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Release No. 34-40760 63 Fed. Reg. 70843 - Dec. 22, 1998 
Regulation of Exchanges and Alternative Trading Systems
XIII. Statutory AuthorityThe rules and rule amendments in this release are being adopted pursuant
to 15 U.S.C. 78 et seq., particularly sections 3(b), 5, 6, 11A, 15, 17(a), 17(b), 19, 23(a), and 36 of the Exchange Act, 15 U.S.C. 78c, 78e, 78f, 78k-1, 78o, 78q(a), 78q(b), 78s(b), 78w(a), and 78mm. List of Subjects 17 CFR Part 202 Administrative practice and procedure, Securities. 17 CFR Part 240 Brokers-dealers, Fraud, Issuers, Reporting and recordkeeping requirements, Securities. 17 CFR Part 242 Securities. 17 CFR Part 249 Reporting and recordkeeping requirements, Securities. For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is amended as follows. PART 202--INFORMAL AND OTHER PROCEDURES
1. The authority citation for part 202 continues to read in part as follows: Authority: 15 U.S.C. 77s, 77t, 78d-1, 78u, 78w, 7811(d), 79r, 79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, and 80b-11, unless otherwise noted. * * * * *
2. Paragraph (b) of Sec. 202.3 is revised to read as follows: Sec. 202.3 Processing of filings.
(a) * * * (b)(1) Applications for registration as brokers, dealers, investment advisers, municipal securities dealers and transfer agents are submitted to the Office of Filings and Information Services where they are examined to determine whether all necessary information has been supplied and whether all required financial statements and other documents have been furnished in proper form. Defective applications may be returned with a request for correction or held until corrected before being accepted as a filing. The files of the Commission and other sources of information are considered to determine whether any person connected with the applicant appears to have engaged in activities which would warrant commencement of proceedings on the question of denial of registration. The staff confers with applicants and makes suggestions in [[Page 70917]] appropriate cases for amendments and supplemental information. Where it appears appropriate in the public interest and where a basis therefore exists, denial proceedings may be instituted. Within forty-five days of the date of the filing of a brokerudealer, investment adviser or municipal securities dealer application (or within such longer period as to which the applicant consents), the Commission shall by order grant registration or institute proceedings to determine whether registration should be denied. An application for registration as a transfer agent shall become effective within 30 days after receipt of the application (or within such shorter period as the Commission may determine). The Office of Filings and Information Services is also responsible for the processing and substantive examination of statements of beneficial ownership of securities and changes in such ownership filed under the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, and the Investment Company Act of 1940, and for the examination of reports filed pursuant to Sec. 230.144 of this chapter.
(2) Applications for registration as national securities exchanges, or exemption from registration as exchanges by reason of such exchanges' limited volume of transactions filed with the Commission are routed to the Division of Market Regulation, which examines these applications to determine whether all necessary information has been supplied and whether all required financial statements and other documents have been furnished in proper form. Defective applications may be returned with a request for correction or held until corrected before being accepted as a filing. The files of the Commission and other sources of information are considered to determine whether any person connected with the applicant appears to have engaged in activities which would warrant commencement of proceedings on the question of denial of registration. The staff confers with applicants and makes suggestions in appropriate cases for amendments and supplemental information. Where it appears appropriate in the public interest and where a basis therefore exists, denial proceedings may be instituted. Within 90 days of the date of the filing of an application for registration as a national securities exchange, or exemption from registration by reason of such exchanges' limited volume of transactions (or within such longer period as to which the applicant consents), the Commission shall by order grant registration, or institute proceedings to determine whether registration should be denied as provided in Sec. 240.19(a)(1) of this chapter. PART 240--GENERAL RULES AND REGULATIONS,
SECURITIES EXCHANGE ACT OF 1934
3. The authority citation for part 240 continues to read in part as follows: Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted. * * * * *
4. Section 240.3a1-1 is added before the undesignated center heading ''Definition of `Equity Security' as Used in Sections 12(g) and 16'' to read as follows: Sec. 240.3a1-1 Exemption from the definition of ''Exchange'' under
Section 3(a)(1) of the Act.
(a) An organization, association, or group of persons shall be exempt from the definition of the term ''exchange'' under section 3(a)(1) of the Act, (15 U.S.C. 78c(a)(1)), if such organization, association, or group of persons:
(1) Is operated by a national securities association;
(2) Is in compliance with Regulation ATS, 17 CFR 242.300 through 242.303; or
(3) Pursuant to paragraph (a) of Sec. 242.301 of Regulation ATS, 17 CFR 242.301(a), is not required to comply with Regulation ATS, 17 CFR 242.300 through 242.303.
(b) Notwithstanding paragraph (a) of this section, an organization, association, or group of persons shall not be exempt under this section from the definition of ''exchange,'' if:
(1) During three of the preceding four calendar quarters such organization, association, or group of persons had:
(i) Fifty percent or more of the average daily dollar trading volume in any security and five percent or more of the average daily dollar trading volume in any class of securities; or
(ii) Forty percent or more of the average daily dollar trading volume in any class of securities; and
(2) The Commission determines, after notice to the organization, association, or group of persons, and an opportunity for such organization, association, or group of persons to respond, that such an exemption would not be necessary or appropriate in the public interest or consistent with the protection of investors taking into account the requirements for exchange registration under section 6 of the Act, (15 U.S.C. 78f), and the objectives of the national market system under section 11A of the Act, (15 U.S.C 78k-1).
(3) For purposes of paragraph (b) of this section, each of the following shall be considered a ''class of securities'':
(i) Equity securities, which shall have the same meaning as in Sec. 240.3a11-1;
(ii) Listed options, which shall mean any options traded on a national securities exchange or automated facility of a national securities exchange;
(iii) Unlisted options, which shall mean any options other than those traded on a national securities exchange or automated facility of a national securities association;
(iv) Municipal securities, which shall have the same meaning as in section 3(a)(29) of the Act, (15 U.S.C. 78c(a)(29));
(v) Investment grade corporate debt securities, which shall mean any security that:
(A) Evidences a liability of the issuer of such security;
(B) Has a fixed maturity date that is at least one year following the date of issuance;
(C) Is rated in one of the four highest ratings categories by at least one Nationally Recognized Statistical Ratings Organization; and
(D) Is not an exempted security, as defined in section 3(a)(12) of the Act, (15 U.S.C. 78c(a)(12));
(vi) Non-investment grade corporate debt securities, which shall mean any security that:
(A) Evidences a liability of the issuer of such security;
(B) Has a fixed maturity date that is at least one year following the date of issuance;
(C) Is not rated in one of the four highest ratings categories by at least one Nationally Recognized Statistical Ratings Organization; and
(D) Is not an exempted security, as defined in section 3(a)(12) of the Act, (15 U.S.C. 78o);
(vii) Foreign corporate debt securities, which shall mean any security that:
(A) Evidences a liability of the issuer of such debt security;
(B) Is issued by a corporation or other organization incorporated or organized under the laws of any foreign country; and
(C) Has a fixed maturity date that is at least one year following the date of issuance; and
(viii) Foreign sovereign debt securities, which shall mean any security that: [[Page 70918]]
(A) Evidences a liability of the issuer of such debt security;
(B) Is issued or guaranteed by the government of a foreign country, any political subdivision of a foreign country, or any supranational entity; and
(C) Does not have a maturity date of a year or less following the date of issuance.
5. Section 240.3b-16 is added before the undesignated center heading ''Registration and Exemption of Exchanges'' to read as follows: Sec. 240.3b-16 Definitions of terms used in Section 3(a)(1) of the Act.
(a) An organization, association, or group of persons shall be considered to constitute, maintain, or provide ''a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange,'' as those terms are used in section 3(a)(1) of the Act, (15 U.S.C. 78c(a)(1)), if such organization, association, or group of persons:
(1) Brings together the orders for securities of multiple buyers and sellers; and
(2) Uses established, non-discretionary methods (whether by providing a trading facility or by setting rules) under which such orders interact with each other, and the buyers and sellers entering such orders agree to the terms of a trade.
(b) An organization, association, or group of persons shall not be considered to constitute, maintain, or provide ''a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange,'' solely because such organization, association, or group of persons engages in one or more of the following activities:
(1) Routes orders to a national securities exchange, a market operated by a national securities association, or a broker-dealer for execution; or
(2) Allows persons to enter orders for execution against the bids and offers of a single dealer; and
(i) As an incidental part of these activities, matches orders that are not displayed to any person other than the dealer and its employees; or
(ii) In the course of acting as a market maker registered with a self-regulatory organization, displays the limit orders of such market maker's, or other broker-dealer's, customers; and
(A) Matches customer orders with such displayed limit orders; and
(B) As an incidental part of its market making activities, crosses or matches orders that are not displayed to any person other than the market maker and its employees.
(c) For purposes of this section the term order means any firm indication of a willingness to buy or sell a security, as either principal or agent, including any bid or offer quotation, market order, limit order, or other priced order.
(d) For the purposes of this section, the terms bid and offer shall have the same meaning as under Sec. 240.11Ac1-1.
(e) The Commission may conditionally or unconditionally exempt any organization, association, or group of persons from the definition in paragraph (a) of this section.
6. Section 240.6a-1 is amended by revising the section heading and paragraphs (a) and (b) to read as follows: Sec. 240.6a-1 Application for registration as a national securities exchange or exemption from registration based on limited volume.
(a) An application for registration as a national securities exchange, or for exemption from such registration based on limited volume, shall be filed on Form 1 (Sec. 249.1 of this chapter), in accordance with the instructions contained therein.
(b) Promptly after the discovery that any information filed on Form 1 was inaccurate when filed, the exchange shall file with the Commission an amendment correcting such inaccuracy. * * * * *
7. Section 240.6a-2 is revised to read as follows: Sec. 240.6a-2 Amendments to application.
(a) A national securities exchange, or an exchange exempted from such registration based on limited volume, shall file an amendment to Form 1, (Sec. 249.1 of this chapter), which shall set forth the nature and effective date of the action taken and shall provide any new information and correct any information rendered inaccurate, on Form 1, (Sec. 249.1 of this chapter), within 10 days after any action is taken that renders inaccurate, or that causes to be incomplete, any of the following:
(1) Information filed on the Execution Page of Form 1, or amendment thereto; or
(2) Information filed as part of Exhibits C, F, G, H, J, K or M, or any amendments thereto.
(b) On or before June 30 of each year, a national securities exchange, or an exchange exempted from such registration based on limited volume, shall file, as an amendment to Form 1, the following:
(1) Exhibits D and I as of the end of the latest fiscal year of the exchange; and
(2) Exhibits K, M, and N, which shall be up to date as of the latest date practicable within 3 months of the date the amendment is filed.
(c) On or before June 30, 2001 and every 3 years thereafter, a national securities exchange, or an exchange exempted from such registration based on limited volume, shall file, as an amendment to Form 1, complete Exhibits A, B, C and J. The information filed under this paragraph (c) shall be current as of the latest practicable date, but shall, at a minimum, be up to date within 3 months as of the date the amendment is filed.
(d)(1) If an exchange, on an annual or more frequent basis, publishes, or cooperates in the publication of, any of the information required to be filed by paragraphs (b)(2) and (c) of this section, in lieu of filing such information, an exchange may:
(i) Identify the publication in which such information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price of such publication; and
(ii) Certify to the accuracy of such information as of its publication date.
(2) If an exchange keeps the information required under paragraphs (b)(2) and (c) of this section up to date and makes it available to the Commission and the public upon request, in lieu of filing such information, an exchange may certify that the information is kept up to date and is available to the Commission and the public upon request.
(3) If the information required to be filed under paragraphs (b)(2) and (c) of this section is available continuously on an Internet web site controlled by an exchange, in lieu of filing such information with the Commission, such exchange may:
(i) Indicate the location of the Internet web site where such information may be found; and
(ii) Certify that the information available at such location is accurate as of its date.
(e) The Commission may exempt a national securities exchange, or an exchange exempted from such registration based on limited volume, from filing the amendment required by this section for any affiliate or subsidiary listed in Exhibit C of the exchange's application for registration, as amended, that either:
(1) Is listed in Exhibit C of the application for registration, as amended, [[Page 70919]] of one or more other national securities exchanges; or
(2) Was an inactive subsidiary throughout the subsidiary's latest fiscal year. Any such exemption may be granted upon terms and conditions the Commission deems necessary or appropriate in the public interest or for the protection of investors, provided however, that at least one national securities exchange shall be required to file the amendments required by this section for an affiliate or subsidiary described in paragraph (e)(1) of this section.
8. Section 240.6a-3 is revised to read as follows: Sec. 240.6a-3 Supplemental material to be filed by exchanges.
(a)(1) A national securities exchange, or an exchange exempted from such registration based on limited volume, shall file with the Commission any material (including notices, circulars, bulletins, lists, and periodicals) issued or made generally available to members of, or participants or subscribers to, the exchange. Such material shall be filed with the Commission within 10 days after issuing or making such material available to members, participants or subscribers.
(2) If the information required to be filed under paragraph (a)(1) of this section is available continuously on an Internet web site controlled by an exchange, in lieu of filing such information with the Commission, such exchange may:
(i) Indicate the location of the Internet web site where such information may be found; and
(ii) Certify that the information available at such location is accurate as of its date.
(b) Within 15 days after the end of each calendar month, a national securities exchange or an exchange exempted from such registration based on limited volume, shall file a report concerning the securities sold on such exchange during the calendar month. Such report shall set forth:
(1) The number of shares of stock sold and the aggregate dollar amount of such stock sold;
(2) The principal amount of bonds sold and the aggregate dollar amount of such bonds sold; and
(3) The number of rights and warrants sold and the aggregate dollar amount of such rights and warrants sold.
9. Section 240.11Ac1-1 is amended by redesignating paragraph (c)(5)(ii)(A) as paragraph (c)(5)(ii)(A)(l), paragraph (c)(5)(ii)(B), introductory text, as paragraph (c)(5)(ii)(A)(2), paragraph (c)(5)(ii)(B)(1) as paragraph (c)(5)(ii)(A)(2)(i), paragraph (c)(5)(ii)(B)(2) as paragraph (c)(5)(ii)(A)(2)(ii), in newly designated paragraph (c)(5)(ii)(A)(2)(ii) by removing the period and adding in its place ''; or'', and adding new paragraph (c)(5)(ii)(B) to read as follows: Sec. 240.11Ac1-1 Dissemination of quotations. * * * * *
(c) * * *
(5) * * *
(ii) * * *
(A)(1) * * *
(B) Is an alternative trading system that:
(1) Displays orders and provides the ability to effect transactions with such orders under Sec. 242.301(b)(3) of this chapter; and
(2) Otherwise is in compliance with Regulation ATS, Sec. 242.300 through Sec. 242.303 of this chapter. * * * * *
10. Section 240.17a-3 is amended by adding paragraph (a)(16) to read as follows: Sec. 240.17a-3 Records to be made by certain exchange members, brokers and dealers.
(a) * * *
(16)(i) The following records regarding any internal broker-dealer system of which such a broker or dealer is the sponsor:
(A) A record of the broker's or dealer's customers that have access to an internal broker-dealer system sponsored by such broker or dealer (identifying any affiliations between such customers and the broker or dealer);
(B) Daily summaries of trading in the internal broker-dealer system, including:
(1) Securities for which transactions have been executed through use of such system; and
(2) Transaction volume (separately stated for trading occurring during hours when consolidated trade reporting facilities are and are not in operation):
(i) With respect to equity securities, stated in number of trades, number of shares, and total U.S. dollar value;
(ii) With respect to debt securities, stated in total settlement value in U.S. dollars; and
(iii) With respect to other securities, stated in number of trades, number of units of securities, and in dollar value, or other appropriate commonly used measure of value of such securities; and
(C) Time-sequenced records of each transaction effected through the internal broker-dealer system, including date and time executed, price, size, security traded, counterparty identification information, and method of execution (if internal broker-dealer system allows alternative means or locations for execution, such as routing to another market, matching with limit orders, or executing against the quotations of the broker or dealer sponsoring the system).
(ii) For purposes of paragraph (a) of this section, the term:
(A) Internal broker-dealer system shall mean any facility, other than a national securities exchange, an exchange exempt from registration based on limited volume, or an alternative trading system as defined in Regulation ATS, Secs. 242.300 through 242.303 of this chapter, that provides a mechanism, automated in full or in part, for collecting, receiving, disseminating, or displaying system orders and facilitating agreement to the basic terms of a purchase or sale of a security between a customer and the sponsor, or between two customers of the sponsor, through use of the internal broker-dealer system or through the broker or dealer sponsor of such system;
(B) Sponsor shall mean any broker or dealer that organizes, operates, administers, or otherwise directly controls an internal broker-dealer trading system or, if the operator of the internal broker-dealer system is not a registered broker or dealer, any broker or dealer that, pursuant to contract, affiliation, or other agreement with the system operator, is involved on a regular basis with executing transactions in connection with use of the internal broker-dealer system, other than solely for its own account or as a customer with access to the internal broker-dealer system; and
(C) System order means any order or other communication or indication submitted by any customer with access to the internal broker-dealer system for entry into a trading system announcing an interest in purchasing or selling a security. The term ''system order'' does not include inquiries or indications of interest that are not entered into the internal broker-dealer system. * * * * *
11. Section 240.17a-4 is amended by revising paragraph (b)(1) and adding paragraph (b)(10) to read as follows: Sec. 240.17a-4. Records to be preserved by certain exchange members, brokers and dealers. * * * * *
(b) * * *
(1) All records required to be made pursuant to paragraphs (a)(4), (a)(6), (a)(7), (a)(8), (a)(9), and (a)(10) of Sec. 240.17a-3. * * * * * [[Page 70920]]
(10) All notices relating to an internal broker-dealer system provided to the customers of the broker or dealer that sponsors such internal broker-dealer system, as defined in paragraph (a)(16)(ii)(A) of Sec. 240.17a-3. Notices, whether written or communicated through the internal broker-dealer trading system or other automated means, shall be preserved under this paragraph (b)(10) if they are provided to all customers with access to an internal broker-dealer system, or to one or more classes of customers. Examples of notices to be preserved under this paragraph (b)(10) include, but are not limited to, notices addressing hours of system operations, system malfunctions, changes to system procedures, maintenance of hardware and software, and instructions pertaining to access to the internal broker-dealer system. * * * * * Sec. 240.17a-23 [Removed]
12. Section 240.17a-23 is removed and reserved.
13. Section 240.19b-5 is added to read as follows: Sec. 240.19b-5 Temporary exemption from the filing requirements of Section 19(b) of the Act. Preliminary Notes
1. The following section provides for a temporary exemption from the rule filing requirement for self-regulatory organizations that file proposed rule changes concerning the operation of a pilot trading system pursuant to section 19(b) of the Act (15 U.S.C. 78s(b), as amended). All other requirements under the Act that are applicable to self-regulatory organizations continue to apply.
2. The disclosures made pursuant to the provisions of this section are in addition to any other applicable disclosure requirements under the federal securities laws.
(a) For purposes of this section, the term specialist means any member subject to a requirement of a self-regulatory organization that such member regularly maintain a market in a particular security.
(b) For purposes of this section, the term trading system means the rules of a self-regulatory organization that:
(1) Determine how the orders of multiple buyers and sellers are brought together; and
(2) Establish non-discretionary methods under which such orders interact with each other and under which the buyers and sellers entering such orders agree to the terms of trade.
(c) For purposes of this section, the term pilot trading system shall mean a trading system operated by a self-regulatory organization that is not substantially similar to any trading system or pilot trading system operated by such self-regulatory organization at any time during the preceding year, and that:
(1)(i) Has been in operation for less than two years;
(ii) Is independent of any other trading system operated by such self-regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b));
(iii) With respect to each security traded on such pilot trading system, during at least two of the last four consecutive calendar months, has traded no more than 5 percent of the average daily trading volume of such security in the United States; and
(iv) With respect to all securities traded on such pilot trading system, during at least two of the last four consecutive calendar months, has traded no more than 20 percent of the average daily trading volume of all trading systems operated by such self-regulatory organization; or
(2)(i) Has been in operation for less than two years;
(ii) With respect to each security traded on such pilot trading system, during at least two of the last four consecutive calendar months, has traded no more than 1 percent of the average daily trading volume of such security in the United States; and
(iii) With respect to all securities traded on such pilot trading system, during at least two of the last four consecutive calendar months, has traded no more than 20 percent of the average daily trading volume of all trading systems operated by such self-regulatory organization; or
(3)(i) Has been in operation for less than two years; and
(ii)(A) Satisfied the definition of pilot trading system under paragraph (c)(1) of this section no more than 60 days ago, and continues to be independent of any other trading system operated by such self-regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)); or
(B) Satisfied the definition of pilot trading system under paragraph (c)(2) of this section no more than 60 days ago.
(d) A pilot trading system shall be deemed independent of any other trading system operated by a self-regulatory organization if:
(1) Such pilot trading system trades securities other than the issues of securities that trade on any other trading system operated by such self-regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b));
(2) Such pilot trading system does not operate during the same trading hours as any other trading system operated by such self- regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)); or
(3) No specialist or market maker on any other trading system operated by such self-regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)), is permitted to effect transactions on the pilot trading system in securities in which they are a specialist or market maker.
(e) A self-regulatory organization shall be exempt temporarily from the requirement under section 19(b) of the Act, (15 U.S.C. 78s(b)), to submit on Form 19b-4, 17 CFR 249.819, proposed rule changes for establishing a pilot trading system, if the self-regulatory organization complies with the following requirements:
(1) Form PILOT. The self-regulatory organization:
(i) Files Part I of Form PILOT, 17 CFR 249.821, in accordance with the instructions therein, at least 20 days prior to commencing operation of the pilot trading system;
(ii) Files an amendment on Part I of Form PILOT at least 20 days prior to implementing a material change to the operation of the pilot trading system; and
(iii) Files a quarterly report on Part II of Form PILOT within 30 calendar days after the end of each calendar quarter in which the market has operated after the effective date of this section.
(2) Fair access.
(i) The self-regulatory organization has in place written rules to ensure that all members of the self-regulatory organization have fair access to the pilot trading system, and that information regarding orders on the pilot trading system is equally available to all members of the self-regulatory organization with access to such pilot trading system.
(ii) Notwithstanding the requirement in paragraph (e)(2)(i) of this section, a specialist on the pilot trading system may have preferred access to information regarding orders that it represents in its capacity as specialist.
(iii) The rules established by a self-regulatory organization pursuant to paragraph (e)(2)(i) of this section will be considered rules governing the pilot trading system for purposes of the temporary exemption under this section. [[Page 70921]]
(3) Trading rules and procedures and listing standards.
(i) The self-regulatory organization has in place written trading rules and procedures and listing standards necessary to operate the pilot trading system.
(ii) The rules established by a self-regulatory organization pursuant to paragraph (e)(3)(i) of this section will be considered rules governing the pilot trading system for purposes of the temporary exemption under this section.
(4) Surveillance. The self-regulatory organization establishes internal procedures for the effective surveillance of trading activity on the self-regulatory organization's pilot trading system.
(5) Clearance and settlement. The self-regulatory organization establishes reasonable clearance and settlement procedures for transactions effected on the self-regulatory organizations pilot trading system.
(6) Types of securities. The self-regulatory organization permits to trade on the pilot trading system only securities registered under section 12 of the Act, (15 U.S.C. 78l).
(7) Activities of specialists.
(i) The self-regulatory organization does not permit any member to be a specialist in a security on the pilot trading system and a specialist in a security on a trading system operated by such self- regulatory organization that has been approved by the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)), or on another pilot trading system operated by such self-regulatory organization, if such securities are related securities, except that a member may be a specialist in related securities that the Commission, upon application by the self-regulatory organization, later determines is necessary or appropriate in the public interest and consistent with the protection of investors;
(ii) Notwithstanding paragraph (e)(7)(i) of this section, a self- regulatory organization may permit a member to be a specialist in any security on a pilot trading system, if the pilot trading system is operated during trading hours different from the trading hours of the trading system in which such member is a specialist.
(iii) For purposes of paragraph (e)(7) of this section, the term related securities means any two securities in which:
(A) The value of one security is determined, in whole or significant part, by the performance of the other security; or
(B) The value of both securities is determined, in whole or significant part, by the performance of a third security, combination of securities, index, indicator, interest rate or other common factor.
(8) Examinations, inspections, and investigations. The self- regulatory organization cooperates with the examination, inspection, or investigation by the Commission of transactions effected on the pilot trading system.
(9) Recordkeeping. The self-regulatory organization shall retain at its principal place of business and make available to Commission staff for inspection, all the rules and procedures relating to each pilot trading system operating pursuant to this section for a period of not less than five years, the first two years in an easily accessible place, as prescribed in Sec. 240.17a-1.
(10) Public availability of pilot trading system rules. The self- regulatory organization makes publicly available all trading rules and procedures, including those established under paragraphs (e)(2) and (e)(3) of this section.
(11) Every notice or amendment filed pursuant to this paragraph (e) shall constitute a ''report'' within the meaning of sections 11A, 17(a), 18(a), and 32(a), (15 U.S.C. 78k-1, 78q(a), 78r(a), and 78ff(a)), and any other applicable provisions of the Act. All notices or reports filed pursuant to this paragraph (e) shall be deemed to be confidential until the pilot trading system commences operation.
(f)(1)A self-regulatory organization shall request Commission approval, pursuant to section 19(b)(2) of the Act, (15 U.S.C. 78s(b)(2)), for any rule change relating to the operation of a pilot trading system by submitting Form 19b-4, 17 CFR 249.819, no later than two years after the commencement of operation of such pilot trading system, or shall cease operation of the pilot trading system.
(2) Simultaneous with a request for Commission approval pursuant to section 19(b)(2) of the Act, (15 U.S.C. 78s(b)(2)), a self-regulatory organization may request Commission approval pursuant to section 19(b)(3)(A) of the Act, (15 U.S.C. 78s(b)(3)(A)), for any rule change relating to the operation of a pilot trading system by submitting Form 19b-4, 17 CFR 249.819, effective immediate upon filing, to continue operations of such trading system for a period not to exceed six months.
(g) Notwithstanding paragraph (e) of this section, rule changes with respect to pilot trading systems operated by a self-regulatory organization shall not be exempt from the rule filing requirements of section 19(b)(2) of the Act, (15 U.S.C. 78s(b)(2)), if the Commission determines, after notice to the SRO and opportunity for the SRO to respond, that exemption of such rule changes is not necessary or appropriate in the public interest or consistent with the protection of investors. PART 242--REGULATIONS M AND ATS
14. The authority citation for part 242 is revised to read as follows: Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78i(a), 78j, 78k-1(c), 78l, 78m, 78mm, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 80a-23, 80a-29, and 80a-37.
15. The part heading for part 242 is revised as set forth above.
16. Part 242 is amended by adding Regulation ATS, Secs. 242.300 through 242.303 to read as follows: Regulation ATS--Alternative Trading Systems Sec. 242.300 Definitions. 242.301 Requirements for alternative trading systems. 242.302 Recordkeeping requirements for alternative trading systems. 242.303 Record preservation requirements for alternative trading systems. Regulation ATS--Alternative Trading Systems Preliminary Notes
1. An alternative trading system is required to comply with the requirements in this Regulation ATS, unless such alternative trading system:
(a) Is registered as a national securities exchange;
(b) Is exempt from registration as a national securities exchange based on the limited volume of transactions effected on the alternative trading system; or
(c) Trades only government securities and certain other related instruments. All alternative trading systems must comply with the antifraud, antimanipulation, and other applicable provisions of the federal securities laws.
2. The requirements imposed upon an alternative trading system by Regulation ATS are in addition to any requirements applicable to broker-dealers registered under section 15 of the Act, (15 U.S.C. 78o).
3. An alternative trading system must comply with any applicable state law relating to the offer or sale of securities or the registration or regulation of persons or entities effecting transactions in securities.
4. The disclosures made pursuant to the provisions of this section are in addition to any other disclosure requirements under the federal securities laws. Sec. 242.300 Definitions. For purposes of this section, the following definitions shall apply: [[Page 70922]]
(a) Alternative trading system means any organization, association, person, group of persons, or system:
(1) That constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange within the meaning of Sec. 240.3b-16 of this chapter; and
(2) That does not:
(i) Set rules governing the conduct of subscribers other than the conduct of such subscribers' trading on such organization, association, person, group of persons, or system; or
(ii) Discipline subscribers other than by exclusion from trading.
(b) Subscriber means any person that has entered into a contractual agreement with an alternative trading system to access such alternative trading system for the purpose of effecting transactions in securities or submitting, disseminating, or displaying orders on such alternative trading system, including a customer, member, user, or participant in an alternative trading system. A subscriber, however, shall not include a national securities exchange or national securities association.
(c) Affiliate of a subscriber means any person that, directly or indirectly, controls, is under common control with, or is controlled by, the subscriber, including any employee.
(d) Debt security shall mean any security other than an equity security, as defined in Sec. 240.3a11-1 of this chapter, as well as non-participatory preferred stock.
(e) Order means any firm indication of a willingness to buy or sell a security, as either principal or agent, including any bid or offer quotation, market order, limit order, or other priced order.
(f) Control means the power, directly or indirectly, to direct the management or policies of an alternative trading system, whether through ownership of securities, by contract, or otherwise. A person is presumed to control an alternative trading system, if that person:
(1) Is a director, general partner, or officer exercising executive responsibility (or having similar status or performing similar functions);
(2) Directly or indirectly has the right to vote 25 percent or more of a class of voting security or has the power to sell or direct the sale of 25 percent or more of a class of voting securities of the alternative trading system; or
(3) In the case of a partnership, has contributed, or has the right to receive upon dissolution, 25 percent or more of the capital of the alternative trading system.
(g) Covered security shall have the meaning provided in Sec. 240.11Ac1-1(a)(6) of this chapter, provided, however, that a debt or convertible debt security shall not be deemed a covered security for purposes of Regulation ATS.
(h) Effective transaction reporting plan shall have the meaning provided in Sec. 240.11Aa3-1(a)(3) of this chapter.
(i) Exchange market maker shall have the meaning provided in Sec. 240.11Ac1-1(a)(9) of this chapter.
(j) OTC market maker shall have the meaning provided in Sec. 240.11Ac1-1(a)(13) of this chapter.
(k) Investment grade corporate debt security shall mean any security that:
(1) Evidences a liability of the issuer of such security;
(2) Has a fixed maturity date that is at least one year following the date of issuance;
(3) Is rated in one of the four highest ratings categories by at least one Nationally Recognized Statistical Ratings Organization; and
(4) Is not an exempted security, as defined in section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)).
(l) Non-investment grade corporate debt security shall mean any security that:
(1) Evidences a liability of the issuer of such security;
(2) Has a fixed maturity date that is at least one year following the date of issuance;
(3) Is not rated in one of the four highest ratings categories by at least one Nationally Recognized Statistical Ratings Organization; and
(4) Is not an exempted security, as defined in section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)).
(m) Commercial paper shall mean any note, draft, or bill of exchange which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited. Sec. 242.301 Requirements for alternative trading systems.
(a) Scope of section. An alternative trading system shall comply with the requirements in paragraph (b) of this section, unless such alternative trading system:
(1) Is registered as an exchange under section 6 of the Act, (15 U.S.C. 78f);
(2) Is exempted by the Commission from registration as an exchange based on the limited volume of transactions effected;
(3) Is operated by a national securities association;
(4)(i) Is registered as a broker-dealer under sections 15(b) or 15C of the Act (15 U.S.C. 78o(b), and 78o-5), or is a bank, and
(ii) Limits its securities activities to the following instruments:
(A) Government securities, as defined in section 3(a)(42) of the Act, (15 U.S.C. 78c(a)(42));
(B) Repurchase and reverse repurchase agreements solely involving securities included within paragraph (a)(4)(ii)(A) of this section;
(C) Any put, call, straddle, option, or privilege on a government security, other than a put, call, straddle, option, or privilege that:
(1) Is traded on one or more national securities exchanges; or
(2) For which quotations are disseminated through an automated quotation system operated by a registered securities association; and
(D) Commercial paper.
(5) Is exempted, conditionally or unconditionally, by Commission order, after application by such alternative trading system, from one or more of the requirements of paragraph (b) of this section. The Commission will grant such exemption only after determining that such an order is consistent with the public interest, the protection of investors, and the removal of impediments to, and perfection of the mechanisms of, a national market system.
(b) Requirements. Every alternative trading system subject to this Regulation ATS, pursuant to paragraph (a) of this section, shall comply with the requirements in this paragraph (b).
(1) Broker-dealer registration. The alternative trading system shall register as a broker-dealer under section 15 of the Act, (15 U.S.C. 78o).
(2) Notice. (i) The alternative trading system shall file an initial operation report on Form ATS, Sec. 249.637 of this chapter, in accordance with the instructions therein, at least 20 days prior to commencing operation as an alternative trading system, or if the alternative trading system is operating as of April 21, 1999, no later than May 11, 1999.
(ii) The alternative trading system shall file an amendment on Form ATS at least 20 calendar days prior to implementing a material change to the operation of the alternative trading system.
(iii) If any information contained in the initial operation report filed under paragraph (b)(2)(i) of this section becomes inaccurate for any reason and has not been previously reported to the [[Page 70923]] Commission as an amendment on Form ATS, the alternative trading system shall file an amendment on Form ATS correcting such information within 30 calendar days after the end of each calendar quarter in which the alternative trading system has operated.
(iv) The alternative trading system shall promptly file an amendment on Form ATS correcting information previously reported on Form ATS after discovery that any information filed under paragraphs (b)(2)(i), (ii) or (iii) of this section was inaccurate when filed.
(v) The alternative trading system shall promptly file a cessation of operations report on Form ATS in accordance with the instructions therein upon ceasing to operate as an alternative trading system.
(vi) Every notice or amendment filed pursuant to this paragraph (b)(2) shall constitute a ''report'' within the meaning of sections 11A, 17(a), 18(a), and 32(a), (15 U.S.C. 78k-1, 78q(a), 78r(a), and 78ff(a)), and any other applicable provisions of the Act.
(vii) The reports provided for in paragraph (b)(2) of this section shall be considered filed upon receipt by the Division of Market Regulation, Stop 10-2, at the Commission's principal office in Washington, DC. Duplicate originals of the reports provided for in paragraphs (b)(2)(i) through (v) of this section must be filed with surveillance personnel designated as such by any self-regulatory organization that is the designated examining authority for the alternative trading system pursuant to Sec. 240.17d-1 of this chapter simultaneously with filing with the Commission. Duplicates of the reports required by paragraph (b)(9) of this section shall be provided to surveillance personnel of such self-regulatory authority upon request. All reports filed pursuant to this paragraph (b)(2) and paragraph (b)(9) of this section shall be deemed confidential when filed.
(3) Order display and execution access. (i) An alternative trading system shall comply with the requirements set forth in paragraph (b)(3)(ii) of this section, with respect to any covered security in which the alternative trading system:
(A) Displays subscriber orders to any person (other than alternative trading system employees); and
(B) During at least 4 of the preceding 6 calendar months, had an average daily trading volume of 5 percent or more of the aggregate average daily share volume for such covered security as reported by an effective transaction reporting plan or disseminated through an automated quotation system as described in section 3(a)(51)(A)(ii) of the Act, (15 U.S.C. 78c(a)(51)(A)(ii)).
(ii) Such alternative trading system shall provide to a national securities exchange or national securities association the prices and sizes of the orders at the highest buy price and the lowest sell price for such covered security, displayed to more than one person in the alternative trading system, for inclusion in the quotation data made available by the exchange or association to quotation vendors pursuant to Sec. 240.11Ac1-1 of this chapter.
(iii) With respect to any order displayed pursuant to paragraph (b)(3)(ii) of this section, an alternative trading system shall provide to any broker-dealer that has access to the national securities exchange or national securities association to which the alternative trading system provides the prices and sizes of displayed orders pursuant to paragraph (b)(3)(ii)(A) of this section, the ability to effect a transaction with such orders that is:
(A) Equivalent to the ability of such broker-dealer to effect a transaction with other orders displayed on the exchange or by the association; and
(B) At the price of the highest priced buy order or lowest priced sell order displayed for the lesser of the cumulative size of such priced orders entered therein at such price, or the size of the execution sought by such broker-dealer.
(4) Fees. The alternative trading system shall not charge any fee to broker-dealers that access the alternative trading system through a national securities exchange or national securities association, that is inconsistent with equivalent access to the alternative trading system required by paragraph (b)(3)(iv) of this section. In addition, if the national securities exchange or national securities association to which an alternative trading system provides the prices and sizes of orders under paragraphs (b)(3)(ii) and (b)(3)(iii) of this section establishes rules designed to assure consistency with standards for access to quotations displayed on such national securities exchange, or the market operated by such national securities association, the alternative trading system shall not charge any fee to members that is contrary to, that is not disclosed in the manner required by, or that is inconsistent with any standard of equivalent access established by such rules.
(5) Fair access. (i) An alternative trading system shall comply with the requirements in paragraph (b)(5)(ii) of this section, if during at least 4 of the preceding 6 calendar months, such alternative trading system had:
(A) With respect to any covered security, 20 percent or more of the average daily volume in that security reported by an effective transaction reporting plan or disseminated through an automated quotation system as described in section 3(a)(51)(A)(ii) of the Act (15 U.S.C. 78c(a)(51)(A)(ii));
(B) With respect to an equity security that is not a covered security and for which transactions are reported to a self-regulatory organization, 20 percent or more of the average daily volume in that security as calculated by the self-regulatory organization to which such transactions are reported;
(C) With respect to municipal securities, 20 percent or more of the average daily volume traded in the United States;
(D) With respect to investment grade corporate debt, 20 percent or more of the average daily volume traded in the United States;
(E) With respect to non-investment grade corporate debt, 20 percent or more of the average daily volume traded in the United States.
(ii) An alternative trading system shall:
(A) Establish written standards for granting access to trading on its system;
(B) Not unreasonably prohibit or limit any person in respect to access to services offered by such alternative trading system by applying the standards established under paragraph (b)(5)(ii)(A) of this section in an unfair or discriminatory manner; and
(C) Make and keep records of:
(1) All grants of access including, for all subscribers, the reasons for granting such access;
(2) All denials or limitations of access and reasons, for each applicant, for denying or limiting access.
(D) Report the information required on Form ATS-R, Sec. 249.638 of this chapter, regarding grants, denials, and limitations of access.
(iii) Notwithstanding paragraph (b)(5)(i) of this section, an alternative trading system shall not be required to comply with the requirements in paragraph (b)(5)(ii) of this section, if such alternative trading system:
(A) Matches customer orders for a security with other customer orders;
(B) Such customers' orders are not displayed to any person, other than employees of the alternative trading system; and
(C) Such orders are executed at a price for such security disseminated by an effective transaction reporting plan or through an automated quotation system as described in section 3(a)(51)(A)(ii) of [[Page 70924]] the Act, (15 U.S.C. 78c(a)(51)(A)(ii)), or derived from such prices.
(6) Capacity, integrity, and security of automated systems. (i) The alternative trading system shall comply with the requirements in paragraph (b)(6)(ii) of this section, if during at least 4 of the preceding 6 calendar months, such alternative trading system had:
(A) With respect to any covered security, 20 percent or more of the average daily volume reported by the effective transaction reporting plan or disseminated through an automated quotation system as described in Section 3(a)(51)(A)(ii) of the Act, (15 U.S.C. 78c(a)(51)(A)(ii));
(B) With respect to equity securities that are not covered securities and for which transactions are reported to a self-regulatory organization, 20 percent or more of the average daily volume as calculated by the self-regulatory organization to which such transactions are reported;
(C) With respect to municipal securities, 20 percent or more of the average daily volume traded in the United States;
(D) With respect to investment grade corporate debt, 20 percent or more of the average daily volume traded in the United States;
(E) With respect to non-investment grade corporate debt, 20 percent or more of the average daily volume traded in the United States.
(ii) With respect to those systems that support order entry, order routing, order execution, transaction reporting, and trade comparison, the alternative trading system shall:
(A) Establish reasonable current and future capacity estimates;
(B) Conduct periodic capacity stress tests of critical systems to determine such system's ability to process transactions in an accurate, timely, and efficient manner;
(C) Develop and implement reasonable procedures to review and keep current its system development and testing methodology;
(D) Review the vulnerability of its systems and data center computer operations to internal and external threats, physical hazards, and natural disasters;
(E) Establish adequate contingency and disaster recovery plans;
(F) On an annual basis, perform an independent review, in accordance with established audit procedures and standards, of such alternative trading system's controls for ensuring that paragraphs (b)(6)(ii)(A) through (E) of this section are met, and conduct a review by senior management of a report containing the recommendations and conclusions of the independent review; and
(G) Promptly notify the Commission staff of material systems outages and significant systems changes.
(iii) Notwithstanding paragraph (b)(6)(i) of this section, an alternative trading system shall not be required to comply with the requirements in paragraph (b)(6)(ii) of this section, if such alternative trading system:
(A) Matches customer orders for a security with other customer orders;
(B) Such customers' orders are not displayed to any person, other than employees of the alternative trading system; and
(C) Such orders are executed at a price for such security disseminated by an effective transaction reporting plan or through an automated quotation system as described in section 3(a)(51)(A)(ii) of the Act, (15 U.S.C. 78c(a)(51)(A)(ii)), or derived from such prices.
(7) Examinations, inspections, and investigations. The alternative trading system shall permit the examination and inspection of its premises, systems, and records, and cooperate with the examination, inspection, or investigation of subscribers, whether such examination is being conducted by the Commission or by a self-regulatory organization of which such subscriber is a member.
(8) Recordkeeping. The alternative trading system shall:
(i) Make and keep current the records specified in Sec. 242.302; and
(ii) Preserve the records specified in Sec. 242.303.
(9) Reporting. The alternative trading system shall:
(i) File the information required by Form ATS-R (Sec. 249.638 of this chapter) within 30 calendar days after the end of each calendar quarter in which the market has operated after the effective date of this section; and
(ii) File the information required by Form ATS-R within 10 calendar days after an alternative trading system ceases to operate.
(10) Procedures to ensure the confidential treatment of trading information.
(i) The alternative trading system shall establish adequate safeguards and procedures to protect subscribers' confidential trading information. Such safeguards and procedures shall include:
(A) Limiting access to the confidential trading information of subscribers to those employees of the alternative trading system who are operating the system or responsible for its compliance with these or any other applicable rules;
(B) Implementing standards controlling employees of the alternative trading system trading for their own accounts; and
(ii) The alternative trading system shall adopt and implement adequate oversight procedures to ensure that the safeguards and procedures established pursuant to paragraph (b)(10)(i) of this section are followed.
(11) Name. The alternative trading system shall not use in its name the word ''exchange,'' or derivations of the word ''exchange,'' such as the term ''stock market.'' Sec. 242.302 Recordkeeping requirements for alternative trading systems. To comply with the condition set forth in paragraph (b)(8) of Sec. 242.301, an alternative trading system shall make and keep current the following records:
(a) A record of subscribers to such alternative trading system (identifying any affiliations between the alternative trading system and subscribers to the alternative trading system, including common directors, officers, or owners);
(b) Daily summaries of trading in the alternative trading system including:
(1) Securities for which transactions have been executed;
(2) Transaction volume, expressed with respect to equity securities in:
(i) Number of trades;
(ii) Number of shares traded; and
(iii) Total settlement value in terms of U.S. dollars; and
(3) Transaction volume, expressed with respect to debt securities in:
(i) Number of trades; and
(ii) Total U.S. dollar value; and
(c) Time-sequenced records of order information in the alternative trading system, including:
(1) Date and time (expressed in terms of hours, minutes, and seconds) that the order was received;
(2) Identity of the security;
(3) The number of shares, or principal amount of bonds, to which the order applies;
(4) An identification of the order as related to a program trade or an index arbitrage trade as defined in New York Stock Exchange Rule 80A;
(5) The designation of the order as a buy or sell order;
(6) The designation of the order as a short sale order;
(7) The designation of the order as a market order, limit order, stop order, stop limit order, or other type or order;
(8) Any limit or stop price prescribed by the order;
(9) The date on which the order expires and, if the time in force is less than one day, the time when the order expires;
(10) The time limit during which the order is in force; [[Page 70925]]
(11) Any instructions to modify or cancel the order;
(12) The type of account, i.e., retail, wholesale, employee, proprietary, or any other type of account designated by the alternative trading system, for which the order is submitted;
(13) Date and time (expressed in terms of hours, minutes, and seconds) that the order was executed;
(14) Price at which the order was executed;
(15) Size of the order executed (expressed in number of shares or units or principal amount); and
(16) Identity of the parties to the transaction. Sec. 242.303 Record preservation requirements for alternative trading systems.
(a) To comply with the condition set forth in paragraph (b)(9) of Sec. 242.301, an alternative trading system shall preserve the following records:
(1) For a period of not less than three years, the first two years in an easily accessible place, an alternative trading system shall preserve:
(i) All records required to be made pursuant to Sec. 242.302;
(ii) All notices provided by such alternative trading system to subscribers generally, whether written or communicated through automated means, including, but not limited to, notices addressing hours of system operations, system malfunctions, changes to system procedures, maintenance of hardware and software, instructions pertaining to access to the market and denials of, or limitations on, access to the alternative trading system;
(iii) If subject to paragraph (b)(5)(ii) of Sec. 242.301, at least one copy of such alternative trading system's standards for access to trading, all documents relevant to the alternative trading systems decision to grant, deny, or limit access to any person, and all other documents made or received by the alternative trading system in the course of complying with paragraph (b)(5) of Sec. 242.301; and
(iv) At least one copy of all documents made or received by the alternative trading system in the course of complying with paragraph (b)(6) of Sec. 242.301, including all correspondence, memoranda, papers, books, notices, accounts, reports, test scripts, test results, and other similar records.
(2) During the life of the enterprise and of any successor enterprise, an alternative trading system shall preserve:
(i) All partnership articles or, in the case of a corporation, all articles of incorporation or charter, minute books and stock certificate books; and
(ii) Copies of reports filed pursuant to paragraph (b)(2) of Sec. 242.301 of this chapter and records made pursuant to paragraph (b)(5) of Sec. 242.301 of this chapter.
(b) The records required to be maintained and preserved pursuant to paragraph (a) of this section must be produced, reproduced, and maintained in paper form or in any of the forms permitted under Sec. 240.17a-4(f) of this chapter.
(c) Alternative trading systems must comply with any other applicable recordkeeping or reporting requirement in the Act, and the rules and regulations thereunder. If the information in a record required to be made pursuant to this section is preserved in a record made pursuant to Sec. 240.17a-3 or Sec. 240.17a-4 of this chapter, or otherwise preserved by the alternative trading system (whether in summary or some other form), this section shall not require the sponsor to maintain such information in a separate file, provided that the sponsor can promptly sort and retrieve the information as if it had been kept in a separate file as a record made pursuant to this section, and preserves the information in accordance with the time periods specified in paragraph (a) of this section.
(d) The records required to be maintained and preserved pursuant to this section may be prepared or maintained by a service bureau, depository, or other recordkeeping service on behalf of the alternative trading system. An agreement with a service bureau, depository, or other recordkeeping service shall not relieve the alternative trading system from the responsibility to prepare and maintain records as specified in this section. The service bureau, depository, or other recordkeeping service shall file with the Commission a written undertaking in a form acceptable to the Commission, signed by a duly authorized person, to the effect that such records are the property of the alternative trading system required to be maintained and preserved and will be surrendered promptly on request of the alternative trading system, and shall include the following provision: With respect to any books and records maintained or preserved on behalf of (name of alternative trading system), the undersigned hereby undertakes to permit examination of such books and records at any time, or from time to time, during business hours by representatives or designees of the Securities and Exchange Commission, and to promptly furnish to the Commission or its designee a true, correct, complete and current hard copy of any, all, or any part of, such books and records.
(e) Every alternative trading system shall furnish to any representative of the Commission promptly upon request, legible, true, and complete copies of those records that are required to be preserved under this section. PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
17. The authority citation for part 249 continues to read in part as follows: Authority: 15 U.S.C. 78a, et seq., unless otherwise noted; * * * * * *
18. Section 249.1 and Form 1 are revised to read as follows: Sec. 249.1 Form 1, for application for, and amendments to applications for, registration as a national securities exchange or exemption from registration pursuant to Section 5 of the Exchange Act. The form shall be used for application for, and amendments to applications for, registration as a national securities exchange or exemption from registration pursuant to Section 5 of the Act, (15 U.S.C. 78e). Note: Form 1 does not and the amendments will not appear in the Code of Federal Regulations. OMB APPROVAL OMB Number: 3235-0017 Expires: 8/31/2001 Estimated Average burden hours per form: 30 Form 1--Application for, and Amendments to Application for, Registration as a National Securities Exchange or Exemption From Registration Pursuant to Section 5 of the Exchange Act BILLING CODE 8010-01-M [[Page 70926]] [GRAPHIC] [TIFF OMITTED] TR22DE98.000 [[Page 70927]] [GRAPHIC] [TIFF OMITTED] TR22DE98.001 [[Page 70928]] [GRAPHIC] [TIFF OMITTED] TR22DE98.002 [[Page 70929]] [GRAPHIC] [TIFF OMITTED] TR22DE98.003 [[Page 70930]] [GRAPHIC] [TIFF OMITTED] TR22DE98.004 [[Page 70931]] [GRAPHIC] [TIFF OMITTED] TR22DE98.005 BILLING CODE 8010-01-C [[Page 70932]] [[Page 70933]] Sec. 249.1a and Form 1-A [Removed]
19. Section 249.1a and Form 1-A are removed. Sec. 249.636 and Form 17A-23 [Removed and reserved]
20. Section 249.636 and Form 17A-23 are removed and reserved.
21. Section 249.637 and Form ATS are added to read as follows: Sec. 249.637 Form ATS, information required of alternative trading systems pursuant to Sec. 242.301(b)(2) of this chapter. This form shall be used by every alternative trading system to file required notices, reports and amendments under Sec. 242.301(b)(2) of this chapter. Note: Form ATS does not and the amendments will not appear in the Code of Federal Regulations. OMB APPROVAL OMB Number: 3235-0509 Expires: 8/31/2001 Estimated Average burden hours per form: 8 Form ATS--Intial Operation Report, Amendment to Initial Operation Report and Cessation of Operations Report of Alternative Trading System Activities BILLING CODE 8010-01-M [[Page 70934]] [GRAPHIC] [TIFF OMITTED] TR22DE98.006 [[Page 70935]] [GRAPHIC] [TIFF OMITTED] TR22DE98.007 [[Page 70936]] [GRAPHIC] [TIFF OMITTED] TR22DE98.008 [[Page 70937]] [GRAPHIC] [TIFF OMITTED] TR22DE98.009 BILLING CODE 8010-01-C [[Page 70938]] [GRAPHIC] [TIFF OMITTED] TR22DE98.010 [[Page 70939]] [GRAPHIC] [TIFF OMITTED] TR22DE98.011 [[Page 70940]] [GRAPHIC] [TIFF OMITTED] TR22DE98.012 [[Page 70941]] [GRAPHIC] [TIFF OMITTED] TR22DE98.013 [[Page 70942]] [GRAPHIC] [TIFF OMITTED] TR22DE98.014 [[Page 70943]]
22. Section 249.638 and Form ATS-R are added to read as follows: Sec. 249.638 Form ATS-R, information required of alternative trading systems pursuant to Sec. 242.301(b)(8) of this chapter. This form shall be used by every alternative trading system to file required reports under Sec. 242.301(b)(8) of this chapter. Note: Form ATS-R does not and the amendments will not appear in the Code of Federal Regulations. OMB APPROVAL OMB Number: 3235-0509 Expires: 8/31/2001 Estimated Average burden hours per form: 3.5 Form ATS-R--Quarterly Report of Alternative Trading System Activities | 
