oversight

Securities and Exchange Commission: Adoption of Amendments to the Intermarket Trading System Plan to Expand the ITS/Computer Assisted Execution System Linkage to All Listed Securities

Published by the Government Accountability Office on 1999-12-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office                                Office of the General Counsel
Washington, DC 20548


          B-284295



          December 22, 1999

          The Honorable Phil Gramm
          Chairman
          The Honorable Paul S. Sarbanes
          Ranking Minority Member
          Committee on Banking, Housing, and Urban Affairs
          United States Senate

          The Honorable Thomas J. Bliley, Jr.
          Chairman
          The Honorable John D. Dingell
          Ranking Minority Member
          Committee on Commerce
          House of Representatives

          Subject: Securities and Exchange Commission: Adoption of Amendments to the
                   Intermarket Trading System Plan to Expand the ITS/Computer Assisted
                   Execution System Linkage to All Listed Securities

          Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a
          major rule promulgated by the Securities and Exchange Commission (SEC), entitled
          “Adoption of Amendments to the Intermarket Trading System Plan to Expand the
          ITS/Computer Assisted Execution System Linkage to All Listed Securities” (RIN:
          3235-AH49). We received the rule on December 9, 1999. It was published in the
          Federal Register as a final rule on December 16, 1999. 64 Fed. Reg. 70297.

          The final rule amends the plan governing the operation of the Intermarket Trading
          System (ITS). The rule expands the ITS/Computer Assisted Execution System
          linkage to all listed securities, including non-Rule 19c-3 securities.

          Enclosed is our assessment of the SEC’s compliance with the procedural steps
          required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.
          Our review indicates that the SEC complied with the applicable requirements.

          If you have any questions about this report, please contact James W. Vickers,
          Assistant General Counsel, at (202) 512-8210. The official responsible for GAO
          evaluation work relating to the subject matter of the rule is Thomas McCool,



                                                                                      GAO/OGC-00-15
Director, Financial Institutions and Markets Issues. Mr. McCool can be reached at
(202) 512-8678.

Sincerely yours,




Robert P. Murphy
General Counsel

Enclosure

cc: The Honorable Jonathan G. Katz
    The Secretary of the Securities and
     Exchange Commission




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                                                                          ENCLOSURE

       ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
                             ISSUED BY THE
                SECURITIES AND EXCHANGE COMMISSION
                                ENTITLED
           "ADOPTION OF AMENDMENTS TO THE INTERMARKET
      TRADING SYSTEM PLAN TO EXPAND THE ITS/COMPUTER ASSISTED
         EXECUTION SYSTEM LINKAGE TO ALL LISTED SECURITIES"
                            (RIN: 3235-AH49)

(i) Cost-benefit analysis

Although the SEC is not required to prepare a formal cost-benefit analysis, it is
required, under section 3(f) of the Exchange Act, to consider whether an action is
necessary or in the public interest and whether such action will promote efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).

The SEC believes that any possible increase in costs to the market participants are
justified by the overall benefits of the rule including increased liquidity, increased
competition, and a better chance for best execution of customer orders.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605,
607, and 609

The Initial Regulatory Flexibility Analysis was incorporated in the Notice of
Proposed Rulemaking and a summary of the Final Regulatory Flexibility Analysis
(FRFA) is included in the preamble to the final rule.

Both analyses provide the information required by the Act and include the reasons
for the agency actions, its objectives, legal basis, and the reporting and
recordkeeping requirements. The FRFA discusses the impact on the approximately
5,000 “small entity” broker-dealers, which will be indirect and positive.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform
Act of 1995, 2 U.S.C. §§ 1532-1535

The SEC, as an independent regulatory agency, is not subject to title II of the
Unfunded Mandates Reform Act of 1995.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

The final rule was issued using the notice and comment procedures contained in
5 U.S.C. 553. On July 30, 1998, the SEC published in the Federal Register a Notice of


                                                                           GAO/OGC-00-15
Proposed Rulemaking (Proposing Release). 63 Fed. Reg. 40748. In response, the
SEC received 15 comment letters, which are summarized and responded to in the
preamble to the final rule.

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520

The final rule does not contain any information collections that are subject to review
by the Office of Management and Budget under the Paperwork Reduction Act.

Statutory authorization for the rule

The final rule is issued under the authority of section 11A(a)(3)(B) of the Exchange
Act, 15 U.S.C. 78k-1(a)(3)(B).

Executive Order No. 12866

As the rule is promulgated by an independent regulatory agency, it is not subject to
the review requirements of Executive Order No. 12866.




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