2010-27468. Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549.

Extension:

Rule 301 and Forms ATS and ATS-R; SEC File No. 270-451; OMB Control No. 3235-0509.

Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval.

Regulation ATS provides a regulatory structure for alternative trading systems. Regulation ATS allows an alternative trading system to choose between registering as a broker-dealer and complying with Regulation ATS, or registering as a national securities exchange. Regulation ATS provides the regulatory framework for those alternative trading systems that choose to be regulated as broker-dealers. Rule 301 of Regulation ATS contains certain notice and reporting requirements, as well as additional obligations that apply only to alternative trading systems with significant volume. Rule 301 describes the conditions with which an alternative trading system must comply to be registered as a broker-dealer. The Rule requires all alternative trading systems that wish to comply with Regulation ATS to file an initial operation report on Form ATS. The initial operation report requires information regarding operation of the system including the method of operation, access criteria and the types of securities traded. Alternative trading systems are also required to supply updates on Form ATS to the Commission, describing material changes to the system, and quarterly transaction reports on Form ATS-R. Alternative trading systems are also required to file cessation of operations reports on Form ATS.

An alternative trading system with significant volume is required to comply with requirements for fair access and systems capacity, integrity and security. Under Rule 301, such alternative trading system is also required to establish standards for granting access to trading on its system. In addition, upon a decision to deny or limit an investor's access to the system, an alternative trading system is required to provide notice to a user of the denial or limitation and its right to an appeal to the Commission. Regulation ATS requires alternative trading systems to preserve any records made in the process of complying with the systems' capacity, integrity and security requirements. In addition, such alternative trading systems are required to notify Commission staff of material systems outages and significant systems changes.

The Commission uses the information provided pursuant to the Rule to monitor the growth and development of alternative trading systems, and to monitor whether the systems promote fair and orderly securities markets and operate in a manner that is consistent with the federal securities laws. In particular, the information collected and reported to the Commission by alternative trading systems enables the Commission to evaluate the operation of alternative trading systems with regard to national market system goals, and monitor the competitive effects of these systems to ascertain whether the regulatory framework remains appropriate to the operation of such systems. Without the information provided on Forms ATS and ATS-R, the Commission would not have readily available information on a regular basis in a format that would allow it to determine whether such systems have adequate safeguards.

Respondents consist of alternative trading systems that choose to register as broker-dealers and comply with the requirements of Regulation ATS. The Commission estimates that there are currently approximately 80 respondents.

An estimated 80 respondents will file an average total of 552 responses per year, which corresponds to an estimated aggregated annual response burden of 1,792.5 hours (comprised of 1,356 hours professional labor and 436.5 hours para-professional labor). At an average cost per burden hour of approximately $316 for professional labor and $59 for para-professional labor, with an additional 35% of labor costs added to account for overhead costs such as printing, copying, and postage, the resultant total related cost of compliance for these respondents is $613,236.82 per year ((1,356 professional burden hours multiplied by $316) plus (436.5 para-professional burden hours multiplied by $59) equals $454,249.50; plus 35% for overhead costs ($158,987.32) equals $613,236.82; figures may vary slightly due to arithmetic rounding).

An estimated 5 respondents will commence operations as an ATS each year, necessitating the filing of an initial operation report on Form ATS. The Commission estimates that the average compliance burden for each respondent would be 20 hours, comprising 13 hours of in-house professional work and 7 hours of clerical work. Thus, the total compliance burden per year is 100 hours (5 responses × 20 hours = 100 hours). The total cost of compliance for the annual burden is $22,605 ($316 × 13 hours per response + $59 × 7 hours per response = $4,521 per response; $4,521 × 5 responses = $22,605). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $1,582.35 per respondent ($4,521 times 35%). Thus, the Commission estimates the total annualized cost burden would be $7,911.75 ($1,582.35 × 5 respondents).

An estimated 80 respondents will file an estimated two periodic amendments to their initial operation report on Form ATS each year, an estimated total of 160 responses. The Commission estimates that the average compliance burden for each response would be 2 hours, comprising 1.5 hours of in-house professional work and 0.5 hours of clerical work. Thus, the total compliance burden per year is 320 hours (160 responses × 2 hours = 320 hours). The total cost of compliance for the annual burden is $1,007 ($316 × 1.5 hours per response + $59 × 0.5 hours per response = $503.50 per response; $503.50 × 160 responses = $80,560). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $176.23 per response ($503.50 times 35%). Thus, the Commission estimates the annualized cost burden for each respondent would be $352.46 ($176.23 × 2 responses per respondent) and the total annualized cost burden for all respondents would be $28,196.80 ($176.23 × 80 respondents × 2 responses per respondent).

An estimated 80 respondents will file four quarterly reports on Form ATS-R each year for an estimated total of 320 responses. The Commission estimates that that the average compliance burden for each response would be 4 hours, comprising 3 hours of in-house professional work and 1 hour of clerical work. Thus, the total compliance burden per year is 1,280 hours (320 responses × 4 hours = 1,280 hours). The total cost of compliance for the annual burden is $322,240 ($316 × 3 hours per response + $59 × 1 hours per response = $1,007 per response; $1,007 × 320 responses = $322,240). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $352.45 per response ($1,007 times 35%). Thus, the Commission estimates the annualized cost burden for each respondent would be $1409.80 ($352.45 × 4 responses per respondent) and the total annualized cost burden for all respondents would be $112,784 ($352.45 × 80 respondents × 4 responses per respondent).

An estimated three respondents will be required to file a cessation of operations report on Form ATS each year. The Commission estimates that the average compliance burden for each response would be 2 hours, comprising 1.5 hours of in-house professional work and 0.5 hours of clerical work. Thus, the total compliance burden per year is 6 hours (3 responses × 2 hours = 6 hours). The total cost of compliance for the annual burden is $1,510.50 ($316 × 1.5 hours per response + $59 × 0.5 hours per response = $503.50 per response; $503.50 × 3 responses = $1,510.50). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $176.23 per respondent ($503.5 × 35%). Thus, the Commission estimates the total annualized cost burden would be $528.69 ($176.23 × 3 respondents).

An estimated two respondents will meet certain volume thresholds requiring them to establish standards for granting access on its trading system. The Commission estimates that the average compliance burden for each response would be 5 hours of in-house professional work at $316 per hour. Thus, the total compliance burden per year is 10 hours (2 responses × 5 hours = 10 hours). The total cost of compliance for the annual burden is $3,160 ($316 × 5 hours per response × 2 responses = $3,160). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $553 per response ($1,580 × 35%). Thus, the Commission estimates the total annualized cost burden would be $1,106 ($553 × 2 respondents).

An estimated two respondents will meet certain volume thresholds requiring them to provide notice to any user upon any decision to deny or limit that user's access to the system, and these notice obligations will be triggered an estimated 27 × per year for each respondent. The Commission estimates that the average compliance burden for each response would be 1 hour of in-house professional work at $316 per hour. Thus, the total compliance burden per year is 54 hours (2 respondents × 27 responses each × 1 hour = 54 hours). The total cost of compliance for the annual burden is $17,064 ($316 × 1 hour per response × 54 responses = $17,064). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $110.60 per response ($316 × 35%). Thus, the Commission estimates the annualized cost burden for each respondent would be $2986.20 ($110.60 × 27 responses per respondent) and the total annualized cost burden for all respondents would be $5972.40 ($110.60 × 2 respondents × 27 responses per respondent).

An estimated two respondents will meet certain volume thresholds requiring them to keep records relating to any steps taken to comply with systems capacity, integrity, and security requirements under Rule 301. The Commission estimates that the average compliance burden for each response would be 10 hours of in-house professional work at $316 per hour. Thus, the total compliance burden per year is 20 hours (2 respondents × 10 hours = 20 hours). The total cost of compliance for the annual burden is $6,320 ($316 × 20 hours = $6,320). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $1,106 per response ($3,160 × 35%). Thus, the Commission estimates the total annualized cost burden would be $2,212 ($1,106 × 2 respondents).

An estimated two respondents will meet certain volume thresholds requiring them to provide a notice to the Commission to report any systems outages, and these notice obligations will be triggered an estimated 5 times per year for each respondent. The Commission estimates that the average compliance burden for each response would be .25 hours of in-house professional work at $316 per hour. Thus, the total compliance burden per year is 2.5 hours (2 respondents × 5 responses each × .25 hours = 2.5 hours). The total cost of compliance for the annual burden is $790 ($316 × .25 hours per response × 10 responses = $790). In addition, estimated overhead costs for printing, copying, and postage equal to 35% of the value of labor costs amount to $27.65 per response ($79 × 35%). Thus, the Commission estimates the annualized cost burden for each respondent would be $138.25 ($27.65 × 5 responses per respondent) and the total annualized cost burden for all respondents would be $276.50 ($27.65 × 2 respondents × 5 responses per respondent).

Written comments are invited on (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.

Please direct your written comments to: Jeffrey Heslop, Acting Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 6432 General Green Way, Alexandria, Virginia 22312 or send an e-mail to: [e-mail].

Dated: October 25,2010.

Florence E. Harmon,

Deputy Secretary.