modernize Form ATS and Form ATS-R and to provide that
they are filed electronically. Every ATS subject to Rule 301(b)(2) of
Regulation ATS is required to file an initial operation report
(``IOR''),\297\

amendments to the IOR,\298\ and cessation of operations report with the
Commission on Form ATS.\299\ ATSs are also required to file the
information required by Form ATS-R \300\ pursuant to Rule 301(b)(9)
within 30 calendar days after the end of each calendar quarter in which
the ATS has operated.\301\
---------------------------------------------------------------------------

    \297\ Form ATS, which provides the Commission with notice about
of an ATS's operations and changes to such operations, is not
approved by the Commission. See Regulation ATS Adopting Release,
supra note 35, at 70864. Form ATS requires the ATS to submit the
information specified in eleven exhibits (Exhibits A through I).
Form ATS is used for three types of submissions: An IOR; an
amendment to the IOR; and a cessation of operations report. An ATS
designates the type of submission on Form ATS. Form ATS and the Form
ATS instructions are available at http://www.sec.gov/about/forms/formats.pdf.
    \298\ See 17 CFR 242.301(b)(2). An ATS is required to file an
amendment on Form ATS at least 20 calendar days prior to
implementing a material change to the operation of the ATS, within
30 calendar days after the end of a quarter when information
contained in an IOR filed on Form ATS becomes inaccurate, and
promptly upon discovering that an IOR filed on Form ATS or an
amendment on Form ATS was inaccurate when filed.
    \299\ See 17 CFR 242.301(b)(2)(vi).
    \300\ See Form ATS-R. See also supra note 126.
    \301\ See 17 CFR 242.301(b)(9)(i). An ATS must also file Form
ATS-R more frequently upon request of the Commission. See Form ATS-R
Instructions.
---------------------------------------------------------------------------

    First, the Commission is proposing an amendment to Rule
301(b)(2)(vi), which currently states that ``[e]very notice or
amendment filed pursuant to this paragraph (b)(2) shall constitute a
`report' '' within the meaning of applicable provisions of the Exchange
Act. The Commission proposes to add a reference to Rule 301(b)(9) to
state that Form ATS-R, as is the case with Form ATS, constitutes a
report within the meaning of applicable provisions of the Exchange
Act.\302\
---------------------------------------------------------------------------

    \302\ This amendment would be consistent with Rule
301(b)(2)(vii), which states that ``[a]ll reports filed pursuant to
this paragraph (b)(2) and paragraph (b)(9)'' of Rule 301 are, as
proposed, accorded confidential treatment subject to applicable law.
See 17 CFR 242.301(b)(2)(vii). The instructions to Form ATS and Form
ATS-R require an ATS to submit one original and two copies of Form
ATS and Form ATS-R to the Commission. See Form ATS and Form ATS-R
Instructions. In addition, Rule 301(b)(2)(vii) requires that an ATS
file copies of its Form ATS filings with the examining authority of
the SRO with which it is registered (e.g., FINRA) at the same time
it files with the Commission, and upon request, the ATS must provide
its SROs surveillance personnel with duplicate Form ATS-R filings.
See 17 CFR 242.301(b)(2)(vii).
---------------------------------------------------------------------------

    Next, the Commission is proposing to require that all Forms ATS and
ATS-R are filed with the Commission electronically. Currently, ATSs are
required to submit paper submissions of Forms ATS and ATS-R to the
Commission.\303\ The Commission proposes to amend Rule 301(b)(2)(vii)
to require that an ATS must file a Form ATS or a Form ATS-R in
accordance with the instructions therein. The Commission is proposing
to revise the instructions to Form ATS and Form ATS-R to require that
they be submitted electronically via EDGAR.\304\ The Commission is also
proposing to require in Rule 301(b)(2)(vii) that reports provided for
in Rule 301(b)(2) and (b)(9) shall be filed on Form ATS and Form ATS-R,
as applicable, and include all information as prescribed in Form ATS or
Form ATS-R, as applicable, and the instructions thereto.\305\ In
addition, the Commission is proposing to require that any Form ATS or
Form ATS-R shall be executed at, or prior to, the time Form ATS or Form
ATS-R is filed and shall be retained by the ATS in accordance with Rule
303 of Regulation ATS and Rule 302 of Regulation S-T, and the
instructions in Form ATS or Form ATS-R, as applicable.\306\ The
Commission believes that, among other benefits, the electronic filing
of Forms ATS and ATS-R would increase efficiencies and decrease filing
costs for ATSs (i.e., ATSs would no longer be required to print and
mail paper filings) and for the Commission's staff when undertaking a
review of these forms. Currently, Form ATS-N must be filed in EDGAR,
and under this proposal, Form ATS-G would be as well. EDGAR is
currently configured to support the Commission's receipt and review of
filings under Regulation ATS, and requiring electronic Form ATS and
Form ATS-R filings to be submitted via EDGAR would be the most
efficient way to facilitate their electronic filing.\307\
---------------------------------------------------------------------------

    \303\ Rule 301(b)(2)(vii) of Regulation ATS specifies that
reports on Form ATS shall be considered filed upon receipt by the
Division of Trading and Markets, at the Commission's principal
office in Washington, DC. See 17 CFR 242.301(b)(2)(vii).
    \304\ See infra note 308 and accompanying text.
    \305\ Accordingly, the Commission is proposing to delete the
provisions of Rule 301(b)(2)(vii) related to paper submission.
Specifically, the Commission is deleting the sentence that the
reports shall be considered filed ``upon receipt by the Division of
Trading and Markets, at the Commission's principal office in
Washington, DC.'' Additionally, although the Commission will
continue to require that duplicates of filings on Form ATS be
provided to the SRO that is the examining authority for each ATS,
and that duplicates of the Form ATS-R be made available to the
surveillance personnel of such SRO upon request, the Commission
proposes to eliminate the reference to ``originals'' in Rule
301(b)(2)(vii) because paper reports will no longer be furnished to
the Commission and there will therefore be no ``original'' version
of the reports.
    \306\ The Commission notes that the proposed provisions would
conform to similar provisions of Rule 304, which provide for the
electronic filing of Form ATS-N. See 17 CFR 242.304(c).
    \307\ See supra Section IV.
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    To facilitate electronic filing, the Commission is proposing to
amend the text of General Instructions A.4 of Forms ATS and ATS-R to
require that all filings be submitted via EDGAR and prepared,
formatted, and submitted in accordance with Regulation S-T and the
EDGAR Filer Manual.\308\ The Commission also proposes to amend Forms
ATS and ATS-R General Instruction A.5 to state that a filing that is
defective may be rejected and not be accepted by the EDGAR system and
that any filing so rejected shall be deemed not be filed. This is
consistent with the requirements of Regulation S-T, which provides the
rules for EDGAR submissions.\309\ The Commission also notes that the
instructions for current Form ATS contain similar language,\310\ but
the current instructions for Form ATS-R do not contain such language.
The Commission believes that it would be appropriate to reject a filing
as defective if, for example, a Form ATS or Form ATS-R is missing
exhibits or does not comply with the electronic filing requirements.
The Commission is also proposing to amend General Instruction A.6
(``Recordkeeping'') of both forms to reflect that records must be
retained in accordance with the EDGAR Filer Manual and Rule 303 of
Regulation ATS and to conform to the recordkeeping instructions on Form
ATS-N and proposed Form ATS-G.\311\
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    \308\ The Commission proposes to eliminate the language in the
Form ATS instructions and Form ATS-R instructions requesting that an
ATS type all information because an ATS would not otherwise have the
option to handwrite any responses. The instructions for both forms
would be amended to eliminate the option to use a ``reproduction''
of the forms. The Commission also believes it is redundant to state
that the Form ATS or Form ATS-R must be the ``current version'' as
the ATS is required to attest that the form is ``current.'' The
Commission also proposes to delete the requirement to attach an
execution page with original manual signatures for Form ATS because,
as discussed above, the Form ATS and Form ATS-R would be signed
electronically and thus there would be no need for an execution
page. The Commission also proposes to delete the instruction that
the name of the alternative trading system, CRD number, SEC file
number, and report period dates be listed on each page, as this
requirement will be unnecessary because the Form ATS or Form ATS-R
will be submitted as a single submission. Because Form ATS and Form
ATS-R would be submitted via EDGAR, the Commission is also proposing
to delete references to submitting the ``original'' and ``copies''
of the form to the Commission at the Commission's mailing address.
    \309\ 17 CFR 232. This is also consistent with the requirements
for current Form ATS-N.
    \310\ The Form ATS Instructions state that ``Form ATS shall not
be considered filed, unless it complies with applicable
requirements.''
    \311\ Rule 303 of Regulation ATS provides the record
preservation requirements for ATSs. See 17 CFR 242.303.
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    In addition, the Commission is proposing to amend Form ATS to
require an ATS filing an amendment on Form ATS to identify whether the
Form ATS filing is a material amendment under Rule 301(b)(2)(ii), a
periodic amendment under Rule 301(b)(2)(iii), or a correcting amendment
under Rule 301(b)(2)(iv).\312\ An ATS currently

identifies an amendment to current Form ATS by marking the ``Amendment
to Initial Operation Report'' box on Form ATS, and Form ATS currently
does not ask the ATS to specify whether the amendment to Form ATS is a
material, periodic, or correcting amendment.\313\ The Commission
believes that requiring an ATS to specify the type of amendment would
better enable the Commission to determine whether an ATS is in
compliance with Regulation ATS. The Commission also proposes requiring
an ATS to provide the date that the ATS ceased to operate, which is not
currently required on Form ATS. The Commission believes that having
information about the date that the ATS ceased to operate would enable
the Commission to determine more readily whether an ATS is, or was, in
compliance with Regulation ATS.\314\
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    \312\ See Rule 301(b)(2)(ii)-(iv).
    \313\ The Commission is also proposing to add cites to the
relevant rule text next to the check boxes on Form ATS identifying
whether the ATS is filing an IOR, amendment to Form ATS, or a
cessation of operations report.
    \314\ See Rule 301(b)(2)(v) (requiring an ATS to promptly file a
cessation of operations report on Form ATS in accordance with the
instructions therein upon ceasing to operate as an alternative
trading system).
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    The Commission is also proposing to amend Form ATS and Form ATS-R
to change the solicitation of information relating to the name of the
broker-dealer operator and the registration and contact information of
the broker-dealer operator. Because many broker-dealer operators of
ATSs engage in brokerage and/or dealing activities in addition to
operating an ATS and some broker-dealers operate multiple ATSs, the
name of the broker-dealer operator of an ATS often differs from the
commercial name under which the ATS conducts business. To identify the
broker-dealer operator of an ATS and to assist the Commission in
collecting and organizing its filings and assessing whether the ATS has
met its requirement to register as a broker-dealer, Forms ATS and ATS-R
would require the ATS to indicate the full name of the broker-dealer
operator of the ATS, as it is stated on Form BD, in Item 1 of Form ATS
and Form ATS-R. To further facilitate compliance with the requirements
of Regulation ATS, as proposed, Form ATS and Form ATS-R would require
the ATS to indicate whether the filer is a broker-dealer registered
with the Commission and whether the broker-dealer operator has been
authorized by a national securities association to operate an ATS. Such
requirements would conform to the proposed requirements of Form ATS-N
and Form ATS-G.\315\ The Commission is proposing to conform Item 1 of
Form ATS and Form ATS-R \316\ to the requirements of Form ATS-N, which
is currently filed electronically, and proposed Form ATS-G, which the
Commission is proposing would be filed electronically.\317\ The
Commission believes these requests would help the Commission in
identifying and corresponding with ATSs.\318\
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    \315\ See supra note 203 and accompanying text.
    \316\ Form ATS and Form ATS-R currently ask for the ATS's main
street address, mailing address, business telephone number and
facsimile number, and the contact information for the ATS's contact
person. The Commission is proposing to move the information requests
for the name and title and telephone number of the contact employee
to the signature block on the form, and to request an email address
for such person. The proposed signature block would also ask for the
primary street address and mailing address of the ATS. The current
certifications required in Form ATS and Form ATS-R, including that
the information filed is current, true, and complete, would remain
unchanged. However, the Commission is proposing to delete the
provision allowing for service of any civil action pursuant to
confirmed telegram and instead, permit service of any civil action
via email. The signature block on Form ATS and Form ATS-R would
conform to the signature block in Form ATS-N, as proposed. See infra
notes 323-324 and accompanying text.
    \317\ See supra Section IV.
    \318\ The Commission proposes to replace in Item 1 of Form ATS
and Form ATS-R the requests for the ATS's main street address,
mailing address, and business telephone number and facsimile number
with a requirement that the ATS provide the primary, and if any,
secondary physical street address of the ATS's matching system, as
well as a URL address for its website if it has a website. The
Commission believes that knowing the location of the matching system
address and secondary matching system address could be useful to the
Commission in the event of, for instance, a natural disaster that
could impact market participants' ability to trade on the ATS and
potential latency that could be experienced due to the location of
the secondary site of the ATS. The Commission is also requesting the
full name of the national securities association of the broker-
dealer operator, the effective date of the broker-dealer operator's
membership with the national securities association, and MPID of the
ATS. In addition, because any current or former names of the ATS
would be searchable on EDGAR and there will be multiple identifiers
included on the form, including MPID, the Commission is proposing to
delete the requirement that the ATS indicate if it is changing its
name and list its former name.
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    The Commission is proposing to amend Form ATS-R to make it easier
for the Commission staff to identify if the ATS has met its reporting
obligations. First, the Commission is proposing to require an ATS to
specify whether it is filing a quarterly report amendment under Rule
301(b)(9)(i) or a report for an ATS that has ceased to operate under
Rule 301(b)(9)(ii) and, if the latter, to indicate the date the ATS
ceased to operate. The Commission believes that requiring an ATS to
indicate its type of Form ATS-R filing would enable the Commission to
more effectively review Form ATS-R submissions and determine whether an
ATS is in compliance with Regulation ATS. The Commission is also
proposing to amend Form ATS-R to ask whether the ATS was subject to the
fair access obligations under Sec.  242.301(b)(5) during any portion of
the period covered by the report by adding a corresponding box for the
ATS to check ``yes'' or ``no.'' Currently, Form ATS-R requires an ATS
that is subject to the Fair Access Rule to report a list of all persons
for whom access to the ATS was granted, denied, or limited access
during the period covered by the Form ATS-R.\319\ The Commission
believes that asking the ATS to indicate whether the ATS was subject to
the Fair Access Rule during any portion of the period covered by the
report would facilitate the Commission's review of Form ATS-R
submissions.
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    \319\ See Form ATS-R and Form ATS-R Instructions, No. 8.
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    The Commission is also proposing changes to the Form ATS-R
categories of securities to modernize them and add more specificity
with regard to all categories of securities. Form ATS-R currently
requires ATSs to indicate the total unit volume and total dollar volume
of government securities transactions in the period covered by the
report. The Commission is proposing to require that ATSs specify the
total unit volume and total dollar volume of transactions in ``U.S.
Treasury Securities'' and ``Agency Securities'' under the heading
``Government securities.'' \320\ As currently, ATSs would also be
required to indicate the total unit volume and total dollar volume in
government securities overall. The Commission believes that this change
will help the Commission facilitate compliance with the thresholds for
the Fair Access Rule and Regulation SCI, which the Commission is
proposing would be based on trading volume in U.S. Treasury Securities
and Agency Securities.\321\ In addition, the Commission is proposing to
amend Form ATS-R to update the descriptions of certain categories of
securities for which volume is required to be reported on Form ATS-R by
an ATS. Specifically, the Commission is proposing to replace the names
of the securities categories, ``Nasdaq National Market Securities'' and
``Nasdaq

SmallCap Market Securities,'' reported in Items 4 and 6 of Form ATS-R,
with ``Nasdaq Global Market Securities'' and ``Nasdaq Capital Market
Securities,'' respectively. The Commission believes that replacing the
description of categories of securities that no longer are in use with
current categories of securities would reduce potential confusion for
an ATS when completing Form ATS-R and would enable an ATS to reflect
more accurately its trading activities during the applicable reporting
period.
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    \320\ The Commission is proposing to add to the Form ATS-R
instructions the definitions of U.S. Treasury Security and Agency
Security, which would conform to the definitions the Commission is
proposing in Rule 300(p) and Rule 300(q), respectively.
    \321\ See supra Section II.D and infra Section VI.
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    The Commission is also proposing to add new Item 4K to Form ATS-R,
which requires ATSs to disclose the total dollar volume of transactions
in repurchase agreements and reverse repurchase agreements. New Item 5C
would require ATSs to list the types of securities subject to such
repurchase or reverse repurchase agreements. In the Commission's
experience, ATSs that trade repurchase or reverse repurchase
agreements, which are currently disclosed as debt securities on Item 4N
of Form ATS-R, currently provide on Form ATS-R a break-down of nominal
trade value of each of these types of securities. The Commission
believes that adding new Item 4K to Form ATS-R to require that ATSs
provide the total dollar volume of transactions in repurchase or
reverse repurchase agreements would require all ATSs that trade
repurchase or reverse repurchase agreements to take a consistent
approach in providing this information. The Commission is also
proposing new Item 5C, which would require ATSs to list the types of
securities subject to repurchase or reverse repurchase agreements
reported in Item 4K of Form ATS-R. The Commission believes that this
would provide information to the Commission about the types of
securities that ATSs trade while imposing a minimal burden on filers.
    Finally, the Commission is proposing to add new Item 5D, which
would require an ATS to list the types of listed options reported in
Item 4H of Form ATS-R. Item 4H of Form ATS-R currently requires ATSs to
disclose the total unit volume and dollar volume of transactions in
listed options. Under new Item 5D, an ATS might indicate, for example,
that it trades equity options and options on government securities. The
Commission believes that this would provide the Commission with more
specific information about the types of options that each ATS trades.
Request for Comment
    114. Would the proposed changes to Form ATS and Form ATS-R enhance
the Commission's oversight of ATSs? Do commenters disagree with any of
the proposed modifications? If so, what alternatives should the
Commission implement?
    115. Form ATS-R requires an ATS to quarterly report volume of
transactions for certain securities, all subscribers that were
participants on the ATS, and securities that were traded on the ATS.
Should the Commission adopt amendments to Form ATS-R to add, change, or
modify any of the requests for information on Form ATS-R? Are the
current categories of securities and the proposed categories of
securities for reporting transaction volume to the Commission
appropriate?
    116. Form ATS requires an ATS to report information to the
Commission in Exhibits A through I. These requests solicit information
about the ATS, including but not limited to, types of subscribers and
differential access to services, types of securities traded, counsel,
governance documents, service providers, manner of operations,
including order entry, order execution procedures, clearance and
settlement procedures, and trade reporting, procedures for reviewing
system capacity, security, and contingency planning, procedures to
safeguard subscriber funds and securities, and direct owners. Should
the Commission adopt amendments to Form ATS to add, change, or modify
any of the requests for information on Form ATS? If so, please identify
the request and explain how it should be amended.
    117. Should the Commission adopt amendments to Form ATS to require
disclosures similar to disclosures required on Part II of Form ATS-N
and proposed Form ATS-G, which request information about ATS-related
activities of the broker-dealer operator and its affiliates?
    118. Should the Commission adopt amendments to Form ATS to include
questions similar to those in Part III of Form ATS-N and proposed Form
ATS-G, which request information about the manner of the ATS's
operations?
    119. Are there any specific items on Form ATS-N or proposed Form
ATS-G that the Commission should incorporate into Form ATS?
    120. Should the Commission propose amendments to Regulation ATS to
require ATSs that trade OTC equity securities to comply with Rule 304,
including filing with the Commission a public form with requirements
similar to Form ATS-N or proposed Form ATS-G?
    121. Should the Commission require an ATS to disclose the LEI of
its broker-dealer operator, in addition to its CRD Number and the
proposed disclosure of the MPID for the ATS on Form ATS?

D. Changes to Form ATS-N

    The Commission is proposing to delete the check box on the cover
page of Form ATS-N that requires an NMS Stock ATS to select whether the