October 2, 2020

Mr. Brett Redfearn
Director, Division of Trading and Markets
U.S. Securities & Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090

Re: SIFMA Comments on LTSE Causing Critical Marketplace Disruptions

Dear Mr. Redfearn:

The Securities Industry and Financial Markets Association (“SIFMA”)1 submits this letter to you at your request to highlight a critical marketplace disruption related to the operation of the Long-Term Stock Exchange (“LTSE”). SIFMA has long supported the efforts of the Securities and Exchange Commission (“Commission” or “SEC”) as the regulator of the national securities exchanges to facilitate a national market system for equity securities by, among other things, adopting a framework for the operation of fair and orderly markets by the exchanges.

While we are supportive of competition and new entrants in the marketplace, we are deeply concerned that the recently launched LTSE is undermining the national market system for equity securities by its continuing and significant technological and operational failures, which are described below. We therefore request that the Commission take prompt action to provide broker-dealers with the ability to avoid having to route orders under Rule 611 of Regulation NMS2 to LTSE and any other exchanges experiencing significant operational problems until those problems are addressed. SIFMA also recommends that the Commission take other actions to ensure that new exchanges are operationally ready before they formally launch with a protected quote that broker dealers are required to access.

I. Persistent Technological and Operational Failures at LTSE

Prior to and after LTSE’s launch into a production environment in August of this year, LTSE has experienced significant and persistent technological and operational failures and consistently ignores member firms’ concerns about launching and operating without having conducted successful testing. SIFMA first raised concerns with LTSE launching in April 2020 in the middle of significant market volatility caused by COVID-19, and given the unresponsiveness of LTSE, SIFMA asked the Commission to request that the exchange push back its testing and launch dates. LTSE subsequently created a launch plan in which it initially would launch with test symbols at the beginning of August and then roll out live trading symbols in increasing numbers throughout the rest of August and September. During July and the first weekend in August, LTSE held multiple weekend and ongoing tests for member firms but was unable to conduct successful, error-free tests. SIFMA and individual member firms again requested during this timeframe that LTSE push back its launch date, but LTSE did not listen to member firms’ concerns. After LTSE ignored these concerns, SIFMA again raised its concerns with the SEC staff, highlighting LTSE’s ongoing issues and its plans to continue to launch in early August despite this unsuccessful testing.