The 15th of March 2023, in Washington, DC —
Regulation Sci Info
Regulation Systems Compliance and Integrity (SCI) is a set of rules that the SEC passed in 2014 to help address technological weaknesses in the U.S. securities markets and enhance Commission monitoring of essential U.S. market infrastructure technology. The Securities and Exchange Commission has today proposed amendments to expand and update Regulation SCI (SCI entities).
Gary Gensler, who is the chair of the Securities and Exchange Commission said, “I am happy to support this proposal because these changes would help strengthen the capacity, integrity, resilience, availability, and security of essential intermediates, which is in line with keeping markets stable.”Technology plays a broad and growing role in underpinning our market systems, and our markets would benefit from revising Reg SCI to take account of these developments.
It is crucial, in my opinion, to expand Reg SCI to cover a wider range of major market participants and to increase the requirements placed on them. Together, these changes would strengthen vital market players and increase their resilience and safety. That’s good for business for us.
After the implementation of Regulation SCI in 2014, trading and technology have progressed. The proliferation of Internet trading platforms, especially those offered by broker-dealers who perform several roles in the markets, has facilitated more frequent and rapid transactions in a larger range of securities. There are now many new kinds of legal entities on the market that rely heavily on distributed computing systems.
There is a growing dependence on cutting-edge technology among market participants and market facilitators due to the rise of remote workforces and outsourcing to third-party service providers.
The proposed changes would update the definition of SCI entities to include security-based swap data repositories, all exempt clearing agencies, and certain large broker-dealers, especially those that exceed a total assets threshold or a transaction activity threshold in national market system stocks, exchange-listed options contracts, US Treasury securities, and agency securitizations.
The proposed changes would also make Regulation SCI’s requirements for SCI entities stricter by requiring the following: a written inventory and classification of all SCI systems; a program for life cycle management; a program to prevent unauthorized access to these systems and the information they contain; and a program to manage and oversee certain third-party providers, such as cloud service providers.
Also, the proposed changes would change the rules about keeping records, update the annual SCI review and testing requirements for business continuity and disaster recovery, and expand the types of SCI events that need to be reported to the Commission right away.
The proposed announcement will be posted on the Federal Register website. There will be a 60-day window for the public to submit comments, beginning on the day the proposed release is published in the Federal Register.
