SEC Adopts Rule Requiring Risk Management Controls on Direct Market Access

The Securities and Exchange Commission ("SEC") recently adopted new Rule 15c3-5 (the "Rule")¹ under the Securities Exchange Act of 1934 (the "Exchange Act") which will require broker-dealers having access to trading activities directly on an exchange or an alternative trading system ("ATS"), as a member or subscriber or as an operator of an ATS, to establish and maintain a system of risk management controls and supervisory procedures reasonably designed to : (1) systematically limit the financial exposure of the broker-dealer arising out of such market access and (2) ensure compliance with all regulatory requirements applicable in connection with such market access. The Rule will be applicable to broker-dealers providing direct market access or sponsored access to an exchange or ATS to customers or other persons and to broker-dealer operators of their own ATS granting access to persons other than broker-dealers. Since the controls required under the Rule must be