Dark pools and other alternative trading systems would be required to file detailed disclosures about their operations, and the activities of their broker-dealer operator and its affiliates as part of proposed rules approved by the SEC on Wednesday.
The proposed rules from the Securities and Exchange Commission would govern any alternative trading system that trades stocks listed on a national securities exchange.
The disclosures would include information on the types of orders and market data used on the ATS, and its execution and priority procedures, according to a fact sheet of the proposal on the SEC’s website.
The disclosures would be posted on the SEC’s website.
As part of the SEC proposal, the commission would certify whether an ATS qualifies for an exemption under Regulation ATS, adopted in 1998, that allows securities markets to register as a national securities exchange or as an alternative trading system. Under that 1998 regulation, an ATS must register as a broker-dealer.
“Information available to market participants about the operations of ATS that trade (national securities exchange) stocks is often limited,” the fact sheet said. “In addition, little information is available to market participants about the relationship between these ATS and the other business operations of their broker-dealer operators.”
The proposal stems from a speech given by SEC Chairwoman Mary Jo White in June 2014 at the Sandler O’Neill + Partners Global Exchange and Brokerage Conference in New York, at which Ms. White said the SEC would consider market structure reforms, including requiring more disclosure of institutional trades made through dark pools and other alternative trading systems.
The SEC will vote to approve the recommendations once the proposal has been published in the Federal Register with public comment accepted for 60 days. It is expected to be published in the register later this week.
