SEC Looks to Enhance Transparency and Oversight in ATSs

Investing

Published: November 19, 2015 1:45 pm

Last Updated: January 13, 2020 4:58 pm

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

Ultimately, the proposal would require an NMS stock ATS to file detailed disclosures 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.

Additionally, the proposal would make these disclosures publicly available on the SEC 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.

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

SEC Chair Mary Jo White said:

Investors and other market participants need more and better information about how alternative trading systems work. The proposed changes would represent a critical step forward in delivering greater transparency to investors and enhancing equity market structure.

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