SEC Receives Comments on Proposed Expansion to "Exchange" Definition

The SEC has received 163 comment letters pertaining to their proposed rule that would expand the scope of the definition of "exchange." Two of the letters are briefly described below.

Securities Industry Financial Markets Association ("SIFMA")

SIFMA expressed significant concern with the proposed rule that would expand the scope of the definition of "exchange." The association stated that it does generally support the SEC's mission to ensure the rules that govern the market keep pace with technological and market developments, and that it also supports certain aspects of the proposal, including (i) rescinding the exemption from Regulation ATS for Government ATSs, (ii) requiring Government ATSs to file specific ATS forms which would be made available to the public and (iii) reasonable fair access requirements for Government ATSs that reach specified volume thresholds. However, SIFMA said that the current proposal is an overreach and goes beyond the regulatory gap initially identified by the SEC. Further, SIFMA raised concerns over the short comment period for this proposal as well as the fact that there are several other major proposals out for review from the SEC at this time, which could cause meaningful public input to be lost in the process.

Virtu Financial, Inc. ("Virtu")

Virtu Financial, Inc. opposed the proposed amendments asserting that the SEC has failed to properly justify the need for the proposal and any potential benefit the changes would bring. Virtu believes that this proposal deviates from the SEC's mission and statutory authority. Virtu asserted that the SEC exceeds its statutory authority by expanding the definition of "exchange" to include marketplaces that utilize non-discretionary methods for buyers and sellers to conduct trades, and Virtu believes that the proposed amendments will not benefit the marketplace, resulting in unnecessary costs and burdens to investors.

The comment period for this proposal closed on April 18, 2022.