MFA and AIMA Commend SEC for "Shedding Light on Dark Pools" with Reg ATS Proposal

The Managed Funds Association ("MFA") and the Alternative Investment Management Association ("AIMA" and, collectively, the "Associations") submitted a joint response supporting proposed SEC amendments to Regulation ATS (the "proposal"). The proposal concerns the regulatory requirements of alternative trading systems ("ATSs") used to sell National Market System stocks (generally, exchange-listed equity securities). The Associations expressed support for enhanced disclosures regarding the operation of an alternative trading system ("ATS"), including how it addresses potential conflicts of interest with affiliates and other broker-dealers. The Associations supported the proposed SEC filing and review process of the new Form ATS-N. The Associations also affirmed that they approved of the proposed requirement that every ATS have written safeguards and procedures for protecting subscribers' confidential trading information. The Associations stated that the proposed amendment would assist investors' understanding of how ATSs operate. The Associations also recommended changes to the proposal. These changes include:

• expanding the scope of the proposal to cover ATSs that trade fixed-income and government securities;

• amending Form ATS-N to require an ATS to (i) provide quantitative responses, where applicable, and (ii) disclose certain market-quality statistics (e.g., platform-wide order flow and execution statistics) that are not otherwise required to be disclosed where the ATS publishes or otherwise provides such information to a substantial portion (e.g., 10% or more) of its subscribers; and

• removing the requirement that an ATS must disclose the positions or titles of its employees who have access to confidential information.

The Associations stressed that expanding the application of the proposal to ATSs that trade fixed-income securities and government securities "would greatly enhance transparency and provide important disclosures to market participants, regulators and the public about increasingly important venues of corporate bond trading and cash trading in U.S. government securities."