ATS Transparency: The Industry Weighs In on Proposed Form ATS-N

On November 18, 2015, the SEC proposed a new registration form for alternative trading systems (ATS), Form ATS-N, which would make publicly available details for each platform’s broker-dealer affiliates and operations. The new form, which was laid out in a 500+ page proposal, contains five parts. While Parts I, II, and V mainly cover general administrative details, the bulk of the proposal comes in Part III and Part IV, which address the ATS’s relationship with its broker-dealer affiliates and its operations, respectively.

The comment period for the new proposal ended on February 26, 2016, and a total of 28 comment letters were submitted. In this market note, TABB Group recaps market participant’s concerns and highlights how the new rule will usher new analytics and further discussion on the role of an exchange versus ATS in today’s equity markets.

Key Points

• The SEC has proposed a new registration form for ATSs, outlining further disclosure of ATS operations and broker-dealer affiliates. The proposed Form ATS-N is the first time the ATS disclosure form has been updated since 1998, with the implementation of Regulation ATS.
• In 2015, US Equities ATS volume accounted for 15% of total industry volume and 39% of off-exchange volume.
• Twenty-eight industry participants have submitted comment letters covering 3 main topics: 1) uniformity, content and format, 2) information sensitivity and limiting disclosures, and 3) unintended consequences.
• TABB Group cautions that lack of uniformity, clear definitions, or the failure to aggregate the disclosures in a centralized database would lead to inconsistent comparisons and ambiguity.