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SEC Letter: Produced Exchange Order Audit Trail Info Not Covered By Regulation SCI
February 13, 2020
Last week, Judge Jesse M. Furman issued a decision, City of Providence v. Bats Global Markets, 14-CV-2811 (JMF), 2020 U.S. Dist. LEXIS 23726 (S.D.N.Y. Feb. 6. 2020), concluding that language proposed by Defendants for an ESI stipulation was unnecessary. The basis of the decision was a letter from the head of the SEC's Division of Trading and Markets to the Court in which it stated its opinion that the 'Regulation Systems Compliance and Integrity' did not apply to produced information from an audit trail of an exchange order. The Regulation SCI covers all national securities exchanges and requires that their trading systems have adequate security, capacity, and integrity. The exchanges and other entities covered by Regulation SCI are also required to report security breaches and system disruptions.
The SEC's letter states that, "In the Division's view, Regulation SCI does not apply to the handling of information that has been extracted in an authorized manner from an individual exchange's order audit trail or other market regulation system. Such information produced and stored for purposes of document discovery in litigation would not be an SCI system and thus would not be subject to the requirements of Regulation SCI." Id. at *10-11. However, the SEC recommended that non-public information from the audit trail, such as the exchange member's name, should be covered by the same protocols used in a case for confidential information.
The Court also ruled that 30(b)(6) depositions could be taken before production was completed.