SEC Adopts Regulation SCI for Trading Systems
The SEC voted to adopt new Regulation SCI (Systems Compliance and Integrity), requiring SROs, ATSs, plan processors, and exempt clearing agencies to address their technological systems. The rules require designated SCI entities to adopt comprehensive policies and procedures (i) addressing actions to take when systems issues occur, (ii) providing for notification and reports to the SEC; (iii) informing members and participants about systems issues; (iv) conducting BCP testing; and (v) conducting annual systems reviews. The new rules are intended to “reduce the occurrence of systems issues and improve resiliency when systems problems do occur.”
OUR TAKE: The SEC hopes to reduce incidents like the “flash crash” as well as reign in ATSs that it believes contribute to volatility without transparency. Covered firms will need to connect the compliance team with the IT folks to make this happen. We suspect the unintended consequence will include higher costs passed on to customers.