Senator Mark Warner writes to SEC about cybersecurity

Sen. Mark Warner on
Capitol Hill.


  • Senator Mark Warner (D-Va) just sent a letter to
    the chairman of the Securities and Exchange Commission focused
    on cybersecurity.

  • The letter is focused on Reg SCI, which requires
    certain trading venues to notify the SEC when there has been an

  • He wants there to be more transparency about
    which firms are subject to the rule, and for investment
    advisers and broker-dealers to factor in compliance to Reg SCI
    when deciding where to trade stocks.

Senator Mark Warner (D-Va) is worried about cybersecurity
threats to the US securities market.

The influential Democrat, who sits on the
Committee on Banking, Housing and Urban Affairs, the Committee on
Finance, and the Select Committee on Intelligence, on August 1
sent a letter to Securities and
Exchange Commission chairman Jay Clayton.

In it, he asked the SEC to provide more information
on cybersecurity rules in the US securities

The letter is focused on Regulation
Systems Compliance and Integrity (Reg SCI), a rule introduced in

“Reg SCI was intended to strengthen the technology
infrastructure of the US securities markets by reducing the
occurrence of systems issues, particularly following several
high-profile outages that had the potential to cause considerable
harm to investor confidence,” he said. 

Under Reg SCI, those trading venues subject to the
regulation “must notify the SEC when system problems do occur,
including compliance issues, system disruptions and system
intrusions.” The entities subject to the rule include all
exchanges, clearinghouses, Securities Information Processors
(SIPs), and those Alternative Trading Systems (ATS) that exceed
certain thresholds. 

Warner writes that the SEC has not publicly disclosed which
market centers have become subject to Reg SCI, and as a
result “

investors are unable to determine whether
their orders are being routed to market centers which are being
held to the requirement of having a strong, audited cybersecurity

The letter said (emphasis added):

“This includes any broker-dealer operated ATS’s,
single-dealer internalizers, and wholesalers which handle a
significant percentage of retail investor order flow and a high
percentage of overall US average daily volume. If compromised,
these market centers could destabilize markets by not
having the protections in place tht the SEC has outlined in Reg
SCI to strengthen the integrity of our markets. “

He urges the SEC to identify those in compliance with Reg
SCI, and to require investment advisers and broker-dealers
to consider compliance with Reg SCI when determining
best execution, or where they send their trades.

It’s not the first time Warner has fired off a letter to Clayton
about equity market structure. On July 14, he called
for the complete elimination of rebates in a letter to the newly
confirmed chairman of the Securities and
Exchange Commission. 

“These reforms would help to strengthen alignment – rather than
conflicts – of interest between brokers and clients, increase
price transparency, reduce fragmentation, strengthen stability,
and bring US equity markets closers to the competition mandate
required by Securities Acts Amendments of 1975,” Warner

The Securities and Exchange Commission may implement
a “pilot program” that would
examine the degree to which rebates affect the

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