[Federal Register Volume 75, Number 50 (Tuesday, March 16, 2010)]
[Notices]
[Pages 12584-12588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5648]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61677; File No. SR-FINRA-2009-054]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change, as Modified
by Amendment No. 1, To Extend Certain Regulation NMS Protections to
Quoting and Trading in the Market for OTC Equity Securities
March 9, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 7, 2009, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by FINRA. The proposed
rule change was subsequently amended by FINRA on March 1, 2010. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing Amendment No. 1 to SR-FINRA-2009-054, a proposed
rule change to adopt new FINRA Rules 6434 (Minimum Pricing Increment
for OTC Equity Securities), 6437 (Prohibition from Locking or Crossing
Quotations in OTC Equity Securities), 6450 (Restrictions on Access
Fees) and 6460 (Display of Customer Limit Orders). The text of the
proposed rule change is available on FINRA's Web site at http://www.finra.org, at the principal office of FINRA and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rule Filing History
On August 7, 2009, FINRA filed with the SEC SR-FINRA-2009-054, a
proposed rule change to adopt new FINRA rules to extend certain
Regulation NMS protections to quoting and trading in over-the-counter
equity securities.\3\ On August 26, 2009, the Commission published for
comment the proposed rule change in the Federal Register and received
twelve comment letters.\4\ Based on comments received, FINRA is filing
this Amendment No. 1 to respond to the comments received and to propose
amendments, where appropriate.
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\3\ See Securities Exchange Act Release No. 60515 (August 17,
2009), 74 FR 43207 (August 26, 2009) (Notice of Filing File No. SR-
FINRA-2009-054) (``Proposing Release'').
\4\ Letter from Ann L. Vlcek, Managing Director and Associate
General Counsel, Securities Industry and Financial Markets
Association, to Elizabeth M. Murphy, Secretary, SEC, dated October
13, 2009 (``SIFMA''); Letter from Christopher Nagy, Managing
Director Order Strategy, TD Ameritrade, Inc., to Elizabeth M.
Murphy, Secretary, SEC, dated October 6, 2009 (``TD Ameritrade'');
Letters from R. Cromwell Coulson, Chief Executive Officer, Pink OTC
Markets Inc., to Elizabeth M. Murphy, Secretary, SEC, dated
September 23, 2009 (``Pink1'') and January 6, 2010 (``Pink2'');
Letter from Janet M. Kissane, Senior Vice President, Legal &
Corporate Secretary, NYSE Euronext, to Nancy M. Morris, Secretary,
SEC, dated September 23, 2009 (``ArcaEdge''); Letter from William
Assatly, Sr. Vice President, Trading, Mercator Associates, to
Elizabeth M. Murphy, Secretary, SEC, dated September 16, 2009
(``Mercator''); Letter from Leonard J. Amoruso, General Counsel, and
Michael T. Carrao, Chief Compliance Officer, Knight Capital Group,
Inc., to Elizabeth M. Murphy, Secretary, SEC, dated September 16,
2009 (``Knight''); Letter from Elaine M. Kaven, Chief Compliance
Officer, StockCross Financial Services, Inc., to Florence H. Harmon,
Deputy Secretary, SEC, dated September 16, 2009 (``StockCross'');
Letters from Kimberly Unger, Executive Director, Security Traders
Association of New York, Inc., to Elizabeth M. Murphy, Secretary,
SEC, dated September 14, 2009 (``STANY1) and September 16, 2009
(``STANY2''); Letter from Daniel Kanter, President, and Craig
Carlino, Chief Compliance Officer, Monroe Securities, Inc., to
Elizabeth M. Murphy, Secretary, SEC, dated September 16, 2009
(``Monroe''); and Letter from Anonymous dated September 1, 2009.
(available at http://www.sec.gov/comments/sr-finra-2009-054/finra2009054.shtml).
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Proposal
As described in the Proposing Release, FINRA proposes to adopt
rules to: (1) Restrict sub-penny quoting; (2) restrict locked and
crossed markets; (3) implement a cap on access fees; and (4) require
the display of customer limit orders. FINRA believes that these
Regulation NMS principles, if applied to over-the-counter equity
securities (``OTC
[[Page 12585]]
Equity Securities''),\5\ would enhance market quality and investor
protections in this market.
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\5\ ``OTC Equity Security'' means any non-exchange-listed
security and certain exchange-listed securities that do not
otherwise qualify for real-time trade reporting. See FINRA Rule
6420(d).
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Comments to the Proposed Rule Change
Restriction on Access Fees
Currently, FINRA Rule 6540(c), which applies only to the OTC
Bulletin Board (``OTCBB'') montage, requires that an alternative
trading system (``ATS'') \6\ and electronic communications network
(``ECN'') \7\ reflect non-subscriber access or post-transaction fees in
their posted quote. Consistent with Regulation NMS, FINRA proposed to
eliminate the OTCBB access fee display requirement and to, instead,
implement a cap on access fees in all OTC Equity Securities, wherever
displayed, that exceed or accumulate to more than the following limits:
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\6\ See Rule 300(a) of Regulation ATS under the Act.
\7\ See Rule 600(b)(23) of the Act (defining ``electronic
communications network'').
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a. If the price of the quotation is $1.00 or more, the fee or fees
cannot exceed or accumulate to more than $0.003 per share; or
b. If the price of the quotation is less than $1.00, the fee or
fees cannot exceed or accumulate to more than 0.3% of the quotation
price per share.
Also consistent with Regulation NMS, the proposal would explicitly
permit market makers to charge access fees.
While some commenters generally expressed support for the proposal
to impose a cap on access fees,\8\ most commenters opposed it.\9\
Several commenters expressed concern that the proposal would lead to a
reduction in the transparency of over-the-counter (``OTC'') quotations
by permitting market participants to charge an access fee without
displaying it in the quoted price, making it difficult for investors to
compare prices offered by different broker-dealers across different
marketplaces.\10\ Commenters also expressed concern that an access fee
cap (without a corresponding display requirement) would result in a
shift in market structure that harms investors by leading to an
increase in transaction costs.\11\ Some commenters also argued that the
proposal would unfairly favor the ATS business model, result in an
increase in the incidence of locked and cross markets, and lead to an
increase in gaming practices.\12\
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\8\ See ArcaEdge and TD Ameritrade.
\9\ See Knight, Mercator, Pink1, SIFMA, STANY2 and StockCross.
\10\ See e.g., Knight, Pink1 and SIFMA.
\11\ See e.g., Mercator and Pink1.
\12\ See e.g., Knight, Pink1 and SIFMA.
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Commenters noted that the proposed access fee cap of 0.3% of the
quotation price per share for securities priced under $1.00 may result
in the assessment of an undisclosed access fee that is greater than the
price increment, which may provide an incentive for gaming activity and
``access fee trading.'' \13\ One commenter presented a scenario that
would result in ``access fee trading'' through crossing quotes across
inter-dealer quotation systems.\14\ In the example, the inside market
for a stock quoted on the OTCBB is $.8999 x $.90 (the relevant access
fee cap under the original proposal would have been $.0027 per share).
Rather than take the offering at $.90, the commenter states that a
market maker could cross the market in the Pink Sheets by posting a bid
of $.9001. If the market maker's bid is hit in the Pink Sheets, it will
be able to buy the stock at $.9001 and then immediately sell to the
OTCBB bid at $.8999. The commenter notes that, although the market
maker sold the stock at a slight loss of $.0002 per share, the access
fee of $.0027 per share provided an instant, virtually riskless
profit.\15\ Accordingly, certain commenters argued that the appropriate
access fee cap should never be greater than 30% of the relevant pricing
increment, which would ensure that the access fee is always lower than
the relevant increment.\16\
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\13\ See generally ArcaEdge, STANY2 and Pink1. As an example,
Pink noted that, using the proposed formula, the access fee cap on a
$0.90 security would be $0.0027 while the pricing increment would be
$0.0001.
\14\ See Knight.
\15\ See Knight.
\16\ See ArcaEdge, Pink1 and STANY2.
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FINRA has considered the comments opposing the elimination of the
access fee display requirement in conjunction with the establishment of
an access fee cap, and continues to believe that the proposal strikes
the appropriate balance between addressing the practical difficulties
of incorporating access fees in published quotes and the need to
curtail potentially excessive undisclosed access fees. FINRA notes that
similar concerns and debate were raised in the context of the adoption
of Regulation NMS, to which the Commission concluded that a uniform fee
limitation of $0.003 per share is the fairest and most appropriate
resolution of the access fee issue.\17\ FINRA believes that the same
holds true in this context as well.
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\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (order adopting rules under
Regulation NMS, SEC File No. S7-10-04).
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However, in light of the lower price points for securities in the
OTC market, and in response to commenters' concerns regarding potential
gaming activities, FINRA believes that an adjustment to the proposed
access fee cap calculation method is appropriate. FINRA is proposing a
revised method of calculating the access fee for securities priced
under $1.00 to ensure that the access fee is always less than the
relevant quotation increment. FINRA is proposing that the cap on access
fees for securities priced under $1.00 would be the lesser of: (a) 0.3%
of the published quotation price on a per share basis, or (b) 30% of
the relevant minimum pricing increment applicable to the display of the
quotation. The revised proposal would provide that:
A member shall not impose, nor permit to be imposed, non-subscriber
access or post-transaction fees against its published quotation in any
OTC Equity Security that exceeds or accumulates to more than:
(a) $0.003 per share, if the published quotation is priced equal to
or greater than $1.00; or
(b) the lesser of 0.3% of the published quotation price on a per
share basis or 30% of the minimum pricing increment under Rule 6434
relevant to the display of the quotation on a per share basis if the
published quotation is less than $1.00.
FINRA believes that this approach would ensure that a permissible
access fee would always be smaller than the pricing increment (which
would address concerns regarding gaming). If the security is priced at
$1.00 or more, the access fee cap would continue to be $0.003 per
share.
Sub-Penny Restrictions
Currently there are no restrictions in place for quotations in
subpenny increments in the OTC marketplace. Subpenny increments have
been associated with certain market abuses, including stepping ahead of
standing limit orders for an economically insignificant amount.
Subpenny increments also have been associated with added difficulty for
broker-dealers in meeting certain regulatory obligations by increasing
the incidence of so-called ``flickering'' quotes. Thus, FINRA has
proposed restrictions on the display of quotations and orders in sub-
penny increments for OTC Equity Securities.
Specifically, FINRA proposed to prohibit members from displaying,
ranking or accepting from others a bid, offer, order, or indication of
interest in
[[Page 12586]]
OTC Equity Securities in an increment smaller than:
--$0.01 if the bid or offer, order, or indication of interest is priced
$1.00 or greater per share,
--$0.0001 if the bid or offer, order, or indication of interest is
priced below $1.00 and equal to or greater than $0.01 per share, and
--$0.000001 if the bid or offer, order or indication of interest is
priced less than $0.01 per share.
Commenters generally favored a restriction on quoting in subpenny
increments, though some argued for modifications to the increments
proposed. Commenters also generally believed that the proposal should
go further by prohibiting subpenny quotations in increments of more
than four decimal places.\18\ Certain commenters also proposed specific
alternative quotation increments for the OTC market.\19\
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\18\ See ArcaEdge and Pink1.
\19\ See ArcaEdge and Pink1.
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FINRA has considered commenters' concerns and is proposing a
modification to the tiers originally proposed. Specifically, FINRA is
proposing to reduce the minimum pricing increment from $0.000001 to
$0.0001 for all securities priced under $1.00. However, with respect to
securities priced less than $0.0001, members would be permitted to rank
or accept (but not display) orders and indications of interest in an
increment of $0.000001 or greater so as not to effectively eliminate
trading in such securities. For example, a member would be permitted to
rank or accept an order of $.000089, but would not be permitted to
display the order at such increments. A member would not be permitted
to rank or accept an order of $.00059, because it has an increment of
$.00001 and is not priced less than $.0001. The proposed exception to
allow the ranking and acceptance of orders in smaller increments for
securities priced below $.0001 per share is in recognition of the fact
that some OTC Equity Securities trade at prices below $.0001 and having
a restriction on increments below that amount would in effect eliminate
trading of those securities. The proposal for securities priced $1.00
or greater would continue to be a penny. Therefore the revised proposal
would provide that:
No member shall display, rank, or accept a bid or offer, an order,
or an indication of interest in any OTC Equity Security priced in an
increment:
(1) Smaller than $0.01 if that bid or offer, order or indication of
interest is priced equal to or greater than $1.00 per share; and
(2) Smaller than $0.0001 if that bid or offer, order or indication
of interest is priced less than $1.00 per share except, where an order
or indication of interest is priced less than $0.0001, a member may
rank or accept (but not display) such order or indication of interest
in an increment of $0.000001 or greater.\20\
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\20\ FINRA also is clarifying that such orders priced less than
$.0001 are not required to be displayed pursuant to proposed Rule
6460 (Display of Customer Limit Orders).
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FINRA believes that most, if not all, systems cannot accommodate
the display of pricing increments smaller than four decimal places and
that increasing the minimum pricing increment to $0.0001 would further
promote and solidify uniformity in the OTC market at these price
levels.
Prohibition on Locking and Crossing Quotations
FINRA rules do not currently prohibit locking or crossing
quotations in OTC Equity Securities. FINRA believes that locked and
crossed markets can cause confusion among investors concerning the
trading interest in a stock and, therefore, FINRA believes that
restricting the practice of submitting locking or crossing quotations
(and requiring reconciliation of locked/crossed quotes) will enhance
the usefulness of quotation information for OTC Equity Securities.
Thus, FINRA proposed requiring members to implement policies and
procedures that reasonably avoid the display of, or engaging in a
pattern or practice of displaying, locking or crossing quotations in
any OTC Equity Security within the same inter-dealer quotation system.
Commenters generally supported the adoption of a rule reasonably
designed to prohibit locked and crossed markets, though commenters
preferred that the prohibition apply across interdealer quotation
systems.\21\ One commenter expressed concern that the proposed rule
takes a ``fragmented'' approach and should, instead, require members to
canvas multiple venues for the purpose of avoiding locking/crossing the
market in a similar manner as is currently required to meet best
execution obligations.\22\
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\21\ See e.g., ArcaEdge, Pink1 and TD Ameritrade.
\22\ See Pink1.
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As FINRA stated in the Proposing Release, because there currently
is no mandated consolidated quotation dissemination mechanism for OTC
Equity Securities (as exists for NMS stocks), the proposed rule would
only restrict locking and crossing quotations within inter-dealer
quotation systems. FINRA continues to believe that, at the present
time, the lock/cross rule can only reasonably be made to impose
restrictions on locking and crossing quotations within, but not across,
interdealer quotations systems due to the lack of a widely accessible,
consolidated national best bid and offer for OTC Equity Securities.
FINRA notes, however, that FINRA has proposed a rule that would require
members to submit all quotation information in OTC Equity Securities to
FINRA, and FINRA would, in turn, disseminate a best bid and offer as
part of the Level 1 data feed entitlement.\23\ If this proposed
quotation consolidation facility is approved, FINRA believes that it
would then be reasonable to propose that members must avoid locking and
crossing across interdealer quotation systems. Thus, FINRA does not
believe that any amendments to the proposed rule addressing locked and
crossed quotations are warranted at this time.
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\23\ See Securities Exchange Act Release No. 60999 (November 13,
2009), 74 FR 61183 (November 23, 2009). (Notice of Filing File No.
SR-FINRA-2009-077; Proposed Rule Change to Restructure Quotation
Collection and Dissemination for OTC Equity Securities).
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Limit Order Display
FINRA proposed requiring market makers displaying a priced
quotation in a security to immediately display customer limit orders
received where such order: (1) improves the price of the bid or offer
displayed by the market maker, or (2) improves the size of its bid or
offer by more than a de minimis amount where it is the best bid or
offer in the interdealer quotation system where the market maker is
quoting. Regulation NMS includes several exceptions from its limit
order display requirements, which generally also would apply to the
proposed limit order display rule for OTC Equity Securities.
Commenters generally supported a display requirement for limit
orders but requested certain clarifications and modifications. For
example, commenters request that the rule permit market makers to
retain discretion as to the size displayed because small orders are
more likely to be executed than large ones.\24\ Certain commenters also
argued that market makers should not be required to display limit
orders in thinly traded securities, but that these orders should be
excepted for the same reason block orders are excepted (i.e., market
impact).\25\ One commenter expressed concern that requiring automatic
display prevents market makers from
[[Page 12587]]
exercising discretion to handle the order in the best possible manner,
which will disadvantage retail customers.\26\ One commenter believed
that the proposal should be amended to require the display in an
interdealer quotation system of all limit orders in OTC Equity
Securities (unless immediately executed by the member or transmitted to
another firm that would display such order in an interdealer quotation
system) and should be expanded to include debt securities.\27\
Commenters asserted that any automatic limit order display size
requirement should be based on the current OTCBB tier sizes, and
provide members with discretion above the size of the tier.\28\
Commenters argued that the proposed definition of ``block size'' in the
context of the exception to the display requirement still would require
display of orders at sizes that may disadvantage the customer.\29\
Therefore, these commenters believed that members should be required to
display only a portion of the order equal to the minimum quote size.
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\24\ See Pink1 and STANY2.
\25\ See Mercator, Pink1 and STANY2.
\26\ See Pink1.
\27\ See Pink2.
\28\ See Pink1.
\29\ See Knight and SIFMA.
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FINRA appreciates the issues raised by commenters regarding the
possible impact of limit order display on OTC Equity Securities in
general and thinly traded OTC Equity Securities in particular. We
confirm that the proposed limit order display rule would not require
display of customer orders that would result in a violation of the
tiers prescribed in FINRA Rule 6450 (Minimum Quotation Size
Requirements For OTC Equity Securities).\30\ FINRA is proposing a new
exception for limit orders less than $0.0001, consistent with the
changes made to proposed FINRA Rule 6434 prohibiting the display of a
bid or offer, order, or indication of interest in any OTC Equity
Security priced less than $0.0001 per share.\31\ However, FINRA does
not believe that any additional modifications to the proposed rule are
appropriate, including with respect to comments that market makers
should retain discretion over display of the size of a customer's limit
order.
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\30\ If a member is already displaying a quotation at or above
the minimum quotation size, then the displayed size must be
increased to reflect the full size of any customer limit order (if
the limit order size represents more than a de minimis amount).
\31\ See supra note 20 and accompanying text.
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FINRA notes that, where the member believes that a customer would
be best served by not displaying the full size of a limit order, the
member is free to obtain the customer's consent to refrain from
displaying such customer's order as is permitted by a proposed
exception to the limit order display provision. FINRA is not persuaded
that the suggested more volatile nature of OTC Equity Securities in
general (or of any subset of especially thinly traded OTC Equity
Securities) should permit a member independently to determine to
withhold display of the full size of a customer limit order. Finally,
FINRA does not agree that the proposed definition of ``block size''
should be modified. As stated in the Proposing Release, the proposed
definition of ``block size'' is consistent with the existing large
order size exception under IM-2110-2 (Trading Ahead of Customer Limit
Order) and we believe it is appropriate that large orders be defined
consistently across both rule sets.\32\ Furthermore, if a member
believes that full display of a limit order that does not meet the
definition of ``block size'' would disadvantage the customer, the
member may obtain that customer's consent to refrain from display of
the full size. As stated in the Proposing Release, FINRA believes that
extending limit order display requirements to OTC Equity Securities
will improve transparency in the OTC equity market and will advance the
goal of the public availability of quotation information, as well as
fair competition, market efficiency, best execution and
disintermediation.
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\32\ FINRA filed proposed rule change SR-FINRA-2009-090 to adopt
NASD IM-2110-2 (Trading Ahead of Customer Limit Order) and NASD Rule
2111 (Trading Ahead of Customer Market Orders) with significant
changes in the Consolidated FINRA Rulebook as new FINRA Rule 5320
(Prohibition Against Trading Ahead of Customer Orders). However,
FINRA is not proposing changes to the definition of ``large order.''
See Securities Exchange Act Release No. 61168 (December 15, 2009),
74 FR 68084 (December 22, 2009) (Notice of Filing File No. SR-FINRA-
2009-090).
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With respect to the recommendation that all customer limit orders
in OTC Equity Securities be displayed, irrespective of whether the firm
that receives the order is already quoting the security, FINRA
continues to believe that the appropriate conditions for the trigger of
an obligation to display a customer limit order is where a market maker
is already displaying a priced quotation in an interdealer quotation
system in the same security (unless an exception applies). Finally, the
changes recommended by the commenter to expand the limit order display
requirements to debt securities are outside the scope of the proposed
changes that are part of this rule filing and therefore, FINRA is not
responding to these recommendations specifically herein. FINRA will
review and analyze these recommendations in the same manner in which it
would consider any requests for rulemaking, and, based on such review
and analysis, will determine whether further action on these
recommendations is appropriate.
As stated in the Proposing Release, because the proposed new rules
provide for significant regulatory changes, FINRA plans to implement
the requirements in two phases to minimize the impact on firms. Phase
one would implement sub-penny quoting restrictions, an access fee cap
and restrictions on locked and crossed markets. Phase two would
implement customer limit order display requirements. FINRA will
announce the implementation dates for the proposed rule change in a
Regulatory Notice to be published no later than 90 days following
Commission approval. The implementation date of Phase one will be at
least 120 days but no more than 365 days from the date of Commission
approval and Phase two will be at least 90 days following the
implementation of Phase one, but no more than 365 days from the date of
Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\33\ which requires that
FINRA rules must be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, to remove impediments to
and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest.
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\33\ 15 U.S.C. 78o-3(b)(6).
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FINRA further believes that the proposed rule change is consistent
with the provisions of 15A(b)(11) of the Act,\34\ which requires, among
other things, that FINRA rules must govern the form and content of
quotations relating to securities sold otherwise than on a national
securities exchange and require that such rules relating to quotations
shall be designed to produce fair and informative quotations, to
prevent fictitious or misleading quotations, and to promote orderly
procedures for collecting, distributing, and publishing quotations.
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\34\ 15 U.S.C. 78o-3(b)(11).
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FINRA is proposing to: (1) Restrict sub-penny quoting; (2) restrict
locked and crossed markets; (3) implement a cap on access fees; and (4)
require the
[[Page 12588]]
display of customer limit orders. FINRA believes that the proposed
restrictions on sub-penny quoting will promote greater price
transparency and consistency, reduce the potential harms associated
with sub-penny quoting in OTC equity securities and improve the depth
and liquidity of this market.
FINRA believes that locked and crossed markets can cause confusion
among investors concerning trading interest in a stock and that
restricting the practice of submitting locking or crossing quotations
will enhance the usefulness of quotation information in the over-the-
counter market, facilitate more fair and orderly markets and support
market efficiency.
Where wide disparities in access fees are permitted, the prices of
quotations are less useful and accurate. Therefore, FINRA believes that
a cap on access fees would improve the usefulness and accuracy of
quotations and address the potential distortions caused by substantial,
disparate fees. Finally, FINRA believes that applying limit order
display requirements to OTC Equity Securities would improve
transparency in the OTC equity market and advance the goal of the
public availability of quotation information, as well as fair
competition, market efficiency, best execution and disintermediation.
FINRA believes that the proposed extension of the specified
Regulation NMS protections to quoting and trading in OTC Equity
Securities will prevent fraudulent and manipulative acts and practices
in this market, promote just and equitable principles of trade, and
protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments on the proposed rule change were solicited by the
Commission in response to the publication of SR-FINRA-2009-054, which
proposed new rules to: (1) Restrict sub-penny quoting; (2) restrict
locked and crossed markets; (3) implement a cap on access fees; and (4)
require the display of customer limit orders.\35\ The Commission
received twelve comment letters.\36\ The comments are summarized above.
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\35\ See Proposing Release.
\36\ See supra note 4.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-FINRA-2009-054 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2009-054. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of FINRA.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make publicly
available. All submissions should refer to File Number SR-FINRA-2009-
054 and should be submitted on or before April 6, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5648 Filed 3-15-10; 8:45 am]
BILLING CODE 8011-01-P