Proposed Rule for Improved Systems Compliance and Integrity

August 7, 2013

In March 2013, the SEC proposed new rules requiring key market participants to implement comprehensive policies and procedures around technology integral to their trading operations. The rules are designed to insulate the market from vulnerabilities caused by system disruptions and ensure that participants can correct problems as they arise.

Regulation SCI  (for systems compliance and integrity) would replace the existing voluntary compliance program. As proposed, it applies to those entities that directly support trading, clearing and settlement, order routing, market data, regulation and surveillance. These include self-regulatory organizations and alternative trading systems that exceed specific volume thresholds. The rules would require these entities to ensure their core technology meets certain standards, conduct business continuity tests and provide certain emergency notifications.

The 60-day comment period ended in July 2013. Most comments [PDF] favored a narrower rule and less detailed reporting to regulatory entities. The SEC is expected to either finalize the rule or revisit it later this year.