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SEC Charges Alternative Trading System for Failing to Comply with Certain Requirements of Regulation ATS

Jan. 10, 2022

File No. 3-20699

January 10, 2022 - The Securities and Exchange Commission today announced settled charges against tZERO ATS, LLC, an indirect subsidiary of, for failing to comply with certain requirements of Regulation ATS.

According to the SEC's order, tZERO, a registered broker dealer that operates an ATS, did not make timely disclosures on Form ATS before it shared information about the ATS's order book with two different third parties. In addition, the order finds that tZERO failed to establish written standards for granting access to the ATS at times when the Fair Access Rule of Regulation ATS required it to have such written standards.

The order finds that, as a result, tZERO violated Rules 301(b)(2) and 301(b)(5) of Regulation ATS under the Securities Exchange Act of 1934. Rule 301(b)(2)(ii) requires an ATS to amend its Form ATS at least 20 calendar days before making a material change to its operations, and Rule 301(b)(2)(iii) requires that an ATS amend its Form ATS, within 30 calendar days after the end of a quarter, if any of the information in its existing Form ATS has become inaccurate during the quarter. Rule 301(b)(5), the Fair Access Rule, imposes certain requirements on an ATS that apply when trading in any security has exceeded 5% of the total volume in at least four of the previous six months, including a requirement to establish written standards for granting access to the ATS.

Without admitting or denying the SEC's findings, tZERO consented to a cease-and-desist order and a censure, and to pay a civil penalty of $800,000.

The SEC's investigation was conducted by Karen E. Willenken and Thomas P. Smith, Jr. and was supervised by Lara Shalov Mehraban.

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