DEFINITION of SEC Form PILOT

SEC Form PILOT is a filing with the Securities and Exchange Commission (SEC) by a self-regulatory organization (SRO) as an initial operation report or an amendment to an initial operation report, or a quarterly report for pilot trading systems operated by an SRO. An SRO is a non-governmental body with regulatory authority over an industry. The Financial Industry Regulatory Authority, or FINRA, is a prime example. The filing must occur 20 days prior to commencement of operations (Part I of the form to be filled), or if already in operation, within 30 days of quarter-end (Part II of the form). 

BREAKING DOWN SEC Form PILOT

A pilot trading system means any trading system operated by a SRO that:
(a) has been in operation for less than two years
(b) is independent of any other trading system operated by an SRO
(c) has traded no more than 5% (or 1%) of the average daily volume of a U.S. security during at least two of the last four consecutive months
(d) during two of the last four consecutive months has traded no more than 20% of the average trading volume of all the trading systems operated by the SRO.

Like SEC Form ATS-R, total unit and dollar volume transactions for the following securities are reported on SEC Form PILOT if the trading system is already up and running:

  • Listed Equity Securities
  • Nasdaq National Market Securities
  • Nasdaq SmallCap Market Securities
  • Rule 144A Equity Securities
  • Penny Stocks
  • Other Equity Securities
  • Rights and Warrants
  • Listed Options
  • Unlisted Options
  • Investment-Grade Corporate Debt Securities
  • Non-Investment-Grade Corporate Debt Securities
  • Government Securities
  • Municipal Securities
  • Mortgage-related Securities
  • Other Debt Securities

Attachments to Part I of the form include exhibits that describe the manner of operation of the pilot system; procedures governing order entry, execution, reporting, clearance and settlement of trades; compliance guidelines; agreements between the SRO and members of the pilot system; and procedures that address system capacity, security and contingency planning.