Forefront Communications

TabbFORUM: An Old Expression Reborn: “Necessity is the Mother of Disruption”

Alexandra Hamer

Alexandra Hamer

James Dolan, Chief Compliance Officer, Luminex Trading & Analytics LLC, discusses the opportunity to bring back the old expression “Necessity is the Mother of Disruption” as it relates to modernizing the SEC’s rules for the securities industry.

Sometimes disruption is something you do and other times disruption is thrust upon you.

In the case of COVID-19 and the financial services industry, it’s a combination of both. While the day-to-day changes and challenges are innumerable, we’ve all spent months talking about some of the biggest ones: for example, working from home was a rarity for our industry until March 2020 but continues to be the default as I write this in July. But less remarked on are the changes that the pandemic has brought to compliance. They are substantial, and are worth taking a closer look at.

In June, the SEC’s Division of Trading and Markets extended the relief it granted several months ago that allowed, for the first time, the electronic filing and submission of Forms ATS and ATS-R, and waiving the notarization requirement.

ATSs that trade NMS securities had already been submitting Form ATS-N and related amendments electronically for more than a year through the SEC’s EDGAR system. Now, I won’t pretend that EDGAR is without its faults, but it is lightyears ahead (from an ease-of-filing standpoint) of its manually filed Forms ATS and ATS-R cousins. Extending that relief is significant, and was not a foregone conclusion before COVID.

Jim – what are Form ATS and Form ATS-R? 

That is a very insightful question! A Form ATS is the form that is required to be submitted by all SEC-registered Alternative Trading Systems (ATSs) that trade anything other than NMS stocks, including (among other things) OTC equities or various types of fixed income securities. Essentially, Form ATS is a non-public filing that describes to the SEC how these ATSs operate.

ATS-Rs are quarterly filings that ATSs submit to the SEC that include aggregated trading volumes for the most recent quarter, as well as some subscriber-related information. These filings are also non-public.

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