the ATS pursuant to Rule 301(b)(10) and each making and keeping records
for the ATS pursuant to Rule 301(b)(8).\152\
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    \150\ See Rule 3a1-1(a)(2) (providing that an organization,
association, or group of persons shall be exempt from the definition
of ``exchange'' if it is in compliance with Regulation ATS) and Rule
301(a) (providing that an ATS shall comply with the requirements of
Rule 301(b)).
    \151\ Under the proposed rules, a broker-dealer operator for an
ATS that currently trades government securities and corporate bonds,
for example, would file a Form ATS-G to disclose its government
securities activities for the Government Securities ATS. The broker-
dealer operator would disclose the corporate bond activities of its
existing ATS by filing with the Commission a material amendment to
its Form ATS pursuant to Rule 301(b)(2)(ii) of Regulation ATS to
remove information regarding government securities activities. See
Regulation ATS Adopting Release, supra note 35, at 70864 (discussing
circumstances under which an ATS would file a material amendment to
Form ATS pursuant to Rule 301(b)(2), which, among other things,
includes changes to the operating platform, the types of securities
traded, or types of subscribers).
    \152\ See supra note 92 and accompanying text.
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    The Commission also is proposing to amend Rule 301(b)(9) of
Regulation ATS.\153\ This rule requires an ATS to report transaction
volume in various types of securities, including government securities
and repos, on Form ATS-R on a quarterly basis and within 10 calendar
days after it ceases operation.\154\ As discussed above, the Commission
is proposing to define ``Government Securities ATS'' and to clarify the
definition of ``NMS Stock ATS'' to make clear that a Government
Securities ATS cannot trade securities other than government securities
or repos and that an NMS Stock ATS cannot trade securities other than
NMS stocks.\155\ For example, a Government Securities ATS operated by a
broker-dealer that is also the registered broker-dealer for a non-
Government Securities ATS would be separate from the non-Government
Securities ATS and would be required to file a Form ATS-R for the
Government Securities ATS. The broker-dealer would be required to file
a separate Form ATS-R for the non-Government Securities ATS. The
Commission is proposing to amend Rule 301(b)(9) by removing language
stating that an ATS must ``separately file'' a Form ATS-R for
transactions in NMS stocks and for transactions in securities other
than NMS stocks to simplify the text and convey that each ATS, whether
operated by a broker-dealer that operates multiple types of ATS, must
file a Form ATS-R. This is consistent with the current Form ATS-R
filing process for a broker-dealer that operates an NMS Stock ATS and
non-NMS Stock ATS.\156\
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    \153\ See 17 CFR 242.301(b)(9).
    \154\ The information filed on Form ATS-R permits the Commission
to monitor trading on an ATS. See Regulation ATS Adopting Release,
supra note 35, at 70878.
    \155\ See supra note 94 and accompanying text.
    \156\ See NMS Stock ATS Adopting Release, supra note 1, Section
III.B.5.
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Request for Comment
    24. Should an NMS Stock ATS or Government Securities ATS that is
operated by a broker-dealer that is a registered broker-dealer for more
than one ATS be subject to Rule 304 independently from any other ATS
for which its broker-dealer is registered?
    25. Should a broker-dealer that is the registered broker-dealer for
more than one ATS be required to file separate Forms ATS-R for each of
the ATSs it operates?

F. Enhanced Filing Requirements for Government Securities ATSs

    The Commission is proposing a process for the Commission to review
disclosures on Form ATS-G and declare a Form ATS-G ineffective if the
Commission finds, after notice and opportunity for hearing, that such
action is necessary and appropriate in the public interest and the
protection of investors. The proposed effectiveness process is not
merit based and is the same effectiveness process that is currently
applicable to NMS Stock ATSs. The effectiveness process is designed to
facilitate the Commission's oversight of Government Securities ATSs, as
the process has facilitated the review of NMS Stock ATSs, and address,
for example, material deficiencies with respect to the accuracy,
currency, and completeness of disclosures on Form ATS-G.
    The Commission is proposing to amend Rule 304(a) to require that a
Covered ATS, which will include a Government Securities ATS, must
comply with Rules 300 through 304 of Regulation ATS as applicable to be
exempt pursuant to Rule 3a1-1(a)(2).\157\ As proposed, all Government
Securities ATSs would be required to comply with Rule 304, as amended,
to, among other things, file Form ATS-G with the Commission. The
Commission is proposing to apply to Government Securities ATSs the
existing provisions of current Rule 304(a) for the filing and
Commission review of an initial Covered Form, which will include Form
ATS-G,\158\ with a modification to the circumstances under which the
Commission can extend the review period for an initial Covered
Form.\159\ The Commission believes this process is appropriate for the
same reasons stated in the NMS Stock ATS Adopting Release.\160\ The
Commission believes that this review process will facilitate the
Commission's oversight of Government Securities ATSs and help ensure
that information is disclosed in a complete and comprehensible manner.
The differences between Form ATS-G and Form ATS-N would not warrant a
different review and effectiveness process and the Commission is
proposing to apply the same provisions

that are applicable to NMS Stock ATSs to Government Securities ATSs,
which include the following:
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    \157\ As proposed, references to ``NMS Stock ATSs'' throughout
Rule 304 would be changed to refer to ``Covered ATSs,'' which would
encompass Government Securities ATSs. See supra Section II.B.
    \158\ See infra notes 161-167 and accompanying text.
    \159\ See infra notes 168-170 and accompanying text.
    \160\ See NMS Stock ATS Adopting Release, supra note 1, Section
IV, at 38782.
---------------------------------------------------------------------------

     No exemption is available to a Government Securities ATS
pursuant to Exchange Act Rule 3a1-1(a)(2) unless the Government
Securities ATS files with the Commission an initial Form ATS-G,\161\
and the initial Form ATS-G is effective.\162\
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    \161\ The Commission staff may reject a Form ATS-G filing that
is defective because, for example, it is missing sections or missing
responses to any sub-questions, or does not comply with the
electronic filing requirements. This is a separate process from the
determination to declare a Form ATS-G ineffective. See NMS Stock ATS
Adopting Release, supra note 1, at 38791.
    \162\ See Rule 304(a)(1)(i). Because NMS Stock ATSs must file a
Form ATS-N and Government Securities ATSs must file a Form ATS-G,
the Commission is proposing a change to current Rule 304(a)(1)(i) to
state that no exemption is available to a Covered ATS pursuant to
Sec.  240.3a1-1(a)(2) unless the Covered ATS files with the
Commission an ``applicable'' initial Covered Form.
---------------------------------------------------------------------------

     To permit the Commission, by order, to declare ineffective
an initial Form ATS-G no later than 120 calendar days from the date of
filing with the Commission, or, if applicable, the end of the extended
Commission review period.\163\ During the Commission review period, the
Government Securities ATS shall amend its initial Form ATS-G by filing
updating amendments and correcting amendments, as applicable.\164\
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    \163\ See proposed Rule 304(a)(1)(ii). As proposed, the
Commission may extend the initial Form ATS-G review period for: (1)
An additional 90 calendar days, if the Commission determines that a
longer period is appropriate, in which case the Commission will
notify the Government Securities ATS in writing within the initial
120-calendar day review period and will briefly describe the reason
for the determination for which additional time for review is
required; or (2) any extended review period to which a duly
authorized representative of the Government Securities ATS agrees in
writing. See infra note 169.
    \164\ As proposed, to make material changes to its initial Form
ATS-G during the Commission review period, the Government Securities
ATS shall withdraw its filed initial Form ATS-G and may refile an
initial Form ATS-G pursuant to Rule 304(a)(1). See Rule
304(a)(1)(ii)(B).
---------------------------------------------------------------------------

     An initial Form ATS-G, as amended, will become effective,
unless declared ineffective, upon the earlier of: (1) The completion of
review by the Commission and publication pursuant to Rule 304(b)(2)(i);
or (2) the expiration of the Commission review period, or, if
applicable, the end of the extended review period.\165\
---------------------------------------------------------------------------

    \165\ See proposed Rule 304(a)(1)(iii)(A).
---------------------------------------------------------------------------

     The Commission will, by order, declare an initial Form
ATS-G ineffective if it finds, after notice and opportunity for
hearing, that such action is necessary or appropriate in the public
interest, and is consistent with the protection of investors.\166\ If
the Commission declares an initial Form ATS-G ineffective, the
Government Securities ATS shall be prohibited from operating as a
Government Securities ATS pursuant to Exchange Act Rule 3a1-1(a)(2). An
initial Form ATS-G declared ineffective does not prevent the Government
Securities ATS from subsequently filing a new Form ATS-G.\167\
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    \166\ Like the review process for Form ATS-N, the Commission's
review of Form ATS-G would not be merit-based; instead it would
focus on the completeness and comprehensibility of the disclosures.
See NMS Stock ATS Adopting Release, supra note 1, at 38790. In the
NMS Stock ATS Adopting Release, the Commission discussed the
circumstances under which the Commission would declare a Form ATS-N
amendment ineffective. Such circumstances would also apply to the
Commission's review of an amendment to Form ATS-G filed by a
Government Securities ATS. For example, the Commission believes it
would be necessary or appropriate in the public interest, and
consistent with the protection of investors, to declare ineffective
a Form ATS-G if, for example, the Commission finds, after notice and
opportunity for hearing, the Form ATS-G was filed by an entity that
does not meet the definition of a Government Securities ATS; one or
more disclosures reveal non-compliance with federal securities laws,
or the rules or regulations thereunder, including Regulation ATS; or
one or more disclosures on Form ATS-G are materially deficient with
respect to their completeness or comprehensibility. For further
discussion, see id. at Section IV.B.2.
    \167\ See Rule 304(a)(1)(iii)(B).
---------------------------------------------------------------------------

    The Commission is proposing to amend Rule 304(a)(1)(ii)(A)(1),
which currently provides that the Commission may extend the initial
Form ATS-N review period for an additional 90 calendar days if the Form
ATS-N is unusually lengthy or raises novel or complex issues that
require additional time for review.\168\ The Commission is extending
the rule to Form ATS-G, and furthermore, the Commission believes that
it is appropriate to extend the Commission review period for a Covered
Form if it finds that an extension is appropriate.\169\ For example, if
an ATS's disclosures on an initial Form ATS-G are difficult to
understand or appear to be incomplete, the Commission may need
additional time to discuss the disclosures with the ATS to ascertain
whether to declare the Form ATS-G ineffective, even if the form is not
unusually lengthy or does not raise novel or complex issues. Rather
than moving to declare an initial Form ATS-G ineffective because of
material deficiencies with respect to completeness and
comprehensibility, the Commission could extend the review period to
allow the filer to resolve the deficiencies. The Commission is
therefore proposing that the Commission may extend the initial Covered
Form review period by an additional 90 calendar days if it determines a
longer period is appropriate. The proposed standard is the same
standard for extending the Commission review period for SRO rule
filings under Section 19 of the Exchange Act.\170\ As under current
Rule 304(a)(1)(ii)(A)(1), in such case, the Commission will notify the
Covered ATS in writing within the initial 120-calendar day review
period and will briefly describe the reason for the determination for
which additional time for review is required.
---------------------------------------------------------------------------

    \168\ See Rule 304(a)(1)(ii)(A)(1). As proposed, the Commission
may also extend the initial Covered Form review period for any
extended review period to which a duly authorized representative of
the Covered Form agrees in writing. See Rule 304(a)(1)(ii)(A)(2).
    \169\ In the Commission's experience reviewing Forms ATS-N, the
Commission review period was extended (either by the Commission or
by the agreement of a duly authorized representative of the ATS) for
31 of the 35 Forms ATS-N that the Commission has reviewed and
published. In its review of each Form ATS-N, the Commission staff
engaged in extensive conversations with the NMS Stock ATS with
regard to the NMS Stock ATS's disclosures on its initial Form ATS-N.
    \170\ See 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    The Commission is also proposing that Legacy Government Securities
ATSs that have a Form ATS on file with the Commission as of the
Compliance Date be subject to identical rules (other than changes to
terminology) during the transition from operating pursuant to a Form
ATS to operating pursuant to a Form ATS-G as those that were applied to
Legacy NMS Stock ATSs during the Commission's review period. In
addition, to allow a Currently Exempted Government Securities ATS to
continue to operate without disruption while its initial Form ATS-G is
under Commission review, the Commission is proposing to amend Rule
304(a)(1)(i) to provide that a Currently Exempted Government Securities
ATS may continue to operate pursuant to Regulation ATS until its
initial Form ATS-G becomes effective. The Commission believes that all
Legacy Government Securities ATSs--whether they are operating pursuant
to a Form ATS or whether they have operated as a Currently Exempted
Government Securities ATS--should be permitted to continue to operate
during the Commission review period. The Commission is therefore
proposing that Legacy Government Securities ATSs can operate pursuant
to Form ATS-G on a provisional basis during the Commission review
period. A Government Securities ATS would file with the Commission an
initial Form ATS-G no earlier than the Compliance Date \171\ and no
later than the date 150

calendar days after the date of publication of the final rule in the
Federal Register. An initial Form ATS-G filed by a Legacy Government
Securities ATS would supersede and replace a previously filed Form ATS
of the Legacy Government Securities ATS. A Legacy Government Securities
ATS that fails to comply with the requirements of Regulation ATS by
filing Form ATS-G by the 150th calendar day and continues operating as
a Government Securities ATS would no longer qualify for the exemption
provided under Rule 3a1-1(a)(2), and thus, risks operating as an
unregistered exchange in violation of Section 5 of the Exchange Act. If
a Legacy Government Securities ATS that has a Form ATS on file with the
Commission to trade, for example, government securities and corporate
bonds fails to file a Form ATS-G by the 150th calendar day, the ATS
must either file a cessation of operations report on Form ATS or file a
material amendment on Form ATS to remove information related to
government securities.
---------------------------------------------------------------------------

    \171\ See supra note 97.
---------------------------------------------------------------------------

    For the same reasons discussed above,\172\ the Commission is
proposing to amend Rule 304(a)(1)(iv)(B) to provide that the Commission
can extend the initial Form ATS-G review period by an additional 120
calendar days if it determines that a longer period is appropriate,
even if the form is not unusually lengthy or does not raise novel or
complex issues.
---------------------------------------------------------------------------

    \172\ See supra notes 168-170 and accompanying text.
---------------------------------------------------------------------------

    Other than the proposed changes to the circumstances under which
the Commission may extend the Commission review period, the Commission
is also proposing that the process for the Commission review and
ineffectiveness determination for an initial Form ATS-G filed by a
Legacy Government Securities ATS would be the same as the process for
an initial Form ATS-N filed by a Legacy NMS Stock ATS.\173\ Given the
intended uses of proposed Form ATS-G to allow the Commission to monitor
developments and carry out its oversight functions over Government
Securities ATSs and to enable market participants to make more informed
decisions about how their orders will be handled by the ATSs, the
Commission believes that it is important for a Government Securities
ATS to maintain an accurate, current, and complete Form ATS-G.\174\
Providing the Commission with the opportunity to review Form ATS-G
disclosures would help ensure that information is disclosed in a
complete and comprehensible manner.\175\
---------------------------------------------------------------------------

    \173\ See Rule 304(a)(1)(iv)(B), which, as proposed, will
provide that the Commission may, by order, as provided in Rule
304(a)(1)(iii), declare an initial Form ATS-G filed by a Legacy
Government Securities ATS ineffective no later than 120 calendar
days from the date of filing with the Commission, or, if applicable,
the end of the extended review period. As proposed, the Commission
may extend the initial Form ATS-G review period for a Legacy
Government Securities ATS for: (1) An additional 120 calendar days
if the Commission determines that a longer period is appropriate, in
which case the Commission will notify the Legacy Government
Securities ATS in writing within the initial 120-calendar day review
period and will briefly describe the reason for the determination
for which additional time for review is required; or (2) any
extended review period to which a duly-authorized representative of
the Legacy Government Securities ATS agrees in writing. See supra
note 172.
    \174\ See NMS Stock ATS Proposing Release, supra note 62, at
81025 (discussing the proposed process for amendments to, and
Commission review of, Form ATS-N).
    \175\ See NMS Stock ATS Adopting Release, supra note 1, Section
IV.A.3.
---------------------------------------------------------------------------

    As the intended uses of Form ATS-G and Form ATS-N disclosures are
similar, the Commission is proposing the same filing requirements that
are currently applicable to Form ATS-N amendments filed by NMS Stock
ATSs to Form ATS-G amendments filed by Government Securities ATSs. A
Government Securities ATS would be required to amend Form ATS-G:
     At least 30 calendar days prior to the date of
implementation of a material change to the operations of the Government
Securities ATS or to the activities of the broker-dealer operator or
its affiliates that are subject to disclosure on the Form ATS-G, other
than changes related to order display or fair access, which will be
contingent amendments reported pursuant to Rule 304(a)(2)(i)(D).\176\
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    \176\ See Rule 304(a)(2)(i)(A). Scenarios that are particularly
likely to implicate a material change include: (1) A broker-dealer
operator or its affiliates beginning to trade on the Government
Securities ATS; (2) a change to the broker-dealer operator's
policies and procedures governing the written safeguards and written
procedures to protect the confidential trading information of
subscribers pursuant to Rule 301(b)(10)(i) of Regulation ATS; (3) a
change to the types of participants on the Government Securities
ATS; (4) the introduction or removal of a new order type on the
Government Securities ATS; (5) a change to the order interaction and
priority procedures; (6) a change to the segmentation of orders and
participants; (7) a change to the manner in which the Government
Securities ATS displays orders or trading interest; and (8) a change
of a service provider to the operations of the Government Securities
ATS that has access to subscribers' confidential trading
information. This list is not intended to be exhaustive, and does
not mean to imply that other changes to the operations of a
Government Securities ATS or the activities of the broker-dealer
operator or its affiliates could not constitute material changes.
Further, the Government Securities ATS should generally consider
whether the cumulative effect of a series of changes to the
operations of the Government Securities ATS or the activities of the
broker-dealer operator or its affiliates with regard to the
Government Securities ATS is material. In addition, in determining
whether a change is material, an ATS generally should consider
whether such change would affect: (1) The competitive dynamics among
ATS subscribers; (2) the execution quality or performance of the
orders of any subscriber or category of subscribers; (3) the fees
that any subscriber or category of subscribers would pay to access
and/or use the ATS; (4) the nature or composition of counter-parties
with which any subscriber or category of subscribers interact; and
(5) the relative speed of access or execution of any subscriber or
group of subscribers. For further discussion, see NMS Stock ATS
Adopting Release, supra note 1, Section IV.B.1.a.
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     No later than 30 calendar days after the end of each
calendar quarter to correct information that has become inaccurate or
incomplete for any reason and was not required to be reported to the
Commission as a material amendment, correcting amendment, or contingent
amendment.\177\
---------------------------------------------------------------------------

    \177\ See Rule 304(a)(2)(i)(B).
---------------------------------------------------------------------------

     Promptly to correct information in any previous disclosure
on the Form ATS-G, after discovery that any information previously
filed on a Form ATS-G was materially inaccurate or incomplete when
filed.\178\
---------------------------------------------------------------------------

    \178\ See Rule 304(a)(2)(i)(C). For a discussion of when an ATS
should file a correcting amendment, see NMS Stock ATS Adopting
Release, supra note 1, at 38806.
---------------------------------------------------------------------------

     No later than seven calendar days after information
required to be disclosed in Part III, Item 24 on Form ATS-G, which
addresses fair access, has become inaccurate or incomplete. Because the
order display and execution access rule under Rule 301(b)(3) does not
apply to Government Securities ATSs, Form ATS-G does not include a
requirement to disclose information pertaining to order display and
execution access. Accordingly, Rule 304(a)(2)(i)(D) will only apply to
the fair access disclosure on Form ATS-G.\179\
---------------------------------------------------------------------------

    \179\ The Commission is proposing to revise Rule 304 to replace
references to ``Order Display and Fair Access Amendments'' with
``Contingent Amendments.'' The term ``Contingent Amendment'' would
apply to the relevant amendments under Rule 304(a)(2)(i)(D) to both
Form ATS-N and Form ATS-G.

Like amendments to Form ATS-N, the Commission will, by order, declare
ineffective any Form ATS-G amendment filed pursuant to Rule
304(a)(2)(i)(A) through (D), no later than 30 calendar days from filing
with the Commission, if it finds that such action is necessary or
appropriate in the public interest and is consistent with the
protection of investors.\180\
---------------------------------------------------------------------------

    \180\ See Rule 304(a)(2)(ii).
---------------------------------------------------------------------------

    The Commission is further proposing to apply current Rule 304(a)(3)
to require a Government Securities ATS to notice its cessation of
operations on a Form ATS-G at least 10 business days prior to the date
it will cease to operate

as a Government Securities ATS and to cause the Form ATS-G to become
ineffective on the date designated by the Government Securities ATS. In
addition, the Commission is proposing to apply Rule 304(a)(4) to
Government Securities ATSs, which would provide that the Commission
will, by order, if it finds, after notice and opportunity for hearing,
that such action is necessary or appropriate in the public interest and
is consistent with the protection of investors, suspend for a period
not exceeding twelve months,\181\ limit, or revoke the exemption for a
Covered ATS pursuant to Rule 3a1-1(a)(2).\182\ Rule 304(a)(4)(ii) would
provide that if the exemption for a Government Securities ATS is
suspended or revoked pursuant to Rule 304(a)(4)(i), the Government
Securities ATS would be prohibited from operating pursuant to the Rule
3a1-1(a)(2) exemption.\183\ If the exemption for a Government
Securities ATS is limited pursuant to Rule 304(a)(4)(i), the Government
Securities ATS shall be prohibited from operating in a manner otherwise
inconsistent with the terms and conditions of the Commission order.
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    \181\ The proposed limitation on the time frame for suspension
is consistent with federal securities law provisions pursuant to
which the Commission may suspend the activities or registration of a
regulated entity. See, e.g., Exchange Act Section 15(b)(4) (15
U.S.C. 78o(b)(4)) and 15B(c)(2) (15 U.S.C. 78o-4(c)(2)). See NMS
Stock ATS Proposing Release, supra note 62, at 81031 n.322.
    \182\ See proposed Rule 304(a)(4)(i).
    \183\ See Rule 304(a)(4). In making a determination as to
whether suspension, limitation, or revocation of a Government
Securities ATS's exemption is necessary or appropriate in the public
interest, and is consistent with the protection of investors, the
Commission would, for example, take into account whether the entity
no longer meets the definition of Government Securities ATS under
Rule 300(l), does not comply with the conditions to the exemption
(in that it fails to comply with any part of Regulation ATS,
including Rule 304), or otherwise violates any provision of federal
securities laws. For further discussion of such examples as applied
to NMS Stock ATSs, see NMS Stock ATS Proposing Release, supra note
62, at 81032.
---------------------------------------------------------------------------

    In addition, Rule 304(a)(4) would provide that prior to issuing an
order suspending, limiting, or revoking a Government Securities ATS's
exemption pursuant to Rule 304(a)(4)(i), the Commission will provide
notice and opportunity for hearing to the Government Securities ATS,
and make the findings specified in Rule 304(a)(4)(i) described above,
that, in the Commission's opinion, the suspension, limitation, or
revocation is necessary or appropriate in the public interest and is
consistent with the protection of investors.\184\
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    \184\ Pursuant to the Commission's current information sharing
practices with the Department of the Treasury, the Commission
expects to provide the Department of the Treasury with prompt notice
in certain cases, such as when the Commission is requiring
registration for certain large volume Government Securities ATSs
under Rule 3a1-1(b), declaring a Form ATS-G ineffective under Rule
304(a)(1)(iii)(b), or suspending, limiting, or revoking the
exemption of a Government Securities ATS under Rule 304(a)(4).
---------------------------------------------------------------------------

Request for Comment
    26. Should Government Securities ATSs be required to file proposed
Form ATS-G instead of Form ATS?
    27. Should Form ATS, or parts thereof, for ATSs that effect
transactions in government securities or repos and securities other
than government securities or repos be made available to the public? Is
current Form ATS sufficient to elicit information for the public about
the operations of Government Securities ATSs?
    28. Do commenters believe that broker-dealers that effect
transactions in government securities or repos generally, or U.S.
Treasury Securities or Agency Securities, specifically, might choose to
modify their business models so that they would not be required to
comply with enhanced regulatory or operational transparency
requirements for Government Securities ATSs?
    29. Should Government Securities ATSs be subject to Rule 304(a), in
whole or in part?
    30. Should Rule 304(a) be amended to provide that an initial
Covered Form be made effective by Commission order or any other means
instead of upon publication by the Commission?
    31. Should Rule 304(a) only apply to Government Securities ATSs
that trade a certain type of government security (e.g., U.S. Treasury
Securities, Agency Securities)? If so, to which type of Government
Securities ATS should Rule 304 apply (e.g., Government Securities ATSs
that trade U.S. Treasury Securities or Government Securities ATSs that
trade Agency Securities)?
    32. Should the Commission require a Currently Exempted Government
Securities ATS to file Form ATS-G and comply with the requirements of
Rule 304 to qualify for the exemption from the definition of exchange?
    33. Would the proposal to require a Currently Exempted Government
Securities ATS to file Form ATS-G by the date 150 calendar days after
the date of publication of the final rule in the Federal Register
provide the ATS sufficient time to transition to compliance with
Regulation ATS and the proposed requirements under Rule 304? Would the
proposal to require a Legacy Government Securities ATS to file a Form
ATS-G by the date 150 calendar days after the date of publication of
the final rule in the Federal Register provide the ATS sufficient time
to transition to compliance with Rule 304?
    34. Should the Commission be permitted to extend the initial
Covered Form review period if it finds that it is appropriate to extend
such review period?
    35. Should a Legacy Government Securities ATS be allowed to
continue operations during the Commission's review of its initial Form
ATS-G? Should the Commission make a Legacy Government Securities ATS's
Form ATS-G publicly available upon filing?
    36. Are there any aspects of Rule 304(a)(2) relating to the filing
and review of amendments that should be modified specifically for Form
ATS-G amendments filed by Government Securities ATSs?
    37. What changes or types of changes to an ATS's operations or the
activities of the broker-dealer operator or its affiliates do
commenters believe are particularly likely to be material as so to
require a material amendment to Form ATS-G?
    38. Currently, and as proposed, Rule 304(a)(2) does not provide for
the Commission to extend the length of the Commission review period for
amendments to a Covered Form.\185\ The Commission has 30 days to review
the amendment, engage in discussion with the ATS, and, if necessary or
appropriate in the public interest, and consistent with the protection
of investors, declare the amendment ineffective. If, however, after the
end of the Commission review period for an amendment, the Commission
finds that, in light of such amendment, it is necessary or appropriate
in the public interest and consistent with the protection of investors,
the Commission may, after notice and opportunity for hearing, suspend,
limit, or revoke a Covered ATS's exemption from the definition of
``exchange'' pursuant to Rule 3a1-1(a)(2). Should the Commission amend
Rule 304(a)(2) to allow the Commission to extend the length of the
Commission review period for amendments to a Covered Form? If so, under
what circumstances should the Commission be permitted to extend the
length of the Commission review period for a Covered Form amendment and
how long should an extension be (e.g., 15, 30, 45 calendar days)?
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    \185\ Based on the Commission's review of Form ATS-N filings,
the Commission has observed that material amendments are often
complex and the Commission staff has frequently engaged in extensive
dialogue with the ATS regarding such disclosures. To date, the
Commission has not declared a Form ATS-N amendment ineffective.

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    39. Should the Commission consider any other factors in determining
whether a Form ATS-G filed by a Government Securities ATS should become
effective or ineffective? If so, what are they and why?
    40. Is the process for the Commission to suspend, limit, or revoke
an NMS Stock ATS's exemption from the definition of ``exchange'' to
Government Securities ATSs necessary or appropriate to protect
investors?

G. Public Disclosure of Form ATS-G and Related Commission Orders

    The Commission is also proposing to make public certain Form ATS-G
reports filed by Government Securities ATSs by applying existing Rule
304(b) to Covered Forms, which would include Form ATS-G.\186\
Commission orders related to the effectiveness of Form ATS-G would also
be publicly posted on the Commission's website. Applying existing Rule
304(b) to Government Securities ATSs would mandate greater public
disclosure of the operations of these ATSs through the publication of
Form ATS-G and related filings available on the Commission's
website.\187\ Accordingly, the Commission is proposing the following:
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    \186\ See proposed revisions to Rule 304(b)(1) (providing that
every Form ATS-G filed pursuant to Rule 304 shall constitute a
``report'' within the meaning of Sections 11A, 17(a), 18(a), and
32(a) and any other applicable provisions of the Exchange Act).
    \187\ See infra Section III.
---------------------------------------------------------------------------

     Similar to Form ATS-N, every Form ATS-G filed pursuant to
Rule 304 shall constitute a ``report'' within the meaning of Sections
11A, 17(a), 18(a), and 32(a) and any other applicable provisions of the
Exchange Act.\188\
---------------------------------------------------------------------------

    \188\ See Rule 304(b)(1).
---------------------------------------------------------------------------

     The Commission will make public via posting on the
Commission's website, each: (1) Effective initial Form ATS-G, as
amended; (2) order of ineffective initial Form ATS-G; (3) Form ATS-G
amendment to an effective Form ATS-G; (4) order of ineffective Form
ATS-G amendment; (5) notice of cessation; and (6) order suspending,
limiting, or revoking the exemption for a Government Securities ATS
from the definition of an ``exchange'' pursuant to Exchange Act Rule
3a1-1(a)(2).\189\
---------------------------------------------------------------------------

    \189\ See Rule 301(b)(2).
---------------------------------------------------------------------------

    The Commission is proposing to apply Rule 304(b)(3) to require each
Government Securities ATS that has a website to post a direct URL
hyperlink to the Commission's website that contains the documents
enumerated in Rule 304(b)(2), which include the Government Securities
ATS's Form ATS-G filings.
    In addition, to promote further transparency, the Commission is
proposing to amend Rule 304(b)(3) to require each Covered ATS to post
on its website the most recently disseminated Covered Form (excluding
Part IV, which is non-public information) within one business day after
publication on the Commission's website, except for any amendment that
the Commission has declared ineffective or that has been withdrawn. The
most recently disseminated Covered Form shall be maintained on the
Covered ATS's website until: (a) The Covered ATS ceases operations; or
(b) the exemption of the Covered ATS is revoked or suspended, in which
cases the Covered ATS shall remove the Covered Form from its website
within one business day of such cessation, revocation or suspension, as
applicable.\190\ A Covered ATS that has submitted a Covered Form or
amendment thereto that is under Commission review prior to
dissemination could monitor the Commission's website to ensure that the
ATS's website reflects the most current version of the form.\191\
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    \190\ If the broker-dealer operator has not created a website
specific for the ATS, the broker-dealer operator would place the
Covered Form, the hyperlink to the Commission's website, and any
other information related to the Covered Form (e.g., aggregate
platform-wide data or direct/indirect ownership information) on the
broker-dealer operator's website in a conspicuous place for the
public to view.
    \191\ The Commission believes that Covered ATSs could reasonably
anticipate when an initial Covered Form and amendments thereto would
be disseminated. Filers receive an automated notice when a filing is
accepted by EDGAR. Once accepted, amendments to a Covered Form
(other than material amendments) would be disseminated. Material
amendments would be made public following the expiration of the 30-
calendar day Commission review period. Although an initial Covered
Form may be disseminated at any time within the 120-calendar day
Commission review period or any extension thereof, the Commission
expects to engage in dialogue with the Covered ATS during such
review period so that the ATS could reasonably anticipate when its
initial Covered Form would be disseminated.
---------------------------------------------------------------------------

Request for Comment
    41. Should the requirements of Rule 304(b) apply to Form ATS-G
reports filed by Government Securities ATSs, in whole or in part?
Should the Commission modify Rule 304(b) in any way for all Covered
ATSs?
    42. Rule 304(b)(2) currently provides that the Commission make Form
ATS-N filings available on its website. The Commission disseminates
Form ATS-N and amendments thereto through the Commission's Electronic
Data Gathering, Analysis, and Retrieval system (``EDGAR''). Should Rule
304(b) be amended so that only filers of a Covered Form make filings
public, rather than the Commission (by EDGAR or by any other form of
filing)?
    43. Should Rule 304(b) be amended to require Covered ATSs to post
the Covered Form on their websites? Should Covered ATSs be required to
post the Covered Form on their websites in addition to or instead of
posting a hyperlink to the Commission website?
    44. Should Rule 304(b) only apply to Government Securities ATSs
that trade a type of government securities (e.g., U.S. Treasury
Securities, Agency Securities)? If so, to which type of Government
Securities ATS should Rule 304 apply?
    45. Are there any other requirements that should apply to making
public a Form ATS-G report filed by a Government Securities ATS? Please
support your arguments, and if so, please list and explain such
procedures in detail.
    46. Should Rule 304(b) apply to Form ATS-G reports filed by a
Currently Exempted Government Securities ATS? If not, which aspects of
Rule 304(b) should not apply and why?

H. Form ATS-G Requirements

    The Commission is proposing to apply existing Rule 304(c) to
Covered ATSs, which would include Government Securities ATSs. As
proposed, Rule 304(c) would require Government Securities ATSs to file
a Form ATS-G in accordance with the instructions therein. Other than
references to Government Securities ATSs and Form ATS-G and the
relevant compliance dates, the proposed instructions to Form ATS-G are
identical to the instructions to Form ATS-N. They require, among other
things, that a Government Securities ATS provide all the information
required by Form ATS-G, including responses to each Item, as
applicable, and the Exhibits, and disclose information that is
accurate, current, and complete.\192\ Given that the Commission expects
market participants will use Form ATS-G to decide where to send their
orders for execution, the Commission believes that it is important that
Form ATS-G filings comply with the instructions and that the
information provided on Form ATS-G is accurate, current, and complete.
The Commission is also proposing that Form ATS-G, like Form ATS-N,\193\
be filed electronically in a structured format through EDGAR.\194\
---------------------------------------------------------------------------

    \192\ See Instructions to proposed Form ATS-G.
    \193\ See NMS Stock ATS Adopting Release, supra note 1, Section
VII.
    \194\ See infra Section IV.

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

    The Commission is proposing to apply Rule 304(c)(2) to Government
Securities ATSs, which would provide that any report required under
Rule 304 shall be filed on a Form ATS-G, and include all information as
prescribed in the Form ATS-G and the instructions to the Form ATS-G.
Rule 304(c)(2) would provide that a Form ATS-G be executed at, or prior
to, the time the Form ATS-G is filed and shall be retained by the
Government Securities ATS in accordance with Rules 302 and 303, and the
instructions in the Form ATS-G. In the Regulation ATS Adopting Release,
the Commission stated that the requirements to make and preserve
records set forth in Regulation ATS are necessary to create a
meaningful audit trail and permit surveillance and examination to help
ensure fair and orderly markets \195\ and that expanding Rule 304(c) to
encompass Form ATS-G would further these goals for Government
Securities ATSs.
---------------------------------------------------------------------------

    \195\ See Regulation ATS Adopting Release, supra note 35, at
70877-78.
---------------------------------------------------------------------------

Request for Comment
    47. Should Rule 304(c) be applied, in whole or in part, to
Government Securities ATSs?
    48. Should Rule 304(c) only apply to Government Securities ATSs
that trade a certain type of government security (e.g., U.S. Treasury
Securities, Agency Securities)? If so, to which type of Government
Securities ATS should it apply?

III. Proposed Form ATS-G for Government Securities ATSs

    As outlined above, the Commission proposes to require Government
Securities ATSs to file a proposed Form ATS-G, which would be a public
report that provides detailed information about the manner of
operations of the ATS and about the ATS-related activities of the
broker-dealer operator and its affiliates. Despite the significant role
of ATSs in the government securities market structure and the
complexity of their operations, most market participants have limited
access to information that permits them to adequately compare and
contrast how their orders would be handled by different Government
Securities ATSs. The Commission believes that proposed Form ATS-G's
public disclosures would provide important information to market
participants that would help them better understand these operational
facets of Government Securities ATSs and select the best trading venue
based on their needs. In addition, in the Commission's experience
reviewing disclosures on Form ATS-N, the Commission observed that the
information responsive to the form is not proprietary or commercially
sensitive. Because the disclosures that would be required on proposed
Form ATS-G are similar to those of Form ATS-N, the Commission believes
that likewise, the vast majority of responsive information would not be
proprietary or commercially sensitive.\196\
---------------------------------------------------------------------------

    \196\ See infra Section III.
---------------------------------------------------------------------------

    The Commission also believes that the proposed disclosures on Form
ATS-G about the conflicts of interest that might arise from the
business structures of the Government Securities ATS and the ATS-
related activities of the broker-dealer operator and its affiliates
would help subscribers protect their interests when using the services
of the ATS.\197\ As the Commission has previously stated, the broker-
dealer operator controls all aspects of the ATS's operations and the
broker-dealer operator's non-ATS and ATS functions may overlap.\198\
Currently, market participants have limited information about conflicts
of interest that might arise from the non-ATS activities of the broker-
dealer operator of a Government Securities ATS, and different classes
of subscribers may have different levels of information about the
operations of the ATS.\199\ Because of overlap between a broker-
dealer's ATS operations and its other operations, there is a risk of
information leakage of subscribers' confidential trading information to
other business units of the broker-dealer operator or its affiliates.
The Commission believes that some market participants would want to
consider the trading activity of the broker-dealer operator, or its
affiliates, when evaluating potential conflicts of interest on a
Government Securities ATS and may also like to know the range of
services and products that the broker-dealer operator or its affiliates
offer subscribers for use on the ATS because such services or products
may have an impact on the subscribers' access to, or trading on, the
ATS. Some commenters have also stated that there are close similarities
between the operations of NMS Stock ATSs and some Government Securities
ATSs, particularly with respect to U.S. Treasury Securities, and that
trading in U.S. Treasury Securities may present potential conflicts of
interest similar to those for NMS Stock ATSs.\200\ The Commission also
believes that the disclosures on proposed Form ATS-G would better
inform the Commission and other regulators about the activities of
Government Securities ATSs and their role in the government securities
markets, which in turn, would facilitate better oversight of these ATSs
and the markets to the benefit of investors.
---------------------------------------------------------------------------

    \197\ See infra Section III.B.
    \198\ See NMS Stock ATS Proposing Release, supra note 62, at
81010, 81041.
    \199\ See id. at 81010.
    \200\ See MFA/AIMA Letter, supra note 66, at 3; OIA Letter,
supra note 65, at 18-19.
---------------------------------------------------------------------------

    Given the similarities of operations between NMS Stock ATSs and
Government Securities ATSs, almost all requests for information on
proposed Form ATS-G are similar to or derived from Form ATS-N; however,
certain requests have been tailored for Government Securities ATSs. The
differences between the forms include that: Form ATS-G does not have an
item corresponding to Part III, Item 16 (Routing) of Form ATS-N; Form
ATS-G does not have an item corresponding to Part III, Item 24 (Order
Display and Execution Access) of Form ATS-N as the associated rule is
inapplicable to government securities; and Form ATS-G added proposed
Part III, Item 16 requiring information about non-government securities
markets (e.g., futures, currencies, swaps, corporate bonds) used in
conjunction with the ATS. The Commission is requesting comment on each
of the requests for information on proposed Form ATS-G and information
about the operations of Government Securities ATSs and ATS-related
activities of the broker-dealer operator and its affiliates that would
be important to subscribers and market participants.

A. Cover Page and Part I of Form ATS-G

1. Cover Page
    To make clear that the Commission is not conducting a merit-based
review of Form ATS-G disclosures filed with the Commission, the
Commission proposes to include a legend on the Form ATS-G cover page
stating that the Commission has not passed upon the merits or accuracy
of the disclosures in the filing. On the cover page of proposed Form
ATS-G, the ATS would be required to identify whether it is a Legacy
Government Securities ATS currently operating as of the Compliance Date
(either pursuant to a Form ATS or an exemption under Exchange Act Rule
3a1-1(a)(3)). In addition, the Government Securities

ATS would indicate the type of filing by marking the appropriate
checkbox.\201\
---------------------------------------------------------------------------

    \201\ The proposed cover page would provide that a filing may be
an initial Form ATS-G, or a Form ATS-G material amendment, updating
amendment, correcting amendment, or contingent amendment.
---------------------------------------------------------------------------

    If the Government Securities ATS is filing an amendment, the ATS
would be required to indicate the Part and Item number of the Form ATS-
G that is the subject of the change(s), provide a brief summary of the
change(s), and state whether or not the change(s) applies to all
subscribers and the broker-dealer operator.\202\ In addition, the
Government Securities ATS would be required to provide the EDGAR
accession number for the Form ATS-G filing to be amended so that market
participants can identify the filing that is being amended. The
Commission is proposing to apply Rule 304(b)(2)(iii) to Form ATS-G to
provide that the Commission would make public the cover page of a filed
Form ATS-G material amendment upon filing and then make public the
entirety of the material amendment following the expiration of the
review period pursuant to Rule 304(a)(2)(ii). For updating and
correcting amendments, which would be made public upon filing, the
Commission believes that the information in the narrative could assist
market participants in understanding the general nature of the change
that the Government Securities ATS is implementing.
---------------------------------------------------------------------------

    \202\ See Instruction A.7.g of Form ATS-G. If a change subject
to the amendment would equally apply to all subscribers and the
broker-dealer operator, the Government Securities ATS would indicate
that the change applies to all subscribers and the broker-dealer
equally. If a change would apply differently among subscribers or
types of subscribers, between subscribers and the broker-dealer
operator, or between the broker-dealer operator and its affiliates
(which may be subscribers to the ATS), the Government Securities ATS
would state so and describe the differences in treatment. This is
the same as how NMS Stock ATSs describe whether or not a change
applies to all subscribers and the broker-dealer operator in
amendments on Form ATS-N.
---------------------------------------------------------------------------

    If the filing is a cessation of operations, the Commission is
proposing that the Government Securities ATS provide the date that the
ATS will cease to operate. The Commission is also proposing to include
a checkbox where the ATS could indicate whether it wishes to withdraw a
previously-filed Form ATS-G filing and provide the EDGAR accession
number for the filing to be withdrawn. The instructions to Form ATS-G
would state that a Government Securities ATS may withdraw an initial
Form ATS-G or an amendment before the end of the applicable Commission
review period. In addition, the Commission is proposing that a
Government Securities ATS may withdraw a notice of cessation of
operations at any time before the date that the ATS indicated it
intended to cease operating.
2. Part I of Form ATS-G: Identifying Information
    Part I of Form ATS-G, as proposed, would be substantively the same
as that for Form ATS-N, as proposed to be amended,\203\ except that
unlike Form ATS-N, Form ATS-G would require an ATS to identify whether
it trades U.S. Treasury Securities, Agency Securities, repos, or other
securities. To parallel the Form ATS-N requirement, the Commission is
proposing that Form ATS-G would require an ATS to identify the
registered broker-dealer that operates the ATS. Part I, Item 1.a of
Form ATS-G would require the ATS to state whether the filer is a
broker-dealer registered with the Commission. The Commission is also
proposing that the Government Securities ATS provide the name of the
registered broker-dealer or government securities broker or government
securities dealer for the Government Securities ATS (i.e., the broker-
dealer operator), as it is stated on Form BD, in Part I, Item 2 of Form
ATS-G. Part I, Item 1.b of Form ATS-G would require the ATS to indicate
whether the broker-dealer operator has been authorized by a national
securities association to operate an ATS.\204\ To comply with
Regulation ATS, and thus qualify for the Rule 3a1-1(a)(2) exemption, an
ATS must register as a broker-dealer and thus become a member of an
SRO. As a member of the SRO, the ATS must comply with the rules of the
SRO, including obtaining any required approvals by the SRO in
connection with operating an ATS in accordance with applicable SRO
rules.\205\ The Commission believes that proposed Part I, Item 1.b
would facilitate compliance with and Commission oversight of this
requirement.
---------------------------------------------------------------------------

    \203\ The Commission is proposing changes to Form ATS-N, which
are described infra Section V.D.
    \204\ The Commission is proposing herein to add this subpart to
Form ATS-N. See infra Section V.D.
    \205\ See 15 U.S.C. 78o(b)(8). See also NMS Stock ATS Adopting
Release, supra note 1, at 38773.
---------------------------------------------------------------------------

    To the extent that a commercial or ``DBA'' (doing business as) name
or names are used to identify the Government Securities ATS to the
public, the Commission, or its SRO, or if a registered broker-dealer
operates multiple Government Securities ATSs, Form ATS-G would require
the full name(s) of the Government Securities ATS under which business
is conducted, if different, in Part I, Item 3 of Form ATS-G. Part I,
Item 4 of Form ATS-G would require the Government Securities ATS to
provide the broker-dealer operator's SEC File Number and Central
Registration Depository (``CRD'') Number. Part I, Item 5 of Form ATS-G
would require the Government Securities ATS to select the types of
securities the ATS trades (i.e., U.S. Treasury Securities, Agency
Securities, repos, or other). If the ATS selects ``other,'' it would be
required to list the types of government securities that it
trades.\206\ Part I, Item 6 of Form ATS-G would require the Government
Securities ATS to provide 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 its MPID. Pursuant to FINRA rules, each ATS is
required to use a unique MPID in its reporting to FINRA, such that its
volume reporting is distinguishable from other transaction volume
reported by the broker-dealer operator of the ATS, including volume
reported for other ATSs or trading desks operated by the broker-dealer
operator.\207\ The broker-dealer operator would provide the unique MPID
for the Government Securities ATS and assess the functionalities
related to trading under that MPID and describe them, as applicable, in
response to the information requests on Form ATS-G. Providing the name
of the Government Securities ATS or DBAs and its MPID would identify
the ATS to the public and Commission. The Commission believes that the
name, identity of the broker-dealer operator, any ``DBA'' name, and the
ATS's MPID are basic information critical to market participants for
identifying the ATS and should be disclosed.
---------------------------------------------------------------------------

    \206\ The types of securities traded would be limited to
government securities (15 U.S.C. 78c(a)(42)) and repos on government
securities. See proposed Rule 300(l).
    \207\ See FINRA Rules 6160, 6170, 6480, and 6720.
---------------------------------------------------------------------------

    Proposed Part I, Item 7 of Form ATS-G would require the Government
Securities ATS to provide a URL address for the website of the ATS and
proposed Part I, Item 8 of Form ATS-G would require the ATS to provide
the physical street address, if any, of a secondary location for the
ATS that may be used in the event that the primary physical location is
not available.
    Proposed Part I, Items 9 and 10 would require a Government
Securities ATS to attach its most recently filed or amended Schedule A
of the broker-dealer operator's Form BD disclosing information related
to direct owners and

executive officers, and its most recently filed or amended Schedule B
of the broker-dealer operator's Form BD disclosing information related
to indirect owners as Exhibits 1 and 2, respectively. In lieu of
attaching those schedules, the Government Securities ATS can indicate,
via a checkbox, that the information under those schedules is available
on its website and is accurate as of the date of the filing of the Form
ATS-G.\208\ In addition, the Commission is proposing Part I, Item 11 of
Form ATS-G to require the Government Securities ATS, for filings made
pursuant to Rule 304(a)(2)(i) (i.e., Form ATS-G amendments), to attach
as Exhibit 3 a marked document to indicate changes to ``yes'' or ``no''
answers and additions or deletions from any item in Part I, Part II,
and Part III, as applicable.
---------------------------------------------------------------------------

    \208\ Like Form ATS-N, Part I, Items 9 and 10 and Part III, Item
25 (see infra Section III.A.2 and Section III.C.25) are the only
requests for information that would allow a Government Securities
ATS to cross-reference to information on the Government Securities
ATS's website instead of providing it in the form disclosures. Like
Form ATS-N, Form ATS-G disclosures would be the vehicle for
disseminating to the public information about the operations of the
Government Securities ATS and the ATS-related activities of the
broker-dealer operator and its affiliates under Rule 304, which are
required to be kept current, accurate, and complete by the ATS.
Accordingly, Government Securities ATSs would be required to provide
information required by the form in the Form ATS-G disclosures and
not cross-reference to other sources.
---------------------------------------------------------------------------

Request for Comment
    49. A Legal Entity Identifier (``LEI'') is a 20-character reference
code that uniquely identifies legally distinct entities that engage in
financial transactions \209\ and is used by numerous domestic and
international regulatory regimes. Although several existing ATS broker-
dealer operators currently have an LEI, not all broker-dealers have an
LEI. An LEI can be obtained for a $65 initial cost and a $50 per year
renewal cost.\210\ Should the Commission require a Government
Securities ATS to disclose the LEI of its broker-dealer operator, in
addition to its CRD Number and the MPID for the Government Securities
ATS, on Form ATS-G?
---------------------------------------------------------------------------

    \209\ See Securities Act Release No. 10425, 82 FR 50988 at 51005
(November 2, 2017) (stating that LEIs are intended to improve market
transparency by providing clear identification of participants).
    \210\ Prices retrieved from Bloomberg Finance, L.P., https://lei.bloomberg.com/docs/faq#what-fees-are-involved. Bloomberg is one
of twelve Legal Entity Identifier issuers that are accredited to
issue LEIs specifically to U.S. entities.
---------------------------------------------------------------------------

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

    The Commission believes that the interests of the broker-dealer
operator or its affiliates sometimes compete against the interests of
those that use the ATS's services. These competing interests, at times,
may give rise to conflicts of interest for the broker-dealer operator
and its affiliates or the potential for information leakage of
subscribers' confidential trading information. Proposed Part II of Form
ATS-G is designed to provide subscribers and market participants with
information about these competing interests, and inform them about: (1)
The operation of the Government Securities ATS--regardless of the
corporate structure of the ATS--and of its broker-dealer operator, or
any arrangements the broker-dealer operator may have made, whether
contractual or otherwise, pertaining to the operation of its Government
Securities ATS; and (2) ATS-related activities of the broker-dealer
operator and its affiliates that may give rise to conflicts of interest
for the broker-dealer operator and its affiliates or the potential for
information leakage of subscribers' confidential trading information.
The Commission believes that these disclosures would enable subscribers
to protect their interests while participating on the ATS. At the same
time, the Commission also believes that Form ATS-G should not require
public disclosure of activities or affiliate relationships of the
broker-dealer operator that do not relate to the Government Securities
ATS and thus, do not present a potential conflict of interest.
    The proposed definitions of ``affiliate'' and ``control,'' which
are identical to those in Form ATS-N,\211\ are intended to encompass
all relevant affiliate relationships between the broker-dealer operator
and other entities that the Commission believes would help market
participants' evaluation of potential conflicts of interest.\212\
---------------------------------------------------------------------------

    \211\ Proposed Form ATS-G would define ``affiliate'' as, with
respect to a specified person, any person that, directly or
indirectly, controls, is under common control with, or is controlled
by, the specified person. ``Control'' would be defined to mean the
power, directly or indirectly, to direct the management or policies
of the broker-dealer of an alternative trading system, whether
through ownership of securities, by contract, or otherwise. A person
is presumed to control the broker-dealer of an alternative trading
system if that person: (1) Is a director, general partner, or
officer exercising executive responsibility (or having similar
status or performing similar functions); (2) directly or indirectly
has the right to vote 25 percent or more of a class of voting
securities or has the power to sell or direct the sale of 25 percent
or more of a class of voting securities of the broker-dealer of the
alternative trading system; or (3) in the case of a partnership, has
contributed, or has the right to receive upon dissolution, 25
percent or more of the capital of the broker-dealer of the
alternative trading system. In this proposal, the Commission is
proposing to update the definition of person for the purposes of
Forms ATS-N and ATS-G. See infra Section V.D.
    \212\ See NMS Stock ATS Adopting Release, supra note 1, at
38818-19.
---------------------------------------------------------------------------

1. Broker-Dealer Operator and Its Affiliate Trading Activities on the
Government Securities ATS
    The Commission is proposing that Part II, Items 1(a) and 2(a) of
Form ATS-G ask whether business units of the broker-dealer operator or
its affiliates, respectively, are permitted to enter or direct the
entry of orders and trading interest into the Government Securities
ATS. If the person that operates and controls an ATS is also able to
trade on that ATS, there may be an incentive to design the operations
of the ATS to favor the trading activity of the operator of the ATS or
affiliates of the operator. The operator of an ATS that also trades on
the ATS it operates would likely have informational advantages over
others trading on the ATS, such as a better understanding of the manner
in which the system operates or who is trading on the ATS. In the most
egregious case, the operator of the ATS might use the confidential
trading information of other traders to advantage its own trading on or
off of the ATS.\213\ Part II, Items 1(a) and 2(a) of Form ATS-G
disclosures are designed to inform market participants about whether
the Government Securities ATS permits the broker-dealer operator or its
affiliates to trade on the ATS. If the Government Securities ATS
permits the broker-dealer operator or its affiliates to enter orders
and trading interest on the ATS, whether on an agency or principal
basis, the ATS would be required to only list the business units or
affiliates that actually enter or direct the entry of orders and
trading interest into the ATS. The Commission believes that if a
business unit or affiliate of the broker-dealer operator enters or
directs the entry of orders and trading interest into the Government
Securities ATS, market participants would find it useful to know that
they may be trading with those business units, affiliates, or client
orders entered by those entities. The Commission believes that
disclosure of whether a broker-dealer operator of a Government
Securities ATS or its affiliates may trade on that ATS would

be important to subscribers given the conflicts of interest that may
arise from the unique position the broker-dealer operator occupies in
relation to the ATS.
---------------------------------------------------------------------------

    \213\ For a further discussion about how a conflict of interest
related to trading by the broker-dealer operator on its own ATS
could be harmful to other subscribers, see NMS Stock ATS Adopting
Release, supra note 1, at 38771, 38824-29.
---------------------------------------------------------------------------

    Part II, Items 1(a) and 2(a) of proposed Form ATS-G would require
the Government Securities ATS to list the business unit or affiliate
if, for example, a trading desk of the broker-dealer operator or an
affiliate uses a direct connection to the ATS or algorithm to submit
orders or trading interest into the ATS. Likewise, if an affiliated
asset manager of the broker-dealer operator uses the services of a
third-party broker-dealer to direct orders to the Government Securities
ATS (i.e., the asset manager instructs the third-party broker-dealer to
send its orders to the ATS), the ATS would be required to list that
affiliated asset manager under Item 2(a). However, if that affiliated
asset manager submits orders to a third-party broker-dealer, and that
third-party broker-dealer using its own discretion, directs the orders
of the asset manager into the affiliated Government Securities ATS, the
ATS would not be required to list the affiliated asset manager under
Item 2(a); under such circumstances, the affiliate would not be
``directing'' orders to the ATS because the third-party broker-dealer
is using its discretion to direct the affiliate's orders and thus, it
would not be required to be listed under Item 2(a).
    The proposed requests also specify the type of information that
must be provided with regard to business units or affiliates of the
broker-dealer operator. Specifically, Item 1(a) would require the
Government Securities ATS to name and describe each type of business
unit of the broker-dealer operator that enters or directs the entry of
orders and trading interest into the ATS (e.g., Government Securities
ATS, type of trading desks, market maker, sales or client desk) and,
for each business unit, to provide the applicable MPID and list the
capacity of its orders and trading interest (e.g., principal, agency,
riskless principal). Item 2(a) would require the Government Securities
ATS to name and describe each type of affiliate that enters or directs
the entry of orders and trading interest into the ATS (e.g., broker-
dealers, investment companies, hedge funds, market makers, PTFs) and,
for each of those affiliates, provide the applicable MPID and list the
capacity of its orders and trading interest (e.g., principal, agency,
riskless principal). The Commission believes that market participants
will find it useful to know both the types of broker-dealer operator
business units and affiliates that can trade in the Government
Securities ATS, and their trading activities.\214\
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    \214\ Although the narrative responses to Items 1(a) and 2(a)
could typically be kept up-to-date via updating amendments to Form
ATS-G, the Commission also notes that in most cases, if the ``yes''
or ``no'' response to Items 1(a) or 2(a) changes (e.g., the
Government Securities ATS changes its operations to allow affiliates
to trade whereas they could not do so prior, or vice versa), the
Government Securities ATS would be required to file a material
amendment. See NMS Stock ATS Adopting Release, supra note 1, at
38826.
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    Part II, Items 1(c) and 2(c) of proposed Form ATS-G would require
Government Securities ATSs to disclose the broker-dealer operator's or
any of its affiliates' role as a liquidity provider on the ATS, if
applicable. These Items would require the Government Securities ATS to
disclose--in the form of a ``yes'' or ``no'' response--whether there
are any formal or informal arrangements with any of the sources of
orders or trading interest of the broker-dealer operator or affiliates
identified in Item 1(a) and Item 2(a), respectively, to provide orders
or other trading interest to the ATS (e.g., undertaking to buy or sell
continuously, or to meet specified thresholds of trading or quoting
activity). If the Government Securities ATS answers ``yes,'' it must
identify the business unit(s) or affiliate(s) and respond to the Item
with information about liquidity providers on the ATS.\215\ The
Commission believes that highlighting whether the broker-dealer
operator or affiliate acts as a liquidity provider on the Government
Securities ATS would help market participants evaluate the potential
for conflicts of interest or information leakage on the trading
platform.
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    \215\ This request is contained in Part III, Item 12. See infra
Section III.C.12.
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    Finally, Part II, Item 1(d) and Item 2(d) of proposed Form ATS-G
would require the Government Securities ATSs to disclose information
about sending orders and trading interest to a trading venue operated
or controlled by the broker-dealer operator or any of its affiliates,
respectively. These Items would require the Government Securities ATS
to disclose--in the form of a ``yes'' or ``no'' response--whether
orders and trading interest in the ATS can be sent to a trading venue
operated or controlled by the broker-dealer operator or any of its
affiliates. If the Government Securities ATS answers ``yes,'' it must
identify the trading venue and explain when and how the order or
trading interest are sent from the ATS to the trading venue. NMS Stock
ATSs are required to provide on Form ATS-N Part III, Item 16
information related to the routing of orders from the ATS if they
indicated that the ATS sent trading interest to a trading center
operated by the broker-dealer operator or any of its affiliates in Part
II, Items 1(d) and 2(d). Because the routing of government securities
among trading centers is not as prevalent as in the market for NMS
stocks, the Commission is not proposing to require on Form ATS-G the
same information about routing that would otherwise be covered under
Part III, Item 16 of Form ATS-N. Instead, the Commission is requiring a
Government Securities ATS to disclose information about the trading
venue where orders and trading interest may be sent and when and how
orders and trading interest are sent in Part II, Items 1(d) and 2(d) of
Form ATS-G. The Commission believes that such information would help
market participants evaluate whether the ATS sending orders to a
trading venue operated or controlled by the broker-dealer operator or
its affiliates poses a conflict of interest and is consistent with its
trading objectives.
Request for Comment
    50. What information about trading by the broker-dealer operator
and its affiliates related to the Government Securities ATS is
important to market participants?
    51. Are there potential conflicts of interest for broker-dealer
operators of Government Securities ATSs or their affiliates that may
justify greater operational transparency for Government Securities
ATSs?
    52. Should the Commission require separate disclosures for
different types of trading by the broker-dealer operator on the
Government Securities ATS, such as trading by the broker-dealer
operator for the purpose of correcting error trades executed on the
ATS, as compared to other types of principal trading? If so, what types
of principal trading should be addressed separately and why? What
disclosures should the Commission require about principal trading and
why?
    53. Should the Commission limit or expand in any way the proposed
disclosure requirements to require disclosure of arrangements regarding
access by the broker-dealer operator or its affiliates to both other
trading venues and affiliates of those other trading venues?
    54. Form ATS-N requires, and Form ATS-G as proposed would require,
that a Covered ATS name the affiliate(s) of the broker-dealer operator
permitted to enter or direct the entry of orders and trading interest
into the Covered ATS. The Covered ATS is required to describe the type
of affiliates on the Covered Form. Should the Commission amend

Form ATS-N, and not require in Form ATS-G, that the name(s) of
affiliate(s) be disclosed?
    55. Should the Commission require Government Securities ATSs to
disclose the percentage of trading on the ATS attributable to each or
all of the broker-dealer operator's business units, affiliates or both?
Should Form ATS-G require a Government Securities ATS to disclose
specific trade volume data for its trading with business units of the
broker-dealer operator or its affiliates? If so, how should that volume
be measured (e.g., executed trades, dollar volume)? Should the
Commission amend Form ATS-N to require such trading percentages or data
for NMS Stock ATSs that execute orders with business units of the
broker-dealer operator or its affiliates?
    56. Would the disclosure of information about trading by the
broker-dealer operator and its affiliates in the ATS be sufficient to
address potential conflicts of interest? If disclosure alone is
insufficient, are there other measures the Commission could take to
mitigate potential conflicts of interest regarding trading? Should the
Commission prohibit some or all trading by the broker-dealer operator
and its affiliates in the ATS?
2. Order Interaction With Broker-Dealer Operator; Affiliates
    Part II, Item 3 of proposed Form ATS-G would request information
about the interaction of orders and trading interest between
unaffiliated subscribers to the Government Securities ATS and orders
and trading interest of the broker-dealer operator and its affiliates
in the ATS. Part II, Item 3(a) of proposed Form ATS-G would require a
Government Securities ATS to disclose whether a subscriber can opt out
of interacting with orders and trading interest of the broker-dealer
operator in the ATS, and Part II, Item 3(b) would require a Government
Securities ATS to disclose whether a subscriber can opt out of
interacting with the orders and trading interest of an affiliate of the
broker-dealer operator in the ATS.\216\ Part II, Item 3(c) of proposed
Form ATS-G would require the Government Securities ATS to disclose
whether the terms and conditions of the opt-out processes for the
broker-dealer operator and affiliates required to be identified in
Items 3(a) and (b) are the same for all subscribers. The Commission
believes that proposed Part II, Item 3 would be important to
unaffiliated market participants trading on an ATS because, given the
potential for informational advantages by the broker-dealer operator or
its affiliates,\217\ some unaffiliated subscribers may not wish to
interact with the order flow of the broker-dealer operator or its
affiliates. This disclosure could also help subscribers understand
whether and how they may avoid trading with the broker-dealer operator
and its affiliates should they elect to use the services of the
Government Securities ATS.
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    \216\ For example, if a broker-dealer operator uses algorithms
to submit subscriber orders into the ATS, any steps that either the
broker-dealer operator or the subscriber needs to take so that the
ATS prevents those orders from trading with the broker-dealer
operator or its affiliates would be required disclosures under Items
3(a) and 3(b), respectively.
    \217\ See supra Section III.B.1.
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Request for Comment
    57. Should proposed Form ATS-G request more or less information
about how a market participant can limit its interaction on a
Government Securities ATS with the broker-dealer operator or its
affiliates? If commenters believe Form ATS-G should request more
information, please provide specific information that would be useful
along with an explanation of its utility.
3. Arrangements With Other Trading Venues
    Part II, Item 4 of proposed Form ATS-G is designed to provide for
the disclosure of formal or informal arrangements (e.g., mutual,
reciprocal, or preferential access arrangements) \218\ between the
broker-dealer operator or an affiliate of the broker-dealer operator
and a trading venue (e.g., ATS, OTC market maker, futures or options
market) \219\ to access the Government Securities ATS services (e.g.,
arrangements to effect transactions or to submit, disseminate, or
display orders and trading interest in the ATS).
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    \218\ See NMS Stock ATS Adopting Release, supra note 1, at 38831
n.769-70 and accompanying text. As the Commission discussed in the
NMS Stock ATS Adopting Release, the disclosures required by Part II,
Item 4 of proposed Form ATS-G are not so broad as to require the
Government Securities ATS to list each unaffiliated subscriber that
accesses its system. See id. at 38831.
    \219\ The Commission is using the term ``trading venue'' for
proposed Form ATS-G instead of the term ``Trading Center,'' which is
used in Form ATS-N, because ``Trading Center'' is a defined term for
purposes of Regulation NMS (17 CFR 600(b)(78)). A trading venue for
government securities can include, among other things, an ATS, an
OTC market maker, a futures or options market, or any other broker-
or dealer-operated platform for executing trading interest
internally by trading as principal or crossing orders as agent.
---------------------------------------------------------------------------

    Proposed Part II, Item 4 would require disclosure of an arrangement
between the broker-operator for the Government Securities ATS or
affiliate of the broker-dealer operator and a broker-dealer operator of
an unaffiliated Government Securities ATS under which the broker-dealer
operator would send orders or other trading interest to the
unaffiliated Government Securities ATS for possible execution before
sending them to any other destination. Item 4 also would require
disclosure of the inverse arrangement pursuant to which any subscriber
orders sent out of the unaffiliated Government Securities ATS would be
sent first to the Government Securities ATS before any other trading
venue. Item 4 would also require a summary of the terms and conditions
of the arrangement such as, for example, whether the broker-dealer
operator of the Government Securities ATS is providing monetary
compensation or some other brokerage service to the unaffiliated
Government Securities ATS. To the extent that a broker-dealer operator
has an arrangement with another trading venue operated by the broker-
dealer operator or an affiliate, or an unaffiliated trading venue, the
Commission believes that market participants are likely to consider
information about such arrangements relevant to their evaluation of a
Government Securities ATS as a potential trading venue and such an
arrangement may raise concerns about conflicts of interest or
information leakage. The Commission is therefore proposing disclosure
of such arrangements in Part II, Item 4 of proposed Form ATS-G.\220\
---------------------------------------------------------------------------

    \220\ In the NMS Stock ATS Adopting Release, the Commission
provided examples of when potential conflicts of interest and
information leakage could occur as a result of preferential routing
arrangements (e.g., an affiliate is contractually obligated to route
all unexecuted orders to ATS) or routing arrangements with
affiliates (e.g., all orders routed by the NMS Stock ATS must first
be routed to an the affiliate(s)). Specifically, the former might
result in information leakage should the arrangement provide that
all orders not executed by the affiliate are to be sent to the NMS
Stock ATS and the latter could provide incentive for the NMS Stock
ATS to route orders to an affiliate instead of trying to execute the
order in the ATS. The Commission believes that these issues could
arise in the government securities markets, as well, so those
examples are also applicable to this proposal. See id. at 38831
n.771.
---------------------------------------------------------------------------

Request for Comment
    58. What type of arrangements might a broker-dealer operator of a
Government Securities ATS have with a trading venue for government
securities or repos? Please explain and describe what information, if
any, market participants may wish to know about such an arrangement.
4. Other Products and Services
    Part II, Item 5(a) of proposed Form ATS-G is designed to disclose
whether the broker-dealer operator offers subscribers any products or
services for

the purpose of effecting transactions or submitting, disseminating, or
displaying orders and trading interest in the Government Securities ATS
(e.g., algorithmic trading products that send orders to the ATS, order
management or order execution systems, data feeds regarding orders and
trading interest in, or executions occurring on, the ATS, order hedging
or aggregation functionality), and if applicable, to indicate whether
the terms and conditions of the services or products required to be
identified in Part II, Item 5(a) are the same for all subscribers and
the broker-dealer operator.\221\
---------------------------------------------------------------------------

    \221\ For example, if a broker-dealer operator offers
subscribers alternative algorithms to handle orders, including
sending such orders to the Government Securities ATS, and there is a
difference in the latency in which each of the alternatives
transmits information, such differences in latency would need to be
disclosed in Part II, Item 5 of proposed Form ATS-G.
---------------------------------------------------------------------------

    Customers of a broker-dealer operator could be both subscribers to
its ATS and customers of the broker-dealer operator and the broker-
dealer operator may offer its customers trading products and services
in addition to its ATS services. In certain cases, the product and
service offered might be used by the customer in conjunction with the
customer's use of the ATS. Broker-dealer operators of Government
Securities ATSs may, directly or indirectly through an affiliate, offer
products or services to subscribers for the purpose of, for example,
submitting orders, or receiving information about displayed interest,
in the ATS.\222\ For example, a Government Securities ATS would be
required to disclose any aggregation functionality that the broker-
dealer operator or its affiliate(s) offers to subscribers, which, for
example, could be used by subscribers to interface with the ATS to send
or receive orders and trading interest to and from other markets,
including U.S. Treasury Securities markets, over-the-counter spot
markets, or futures markets. The Commission believes that subscribers
to the Government Securities ATS would be interested in understanding
the use of an aggregation functionality with the ATS and how it can
help achieve their trading strategies. If the broker-dealer operator or
its affiliate offered a product for effecting transactions or
submitting, disseminating, or displaying orders and trading interest in
the Government Securities ATS that was used in conjunction with related
financial markets for non-government securities (e.g., futures,
currencies, swaps, corporate bonds), the ATS would summarize the terms
and conditions for use of such a product in this item and explain the
product's use under Part III, Item 16.
---------------------------------------------------------------------------

    \222\ See NMS Stock ATS Proposing Release, supra note 62, at
81048. See also NMS Stock ATS Adopting Release, supra note 1, at
38832 n.779. For example, order hedging functionalities could
encompass a product or service offered by the broker-dealer operator
to a customer that the customer may use as a subscriber to the
broker-dealer operator's ATS to hedge exposures of trading interest
in or outside the ATS. A broker-dealer operator that offers such a
functionality for use with the ATS would describe the terms and
conditions for a subscriber to use the functionality in Part II,
Item 5 and explain its use with regard to the ATS in Part III of
Form ATS-G. For example, if the order hedging functionality affects
order interaction in the ATS, the ATS would explain the
functionality in Part III, Item 11(c). If the order hedging
functionality involves futures and trading interest in the ATS, the
Government Securities ATS would explain the related procedures under
Part III, Item 16.
---------------------------------------------------------------------------

    The Commission believes subscribers want to know the products or
services that the broker-dealer operator or its affiliates may offer
for the purpose of effecting transactions, or submitting,
disseminating, or displaying orders and trading interest on the
Government Securities ATS because such products or services may impact
the subscribers' access to, or trading on, the ATS.\223\ In some cases,
a broker-dealer operator offering products or services in connection
with a subscriber's use of the Government Securities ATS may result in
the subscribers receiving more favorable terms from the broker-dealer
operator with respect to their use of the ATS. For example, if a
subscriber purchases a service offered by the broker-dealer operator of
a Government Securities ATS, the broker-dealer operator might also
provide that subscriber more favorable terms for its use of the ATS
than other subscribers who do not purchase the service. Such favorable
terms could include fee discounts or access to a faster connection line
to the Government Securities ATS. Additionally, a broker-dealer
operator of a Government Securities ATS may offer certain products and
services only to certain subscribers or may offer products and services
on different terms to different categories of subscribers. The
Commission believes that subscribers would want to know, when assessing
a Government Securities ATS as a potential trading venue, the range of
services or products that the broker-dealer operator or its affiliates
offers subscribers of the ATS, and any differences in treatment among
subscribers, because such services or products may impact the
subscribers' access to, or trading on, the ATS.
---------------------------------------------------------------------------

    \223\ Services for the purpose of effecting transactions, or
submitting, disseminating, or displaying orders and trading interest
on the Government Securities ATS that are offered by a third-party
in contract with the broker-dealer operator or affiliates would also
be responsive to this Item.
---------------------------------------------------------------------------

    To the extent that a customer is a subscriber to the Government
Securities ATS and is offered use of products and services by the
broker-dealer operator or its affiliate for the purpose of effecting
transactions or submitting, disseminating, or displaying orders and
trading interest in the ATS, Part II, Item 5 of proposed Form ATS-G
would require disclosures about those products or services. For
example, if a broker-dealer operator offers its customers an order
management system that can also be used by customer-subscribers to the
Government Securities ATS to manage orders in the ATS (e.g., adjust the
pricing or size of an ATS order in relation to an order resting in or
outside the ATS, modify order instructions to execute or cancel at a
specified time or under certain market conditions), the ATS would be
required to identify the order management system, provide a summary of
the terms and conditions for its use, and identify the Part and Item
number in Form ATS-G for where the order management system is
explained. In addition, any services offered by the broker-dealer
operator for subscribers to mitigate risk, such as limits on gross or
net notional exposures by a subscriber, identification of duplicative
orders in the ATS, or other checks offered related to order entry or
authorizations to trade in the ATS, would be identified in this Item
and explained further in Part III, Item 8 (Order Sizes). However, the
proposed requests in Part II, Item 5 would not encompass trading
products or services offered by the broker-dealer operator to customers
that are not for the purpose of effecting transactions or submitting,
disseminating, or displaying orders and trading interest in the
Government Securities ATS.
    To alleviate any concerns regarding the potential disclosure of
commercially sensitive information in this disclosure request, the
proposed disclosure request would require the Government Securities ATS
to provide only a summary of the terms and conditions for the products
and services disclosed and to explain how the product or service is
used with the ATS in the applicable Item number in Part III of proposed
Form ATS-G. The Commission believes that requiring only a summary
narrative would normally not require the broker-dealer operator to
disclose commercially sensitive information.

Request for Comment
    59. What types of products and services do broker-dealer operators
of Government Securities ATS or affiliates of the broker-dealer
operator offer to subscribers and how are such products and services
used in connection with the ATS?
    60. What information about the products and services offered by
broker-dealer operators would be helpful to market participants?
    61. Should the Commission expand Part II, Item 5 of proposed Form
ATS-G to require disclosure of products or services offered by the
broker-dealer operator or its affiliates to subscribers, but not
necessarily offered in connection with transacting on the Government
Securities ATS?
5. Activities of Service Providers
a. Shared Employees
    Part II, Item 6(a) of proposed Form ATS-G is designed to solicit
disclosures relating to any employee of the ATS's broker-dealer
operator or employee of its affiliate that provides services for both
the operations of the Government Securities ATS and any other business
unit or any affiliate of the broker-dealer operator (``shared
employee'') that has access to subscriber confidential trading
information. The Commission believes that disclosures about shared
employees with access to subscriber confidential trading information
would help market participants evaluate circumstances when there is the
potential for information leakage. For example, the Commission believes
that market participants would likely want to know if an employee of
the broker-dealer operator (or employee of an affiliate of the broker-
dealer operator) that is responsible for the operations of a system
containing subscriber confidential trading information from the
Government Securities ATS is also responsible for supporting, for
instance, the principal trading activity of the broker-dealer operator,
or another trading venue operated by the broker-dealer, or a trading
venue that is an affiliate of the broker-dealer operator.
Request for Comment
    62. Should the Commission expand the proposed disclosures in Part
II, Item 6(a) to other employees, personnel, or independent contractors
of the broker-dealer operator? If so, which employees, personnel, or
independent contractors should be included and what information about
such persons should be solicited?
b. Third-Party Service Providers
    Part II, Item 6(b) of proposed Form ATS-G is designed to provide
disclosures relating to any entity, other than the broker-dealer
operator, that supports the services or functionalities of the
Government Securities ATS. Information about the roles and
responsibilities of service providers to the ATS is important because
it could inform market participants about the potential for information
leakage on the Government Securities ATS.\224\ The Commission is not
proposing that the third-party service provider requests encompass
purely administrative items, such as human resources support, or basic
overhead items, such as phone services and other utilities. The
information solicited in this disclosure is meant to provide
information about the extent to which a third party may be able to
influence or control the operations of the ATS through involvement with
its operations (such as operating the ATS's proprietary data feeds sent
to subscribers). For example, any service provider for clearance and
settlement of transactions on the ATS, consulting relating to the
trading systems or functionality, regulatory compliance, and
recordkeeping for the Government Securities ATS would be responsive to
this request.\225\
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    \224\ Legacy Government Securities ATSs that operate pursuant to
a Form ATS on file with the Commission are currently subject to the
disclosure requirement of Exhibit E of Form ATS, which requires ATSs
to disclose the name of any entity other than the ATS that will be
involved in the operation of the ATS, including the execution,
trading, clearing, and settling of transactions on behalf of the
ATS; and to provide a description of the role and responsibilities
of each entity. See Item 7 of Form ATS (describing the requirements
for Exhibit E of Form ATS). Proposed Part II, Item 6(b) would expand
upon this requirement.
    \225\ If a summary of the role and responsibilities of the
service provider is disclosed in response to Part III of Form ATS-G,
the Government Securities ATS need only list the applicable Item
number in response to this Item. If there are services or
functionalities that are not applicable to Part III, the ATS would
identify the service provider, the services and functionalities, and
also provide a summary of the role and responsibilities of the
service provider in proposed Part II, Item 6(b).
---------------------------------------------------------------------------

    Furthermore, the proposed requests under Part II, Items 6(c)-(d)
would require the Government Securities ATS to disclose whether any
service providers or their affiliates use the services of the ATS. If
they do, the ATS would be required to identify the service providers,
the service(s) used, and whether there is any disparate treatment
between those service providers and other subscribers. Thus, a
Government Securities ATS would only be required to obtain and disclose
information about third-party vendors and their affiliates that
actively use the services of the ATS; the ATS should be aware of all
parties that use its services under its current recordkeeping
obligations. The Commission believes that market participants, when
analyzing potential conflicts of interest or information leakage, would
find it very useful to understand whether potential counterparties with
whom they are trading, and who also service the operation of the
Government Securities ATS, have access to different or unique ATS-
related services. Part II, Item 6(d) of proposed Form ATS-G would
require the Government Securities ATS to identify and explain any
differences in ATS services to a service provider and all other
subscribers. Additionally, depending on the role and responsibilities
of the third-party service provider, market participants may wish to
consider evaluating the robustness of the Government Securities ATS's
safeguards and procedures to protect confidential subscriber
information.
    This request for summary information is designed to provide market
participants with a general understanding of the types of technology or
hardware provided by the service provider as part of its
responsibilities, and how that hardware or technology is used by the
Government Securities ATS. The purpose of this disclosure is to provide
information that subscribers can use to better understand whether the
service provider might be able to access subscriber confidential
trading information, so Government Securities ATSs should draft their
disclosure with the goal of conveying such information. Simply stating
that a third party provides technology or hardware to the ATS would not
be responsive to the required summary of the service provider's role,
but, on the other hand, the ATS would not have to provide information
about the manufacturer of its hardware components.
Request for Comment
    63. Are there any critical services or functionalities (e.g.,
matching engine, market data) that, if provided by a third party,
should be required to be described in a higher level of detail than the
proposed ``summary'' level? If so, which services and functionalities?
6. Protection of Confidential Trading Information
    Part II, Item 7(a) of proposed Form ATS-G would require a
Government Securities ATS to describe its written safeguards and
written procedures to protect the confidential trading information of
subscribers to the ATS,

including: (i) Written standards controlling employees of the ATS that
trade for employees' accounts; and (ii) written oversight procedures to
ensure that the safeguards and procedures described above are
implemented and followed. The protection of confidential trading
information is a bedrock component of the regulation of ATSs and is
essential to ensuring the integrity of ATSs as execution venues. If
such information is not protected, many of the advantages or purposes
for which a subscriber may choose to send its orders to an ATS (e.g.,
to trade anonymously and/or to mitigate the impact of trading in large
positions) are eliminated. In cases where the confidential trading
information of a subscriber is impermissibly shared with the personnel
of the broker-dealer operator or any of its affiliates, such an abuse
is also compounded by the conflicting interests of the broker-dealer
operator. That is, in such a case, the broker-dealer operator has
invited subscribers to trade on its ATS and may have abused that
relationship to provide itself or its affiliates with a direct
competitive advantage over that subscriber. Accordingly, the Commission
believes that disclosures informing market participants about broker-
dealer operators' written safeguards and written procedures to protect
confidential trading information are necessary so market participants
can independently evaluate the robustness of the safeguards and
procedures and decide for themselves whether they wish to do business
with a particular Government Securities ATS.
    The Commission is proposing Part II, Items 7(b) and (c) to require
a Government Securities ATS to disclose whether a subscriber can
consent and withdraw consent, respectively, to the disclosure of its
confidential trading information to any person (not including those
employees of the ATS who are operating the system or responsible for
its compliance with applicable rules). Subscribers should be able to
give consent if they so choose to share their confidential trading
information.\226\ ATSs that transact in government securities vary in
terms of the types of orders, indications of interests (``IOIs''), or
other forms of trading interest that are confidential on their systems
and what information about such trading interest may be shared. For
example, an ATS might provide that no IOIs submitted by subscribers
will be considered confidential, but may provide subscribers with the
option to restrict the information in the IOI message to just the
symbol and side (i.e., buy or sell). For this example, Part II, Items
7(b) and 7(c) of proposed Form ATS-G would require the Government
Securities ATS to describe the means by which a subscriber could
control some of the information contained in the IOI message by
providing consent or withdrawing such consent for the sharing of its
confidential trading information.\227\ For example, a subscriber can
consent to its open trading interest being displayed to certain
subscribers that the subscriber believes are less likely to misuse or
exploit such information, or that have open trading interest on the
contra side in the same symbol. If a Government Securities ATS allows
subscribers to consent in this manner, the ATS would mark ``yes'' to
Part II, Item 7(b). Continuing the example, if the subscriber can
subsequently withdraw its consent to this display of its open trading
interest, the Government Securities ATS would mark ``yes'' to Part II,
Item 7(c).
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    \226\ See Regulation ATS Adopting Release, supra note 35, at
70879.
    \227\ See id. The Commission believes that there may be some
Government Securities ATSs that might not offer any means by which a
subscriber could consent to the dissemination of its confidential
trading information. A Government Securities ATS would be required
to disclose this fact pursuant to Item 7(a). See id. at 70891 n.437.
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    Finally, the Commission is proposing Part II, Item 7(d) to require
a Government Securities ATS to provide a summary of the roles and
responsibilities of any persons that have access to confidential
trading information, the confidential trading information that is
accessible by them, and the basis for the access. In responding to this
Item, the Government Securities ATS would initially need to describe
what it considers to be confidential trading information. For example,
the ATS would need to disclose whether only pre-trade order information
would be considered confidential trading information, or whether post-
trade information would also be treated as confidential trading
information, and for what period of time. Furthermore, to explain the
basis for the access, the Government Securities ATS would need to
provide the basis for a person to have access to the confidential
trading information and any limitations placed on that person's access.
Request for Comment--Part II
    64. Should the Commission require the disclosure of the information
in Part II of Form ATS-G? If so, what level of detail should be
disclosed?
    65. Would Part II of proposed Form ATS-G capture the information
that is most relevant to understanding the Government Securities ATS
and its relationship with the broker-dealer operator and the broker-
dealer operator's affiliates? Please support your arguments.
    66. Would the proposed disclosures in Part II require broker-dealer
operators of Government Securities ATSs to reveal too much (or not
enough) information about their structure and operations?
    67. Is there other information about the activities of the broker-
dealer operator and its affiliates that market participants might find
relevant or useful in their assessment of use of the ATS? If so,
describe such information and explain whether or not such information
should be required to be provided under proposed Form ATS-G.
    68. Should the proposed disclosures in Part II not be required to
be disclosed on proposed Form ATS-G due to concerns regarding
confidentiality, business reasons, trade secrets, burden, or any other
concerns? If so, what information and why?
    69. Are there ways to obtain the same information as would be
required from Government Securities ATSs by Part II other than through
disclosure on proposed Form ATS-G? If so, how else could this
information be obtained and would such alternative means be preferable
to the proposed disclosures in Part II?
    70. Should Government Securities ATSs be required to publicly
disclose in their entirety on Form ATS-G their written safeguards and
written procedures to protect the confidential trading information of
subscribers? Should the Commission require less information be
disclosed about the written safeguards and procedures?
    71. Would the information about written safeguards and written
procedures to protect the confidential trading information of
subscribers described in Form ATS-G be sufficient for subscribers to
independently evaluate such safeguards and procedures and thus evaluate
the ATS as a destination for their orders? Should the Commission
prohibit the disclosure of confidential subscriber information in some
circumstances?

C. Part III Form ATS-G: Manner of ATS Operations

    Part III of proposed Form ATS-G is designed to provide public
disclosures to help market participants understand, among other things,
how subscribers' orders and trading interest are handled, matched, and
executed on the Government Securities ATS. Part III of

Form ATS-G is modeled after Form ATS-N with few differences. Form ATS-G
does not have an item corresponding to Part III, Item 16 (Routing) of
Form ATS-N nor does it have an item corresponding to Part III, Item 24
(Order Display and Execution Access) of Form ATS-N as the associated
rule is inapplicable to government securities. And, because of the
close relationship between government securities markets and markets
for other financial instruments (e.g., futures), the Commission is
proposing Part III, Item 16 of Form ATS-G to specifically highlight for
market participants how the broker-dealer operator and subscribers may
use a functionality or procedure to facilitate trading on, or source of
pricing for, the Government Securities ATS in conjunction with a
related market (e.g., futures).\228\ In Form ATS-G, the Commission has
included ``yes'' or ``no'' questions, which the Commission believes
would allow market participants to find information more efficiently
and facilitate comparisons across Government Securities ATSs. The
Commission also has included a requirement to identify and explain any
differences in the treatment of subscribers and the broker-dealer
operator that the Commission believes would help market participants
discern any benefit or disadvantage they may receive in comparison to
other market participants or the broker-dealer operator.\229\ The
Commission believes that the disclosure about differences in treatment
of subscribers is important to market participants and would better
allow them to decide whether submitting order flow to that Government
Securities ATS aligns with their trading objectives.
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    \228\ On Form ATS-N, an NMS Stock ATS that offers a
functionality or procedure that subscribers could use on the ATS in
conjunction with a related market (e.g., futures, options) would
disclose this information under Part II, Item 5 and Part III, Item
11.
    \229\ For example, in Part III, Item 5, if a Government
Securities ATS designed its operations to allow only certain types
of subscribers to enter orders into the ATS through direct means
(e.g., FIX protocol) and other types of subscribers to enter orders
into the ATS through indirect means (e.g., SOR or algorithm), the
ATS would describe these means of entry in Part III, Items 5(a) and
5(c), respectively. If, for example, the Government Securities ATS
were to treat a subscriber that enters orders directly into the ATS
differently from other subscribers that also enter orders directly
into the ATS with respect to means of order entry, the ATS would
describe that different treatment in Part III, Item 5(b).
Differences in treatment of subscribers and the broker-dealer
operator are disclosed in the same way on Form ATS-N.
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1. Types of ATS Subscribers
    Part III, Item 1 of proposed Form ATS-G is designed to provide
information on the type(s) of subscribers that can use the Government
Securities ATS services. The Item would provide market participants
with information about the type of order flow in the Government
Securities ATS based on the types of subscribers that use it.
Government Securities ATSs may design their system for trading by
retail investors, institutional investors, dealers, or any other type
of market participant. The Commission is providing a list of market
participants in Part III, Item 1 of proposed Form ATS-G that, in the
Commission's experience, are commonly used.\230\ The list includes:
Retail investors, asset managers, brokers, dealers, investment
companies, hedge funds, market makers, PTFs, insurance companies,
pension funds, corporations, and banks. The list is non-exhaustive and
a Government Securities ATS would be required to list any type of
subscriber that can use the ATS's services.\231\ In addition to
disclosing its subscribers, a Government Securities ATS may use Part
III, Item 1 to disclose any types of participants whose trading
interest may reach the ATS. For example, for an ATS that only allows
brokers or dealers as subscribers, the ATS could identify the types of
customers for which the brokers or dealers send orders to the ATS.
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    \230\ As compared to Form ATS-N, the Commission is modifying the
checkboxes listing types of subscribers to remove types that are not
applicable to the government securities market and adding insurance
companies, pension funds, and corporations to the list of
checkboxes. The Commission is also proposing to add these checkboxes
to Form ATS-N. See infra Section V.D. The Commission believes that
adding these checkboxes will provide more granular information on
the types of subscribers participating on an ATS in an easier-to-
read format.
    \231\ See NMS Stock ATS Adopting Release, supra note 1, at
38820-21 (discussing the definition of ``subscriber'' and the
persons encompassed thereunder).
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Request for Comment
    72. Should Form ATS-G include information about the types of
subscribers to the ATS? Based on Commission experience, some ATSs only
accept broker-dealers as subscribers to the ATS and various types of
market participants send orders into the ATS through the broker-dealer
subscriber. Should the Commission require the identification of the
types of market participants whose orders may be sent to the ATS,
whether directly or indirectly, by a broker-dealer subscriber to the
Government Securities ATS? Should the Commission require the same
information from NMS Stock ATSs by amending Form ATS-N? Would this
information be useful to understanding the type of order flow in the
ATS?
2. Eligibility for ATS Services
    Part III, Item 2 of proposed Form ATS-G is designed to provide
market participants with information about whether the Government
Securities ATS requires subscribers to be registered broker-dealers or
enter a written agreement to use the ATS services, and whether there
are any other conditions that the ATS requires a person to satisfy
before accessing the ATS services. This Item would require the
conditions a person must satisfy ``before accessing the ATS services.''
On the other hand, Part III, Item 3 of proposed Form ATS-G (discussed
infra), would require disclosures about any conditions that would
exclude a subscriber, in whole or in part, from using the Government
Securities ATS as a result of subscriber behavior while already
actively participating in the ATS.\232\
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    \232\ For example, if a Government Securities ATS has a practice
of excluding subscribers that do not meet certain percentage
thresholds for submitting firm-up orders in response to receiving an
IOI or conditional order sent to them by the ATS, then this practice
would be subject to disclosure under Part III, Item 3 of proposed
Form ATS-G (``Exclusion from ATS Services'') and not Part III, Item
2 (``Eligibility for ATS Services'').
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    The Commission believes that the disclosures required by Part III,
Item 2 would allow market participants to understand the conditions
that they would need to satisfy to participate on the Government
Securities ATS. If the Government Securities ATS indicates that it does
have conditions that a person must satisfy before accessing the ATS
services, the request would require the ATS to list and provide a
``summary'' of those conditions. Some Government Securities ATSs may
only have the eligibility requirement that a person be a client of the
broker-dealer operator. In that case, any eligibility requirements to
become a client of the broker-dealer operator would be responsive to
this Item. For example, if a subscriber must be a customer of the
broker-dealer operator, the Government Securities ATS would provide a
summary of conditions the subscriber, as a customer, would need to
satisfy (e.g., know your customer) before its orders can be entered
into the ATS. If the Government Securities ATS requires subscribers to
be members of a third party for purposes of clearance and settlement,
such as the Fixed Income Clearing Corporation's Government

Securities Division, such information would be responsive.
Request for Comment
    73. What eligibility requirements to access a Government Securities
ATS are important to a potential subscriber or participant to the ATS
and why?
3. Exclusion From ATS Services
    Based on the Commission's experience, ATSs often have rules
governing subscribers' participation on the ATS, and if a subscriber
fails to comply with these rules, the ATS may limit or deny access to
the ATS.\233\ Part III, Item 3 of proposed Form ATS-G would require the
Government Securities ATS to provide information about whether the ATS
can exclude, in whole or in part, any subscriber from the ATS services,
and if so, to list and provide a summary of the conditions for
excluding (or limiting) a participant from using the ATS. The
disclosures are designed to provide subscribers with information about
when the Government Securities ATS can exclude, in whole or in part, a
subscriber from the services of the ATSs and help them reasonably
anticipate the types of activities that may cause them to be excluded
(or limited) from using the services of the ATS. The Commission
believes that allowing for a summary of conditions for excluding (or
limiting) a participant would alert subscribers about the types of
activities that may cause them to be excluded (or limited) from using
the services of the Government Securities ATS while allowing the ATS to
reasonably control the activities and quality of flow on its platform
and not allowing subscribers to game a more detailed description of
conditions for excluding.
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    \233\ These limitations can result in some subscribers having
different levels of functionality or more favorable terms of access
than others. For example, in the Commission's experience, some ATSs
exclude subscribers that frequently fail to respond with a firm-up
order after receiving an IOI or request for quote.
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Request for Comment
    74. Is there any subscriber behavior for which ATSs commonly
exclude a subscriber in whole or in part? What is that behavior(s) and
what form of exclusion is commonly employed (e.g., disqualification
from ATS, limitation of services)?
4. Hours of Operations
    Part III, Item 4 is intended to provide market participants with
information about the days and hours of operations of the Government
Securities ATS, including the times when orders or trading interest can
be entered on the ATS, and any hours of operations outside of its
regular trading hours, as established by the ATS. Notably, the Item
would require a Government Securities ATS to provide the hours when it
is operating, which would include functions such as accepting orders.
Accordingly, the disclosure required is not limited to only those hours
when the matching and execution of orders are occurring. The Commission
believes that it is important for market participants and the
Commission to understand when a Government Securities ATS operates and
when orders can be entered, including when the ATS will accept orders
outside of its regular trading hours. Making such information publicly
available would enable market participants to more easily compare when
trading interest can be entered on trading venues.
5. Means of Entry
    Part III, Item 5 of proposed Form ATS-G is intended to disclose the
means that can be used to directly enter orders and trading interest
into the Government Securities ATS and any other means for entering
orders and trading interest into the ATS (e.g., smart order router,
algorithm, order management system, sales desk, or aggregation
functionality). The Government Securities ATS would be required to
identify and explain the other means for entering orders and trading
interest, indicate whether the means are provided through the broker-
dealer operator itself, through a third-party contracting with the
broker-dealer operator, or through an affiliate of the broker-dealer
operator, and list and provide a summary of the terms and conditions
for entering orders or trading interest into the ATS through these
means.
    Subscribers may submit orders or trading interest to the Government
Securities ATS both directly and indirectly. A direct method of sending
orders or trading interest to an ATS, for example, may include the use
of a direct market access platform or FIX Protocol connection, which
allows subscribers to enter orders or trading interest into the ATS
without an intermediary. An example of an indirect method of submitting
orders or trading interest to an ATS could include the use of a smart
order router (``SOR''), algorithm or similar functionality, website,
graphical user interface (``GUI''), aggregation interface, or front-end
system. The means of order entry into an ATS (e.g., direct or indirect)
could impact the speed with which a subscriber's order is handled and
potentially executed and could increase the risk of information
leakage. The government securities markets are not interconnected
markets like those for NMS stocks and therefore SOR technology may not
be applied in the same manner by broker-dealer operators of Government
Securities ATSs. The Commission believes, however, that SOR technology
may be used to send or receive orders from a Government Securities ATS
to reduce latency or send orders to markets with better prices for
certain government securities, and to the extent it does, the ATS
should be required to provide information about the SOR as required.
    The Commission believes that the disclosures regarding the direct
or indirect means of order entry would inform subscribers about the
functionalities that their orders and trading interest pass through on
their way to the ATS and help them assess any potential advantages that
orders sent through the broker-dealer operator may have with respect to
other subscribers on the Government Securities ATS. A Government
Securities ATS would be required to identify the functionality that
directly connects to the ATS (e.g., algorithm) and, if present, any
intermediate functionality that an ATS order passes through on its way
to the functionality that directly connects to the ATS.\234\
Conversely, if ATS orders submitted through an algorithm are sent to
another intermediate functionality, and then submitted to the ATS by
that functionality, such information would need to be disclosed
pursuant to this Item.\235\
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    \234\ If an intermediate application or functionality has access
to a subscriber's order information, the Government Securities ATS
must take appropriate measures to protect the confidentiality of
such information pursuant to Rule 301(b)(10) of Regulation ATS.
    \235\ If a broker-dealer operator permits subscribers to send
orders to the ATS by excluding all other trading venues from where
such orders could be sent, this procedure would in effect allow a
subscriber to direct an order to the ATS and would be responsive to
Part III, Item 5.
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    The proposed disclosure requirements would only require the
Government Securities ATS to ``list and provide a summary of the terms
and conditions for entering orders or trading interest into the ATS''
through these sources. Therefore, the Government Securities ATS would
not need to provide a detailed description of the programming of the
indirect means for entering order and trading interests that could put
the ATS at a competitive disadvantage with competitors. However, if,
for example, an ATS ``throttled'' the number of messages allowed for a
given type of

connection, that information would be responsive as a term or condition
of that means of entry.
    Among the advantages and disadvantages that market participants
should be able to discern from the disclosure of Part III, Item 5(b)
are any differences in the latency of the alternative means for
entering orders and trading interest into the Government Securities
ATS. The Commission understands that there might be different latencies
associated with each alternative. For instance, in some cases, a direct
connection to the Government Securities ATS may have reduced latencies
as compared to indirect means where orders and trading interest pass
through an intermediate functionality. A broker-dealer operator could
also, for example, configure the Government Securities ATS to provide
reduced latencies for certain means of order entry used by itself or
its affiliates.\236\ The Commission also believes that it is important
for subscribers to understand a means of entry provided by an
affiliate, even if it does not provide an advantage to a particular
entity.
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    \236\ The proposed rule would not require that the Government
Securities ATS calculate and disclose precise latencies for each
means of entry.
---------------------------------------------------------------------------

    The Commission believes that disclosures about a broker-dealer
operator's use of its or an affiliate's direct or indirect
functionality to enter orders into the Government Securities ATS are
important to market participants to allow them to assess the potential
for information leakage. The indirect means of access (e.g., SOR or
algorithm) may obtain information about subscriber orders or trading
interest that have been sent to the Government Securities ATS (and may
now be resting on the ATS) and subscriber orders that have been sent
out of the ATS. The high likelihood that an indirect means of accessing
the Government Securities ATS could lead to leakage of subscribers'
confidential trading information necessitates disclosure of certain
information to subscribers about the use of such indirect means to send
subscriber orders to or out of the ATS. In addition, there may be