SEC proposes rules to enhance transparency and oversight of alternative trading systems

Source: SEC

The Securities and Exchange Commission today announced it has voted to propose rules to enhance operational transparency and regulatory oversight of alternative trading systems (ATSs) that trade stocks listed on a national securities exchange (NMS stocks), including “dark pools.”

“Investors and other market participants need more and better information about how alternative trading systems work,” said SEC Chair Mary Jo White. “The proposed changes would represent a critical step forward in delivering greater transparency to investors and enhancing equity market structure.”

The proposal would require an NMS stock ATS to file detailed disclosures on newly proposed Form ATS-N about its operations and the activities of its broker-dealer operator and its affiliates. These disclosures would include information regarding trading by the broker-dealer operator and its affiliates on the ATS, the types of orders and market data used on the ATS, and the ATS’ execution and priority procedures.

In addition, the proposal would make Form ATS-N disclosures publicly available on the Commission’s website, which could allow market participants to better evaluate whether to do business with an ATS, as well as to be better informed when evaluating order handling decisions made by their broker.

The proposals also would provide a process for the Commission to qualify NMS stock ATSs for the exemption under which they operate and to review disclosures made on Form ATS-N. This would provide a process for the Commission to declare Form ATS-N filings effective or ineffective, as well as provide a process to review amendments. The proposed processes would enhance the Commission’s ongoing oversight of NMS stock ATSs.

The SEC is seeking public comment on the proposal for 60 days following its publication in the Federal Register.

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