SEC Proposal to Amend Regulation ATS: Why Those That Facilitate Communications Between Buyers or Sellers of Any Security Should Closely Evaluate the Rule

By: David Franasiak, Mahlet Makonnen, and Joel Oswald

On January 26, 2022, the Securities and Exchange Commission (SEC or Commission) proposed a rule  to (i) amend certain terms used in the statutory definition of “exchange” under Section 3(a)(1) of the Securities Exchange Act of 1934 (Exchange Act) to include a newly-coined “Communication Protocol Systems” terminology and (ii) amend Regulation ATS for alternative trading systems (ATSs), including for ATSs that trade government securities. As detailed below, the proposal may be wide-reaching, impacting markets beyond government securities, fixed-income, or what is considered traditional securities. The below is an initial assessment of the proposal. Williams & Jensen will continue to evaluate the rule and provide further analysis.

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