The SEC proposed amendments to Regulation ATS ("Alternative Trading Systems") to improve the "operational transparency, system integrity and regulatory oversight" of those systems that trade (i) government securities (as that term is defined under Section 3(a)(42)>b of the Exchange Act), and (ii) repurchase and reverse repurchase agreements on government securities ("Government Securities ATSs"). Additionally, the SEC issued a concept release concerning the regulatory framework for electronic fixed-income trading platforms.
The amendments would, among other things:
- revoke the exemption from compliance with Regulation ATS for a Government Securities ATS that registers as a broker-dealer or is a bank;
- mandate the filing of a public Form ATS-G, requiring a Government Securities ATS to disclose certain information regarding its operations and the ATS-related activities of the registered broker-dealer, or government securities broker-dealer that operates the ATS;
- require the public dissemination of certain Form ATS-G filings and provide the SEC with a process for reviewing the ATS-G filings;
- apply the fair access rule under Regulation ATS Rule 301(b)(5) to Government Securities ATSs, pending their satisfaction of certain volume thresholds in U.S. Treasury Securities or debt securities issued or guaranteed by an "executive agency" (as defined under 5 U.S.C. 105) or a "government-sponsored enterprise" (as defined under 2 U.S.C. 622(8)) ("Agency Securities"); and
- make Regulation SCI applicable to ATSs that hit certain volume thresholds in U.S. Treasury Securities or Agency Securities.
Comments on the proposal are due 60 days after its publication in the Federal Register.
SEC Commissioner Elad Roisman stated that greater transparency in disclosures will enable regulators and market participants to better understand how government securities markets operate and that the concept release would allow the SEC to learn more about how current regulations apply to existing electronic trading platforms in the fixed-income marketplace.
In his remarks at a U.S. Treasury Market Conference, Mr. Roisman emphasized that ATSs are integral to the structure of the Treasury market and explained that the goal of the proposed amendments is to "strengthen the public market for Treasury securities." Mr. Roisman said that the Treasury securities market could be further strengthened by, among other things: (i) including Treasury security trade data from banks in transaction reporting, (ii) applying certain SEC equity market requirements, such as trading venue and dealer regulations, to the cash Treasury market and (iii) expanding access to central clearing in the cash Treasury market. Mr. Roisman stated that such considerations may enhance oversight of the Treasury securities markets and improve their overall functionality.
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