Regulation SCI - Systems Compliance and Integrity

Regulation SCI requires an SCI entity to establish, maintain, and enforce written policies and procedures that keep its “SCI systems” adequately capable and protected, across capacity, integrity, resiliency, availability, and security. To operationalize it fast, treat it as a control standard for mission-critical trading and market infrastructure systems: define scope, set engineering requirements, test continuously, and report SCI events to the SEC. (17 CFR §§ 242.1000-1007)

Key takeaways:

• Reg SCI is a systems control rule: scope “SCI systems,” then harden capacity, resiliency, security, and change controls. (17 CFR §§ 242.1000-1007)
• “Written policies and procedures” must be enforceable and testable, not aspirational. (17 CFR §§ 242.1000-1007)
• SCI event reporting and public dissemination are operational requirements, so you need a practiced incident path and decision process. (17 CFR §§ 242.1000-1007)

A CCO or GRC lead usually gets pulled into Regulation SCI at the worst moment: during a major incident, a system upgrade, or an SEC exam cycle. The fastest way to get control is to translate the rule’s engineering language into requirement-level governance: define which systems are “SCI systems,” document the minimum service levels and security properties they must meet, and implement repeatable testing and change management around those requirements. (17 CFR §§ 242.1000-1007)

Reg SCI is not a generic cybersecurity rule. It is aimed at the systems that directly support market functions and participant access, and it expects you to prove operational capability under stress (capacity), under failure (resiliency/availability), under compromise attempts (security), and under internal change (integrity/change control). Your job is to make sure the business can demonstrate that these controls exist, are followed, and produce evidence. (17 CFR §§ 242.1000-1007)

This page gives you a practical operating model: scoping, policy set, control implementation steps, evidence you must retain, common exam questions, and a phased execution plan you can run with engineering and operations.

Regulatory text

Core requirement (excerpt): SCI entities must establish, maintain, and enforce written policies and procedures reasonably designed to ensure that their SCI systems have levels of capacity, integrity, resiliency, availability, and security adequate to maintain the entity's operational capability. (17 CFR §§ 242.1000-1007)

Operator interpretation: you must (1) identify the systems covered by Reg SCI, (2) set explicit operational requirements for those systems across the five attributes, and (3) run a control program that makes those requirements true in practice (testing, monitoring, change control, incident handling) with retained evidence. “Reasonably designed” is where exams live: it means your program matches your risks, system criticality, and operational reality. (17 CFR §§ 242.1000-1007)

Plain-English interpretation of the requirement

Regulation SCI expects an SCI entity to run its critical market systems like safety-critical infrastructure. That means:

• Capacity: you plan for peak load and abnormal conditions, and you test for it.
• Integrity: system outputs are accurate and complete; you control changes and data flows.
• Resiliency and availability: you can continue operating through failures and recover quickly.
• Security: you detect, prevent, and respond to threats that could impair those systems.
  All of this must be written down as enforceable policies and procedures, then proven through execution evidence. (17 CFR §§ 242.1000-1007)

Who it applies to (entity and operational context)

Reg SCI applies to SCI entities, including self-regulatory organizations, certain alternative trading systems over thresholds, plan processors, and exempt clearing agencies. (17 CFR §§ 242.1000-1007)

Operationally, it applies wherever you operate or rely on SCI systems: the technology that supports trading, routing, matching, market data processing, clearing-related functions within scope, participant connectivity, and the controls that keep those functions stable and secure. If an outage, bad deployment, or intrusion would impair market participant access or the entity’s ability to operate, assume the system is a scoping candidate and force a decision. (17 CFR §§ 242.1000-1007)

What you actually need to do (step-by-step)

1) Establish SCI system scope and ownership

1. Build an SCI system inventory: applications, services, infrastructure components, and third-party dependencies that support in-scope functions.
2. Assign accountable owners per system: an engineering owner (technical), an operations owner (run), and a compliance owner (evidence and reporting).
3. Document system boundaries: upstream/downstream feeds, external connections, market participant touchpoints, and failover architecture.
   Deliverable: SCI System Register with ownership and dependency mapping. (17 CFR §§ 242.1000-1007)

2) Translate “adequate levels” into measurable requirements

For each SCI system, define minimum requirements across the five attributes:

• Capacity: load assumptions, stress conditions, and what “degradation” means operationally.
• Integrity: data validation, reconciliation, control checks, and deployment gating for correctness.
• Resiliency/availability: redundancy model, recovery procedures, and operational readiness criteria.
• Security: access control, monitoring, vulnerability management expectations, and incident response integration.
  Deliverable: SCI System Requirements Standard (a baseline) plus system-specific addenda. (17 CFR §§ 242.1000-1007)

3) Implement change management that protects integrity and availability

1. Define “SCI change” criteria: what types of changes require heightened review, testing, scheduling controls, and approvals.
2. Standardize pre-release testing tied to the requirements above (capacity, resiliency, security).
3. Require rollback plans and operational runbooks before deployment.
4. Implement post-change validation: confirm market-facing functions, data integrity checks, and monitoring signals.
   Evidence focus: approvals, test results, release notes, and validation logs. (17 CFR §§ 242.1000-1007)

4) Build capacity planning and performance testing into operations

1. Continuous monitoring of performance and capacity indicators aligned to system requirements.
2. Scenario-based testing for peak trading days, message bursts, downstream dependency failure, and recovery transitions.
3. Document outcomes and track remediation to closure if tests fail.
   Your goal is to show you can predict problems before they become SCI events. (17 CFR §§ 242.1000-1007)

5) Formalize BCP/DR for SCI systems, then prove it works

1. Define recovery procedures per SCI system (failover steps, communications, validation checks).
2. Run DR tests that reflect realistic operational conditions (not tabletop-only), and capture defects.
3. Ensure staffing and access: on-call, break-glass access controls, and vendor/third-party contact paths.
   Evidence focus: DR plans, test scripts, results, tickets, and retest proof. (17 CFR §§ 242.1000-1007)

6) Security monitoring and incident response must map to SCI event reporting

1. Integrate SOC monitoring for SCI systems with clear escalation thresholds.
2. Define “SCI event” triage: disruption, compliance issue, or intrusion affecting SCI systems; then confirm whether SEC reporting and public dissemination are required when market participants are affected. (17 CFR §§ 242.1000-1007)
3. Practice the path: run incident simulations that include compliance decisions, SEC notification workflow, and external communications.
   Deliverable: SCI Event Decision Tree + call tree + reporting playbook. (17 CFR §§ 242.1000-1007)

7) Governance: enforce the written program

1. Approve policies through the right governance forum (technology risk committee, compliance oversight).
2. Train relevant teams (engineering, operations, SOC, NOC, release managers).
3. Measure compliance: exceptions, overdue testing, repeat incidents, and change failures tied to SCI systems.
   Reg SCI expects enforcement, so you need an exception process with risk acceptance and remediation dates. (17 CFR §§ 242.1000-1007)

Required evidence and artifacts to retain

Maintain evidence that proves design and execution. Typical artifacts:

• SCI System Register (scope, owners, dependencies). (17 CFR §§ 242.1000-1007)
• Written policies and procedures for capacity, integrity, resiliency/availability, security, change management, incident response, and reporting. (17 CFR §§ 242.1000-1007)
• Capacity plans, monitoring dashboards, performance test plans and results, defect remediation records. (17 CFR §§ 242.1000-1007)
• DR/BCP documentation, test scripts, test results, issues and retest records. (17 CFR §§ 242.1000-1007)
• Security monitoring coverage mapping for SCI systems, alert runbooks, incident tickets, root cause analyses. (17 CFR §§ 242.1000-1007)
• Change records for SCI changes: approvals, testing evidence, rollout/rollback steps, post-deploy validation. (17 CFR §§ 242.1000-1007)
• SCI event log and reporting package: timeline, impact analysis, internal notifications, SEC report drafts/finals, public communications where applicable. (17 CFR §§ 242.1000-1007)
• Exception register: what deviated, who approved, compensating controls, remediation plan, closure evidence. (17 CFR §§ 242.1000-1007)

Practical tip: store evidence by system and by event. During an exam, “show me everything for System X” is a common pattern.

Common exam/audit questions and hangups

Expect questions like:

• “Show me how you determined SCI system scope and how you keep the inventory current.” (17 CFR §§ 242.1000-1007)
• “Where are the written procedures, and how do you prove teams follow them?” (17 CFR §§ 242.1000-1007)
• “How do you test capacity and resiliency, and what happens when tests fail?” (17 CFR §§ 242.1000-1007)
• “Walk through an SCI event: detection, triage, decision to report, SEC notification, and any public dissemination.” (17 CFR §§ 242.1000-1007)
• “How do you manage third-party dependencies that can impair SCI systems?” Tie the third party into your SCI requirements, monitoring, and incident path. (17 CFR §§ 242.1000-1007)

Hangups that slow teams down:

• Arguing about whether a system is “really SCI” without making a documented decision.
• Having policies that read well but do not map to test artifacts, tickets, and change records.

Frequent implementation mistakes and how to avoid them

• Mistake: treating Reg SCI as an IT policy project. Fix: build system-level requirements and tie them to monitoring, testing, and change records you can produce on demand. (17 CFR §§ 242.1000-1007)
• Mistake: weak SCI system boundaries. Fix: define interfaces and dependencies explicitly, including cloud services and third parties that can take you down. (17 CFR §§ 242.1000-1007)
• Mistake: “DR tested” with no defect closure. Fix: require remediation tracking and retest evidence as part of the DR control. (17 CFR §§ 242.1000-1007)
• Mistake: incident response not aligned to SCI reporting. Fix: add an SCI event decision tree and practice it with compliance in the room. (17 CFR §§ 242.1000-1007)
• Mistake: change management exemptions become the norm. Fix: create an exception register with approvals, compensating controls, and closure criteria. (17 CFR §§ 242.1000-1007)

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this page, so this section is intentionally limited to operational risk. Reg SCI failures tend to cluster around outages, faulty releases, and intrusions that impair participant access or market operations, which can drive SEC scrutiny, remediation commitments, and reputational damage. Your mitigation is evidence-backed operational discipline: tested resiliency, controlled change, and practiced reporting. (17 CFR §§ 242.1000-1007)

Practical 30/60/90-day execution plan

First 30 days (stabilize scope and reporting readiness)

• Confirm SCI entity applicability and assemble a named SCI working group (Compliance, Tech Ops, Security, Engineering). (17 CFR §§ 242.1000-1007)
• Create the first SCI System Register and mark systems “confirmed,” “excluded,” or “needs decision,” with an owner and rationale. (17 CFR §§ 242.1000-1007)
• Draft the SCI event decision tree and escalation path, then run a live simulation from detection to reporting package. (17 CFR §§ 242.1000-1007)
• Inventory current evidence sources (monitoring tools, ITSM, CI/CD, SOC platform) and identify gaps.

Next 60 days (convert policy into controls and proof)

• Publish written policies and procedures that map directly to: capacity testing, change management, DR, security monitoring, and incident reporting. (17 CFR §§ 242.1000-1007)
• Define system-level requirements for each SCI system and map each requirement to: control owner, test method, and evidence location. (17 CFR §§ 242.1000-1007)
• Implement an SCI change workflow in your ITSM/SDLC process with required artifacts (test results, rollback, approvals). (17 CFR §§ 242.1000-1007)
• Launch a remediation tracker for capacity/resiliency/security gaps discovered.

Next 90 days (operate it like a program)

• Run at least one end-to-end resiliency exercise for top critical SCI systems with defect closure tracked. (17 CFR §§ 242.1000-1007)
• Stand up recurring governance: metrics review, exception approvals, and evidence spot checks. (17 CFR §§ 242.1000-1007)
• Audit your own program: pick one SCI system and one incident/change and rehearse an SEC-style evidence walkthrough.
• If you need to scale evidence management, Daydream can help you centralize SCI system inventories, map controls to evidence sources, and produce exam-ready packages without chasing screenshots across teams.

Frequently Asked Questions

How do I decide what counts as an “SCI system”?

Start from market-facing and operationally critical functions, then map upstream/downstream dependencies until you reach a reasonable boundary you can control and evidence. Document each inclusion/exclusion decision in the SCI System Register. (17 CFR §§ 242.1000-1007)

What does “reasonably designed” mean in practice?

It means your controls match the system’s criticality and realistic failure modes, and you can show testing, monitoring, and remediation evidence. If your written procedures say you test or review something, you must be able to produce the records. (17 CFR §§ 242.1000-1007)

Do we need separate policies for Reg SCI, or can we point to existing SDLC/IR/BCP documents?

You can use existing documents if they explicitly cover SCI systems and include SCI-specific procedures (testing, change criteria, escalation, reporting). Most teams add an SCI overlay standard that references existing policies and adds missing SCI requirements. (17 CFR §§ 242.1000-1007)

How should third parties fit into Reg SCI controls?

Treat third-party services that support SCI systems as in-scope dependencies with defined expectations for availability, incident notification, and recovery support. Capture contractual hooks, monitoring coverage, and escalation paths in your SCI system documentation. (17 CFR §§ 242.1000-1007)

What evidence is most likely to be requested in an exam?

Auditors commonly ask for the SCI system inventory, change records for a major release, DR test results with defect closure, and an incident walkthrough that shows decisioning and reporting. Organize evidence by system and by event so you can answer fast. (17 CFR §§ 242.1000-1007)

How do we prevent “paper compliance” where policies exist but execution is inconsistent?

Tie each written procedure to a workflow system (ITSM, CI/CD, SOC platform) that generates immutable records, then run periodic spot checks against the SCI System Register. Use an exception register so deviations are visible and actively managed. (17 CFR §§ 242.1000-1007)