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ARTICLE · 10 APRIL 2013

SEC Gets SCI-entific About Trading Systems With Proposed Regulation SCI

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On March 7, 2013, the Securities and Exchange Commission voted unanimously to propose Regulation Systems Compliance and Integrity under the Securities Exchange Act of 1934.

United StatesCorporate/Commercial Law
Andre Owens
Andre Owens
Stephen Luparello
Stephen Luparello
Cherie Weldon
Cherie Weldon
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A. EXECUTIVE SUMMARY

On March 7, 2013, the Securities and Exchange Commission ("Commission" or "SEC") voted unanimously to propose Regulation Systems Compliance and Integrity ("Reg SCI") under the Securities Exchange Act of 1934 ("Exchange Act").1 The Commission believes that the dependence of today's trading markets on sophisticated automated systems, the lessons of recent market events,2 and the limitations of the SEC's current approach to the oversight of automated systems important to the national market system highlight the need to consider an updated and formalized regulatory framework for such systems. Therefore, the SEC has proposed replacing the voluntary requirements of the existing Automation Review Policy3 ("ARP Program") and the requirements of Rule 301(b)(6) of Regulation ATS4 with mandatory uniform requirements relating to the automated systems of "SCI entities." The term "SCI entities," as currently defined, would include:

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