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SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts …

1 Conformed to the Federal Register Version SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 232, 240, 242, and 249 [Release No. 34-94062; File No. S7-02-22] RIN 3235-AM45 Amendments Regarding the Definition of EXCHANGE and Alternative Trading Systems (ATSs) That Trade Treasury and Agency SECURITIES , National Market System (NMS) Stocks, and Other SECURITIES . AGENCY: SECURITIES and EXCHANGE COMMISSION . ACTION: Proposed rule. SUMMARY: The SECURITIES and EXCHANGE COMMISSION ( COMMISSION ) is proposing to amend Rule 3b-16 under SECURITIES EXCHANGE Act of 1934 ( EXCHANGE Act ), which defines certain terms used in the statutory definition of EXCHANGE under Section 3(a)(1) of the EXCHANGE Act to include systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securit ies.

• Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-02-22. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method.

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Transcription of SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts …

1 1 Conformed to the Federal Register Version SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 232, 240, 242, and 249 [Release No. 34-94062; File No. S7-02-22] RIN 3235-AM45 Amendments Regarding the Definition of EXCHANGE and Alternative Trading Systems (ATSs) That Trade Treasury and Agency SECURITIES , National Market System (NMS) Stocks, and Other SECURITIES . AGENCY: SECURITIES and EXCHANGE COMMISSION . ACTION: Proposed rule. SUMMARY: The SECURITIES and EXCHANGE COMMISSION ( COMMISSION ) is proposing to amend Rule 3b-16 under SECURITIES EXCHANGE Act of 1934 ( EXCHANGE Act ), which defines certain terms used in the statutory definition of EXCHANGE under Section 3(a)(1) of the EXCHANGE Act to include systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securit ies.

2 In addition, the COMMISSION is re-proposing amendments to its regulat ions under the EXCHANGE Act that were initially proposed in September 2020 for ATSs to take into consideration systems that may fall within the definition of EXCHANGE because of the proposed amendments and operate as an ATS. The COMMISSION is re-proposing, with certain revisions, amendments to its regulat ions for ATSs that trade government SECURITIES as defined under Section 3(a)(42) of the EXCHANGE Act ( government SECURITIES ) or repurchase and reverse repurchase agreements on government SECURITIES ( Government SECURITIES ATSs ). The COMMISSION is also proposing to amend Form ATS-N for NMS Stock ATSs, which would require existing NMS Stock ATSs to amend their existing disclosures.

3 In addition, the COMMISSION is proposing to amend the fair access rule for ATSs. The COMMISSION is also proposing to require electronic filing of and to modernize Form 2 ATS-R and Form ATS, which would require existing Form ATS filers to amend their existing disclosures. Further, the COMMISSION is re-proposing amendments to its regulations regarding systems compliance and integrity to apply to ATSs that meet certain volume thresholds in Treasury SECURITIES or in a debt security issued or guaranteed by a executive agency, or government-sponsored enterprise ( Agency SECURITIES ). DATES: Comments should be received on or before APRIL 18, 2022. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments: Use the COMMISSION s Internet comment form ( ); or Send an e-mail to Please include File Number S7-02-22 on the subject line.

4 Paper Comments: Send paper comments to Secretary, SECURITIES and EXCHANGE COMMISSION , 100 F Street NE, washington , DC 20549-1090. All submissions should refer to File Number S7-02-22. This file number should be included on the subject line if e-mail is used. To help the COMMISSION process and review your comments more efficiently, please use only one method. The COMMISSION will post all comments on the COMMISSION s Internet website ( ). Comments are also available for website viewing and printing in the COMMISSION s Public Reference Room, 100 F Street, NE, washington , DC 20549, on official business days between the hours of 10 and 3 Operating conditions may limit access to the COMMISSION s public reference room.

5 Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. 3 Studies, memoranda, or other substantive items may be added by the COMMISSION or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any materials will be made available on the COMMISSION s website. To ensure direct electronic receipt of such notifications, sign up through the Stay Connected option at to receive notifications by e-mail. FOR FURTHER INFORMATION CONTACT: Regulation ATS: Tyler Raimo, Assistant Director, at (202) 551-6227; Matthew Cursio, Special Counsel, at (202) 551-5748; David Garcia, Special Counsel, at (202) 551-5681; Megan Mitchell, Special Counsel, at (202) 551-4887; Amir Katz, Special Counsel, at (202) 551-7653; and Joanne Kim, Attorney Advisor, at (202) 551-4393, and for Regulation SCI: David Liu, Special Counsel, at (312) 353-6265 and Sara Hawkins, Special Counsel, at (202) 551-5523, Office of Market Supervision, Division of Trading and Markets, SECURITIES and EXCHANGE COMMISSION , 100 F Street NE, washington , DC 20549.

6 SUPPLEMENTARY INFORMATION: The COMMISSION is proposing amendments to the following rules under the EXCHANGE Act: (1) 17 CFR (Rule 101 of Regulation S-T); (2) 17 CFR (Rule 3b-16); (3) 17 CFR (Rule 300 of Regulation ATS);1 (4) 17 CFR (Rule 301 of Regulation ATS); (5) 17 CFR (Rule 302 of Regulation 1 Regulation ATS consists of 17 CFR through ( Rules 300 through 304 under the EXCHANGE Act). See also Regulation ATS Adopting Release, infra note 31. 4 ATS); (6) 17 CFR (Rule 304 of Regulation ATS);2 and (7) 17 CFR (Rule 1000 of Regulation SCI).3 I. Introduction In September 2020, the COMMISSION issued a proposal to amend Regulation ATS and Regulation SCI for Government SECURITIES ATSs ( 2020 Proposal ).

7 4 The COMMISSION recognized the critical role of government SECURITIES in the and global economy, the significant volume in government SECURITIES transacted on systems currently operating as ATSs, and these ATSs growing importance to investors and overall SECURITIES market structure. Notwithstanding their importance for government SECURITIES , the investor protection and fair and orderly market principles of Regulation ATS have limited application to Government SECURITIES For example, an ATS that limits its SECURITIES activities to government SECURITIES or 2 The COMMISSION adopted Rule 304 on July 18, 2018. See SECURITIES EXCHANGE Act Release No.

8 83663 (July 18, 2018), 83 FR 38768 (August 7, 2018) ( NMS Stock ATS Adopting Release ). 3 The COMMISSION adopted 17 CFR through (Regulation SCI) on November 19, 2014. See SECURITIES EXCHANGE Act Release No. 73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) ( Regulation SCI Adopting Release ). 4 See SECURITIES EXCHANGE Act Release No. 90019 (September 28, 2020), 85 FR 87106 (December 31, 2020). 5 For the purposes of this re-proposal, the term Government SECURITIES ATS refers to an ATS that trades government SECURITIES or repos and includes ATSs that would be subject to Regulation ATS after the effective date of any final rule. This term includes three categories of ATSs. First, a Currently Exempted Government SECURITIES ATS means an ATS that trades government SECURITIES or repos, is operating as of the effective date of any final rule, and was formerly not required to comply with Regulation ATS under 17 CFR (a)(3) ( EXCHANGE Act Rule 3a1-1(a)(3)) exemption prior to the effective date of any final rule.

9 Second, a Current Government Securit ies ATS means an ATS that trades government SECURITIES or repos and is operating pursuant to an initial operation report on Form ATS on file with the COMMISSION as of the effective date of any final rule. Finally, when referring to regulatory requirements after the effective date of any final rule, the term Government SECURITIES ATS also includes a Communication Protocol System that trades Government SECURITIES or repos on Government SECURITIES and that chooses to operate as an ATS after the effective date of any final rule. A Communication Protocol System would include a system that offers protocols and 5 repurchase and reverse repurchase agreements on government SECURITIES ( repos ) and registers as a broker-dealer or is a bank ( , a Currently Exempted Government SECURITIES ATS) is exempt from EXCHANGE registration and is not required to comply with Regulation ATS.

10 Further, ATSs that trade both government SECURITIES and non-government SECURITIES ( , corporate bonds) are subject to Regulation ATS but are not required to comply with many of its investor protection and fair and orderly markets provisions, including public transparency rules and the obligation to provide fair access to investors if the ATS has significant trading volume. In addit ion, ATSs that trade government SECURITIES are not subject to the systems integrity provisio ns of Regulation SCI. To promote operational transparency, investor protection, system integrit y, fair and orderly markets, and regulatory oversight for Government SECURITIES ATSs, the COMMISSION proposed in the 2020 Proposal to: eliminate the exemption from compliance with Regulation ATS for Currently Exempted Government SECURITIES ATSs; require all Government SECURITIES ATSs to publicly file Form ATS-G, on which they would disclose information about their operations and potential conflicts of interest; provide a process for the COMMISSION to review Form ATS-G disclosures for clarity, completeness, and potential violations of law and, if necessary, declare ineffective Form ATS-G filings.


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