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SEC Announces Rules To Enhance Transparency, Oversight Of Alternative Trading Systems

SEC Announces Rules To Enhance Transparency, Oversight Of Alternative Trading Systems

On 18 July, the SEC announced that it would adopt rules to enhance the transparency and oversight of Alternative Trading Systems (ATSs).

With the increased regulatory scrutiny, ATSs will now be required to file public disclosures, including information around how the ATS operates (e.g. order types and market data used on the ATS, fees, execution and priority procedures and procedures to segment orders). By publicly disclosing this information, market participants can better assess any potential conflicts of interest or potential information breaches and leakage.

In addition to public disclosures through Form ATS-N, under the amended rules all ATSs must provide evidence of appropriate processes and procedures for the protection of market participants’ private trading information and overall market integrity. If upon review, an ATS is found delinquent, the SEC can then declare the Form ATS-N ineffective.

The new measures being put into place add significant pressure to the daily operations of ATSs. With exchange level transparency requirements, come higher overhead costs and increased responsibility, leading to much higher levels of regulatory and operational risk – all while ATSs must remain relevant in an increasingly competitive and highly fragmented environment.

As a result, many firms are looking to outsource what were once traditionally in-house regulatory, compliance and risk management operations. By outsourcing the hosting and operation of an ATS, they are able to offload their regulatory burden and benefit from an independent point of verification. Furthermore, for ATSs facing impending regulations, outsourcing can provide a means to better capitalize on scarce resources and focus more time on revenue generating activities.

With 20+ years of experience operating and maintaining regulated and highly transparent marketplace systems spanning trading, risk, clearing and surveillance, Nasdaq can help firms minimize their regulatory obligations and enable them to benefit from the services needed to effectively manage their internal marketplaces, further reduce expenses and enable business and revenue growth opportunities.

>> For more information about Nasdaq's offerings for Alternative Trading Systems, please download our factsheet and visit our website.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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