SEC Proposes Rules to Extend Regulations ATS and SCI to Treasuries and Other Gov. Securities Markets

October 9th | 2020

The SEC recently submitted a proposal to enhance regulatory oversight of alternative trading systems (ATSs) that trade government securities as well as repurchase and reverse repurchase agreements on government securities (Government Securities ATSs). The proposal does this by eliminating the exemption from compliance with Regulation ATS for ATSs that are limited to government securities or repurchase and reverse repurchase agreements on government securities, and registers as a broker-dealer or is a bank.

The proposal is also designed to increase transparency in the government securities markets by requiring Government Securities ATSs to file comprehensive public disclosures on new Form ATS-G. Among other things, Form ATS-G would inform market participants about potential conflicts of interests arising from trading activity of the ATS’s broker-dealer operator or its affiliates, and the ATS’s manner of operations, such as order types, use of market data offered and used by the ATS, and fees.

This proposal will make Government Securities ATSs act a lot like many equities ATS, which are commonly referred to as dark pools. The transparency effort is expected to be particularly illuminating because of the substantial volume of the U.S. government securities markets. Over the last six months of 2019, for example, the average daily trading volume in government securities was approximately $835 billion.

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