The Securities and Exchange Commission (SEC) proposed a new registration form in 2015 for alternative trading systems (ATS), Form ATS-N, which would make details for each platform’s broker-dealer affiliates and operations publicly available.
The proposal would impose new transparency requirements on all ATSs, also referred to as “dark pools,” which accounted for 15 per cent of total industry volume and 39 per cent of off-exchange volume in 2015.
TABB’s latest market note, “ATS Transparency: The Industry Weighs In on Proposed Form ATS-N,” recaps market participants’ concerns and lays out specific areas for enhancements that TABB believes will ensure an effective transparency regime.
Research author Valerie Bogard (pictured) found that some ATS operators had serious concerns about the proposal overall, while others were focused on more nuanced details. Reviewing the 28 comment letters submitted, Bogard breaks down the recommendations in the following primary categories of concern: uniformity, content and format; information sensitivity and limiting disclosures; and unintended consequences.
Given the wide scope of the proposal’s required disclosures, TABB believes it will be imperative that the SEC defines terms explicitly, creates uniform formatting, and provides a central repository and basic comparison tools to ensure Form ATS-N responses meet transparency requirements appropriately.
“Regardless of the final proposal, adoption of a new Form ATS-N will reveal to the public more ATS information than ever before,” says Bogard. “It is likely that this change will usher in even more analytics and increase the discussion on the role of an ATS versus an exchange in the U.S. equities markets.”
