ATSs Move Along With Plans to Register as Exchanges
By Sarah Stirland
With its new rules on exchanges and alternative trading systems in effect, the Securities and Exchange Commission is busy meeting with executives from firms that want to register as exchanges.
Last week, executives from the Island ECN briefed the SEC on the firm's plans for self-regulation in a meeting with the commission staff, according to Island. But Island wasn't the only firm meeting with the SEC last week. Members of the SEC staff were also involved in talks with other companies on their exchange registration plans.
Island has hired a small group of lawyers to set up a regulatory framework, which is required for a firm to become an exchange. Cameron Smith, Island's in-house general counsel, was a former SEC attorney in the division of market regulation. He also knows the workings of Nasdaq, the New York Stock Exchange and the regional exchanges from his days as the SEC's senior counsel in its office of compliance inspections and examinations.
Island has also hired Andrew Klein and Andre Owens, two attorneys from the Washington, D.C., law firm of Schiff Hardin & Waite, to work on its plans to register as an exchange (Securities Industry News, Jan. 25).
By becoming exchanges and gaining access to the Intermarket Trading System, electronic trading systems, such as Island, can broaden the breadth of the products traded on their systems. They can trade listed equities and - unlike systems that are registered as ATSs - under the new rules, new exchanges would be authorized to trade options by joining the Options Clearing Corp. The SEC also requires new exchanges to become members of organizations that are part of the national market system, such as the Consolidated Tape Association and the Options Price Reporting Authority. Under the SEC's self-regulatory requirements, new exchanges can either regulate themselves or outsource the responsibilities to a third party.
The rules usher in a new era in the capital markets because for the first time, exchanges, as in the case of Island and others, can be for-profit institutions. Other firms in the United States that want to register as exchanges include Archipelago, NexTrade and the Knight/Trimark Group.
In early April, Ashton Technology Group, the Internet technology and financial transactions firm, announced that it had formed a new subsidiary, NextExchange, which will in the future be an electronic exchange. The subsidiary was formed Feb. 5, and its CEO is William W. Uchimoto, who is also ATG's executive vice president and general counsel. |
