Recordkeeping and Record Preservation

Two rules do this work. One says what an alternative trading system must make and keep current. The other says how long each record survives and in what form, and it allows a venue to satisfy the duty out of records it already keeps elsewhere.

What Records Must an ATS Make and Keep Current?

To comply with the recordkeeping requirement, an alternative trading system (ATS) makes and keeps current three groups of records.

• A record of subscribers, identifying any affiliations between the venue and its subscribers, including common directors, officers, or owners.
• Daily summaries of trading in the venue, an open list that includes the securities for which transactions have been executed and the transaction volume in the terms below.
• Time-sequenced records of order information, an open list that includes the sixteen fields set out under Which Fields Must an Order Record Include? below.

Transaction volume is expressed differently for the two instrument groups.

Exam Tip: Gotchas

• Equity volume carries three measures and debt volume carries two. Debt has no share count, and its value measure is a total U.S. dollar value rather than a settlement value.
• The subscriber record is also an affiliation record. It must identify common directors, officers or owners between the venue and its subscribers.

Which Fields Must an Order Record Include?

Exam Tip: Gotchas

• Both time fields carry the same granularity. Receipt and execution are each expressed in hours, minutes and seconds.
• The expiration time is conditional. Only where the time in force is less than one day must the record carry an expiration time as well as a date.
• The account-type list is open at its end. It names retail, wholesale, employee and proprietary, and then any other type of account the venue designates.

How Long Must Each Record Be Preserved?

The Regulation ATS record preservation rule sets two periods.

For a period of not less than three years, the first two years in an easily accessible place, the venue preserves five categories.

1. All records required to be made under the Regulation ATS recordkeeping rule.
2. All notices the venue provides 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.
3. Where the venue is subject to the fair access duties themselves, at least one copy of its standards for access to trading, all documents relevant to its decision to grant, deny or limit access to any person, and all other documents made or received in the course of complying with the fair access rule as a whole.
4. At least one copy of all documents made or received in the course of complying with the capacity, integrity and security requirement for automated systems, including all correspondence, memoranda, papers, books, notices, accounts, reports, test scripts, test results, and other similar records.
5. At least one copy of the written safeguards and written procedures protecting subscribers' confidential trading information, and the written oversight procedures created in the course of complying with that requirement.

During the life of the enterprise and of any successor enterprise, the venue preserves two further categories.

1. All partnership articles or, in the case of a corporation, all articles of incorporation or charter, minute books and stock certificate books.
2. Copies of reports filed under the notice requirement or under the separate filing rule for national market system (NMS) stock venues, and records made under the fair access requirement.

Exam Tip: Gotchas

• The three-year period has an accessibility split inside it. The first two years must be in an easily accessible place, so a single three-year answer with no split is incomplete.
• The notices category is an open list. The rule says including but not limited to, and it reaches notices communicated through automated means as well as written ones.
• The fair access category has a catch-all third limb. It reaches all other documents made or received in the course of complying with the fair access rule as a whole, not only the standards and the access decisions.
• Corporate records outlive the enterprise. They are preserved during the life of the enterprise and of any successor enterprise.

In What Form Must the Records Be Kept?

The preserved records must be produced, reproduced, and maintained in paper form, or in any of the forms the records retention rule permits, subject to that rule's conditions. Those are an electronic recordkeeping system, meaning a system that preserves records in a digital format in a manner permitting them to be viewed and downloaded, or micrographic media, meaning microfilm or microfiche or any similar medium.

An alternative trading system must comply with any other applicable recordkeeping or reporting requirement in the Securities Exchange Act and the rules under it. The records to be made rule and the records retention rule themselves are covered in the unit on creating, retaining and reporting required records of orders and transactions.

Where the information in a record required here is preserved in a record made under those two rules, or is otherwise preserved by the venue, whether in summary or some other form, this rule does not require the sponsor to maintain that information in a separate file. That relief comes with two provisos.

1. The sponsor can promptly sort and retrieve the information as if it had been kept in a separate file as a record made under this rule.
2. The sponsor preserves the information in accordance with the time periods this rule sets.

Exam Tip: Gotchas

• The relief removes the separate file, not the record. The information must still exist, still be promptly sortable and retrievable, and still sit inside the same retention periods.
• Paper is still a permitted form. The rule lists paper first and then the electronic and micrographic alternatives.

Can a Service Bureau Keep the Records?

The records may be prepared or maintained by a service bureau, depository, or other recordkeeping service on the venue's behalf. An agreement with such a service shall not relieve the alternative trading system from the responsibility to prepare and maintain the records.

The service files with the SEC a written undertaking, in a form acceptable to the SEC and signed by a duly authorized person, to the effect that the records are the property of the alternative trading system and will be surrendered promptly on its request.

That undertaking also covers examination and delivery, and it names three parties.

• Permit examination of the books and records it maintains or preserves for the venue at any time, or from time to time, during business hours by the staff of the SEC, any self-regulatory organization (SRO) of which the venue is a member, or any State securities regulator having jurisdiction over the venue.
• Promptly furnish to any of those three a true, correct, complete and current hard copy of any, all, or any part of the books and records.

Separately, every alternative trading system shall furnish to any representative of the SEC, promptly upon request, legible, true, and complete copies of the records this rule requires it to preserve.

Exam Tip: Gotchas

• Outsourcing the work does not move the duty. The venue stays responsible to prepare and maintain the records however much the service bureau does.
• The undertaking runs to three parties, not one. A State securities regulator having jurisdiction sits alongside the SEC staff and the venue's self-regulatory organization.
• The hard copy must be current as well as complete. The undertaking uses the words true, correct, complete and current.

What Should You Check on Exam Day?

• Split the three-year period correctly, since the first two years must be in an easily accessible place.
• Confirm which records run for the life of the enterprise and of any successor: the corporate documents, the filed reports, and the fair access records.
• Check that a debt volume answer uses trades and total dollar value, with no share count.
• On a separate-file question, confirm both provisos hold: prompt sorting and retrieval, and preservation for the same periods.
• Confirm the examination undertaking names the SEC staff, the venue's self-regulatory organization, and a State securities regulator with jurisdiction.