recovery plans to be approximately $10,000 per SCI entity member or
participant.
---------------------------------------------------------------------------

    The Commission believes that market participants could incur
indirect costs related to compliance requirements for Government
Securities ATSs as SCI entities. Government Securities ATSs that are
close to satisfying the volume thresholds for certain government
securities could limit the trading in those government securities on
their ATSs over some period to stay below the volume thresholds and
avoid being subject to Regulation SCI. The order flow that was being
executed on those Government Securities ATSs might be absorbed and
redistributed amongst other Government Securities ATSs. If a Government
Securities ATS that is the sole provider of a niche service limits the
trading in certain government securities to avoid being subject to
Regulation SCI, it could require some market participants to seek
execution on other trading venues, which could result in higher trading
costs.
    The Commission believes that the costs to comply with Regulation
SCI discussed above would also fall on third-party vendors employed by
Government Securities ATSs to provide services used in their SCI
systems. The costs for third-party vendors imposed by Regulation SCI
could depend on the extent to which Government Securities ATSs use
third-party systems that fall under the definition of SCI systems and
the portion of third-party vendors operating SCI systems on behalf of
larger Government Securities ATSs already comply with the requirements
of Regulation SCI. It is possible that some third-party vendors
operating SCI systems on behalf of larger Government Securities ATSs
that already complies with the requirements of Regulation SCI because
they also operate the SCI systems for other SCI (e.g., SCI ATSs, SCI
SROs). The additional compliance costs from the proposed amendments of
Regulation SCI for these third-party vendors would be minimal. However,
at this time, it is difficult to estimate the cost for third-party
vendors because the Commission does not know the extent to which
Government Securities ATSs use third-party systems that fall under the
definition of SCI systems.
c. Amendments to Rule 301(b)(2), Form ATS, Form ATS-R, and Form ATS-N
    The proposal to amend Rule 301(b)(2) and Forms ATS and ATS-R would
impose initial and ongoing annual PRA costs on all ATSs including
Government Securities ATSs.\775\ For the proposed amendments to Part I
of Form ATS, the Commission estimates that Form ATS filers would incur
aggregate PRA costs of approximately $1,800 for initial Form ATS
filings, as well as aggregate annual PRA costs of approximately $3,600
for Form ATS amendments.\776\ In addition, the proposed Form ATS-R
amendment that would require filers to indicate the type of filing (and
if applicable the date of cessation) and whether the ATS is subject to
fair access obligations would impose aggregate annual PRA costs of
approximately $11,800.\777\ Furthermore, the proposed Form ATS-R
amendment that would require additional details on Form ATS-R, such as
total dollar volume in transactions in repos, would impose aggregate
annual PRA costs of approximately $11,300.\778\
---------------------------------------------------------------------------

    \775\ See supra Section IX.D. The estimated aggregate ongoing
annual PRA cost associated with filing Form ATS-R for 7 Currently
Exempted Government Securities ATSs is reflected in the cost
associated with Rule 301(b)(9) in supra note 706. The estimated
aggregate ongoing annual PRA cost associated with filing Form ATS
and Form ATS-R for 17 Legacy Filers is reflected in the cost
associated with Rule 301(b)(2)(viii) and Rule 301(b)(9) in supra
note 729. See also supra Section V.C.
    \776\ See supra notes 522 and 523. Compliance Clerk at $71 x
25.5 hours = $1810.50; Compliance Clerk at $71 x 51 hours = $3,621.
    \777\ See supra note 531. Compliance Manager at $315 x 37.6
hours = $11,844.
    \778\ See supra note 529. Compliance Manager at $315 x 36 hours
= $11,340.
---------------------------------------------------------------------------

    The proposal to require Forms ATS and ATS-R to be filed on EDGAR is
not expected to impose any incremental costs on any Government
Securities ATS. As discussed above, because all ATSs that are currently
subject to Form ATS and ATS-R filing requirements (including Legacy
Filers) are operated by registered broker-dealers, those ATSs would not
incur any burden to gain access to EDGAR. Any new ATS entities that are
not operated by a registered broker-dealer (including bank-operated
Currently Exempted Government Securities ATSs) and do not otherwise
have access to EDGAR would need to submit a Form ID and thus incur the
estimated 0.15 hour burden in order to file Form ATS-G, and would
consequently already have access to EDGAR when filing a Form ATS-
R.\779\ Beyond the cost of gaining access to EDGAR, the Commission does
not expect that the EDGAR filing requirement would impose any
incremental costs on any Form ATS and ATS-R filer (including Government
Securities ATSs) with respect to ongoing filing requirements (such as
quarterly reports on Form ATS-R or amendments to a Form ATS).
---------------------------------------------------------------------------

    \779\ See supra Sections IX.D.4 and X.C.2.a.ii.
---------------------------------------------------------------------------

    The proposed changes to Form ATS-N include a new requirement for
NMS Stock ATSs to indicate via checkbox whether the broker-dealer
operator of the NMS Stock ATS is authorized by a national securities
association to operate an ATS. The Commission believes that because
this information should be readily available to a filer and requires
only marking a checkbox, the requirement would not impose any material
additional costs relative to the current baseline.\780\
---------------------------------------------------------------------------

    \780\ See supra Section V.D and note 520.
---------------------------------------------------------------------------

3. Efficiency, Competition, and Capital Formation
    The Commission considered the effects of the amendments on
efficiency, competition, and capital formation. The Commission believes
that the amendments could foster competition for order flow in the
market for government securities and repo

execution services, enhance the efficiency with which market
participants achieve their trading objectives or investment objectives,
and promote price efficiency and capital formation.
    The Commission believes that the proposed amendments to Regulation
ATS could promote competition in the markets for government securities
and repo execution services. The Commission believes that the proposal
to extend Regulation ATS to include Currently Exempted Government
Securities ATSs would enable ATSs wishing to effect transactions in
government securities or repos to compete for order flow on a more
level competitive landscape with the same regulatory requirements.\781\
The Commission also believes that the public disclosure of Form ATS-G
could promote competition for order flow in the market for government
securities and repo execution services via lowering fees and improving
order handling procedures. Furthermore, greater competition for order
flow could in turn incentivize Government Securities ATSs to innovate,
including, in particular, in technology related to execution services
to compete on execution services to attract more subscribers and order
flow.
---------------------------------------------------------------------------

    \781\ See supra Section X.B.2 for discussion about the current
regulatory requirements for bank-operated Currently Exempted
Government Securities ATSs, Currently Exempted Government Securities
ATSs, and Legacy Filers.
---------------------------------------------------------------------------

    The Commission believes that the proposed amendments to Regulation
ATS could enhance the efficiency with which market participants achieve
their trading objectives. The Commission believes the proposed
amendments to Regulation ATS would increase transparency regarding the
operations of Government Securities ATSs and the activities of its
broker-dealer operator and its affiliates and lower search costs for
market participants in the selection of trading venues in the market
for government securities and repos. Furthermore, the fair access
requirements could increase trading venue options for market
participants resulting in lower trading costs and better efficiency
with which they achieve their trading objectives.
    The Commission believes that extending Regulation SCI to include
Government Securities ATSs with significant volume could promote price
efficiency and capital formation. Extending Regulation SCI to include
Government Securities ATSs could reduce the frequency, severity, and
duration of such effects resulting from systems issues, thereby
facilitating price discovery process in government securities and
promote capital formation.\782\
---------------------------------------------------------------------------

    \782\ See infra Section X.C.3.c for a discussion about the price
discovery and price efficiency of U.S. Treasury Securities, risk-
free rate benchmarks, pricing of risky securities, and capital
formation. See also October 15 Staff Report, supra note 14, for a
discussion about price discovery being especially important in the
secondary market for on-the-run U.S. Treasury Securities because the
transaction prices are used as risk-free rate benchmarks to price
other securities transactions.
---------------------------------------------------------------------------

    As discussed in more detail below, the Commission believes that the
risk of the proposed amendments adversely affecting competition in the
market for government securities and repo execution services, the
incentive for Government Securities ATSs to innovate, and the
efficiency with which market participants achieve trading objectives,
is likely to be low.
a. Competition
    The Commission believes that the proposed amendments of Regulation
ATS and Regulation SCI could affect competition for order flow and the
decision of ATSs to enter or exit the market for government securities
and repo execution services.\783\
---------------------------------------------------------------------------

    \783\ See supra Section X.C.1.a for a discussion about benefits
from the requirements of Regulation ATS and Section X.C.2.a for a
discussion about costs of the requirements of Regulation ATS.
---------------------------------------------------------------------------

i. Regulation ATS
    The Commission believes that the proposed amendments to Regulation
ATS could foster competition for order flow in the market for
government securities and repo execution services. The proposed
extension of Regulation ATS to include Currently Exempted Government
Securities ATSs would enable ATSs wishing to effect transactions in
government securities or repos to compete for order flow on a more
level competitive landscape. The Commission believes that the public
disclosure of Form ATS-G could promote competition and incentivize
Government Securities ATSs to innovate. Furthermore, the Commission
does not believe that allowing the Commission to declare Form ATS-G
ineffective and PRA compliance costs imposed on Government Securities
ATSs would result in significant adverse impact on competition in the
market for government securities and repo execution services.
(a) Competitive Landscape
    The Commission believes that the proposed extension of Regulation
ATS to include Currently Exempted Government Securities ATSs would help
eliminate a Government Securities ATS's competitive advantage or
competitive disadvantage that may arise due to uneven regulatory
requirements in the market for government securities and repo execution
services. For example, Legacy Filers could be at a competitive
disadvantage to Currently Exempted Government Securities ATSs, which do
not currently incur compliance costs associated with the requirements
of Regulation ATS.\784\ Furthermore, due to reporting requirements of
Regulation ATSs, it could be more difficult or costly for a Legacy
Filer to implement significant operational changes to compete with
Currently Exempted Government Securities ATSs if the Legacy Filer's
competitive advantage is driven by operational facets that would be
reported on Form ATS. The proposed extension of Regulation ATS would
subject Currently Exempted Government Securities ATSs, bank-operated
Currently Exempted Government Securities ATSs, and Legacy Filers to the
same regulatory requirements.
---------------------------------------------------------------------------

    \784\ Presently, Currently Exempted Government Securities ATSs,
bank-operated Currently Exempted Government Securities ATSs, and
Legacy Filers compete for order flow in the market for government
securities and repo execution services on an uneven competitive
landscape with different regulatory requirements. See supra Section
X.B.2 for a discussion about the differences in regulatory
requirements between Legacy Filers and Currently Exempted Government
Securities ATSs under the current regulatory framework. See also
supra Section I.B.
---------------------------------------------------------------------------

(b) Declaration of Ineffectiveness
    The proposal to allow the Commission to declare Form ATS-G and
amendments to Form ATS-G ineffective could lead some Currently Exempted
Government Securities ATSs and Legacy Filers to exit the market for
government securities and repo execution services. However, based on
the Commission's experience with NMS Stock ATSs that filed an initial
Form ATS-N, the Commission believes this would be an unlikely
result.\785\ If the Commission declares an initial Form ATS-G or
amendment ineffective, the Government Securities ATS would either have
to cease operations \786\ or, in the case of an amendment, roll back
any changes it made and operate pursuant to its previous Form ATS-G
that is effective until it is able to address the deficiencies and file
a new Form ATS-

G that becomes effective.\787\ Some broker-dealer operators of Legacy
Filers may find that the costs of addressing deficiencies in Form ATS-G
outweigh the benefits of continuing to operate the ATS, particularly if
the ATS does not constitute a significant source of profit for a
broker-dealer operator. The ability of the Commission to declare Form
ATS-G ineffective could also raise barriers to entry for new Government
Securities ATSs, as it could create uncertainty as to whether the
Commission would declare its initial Form ATS-G effective or
ineffective and as to the cost of avoiding an ineffective declaration.
If a new Government Securities ATS's initial Form ATS-G is declared
ineffective, it would require time and additional expenditures to
address the deficiencies delaying the commencing of operations, which
may deter some potential ATSs from operating in this space.
---------------------------------------------------------------------------

    \785\ Unlike the current rules applicable to NMS Stock ATSs
under Rule 304 of Regulation ATS with respect to ineffectiveness,
the Commission does not have a process to declare a Form ATS
ineffective because of the quality of the disclosures and cause the
ATS cease operating pursuant the exemption. See Rule
304(a)(1)(iv)(B).
    \786\ See Rule 304(a)(1)(iv)(B).
    \787\ See id.
---------------------------------------------------------------------------

(c) Public Disclosure
    The increase in transparency due to the public disclosure of Form
ATS-G could foster greater competition for order flow in the market for
government securities and repo execution services. The increase in
competition could lower trading venue fees, improve the efficiency of
order handling procedures, and promote innovation. For instance,
because the public disclosure of Form ATS-G would make it easier for
market participants to compare fees across Government Securities ATSs,
market participants could choose to send their orders to ATSs that
offer lower fees, and Government Securities ATSs may lower their fees
to attract subscribers and compete for order flow. If non-ATS trading
venues compete with Government Securities ATSs for trade execution
services, the increased operational transparency of Government
Securities ATSs could also incentivize non-ATS trading venues to reduce
their fees to compete with Government Securities ATSs for order flow.
    Because the public disclosure of Form ATS-G would make it easier
for market participants to compare order handling procedures and
execution statistics--if they are made available--across trading
platforms,\788\ market participants may be more likely to send their
orders to ATSs that offer better execution services. Greater
competition for order flow could in turn incentivize Government
Securities ATSs to innovate, including, in particular, technology
related to execution services to improve the quality of trade execution
services and to compete on execution services to attract more
subscribers and order flow.
---------------------------------------------------------------------------

    \788\ See supra Section X.C.1.a.ii for a discussion about
benefits from public disclosure via Form ATS-G.
---------------------------------------------------------------------------

    The public disclosure of a Government Securities ATS's previously
non-public information regarding innovative operational facets could
adversely impact competition for order flow in the market for
government securities and repo execution services and could also lower
the incentives for Government Securities ATSs to innovate. However, the
Commission believes that the risk of this is likely to be low. If the
competitive advantage of a Government Securities ATS in the market is
driven by certain operational innovations, the disclosure of this
information could result in other competing Government Securities ATSs
with similar operational platforms implementing similar methodologies,
which could cause market participants to direct more order flow to
those other Government Securities ATSs. This could potentially reduce
the incentives for Government Securities ATSs to innovate if publicly
disclosing new innovations results in the disclosing ATS earning less
revenue from new innovations it develops. Furthermore, some Government
Securities ATSs may choose to exit the market if their profitability
declines. Fewer opportunities to profit from innovation could also
raise barriers to entry for new Government Securities ATSs. However,
the Commission believes that the risk of this may be low because it is
not likely the responsive information to the proposed Form ATS-G would
include information regarding operational facets such that the public
disclosure of the information would adversely affect the competitive
position of the disclosing Government Securities ATS in the market for
government securities and repo execution services.\789\
---------------------------------------------------------------------------

    \789\ See supra note 196 and accompanying text.
---------------------------------------------------------------------------

(d) Compliance Costs
    The Commission believes that the direct compliance costs associated
with the amendments to Regulation ATS are generally represented by PRA
costs.\790\ The Commission does not believe that initial and ongoing
PRA compliance costs associated with the amendments to Regulation ATS
would have a significant adverse impact on competition in the market
for government securities and repo execution services. If Government
Securities ATSs find that PRA costs outweigh the benefits of operating
a Government Securities ATS, these costs could act as a deterrent or a
barrier to entry for potential ATSs wishing to effect transactions in
government securities or could cause some Government Securities ATSs to
exit the market for government securities or repo execution services.
However, the Commission does not believe that the PRA costs imposed by
the proposed amendments to Regulation ATS would be significant enough
to make this a likely possibility.\791\
---------------------------------------------------------------------------

    \790\ See supra Section X.C.2 for a discussion about compliance
costs associated with the amendments to Regulation ATS. The effect
of compliance costs associated with the extension of Regulation ATS
to include the Currently Exempted Government Securities ATSs on
competition is discussed in Section X.C.3.a.i.a. The effect of
indirect costs associated with the declaration of ineffectiveness
for Form ATS-G and the public disclosure of Form ATS-G on
competition is discussed in Section X.C.3.a.i.b and X.C.3.a.i.c,
respectively.
    \791\ See supra Sections X.C.2.a and X.C.2.c for discussions on
the PRA costs associated with the amendments to Regulation ATS.
---------------------------------------------------------------------------

    The Commission believes that the PRA compliance costs could have
different effects on the rates at which small and large Government
Securities ATSs may exit the market. The Commission believes that most
of the estimated PRA costs are fixed costs, which all Government
Securities ATSs may incur, regardless of the amount of trading activity
that takes place on them. The PRA costs would represent a larger
fraction of revenue generated for a small Government Securities ATS
relative to that for a large Government Securities ATS.\792\ This could
adversely affect small Government Securities ATSs in competing against
larger Government Securities ATSs and could lead to small ATSs exiting
the market for government securities and repo execution services.
However, smaller Government Securities ATSs that are not operated by
multi-service broker-dealer operators are likely to incur lower PRA
costs because certain sections of proposed Form ATS-G would not be
applicable to these Government Securities ATSs.\793\ The PRA costs
could also vary across Government Securities ATSs depending on the
complexity of the ATS and the services that it offers.\794\ For
example, some Government Securities ATSs may not segment subscriber
order flow or offer counter-party selection protocols. These ATSs would
not be required to complete Part III, Items 13 and 14 of proposed Form
ATS-G. As a result,

such Government Securities ATSs could incur lower PRA costs because
these ATSs would complete their Form ATS-G with fewer burden hours. To
the extent that small Government Securities ATSs engage in providing
simpler services, these small Government Securities ATSs are likely to
incur lower compliance costs. Furthermore, to the extent that the
Government Securities ATSs that decide to cease operating as ATSs due
to this fixed PRA compliance cost only transact small dollar volume,
the Commission does not believe that there would be a significant
impact on the overall competitive structure for the remaining
Government Securities ATSs. The order flow that was being executed on
those small Government Securities ATSs may be absorbed and
redistributed amongst those larger remaining Government Securities
ATSs. On the other hand, if the PRA costs cause a small Government
Securities ATS that is the sole provider of a niche service to cease
operating as an ATS, it could require some market participants to seek
execution on other trading venues that may not minimize their trading
costs to the same extent.
---------------------------------------------------------------------------

    \792\ See supra Section X.C.2.a.ii for a discussion about the
impact of PRA costs for small Government Securities ATSs.
    \793\ See supra note 792.
    \794\ See supra Section X.C.2.a.ii for a discussion about PRA
costs and the complexity of the ATS and the services that it offers.
---------------------------------------------------------------------------

ii. Regulation SCI
    The Commission does not believe that the requirements imposed by
Regulation SCI would have significant adverse effect on competition for
order flow in the market for government securities and repo execution
services and the efficiency with which market participants achieve
their trading objectives.
    The Commission does not believe that the compliance costs imposed
by the proposed amendments of Regulation SCI would have significant
adverse effect on competition among SCI Government Securities ATSs,
non-SCI Government Securities ATSs, and non-ATS trading venues due to
mitigating factors. The compliance costs imposed by the proposed
amendments of Regulation SCI could have some impact on competition in
the market for government securities and repo execution services.
Specifically, because non-SCI Government Securities ATSs do not have to
incur the compliance costs associated with Regulation SCI, non-SCI
Government Securities ATSs and non-ATS trading venues may gain a
competitive advantage in the market for government securities and repo
execution services over SCI Government Securities ATSs with which they
compete. To the extent that SCI Government Securities ATSs pass on the
compliance costs to their subscribers in the form of higher fees, SCI
Government Securities ATSs could lose order flow or their subscribers
to other non-SCI Government Securities ATSs and non-ATS trading venues
with lower fees. The Commission believes that the adverse competitive
effect, however, would be mitigated to some extent because an SCI
Government Securities ATS likely would have more robust systems, fewer
disruptive systems issues, and better up-time compared to non-SCI
Government Securities ATSs.\795\ Furthermore, any adverse competitive
effect could be minor to the extent that an SCI Government Securities
ATS is large and has a more stable and established subscriber base than
other ATSs and non-ATS trading venues. Although non-ATS trading venues
may compete with SCI Government Securities ATSs in the market for
government securities and repo execution services, non-ATS trading
venues cannot offer the same services as ATSs without becoming ATSs,
regardless of whether Regulation SCI applies to the ATS.\796\
---------------------------------------------------------------------------

    \795\ See supra Section X.B.6.
    \796\ See supra Section X.B.1 for a discussion about the
differences in execution services between ATSs and non-ATS trading
venues. See also supra note 564.
---------------------------------------------------------------------------

    The costs imposed by the amendments to Regulation SCI could also
affect barriers to entry for new Government Securities ATSs and thus
could adversely affect competition. Specifically, the Commission
acknowledges that Regulation SCI would increase the costs for those
that meet the volume thresholds. This would increase the expected
compliance costs of market entrants who expect to eventually be SCI
Government Securities ATSs. To the extent that an increase in these
costs reduces the number of potential new entrants, the potential
competition from new entrants would be lower.
    The compliance costs associated with participating in business
continuity and disaster recovery plan testing may affect competition
among subscribers of SCI Government Securities ATSs and also could
raise barriers to entry for new subscribers. Because some subscribers
would incur compliance costs associated with Rule 1004 and others would
not, it could adversely impact the ability for those subscribers of SCI
Government Securities ATSs to compete. However, it is difficult to
gauge the extent of impact on competition because the Commission does
not have sufficient information, for example, on whether certain
subscribers of SCI Government Securities ATSs currently maintain
connections to backup facilities including for testing purposes. If
larger subscribers of SCI Government Securities ATSs already maintain
connections to backup facilities including for testing purposes, the
adverse impact on competition would be mitigated to some extent because
the compliance costs associated with the business continuity and
disaster recovery plans testing requirements in Rule 1004 would be
limited for those larger subscribers. The Commission believes that new
subscribers are less likely to be designated immediately to participate
in business continuity and disaster recovery plan testing than are
existing larger subscribers because new subscribers may not initially
satisfy the ATS's designation standards as they establish their
businesses.
    As discussed in Section X.C.2.b, it is difficult to estimate the
costs of the proposed amendments of Regulation SCI for third-party
vendors that operate SCI systems or indirect SCI systems \797\ on
behalf of SCI Government Securities ATSs. To the extent that the
proposed amendments of Regulation SCI impose compliance costs on third-
party vendors that operate SCI systems or indirect SCI systems on
behalf of SCI Government Securities ATSs, the compliance costs could
affect the competition among third-party vendors in the market for SCI
systems or indirect SCI systems. To the extent that the costs
associated with Regulation SCI for third-party vendors outweigh the
benefits of continuing to operate SCI systems or indirect SCI systems
on behalf of SCI Government Securities ATSs, these third-party vendors
could exit the market for SCI systems or indirect systems. In this
respect, Regulation SCI could adversely impact such vendors and reduce
the ability for some third-party vendors to compete in the market for
SCI systems and indirect SCI systems, with attendant costs to SCI
Government Securities ATSs. To the extent that this happens, SCI
Government Securities ATSs would incur costs from having to find a new
vendor, form a new business relationship, and adapt their systems to
those of the new vendor. SCI Government Securities ATSs may also elect
to perform the relevant functions internally. To the extent that the
current third-party vendors are the most efficient means of performing
certain functions for SCI Government Securities ATSs, and to the extent
that any third-party vendor exits the market, finding new vendors or
performing the functions internally would represent a

reduction in efficiency for SCI Government Securities ATSs.
---------------------------------------------------------------------------

    \797\ See supra note 767 and accompanying text for the
definition of indirect SCI systems.
---------------------------------------------------------------------------

b. Market Participants' Trading Efficiency
    The Commission believes that the proposed amendments of Regulation
ATS including the Fair Access Rule and Regulation SCI could affect the
efficiency with which market participants achieve trading objectives,
and in the subsections below, we discuss both positive and potential
negative effects.
i. Positive Effects on Market Participants' Trading Efficiency
    The enhancement in Government Securities ATS operational
transparency via public disclosure of Form ATS-G would help market
participants select the trading venue that best meets their trading
needs (e.g., order types, trading functionalities) and lower search
costs in the selection of trading venues, which would help market
participants achieve their trading objectives more efficiently. Market
participants may consider various factors, such as order types, trading
functionalities, and fees, in deciding where to send their orders to
achieve their trading objectives. The public disclosure of Form ATS-G
would enable market participants to compare Government Securities ATSs
in an expedited manner and find an ATS that would help them achieve
their trading objectives more efficiently.
    The Commission believes that the public disclosure of Form ATS-G
that contains the information related to operational characteristics of
Government Securities ATSs could foster greater competition for order
flow in the market for government securities and repo execution
services and result in lower trading costs and better execution quality
for market participants, which would help achieve their trading
objectives more efficiently. For example, because the public disclosure
of Form ATS-G would make it easier for market participants to compare
fees and order handling procedures and execution statistics--if they
are made available--across Government Securities ATSs,\798\ market
participants would be more likely to send their orders to ATSs that
offer lower fees or better execution services. To the extent that non-
ATS trading venues compete with Government Securities ATSs for trade
execution services, the increased operational transparency of these
ATSs could also incentivize non-ATS trading venues to reduce their fees
or improve the efficiency of order handling procedures to compete with
Government Securities ATSs for order flow. This would lower market
participants' trading costs and enhance order execution quality, which
would help achieve their trading objectives more efficiently.
---------------------------------------------------------------------------

    \798\ See supra Section X.C.1.a.ii for a discussion about
benefits from public disclosure via Form ATS-G.
---------------------------------------------------------------------------

    The Commission believes that the proposed application of Fair
Access Rule could help market participants achieve their trading
objectives more efficiently. Market participants who may have been
denied access to a Government Securities ATS that would now be subject
to the Fair Access Rule may be able to access the ATS as a result of
the proposal because the previous reasons for denial of access by the
ATS no longer comport with the reasonable standards under the Fair
Access Rule. To the extent that there are market participants excluded
from trading on Government Securities ATSs, this could increase trading
venue options for those market participants and result in lower trading
costs or better execution for their orders, which would help achieve
their trading objectives more efficiently.
ii. Negative Effects on Market Participants' Trading Efficiency
    The Commission does not believe that the compliance costs imposed
by the proposed amendments of Regulation SCI would have a significant
adverse effect on the efficiency with which market participants achieve
their trading objectives. It is possible that SCI Government Securities
ATSs would pass on the compliance costs to their subscribers in the
form of higher venue fees. However, the adverse effect of higher fees
on the efficiency with which market participants achieve their trading
objectives could be mitigated to some extent because an SCI Government
Securities ATS likely would have more robust systems, fewer disruptive
systems issues, and better up-time compared to non-SCI Government
Securities ATSs.
    Through exits and entries, the number of ATSs competing in the
market for government securities and repos could change and this could
impact market participants' trading costs and thus the efficiency with
which market participants achieve their trading objectives. The
Commission does not believe that requirements and costs imposed by the
proposed amendments to Regulation ATS and Regulation SCI would result
in Government Securities ATSs exiting and adversely impact the
efficiency with which market participants achieve their trading
objectives.\799\ The Commission recognizes that the public disclosure
of Form ATS-G required by Regulation ATS and the costs associated with
Regulation SCI could dissuade potential entrants from entering the
market.\800\ To the extent that these effects reduce the number of
potential new entrants, the potential competition from new entrants
would be lower and this could adversely affect market participants'
trading costs and thus the efficiency with which market participants
achieve their trading objectives.
---------------------------------------------------------------------------

    \799\ See supra Section X.C.3.a.
    \800\ See supra Sections X.C.3.a.i.c and X.C.3.a.ii.
---------------------------------------------------------------------------

    The Commission believes that the proposed amendments of the Fair
Access Rule and Regulation SCI could adversely affect the efficiency
with which market participants achieve their trading objectives.
Government Securities ATSs that are close to satisfying the volume
threshold for certain government securities could limit the trading in
those securities over some period to stay below the volume thresholds
and avoid being subject to the Fair Access Rule and Regulation SCI. The
order flow that was being executed on those Government Securities ATSs
might be absorbed and redistributed amongst other Government Securities
ATSs. If a Government Securities ATS that is the sole provider of a
niche service limits the trading in certain government securities to
avoid being subject to the Fair Access Rule and Regulation SCI, it
could require some market participants to seek execution on other
trading venues, which could result in higher trading costs and reduce
the efficiency with which they achieve their trading objectives.
c. Price Efficiency and Capital Formation
    The Commission believes that the proposed extension of Regulation
SCI to include systems that trade government securities and repos could
promote price efficiency and capital formation by reducing the
potential for systems disruptions on ATSs that capture a significant
portion of the trading volume in the market for U.S. Treasury or Agency
Securities. Although the Commission acknowledges that extending
Regulation SCI to Government Securities ATSs would not eliminate all
systems issues,\801\ the Commission believes that extending Regulation
SCI would help prevent market disruptions due to systems issues, which
could help prevent

interruptions in the price discovery process and liquidity flows and
thus could help prevent periods with pricing inefficiencies from
occurring in the government securities market. Specifically, the
Commission believes that extending Regulation SCI would help improve
systems up-time \802\ for SCI Government Securities ATSs and would also
promote more robust systems that directly support execution facilities,
order matching, and the dissemination of market data.\803\ This would
help facilitate the price discovery process and liquidity flows in the
secondary market for on-the-run U.S. Treasury Securities and could also
enhance price efficiency of risky securities because the transaction
prices of on-the-run U.S. Treasury Securities are used as risk-free
rate benchmarks to price risky securities transactions.\804\ Price
efficiency of risky securities is important because prices that
accurately convey information about fundamental value improve the
efficiency in allocating capital across projects and entities, which
helps promote capital formation.
---------------------------------------------------------------------------

    \801\ See supra Section X.B.6 for a discussion about market
disruption and system up-time.
    \802\ Systems up-time is a measure of the time that a computer
system is running and available.
    \803\ Based on the Commission's understanding, Government
Securities ATSs disseminate their Treasury trades via private feeds
and third-party vendors. These prices also serve as benchmarks for
pricing other financial products.
    \804\ See October 15 Staff Report, supra note 14.
---------------------------------------------------------------------------

    On the other hand, the Commission believes that the proposed
amendments of the Fair Access Rule and Regulation SCI could adversely
affect capital formation. Government Securities ATSs that are close to
satisfying the volume threshold for certain government securities could
limit the trading in those securities over some period to stay below
the volume thresholds and avoid being subject to the Fair Access Rule
and Regulation SCI. To the extent that Government Securities ATSs limit
the trading in certain government securities to avoid being subject to
the Fair Access Rule and Regulation SCI, this could limit or reduce
liquidity provision and liquidity flows in those government securities,
which would adversely affect the price discovery process and price
efficiency in those government securities harming capital
formation.\805\
---------------------------------------------------------------------------

    \805\ See id.
---------------------------------------------------------------------------

D. Reasonable Alternatives

    The Commission considered several alternatives to the proposal: (1)
Require Currently Exempted Government Securities ATSs to file Form ATS,
but not publicly disclose Form ATS; (2) require Government Securities
ATSs to file proposed Form ATS-G, but treat the information as
confidential; (3) require differing levels of public disclosure by
Government Securities ATSs depending on their trading volume; (4)
extend the transparency requirements of Regulation ATS to all non-ATS
trading government securities; (5) alter the volume thresholds for the
Fair Access Rule and Regulation SCI; (6) apply Rule 301(b)(6) of
Regulation ATS to Government Securities ATSs; (7) require Forms ATS-G,
ATS, and ATS-R to be submitted in the Inline XBRL format; and (8)
require Forms ATS-G, ATS, and ATS-R to be filed on EFFS/SRTS or on
individual ATS websites.
1. Require Currently Exempted Government Securities ATSs To File a Non-
Public Form ATS
    One alternative could require Currently Exempted Government
Securities ATSs to file Form ATS and subsequent amendments with the
Commission, instead of filing Form ATS-G. This alternative would allow
Legacy Filers to continue to file current Form ATS. However, Form ATS
would be deemed confidential for all Government Securities ATSs and
would not have to be publicly disclosed. Under this alternative,
compliance costs would be lower because Legacy Filers would not bear
the additional costs of preparing and amending Form ATS-G. Furthermore,
Currently Exempted Government Securities ATSs would not incur
additional costs associated with amending Form ATS-G to address any
deficiencies to avoid an ineffectiveness determination because Rule 304
of Regulation ATS does not apply to Form ATS filings. However, this
alternative would reduce regulators' insight into Government Securities
ATSs compared to the proposal because Form ATS would require the
disclosure of less information about the operations of Government
Securities ATSs and the activities of their broker-dealer operators and
their affiliates, as compared to Form ATS-G.
    The lack of public disclosure of Form ATS under the alternative
could result in market participants making less informed decisions
regarding where to send their orders and thus result in lower execution
quality than they would obtain under the proposal. Additionally, this
alternative could result in higher search costs for subscribers to
identify potential trading venues for their orders. Because Government
Securities ATSs would not have to publicly disclose their fees or
details about their operations, there would be less competition among
Government Securities ATSs and between Government Securities ATSs and
non-ATS trading venues compared to the proposal. To the extent that
there is less competition for order flow in the market for government
securities and repo execution services, there could be less incentive
to innovate for Government Securities ATSs.
2. Require Proposed Form ATS-G Be Filed but Treat the Information as
Confidential
    Another alternative approach the Commission could take would be to
require Government Securities ATSs to file the proposed Form ATS-G with
the Commission, but not make Form ATS-G public. The proposed Form ATS-G
would include detailed disclosures about the operational facet of a
Government Securities ATS and the activities of its broker-dealer
operator and its affiliates, and the Commission would have the ability
to declare Form ATS-G filings ineffective. Although this alternative
would allow the Commission to review the disclosures of Government
Securities ATSs, this alternative would make Government Securities
ATSs' operations less transparent for market participants, which could
result in market participants making less informed decisions regarding
where to send their orders and thus result in lower execution quality
than they would obtain under the proposal. Because Form ATS-G would not
be publicly disclosed under this alternative, there would be less
competition among Government Securities ATSs and between Government
Securities ATSs and non-ATS trading venues, as compared to the
proposal. To the extent that a Government Securities ATS's competitive
advantage in attracting order flow and generating trading revenues is
in part driven by certain operational characteristics, the
confidentiality of Form ATS-G could help maintain that Government
Securities ATS's competitive advantage in the market for government
securities and repo execution services compared to the proposal.
However, the Commission believes that it is not likely the responsive
information to the proposed Form ATS-G would include information
regarding operational facets such that the public disclosure of the
information would adversely affect the competitive position of the
disclosing Government Securities ATS in the market for government
securities and repo execution services.\806\
---------------------------------------------------------------------------

    \806\ See supra note 789 and accompanying text. See also supra
note 196 and accompanying text.

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

3. Initiate Differing Levels of Public Disclosure Depending on
Government Securities ATS Dollar Volume
    The Commission could require different levels of disclosure among
Government Securities ATSs based on dollar volume in government
securities. In particular, this alternative would subject Government
Securities ATSs with lower dollar volumes to lower levels of disclosure
on the proposed Form ATS-G. This alternative could provide smaller
Government Securities ATSs with a competitive advantage over larger
ones because smaller Government Securities ATSs would incur lower
compliance costs relative to the proposal, which could translate into
lower entry barriers relative to such barriers under the proposal.
Because these small Government Securities ATSs would not have to
disclose as much information pertaining to their operational facets to
their competitors, they would have a competitive advantage over more
established Government Securities ATSs and non-ATS government
securities trading venues. This approach therefore would promote
competition in the market. It also would promote innovation because
these small Government Securities ATSs would not be deterred from
innovating by the possibility of having to disclose certain operational
facets. This approach could also benefit market participants who
execute on these ATSs by improving the execution quality of their
trades. However, this alternative could incentivize small Government
Securities ATSs to limit the trading in government securities on their
ATSs to stay small and not trigger additional disclosure requirements.
To the extent that this happens, it could limit market participants'
options for trading venues, which could result in higher trading costs
or worse execution quality. Lower execution quality or higher trading
costs for market participants would reduce the efficiency with which
they achieve their trading objectives as compared to the proposal.
4. Extend the Transparency Requirements of Regulation ATS to All Non-
ATS Trading Venues for Government Securities
    As another alternative, the Commission could extend the
transparency requirements (i.e., filing Form ATS-G) of Regulation ATS
to non-ATS trading venues for government securities. Under this
alternative, investors would receive information about the operations
and the activities of the broker-dealer operators and affiliates of all
non-ATS trading venues for government securities. While the disclosure
requirements of individual venues would be similar to what is required
under the proposal, investors would be able to access detailed
information on non-ATS trading venues that use a variety of
protocols.\807\ This could help market participants make better-
informed decisions about where to send their orders to achieve their
trading or investment objectives as compared to under the proposal.
However, non-ATS trading venues, unlike ATSs, cannot offer certain
execution protocols, such as crossing mechanisms, auctions, and central
limit order books, which generally meet the definition of an
exchange.\808\ Thus, non-ATS trading venues may not be as
technologically advanced and may not have the same level of automation,
speed, and complexity as ATSs that would be required to comply with
Regulation ATS under the proposal. Thus, the public disclosure of
information from such non-ATS trading venues concerning their trading
protocols could be less valuable to market participants.
---------------------------------------------------------------------------

    \807\ See supra Section X.B.1.
    \808\ See supra Section X.B.1 for a discussion about the
differences in execution services between ATSs and non-ATS trading
venues. See also supra note 564.
---------------------------------------------------------------------------

    Under this alternative, non-ATS trading venues effecting
transactions in government securities would incur the compliance costs
discussed in Section X.C.2.a to comply with Regulation ATS.
Additionally, the public disclosure of details regarding the
operational facets of non-ATS trading venues could adversely impact
competition for order flow and raise barriers to entry in the market
for government securities and repo execution services, and could also
lower the incentives for non-ATS trading venues to innovate. However,
the Commission believes that the risk of this is likely to be low.\809\
---------------------------------------------------------------------------

    \809\ See supra Section X.C.3.a.i.c for a discussion about the
risk that the responsive information to the proposed Form ATS-G
would include information regarding operational facets such that the
public disclosure of the information would adversely affect the
competitive position of the disclosing ATS and why the Commission
believes that this risk likely to be low. See also supra note 196
and accompanying text.
---------------------------------------------------------------------------

5. Alter the Volume Thresholds for the Fair Access Rule and Regulation
SCI
    Another alternative for the Commission is to alter the volume
thresholds for the Fair Access Rule and Regulation SCI.\810\ A higher
volume threshold for the Fair Access Rule would result in a smaller
number of Government Securities ATSs that are subject to the Fair
Access Rule than under the proposal.\811\ With fewer Government
Securities ATSs subject to the Fair Access Rule, some market
participants may not be able to trade on as many Government Securities
ATSs as they could have under the proposal. This could result in higher
trading costs or worse execution quality for those market participants
than under the proposal. With a higher volume threshold for the Fair
Access Rule, fewer Government Securities ATSs would incur compliance
costs discussed in Section X.C.2.a.iii to comply with the Fair Access
Rule than under the proposal. This could lower barriers to entry in the
market for government securities execution services and increase
competition compared to the proposal, resulting in lower trading costs
or better execution quality for investors.
---------------------------------------------------------------------------

    \810\ The Commission estimates that 3 ATSs trading U.S. Treasury
Securities and 1 ATS trading Agency Securities would be subject to
the Fair Access Rule under the proposal. Furthermore, the Commission
estimates that 3 Government Securities ATSs would meet the volume
thresholds for Regulation SCI under the proposal. See also supra
Sections II.D and IX.C.
    \811\ If the proposed volume thresholds were 10 percent, the
Commission estimates only 1 ATS trading U.S. Treasury Securities and
1 ATS trading Agency Securities would be subject to the Fair Access
Rule. See Table X.1 in supra Section X.B.1. See also supra Section
II.D.
---------------------------------------------------------------------------

    A lower volume threshold for the Fair Access Rule would allow
market participants to access a greater number of Government Securities
ATSs and provide them with more options in the selection of trading
venues than under the proposal.\812\ Thus, compared to the proposal,
investors could better access the trading venue that best meets their
trading objectives resulting in lower trading costs or better execution
for their orders, which would help achieve their trading objectives
more efficiently. With a lower volume threshold for the Fair Access
Rule, ATSs would incur greater compliance costs discussed in Section
X.C.2.a.iii to comply with the Fair Access Rule than under the
proposal. The Commission also believes that there would be a greater
likelihood of small Government Securities ATSs exiting the market and
thus decreasing competition for government securities execution
services, which could

adversely affect trading costs and execution quality.
---------------------------------------------------------------------------

    \812\ If the proposed volume thresholds were three percent, the
Commission estimates 4 ATSs trading U.S. Treasury Securities and 1
ATS trading Agency Securities would be subject to the Fair Access
Rule. See also supra Section II.D. Furthermore, if the proposed
volume thresholds were two percent, the Commission estimates 5 ATSs
trading U.S. Treasury Securities and 1 ATS trading Agency Securities
would be subject to the Fair Access Rule. See Table X.1 in supra
Section X.B.1.
---------------------------------------------------------------------------

    A lower volume threshold would include a greater number of small
Government Securities ATSs to be subject to the Fair Access Rule
compared to the proposal. To avoid being subject to the Fair Access
Rule, small Government Securities ATSs that are close to satisfying the
volume threshold for certain government securities could limit the
trading in those government securities on their ATSs over some period
to stay below the volume threshold. The order flow that was being
executed on those small Government Securities ATSs might be absorbed
and redistributed amongst other Government Securities ATSs. If a
Government Securities ATS that is the sole provider of a niche service
limits the trading in certain government securities to avoid being
subject to the Fair Access Rule, it could require some market
participants to seek execution on other trading venues, which could
result in higher trading costs. A lower volume threshold for the Fair
Access Rule could cause a greater number of small ATSs to exit the
market for government securities and repo execution services resulting
in a lower number of ATSs and less competition compared to the
proposal. If there are fewer options in the selection of trading
venues, investors could face higher trading costs or lower execution
quality for their orders compared to the proposal.
    A higher volume threshold for Regulation SCI would result in a
smaller number of Government Securities ATSs that are subject to
Regulation SCI than under the proposal.\813\ Compared to the proposal,
a higher volume threshold for Regulation SCI could exclude Government
Securities ATSs that play a significant role (i.e., capture a
significant portion of trading volume) in the market for government
securities execution services and have the potential to impact
investors, the overall market, and the trading of government securities
should an SCI event occur. With a higher volume threshold for
Regulation SCI, the Commission believes that a smaller number of
Government Securities ATSs would incur compliance costs discussed in
Section X.C.2.b to comply with Regulation SCI requirements than under
the proposal. This could lower barriers to entry in the market for
government securities execution services and increase competition
compared to the proposal, resulting in lower trading costs or better
execution quality for investors.
---------------------------------------------------------------------------

    \813\ If the proposed volume thresholds were 10 percent, the
Commission estimates 2 Government Securities ATSs would be subject
to Regulation SCI, whereas under the proposed volume threshold of
five percent, the Commission estimates 3 Government Securities ATSs
would be subject to Regulation SCI. See Table X.1 in supra Section
X.B.1.
---------------------------------------------------------------------------

    A lower volume threshold for Regulation SCI likely would promote
the establishment of more robust systems, help reduce the duration and
severity of any system distributions, and help prevent system issues
from occurring on small Government Securities ATSs that met the volume
thresholds, which could help prevent interruptions in the price
discovery process and liquidity flows and thus may help prevent periods
with pricing inefficiencies from occurring compared to the
proposal.\814\ With a lower volume threshold for Regulation SCI, more
Government Securities ATSs would incur compliance costs discussed in
Section X.C.2.b to comply with Regulation SCI requirements than under
the proposal. A greater number of small Government Securities ATSs
could exit the market for government securities and repos and hence
decrease competition resulting in higher trading costs or worse
execution quality for investors compared to the proposal. A lower
volume threshold would cause a greater number of small Government
Securities ATSs to be subject to Regulation SCI requirements compared
to the proposal. To avoid being subject to Regulation SCI, small
Government Securities ATSs that are close to satisfying the volume
threshold for certain government securities could limit the trading in
those government securities on their ATSs over some period to stay
below the volume threshold. The order flow that was being executed on
those small Government Securities ATSs might be absorbed and
redistributed amongst other Government Securities ATSs. If a Government
Securities ATS that is the sole provider of a niche service limits the
trading in certain government securities to avoid being subject to
Regulation SCI, it could require some market participants to seek
execution on other trading venues, which could result in higher trading
costs. The Commission believes that compliance costs associated with
Regulation SCI could cause a greater number of small ATSs to exit the
market for government securities execution services resulting in a
lower number of ATSs and less competition compared to the proposal. To
the extent that there are fewer options in the selection of trading
venues, investors could face higher trading costs and/or lower
execution quality for their orders compared to the proposal.
---------------------------------------------------------------------------

    \814\ If the proposed volume thresholds were three percent, the
Commission estimates 4 Government Securities ATSs would be subject
to Regulation SCI. If the proposed volume thresholds were two
percent, the Commission estimates 5 Government Securities ATSs would
be subject to Regulation SCI. See Table X.1 in supra Section X.B.1.
---------------------------------------------------------------------------

6. Apply Rule 301(b)(6) of Regulation ATS to Government Securities ATSs
    Another alternative for the Commission is to apply Rule 301(b)(6)
\815\ of Regulation ATS to Government Securities ATSs instead of
extending Regulation SCI.\816\ The Commission believes that the
application of the Capacity, Integrity, and Security Rule to certain
Government Securities ATSs could help enhance the price discovery
process and price efficiency of government securities by reducing
disruptions in trading due to failures or capacity issues with respect
to automated systems that support order entry, order routing, order
execution, transaction reporting, and trade comparison of the ATSs.
Under this alternative, Government Securities ATSs would be subject to
the Capacity, Integrity, and Security Rule in Rule 301(b)(6). The scope
and requirements of the Capacity, Integrity, and Security Rule would be
narrower than those of Regulation SCI. For example, Rule 301(b)(6) of
Regulation ATS would apply to narrower set of systems, as compared to
Regulation SCI. Rule 301(b)(6) of Regulation ATS applies only to
systems that support order entry, order routing, order execution,
transaction reporting, and trade comparison, which is narrower than the
definition of SCI system. Thus, the Commission believes that this
alternative would reduce the potential benefits discussed in Sections
X.C.1.b and X.C.3.c, as compared to the proposal. Furthermore, the
Commission believes that compliance costs associated with the Capacity,
Integrity, and Security Rule would be significantly less than those
under the proposal because the scope and requirements of the Capacity,
Integrity, and Security Rule would be narrower than those of Regulation
SCI. For example, the Capacity, Integrity, and Security Rule would not
require

Government Securities ATSs to maintain a backup facility to comply with
the requirements of Regulation SCI related to business continuity and
disaster recovery plans. As compared to the proposal, the significantly
lower compliance costs of this alternative could result in lower
trading costs for market participants to the extent that Government
Securities ATSs pass on these compliance costs to their subscribers.
Furthermore, the lower compliance costs of this alternative could lower
barriers to entry in the market for government securities execution
services and increase competition compared to the proposal, resulting
in lower trading costs or better execution quality for investors.
---------------------------------------------------------------------------

    \815\ As also explained above, Rule 301(b)(6) addresses the
capacity, integrity, and security requirements of automated systems
for ATSs that meet certain volume thresholds. See supra note 355.
    \816\ Applying the dollar volume threshold of 20 percent or more
of the average daily volume traded in the United States during at
least four of the preceding six calendar months, the Commission
estimates one Government Securities ATS would be subject to Rule
301(b)(6) of Regulation ATS. See supra note 57.
---------------------------------------------------------------------------

    As another alternative, the Commission could apply the Capacity,
Integrity, and Security Rule in Rule 301(b)(6) to smaller Government
Securities ATSs and extend Regulation SCI to larger Government
Securities ATSs as proposed. For example, the Commission could require
a Government Securities ATS that falls within a volume range for U.S.
Treasury Securities of 5 percent and 10 percent to comply with Rule
301(b)(6) of Regulation ATS and a Government Securities ATS that
exceeds a 10 percent volume threshold for U.S. Treasury Securities to
be subject to Regulation SCI.\817\ Under this alternative, the
Commission believes that smaller Government Securities ATSs subject to
Rule 301(b)(6) would incur additional compliance costs, as compared to
the proposal where these smaller Government Securities ATSs would be
subject to neither Regulation SCI or Rule 301(b)(6). Smaller Government
Securities ATSs subject to Rule 301(b)(6) would incur compliance costs
associated with, among other things, upgrading systems to an adequate
capacity level, the independent review of their systems on an annual
basis, recordkeeping requirements, and notification requirements.\818\
The application of Rule 301(b)(6) to smaller Government Securities ATSs
could result in higher trading costs (e.g., in the form of higher fees)
to the extent that the Government Securities ATSs pass on the
additional compliance costs associated with Rule 301(b)(6) to their
subscribers. However, the Commission believes that the requirements of
Rule 301(b)(6) would not impose significant costs and thus would not
result in a significant increase in trading costs for market
participants, as compared to the proposal.
---------------------------------------------------------------------------

    \817\ If the proposed U.S. Treasury Security volume threshold
range for Rule 301(b)(6) were set to be greater than 5 percent and
less than or equal to 10 percent, the Commission estimates 2
Government Securities ATSs would be subject to Rule 301(b)(6) of
Regulation ATS. If the proposed U.S. Treasury Security volume
threshold range for Regulation SCI were set to be greater than 10
percent, the Commission estimates 1 Government Securities ATS would
be subject to Regulation SCI.
    \818\ See Regulation ATS Adopting Release, supra note 35, at
70907 for a discussion of costs associated with the Capacity,
Integrity, and Security Rule.
---------------------------------------------------------------------------

7. Require Forms ATS-G, ATS, and ATS-R to be Submitted in the Inline
XBRL Format
    The proposal would require Form ATS-G to be submitted in a custom
XML format. Alternatively, the Commission could require these forms to
be submitted in the Inline eXtensible Business Reporting Language
(``Inline XBRL'') format, a derivation of XML that is designed for
business reporting information and is both machine-readable and human-
readable.\819\ This alternative could include numerical detail tagging
of quantitative disclosures (e.g., platform-wide statistics) and text
block tagging for narrative disclosures (e.g., trade reporting
arrangements).\820\ Compared to the proposal, the Inline XBRL
alternative for Forms ATS-G, ATS, and ATS-R would provide more
sophisticated validation, presentation, and reference features for
filers and data users. However, the Inline XBRL alternative would also
impose initial implementation costs (e.g., training staff to prepare
filings in Inline XBRL, licensing Inline XBRL filing preparation
software) upon filers that do not have prior experience structuring
data in the Inline XBRL format. By contrast, because the proposal would
allow filers to submit Form ATS-G using a web-fillable Form, filers
that lack experience structuring data in XML would not incur
implementation costs.
---------------------------------------------------------------------------

    \819\ Such a requirement would be implemented by revising
Regulation S-T (17 CFR 232) and including an Instruction to Forms
ATS-G, ATS, and ATS-R which cites to Regulation S-T. In conjunction
with the EDGAR Filer Manual, Regulation S-T governs the electronic
submission of documents filed with the Commission. Modifying a
structured format requirement for a Commission filing or series of
filings can generally be accomplished through changes to Regulation
S-T, and would not require dispersed changes to the various rules
and forms that would be impacted by the format modification.
    \820\ See supra Sections III.C.25.a and III.C.21.
---------------------------------------------------------------------------

8. Require Forms ATS-G, ATS, and ATS-R To Be Filed on EFFS or on
Individual ATS Websites
    The proposal would require Forms ATS-G, ATS, and ATS-R to be filed
on the EDGAR system. Alternatively, the Commission could require a
different filing location for these forms, such as the Commission's
Electronic Form Filing System (EFFS) or the individual ATSs' websites.
Because SCI entities use EFFS to file Form SCI, any Government
Securities ATS that is an SCI entity or affiliate thereof will have
experience using EFFS and could benefit from such familiarity in filing
Form ATS-G.\821\ However, to the extent any such Government Securities
ATSs are operated by a broker-dealer that files its annual reports on
EDGAR or that operates an NMS Stock ATS and files Form ATS-N on EDGAR,
there would be no familiarity benefit under an EFFS alternative
relative to the proposed EDGAR requirement.\822\ In addition, for
Government Securities ATSs that are not SCI entities or affiliates
thereof and do not have prior EFFS experience, this alternative would
impose the burden of submitting an External Account User Application to
request access to EFFS.\823\ Unlike EDGAR, EFFS does not support the
open-source XML format, instead relying on a proprietary XML
implementation (XFDL) that requires a data user to license a commercial
proprietary viewer. The EFFS alternative would therefore impose
additional costs on data users compared to the proposal.
---------------------------------------------------------------------------

    \821\ See General Instructions A and E to Form SCI. The
Commission believes there is one Government Securities ATS that is
operated by a broker-dealer that operates an NMS Stock ATS that is
an SCI entity, and would therefore have experience using both EFFS
(Form SCI) and EDGAR (Form ATS-N). See supra Section X.B.6.
    \822\ See 17 CFR 240.17a-5(d)(6) and the Commission's guidance
at https://www.sec.gov/divisions/marketreg/electronic-filing-broker-dealer-annual-reports-instructions.htm. See also Instruction A.5 to
Form ATS-N.
    \823\ In 2015, the Commission calculated this burden as 0.15
hours per individual requesting access on the ATS's behalf. See NMS
Stock ATS Proposing Release, supra note 62, at 81106.
---------------------------------------------------------------------------

    Similarly, requiring Forms ATS-G, ATS, and ATS-R to be posted on
the individual ATSs' websites rather than EDGAR would impose additional
direct costs on data users, who would need to navigate to and manually
retrieve data from different ATSs' websites to aggregate, compare, and
analyze the data. In addition, individual websites would not provide
the validation capabilities that an EDGAR requirement would enable, and
would thus impose on data users the indirect costs associated with
lower reliability of the data. An individual website requirement would
provide a small benefit to bank-operated Government Securities ATSs
relative to the proposal's EDGAR requirement, as those entities would
not be required to incur the 0.15 hour

burden of submitting a Form ID in order to begin making EDGAR
filings.\824\
---------------------------------------------------------------------------

    \824\ The Commission believes that one Currently Exempted
Government Securities ATS is operated by a bank. See supra Section
IX.D.2.b.iv.
---------------------------------------------------------------------------

E. Request for Comments

    The Commission is sensitive to the potential economic effects,
including costs and benefits, of the proposed amendments to Regulation
ATS and Regulation SCI. The Commission has identified certain costs and
benefits associated with the proposal and requests comment on all
aspects of its preliminary economic analysis, including with respect to
the specific questions below. The Commission encourages commenters to
identify, discuss, analyze, and supply relevant data, information, or
statistics regarding any such costs or benefits.
    172. Does the baseline accurately reflect the current state of the
market and reporting? Please provide any information necessary to
correct the baseline.
    173. Is the assessment of the current state of competition in the
market for trading government securities reasonable? Why or why not?
    174. Can commenters provide any additional information on trading
activities of non-FINRA-member ATSs?
    175. Is subscribers' confidential trading information at risk
because Currently Exempted Government Securities ATSs are not required
to comply with Regulation ATS, they are not subject to Rule 201(b)(10)
and Rule 303(a)(1)?
    176. Have commenters encountered any problems with the current
operational reporting requirements or the required method of intake?
    177. The provisions of Regulation SCI and Rule 301(b)(6) of
Regulation ATS do not apply to the government securities activities of
an ATS. Therefore, a Currently Exempted Government Securities ATS would
not be subject to the rules and procedures of Regulation SCI, and a
Legacy Filer would only be subject to them if its transaction volume in
non-government securities exceeded the thresholds. Although most
Government Securities ATSs are not subject to these requirements with
respect to their government securities activities, a comment letter
received in response to the Treasury Request for Information stated
that many Government Securities ATSs adopted system testing and control
procedures that followed the recommended best practices of the Treasury
Market Practices Group. Is voluntary adoption of best practices
sufficient to mitigate systemic risks?
    178. Do differences in operational transparency around Government
Securities ATSs impede market participants' ability to evaluate whether
submitting order flow to a particular Government Securities ATS aligns
with its business interests and objectives?
    179. Are there any costs and benefits of the proposed rules that
are not discussed in the economic analysis? If so, please describe the
types of costs and benefits and provide a dollar estimate of these
costs and benefits.
    180. Would removing the exemption for Currently Exempted Government
Securities ATS and proposing amendments to Regulation ATS for
Government Securities ATSs enhance the Commission's oversight of these
ATSs and ability to monitor trading and their role in the government
securities and repo market?
    181. Would removing the exemption for Currently Exempted Government
Securities ATS and proposing amendments to Regulation ATS for
Government Securities ATSs enhance investor protection?
    182. Would removing the exemption for Currently Exempted Government
Securities ATS result in enhancements to operational transparency
regarding the manner of operations and the ATS-related activities of
Currently Exempted Government Securities ATS by way of public
disclosures on Form ATS-G? Would the proposed enhancements improve
market participants' ability to evaluate a Government Securities ATS as
a destination for its orders?
    183. Would requiring Forms ATS-G, ATS, and ATS-R to be filed in a
custom XML format yield the benefits described above, such as improving
the usability of the disclosures through facilitation of automated
analyses? Do commenters believe the custom XML format requirement for
these forms would not impose incremental costs on filers, given the
availability of a web-fillable form into which filers can input their
disclosures? If not, how would the costs be more accurately
characterized? How would the costs and benefits of other format
requirements, such as an Inline XBRL requirement, compare to those
associated with the proposed custom XML format requirement?
    184. Would requiring Forms ATS-G, ATS, and ATS-R to be filed on
EDGAR yield the benefits described above, such as the availability of
the disclosures in a centralized filing location that is publicly
accessible (for Form ATS-G) and provides validation capabilities (for
all three forms)? Would the EDGAR requirement impose, at most, a
minimal cost on filers? How would the costs and benefits of other
location requirements, such as EFFS or the individual ATSs' websites,
compare to those associated with the proposed EDGAR requirement?
    185. Would removing the exemption for Currently Exempted Government
Securities ATS and proposing amendment to Regulation ATS for Government
Securities ATSs help ensure the fair treatment of potential and current
subscribers to a Currently Exempted Government Securities ATS that
consist of a large percentage of trading volume in U.S. Treasury
Securities and Agency Securities?
    186. Could requiring Government Securities ATSs that meet the
volume thresholds to establish and objectively apply the fair access
standards help prevent certain market participants from being unfairly
denied access to an ATS that trades a significant portion of the market
for U.S. Treasury Securities and Agency Securities? Are any market
participants currently being denied fair access?
    187. Would information from Form ATS-R regarding fair access
grants, denials, and limitations of access to Government Securities
ATSs improve the Commission's ability to oversee those ATSs to evaluate
for compliance with the Fair Access Rule?
    188. Would the proposed amendments to extend Regulation SCI to
include ATSs that trade a significant volume of U.S. Treasury
Securities or Agency Securities help reduce market disruptions due to
systems issues and help improve system up-time, which would help
prevent interruptions in the price discovery process and liquidity
flows and thus, may help prevent periods with pricing inefficiencies
from occurring?
    189. Would the proposed extension of Regulation SCI strengthen the
infrastructure and improve the resiliency of the automated systems of
Government Securities ATSs that are important to the U.S. securities
markets?
    190. Would the proposed amendments to Regulation SCI promote the
establishment of more robust systems that are less likely to experience
a system disruption? If so, do commenters believe that this could lower
trading costs and enhance liquidity and price discovery?
    191. Would the requirement for a Government Securities ATS that
would be an SCI ATS to establish procedures to disseminate information
about SCI events to responsible SCI personnel, ATS participants, and
the Commission help reduce the duration and severity of any system
distributions that do occur?
    192. Would the requirement for a Government Securities ATS that
meets the definition of SCI ATS to conduct

testing of its business continuity and disaster recovery plans with its
designated participants and other industry SCI entities help detect and
improve the coordination of responses to system issues that could
affect multiple trading venues and participants in the government
securities and repo market? What would the cost to designated
participants be?
    193. Are the Commission's cost estimates, in general, reasonable?
    194. What are commenters' views on costs related to a bank-operated
Currently Exempted Government Securities ATS complying with the broker-
dealer registration requirements under Rule 301(b)(1), as proposed? Is
the estimated initial cost of approximately $275,000 to register as a
broker-dealer with the commission via Form BD and become a member of
FINRA reasonable?
    195. Is the estimated ongoing annual cost of approximately $50,000
to maintain the broker-dealer registration with the Commission and
FINRA reasonable?
    196. What are the costs a bank-operated Currently Exempted
Government Securities ATS would incur for effectively completing the
application to be a member of FINRA? What other costs related to FINRA
examination and surveillance, trade reporting obligations, and investor
protection rules may be incurred by a bank-operated Currently Exempted
Government Securities ATS? Please provide a description of these costs
and cost estimates or a range of potential costs.
    197. Would there be a substantial burden imposed on Government
Securities ATSs in connection with resubmitting Form ATS-G or a Form
ATS-G amendment? Please provide estimates if available.
    198. Could the public disclosure of Form ATS-G generate indirect
costs for some subscribers to Government Securities ATSs that might
currently have more information regarding some ATS features, such as
order priority and matching procedures, than other subscribers or
market participants?
    199. Are the 2018 estimates (the 2018 SCI PRA Extension) of initial
paperwork burdens for new SCI entities and ongoing paperwork burdens
for all SCI entities under Regulation SCI largely applicable to
Government Securities ATSs?
    200. Would Government Securities ATSs also incur non-paperwork
related direct compliance costs as SCI entities? The Regulation SCI
Adopting Release in 2014 estimated that an SCI entity would incur an
initial cost of between approximately $320,000 and $2.4 million.
Additionally, an SCI entity would incur an ongoing annual cost of
between approximately $213,600 and $1.6 million. Are these estimated
costs applicable to Government Securities ATSs? How might the actual
level of costs Government Securities ATSs would incur differ from the
estimates in the Regulation SCI Adopting Release because they differ
from existing SCI entities? How might other factors, such as the
complexity of SCI entities' systems and the degree to which SCI
entities employ third-party systems, affect the estimated costs? Please
provide cost estimates or a range for cost estimates, if possible.
    201. Could the increase in ATS operational transparency from the
proposed amendments to Regulation ATS lower the trading costs and
improve the execution quality of market participants, which would
enhance the efficiency with which they achieve their trading
objectives?
    202. Could the increase in ATS operational transparency from the
proposed amendments to Regulation ATS increase competition among
trading venues in the market for government securities execution
services by causing them to decrease their trading fees in order to
attract order flow?
    203. Could the proposed Regulation ATS and Regulation SCI
amendments result in some existing Government Securities ATSs exiting
the market for government securities execution services or raise the
barriers to entry for new Government Securities ATSs? If so, what would
be the effects on competition?
    204. To the extent that amendments to Regulation ATS and Regulation
SCI reduce the trading costs of U.S. Treasury Securities, would the
reductions in trading costs be significant enough to decrease their
yields, lowering the risk-free rate? As a result, would this decrease
the cost of capital for firms and promote capital formation?
    205. Would the alternative to require Currently Exempted Government
Securities ATSs to file Form ATS, but not require Form ATS to be
publicly disclosed make Government Securities ATSs' operations less
transparent for market participants and result in larger the search
costs for subscribers?
    206. Do commenters agree with the Commission's analysis of the
alternative to require proposed Form ATS-G be filed but treat the
information as confidential?
    207. Do commenters agree with the Commission's analysis of
alternative to initiate differing levels of public disclosure expending
on Government Securities ATS dollar volume?
    208. Do commenters agree with the Commission's analysis of the
alternative to extend the proposed transparency requirements of
Regulation ATS to all non-ATSs trading venues for government
securities?
    209. Do commenters agree with the Commission's analysis of the
alternative to alter the proposed volume thresholds for the Fair Access
Rule and Regulation SCI?
    210. Do commenters agree with the Commission's analysis of the
alternatives to apply Rule 301(b)(6) of Regulation ATS to Government
Securities ATSs?
    211. Do commenters agree with the Commission's analysis of the
alternative to require Form ATS-G to be filed in a filing location
other than EDGAR, such as EFFS or individual ATS websites?

XI. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996,\825\ the Commission requests comment on the potential
effect of the proposed amendments and Form ATS-G on the United States
economy on an annual basis. The Commission also requests comment on any
potential increases in costs or prices for consumers or individual
industries, and any potential effect on competition, investment, or
innovation. Commenters are requested to provide empirical data and
other factual support for their views to the extent possible.
---------------------------------------------------------------------------

    \825\ 5 U.S.C. 603.
---------------------------------------------------------------------------

XII. Regulatory Flexibility Act Certification

    Section 3(a) of the Regulatory Flexibility Act of 1980 \826\
(``RFA'') requires the Commission to undertake an initial regulatory
flexibility analysis of the impact of the proposed rule amendments on
small entities unless the Commission certifies that the rule, if
adopted, would not have a significant economic impact on a substantial
number of small entities.\827\ For purposes of Commission rulemaking in
connection with the RFA,\828\ a small

entity includes a broker or dealer that: (1) Had total capital (net
worth plus subordinated liabilities) of less than $500,000 on the date
in the prior fiscal year as of which its audited financial statements
were prepared pursuant to Rule 17a-5(d) under the Exchange Act,\829\
or, if not required to file such statements, a broker-dealer with total
capital (net worth plus subordinated liabilities) of less than $500,000
on the last day of the preceding fiscal year (or in the time that it
has been in business, if shorter); and (2) is not affiliated with any
person (other than a natural person) that is not a small business or
small organization.\830\
---------------------------------------------------------------------------

    \826\ 5 U.S.C. 603(a).
    \827\ 5 U.S.C. 605(b).
    \828\ Although Section 601(b) of the RFA defines the term
``small entity,'' the statute permits agencies to formulate their
own definitions. The Commission has adopted definitions for the term
``small entity'' for the purposes of Commission rulemaking in
accordance with the RFA. Those definitions, as relevant to this
proposed rulemaking, are set forth in Rule 0-10 under the Exchange
Act, 17 CFR 240.0-10. See Securities Exchange Act Release No. 18451
(January 28, 1982), 47 FR 5215 (February 4, 1982) (File No. AS-305).
    \829\ 17 CFR 240.17a-5(d).
    \830\ See 17 CFR 240.0-10(c). See also 17 CFR 240.0-10(i)
(providing that a broker or dealer is affiliated with another person
if: Such broker or dealer controls, is controlled by, or is under
common control with such other person; a person shall be deemed to
control another person if that person has the right to vote 25
percent or more of the voting securities of such other person or is
entitled to receive 25 percent or more of the net profits of such
other person or is otherwise able to direct or cause the direction
of the management or policies of such other person; or such broker
or dealer introduces transactions in securities, other than
registered investment company securities or interests or
participations in insurance company separate accounts, to such other
person, or introduces accounts of customers or other brokers or
dealers, other than accounts that hold only registered investment
company securities or interests or participations in insurance
company separate accounts, to such other person that carries such
accounts on a fully disclosed basis).
---------------------------------------------------------------------------

    All Government Securities ATSs would be required to register as
broker-dealers, including those that are currently exempt from such
requirement.\831\ The Commission examined recent FOCUS data for the 19
broker-dealers that currently operate ATSs that indicated on their Form
ATS that they trade government securities and repos and concluded that
2 of the broker-dealer operators of these ATSs had total capital of
less than $500,000 on the last day of the preceding fiscal year (or in
the time that it has been in business, if shorter).\832\ The Commission
notes that these broker-dealer operators have never reported any
transaction volume in any security, including a government security or
repo, to the Commission on Form ATS-R. Given that these ATSs have never
reported any transaction volume in government securities to the
Commission, the Commission believes that these ATSs would likely not
submit a Form ATS-G if the proposed amendments to Regulation ATS are
adopted. The Commission has also recently examined recent FOCUS data
for the 6 broker-dealers that are Currently Exempted Government
Securities ATSs and concluded that none of the broker-dealer operators
of ATSs that currently trade government securities had total capital of
less than $500,000 on the last day of the preceding fiscal year (or in
the time that it has been in business, if shorter). Consequently, the
Commission certifies that the proposed amendments to Regulation ATS
would not, if adopted, have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------

    \831\ See supra Section II.C. See also 17 CFR 242.301(b)(1).
---------------------------------------------------------------------------

    The Commission encourages written comments regarding this
certification. The Commission solicits comment as to whether the
proposed amendments could have impacts on small entities that have not
been considered. The Commission requests that commenters describe the
nature of any impacts on small entities and provide empirical data to
support the extent of such effect. Such comments will be placed in the
same public file as comments on the proposed amendments to Regulation
ATS. Persons wishing to submit written comments should refer to the
instructions for submitting comments in the front of this release.

XIII. Statutory Authority and Text of Proposed Amendments

    Pursuant to Exchange Act, 15 U.S.C. 78a et seq., and particularly
Sections 3(b), 5, 6, 15, 15C, 17(a), 17(b), 19, 23(a), and 36 thereof
(15 U.S.C. 78c(b), 78e, 78f, 78o, 78o-5, 78q(a), 78q(b), 78s, 78w(a),
and 78mm), the Commission proposes amendments to Form ATS-G under the
Exchange Act, Regulation ATS under the Exchange Act, and 17 CFR 232,
240, 242 and 249.

List of Subjects in 17 CFR Parts 232, 240, 242, and 249

    Administrative practices and procedure, Brokers, Confidential
business information, Fraud, Reporting and recordkeeping requirements,
Securities.

    For the reasons stated in the preamble, title 17, chapter II of the
Code of Federal Regulations is proposed as follows:

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
1. The general authority citation for part 232 continues to read as
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *
0
2. Amend Sec.  232.101 by adding paragraphs (a)(1)(xxii) through (xxiv)
to read as follows:

Sec.  232.101   Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (xxii) Form ATS (Sec.  249.637 of this chapter).
    (xxiii) Form ATS-R (Sec.  249.638 of this chapter).
    (xxiv) Form ATS-G (Sec.  249.642 of this chapter).
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1934

0
3. The general authority citation for part 240 continues to read as
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et
seq.; and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C.
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, secs. 503 and 602, 126 Stat. 326 (2012), unless otherwise
noted.
* * * * *
0
4. Amend Sec.  240.3a1-1 by adding paragraphs (b)(3)(viii) and (ix) to
read as follows:

Sec.  240.3a1-1   Exemption from the definition of ``Exchange'' under
Section 3(a)(1) of the Act.

    (a) * * *
    (b) * * *
    (3) * * *
    (viii) U.S. Treasury Securities, which shall have the same meaning
as in Sec.  242.300(p), and for which transactions are reported to a
self-regulatory organization.
    (ix) Agency Securities, which shall have the same meaning as in
Sec.  242.300(q), and for which transactions are reported to a self-
regulatory organization.

PART 242--REGULATIONS M, SHO, ATS, AC, NMS, AND SBSR AND CUSTOMER
MARGIN REQUIREMENTS FOR SECURITY FUTURES

0
5. The authority citation for part 242 continues to read as follows:

    Authority:  15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2),
78i(a), 78j, 78k-1(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g),
78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a-23, 80a-29, and
80a-37.
* * * * *
0
6. Amend Sec.  242.300 by:

0
a. Adding ``An NMS Stock ATS shall not trade securities other than NMS
stocks.'' at the end of paragraph (k); and
0
b. Adding paragraphs (l) through (q) to read as follows:

Sec.  242.300  Definitions.

* * * * *
    (l) Government Securities ATS means an alternative trading system,
as defined in paragraph (a) of this section, that trades government
securities, as defined in section 3(a)(42) of the Act (15 U.S.C.
78c(a)(42)) or repurchase and reverse repurchase agreements on
government securities. A Government Securities ATS shall not trade
securities other than government securities or repurchase and reverse
repurchase agreements on government securities.
    (m) Covered ATS means an NMS Stock ATS or Government Securities
ATS, as applicable.
    (n) Covered Form means a filing on Form ATS-N or Form ATS-G, as
applicable.
    (o) Legacy Government Securities ATS means a Government Securities
ATS operating as of [date 120 calendar days after the date of
publication of the final rule in the Federal Register].
    (p) U.S. Treasury Security means a security issued by the U.S.
Department of the Treasury.
    (q) Agency Security means a debt security issued or guaranteed by a
U.S. executive agency, as defined in 5 U.S.C. 105, or government-
sponsored enterprise, as defined in 2 U.S.C. 622(8).
0
7. Amend Sec.  242.301 by:
0
a. Removing and reserving paragraphs (a)(4)(ii)(A) through (C);
0
b. In paragraph (b)(1), adding ``or section 15C(a)(1)(A) of the Act (15
U.S.C. 78o-5(a)(1)(A))'' after the phrase ``section 15 of the Act, (15
U.S.C. 78o)'';
0
c. In paragraph (b)(2)(vi), adding the words ``and information filed
pursuant to paragraph (b)(9)'' after the words ``pursuant to this
paragraph (b)(2)'';
0
d. Revising paragraph (b)(2)(vii);
0
e. Revising paragraph (b)(2)(viii);
0
f. In paragraph (b)(5)(i)(A), adding the word ``share'' after the
phrase ``average daily'';
0
g. In paragraph (b)(5)(i)(B), adding the word ``share'' after the
phrase ``average daily trading'';
0
h. In paragraphs (b)(5)(i)(C) and (D), adding the word ``dollar'' after
the phrase ``average daily'';
0
i. In paragraph (b)(5)(i)(C), adding the phrase ``as provided by the
self-regulatory organization to which such transactions are reported''
after the phrase ``in the United States'';
0
j. In paragraph (b)(5)(i)(C), removing the word ``or'' after the phrase
``average daily volume traded in the United States'';
0
k. In paragraph (b)(5)(i)(D), adding the phrase ``as provided by the
self-regulatory organization to which such transactions are reported''
after the phrase ``in the United States'';
0
l. In paragraph (b)(5)(i)(D), removing ``.'' after the phrase ``in the
United States'' and adding in its place ``;'';
0
m. Adding paragraphs (b)(5)(i)(E) and (F);
0
n. In paragraph (b)(5)(ii)(A), adding the word ``reasonable'' before
the phrase ``written standards'';
0
o. Removing paragraph (b)(5)(iii);
0
p. In paragraphs (b)(6)(i)(A) and (B), adding the word ``dollar'' after
the phrase ``average daily'';
0
q. Removing paragraph (b)(6)(iii);
0
r. In paragraph (b)(9)(i), removing the word ``Separately'' and the
phrase ``for transactions in NMS stocks, as defined in paragraph (g) of
this section, and transactions in securities other than NMS stocks'',
and capitalizing the word ``File''; and
0
s. In paragraph (b)(9)(ii), removing the word ``Separately'' and the
phrase ``for transactions in NMS stocks and transactions in securities
other than NMS stocks'', and capitalizing the word ``File''.
    The additions and revisions read as follows:

Sec.  242.301  Requirements for alternative trading systems.

* * * * *
    (b) * * *
    (2) * * *
    (vii) An ATS must file a Form ATS or Form ATS-R in accordance with
the instructions therein. The reports provided for in paragraphs (b)(2)
and (b)(9) of this section shall be filed on Form ATS or Form ATS-R, as
applicable, and include all information as prescribed in Form ATS or
Form ATS-R, as applicable, and the instructions thereto. Any such
document shall be executed at, or prior to, the time Form ATS or Form
ATS-R is filed and shall be retained by the ATS in accordance with
Sec. Sec.  242.303 and Sec.  232.302 of this chapter, and the
instructions in Form ATS or Form ATS-R, as applicable. Duplicates of
the reports provided for in paragraphs (b)(2)(i) through (v) of this
section must be filed with surveillance personnel designated as such by
any self-regulatory organization that is the designated examining
authority for the alternative trading system pursuant to Sec.  240.17d-
1 of this chapter simultaneously with filing with the Commission.
Duplicates of the reports required by paragraph (b)(9) of this section
shall be provided to surveillance personnel of such self-regulatory
authority upon request. All reports filed pursuant to this paragraph
(b)(2) and paragraph (b)(9) of this section (except for types of
securities traded provided on Form ATS and Form ATS-R) will be accorded
confidential treatment subject to applicable law.
    (viii) A Legacy Government Securities ATS operating pursuant to an
initial operation report on Form ATS on file with the Commission as of
[date 120 calendar days after the date of publication of the final rule
in the Federal Register] shall be subject to the requirements of
paragraphs (b)(2)(i) through (vii) of this section until that ATS files
an initial Form ATS-G with the Commission pursuant to Sec.
242.304(a)(1)(iv)(A). Thereafter, the Legacy Government Securities ATS
shall file reports pursuant to Sec.  242.304 and shall not be subject
to the requirements of paragraphs (b)(2)(i) through (vii) of this
section. A Legacy Government Securities ATS that was formerly not
required to comply with Regulation ATS (Sec.  242.300 through 242.304)
pursuant to an exemption prior to [the effective date of the final
rule], shall file reports pursuant to Sec.  242.304 and shall not be
subject to the requirements of paragraphs (b)(2)(i) through (vii) of
this section. As of [date 120 calendar days after the date of
publication of the final rule in the Federal Register], an entity
seeking to operate as a Government Securities ATS shall not be subject
to the requirements of paragraphs (b)(2)(i) through (vii) of this
section and shall file reports pursuant to Sec.  242.304. An NMS Stock
ATS or entity seeking to operate as an NMS Stock ATS shall not be
subject to the requirements of paragraphs (b)(2)(i) through (vii) of
this section and shall file reports pursuant to Sec.  242.304. An ATS
that is not an NMS Stock ATS or Government Securities ATS shall be
subject to paragraph (b)(2) of this section. An NMS Stock ATS or a
Government Securities ATS that is operated by a broker-dealer that is
the registered broker-dealer for more than one ATS must independently
comply with Regulation ATS, including the filing requirements of Sec.
242.304 of this chapter.
* * * * *
    (5) Fair access.
    (i) * * *
    (E) With respect to U.S. Treasury Securities, 5 percent or more of
the average weekly dollar volume traded in the United States as
provided by the self-regulatory organization to which such transactions
are reported; or
    (F) With respect to Agency Securities, 5 percent or more of the
average daily

dollar volume traded in the United States as provided by the self-
regulatory organization to which such transactions are reported.
* * * * *
0
8. Amend Sec.  242.304 by:
0
a. Revising the section heading;
0
b. In paragraph (a), removing ``an NMS Stock ATS'' before the phrase
``must comply'' and adding in its place ``a Covered ATS'';
0
c. In the title to paragraph (a)(1), removing ``Form ATS-N'' and adding
in its place ``Covered Form'';
0
d. In paragraph (a)(1)(i), adding ``applicable'' after the phrase
``files with the Commission an'' and adding a sentence at the end of
the paragraph;
0
e. In paragraph (a)(1)(ii)(A)(1), removing the phrase ``the Form ATS-N
is unusually lengthy or raises novel or complex issues that require
additional time for review'' and adding in its place ``the Commission
determines that a longer period is appropriate'';
0
f. In paragraphs (a)(1)(i) through (iii),
0
1. Removing each reference to ``NMS Stock ATS'' and adding in its place
``Covered ATS'';
0
2. Removing each reference to ``an NMS Stock ATS'' and adding in its
place ``a Covered ATS''; and
0
3. Removing each reference to ``Form ATS-N'' and adding in its place
``Covered Form'';
0
g. In the title to paragraph (a)(2), removing ``Form ATS-N'' and adding
in its place ``Covered Form'';
0
h. In paragraph (a)(2)(i),
0
1. Removing ``An NMS Stock ATS'' before the phrase ``shall amend'' and
replacing it with ``A Covered ATS''; and
0
2. Removing ``Form ATS-N'' after the phrase ``shall amend a'' and
replacing it with ``Covered Form'';
0
i. In paragraph (a)(2)(i)(A), removing ``NMS Stock ATS'' after the
phrase ``change to the operations of the'' and replacing it with
``Covered ATS'';
0
j. In paragraph (a)(2)(i)(A) through (C), removing each reference to
``Form ATS-N'' and adding in its place ``Covered Form'';
0
k. In paragraphs (a)(2)(ii), (a)(3), (a)(4), (b), and (c),
0
1. Removing each reference to ``NMS Stock ATS'' and adding in its place
``Covered ATS'';
0
2. Removing each reference to ``an NMS Stock ATS'' and adding in its
place ``a Covered ATS''; and
0
3. Removing each reference to ``Form ATS-N'' and adding in its place
``Covered Form'';
0
l. In paragraph (a)(1)(iv),
0
1. Removing each reference to ``Form ATS-N'' and adding in its place
``Form ATS-G''; and
0
2. Removing each reference to ``Legacy NMS Stock ATS'' and adding in
its place ``Legacy Government Securities ATS'';
0
m. In paragraph (a)(1)(iv)(A),
0
1. Adding the phrase ``operating pursuant to an initial operation
report on Form ATS on file with the Commission as of [date 120 calendar
days after the date of publication of the final rule in the Federal
Register]'' immediately preceding the phrase, ``shall supersede and
replace'';
0
2. Removing ``January 7, 2019'' and adding in its place ``[date 120
calendar days after the date of publication of the final rule in the
Federal Register]''; and
0
3. Removing ``February 8, 2019'' and adding in its place ``[date 150
calendar days after the date of publication of the final rule in the
Federal Register]'';
0
n. In paragraph (a)(1)(iv)(B)(1), removing the phrase ``the initial
Form ATS-N is unusually lengthy or raises novel or complex issues that
require additional time for review'' and adding in its place ``the
Commission determines that a longer period is appropriate'';
0
o. In paragraph (a)(2)(i)(D),
0
1. Adding ``or Part III, Item 24 on Form ATS-G'' immediately preceding
the phrase, ``has become inaccurate or incomplete''; and
0
2. Removing the phrase ``Order Display and Fair Access Amendment'' and
adding in its place ``Contingent Amendment'';
0
p. In paragraph (b)(2)(iii)(B), removing the phrase ``Order Display and
Fair Access'' wherever it appears and adding in its place the word
``Contingent''; and
0
q. Revising paragraph (b)(3).
    The additions and revisions read as follows:

Sec.  242.304  Covered ATSs.

    (a) * * *
    (1) * * *
    (i) * * * Notwithstanding the foregoing, a Legacy Government
Securities ATS that was formerly not required to comply with Regulation
ATS (Sec.  242.300 through 242.304) pursuant to an exemption prior to
[the effective date of the final rule], may continue to operate
pursuant to Regulation ATS until its initial Form ATS-G becomes
effective.
* * * * *
    (b) * * *
    (3) Each Covered ATS shall make public via posting on its website:
    (i) A direct URL hyperlink to the Commission's website that
contains the documents enumerated in paragraph (b)(2) of this section;
and
    (ii) The most recently disseminated Covered Form (excluding Part
IV) 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.
* * * * *
0
9. Amend Sec.  242.1000 by:
0
a. Adding, in alphabetical order, a definition for ``Agency
Securities'';
0
b. At the end of paragraph (1)(ii), under the definition of ``SCI
alternative trading system or SCI ATS'', removing the word, ``or'';
0
c. Under the definition of ``SCI alternative trading system or SCI
ATS'', redesignating paragraph (3) as paragraph (5);
0
d. Under the definition of ``SCI alternative trading system or SCI
ATS'', adding a new paragraph (3) and paragraph (4); and
0
e. In newly redesignated paragraph (5), removing ``paragraphs (1) or
(2)'' and adding in its place ``paragraphs (1), (2), (3), or (4)''; and
0
f. Adding, in alphabetical order, a definition for ``U.S. Treasury
Securities''.
    The additions read as follows:

Sec.  242.1000   Definitions.

* * * * *
    Agency Security has the meaning set forth in Sec.  242.300(q).
* * * * *
    SCI alternative trading system or SCI ATS * * *
    (3) Had with respect to U.S. Treasury Securities, five percent (5%)
or more of the average weekly dollar volume traded in the United States
as provided by the self-regulatory organization to which such
transactions are reported; or
    (4) Had with respect to Agency Securities, five percent (5%) or
more of the average daily dollar volume traded in the United States as
provided by the self-regulatory organization to which such transactions
are reported.
* * * * *
    U.S. Treasury Security has the meaning set forth in Sec.
242.300(p).
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
10. The general authority citation for part 249 continues to read as
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *
0
11. Amend Form ATS (referenced in Sec.  249.637) by:
0
a. In the General Instructions, revising Items A.3 through A.6;
0
b. In the General Instructions, revising the fifth and seventh
paragraphs of Item A.7;
0
c. At the top of page 1 of the form, removing ``INITIAL OPERATION
REPORT'', ``AMENDMENT TO INITIAL OPERATION REPORT'', ``CESSATION OF
OPERATIONS REPORT'' and accompanying check boxes and adding text under
a new heading ``Type of Filing (select one)'';
0
d. Revising Item 1;
0
e. Removing the text on page 1 of the form beginning ``EXECUTION'', the
signature block below, the instruction that states ``This page must
always be completed in full with original, manual signature and
notarization. Affix notary stamp or seal where applicable.'' and ``DO
NOT WRITE BELOW THIS LINE--FOR OFFICIAL USE ONLY'' and adding in its
place text under a new heading ``CONTACT INFORMATION, SIGNATURE BLOCK,
AND CONSENT TO SERVICE''; and
0
f. On page 2 of the form, removing the following text:
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    The revisions read as follows:

    Note: The text of Form ATS does not and this amendment will not
appear in the Code of Federal Regulations

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0
12. Amend Form ATS-R (referenced in Sec.  249.634) by:
0
a. In the General Instructions, revising Items A.3 through A.6;
0
b. In the General Instructions, revising the fifth and seventh
paragraphs of Item A.7;
0
c. In the Explanation of Terms, adding the definitions of ``Agency
Securities'' and ``U.S. Treasury Securities'';
0
d. On page 1 of the form, immediately before Section 1, adding text
under a new heading ``Type of Filing'';
0
e. Revising Item 1;
0
f. Removing text on page 1 of the form beginning ``EXECUTION'', the
signature block below, the instruction that states ``This page must
always be completed in full with original, manual signature and
notarization. Affix notary stamp or seal where applicable.'' and ``DO
NOT WRITE BELOW THIS LINE - FOR OFFICIAL USE ONLY'' and adding in its
place text under a new heading ``CONTACT INFORMATION, SIGNATURE BLOCK,
AND CONSENT TO SERVICE'';
0
g. On page 2 and 3 of the form, removing the following text:
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0
h. Revising Item 4;
0
i. Adding Items 5.C and 5.D;
0
j. Revising Items 6.B through 6.C, and
0
k. Adding Item 8.
    The additions and revisions read as follows:

    Note: The text of Form ATS-R does not and this amendment will
not appear in the Code of Federal Regulations.

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0
13. Amend Form ATS-N (referenced in Sec.  149.640) by:
0
a. On page 1 of the form, removing the following:
     Does the NMS Stock ATS currently operate pursuant to a
Form ATS?
    [square] Yes No
0
b. On page 1 of the form, revising text under ``Type of Filing (select
one)'',
0
c. Revising Part I, Item 1;
0
d, Revising Part I, Item 10;
0
e. Revising Part II, Item 4.b;
0
f. Revising Part II, Item 6.a;
0
g. Revising Part III, Item 1;
0
h. Revising Part III, Item 4.a;
0
i. Revising Part III, Item 6.b;
0
j. Revising Part III, Item 7.a;
0
k. Revising Part III, Item 10;
0
l. Revising Part III, Item 13.a;
0
m. Revising Part III, Item 17.a;
0
n. Revising Part III, Item 18;
0
o. Revising Part III, Item 19.a;
0
p. Revising Part IV;
0
q. In FORM ATS-N INSTRUCTIONS, revising Item A.4;
0
r. In FORM ATS-N INSTRUCTIONS, revising Items A.6 through A.7;
0
s. In FORM ATS-N INSTRUCTIONS, revising Item D; and
0
t. In FORM ATS-N INSTRUCTIONS, under Item E, revising the definitions
of ``NMS STOCK ATS'' and ``PERSON''.
    The revisions read as follows:

    Note: The text of Form ATS-N does not and this amendment will
not appear in the Code of Federal Regulations.

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0
14. Add Sec. 249.642 to subpart G to read as follows:

    Note: The text of Form ATS-G does not and this amendment will
not appear in the Code of Federal Regulations.

Sec.  249.642  Form ATS-G, information required of Government
Securities ATSs pursuant to Sec. 242.304(a) of this chapter.

    This form shall be usd by every Government Securities ATS to file
required reports under Sec.  242.304(a) of this chapter.

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    By the Commission.

    Dated: September 28, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-21781 Filed 12-22-20; 4:15 pm]
BILLING CODE 8011-01-C