[Federal Register Volume 79, Number 209 (Wednesday, October 29, 2014)]
[Notices]
[Pages 64421-64423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25675]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73419; File No. 10-214]
Automated Matching Systems Exchange, LLC; Order Instituting
Proceedings To Determine Whether To Grant or Deny an Application for an
Exemption From Registration as a National Securities Exchange Under
Section 5 of the Securities Exchange Act of 1934
October 23, 2014.
I. Introduction
On July 7, 2014, Automated Matching Systems Exchange, LLC
(``AMSE'') filed with the Securities and Exchange Commission
(``Commission'') an application seeking a limited volume exemption
under Section 5 of the Securities Exchange Act (``Exchange Act'') from
registration as a national securities exchange under Section 6 of the
Exchange Act.\1\ Notice of AMSE's exemption application was published
for comment in the Federal Register on July 29, 2014.\2\ Although
Section 5 of the Exchange Act does not require the Commission to
institute proceedings on whether to grant or deny AMSE's exemption
application, the Commission has determined, in its discretion, to
institute such proceedings in order to solicit further the views of
interested persons on AMSE's exemption application. This order
institutes proceedings to determine whether to grant or deny the
exemption application.
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\1\ 15 U.S.C. 78e.
\2\ See Securities Exchange Act Release No. 72661 (July 23,
2014), 79 FR 44070 (``Notice). The Commission notes that Section 5
of the Exchange Act did not require publication of AMSE's exemption
application. The Commission determined, in its discretion, to
publish the Notice in order to solicit the views of interested
persons on AMSE's exemption application.
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II. Description of AMSE's System
AMSE proposes to conduct business in reliance upon an exemption
from registration as a national securities exchange pursuant to Section
5 of the Exchange Act.\3\ In general, AMSE seeks to operate as an
exchange for alternative trading systems.\4\ AMSE proposes to
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operate solely on an ``off-order-book'' trading basis. AMSE does not
intend to have a physical exchange trading floor, centralized order
book, or specialists or market makers with affirmative and negative
market making obligations. Each member of AMSE would maintain its own
automated matching system or electronic order book. Each member of AMSE
would adopt its own rules governing the execution and priority of
orders on its system. Trades would occur when an order to buy and an
order to sell match on a member's electronic order book. Each member
would report its transactions to AMSE at such intervals as required by
AMSE.
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\3\ 15 U.S.C. 78e.
\4\ For more detail on AMSE's proposed system, see AMSE's full
exemption application and Exhibits, which are published with the
Notice on the Commission's Web site at http://www.sec.gov/rules/other.shtml. The Commission notes that alternative trading systems
are securities markets that meet the definition of exchange under
the Exchange Act. Regulation ATS established an alternative
regulatory regime for securities markets by giving them the choice
to register as exchanges, or to register as broker-dealers and
comply with Regulation ATS. See Securities Exchange Act Release No.
40760 (December 8, 1998), 63 FR 70844, 70847 (December 22, 1998)
(``Regulation ATS Adopting Release''). Rule 300 of Regulation ATS
defines an alternative trading system to mean ``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 [Rule
3b-16]; 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.'' See 17 CFR 242.300(a).
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III. Proceedings To Determine Whether To Grant or Deny the Exemption
Application and Grounds for Denial Under Consideration
The Commission is instituting proceedings to determine whether
AMSE's exemption application should be granted or denied. Institution
of such proceedings is appropriate at this time in view of the legal
and policy issues raised by the exemption application. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, as
described in greater detail below, the Commission seeks and encourages
interested persons to provide additional comment on the exemption
application.
The Commission is providing notice of the grounds for denial under
consideration. Section 5 of the Exchange Act allows the Commission to
exempt an exchange from the requirements of exchange registration if
``in the opinion of the Commission, by reason of the limited volume of
transactions effected on such exchange, it is not practicable and not
necessary or appropriate in the public interest or for the protection
of investors to require such registration.'' \5\ Section 3(a)(1) of the
Exchange Act \6\ defines an ``exchange'' to be ``any organization,
association, or group of persons, whether incorporated or incorporated,
which 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 market as that term is generally understood, and
includes the market place and facilities maintained by such exchange.''
Rule 3b-16 under the Exchange Act \7\ further provides that ``[a]n
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 of 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 the trade.''
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\5\ 15 U.S.C. 78e.
\6\ 15 U.S.C. 78c(a)(1).
\7\ 17 CFR 240.3b-16.
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As noted above, trades would occur on the separate systems of the
individual members of AMSE. As described in the AMSE exemption
application, it does not appear that the orders of the individual
members of AMSE would interact with one another on any AMSE system, but
rather on each distinct and separate system of AMSE's members. That is,
it does not appear that any AMSE system would operate as an exchange by
bringing together purchasers and sellers of securities. As a result,
the Commission is concerned that AMSE's exemption application does not
meet a key threshold requirement for being granted an exemption from
exchange registration--namely, that the applicant actually be an
``exchange'' as defined under Section 3(a)(1) of the Exchange Act and
Rule 3b-16 thereunder.\8\
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\8\ See Regulation ATS Adopting Release, 63 FR at 70898-70901
(discussing the Commission's revised interpretation of the
``exchange'' definition). Among other things, the Commission stated
that ``the first essential element of an exchange is the bringing
together of orders of multiple buyers and sellers.'' Id. at 70900.
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Accordingly, the Commission believes that it is appropriate at this
time to issue this order to institute proceedings to determine whether
to grant or deny the exemption application on the grounds that the
applicant does not meet the definition of an ``exchange'' under Section
3(a)(1) of the Exchange Act and Rule 3b-16 thereunder.
IV. Procedure: Request for Written Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as other relevant
concerns. Such comments should be submitted by November 19, 2014.
Rebuttal comments should be submitted by December 3, 2014. Although
there do not appear to be any issues relevant to a grant or denial of
the exemption application which would be facilitated by an oral
presentation of views, data, and arguments, the Commission will
consider any request for an opportunity to make an oral presentation.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
Send an email to [email protected]. Please include
File Number 10-214 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number 10-214. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the exemptive application that are filed
with the Commission, and all written communications relating to the
exemptive application between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public
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Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available. All
submissions should refer to File Number 10-214 and should be submitted
on or before November 19, 2014. Rebuttal comments should be submitted
by December 3, 2014.
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25675 Filed 10-28-14; 8:45 am]
BILLING CODE 8011-01-P