SEC Equity Market Structure Advisory Subcommittee Recommends Improving Trading Venue Models

The SEC Equity Market Structure Advisory Committee ("EMSAC") Trading Venues Regulation Subcommittee ("Subcommittee") recommended ways for EMSAC to formalize, clarify and modernize its trading venue models.

The Subcommittee made the following recommendations:

• SRO Immunity. EMSAC should (i) increase SRO-rule-based liability levels and apply them clearly and consistently across SROs, (ii) identify what kinds of activities are covered, (iii) consider whether exchanges that engage in activities with increased risks of negative financial exposure for participants, if mismanaged (e.g. IPOs, or opening and closing auctions), should be required to allow for higher levels of liability for those functions, and (iv) evaluate whether exchanges should be required to set aside funds to be made available in the event of future exchange liabilities.

• National Market System ("NMS") Plan Governance. EMSAC should clarify the process for selecting NMS Plan Advisory Committee members and should make various changes to the operating procedures for that process.

• Technical Specifications. EMSAC should (i) publish draft technical specifications prior to the SEC's approval of any related rule change, (ii) provide procedures for implementation, and (iii) examine how increased centralization and standardization might reduce costs.

The Subcommittee noted that it will continue to discuss recommendations that are related to SIP effectiveness and the operation of the Consolidated Data Plans (CTA/CQ/UTP NMS Plans) at its next meeting.