On November 18, the Securities and Exchange Commission proposed a rule to enhance operational transparency and regulatory oversight of alternative trading systems (ATSs) that trade stocks listed on a national securities exchange (NMS stocks), including “dark pools.” If adopted, the rule would require NMS Stock ATSs to publicly disclose, on new Form ATS-N, detailed information about the operations and activities of a broker-dealer operator and its affiliates.

The Form ATS-N would include information about: (1) products or services offered to subscribers; (2) use of smart order routers (or similar functionality) or algorithms to send or receive subscriber orders; (3) fees; and (4) market quality statistics published or provided by the NMS Stock ATS to one or more subscribers. In addition, the proposal would amend Regulation ATS to require all ATSs to have and maintain written safeguards and procedures to protect the confidential trading information of their subscribers, and written procedures to ensure that those safeguards and procedures are followed.

The comment period expires on January 18, 2016, and, among other things, the SEC is specifically asking for comments addressing the proposals regarding: (1) disclosure of additional information; (2) the requirement that ATSs have written safeguards and procedures; and (3) the recordkeeping requirements for ATSs.

For the full text of the Rule click here.