Do SEC Acting Chair’s Remarks Signal a Redux of Government Securities ATS Rulemaking?

On March 10, 2025, Acting Securities and Exchange Commission (SEC) Chair Mark Uyeda indicated in public remarks that he was directing the SEC staff to revisit a 2020 proposal under then-Chair Jay Clayton that, among other things, would have subjected to Regulation ATS alternative trading systems (ATSs) that support trading exclusively in US Treasuries and other government securities (government securities ATSs).

While what may ultimately develop from this new effort is uncertain, government securities ATSs that have to date been able to avoid registering as broker-dealers and becoming subject to Regulation ATS should aim to engage with the SEC and its staff to help inform any eventual rule proposal.

BACKGROUND  

Acting Chair Uyeda’s remarks[1] follow a January 2022 proposal by then-Chair Gary Gensler’s SEC to substantially expand Regulation ATS to encompass both ATSs that trade government securities and also trading systems that more broadly offer the use of non-firm trading interest and “communication protocols” to bring together buyers and sellers of securities (2022 Proposal).[2] The 2022 Proposal met with heavy industry criticism, resulting in the SEC reopening the comment period in 2023 and providing additional clarity on the intended scope of the proposal, including that it would squarely apply to digital asset platforms.[3] The 2022 Proposal was never adopted.

In his remarks on March 10, Acting Chair Uyeda tacitly endorsed the general scope of the earlier 2020 Proposal,[4] described below. Acting Chair Uyeda emphasized the importance of the US Treasuries trading markets and the evolution of those markets to involve substantial participation by principal trading firms and other short-term liquidity providers that frequently buy and sell US Treasuries but rarely carry inventory overnight. He also highlighted that ATSs that trade US Treasuries “now operate with similar complexities and speed to trading venues for National Market System (NMS) stocks” but “are not subject to the transparency, fair and orderly markets, investor protections, and system integrity rules that apply to ATSs generally.” Nonetheless, he stressed the importance of robust discourse between regulators and industry prior to issuing any new proposal based on the 2020 Proposal.

THE 2020 PROPOSAL

The overly expansive 2022 Proposal differed considerably from the 2020 Proposal, the latter of which narrowly focused on government securities ATSs. The following are key aspects of the 2020 Proposal that may be revisited:

Application of Regulation ATS to All Government Securities ATSs

The 2020 Proposal would have eliminated the exemption from compliance with Regulation ATS for an ATS that limits its securities activities to government securities or repurchase and reverse repurchase agreements on government securities, and registers as a broker-dealer or is a bank.

Form ATS-G Disclosures and SEC Oversight

The 2020 Proposal would have added new Form ATS-G, which would have required a government securities ATS to publicly disclose information about its manner of operations and the ATS-related activities of the registered broker-dealer or government securities broker or dealer that operates the ATS (broker-dealer operator) and its affiliates. Form ATS-G would have been designed to allow market participants to assess conflicts of interest and understand how their orders will interact, match, and execute in the ATS.

Fair Access Rule

The 2020 Proposal would have applied the Fair Access Rule to government securities ATSs that, during at least four of the preceding six calendar months, had (1) with respect to US Treasury securities, 5% or more of the average weekly dollar volume traded in the United States as provided by the self-regulatory organization (SRO) to which such transactions are reported or (2) with respect to agency securities, 5% or more of the average daily dollar volume traded in the United States as provided by the SRO to which such transactions are reported.[5]

Regulation SCI Amendments for Government Securities ATS

The 2020 Proposal would have amended Regulation SCI to expand the definition of “SCI alternative trading system” to include government securities ATSs that, during at least four of the preceding six calendar months, had (1) with respect to U.S. Treasury securities, 5% or more of the average weekly dollar volume traded in the United States as provided by the SRO to which such transactions are reported or (2) with respect to agency securities, 5% or more of the average daily dollar volume traded in the United States as provided by the SRO to which such transactions are reported. This would have subjected certain government securities ATSs to the requirements of Regulation SCI and helped to address the technological vulnerabilities, and improve the SEC’s oversight, of the core technology of key entities in the markets for government securities.[6]

ACTING CHAIR UYEDA’S DIRECTIVES

In his public remarks, the Acting Chair specifically directed the staff to:

• Re-engage with the Treasury Department, the Federal Reserve, and market participants to consider whether the SEC should move forward on regulatory changes for government securities ATSs; and
• Consider options for abandoning any modifications to the definition of “exchange” and Regulation ATS that might relate to crypto, given the significant negative public comment received on that aspect of the 2022 Proposal.

POLICY BEHIND TREASURY CLEARING RULES IS “SOUND”

In his remarks on March 10, Acting Chair Uyeda also addressed the SEC’s December 2023 adoption of new standards that require covered clearing agencies to promulgate rules to require members to submit eligible transactions in US Treasuries for central clearing (the Treasury Clearing Rules).[7] In particular, the Acting Chair touted “the policy changes” in the Treasury Clearing Rules as “sound,” but he also described the original implementation timeline as “sub-optimal,” given the extensive preparations required of market participants.

Notably, on February 25, 2025, the SEC extended the compliance dates and provided a temporary exemption for aspects of the Treasury Clearing Rules. The new compliance dates are:

• September 30, 2025: Covered clearing agencies must have policies and procedures in place to calculate, collect, and hold margin for their direct participants’ proprietary transactions separately from transactions submitted on behalf of indirect participants (original compliance date was March 31, 2025).
• December 31, 2026: Direct participants of covered clearing agencies must clear eligible cash secondary market transactions (original compliance date was December 31, 2025).
• June 30, 2027: Direct participants of covered clearing agencies must clear eligible Treasury repo transactions (original compliance date was June 30, 2026).[8]