April 18, 2022

Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549-1090

Re: Notice of Proposed Rulemaking on amendments to Exchange Act Rule 3b-16 regarding the definition of “Exchange”; Regulation ATS for ATSs That Trade U.S. Government Securities, NMS Stocks, and Other Securities; Regulation SCI for ATSs That Trade U.S. Treasury Securities and Agency Securities (the “Proposal”)1 (File No. S7-02-22)

Dear Ms. Countryman:

The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA AMG”)2 appreciates the opportunity to provide comments to the Securities and Exchange Commission (the “Commission” or “SEC”) on the above-referenced Proposal to:

• make changes to Rule 3b-16 under the Exchange Act that would materially expand the scope of the definition of “exchange.” Most notably, the Commission has proposed to require “communication protocol systems”—a term the Commission does not define—to either register as exchanges or operate as alternative trading systems (“ATSs”)
• propose changes to the fair access requirements in Rule 301(b)(5) of Regulation ATS (“Fair Access Rule”) that would require an ATS to ensure that it has reasonable written standards for granting, limiting, and denying access to the ATS’s services; and
• amend Regulation ATS under the Securities Exchange Act of 1934 (“Exchange Act”) for ATSs that trade government securities as defined under 3(a)(42) of the Exchange Act or repurchase and reverse repurchase agreements on government securities (“Government Securities ATSs”).

The Proposal makes a number of changes to an existing regulation that has functioned very well. In our view, the broad drafting of the Proposal suggests a dramatic expansion of regulatory scope and obligations – in ways unrelated to a data-driven identification of problems requiring attention. And it is the risk of such an expansion of scope and obligations that presents the most troubling consequences. The wording of the Proposal, perhaps intended to capture a limited number of alternative trading systems, risks

1 SEC Exchange Act Release No. 94062 (Jan. 26, 2022). The Proposal includes reproposals of certain amendments included in the Commission’s 2020 proposed amendments to Regulation ATS. See Exchange Act Release No. 90019 (Sept. 28, 2020), 85 Fed. Reg. 87106 (Dec. 31, 2020) (“2020 Proposal”).

2 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.