operation of any other NMS Stock ATSs operated by the broker-dealer
operator or any of its affiliates. Part III, Item 5 of proposed Form
ATS-N would have required disclosures regarding the broker-dealer
operator's and its affiliates' trading activity on the NMS Stock ATS.
    As discussed above, we received general comments on Part III of
proposed Form ATS-N.\726\ Additionally, we received comments
specifically addressing the requests in Part III, Items 1, 2, and 5, of
proposed Form ATS-N. In this section, we outline and address these more
specific comments not previously outlined above. In Section V.C.1.b.,
we outline how we have consolidated much of the subject matter set
forth in in Part III, Items 1, 2, and 5 of proposed Form ATS-N into
Part II, Items 1 and 2 of adopted Form ATS-N.\727\
---------------------------------------------------------------------------

    \726\ See supra notes 712-715 and accompanying text.
    \727\ We also note that because Parts I and II of proposed Form
ATS-N have been consolidated into a single section of adopted Form
ATS-N, the disclosure requests about the ATS-related activities of
the broker-dealer operator and its affiliates on the NMS Stock ATS
are set forth in Part II of adopted Form ATS-N.
---------------------------------------------------------------------------

    First, in addition to the general comments regarding the scope of
the affiliate disclosure requests that are explained above, some
commenters provide comments specific to proposed Part III, Item 1 and
Part III, Item 5.\728\ One of these commenters states that the scope of
the proposed requests in Part III, Item 1 with regard to non-ATS
trading centers of the broker-dealer operator or its affiliates could
have prejudiced commercial strategy.\729\ We believe that a list
containing business units or affiliates of the broker-dealer operator
that do not use the trading services of the NMS Stock ATS would not be
as helpful to market participants as would a list of only those that
trade on, or otherwise use the trading services of, the ATS.\730\
Accordingly, we have revised these disclosures so that Part II, Items
1(a) and 2(a) of adopted Form ATS-N ask whether business units of the
broker-dealer operator or its affiliates, respectively, are permitted
to enter or direct the entry of orders into the ATS. This disclosure is
designed to inform market participants about whether the ATS permits
the broker-dealer operator or its affiliates to trade on the NMS Stock
ATS. If the ATS permits the broker-dealer operator or its affiliates to
trade on the ATS, the NMS Stock ATS will be required to only list the
business units or affiliates that actually enter or direct the entry of
orders into the NMS Stock ATS.
---------------------------------------------------------------------------

    \728\ See STA Letter at 4-5; UBS Letter at 5; SIFMA Letter at
10; LeveL ATS Letter at 4.
    \729\ See UBS Letter at 5.
    \730\ In the Proposal, the term ``non-ATS trading center'' was a
defined term, but as explained above, adopted Form ATS-N will not
use the term ``non-ATS trading center.'' See supra Section V.A.2.a.
---------------------------------------------------------------------------

    Furthermore, with regard to Part III, Item 5 of proposed Form ATS-
N, one commenter states that affiliates or business units that
indirectly send orders to an NMS Stock ATS through another entity or
through services provided by another entity are not `enter[ing]' orders
``on the NMS Stock ATS.'' \731\ We believe that if a business unit or
affiliate of the broker-dealer operator enters or directs the entry of
orders into the ATS, market participants would find it useful to know
that they may be trading against those business units, affiliates, or
client orders entered by those entities. For example, if a principal
trading desk of the broker-dealer operator or an affiliate uses a
direct connection to the NMS Stock ATS or the broker-dealer operator's
SOR to submit orders or trading interest into the ATS, the NMS Stock
ATS must list that desk or affiliate on adopted Form ATS-N under Part
II, Item 1(a) or 2(a), respectively. Likewise, if an affiliated asset
manager of the broker-dealer operator uses the services of a third-
party broker-dealer to route directed orders to the NMS Stock ATS
(i.e., the asset manager instructs the third-party broker-dealer to
send its orders to the NMS Stock ATS), the NMS Stock ATS would be
required to list that affiliated asset manager under Item 2(a).
However, if that affiliated asset manager submits orders to a third-
party broker-dealer, and that third-party broker-dealer using its own
discretion, routes the orders of the asset manager into the affiliated
NMS Stock ATS (e.g., the third-party broker-dealer's SOR decides where
to route the affiliated asset manager's orders using its routing
table), the NMS Stock ATS would not be required to list the affiliated
asset manager under Item 2(a); under such circumstances, the affiliate
would not be ``directing'' orders to the ATS because the third-party
broker-dealer is using its discretion to route the affiliate's orders
and thus, not required to be listed under Item 2(a).
---------------------------------------------------------------------------

    \731\ See UBS Letter at 6.
---------------------------------------------------------------------------

    The adopted requests also specify the type of information that must
be provided with regard to business units or affiliates of the broker-
dealer operator. Specifically, Item 1(a) requires the NMS Stock ATS to
name and describe each type of business unit of the broker-dealer
operator that enters or directs the entry of orders and trading
interest into the ATS (e.g., NMS Stock ATS, type of trading desks,
market maker, sales or client desk) and, for each business unit, to
provide the applicable MPID and list the capacity of its orders and
trading interest (e.g., principal, agency, riskless principal). Item
2(a) requires the NMS Stock ATS to name and describe each type of
affiliate that enters or directs the entry of orders and trading
interest into the ATS (e.g., broker-dealers, NMS Stock ATS, investment
company, hedge fund, market maker, principal trading firm) and, for
each of those affiliates, provide the applicable MPID and list the
capacity of its orders and trading interest (e.g., principal, agency,
riskless principal). We believe that market participants will find it
more relevant to know both the types of broker-dealer operator business
units and affiliates that can trade in the NMS Stock ATS, and their
trading activities, rather than, as proposed, having a potentially
voluminous list of entities that might include some that cannot send or
direct orders or trading interest to the ATS.
    We also believe that the revised requests will reduce the burden on
NMS Stock ATSs when completing the form because they will only require
the NMS Stock ATS to list entities that trade on the ATS. The narrative
responses to Items 1(a) and 2(a) could typically be kept up-to-date via
Updating Amendments to Form ATS-N, which the ATS could file on a
quarterly basis. However, we also note that in most cases, if the
``yes'' or ``no'' response to Items 1(a) or 2(a) changes (e.g., the NMS
Stock ATS changes its operations to allow affiliates to trade whereas
they could not do so prior, or vice versa), the NMS Stock ATS would be
required to file a material amendment. Accordingly, we believe that the
scope of the requests in Part II, Items 1(a) and 2(a) of adopted Form
ATS-N present a reasonable disclosure requirement for NMS Stock ATSs,
particularly multi-service broker-dealers with many affiliates, without
eliminating the requirements for the NMS Stock ATS to provide
information about the NMS Stock ATS-related trading activities of
broker-dealer operator and its affiliates, which we believe will be
helpful for market participants.
    Another commenter recommends that the Commission take a progressive
approach of ``yes'' or ``no'' questioning for disclosures concerning
affiliates of the broker-dealer operators that initially targets
whether the affiliate directly

routes orders to the NMS Stock ATS.\732\ The commenter recommends that
the Commission require NMS Stock ATSs to state whether the ATS directly
receives any order flow from an affiliated party, and if so, if the
affiliated party is treated exactly the same as every other party with
access to the ATS.\733\ If the ATS answers in the affirmative, the
commenter suggests that the ATS be required to identify the affiliated
parties with access and the procedure for treatment of their orders,
and if the ATS answers in the negative, the ATS would be required to
identify parties with access and specifically articulate differences in
treatment. The disclosure requests in Part II of adopted Form ATS-N are
all structured in a ``yes'' or ``no'' format with follow-on narrative
(as necessary), and we believe that the information this commenter
recommends to be included in Form ATS-N is presented in a format that
resembles that recommendation.\734\
---------------------------------------------------------------------------

    \732\ See Fidelity Letter at 5.
    \733\ See id. at 5-6.
    \734\ Specifically, Item 2(a) requires the NMS Stock ATS to
answer ``yes'' or ``no'' as to whether affiliates of the broker-
dealer operator are permitted to enter or direct the entry of orders
and trading interest into the NMS Stock ATS, and if the answer is
``yes'', the ATS must provide specific information about those
affiliates and the capacity of the orders and trading interest that
the affiliates enter onto the ATS. Item 2(b) then requires the NMS
Stock ATS to answer ``yes'' or ``no'' as to whether the services
that the NMS Stock ATS offers and provides to the affiliates
identified in Item 2(a) are the same for all subscribers, and if the
NMS Stock ATS answers no, it must explain any differences. We also
note that the requests in Item 1(a) of adopted Form ATS-N with
regard to trading activity of the broker-dealer operator on the NMS
Stock ATS follow the same format as that in Item 2 of adopted Form
ATS-N.
---------------------------------------------------------------------------

    Several commenters also opine that terms such as ``describe,''
``any interaction or coordination,'' ``circumstances,'' and ``otherwise
made known'' in the conflicts of interest requests might result in
overbroad or lengthy responses that contain information which would not
be helpful for market participants.\735\ Another commenter cites Part
III, Item 5 of proposed Form ATS-N as an example of a request that
should be tailored to elicit information based on which ATS users can
make informed decisions.\736\ This commenter states that full-service
broker-dealers often have hundreds of affiliates and business units
that meet the definition of entities that may trade on the subject ATS,
and that keeping such information current and accurate on an ongoing
basis would bring additional burden with very little, if any, benefit
to ATS users; the commenter believes that the request regarding trading
on the ATS by the broker-dealer operator or its affiliates should be
focused on whether they receive any preferential or differentiated
treatment.
---------------------------------------------------------------------------

    \735\ See KCG Letter at 8-9; STA Letter at 4; SIFMA Letter at
10-11; 14. See also SIFMA Letter at 4, 8.
    \736\ See Morgan Stanley Letter at 5.
---------------------------------------------------------------------------

    In response to these comments, we are eliminating the terms
``interaction and coordination,'' ``circumstances,'' and ``otherwise
made known'' from these requests to reduce any potential
ambiguity.\737\ The adopted requests are closely tailored to solicit
information that market participants find relevant to evaluating
potential conflicts of interest on an NMS Stock ATS.\738\ Further, both
Part II, Items 1(a) and 2(a) of adopted Form ATS-N enumerate the type
of information that an NMS Stock ATS must provide if it answers in the
affirmative that the broker-dealer operator or its affiliates,
respectively, is permitted to trade on the NMS Stock ATS.\739\
---------------------------------------------------------------------------

    \737\ While the terms ``interaction and coordination'' are no
longer used in this disclosure request, many, if not all, Form ATS-N
requests are designed to provide insight into how the broker-dealer
operator, its affiliates, or third-parties interact or coordinate
their activities with the NMS Stock ATS. Two examples of this
include Part II, Items 3 and 5 of adopted Form ATS-N. Part II, Item
3 of adopted Form ATS-N requests specific information about how
subscribers can opt out from interacting with orders of the broker-
dealer operator or its affiliates. Likewise, Item 5 of adopted Form
ATS-N requests specific information about how the ATS interacts with
affiliates by requiring certain disclosures about products and
services offered by the broker-dealer operator.
    \738\ Because we are replacing the term ``interaction and
coordination'' with these enumerated points of information, aspects
of the requests set forth in Part III, Items 1(b)(ii)-(iii) and
2(b)(i), (iii) of proposed Form ATS-N--which addressed the
transmission of subscriber orders to other trading centers operated
by the broker-dealer operator or its affiliates--are being either
narrowed or eliminated from adopted Part II, Items 1 and 2. As
explained further below, to the extent information that would have
been required by Part III, Items 1(b)(ii)-(iii) and 2(b)(i), (iii)
of proposed Form ATS-N is responsive to Part II, Item 4 of adopted
Form ATS-N--which requests information about the NMS Stock ATS's
arrangements with unaffiliated or affiliated trading centers--the
NMS Stock ATS is required to provide that information in response to
Item 4. See infra Section V.C.3.
    \739\ Another commenter suggests that the Commission's goals
would be served more simply by requiring ATSs to categorize and
disclose to their subscribers the nature of a counterparty (i.e.,
agent, principal (including affiliates of the broker-dealer
operator)) rather than using the term ``proprietary'' in the
disclosures regarding trading activities of the broker-dealer
operator and its affiliates. See UBS Letter at 6. The commenter
believes that this type of disclosure would succinctly inform a
subscriber about what type of counterparty was on the other side of
a trade. See id. This commenter also notes that in the Proposal, the
Commission discussed disclosures and potential additional
regulations related to ``proprietary trading.'' See id. The
commenter states that federal regulators have encountered challenges
in defining this term as part of the ``Volcker Rule'' under the Dodd
Frank Act. See id. In response to this comment, the Commission has,
in the language of Part II, Items 1 and 2, listed several examples
of the capacity in which the broker-dealer operator and its
affiliates enter or direct the entry of orders (principal, agency,
or riskless principal) to provide more guidance about the type of
information sought by Form ATS-N. The Commission has also removed
references to ``proprietary trading'' from Form ATS-N, and the
adopted form's disclosure requirements refer to, when applicable,
``principal trading'' of the broker-dealer operator and its
affiliates.
---------------------------------------------------------------------------

    Furthermore, while the term ``describe'' is still used in Items
1(a) and 2(a), we are adding specific examples to each respective
request to better explain the type of description that would necessary,
such as ``NMS Stock ATS,'' ``trading desks,'' ``market maker,''
``sales'' or ``client desk.'' Also, Items 1(b)-(d) and 2(b)-(d)
specifically state that the NMS Stock ATS must explain (1) any
differences between the treatment of those business units or affiliates
of the broker-dealer operator and other subscribers regarding services
offered and provided by the NMS Stock ATS; (2) whether any of those
business units or affiliates of the broker-dealer operator have formal
or informal arrangements with the NMS Stock ATS to provide liquidity to
the NMS Stock ATS; and (3) how orders and trading interest in the NMS
Stock ATS can be routed to a trading center of the broker-dealer
operator or affiliate.\740\
---------------------------------------------------------------------------

    \740\ With regard to the latter two of these items, adopted Form
ATS-N requests that the description be provided in the applicable
Part III item to reduce redundancy on the Form ATS-N, as further
explained below.
---------------------------------------------------------------------------

    Additionally, a commenter expresses concern that it may not be
privy to some the information that proposed Form ATS-N would have
required.\741\ We note that ATSs are currently obligated to make and
keep records of, among other things, subscribers to the ATS and daily
summaries of trading, including the identity of the parties to the
transactions.\742\ We believe that the specific information sought in
these requests with regard to affiliate trading activity on the ATS in
adopted Form ATS-N should be maintained as part of the ATS's
recordkeeping obligation without the ATS having to breach any
information barriers or other compliance protections. To the extent
that a business unit or affiliate of the broker-dealer operator
triggers a disclosure obligation on Form ATS-N by directing the entry
of orders into the NMS Stock ATS through a third-party broker-dealer,
we believe that the broker-dealer operator should have--or be able to
obtain--such information through appropriate internal compliance
procedures to be responsive to Form ATS-N.
---------------------------------------------------------------------------

    \741\ See supra note 717 and accompanying text.
    \742\ See 17 CFR 242.302.

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

    We have also revised the requests in proposed Form ATS-N to reduce
redundant disclosure requirements. First, Part II, Items 1 and 2 of
adopted Form ATS-N now require the NMS Stock ATS to provide any
narratives about differences in treatment between the broker-dealer
operator, its affiliates, and other subscribers in Part III of the
adopted form, and only cross reference those narratives in Part II (as
opposed to providing a separate, likely redundant narrative in Part
II). Second, Part II, Items 1 and 2 of adopted Form ATS do not require
the NMS Stock ATS to disclose whether subscriber orders or other
trading interest sent to the NMS Stock ATS are displayed or otherwise
made known to a non-ATS trading center or another NMS Stock ATS
operated by the broker-dealer operator or an affiliate.\743\ Rather,
any narrative with regard to order display (including a description
about differences in services) is only required to be set forth in Part
III, Item 15 of adopted Form ATS-N, which contains the order display
requests of adopted Form ATS-N.
---------------------------------------------------------------------------

    \743\ This information would have been required under Part III,
Item 1(b)(i) and 2(b)(ii) of proposed Form ATS-N.
---------------------------------------------------------------------------

    Finally, Part II, Items 1 and 2 of adopted Form ATS-N do not
require the NMS Stock ATS to disclose how the business units and
affiliates of the broker-dealer operator connect to the ATS, such as
through a Financial Information Exchange (``FIX'') protocol.\744\
Rather, any narrative about order entry in the NMS Stock ATS (including
a description about differences in services) is only required by Part
III, Item 5 of adopted Form ATS-N (Means of Entry). Accordingly, Part
II of adopted Form ATS-N is designed to provide market participants
with information about how the NMS Stock ATS interacts with the
business units and affiliates of the broker-dealer operator so they can
assess potential conflicts of interest, while minimizing disclosure
requests that would be redundant with those contained in Part III.\745\
---------------------------------------------------------------------------

    \744\ This information would have been required under Part III,
Item 5(c) of proposed Form ATS-N.
    \745\ One commenter also recommends limiting the requests
related to order routing from proposed Part III, Item 2 (Multiple
NMS Stock ATS Operations) to the functions of ATS operation, as
distinguished from other algorithmic or routing functions housed
within the broker-dealer operator or an affiliate, which the
commenter states appear to be addressed in Part III, Item 3 of
proposed Form ATS-N, as well as asking what it means to ``remove''
an order. See SIFMA Letter at 11. See infra Section V.D.7. for a
discussion of the required disclosures related to the removal of
trading interest. Furthermore, this commenter recommends that
Commission state whether the ATS operator should distinguish between
parent and child orders for the disclosures related to Part III,
Item 2 of proposed Form ATS-N. See id. Adopted Part III, Item 16(b)
requires the NMS Stock ATS to either describe the affirmative
instructions from a subscriber that must be obtained to route
outside of the NMS Stock ATS or, if no instructions are required,
the ATS must explain when orders in the ATS can be routed from the
NMS Stock ATS. If the NMS Stock ATS breaks up a parent order into
child orders or otherwise uses the fact that an order is a parent
order or child order to make routing decisions, such information
must be disclosed under Item 16(b).
---------------------------------------------------------------------------

    Another commenter believes that the information requested under
proposed Part III, Item 5 of proposed Form ATS-N was too granular,
duplicative of information required by Form BD, and that some of the
prompts (e.g., ``business unit,'' ``describe the circumstances'') were
too open-ended, which could lead to non-standardized responses that
would not be helpful to market participants.\746\ This commenter
recommends: (i) Eliminating proposed Item 5 and replacing the proposed
disclosure requirements with yes/no prompts or short-answer responses
that are more focused or narrowly tailored and (ii) eliminating or
further clarifying and limiting the request for information of
affiliates and business units.
---------------------------------------------------------------------------

    \746\ See SIFMA Letter at 14.
---------------------------------------------------------------------------

    As explained above, Part II, Items 1(a) and 2(a) of adopted Form
ATS-N provide more specificity about the information requested about
the ATS-related activities of business units and affiliates of the
broker-dealer operator by providing examples of what we intend to
solicit from these requests. To the degree that some information
solicited by adopted Form ATS-N is duplicative of information sought on
Form BD, the duplicative information is straightforward for the broker-
dealer to reproduce on Form ATS-N, and we believe that market
participants will derive greater benefit from this information being
disclosed on a single form (Form ATS-N) as opposed to being spread
across multiple forms filed with the Commission.
    Similarly, another commenter cites the proposed requirement to
provide the names of specific business units and algorithms that trade
in NMS Stock ATS as an example of requested information that it
believes is unnecessary to risk assessment.\747\ We believe that some
market participants may find it very helpful to know the identities and
number of the broker-dealer operator's business units or affiliates
that trade on the NMS Stock ATS. As indicated by commenters, some
market participants may, for example, view trading on an ATS by a
principal trading desk of the broker-dealer operator as presenting a
potential conflict of interest for the broker-dealer operator, even if
the ATS does not give any preference to the orders from that desk.\748\
---------------------------------------------------------------------------

    \747\ See STANY Letter at 5.
    \748\ See Consumer Federation of America Letter at 7-8; HMA
Letter at 13.
---------------------------------------------------------------------------

    We also received comments supporting the original requests under
Part III, Items 1, 2, and 5 of proposed Form ATS-N. One commenter
believes that these proposed disclosure requests are essential to
alerting market participants about potentially significant advantages
of the broker-dealer operator and its affiliates and to allow market
participants to obtain a reasonable understanding of the conflicts of
interest posed by the broker-dealer operator's or its affiliates'
trading activities on the ATS.\749\ In addition, a commenter states
that the requests under Part III, Item 5 of proposed Form ATS-N would
help investors better understand the relationship between the NMS Stock
ATS, its broker-dealer operator, and any affiliates.\750\ One commenter
asserts that market participants would want to know the specific
advantages afforded to the ATS operator or its affiliate, and urges the
Commission to adopt proposed Part III, Item 5.\751\ While we have
refined the scope of certain subject matter in response to comment, we
still believe that the disclosure requests in adopted Form ATS-N about
the trading activities of the broker-dealer operator and its affiliates
will allow for a high degree of transparency by capturing information
that these commenters believe is important to market participants.
---------------------------------------------------------------------------

    \749\ See HMA Letter at 15-18. Another commenter states its
support for the goal of a fulsome disclosure of circumstances where
subscriber orders or other trading interest could leave an NMS Stock
ATS and be made available to other areas of the broker-dealer
operator. See UBS Letter at 5. The commenter states that market
participants are entitled to know such information, but also states
that the Commission's goal could be achieved through simplified
disclosures. The commenter states that the proposed requirement to
list the non-ATS trading centers controlled by the broker-dealer
operator or its affiliates should only be required if orders are
routed to the NMS Stock ATS from such trading centers or from the
NMS Stock ATS to those trading centers.
    \750\ See MFA/AIMA Letter at 5.
    \751\ See HMA Letter at 16.
---------------------------------------------------------------------------

    In addition, one commenter states that it supports the disclosure
of potential trading activity on the NMS Stock ATS by the broker-dealer
operator and its affiliates, but asserts that the disclosure
requirement should be revised to allow for a series of progressive
``yes'' or ``no'' responses.\752\ The commenter also notes that as
proposed, it would be difficult for NMS Stock ATSs to maintain this
disclosure on an on-going basis. As is

explained above, we do not believe that maintaining up-to-date
disclosures regarding the ATS-related trading activities of the broker-
dealer operator and its affiliates will impose an unreasonable
administrative burden on the NMS Stock ATS.
---------------------------------------------------------------------------

    \752\ See KCG Letter at 10.
---------------------------------------------------------------------------

b. Adopted Part II, Item 1 and 2 of Form ATS-N; ATS-Related Trading
Activities of the Broker-Dealer Operator and its Affiliates
    As noted above, we reorganized and relocated the subject matter
requested in Part III, Items 1, 2, and 5 of proposed Form ATS-N to Part
II, Items 1 (``Broker-Dealer Operator ATS Trading Activities'') and 2
(``Affiliates ATS Trading Activities'') of adopted Form ATS-N. We have
also revised the content of the proposed disclosure requests in
response to public comment.\753\
---------------------------------------------------------------------------

    \753\ The subject matter covered in Part III, Item 5.d of
proposed Form ATS is now addressed in Part II Item 3 of adopted Form
ATS-N. See infra Section V.C.2.
---------------------------------------------------------------------------

    Part II, Item 1(a) of adopted Form ATS-N requires the NMS Stock ATS
to disclose whether business units of the Broker-Dealer Operator are
permitted to enter or direct the entry of orders and trading interest
(e.g., quotes, conditional orders, or indications of interest) into the
NMS Stock ATS. This request will be in the form of a ``yes'' or ``no''
question, and if the NMS Stock ATS answers ``yes,'' it will be required
to name and describe each type of business unit of the Broker-Dealer
Operator that enters or directs the entry of orders and trading
interest into the ATS (e.g., NMS Stock ATS, type of trading desks,
market maker, sales or client desk) and, for each type of business
unit, it must provide the applicable MPID and list the capacity of its
orders or trading interest (e.g., principal, agency, riskless
principal). This request is designed to encompass the information
request in Part III, Items 5(a) and (b) of proposed Form ATS-N and
capture elements of Part III Items 1(a) and (b) and Items 2(a) and (b)
of proposed Form ATS-N.
    The subject matter covered by Part III, Item 1(b)(i) and (ii) is no
longer included in the disclosure request contained in Part II, Item 1
of adopted Form ATS-N.\754\ Likewise, the subject matter covered by
Part III, Item 2(b)(i) and (ii) is no longer included in the disclosure
request contained in Part II, Item 1 of adopted Form ATS-N.\755\ Part
II, Item 1 of adopted Form ATS-N focuses on the trading activity of the
broker-dealer operator in the NMS Stock ATS, so those proposed
disclosure requests are outside the scope of adopted Part II, Item 1.
However, to the extent that information about the subjects in those
proposed disclosure requests are responsive to other disclosure
requests in adopted Form ATS-N--such as Part II, Item 3 (``Arrangements
With Trading Centers) and Part III, Item 15 (``Display'')--the NMS
Stock ATS must respond to those items accordingly.
---------------------------------------------------------------------------

    \754\ These proposed requests would have required disclosures
regarding the display of subscriber orders to a non-ATS trading
center operated by the broker-dealer operator (proposed Part III,
Item 1(b)(i)) and the execution of subscriber orders in a non-ATS
trading center operated by the broker-dealer operator (proposed Part
III, Item 1(b)(ii)), respectively.
    \755\ These proposed requests would have required disclosures
about sending subscriber orders to another NMS Stock ATS operated by
the broker-dealer operator in lieu of the NMS Stock ATS filing the
form (proposed Part III, Item 2(b)(i)) and the display of subscriber
orders to another NMS Stock ATS operated by the broker-dealer
operator (proposed Part III, Item 2(b)(ii)), respectively.
---------------------------------------------------------------------------

    Next, Part II, Item 1(b) of adopted Form ATS-N requires an NMS
Stock ATS to disclose whether the services that the NMS Stock ATS
offers and provides to the business units required to be identified in
Item 1(a) are the same for all subscribers. This request will be in the
form of a ``yes'' or ``no'' question, and if the NMS Stock ATS answers
``no,'' it will be required to explain any differences in response to
the applicable Item number(s) in Part III of adopted Form ATS-N and
list the applicable Item number(s). If there are differences that are
not applicable to Part III of adopted Form ATS-N, the NMS Stock ATS
must explain those differences in detail under Part II, Item 1.
    Next, Part II, Item 1(c) of adopted Form ATS-N requires NMS Stock
ATSs to disclose the broker-dealer operator's role as a liquidity
provider on the NMS Stock ATS, if applicable.\756\ This item requires
the NMS Stock ATS to disclose--in the form of a ``yes'' or ``no''
question--whether there are any formal or informal arrangements with
any of the sources of orders or trading interest of the broker-dealer
operator identified in Item 1(a) to provide orders or other trading
interest to the NMS Stock ATS (e.g., undertaking to buy or sell
continuously, or to meet specified thresholds of trading or quoting
activity). If the NMS Stock ATS answers ``yes,'' it must identify the
business unit(s) and respond to the request in Part III, Item 12, which
sets forth the requests for liquidity providers on the NMS Stock
ATS.\757\ We believe that highlighting, in Part II of adopted Form ATS-
N, whether the broker-dealer operator acts as a liquidity provider on
the NMS Stock ATS will be helpful to market participants when
evaluating the potential for conflicts of interest or information
leakage on the trading platform. However, to reduce duplicative
requests on adopted Form ATS-N, we are not requiring the NMS Stock ATS
to provide a narrative in Part II of adopted Form ATS-N regarding the
broker-dealer operator's liquidity provider activities because that
information will be disclosed under Part III, Item 12 of adopted Form
ATS-N.
---------------------------------------------------------------------------

    \756\ The requirement to disclose liquidity providers and the
terms and condition of any arrangements with liquidity providers was
set forth under Part IV, Item 1(d) of proposed Form ATS-N.
    \757\ See infra Section V.D.12.
---------------------------------------------------------------------------

    Finally, Part II, Item 1(d) of adopted Form ATS-N requires the NMS
Stock ATSs to disclose information about the routing of orders and
trading interest to trading centers operated or controlled by the
broker-dealer operator. This Item will require the NMS Stock ATS to
disclose--in the form of a ``yes'' or ``no'' question--whether orders
and trading interest in the NMS Stock ATS can be routed to a trading
center of the broker-dealer operator. If the NMS Stock ATS answers
``yes,'' it must respond to the requests in Part III, Item 16 of
adopted Form ATS-N, which sets forth the requests for disclosures about
routing orders and trading interest out of the NMS Stock ATS. We
continue to believe that disclosures regarding the routing of orders
will provide subscribers with information about how their orders would
be handled if they are not executed on the ATS and allow them to assess
whether such routing could result in the leakage of confidential
information, particularly if those orders are being routed to a trading
center of the broker-dealer operator. Similar to Part II, Item 1(c) of
adopted Form ATS-N, the request in Part II, Item 1(d) will not require
a narrative because Part IV, Item 16 of adopted Form ATS-N requires
disclosures about routing.\758\
---------------------------------------------------------------------------

    \758\ See id.
---------------------------------------------------------------------------

    Part II, Item 2(a) of adopted Form ATS-N requires an NMS Stock ATS
to disclose whether affiliates of the broker-dealer operator are
permitted to enter or direct the entry of orders and trading interest
into the NMS Stock ATS. This request will be in the form of a ``yes''
or ``no'' question, and if the NMS Stock ATS answers ``yes,'' it must
name and describe each type of affiliate that enters or directs the
entry of orders and trading interest in the ATS (e.g., broker-dealers,
NMS Stock ATS, mutual fund, hedge fund, market maker) and, for each
affiliate that trades on the NMS Stock ATS, the NMS Stock ATS must
provide the applicable MPID and list the capacity(ies) of its orders
and trading interest (e.g., principal, agency, riskless

principal). As with Item 1, these requests are designed to encompass
the information that would have been required under Part III, Items
5(a) and (b) of proposed Form ATS-N and is designed to capture elements
of Part III Item 1(a) and Item 2(a) of proposed Form ATS-N.\759\
---------------------------------------------------------------------------

    \759\ Also like Part II, Item 1(a) of adopted Form ATS-N, Item
2(a) does not contain the subject matter covered by Part III, Item
1(b)(i) and (ii) and Part III, Item 2(b)(i) and (ii) of proposed
Form ATS-N, but to the extent that information about the subjects in
those proposed requests are responsive to other requests in adopted
Form ATS-N, the NMS Stock ATS must respond to those items
accordingly.
---------------------------------------------------------------------------

    Next, Part II, Item 2(b) of adopted Form ATS-N requires an NMS
Stock ATS to disclose whether the services that the NMS Stock ATS
offers and provides to the affiliates required to be identified in Item
2(a) are the same for all subscribers. This request is in the form of a
``yes'' or ``no'' question, and if the NMS Stock ATS answers ``no,'' it
will be required to explain any differences in response to the
applicable Item number(s) in Part III of adopted Form ATS-N, as
required, and list the applicable Item number(s). If there are
differences that are not applicable to Part III of adopted Form ATS-N,
the NMS Stock ATS must explain those differences in detail under Part
II, Item 2.\760\
---------------------------------------------------------------------------

    \760\ We have incorporated the requests of proposed Part III,
Item 9 of proposed Form ATS-N into individual Part II requests in
adopted Form ATS-N, and thus, there is no longer a stand-alone
question addressing differences among the services provided to the
broker-dealer operator or its affiliates and other subscribers. See
supra Section V.C.7.
---------------------------------------------------------------------------

    Part II, Item 2(c) of adopted Form ATS-N requests information about
the role of the broker-dealer operator's affiliates as liquidity
providers on the NMS Stock ATS, if applicable. This item requires the
NMS Stock ATS to disclose--in the form of a ``yes'' or ``no''
question--whether there are there any formal or informal arrangements
with affiliates of the broker-dealer operator identified in Item 2(a)
to provide orders or other trading interest to the NMS Stock ATS (e.g.,
undertaking to buy or sell continuously, or to meet specified
thresholds of trading or quoting activity). If the NMS Stock ATS
answers ``yes,'' it must identify the affiliates and respond to the
request in Part III, Item 12, which sets forth the required disclosures
for liquidity providers on the NMS Stock ATS.
    Finally, Part II, Item 2(d) of adopted Form ATS-N requires an NMS
Stock ATS to disclose information about routing orders and trading
interest out of the NMS Stock ATS to a trading center operated and
controlled by affiliates of the broker-dealer operator. This item will
require the NMS Stock ATS to disclose--in the form of a ``yes'' or
``no'' question--whether orders and trading interest in the NMS Stock
ATS can be routed to a trading center operated or controlled by an
affiliate of the broker-dealer operator. If the NMS Stock ATS answers
``yes,'' it must respond to request in Part III, Item 16, which sets
forth the required disclosures for routing orders and trading interest
out of the NMS Stock ATS.
2. Order Interaction With Broker-Dealer Operator; Affiliates
    Part II, Item 3 of adopted Form ATS-N requests information about
the interaction of orders of between unaffiliated subscribers to the
ATS and orders of the broker-dealer operator and its affiliates in the
NMS Stock ATS. Part II, Item 3(a) of adopted Form ATS-N requires an NMS
Stock ATS to disclose whether a subscriber can opt out of interacting
with orders and trading interest of the broker-dealer operator in the
NMS Stock ATS, and Part II, Item 3(b) requires an NMS Stock ATS to
disclose whether a subscriber can opt out of interacting with the
orders and trading interest of an affiliate of the broker-dealer
operator in the NMS Stock ATS.\761\ Part II, Item 3(c) of adopted Form
ATS-N requires the NMS Stock ATS to disclose whether the terms and
conditions of the opt-out processes for the broker-dealer operator and
affiliates required to be identified in Items 3(a) and (b) are the same
for all subscribers. The content of these requests are intended to
cover the subject matter contained in Part III, Item 5(d) of proposed
Form ATS-N.\762\
---------------------------------------------------------------------------

    \761\ For example, if a broker-dealer operator uses its SOR or
algorithms to submit subscriber orders into the ATS, any steps that
either the broker-dealer operator or the subscriber would have to
take so that those orders are opted-out of trading with the broker-
dealer operator or its affiliates would be required disclosures
under Items 3(a) and 3(b), respectively.
    \762\ Part III, Item 5(d) of proposed Form ATS-N would have
required the NMS Stock ATS to describe any means by which a
subscriber can be excluded from interacting or trading with orders
or other trading interest of the broker-dealer operator or its
affiliates on the NMS Stock ATS.
---------------------------------------------------------------------------

    We believe that is helpful to market participants for the subject
matter covered by proposed Part III, Item 5(d) to be a stand-alone
question in adopted Form ATS-N. Such information is important to
unaffiliated market participants trading on an ATS because some
unaffiliated subscribers may not wish to interact with the order flow
of the broker-dealer operator or its affiliates. This disclosure will
help market participants understand whether and how they may avoid
trading with the broker-dealer operator and its affiliates should they
elect to use the services of the NMS Stock ATS.
    As explained above, we received several comments about the proposed
requests addressing ATS-related activities of the broker-dealer
operator and its affiliates, including the request set forth in Part
III, Item 5. In addition to these comments, one commenter opines that
if a subscriber desires to opt out of trading with the broker-dealer
operator's principal orders, the broker-dealer operator should be
obliged to follow and implement the stated instruction.\763\ This
rulemaking addresses enhanced disclosure requirements for NMS Stock
ATSs, and not regulations to require certain actions by NMS Stock ATSs
outside of the disclosures and other requirements specifically
enumerated herein.
---------------------------------------------------------------------------

    \763\ See UBS Letter at 6.
---------------------------------------------------------------------------

3. Arrangements With Trading Centers
    Part III, Item 4 of proposed Form ATS-N requested disclosures about
arrangements the broker-dealer operator, or any of its affiliates, has
with unaffiliated trading centers. The subject matter covered in Part
III, Item 4 of proposed Form ATS-N is under Part II, Item 4 of adopted
Form ATS-N.
    The Commission received several comments regarding disclosure
requests about arrangements with unaffiliated trading centers. Three
commenters support the public disclosure of preferential arrangements
with third parties.\764\ One of these commenters, while supporting the
disclosure of preferential arrangements in principle, believes the
requests in Part III, Item 4 of proposed Form ATS-N could be too
exhaustive and should be narrowed to focus on preferential
arrangements.\765\ Similarly, another commenter believes the central
concern around affiliate relationships should focus on whether a third-
party entity has differentiated or unique access to an ATS.\766\
Another commenter believes that the broker-dealer operators of NMS
Stock ATSs should not be required to provide proprietary information to
the public under this disclosure, stating that in instances where SORs
operate outside of the NMS Stock ATS and make routing decisions
independent of the NMS Stock ATS, the appropriate source of information
sought by the Commission

is the operator of the SOR, not the operator of the NMS Stock ATS.\767\
---------------------------------------------------------------------------

    \764\ See HMA Letter at 16; UBS Letter at 5; SIFMA Letter at 13.
    \765\ See SIFMA Letter at 13.
    \766\ See UBS Letter at 5.
    \767\ See STANY Letter at 4.
---------------------------------------------------------------------------

    We have not limited the disclosures required under adopted Part II,
Item 4 of adopted Form ATS-N to preferential arrangements or other
unique access given to unaffiliated third parties, as suggested by
these commenters. We believe that some market participants may consider
other arrangements with third parties relevant to their evaluations of
an NMS Stock ATS as a potential trading venue. For example, if an NMS
Stock ATS has a mutual access agreement with another ATS, a market
participant may take into account the fact that its order may
eventually route to another ATS, even if orders from the other ATS do
not receive preferential treatment on the ATS.
    The disclosure requests in Part II, Item 4 of adopted Form ATS-N
will provide market participants with information necessary to evaluate
potential conflicts of interest or sources of information leakage. For
example, Part II, Item 4 of adopted Form ATS-N requires the disclosure
of an arrangement between the NMS Stock ATS and an unaffiliated NMS
Stock ATS under which the NMS Stock ATS would route orders or other
trading interest to the unaffiliated NMS Stock ATS for possible
execution before routing to any other destination. By way of further
example, Item 4 also requires disclosure of an arrangement pursuant to
which any subscriber orders routed out of the unaffiliated NMS Stock
ATS would be routed first to the NMS Stock ATS before any other trading
center; it also requires a summary of the terms and conditions of the
arrangement such as, for example, whether the NMS Stock ATS is
providing monetary compensation or some other brokerage service to the
unaffiliated NMS Stock ATS.
    In response to the above commenter concerns, however, Part II, Item
4 of adopted Form ATS-N includes some modifications. First, the adopted
disclosure request in Part II, Item 4 replaces the proposed phrase
``describe the terms of the arrangement'' with the phrase ``provide a
summary of the terms and conditions of the arrangement.'' We believe
that replacing the term ``describe'' with a requirement to ``provide a
summary'' will make it clear that the scope of the adopted request
should not typically require the NMS Stock ATS to provide granular
details about its arrangements that the ATS might consider to be
commercially sensitive.
    Second, Part II, Item 4 of adopted Form ATS-N does not use the
phrase ``person(s), or affiliate(s) of such person(s) that operates a
trading center'' when establishing the scope of the request, as was
proposed. Rather, the adopted request focuses on arrangements with
trading centers themselves. One commenter argues that to the extent a
third-party entity solely has access to functionality disclosed
elsewhere in proposed Form ATS-N, proposed Part III, Item 4 would not
be necessary.\768\ We did not intend for the proposed request to
encompass, for example, a subscriber agreement between a third-party
broker-dealer, who happens to also operate a trading center, and the
NMS Stock ATS under which the third-party broker-dealer submits orders
to the ATS in the same manner as all other subscribers. Rather, the
purpose of the request in Part II, Item 4 is to publicly disclose any
arrangement with another trading center that may be relevant to a
conflicts of interest analysis, such as one under which the NMS Stock
ATS and a third-party NMS Stock ATS send their respective subscriber
orders to one another.
---------------------------------------------------------------------------

    \768\ See UBS Letter at 5.
---------------------------------------------------------------------------

    Additionally, we are including in Part II, Item 4 of adopted Form
ATS-N examples of the types of arrangements that would be responsive to
the disclosure request, such as mutual or reciprocal access
arrangements \769\ and preferential access arrangements \770\ to
clarify that the disclosures required by Part II, Item 4 of adopted
Form ATS are not so broad as to require the NMS Stock ATS to list each
unaffiliated subscriber that accesses its system. We are also revising
the request in Part III, Item 4 of proposed Form ATS-N to only require
disclosures about arrangements with trading centers to access the NMS
Stock ATS's services in adopted Form ATS-N. For example, an NMS Stock
ATS must provide details about how it disseminates orders or trading
interest submitted by a trading center under a unique arrangement with
that trading center such a reciprocal access agreement; these types of
arrangements would typically be different than the ATS's standard
contract with subscribers to access the services of the ATS. We believe
that this change will better define the scope of information responsive
to the Part II, Item 4 of adopted Form ATS-N while not removing any
proposed disclosure requirements.
---------------------------------------------------------------------------

    \769\ Mutual or reciprocal access arrangements may be, for
example, an NMS Stock ATS that allows another broker-dealer operator
to access its ATS for liquidity in return for the ability to access
the liquidity of the other broker-dealer's ATS.
    \770\ Preferential routing arrangements may be, for example, an
NMS Stock ATS being the first routing destination on the routing
table of a third party's algorithm.
---------------------------------------------------------------------------

    Likewise, the Commission is modifying the wording of the proposed
disclosure requests to require the NMS Stock ATS to disclose formal or
informal arrangements for a trading center ``to access the NMS Stock
ATS services.'' Adding the word ``services'' clarifies that the
disclosure must explain the services provided to the unaffiliated
trading center after it connects to the ATS. An NMS Stock ATS can
provide various types of services to subscribers and the request, as
revised, is tailored for those ATSs services that a subscriber may use.
    Next, the scope of Part III, Item 4 of proposed Form ATS-N only
encompassed arrangements with unaffiliated trading centers, but Part
II, Item 4 of adopted Form ATS-N encompasses arrangements with both
unaffiliated and affiliated trading centers. As explained above, the
requests set forth in Part III, Items 1(b)(ii)-(iii) and 2(b)(i), (iii)
of proposed Form ATS-N--which addressed the transmission of subscriber
orders to other trading centers operator by the broker-dealer operator
or its affiliates--have either been narrowed or eliminated from Part
II, Items 1 and 2 of adopted Form ATS-N. However, to the extent that an
NMS Stock ATS has an arrangement with a trading center operated by the
broker-dealer operator or an affiliate, we believe that market
participants are still likely to consider information about such
arrangements relevant to their evaluation of an NMS Stock ATS as a
potential trading venue and such an arrangement may raise concerns
about conflicts of interest or information leakage.\771\
---------------------------------------------------------------------------

    \771\ For example, a potential conflict of interest could arise
where an NMS Stock ATS has a preferred routing arrangement with an
affiliated, non-ATS trading center wherein all orders sent to the
NMS Stock ATS would first be routed to the affiliated, non-ATS
trading center before entering the NMS Stock ATS in exchange for
monetary compensation. Such an arrangement could also pose a risk of
information leakage because the non-ATS trading center would know
that any unexecuted orders would then be routed to the NMS Stock
ATS. Alternatively, if an arrangement between the NMS Stock ATS and
affiliated trading center provides that any subscriber orders routed
out of the NMS Stock ATS would be first routed to the affiliated,
non-ATS trading center, the NMS Stock ATS may have an incentive to
remove subscribers' orders from the NMS Stock ATS and allow the
affiliated non-ATS trading center the opportunity to execute those
orders.
---------------------------------------------------------------------------

    Additionally, Part III, Item 4 of proposed Form ATS-N would also
have required the disclosure of mutual access arrangements between an
NMS Stock

ATS and other trading centers whereby, for example, a broker-dealer
operator, or its affiliate, may offer access to the broker-dealer
operator's NMS Stock ATS in exchange for access to another NMS Stock
ATS of operated by another broker-dealer. Accordingly, Part II, Item 4
of adopted Form ATS-N is designed to inform subscribers about these
arrangements as such information may impact a subscriber's experience
on the NMS Stock ATS and allow them to evaluate potential conflicts of
interest of the broker-dealer operator and its affiliates.\772\
---------------------------------------------------------------------------

    \772\ See Proposal, supra note 2, at 81049. Furthermore, as
discussed in the Proposal, an NMS Stock ATS would not be prohibited
from establishing arrangements with other trading centers, provided
that such arrangements comply with other applicable laws and rules,
including applicable federal securities laws and Regulation ATS. A
broker-dealer operator may have valid business reasons for it or its
affiliates to have formal or informal arrangements with an
unaffiliated person(s), or affiliate(s) of such person that operates
a trading center regarding access to the NMS Stock ATS. See id. at
81049, n.401.
---------------------------------------------------------------------------

    Finally, in Part II, Item 4 of adopted Form ATS-N, the Commission
has divided the request into two subparts--one subpart addressing the
broker-dealer operator's arrangements, and another subpart addressing
its affiliates' arrangements. This is a technical edit so that the
format of Part II, Item 4 of Form ATS-N is consistent with the format
of Part II, Items 1-3 above.
4. Other Products and Services
    Part III, Item 3 of proposed Form ATS-N would have required
disclosures about products and services offered to subscribers used in
connection with trading on the NMS Stock ATS. We are adopting Part III,
Item 3 of proposed Form ATS-N as Part II, Item 5 of adopted Form ATS-N;
however, we are modifying the proposed disclosure request in response
to commenter concerns.
    One commenter states that the proposed requests would have helped
investment funds assess an NMS Stock ATS as a potential execution venue
by improving their ability to understand all functionality offered by
the broker-dealer operator and whether the broker-dealer operator makes
all services available in a fair and impartial manner.\773\ Some
commenters, while not opposing the general category of disclosure
requested in proposed Part III, Item 3, believe the scope of the
requests regarding products and services should be narrowed.\774\ One
commenter agrees with the Commission's approach, but states that the
disclosure requirement should be refined to cover products or services
used in connection with trading NMS stocks, not just trading on the NMS
Stock ATS.\775\ Another commenter believes that distinct products and
services provided by an affiliate of the broker-dealer operator to a
client--who happens to be an ATS subscriber--but which are not directly
linked to the ATS subscription should not be captured by this
requirement, particularly, when the client/subscriber ultimately may or
may not use those services to trade on the ATS.\776\ Another commenter
suggests only requiring an ATS to list or outline broad categories of
products or services rather than requiring the NMS Stock ATS to
``describe'' its products or services.\777\ Another commenter states
that each relationship and customer experience is different and free-
standing in certain respects, and believes that the proposed request
would potentially require the disclosure of a whole array of products
or services, the enumeration of which would add little value and be
burdensome to maintain/update.\778\
---------------------------------------------------------------------------

    \773\ See ICI Letter at 7.
    \774\ See HMA Letter at 16; KCG Letter at 9; SIFMA Letter at 11-
13; UBS Letter at 5; STANY Letter at 4.
    \775\ See HMA Letter at 16.
    \776\ See KCG Letter at 9. The commenter states that, in many
cases, an ATS operator may be unaware of products and services
separately provided by an affiliate to a customer that are entirely
independent from and may pre-exist the client's ATS subscription.
See id.
    \777\ See SIFMA Letter at 12.
    \778\ See UBS Letter at 5. The commenter also states that a
forced public listing of a broker-dealer's products and services may
be inconsistent with the broker-dealer's traditional approach and
preferences for marketing. See id.
---------------------------------------------------------------------------

    Broker-dealer operators of NMS Stock ATSs may, directly or
indirectly through an affiliate, offer products or services to
subscribers for the purpose of, for example, submitting orders, or
receiving information about displayed interest, in the ATS.\779\ We
continue to believe that subscribers would want to know the products or
services that the broker-dealer operator or its affiliates may offer
for the purpose of effecting transactions, or submitting,
disseminating, or displaying orders and trading interest on the NMS
Stock ATS because such products or services may impact the subscribers'
access to, or trading on, the ATS.
---------------------------------------------------------------------------

    \779\ See Proposal, supra note 2 at 81048. For example, if a
subscriber purchases a service offered by the broker-dealer operator
of an NMS Stock ATS, the broker-dealer operator might also provide
that subscriber more favorable terms for its use of the NMS Stock
ATS than other subscribers who do not purchase the service. Such
favorable terms could include fee discounts or access to a faster
connection to the NMS Stock ATS.
---------------------------------------------------------------------------

    We note that many broker-dealer operators are multi-service broker-
dealers and provide routing and execution services in NMS stocks
separate from their ATS services. We further note that customers of a
broker-dealer operator could be both subscribers to its ATS and
customers of the broker-dealer operator that use trading products and
services outside of the ATS. To the extent that a customer is a
subscriber to the NMS Stock ATS and is offered use of products and
services by the broker-dealer operator or its affiliate for the purpose
of effecting transactions or submitting, disseminating, or displaying
orders and trading interest in the NMS Stock ATS, Part II, Item 5 of
adopted Form ATS-N would require disclosures about those products or
services. However, the adopted requests in Part II, Item 5 would not
encompass trading products or services offered by the broker-dealer
operator to customers that are not for the purpose of effecting
transactions or submitting, disseminating, or displaying orders and
trading interest in the NMS Stock ATS.
    Two commenters express opinions about how the scope of the proposed
requests relate to the scope of an NMS Stock ATS's operations. One
commenter states that the Proposal does not draw sufficient distinction
between the operations of the NMS Stock ATS and other products and
services of the broker-dealer operator, including agency execution
services, market making and algorithms.\780\ Another commenter states
that the Commission should clarify the terminology used in this item
because it appears to conflate the NMS Stock ATS itself with routing
and algorithmic functions.\781\ Whether a product or service is part of
the ATS requires a facts and circumstances analysis. Based on
Commission experience, broker-dealers generally offer various products
and services to customers, which include execution and routing
services, such as a SOR. These products and services are generally
independent of each other, and how such products and services may be
used by a subscriber to an NMS Stock ATS varies. However, to the extent
that a SOR (or similar functionality) or algorithm performs a function
of the ATS by bringing together the orders for securities of multiple
buyers and sellers using established nondiscretionary methods, the SOR
(or similar functionality) or algorithm may be part of the NMS Stock
ATS.\782\
---------------------------------------------------------------------------

    \780\ See STANY Letter at 4.
    \781\ See SIFMA Letter at 12-13.
    \782\ For a further discussion about when a broker-dealer
operator's SOR (or similar functionality) or algorithm may operate
as part of its NMS Stock ATS, see Section V.D.5 below.
---------------------------------------------------------------------------

    Another commenter states that Form ATS-N should only require
disclosure

of products or services at a high level and that commercially sensitive
or proprietary information should not be required to be publicly
disclosed.\783\ As noted above, we are sensitive to concerns about the
potential disclosure of commercially sensitive information. The
proposed request stated that NMS Stock ATSs must ``[d]escribe the
products or services.'' To address commenter concerns regarding the
potential disclosure of commercially sensitive information in this
disclosure request, the adopted disclosure request requires the NMS
Stock ATS to provide only a summary of the terms and conditions for the
products and services disclosed and to explain how the product or
service is used with the ATS in the applicable Item number in Part III
of adopted Form ATS-N. As explained above, we believe that requiring
only a summary narrative would normally not require the broker-dealer
operator to disclose commercially sensitive information.\784\
---------------------------------------------------------------------------

    \783\ See STANY Letter at 4.
    \784\ We note that, as part of our review of Form ATS-N
responses, we intend to monitor the level of summary information
provided on the form for completeness to help ensure that such
information is responsive to the form and is not designed to avoid
meaningful disclosure.
---------------------------------------------------------------------------

    To reduce redundancy and streamline disclosures, we are requiring
NMS Stock ATSs to provide a narrative explaining the use of the product
or service required to be disclosed in Part II, Item 5 in the relevant
item in Part III of adopted Form ATS-N. We are also adding to Part II,
Item 5 of adopted Form ATS-N the language ``for the purpose of'' before
effecting transactions, or submitting, disseminating, or displaying
orders and trading interest on the NMS Stock ATS to make clear that
this Item requests information about those products or services offered
by the broker-dealer operator or its affiliate that have a nexus to the
ATS services. We believe that the disclosure requests in Part III of
adopted Form ATS-N are limited to information that we believe is
necessary for market participants to understand the operation of the
ATS, without requiring a level of detail that would normally require
the disclosure of commercially sensitive information.
    In summary, we are modifying the proposed requests being adopted as
Part II, Item 5 of Form ATS-N to clarify that the NMS Stock ATS is only
required to provide information about products and services offered to
subscribers for the purpose of effecting transactions, or submitting,
disseminating, or displaying orders and trading interest on the NMS
Stock ATS. Specifically, we have modified the proposed language to
state that the broker-dealer operator must disclose any products or
services offered to subscribers for the purpose of effecting
transactions or for submitting, disseminating, or displaying orders and
trading interest in the NMS Stock ATS (e.g., algorithmic trading
products that send orders to the ATS, order management or order
execution systems and market data feeds). We believe that this language
makes a sufficient distinction between products and services that
relate to the functions of the ATS and those that do not; disclosures
about the latter would not be required.\785\
---------------------------------------------------------------------------

    \785\ The revised wording for this request also provides
examples of the types of services that would be encompassed by this
question, such as algorithmic trading products that send orders to
the ATS, order management or order execution systems, and market
data feeds.
---------------------------------------------------------------------------

    In addition, we have divided the disclosure requests into four
subparts: (i) One subpart addresses the products or services that the
broker-dealer operator offers to subscribers for the purpose of
effecting transactions or for submitting, disseminating, or displaying
orders and trading interest in the NMS Stock ATS; (ii) another subpart
addresses products or services that the broker-dealer operator's
affiliates offer to subscribers for the purpose of effecting
transactions or for submitting, disseminating, or displaying orders and
trading interest in the NMS Stock ATS; and (iii) the other two subparts
address any differences between the terms and conditions of the
services or products required to be identified in Item 5 among the
broker-dealer operator, affiliates, and unaffiliated subscribers.\786\
This is a technical edit to the proposed disclosures so that the format
of Part II, Item 5 is consistent with the format of Part II, Items 1-4
above.
---------------------------------------------------------------------------

    \786\ For example, if a broker-dealer operator offers
subscribers alternative algorithms to handle orders, including
sending such order to the NMS Stock ATS, and there is a difference
in the speed or latency in which each of the alternatives transmits
information, such differences in speed or latency would need to be
disclosed in Part II, Item 5 of adopted Form ATS-N.
---------------------------------------------------------------------------

5. Activities of Service Providers
a. Shared Employees
    Part III, Item 7 of proposed Form ATS-N would have required
disclosures about employees of the broker-dealer operator that service
the operations of the NMS Stock ATS and also service other business
units of the broker-dealer operator or any of its affiliates (``shared
employees''). We received several comments on Part III, Item 7 of
proposed Form ATS-N. We are adopting Part III, Item 7 of proposed Form
ATS-N with modifications in response to commenters' concerns, as
further explained below, and we are also renumbering Part III, Items 7
of proposed Form ATS-N as Part II, Item 6(a) of adopted Form ATS-N.
    One commenter recommends eliminating the requests related to shared
employees because the commenter believes that keeping the item up-to-
date would be too burdensome and unnecessary as employee roles and
responsibility shift periodically.\787\ Similarly, another commenter
believes that while accountability for the safeguarding of customer
information is essential, the commenter is uncertain as to why the
disclosures regarding shared employees under Part III, Item 7 of
proposed Form ATS-N need to be public, particularly in light of the
proposal's other reforms regarding the safeguarding of customers'
confidential information.\788\ We continue to believe that disclosures
about shared employees with access to confidential trading information
from the NMS Stock ATS would help market participants evaluate
circumstances under which a conflict of interest may arise for the NMS
Stock ATS or when there is the potential for information leakage
involving shared employees. For example, we believe that market
participants would likely want to know if an employee of the broker-
dealer operator that is responsible for the operations of a system
containing confidential subscriber trading information from the NMS
Stock ATS is also responsible for supporting the principal trading
activity of the broker-dealer operator. As discussed further below,
however, we are modifying the proposed request about shared employees
on Form ATS-N to more narrowly tailor the request in response to
comments, which should reduce the proposed reporting burden.
---------------------------------------------------------------------------

    \787\ See SIFMA Letter at 16.
    \788\ See HMA Letter at 17.
---------------------------------------------------------------------------

    Some commenters believe that the Commission should narrow the scope
of the shared employee request to shared employees who may have access
to or knowledge of confidential subscriber information or orders.\789\
One commenter states that market participants would need to dedicate
resources to determine which employees actually could pose risks of
information leakage without limiting the disclosure in this
manner.\790\ Another commenter also opines that it would be more useful
to limit the information

about shared employees to those with access to confidential
information.\791\ We acknowledge that for some broker-dealer
operators--particularly multi-service broker-dealers for which the NMS
Stock ATS is one of many business units--some employees provide purely
administrative services or other support services to multiple business
units that would not make them privy to confidential subscriber trading
information of the NMS Stock ATS. In response to these comments, the
adopted request requires disclosures only about shared employees with
access to confidential trading information on the ATS.
---------------------------------------------------------------------------

    \789\ See ICI Letter at 5-6; STANY Letter at 4.
    \790\ See ICI Letter at 5-6.
    \791\ See STANY Letter at 4.
---------------------------------------------------------------------------

    Furthermore, some commenters state that information about shared
employees should not contain certain personal information about the
employee, such as the employees name, title, or position.\792\ Several
of these commenters believe that such public disclosures would provide
little benefit to market participants because, for example, titles
change frequently, lack standard meaning across firms and businesses,
and do not provide meaningful information about potential information
leakage on the ATS.\793\ In response to these comments, we have
eliminated the requirement that the NMS Stock ATS identify the name and
position or title of shared employees because we agree that any benefit
to providing personally identifiable information about shared employees
would not be justified by the potential negative effects to the
individual whose personally identifiable information has been posted.
We also agree that such information could become stale or change
frequently, resulting in an increased burden on NMS Stock ATSs to keep
that information up-to-date.
---------------------------------------------------------------------------

    \792\ See ICI Letter at 5-6; STANY Letter at 4-5; Liquidnet
Letter at 9; STANY Letter at 4-5; UBS Letter at 6.
    \793\ See ICI Letter at 5-6; STANY Letter at 4-5; UBS Letter at
6-7.
---------------------------------------------------------------------------

    One of the above commenters also states that, while it supports
disclosure to the Commission of relevant information concerning
individuals responsible for ATS functions, it believes that the request
concerning shared employees should be limited to ``categories of
service'' as opposed to individual positions and titles.\794\ As
explained above, we have removed the proposed requirement that the
disclosures regarding shared employees contain the name and position or
title of all shared employees, and Form ATS-N only requires a summary
of the role and responsibilities of a shared employee that has access
to confidential trading information.\795\ While these changes reduce
the proposed burden on filers, disclosures responsive to Part II, Item
6(a) of adopted Form ATS-N should also provide market participants with
sufficient information to evaluate whether a shared employee's role
with the NMS Stock ATS may create a potential for information leakage.
We do not believe that market participants would benefit from even
broader, or more general, disclosures, such as ``categories of
service'' for shared employees because such information would likely
not provide market participants with relevant information to assess the
potential for information leakage.
---------------------------------------------------------------------------

    \794\ See UBS Letter at 6.
    \795\ As guidance for this request, the summary of the shared
employees' role and responsibilities generally should include
sufficient detail to provide market participants with a
comprehensive understanding of the full range of the shared
employee's responsibilities with the NMS Stock ATS and each relevant
entity, including responsibilities that could enable the employee to
view confidential trading information of the NMS Stock ATS.
---------------------------------------------------------------------------

    Two commenters express support for Part III, Item 7 of proposed
Form ATS-N by noting that current Form ATS Exhibit E calls for the
disclosure of other entities relevant to the operation of the ATS,
which the commenters believe would be helpful in determining whether
there are apparent conflicts of interest that could come into play in
terms of how orders are executed in the ATS.\796\
---------------------------------------------------------------------------

    \796\ See Luminex Letter at 2; see also PDQ Letter at 1
(agreeing with Luminex's letter).
---------------------------------------------------------------------------

    Another commenter recommends that the Commission ensure that the
requests provide meaningful narrative information about the role and
duties of each shared employee, both at the NMS Stock ATS and the other
business unit or affiliate of the broker-dealer operator.\797\ This
commenter states that, to better equip funds and other market
participants to assess the roles and expertise of shared employees, an
NMS Stock ATS should also disclose whether any shared employees are
registered with the Commission or the Financial Industry Regulatory
Authority and whether they hold one or more securities licenses.\798\
Because we have amended the proposed requests to reduce the potential
for the public disclosure of personally identifiable information, we
will not incorporate this commenter's recommendation to require an NMS
Stock ATS to disclose whether any shared employees are registered with
the Commission or FINRA and whether they hold one or more securities
licenses. The details solicited in Part II, Item 6(a) of adopted Form
ATS-N are designed to provide market participants with information to
assess whether an NMS Stock ATS's use of shared employees poses a risk
of information leakage or other conflicts of interest that could affect
a market participant's decision of whether or not to trade on the ATS.
Requiring an NMS Stock ATS to disclose information about a shared
employee's credentials would be contrary to the Commission's intent to
limit the amount of personally identifiable information that is
required by Form ATS-N.
---------------------------------------------------------------------------

    \797\ See ICI Letter at 5-6.
    \798\ See id.
---------------------------------------------------------------------------

b. Third-Party Service Providers
    Part III, Item 8 of proposed Form ATS-N would have required
disclosures about third-party service providers to the NMS Stock ATS.
The Commission received several comments on Part III, Item 8 of
proposed Form ATS-N. The Commission is adopting Part III, Item 8 of
proposed Form ATS-N with modifications in response to commenters'
concerns, as further explained below, and is renumbering Part III, Item
8 of proposed Form ATS-N as Part II, Items 6(b), 6(c), and 6(d) of
adopted Form ATS-N.
    Two commenters support the Commission's proposal to require the
disclosure of information related to third-party service providers
because such disclosures would provide information related to potential
information leakage on the NMS Stock ATS.\799\ One of those commenters
further opines that while shared employees are likely subject to
increased oversight and it supports the proposed requests related to
shared employees, the oversight of third-parties is significantly less
formidable and may result in greater risk for information leakage.\800\
As they did for Part III, Item 7 of proposed Form ATS-N, two other
commenters express support for Part III, Item 8 of proposed Form ATS-N
by noting that current Form ATS Exhibit E calls for the disclosure of
other entities relevant to the operation of the ATS, which the
commenters believe would be helpful in determining whether there are
apparent conflicts of interest that could come into play in terms of
how orders are executed in the ATS.\801\
---------------------------------------------------------------------------

    \799\ See HMA Letter at 17; ICI Letter at 5.
    \800\ See HMA Letter at 17.
    \801\ See Luminex Letter at 2; see also PDQ Letter at 1
(agreeing with Luminex's letter).
---------------------------------------------------------------------------

    Several commenters believe that aspects of the request under Part
III, Item 8 of proposed Form ATS-N related to third-party service
providers are unnecessary to evaluating an NMS

Stock ATS as a potential trading venue. Two commenters state that
information about certain shared personnel for vendors or certain
support functions, such as back-office or technology resources, are not
necessary for risk assessment of an ATS.\802\ Similarly, another
commenter believes that the disclosures could, in fact, inhibit useful
comparison of ATSs and create unnecessary and burdensome disclosure
obligations.\803\ Specifically, this commenter cites the proposed
requirements to provide detailed information regarding persons,
including natural persons, providing services for the ATS, but who are
unaffiliated with the broker-dealer.
---------------------------------------------------------------------------

    \802\ See Luminex Letter at 4; STANY Letter at 5.
    \803\ See Morgan Stanley Letter at 5.
---------------------------------------------------------------------------

    We disagree that the proposed request regarding third party service
providers to the NMS Stock ATS is unnecessary, would not be meaningful
to market participants, or, when compared to the current requirements
on Form ATS, would be overly burdensome. As noted in the Proposal,\804\
the request related to service providers is intended to expand on the
current disclosure requirement of Exhibit E of Form ATS, which requires
ATSs to disclose the name of any entity other than the ATS that will be
involved in the operation of the ATS, including the execution, trading,
clearing, and settling of transactions on behalf of the ATS; and to
provide a description of the role and responsibilities of each
entity.\805\ We continue to believe that subscribers and market
participants would be interested in whether services performed by a
third-party may or may not be under the control of the broker-dealer
operator for the purposes of evaluating the potential information
leakage.
---------------------------------------------------------------------------

    \804\ See Proposal, supra note 2, at 81055.
    \805\ See Item 7 of Form ATS (describing the requirements for
Exhibit E of Form ATS).
---------------------------------------------------------------------------

    Some commenters recommend clarifying or more narrowly tailoring the
scope of the requests in Part III, Item 8 of proposed Form ATS-N
related to service providers so as not to capture information about
vendors that only provide administrative services to the ATS or other
overhead, such as utility companies.\806\ We believe that the scope of
the third-party service provider requests should not encompass purely
administrative items--such as human resources support--or basic
overhead items--such as phone services and other utilities. The
information solicited in this disclosure is meant to provide
information about the extent to which a third-party may be able to
influence or control the operations of the ATS through involvement with
its operations (such as operating the ATS's proprietary data feeds sent
to subscribers). As indicated by commenters, information about the
roles and responsibilities of service providers to the ATS is important
because it could inform market participants about the potential
information leakage on the NMS Stock ATS.
---------------------------------------------------------------------------

    \806\ See ICI Letter at 6; UBS Letter at 6; SIFMA Letter at 16.
---------------------------------------------------------------------------

    A commenter also states that it is very difficult for a broker-
dealer to know the structure of all of its vendors, much less whether
the vendor has an affiliate that may enter orders in the subject
ATS.\807\ This commenter believes that requiring an ATS to disclose
information regarding whether any such persons, or any of their
affiliates, may enter orders or other trading interest on the NMS Stock
ATS would be unduly burdensome. We believe that the benefit to market
participants from the public disclosure of information concerning the
use of ATS services by third-party service providers and their
affiliates justifies the potential burden on the NMS Stock ATS to
provide those disclosures in Form ATS-N. Service providers have
business relationships outside of simple subscriber-ATS arrangements,
which may give those service providers or their affiliates access to
confidential trading information of other subscribers. As such, market
participants should be aware of how those service providers utilize the
ATS as a trading venue or for any other services.
---------------------------------------------------------------------------

    \807\ See Morgan Stanley Letter at 5.
---------------------------------------------------------------------------

    Furthermore, the adopted requests under Part II, Items 6(c)-(d)
require the NMS Stock ATS to disclose whether any service providers or
their affiliates use the services of the NMS Stock ATS and if they do,
the ATS is required to identify the service providers, the service(s)
used, and whether there is any disparate treatment between those
service providers and other subscribers. Thus, an NMS Stock ATS would
only be required to obtain and disclose information about third-party
vendors and their affiliates that actively use the services of the ATS;
the ATS should be aware of all parties the use its services under its
current recordkeeping obligations.\808\ Additionally, because the ATS
has already established a relationship with its service providers, we
do not believe that it would impose a significant burden on ATSs to
require its service providers to inform them about any affiliates that
use the services of the ATS. Accordingly, to the extent that an
affiliate of a service provider uses the services of the ATS, we
believe that the burden to obtain the information required by Form ATS-
N is justified by the above-explained benefits to market participants
from these disclosures.
---------------------------------------------------------------------------

    \808\ See supra note 742 and accompanying text.
---------------------------------------------------------------------------

    This commenter also states that if the Commission's concern is
whether a service provider is receiving preferential treatment from an
ATS, the Proposal should have mandated disclosure of whether there is
any preferential and/or differentiated treatment.\809\ We believe
market participants would find it very useful to understand whether
potential counterparties with whom they are trading, and who also
service the operation of the NMS Stock ATS, have access to different or
unique ATS-related services when analyzing potential conflicts of
interest or information leakage on the venue. We have added a request
to Part II, Item 6 of adopted Form ATS-N to expressly require the ATS
to identify and explain any differences in ATS services to a service
provider and all other subscribers.
---------------------------------------------------------------------------

    \809\ See Morgan Stanley Letter at 5.
---------------------------------------------------------------------------

    One commenter questions the feasibility of providing ``a detailed
description of information technology services, including both hardware
and software'' in Part III, Item 8 of proposed Form ATS-N, which the
commenter opines can be taken to the extreme of requiring an ATS
operator to disassemble a server to enumerate the manufacturer of
various components. The commenter believes that a general--but
thorough--description of the information technology services would be
more practical.\810\ We did not intend for the adopted disclosures to
require the level of granular detail to which this commenter cites in
its comment letter. To clarify the scope of the required disclosure
about services provided by third parties, adopted Form ATS-N no longer
requires the NMS Stock ATS to ``describe'' the operation, service, or
function provided by the third party service provider. Instead, it
requires an NMS Stock ATS to provide a ``summary'' of the service
provider's role and responsibilities.\811\
---------------------------------------------------------------------------

    \810\ See UBS Letter at 7.
    \811\ As guidance for this request, the Commission would view,
for example, an NMS Stock ATS simply stating that a third-party
provides technology or hardware to the ATS as insufficient. See
Proposal, supra note 2, at 81055. In this example, the summary
generally should provide market participants with an understanding
of the types of technology or hardware provided, and how that
hardware or technology is used by the NMS Stock ATS. This
information is meant to provide market participants with a better
understanding about whether the service provider could access
confidential trading information.

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

    As guidance for this request, we would view, for example, an NMS
Stock ATS simply stating that a third-party provides technology or
hardware to the ATS as not responsive to the required summary of the
service provider's role. But we would not expect the ATS to provide
information about the manufacturer of certain components of its
hardware. This request for summary information is designed to provide
market participants with a general understanding of the types of
technology or hardware provided by the service provider as part of its
responsibilities, and how that hardware or technology is used by the
NMS Stock ATS. The purpose of this disclosure is to provide market
participants with information to better understand whether the service
provider might be able to access confidential trading information, so
NMS Stock ATSs should draft its disclosure with the goal of conveying
such information.
    Furthermore, to reduce redundant disclosures on Form ATS-N, adopted
Form ATS-N will only require this in Part III, unless there are no
disclosure requests in Part III that would encompass these types of
services. The disclosure requests in Part III will likely require the
NMS Stock ATS to describe the services provided by third-parties, and
we believe that a summary narrative about the roles and
responsibilities of third-party service providers will likely be
included in that description of the services. We do not believe that it
is not necessary to also provide a redundant summary narrative of the
roles and responsibilities of service providers in Part II.
    A commenter also recommends eliminating the disclosures of third-
party service providers from the publicly available Form ATS-N and
requiring that the information requested be made available only to the
Commission on a confidential basis.\812\ We are not changing the nature
of the third-party service provider request to require the disclosures
to be filed on a confidential basis with the Commission. We have
narrowed the scope of the request so that the information provided is
tailored to address the concerns of market participants and NMS Stock
ATSs clarify the level of detail required by these disclosures. We
believe that requiring only a summary description of the roles and
responsibilities of third-party service providers would not require the
type of details that could be subject to confidentiality concerns or
otherwise put either the NMS Stock ATS or the service provider at a
competitive disadvantage.
---------------------------------------------------------------------------

    \812\ See SIFMA Letter at 16.
---------------------------------------------------------------------------

    Finally, we are replacing the proposed word ``person'' with the
word ``entity'' in Part II, Item 6(b) of adopted Form ATS-N. The
Commission does not believe that an NMS Stock ATS is likely to contract
with a natural person who is not associated with a legal entity (e.g.,
a corporation or an LLC) to provide services to the ATS. Furthermore,
the Commission does not intend for the service provider request to
disclose details about natural persons providing services to the ATS
when those natural persons are employees of, or independent contractors
hired by, a third party.
6. Protection of Confidential Trading Information
    Part III, Item 10 of proposed Form ATS-N would have required an NMS
Stock ATS to provide disclosures about its confidential treatment of
trading information. One commenter states its belief that the proposed
requests under Part III, Item 10 of proposed Form ATS-N seemed
appropriate given the risk of misuse of confidential information.\813\
This commenter believes the requests fit well within the framework of
the new requirement that all ATSs maintain written safeguards and
procedures to protect confidential trading information. We are adopting
Part III, Item 10 of proposed Form ATS-N with modifications in response
to commenter concerns, as further explained below, and renumbering the
proposed request as Part II, Item 7 of adopted Form ATS-N.
---------------------------------------------------------------------------

    \813\ See HMA Letter at 18.
---------------------------------------------------------------------------

    Part II, Item 7(a) of adopted Form ATS-N requires an NMS Stock ATS
to describe its written safeguards and written procedures to protect
the confidential trading information of subscribers to the NMS Stock
ATS, including: (i) Written standards controlling employees of the ATS
that trade for employees' accounts; and (ii) written oversight
procedures to ensure that the safeguards and procedures described above
are implemented and followed. The protection of confidential trading
information is a bedrock component of the regulation of ATSs and is
essential to ensuring the integrity of ATSs as an execution venue. If
such information is not protected, many of the advantages or purposes
for which a subscriber may choose to send its orders to an ATS (e.g.,
trade anonymously and/or to mitigate the impact of trading in large
positions) are eliminated. In cases where the confidential trading
information of a subscriber is impermissibly shared with the personnel
of the broker-dealer operator or any of its affiliates (e.g., persons
who are not responsible for the operation of the ATS or compliance with
applicable rules), such an abuse is also compounded by the conflicting
interests of the broker-dealer operator. That is, in such a case, the
broker-dealer operator has invited subscribers to trade on its ATS and
may have abused that relationship to provide itself or its affiliates
with a direct competitive advantage over that subscriber. Accordingly,
we believe that disclosures informing market participants about broker-
dealer operators' written safeguards and procedures to protect
confidential trading information are necessary so market participants
can independently evaluate the robustness of the safeguards and
procedures that are employed by the NMS Stock ATS to protect subscriber
confidential trading information and decide for themselves whether they
wish to do business with a particular NMS Stock ATS.\814\
---------------------------------------------------------------------------

    \814\ If an NMS Stock ATS has disclosed information on its Form
ATS-N about the written safeguards and procedures that it has
established to protect the confidential trading information of
subscribers, including oversight procedures to ensure that such
safeguards and procedures are followed, but those disclosures
materially differ from the actual means by which the NMS Stock ATS
protected the confidential trading information of subscribers, the
ATS would be required to file an amendment pursuant to Rule
304(a)(2) to revise its Form ATS-N to accurately describe such
safeguards and procedures.
---------------------------------------------------------------------------

    We are adopting Part II, Items 7(b) and (c) to require an NMS Stock
ATS to disclose whether a subscriber can consent and withdraw consent,
respectively, to the disclosure of its confidential trading information
to any person (not including those employees of the NMS Stock ATS who
are operating the system or responsible for its compliance with
applicable rules). Subscribers should be able to give consent if they
so choose to share their confidential trading information.\815\ ATSs
that transact in NMS stocks vary in terms of what types of orders,
indications of interests, or other forms of trading interest are
confidential on their systems and what information about such trading
interest may be shared. For example, an ATS might provide that no IOIs
submitted by subscribers will be considered confidential, but may
provide subscribers with the option to restrict the information in the
IOI message to just the symbol and side (i.e., buy or sell).\816\ For
this example, Part II, Items 7(b) and 7(c) of adopted Form ATS-N

would require the NMS Stock ATS to describe the means by which a
subscriber could control some of the information contained in the IOI
message by providing consent or withdrawing such consent for the
sharing of its confidential trading information.\817\
---------------------------------------------------------------------------

    \815\ See Regulation ATS Adopting Release, supra note 3, at
70879.
    \816\ See Proposal, supra note 2, at 81058.
    \817\ See id. We believe that there may be some NMS Stock ATSs
that might not offer any means by which a subscriber could consent
to the dissemination of its confidential trading information. An NMS
Stock ATS would be required to disclose this fact pursuant to Item
7(a). See id., n.437.
---------------------------------------------------------------------------

    Part II, Items 7(b) and 7(c) contain requests similar to those in
Part III, Item 10(a) of proposed Form ATS-N, but we are modifying the
format of these requests so that they are in the form of a ``yes'' or
``no'' question, and if the NMS Stock ATS answers ``yes,'' the NMS
Stock ATS must explain how and under what conditions consent can be
given and withdrawn. We are also adding the phrase ``not including
those employees of the NMS Stock ATS who are operating the system or
responsible for its compliance with applicable rule'' to Part II, Item
7(b) of adopted Form ATS-N. This change is to clarify that the request
does not cover such employees that may need access to such information
in the course of their responsibilities to service the system. As noted
above, Regulation ATS requires that access to confidential subscriber
information be available only to those employees of the ATS that
operate the ATS's system or are responsible for the ATS's compliance
with applicable rules.\818\
---------------------------------------------------------------------------

    \818\ See Regulation ATS Adopting Release, supra note 3, at
70879; 17 CFR 242.301(b)(10)(i)(A).
---------------------------------------------------------------------------

    Finally, we are adopting Part II, Item 7(d) to require an NMS Stock
ATS to provide a summary of the roles and responsibilities of any
persons that have access to confidential trading information, the
confidential trading information that is accessible by them, and the
basis for the access. Part III, Item 10(b) of proposed Form ATS-N would
have required the NMS Stock ATS to identify the position or title of
any person who has access to confidential trading information, describe
the confidential information to which the person has access, and
describe the circumstances under which the person can access
confidential trading information. Some commenters express concerns
regarding the potential disclosure of personally identifiable
information under proposed Part III, Item 10(b).\819\ We have
eliminated the proposed requirement to publicly disclose the positions
or titles of persons with access to confidential trading information
and part II, Item 7(d) of adopted Form ATS-N requires only a summary of
the roles and responsibilities of any persons that have access to
confidential trading information, the confidential trading information
that is accessible by them, and the basis for the access. We believe
that any benefit of providing personally identifiable information is
not justified by the potential negative effects of publicly posting
personally identifiable information; a summary of the information
required under Item 7(d) will buttress the existing obligations on ATSs
to restrict access only to permitted personnel (e.g., those responsible
for its operation or compliance).\820\
---------------------------------------------------------------------------

    \819\ See MFA/AIMA Letter at 6 (expressing concern that
requiring disclosure of the positions or titles of persons who have
access to confidential trading information would paint a target on
such persons and could increase their security risks and risks of
receiving phishing attacks); SIFMA Letter at 17-18 (stating that the
public disclosure of information under Part IV, Item 10 of proposed
Form ATS-N would have raised privacy, security, and proprietary
information concerns).
    \820\ See Regulation ATS Adopting Release, supra note 3, at
70879; 17 CFR 242.301(b)(10)(i)(A).
---------------------------------------------------------------------------

7. Differences in Availability of Services, Functionalities, or
Procedures
    Part III, Item 9 of proposed Form ATS-N would have required an NMS
Stock ATS to disclose information regarding the differences in the
availability of services, functionalities, or procedures of the NMS
Stock ATS that are available or apply to the broker-dealer operator or
its affiliates that are not available or do not apply to other
subscribers.
    In general, several commenters support requests for information
about differences between subscribers and the broker-dealer with
respect to their use of the NMS Stock ATS.\821\ A commenter also states
that the proposed requests in Part III, Item 9 of proposed Form ATS-N
are reasonable.\822\ One commenter, however, expresses concern that the
proposed disclosures that would have been required under Part III, Item
9 of proposed Form ATS-N were too broad and could result in the
disclosure of either proprietary information or other information that
could pose a cybersecurity risk.\823\
---------------------------------------------------------------------------

    \821\ See SIFMA Letter at 6; Consumer Federation of America
Letter at 9-10. See also Fidelity Letter at 5 (stating it should be
disclosed when subscribers are not treated the same way); UBS Letter
at 7 (suggesting the Commission request should highlight differences
among subscribers).
    \822\ See HMA Letter at 17-18.
    \823\ See SIFMA Letter at 17.
---------------------------------------------------------------------------

    We continue to believe that the disclosure about differences in
treatment are important to market participants and will better allow
them to decide whether submitting order flow to that NMS Stock ATS
aligns with their trading or investment objectives. To more closely
tailor the Form ATS-N disclosures about differences in treatment to the
subject matter covered in relevant conflicts-of-interest requests, we
are removing Part III, Item 9 of proposed Form ATS-N as a stand-alone
question and incorporating the request into Part II, Items 1, 2, 3, and
6 of adopted Form ATS-N. We believe that under this format, disclosures
regarding the differences in the availability of services,
functionalities, or procedures of the NMS Stock ATS will relate to the
specific subject matter covered by each of the aforementioned
disclosure requests that relate to services, functionalities, or
procedures that may differ among subscribers or the broker-dealer
operator and subscribers.
    The requests in Part II of adopted Form ATS-N focus on the ATS-
related activities of the broker-dealer operator and its affiliates and
are designed to inform market participants about the competing
interests between the broker-dealer operator or its affiliates and
other subscribers and the potential for information leakage of
subscribers' confidential trading information. In response to a
commenter's concern,\824\ we note that we did not intend for these
requests to require descriptions of technologies or other aspects of
the NMS Stock ATS that could pose a cybersecurity risk or are otherwise
disclose commercially sensitive information.
---------------------------------------------------------------------------

    \824\ See id.
---------------------------------------------------------------------------

8. Other Recommendations From Commenters
    The Commission received comments recommending additional regulation
or disclosures for NMS Stock ATSs related to conflicts of interests. In
the Proposal, the Commission considered alternatives to address
conflicts of interests between the broker-dealer operator and the NMS
Stock ATS. One alternative the Commission considered was to eliminate
any potential conflicts of interest by requiring the NMS Stock ATS to
operate with a single business function--operating the NMS Stock ATS--
and by eliminating any other function of the broker-dealer, such as
principal trading.\825\ The Commission also considered continuing to
allow broker-dealer operators to act as a broker-dealer operator of an
NMS Stock ATS and engage in non-ATS functions while imposing new
requirements designed to limit potential conflicts of

interest.\826\ In the Proposal, the Commission requested comment about
whether certain conflicts of interest arising out of the broker-
dealer's operation of the NMS Stock ATS should be prohibited.\827\
---------------------------------------------------------------------------

    \825\ See Proposal, supra note 2, at 81043.
    \826\ See id.
    \827\ See id.
---------------------------------------------------------------------------

    Several commenters recommend that the Commission prohibit conflicts
of interest altogether on NMS Stock ATSs, which would include a
prohibition on trading on the NMS Stock ATS by the broker-dealer
operator and its affiliates, rather than simply increasing the
disclosure requirements for conflicts of interest.\828\ However, we
continue to believe that prohibiting conflicts of interest for the
broker-dealer operator related to its operation of an NMS Stock ATS
would be significantly more intrusive relative to requiring additional
disclosures about the operations of the broker-dealer operator and its
affiliates, and therefor did not propose these alternatives.\829\ We
also believe that such a prohibition would substantially affect or
limit the current operations of ATSs that trade NMS stocks. Part II of
adopted Form ATS-N is designed to provide disclosures to market
participants about ATS-related activities of a broker-dealer operator
and its affiliates that might give rise of potential conflicts of
interest or information leakage, and thus, should better enable market
participants to evaluate whether they want to use the services of that
NMS Stock ATS.
---------------------------------------------------------------------------

    \828\ See Consumer Federation of America Letter at 7-8
(asserting that certain conflicts of interest are so acute and
pernicious that they cannot be mitigated or absolved merely by
disclosing them; the commenter provides principle trading by the
broker-dealer operator as an example); HMA Letter at 13-18
(advocating for: (1) The Commission to prohibit what the commenter
considers to be the deeply troubling conflicts of interest attendant
with allowing an ATS operator or affiliate to trade in the ATS; or
(2) alternatively if the Commission would not adopt such a
prohibition, for the Commission to affirmatively restrict how the
broker-dealer operator or its affiliates interact with the ATS);
Better Markets Letter at 5-6 (advocating that the Commission ban
material conflicts of interest rather than relying on disclosure
alone).
    \829\ See Proposal, supra note 2, at 81043.
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    Also, one commenter recommends that, for any conflicts of interest
that are permitted, at a minimum Form ATS-N should include clear
disclosures of conflicts of interest under a section titled ``conflicts
of interest.'' \830\ We decline the commenter's request to title Part
II ``conflicts of interest.'' We believe that it is more helpful to
market participants for Form ATS-N to provide the information market
participants need to individually evaluate whether there is a conflict
of interest on a given NMS Stock ATS rather than relying on the ATS to
determine when a conflict exits.
---------------------------------------------------------------------------

    \830\ See Better Markets Letter at 6.
---------------------------------------------------------------------------

    We also received a comment requesting the Commission to require NMS
Stock ATSs to disclose in Part II of Form ATS-N any proceeding within
the last 10 years against the NMS Stock ATS, the broker-dealer operator
or officers or employees of the broker-dealer operator that relates to
the handling of equity orders or the operation of the NMS Stock
ATS.\831\ Form ATS-N is designed to provide market participants with
public disclosures about the current operations of an NMS Stock ATS and
the current ATS-related activities of the broker-dealer operator and
its affiliates. We believe that this information will help market
participants assess the NMS Stock ATS as potential venue for their
orders. We believe that disclosures about past proceedings, or other
disciplinary matters, of the NMS Stock ATS, its broker-dealer operator,
or officers and employees of the broker-dealer operator--even those
that relate to the handling of equity orders or the operation of the
NMS Stock ATS--would not provide additional transparency into the
current operations of the NMS Stock ATS. To the extent that such
information is publicly available, a market participant may review
details about past and pending proceedings involving the NMS Stock ATS,
its broker-dealer operator, or the officers and employees of the
broker-dealer operator via, for example, public databases maintained by
the Commission or FINRA.
---------------------------------------------------------------------------

    \831\ See ICI Letter at 6, n.14.
---------------------------------------------------------------------------

D. Part III Form ATS-N: Manner of ATS Operations

    Part III of adopted Form ATS-N is designed to provide public
disclosures to help market participants understand, among other things,
how subscribers' orders and trading interest are handled, matched, and
executed on the NMS Stock ATS. In response to comments, we are revising
the format of several requests in Part IV of proposed Form ATS-N
(renumbered as Part III in the adopted Form) to help NMS Stock ATSs
provide disclosures that would be useful to market participants. For
example, in response to commenters that believe the Commission's use of
the term ``describe'' is vague and would lead to discursive disclosures
and obscure key information, we are revising requests to be more
explicit, adding specificity to clarify the meaning of the requests,
and providing non-exhaustive examples for NMS Stock ATSs to better
understand what would be responsive to the Form ATS-N.\832\ In
addition, we have added ``yes'' or ``no'' questions, and converted
proposed Items into ``yes'' or ``no'' questions, throughout Part III of
Form ATS-N, which we believe will allow market participants to find
information more efficiently and facilitate their comparisons across
NMS Stock ATSs.\833\ Moreover, we have separated the requests for
information in Part III of adopted Form ATS-N into more items (and
renumbered the items) and discrete topics to help readers more easily
find information and compare that information among NMS Stock ATSs. In
addition, we are combining or removing certain requests to reduce
redundancy within Part III, and between Parts II and III, and
separating certain requests for information into new items or subparts
that focus the information required in response to commenter
suggestions and concerns. Finally, we are adding a requirement to
identify and explain any differences in the treatment of subscribers
and the broker-dealer operator to several items that did not require
this information as proposed.\834\ We intended that these differences
be explained for all of the subject matter covered by Form ATS-N, and
several commenters support requests for information about differences
between subscribers and the broker-dealer operator with respect to
their use of the NMS Stock ATS.\835\ Differences in the treatment among
subscribers and the broker-dealer operator and its affiliates

will help market participants discern any benefit or disadvantage they
may receive in comparison to other market participants or the broker-
dealer operator.
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    \832\ The topics and examples provided on Form ATS-N are
designed to help NMS Stock ATS consider the scope of the request and
information potentially responsive to the form requirements. While
we use the term ``including'' to denote topics responsive to an Item
and have provided examples in many of the requests, these topics or
examples are not an exhaustive list of what may be responsive to a
Form ATS-N request. See, e.g., Items 4, 6, 7, 9, 10, 11, 13, 19, 21,
and 23 of Part III of adopted Form ATS-N.
    \833\ See e.g., SSGA Letter at 2; SIFMA Letter at 9; STANY
Letter at 5; LeveL ATS Letter at 6-7; KCG Letter at 10. See also
Section V.A.1. (discussing the format of items in Part II and III of
Form ATS-N).
    \834\ Specifically, this requirement is being added to Items 10,
14, 17, 18, and 23 of adopted Form ATS-N. In the Proposal, the
Commission required a description of any differences between
subscribers and persons in Part IV, Items 1(b), 1(e), 2(b), 3(b)-
(d), 4, 5(a), 5(b), 6(a), 7, 8, 10(b), 12(b), and 13 of proposed
Form ATS-N. See Proposal, supra note 2, at 81146-81152.
    \835\ See, e.g., SIFMA Letter at 5-6 (stating whether all
subscribers have access to the same suite of products and services
is particularly appropriate and useful); Fidelity Letter at 5
(calling for disclosure when subscribers are not treated the same
way); UBS Letter at 7 (suggesting the Commission request should
highlight differences in subscriber access that may impact other
users of the ATS). See also Consumer Federation of America Letter at
9-10 (discussing how to address potential advantages of the broker-
dealer operator and its affiliates).
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1. Types of ATS Subscribers
    Part IV, Item 1(c) of proposed Form ATS-N would have required
disclosures about types of subscribers to the NMS Stock ATS. We are
adopting Part IV, Item 1(c) of proposed Form ATS-N with modifications
as Part III Item 1 (``Types of Subscribers'') of adopted Form ATS-
N.\836\ Part III, Item 1 of adopted Form ATS-N is designed to provide
market participants with information about the type of order flow in
the NMS Stock ATS. NMS Stock ATSs may design their system for trading
by retail, institutional, or any other type of market participant.
---------------------------------------------------------------------------

    \836\ As also discussed under Section V.D.2., commenters state
with regard to the entirety of Part IV, Item 1 of proposed Form ATS-
N that the Commission should adopt a ``yes'' or ``no'' format for
the item instead of requests for descriptions. See SIFMA Letter at
19; KCG Letter at 11.
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    One commenter recommends that the Commission consider eliminating
or consolidating this request because it is redundant to the request in
Part IV, Item 5 of proposed Form ATS-N regarding segmentation.\837\ In
response to this comment, we are removing the requirement from Part IV,
Item 1(c) of proposed Form ATS-N to ``describe any criteria for
distinguishing among types of subscribers, classes of subscriber, or
other persons.'' To the extent that an NMS Stock ATS distinguishes
among ATS subscribers, the ATS will be required to discuss such
information in Part III, Item 13 of adopted Form ATS-N, which relates
to segmentation.
---------------------------------------------------------------------------

    \837\ See SIFMA Letter at 20.
---------------------------------------------------------------------------

    Another commenter believes that the phrase ``types of subscribers''
should be specifically defined.\838\ In response to this comment, we
are providing a list of market participants in Part III, Item 1 of
adopted Form ATS-N that, in the Commission's experience, are commonly
used. The revised list includes: Retail investors, issuers, asset
managers, brokers, dealers, NMS Stock ATSs, investment companies, hedge
funds, market makers, principal trading firms, and banks. The list is
non-exhaustive and an NMS Stock ATS is required to list any type of
subscriber that can use the NMS Stock ATS services. Also, in response
to this comment, we are revising Part IV, Item 1(c) of proposed Form
ATS-N, by removing the request to describe the type of subscribers and
other persons and instead, are only requesting that the NMS Stock ATS
select the checkbox for the types of subscribers that can use the NMS
Stock ATS services (and identify any other types of subscribers not
listed in a checkbox). We are also revising the Item to require the
selection of the types of subscribers that ``can'' use the NMS Stock
ATS services, rather than solely those types of subscribers that in
fact use the NMS Stock ATS as was proposed.
---------------------------------------------------------------------------

    \838\ See KCG Letter at 12. The proposed Item required the NMS
Stock ATS to describe the types of subscribers and other persons
that use the services of the NMS Stock ATS.
---------------------------------------------------------------------------

    Furthermore, in response to general comments that the Form ATS-N
should be formatted to facilitate comparisons across NMS Stock
ATSs,\839\ we are relocating Part IV, Item 1(c) of proposed Form ATS-N
into a separate Item in Part III, Item 1 of adopted Form ATS-N and
naming it ``Types of ATS Subscribers.'' \840\
---------------------------------------------------------------------------

    \839\ See e.g., SSGA Letter at 2; SIFMA Letter at 9; STANY
Letter at 5; LeveL ATS Letter at 6-7; KCG Letter at 10.
    \840\ See Section V.D.2 for a discussion of changes to the
requirement under Part IV, Item 1(c) of proposed Form ATS-N that NMS
Stock ATSs state whether they accept non-broker-dealers as
subscribers to the NMS Stock ATS.
---------------------------------------------------------------------------

2. Eligibility for ATS Services
    Part IV, Item 1(a) of proposed Form ATS-N would have required
disclosures about eligibility requirements of the NMS Stock ATS.\841\
We are adopting Part IV, Item 1(a) of proposed Form ATS-N with certain
modifications described below, naming the Item ``Eligibility for ATS
Services,'' and relocating the request as Part III, Item 2 of adopted
Form ATS-N.\842\
---------------------------------------------------------------------------

    \841\ As discussed in the Proposal, the eligibility process and
requirements to access an NMS Stock ATS may vary, and the
requirements may differ depending on whether a potential subscriber
is a customer of the broker-dealer operator of the ATS. For
instance, some ATSs may require that a potential subscriber be a
broker-dealer to submit orders in the ATS, while other ATSs may not.
Some NMS Stock ATSs may require potential subscribers to submit
financial information as a pre-requisite to subscribing to, or
maintaining their subscriber status on, the NMS Stock ATS. See
Proposal, supra note 2, at 81060.
    \842\ One commenter supports the proposed disclosures stating
that funds and other market participants would find this information
valuable because it would facilitate the efficient comparison of
eligibility processes and requirements across all NMS Stock ATSs and
describe the types of participants that may dominate order flow on a
particular NMS Stock ATS. See ICI Letter at 8.
---------------------------------------------------------------------------

    We also received comment seeking modifications to the proposed
Item. One commenter suggests that the term ``eligibility requirements''
under Part IV, Item 1(a) of proposed Form ATS-N is unclear and suggests
using eligibility ``standards'' as a more accurate way to capture the
various subscriber criteria an ATS might evaluate.\843\ In response to
this comment, we are replacing the reference to ``eligibility
requirements'' in Part IV, Item 1(a) of proposed Form ATS-N with a
reference to ``conditions'' the NMS Stock ATS requires a person to
satisfy before accessing the ATS services. We believe that the term
``conditions'' provides the NMS Stock ATS with more flexibility to
describe the relevant criteria.
---------------------------------------------------------------------------

    \843\ See SIFMA Letter at 19.
---------------------------------------------------------------------------

    Also, commenters express confusion over the difference between Part
IV, Item 1(a) and 1(e) (adopted as Part III, Items 2 and 3,
respectively) of proposed Form ATS-N and whether they overlapped.\844\
In response to these commenters, we are clarifying the request by
adding the phrase ``before accessing the ATS services'' in Part III,
Item 2(b) of adopted Form ATS-N. On the other hand, Part III, Item 3 of
adopted Form ATS-N, as discussed infra, requires disclosures about any
conditions that would exclude a subscriber, in whole or in part, from
using the services of the NMS Stock ATS after the person, as a
subscriber, is permitted to use or submit orders to the NMS Stock ATS,
such as for certain subscriber behavior while actively participating in
the ATS.\845\
---------------------------------------------------------------------------

    \844\ Id. at 20 (stating it cannot distinguish between the
requested information in proposed Items 1(a) and 1(e)); KCG Letter
at 11-12 (noting an apparent overlap between the information
requested under proposed Item 1(a) and proposed Item 1(e) and
recommending that the Commission revisit and clarify the request).
    \845\ For example, if an NMS Stock ATS has a practice of
excluding subscribers that do meet certain percentage thresholds for
submitting firm-up orders in response to receiving a conditional
order sent to them by the NMS Stock ATS, then this practice would be
subject to disclosure under Part III, Item 3 of adopted Form ATS-N
(``Exclusion from Services'') and not Part III, Item 2
(``Eligibility Requirements'').
---------------------------------------------------------------------------

    We are not imposing new requirements for NMS Stock ATSs to have
certain eligibility requirements, either by implicating the fair access
rule under Rule 301(b)(5) (as suggested by a commenter), or
otherwise.\846\ The ``yes'' or ``no'' questions of Part III, Item 2(b)
of adopted Form ATS-N ask whether there are any conditions that the NMS
Stock ATS requires a person to satisfy before accessing the ATS
services. If an NMS Stock ATS marks ``yes,'' the ATS is indicating that
it has such conditions and must list and provide a summary of the
conditions. We believe that these revisions make clear that we are not
requiring any eligibility requirements.
---------------------------------------------------------------------------

    \846\ See infra notes 855-857 and accompanying text.
---------------------------------------------------------------------------

    In Part III, Item 2(a) of adopted Form ATS-N, we are requiring the
NMS Stock ATS to state whether it requires subscribers to be registered
broker-dealers. This request is similar to the

proposed request in Part IV, Item 1(c) of proposed Form ATS-N but asked
in a ``yes'' or ``no'' format. Part III, Items 2(c) and 2(d) of adopted
Form ATS-N are requirements proposed in Part IV, Item 1(a) \847\ and
1(b), respectively, of proposed Form ATS-N, that the Commission is
formatting as ``yes'' or ``no'' questions.
---------------------------------------------------------------------------

    \847\ We are removing the reference to `subscriber' from the
Item, as proposed, because Part III, Item 2 of adopted Form ATS-N
relates to eligibility requirements of persons before they become
subscribers.
---------------------------------------------------------------------------

    If the NMS Stock ATS indicates that it does have conditions that a
person must satisfy before accessing the ATS services, the request, as
modified, requires an NMS Stock ATS to list and provide a ``summary''
of those conditions. We believe a summary of those conditions would
provide sufficient disclosure (in conjunction with Part III, Item 1 of
adopted Form ATS-N) for market participants to discern the type of
order flow that they are likely to interact with on the NMS Stock ATS,
while at the same time, not impairing the ATS's ability to reasonably
control the activities and quality of flow on its platform.\848\ One
commenter acknowledges that it already discloses the general
requirements for becoming a user of its ATS,\849\ which is analogous to
the summary of conditions we are adopting in this Item. Moreover, we
believe that requiring additional disclosures about differences in
treatment among persons is important to market participants.\850\
---------------------------------------------------------------------------

    \848\ See UBS Letter at 7. See infra note 853 and accompanying
text.
    \849\ See id.
    \850\ See, e.g., SIFMA Letter at 5-6 (stating whether all
subscribers have access to the same suite of products and services
is particularly appropriate and useful); Fidelity Letter at 5
(stating it should be disclosed when subscribers are not treated the
same way); UBS Letter at 7 (suggesting the Commission request should
highlight differences in subscriber access that may impact other
users of the ATS). See also Consumer Federation of America Letter at
9-10 (discussing how to address potential advantages of the broker-
dealer operator and its affiliates).
---------------------------------------------------------------------------

    We also received comment unfavorable to Part IV, Item 1(b) of
proposed Form ATS-N.\851\ The proposed Item would have required an NMS
Stock ATS to describe the terms and conditions of any contractual
agreements for granting access to the NMS Stock ATS for the purpose of
effecting transactions in securities or for submitting, disseminating,
or displaying orders on the NMS Stock ATS, and to state whether these
contractual agreements are written and if the terms and conditions of
any contractual agreements were not the same for all subscribers and
persons, the NMS Stock ATS would be required to describe any
differences.
---------------------------------------------------------------------------

    \851\ See Liquidnet Letter at 12; UBS Letter at 7; SIFMA Letter
at 19.
---------------------------------------------------------------------------

    We are not adopting the provision requiring the disclosure of the
terms and conditions of any contractual agreements in Part IV, Item
1(b) of proposed Form ATS-N.\852\ We believe that the Form ATS-N, as