Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Instituting Proceedings To Determine Whether To Disapprove Proposed Rule Change To Amend FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities), 3515-3520 [2012-1276]
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Federal Register / Vol. 77, No. 15 / Tuesday, January 24, 2012 / Notices
NUCLEAR REGULATORY
COMMISSION
[Docket No. 50–285, License No. DPR–40;
Docket No. 50–298, License No. DPR–46;
NRC–2012–0014]
srobinson on DSK4SPTVN1PROD with NOTICES
Request for Action Against Omaha
Public Power District and Nebraska
Public Power District
Notice is hereby given that by
petitions dated June 26 and July 3, 2011,
respectively, Thomas Saporito (the
petitioner) has requested that the U.S.
Nuclear Regulatory Commission (NRC
or the Commission) take escalated
enforcement actions against Omaha
Public Power District, the licensee for
Fort Calhoun Station, Unit 1 (FCS), and
Nebraska Public Power District, the
licensee for Cooper Nuclear Station
(Cooper). The petitions dated June 26
and July 3, 2011, are publicly available
in the NRC’s Agencywide Documents
Access and Management System
(ADAMS) under Accession Nos.
ML11182B029 and ML11192A285,
respectively.
The petitioner has requested that the
NRC take action to suspend or revoke
the NRC licenses granted for the
operation of nuclear power reactors and
issue a notice of violation with a
proposed civil penalty against the
collectively named and each singularly
named licensee in this matter—in the
amount of $500,000 for Fort Calhoun
Station and $1,000,000 for Cooper.
Additionally, the petitioner requested
that the NRC issue confirmatory orders
to prohibit restart at FCS and to bring
Cooper to a ‘‘cold shutdown’’ mode of
operation until such time as: (1) The
floodwaters subside to an appreciable
lower level or sea level; (2) the licensee
upgrades its flood protection plan; (3)
the licensee repairs and enhances its
current flood protection berms; and (4)
the licensee upgrades its station
blackout procedures to meet a
challenging extended loss of offsite
power due to floodwaters and other
natural disasters or terrorist attacks.
As the basis for these requests, the
petitioner stated that: (1) The licensees’
installed flood protection measures and
systems and barriers at FCS and Cooper
are not sufficient to adequately protect
the nuclear reactor from a fullmeltdown scenario like that currently
unfolding in Japan; and (2) the
licensees’ station blackout procedures
are not sufficient to meet a challenging
extended loss of offsite power due to
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or terrorist attacks.
The requests are being treated
pursuant to Title 10 of the Code of
Federal Regulations Section 2.206 of the
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Commission’s regulations. The requests
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provided by Section 2.206, appropriate
action will be taken on these petitions
within a reasonable time. The petitioner
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held a recorded teleconference with the
petitioner on August 29, 2011, during
which the petitioner supplemented and
clarified the petitions. The results of
those discussions were considered in
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petitioner’s requests. As a result, the
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including station blackout procedures,
at FCS and Cooper. By letter dated
January 13, 2012 (ADAMS Accession
No. ML120030022), the Director of the
NRC’s Office of Nuclear Reactor
Regulation denied the petitioner’s
requests for immediate action.
Additionally, the PRB noted that: (1)
Natural disasters such as earthquakes
and flooding, and (2) station blackout
regulations are undergoing NRC review
as part of the lessons learned from the
Fukushima event. The PRB intends to
use the results of the Fukushima review
to inform its final decision on whether
to implement the requested actions.
Copies of the petitions dated June 26
and July 3, 2011, are available for
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floor), Rockville, Maryland 20852.
Publicly available documents created or
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reading-rm/adams.html. Persons who
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documents located in ADAMS should
contact the NRC’s PDR Reference staff
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PDR.Resource@nrc.gov.
Dated at Rockville, Maryland, this 13th day
of January 2012.
For the Nuclear Regulatory Commission.
Eric J. Leeds,
Director, Office of Nuclear Reactor
Regulation.
[FR Doc. 2012–1370 Filed 1–23–12; 8:45 am]
BILLING CODE 7590–01–P
PO 00000
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SECURITIES AND EXCHANGE
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[Release No. 34–66168; File No. SR–FINRA–
2011–058]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Instituting
Proceedings To Determine Whether To
Disapprove Proposed Rule Change To
Amend FINRA Rule 6433 (Minimum
Quotation Size Requirements for OTC
Equity Securities)
January 17, 2012.
I. Introduction
On October 6, 2011, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend FINRA
Rule 6433 (‘‘Rule’’), which governs
minimum quotation size requirements
for OTC Equity Securities.3 The
proposed rule change is designed to
simplify the Rule’s price and size tiers;
facilitate the display of customer limit
orders under new FINRA Rule 6460
(Display of Customer Limit Orders)
(‘‘FINRA limit order display rule’’);4 and
expand the scope of the Rule. The
proposed rule change was published for
comment in the Federal Register on
October 20, 2011.5 On November 17,
2011, FINRA consented to extending the
time period for the Commission to
either approve or disapprove the
proposed rule change or to institute
proceedings to determine whether to
disapprove the proposed rule change, to
January 18, 2012. The Commission
received seven comment letters on the
proposal from four separate
commenters,6 as well as two responses
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 ‘‘OTC Equity Security’’ means ‘‘any equity
security that is not an NMS stock as that term is
defined in Rule 600(b)(47) of SEC Regulation NMS;
provided, however, that the term ‘OTC Equity
Security’ shall not include any Restricted Equity
Security.’’ See FINRA Rule 6420(e).
4 See Securities Exchange Act Release No. 62359
(June 22, 2010), 75 FR 37488 (June 29, 2010) (Order
Approving NMS–Principled Rules for OTC Equity
Securities) (‘‘NMS–Principled Rules Approval
Order’’). FINRA Rule 6460 became operative on
May 9, 2011.
5 See Securities Exchange Act Release No. 65568
(October 14, 2011), 76 FR 65307 (‘‘Notice’’).
6 See Letter from Suzanne H. Shatto, dated
October 20, 2011 (‘‘Shatto Letter’’); Letter from
Naphtali M. Hamlet, dated October 21, 2011
(‘‘Hamlet Letter); Letter from Daniel Zinn, General
Counsel, OTC Markets Group Inc. to Elizabeth M.
Murphy, Secretary, Commission, dated November
10, 2011 (‘‘OTC Markets Letter I’’); Letter from
2 17
Continued
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Federal Register / Vol. 77, No. 15 / Tuesday, January 24, 2012 / Notices
to the comment letters from FINRA.7
This order institutes proceedings under
Section 19(b)(2)(B) of the Act 8 to
determine whether to disapprove the
proposed rule change.
srobinson on DSK4SPTVN1PROD with NOTICES
II. Description of the Proposal
FINRA proposed changes to the
minimum quotation sizes in FINRA
Rule 6433, among other things, to
simplify the Rule’s price and size tiers;
facilitate the display of customer limit
orders under new FINRA Rule 6460;9
and expand the Rule’s scope. In its
filing, FINRA noted, among other
things, that currently FINRA Rule 6433
requires every member functioning as
an OTC Market Maker 10 in an OTC
Equity Security that enters firm
quotations into any inter-dealer
quotation system that permits quotation
updates on a real-time basis to honor
those quotations for certain minimum
sizes (‘‘minimum quotation sizes’’).11
In its filing, FINRA explained that
OTC Market Makers currently are not
required to display a customer limit
order unless doing so would comply
with the minimum quotation sizes
applicable to the display of quotations
on an inter-dealer quotation system.12
FINRA noted that, although a customer
limit order may improve price or size by
more than a de minimus amount, if the
order is for an amount less than the
minimum quotation size set forth in the
Rule, the member is not required to
Michael T. Corrao, Managing Director, Knight
Capital Group, Inc. to Elizabeth M. Murphy,
Secretary, Commission, dated November 16, 2011
(‘‘Knight Letter I’’); Letter from R. Cromwell
Coulson, President & CEO, OTC Markets to Craig
Lewis, Commission, and Kathleen Hanley,
Commission, dated November 18, 2011 (‘‘OTC
Markets Letter II’’); Letter from Daniel Zinn, General
Counsel, OTC Markets Group Inc. to Elizabeth M.
Murphy, Secretary, Commission, dated December
30, 2011 (‘‘OTC Markets Letter III’’); Letter from
Michael T. Corrao, Managing Director, Knight
Capital Group, Inc. to Elizabeth M. Murphy,
Secretary, Commission, dated January 13, 2012
(‘‘Knight Letter II’’).
7 See E-mail from Marc Menchel, FINRA to John
Ramsay, David S. Shillman, and Nancy J. Sanow,
Commission, dated November 30, 2011 (‘‘FINRA
Response I’’); and Letter from Stephanie M.
Dumont, Senior Vice President and Director of
Capital Markets Policy, FINRA to Elizabeth M.
Murphy, Secretary, Commission, dated December
23, 2011 (‘‘FINRA Response II’’).
8 15 U.S.C. 78s(b)(2)(B).
9 See NMS–Principled Rules Approval Order,
supra note 4.
10 OTC Market Maker’’ means ‘‘a member of
FINRA that holds itself out as a market maker by
entering proprietary quotations or indications of
interest for a particular OTC Equity Security in any
inter-dealer quotation system, including any system
that the SEC has qualified pursuant to Section 17B
of the Act. A member is an OTC Market Maker only
in those OTC Equity Securities in which it displays
market making interest via an inter-dealer quotation
system.’’ See FINRA Rule 6420(f).
11 See Notice, supra note 5.
12 See Regulatory Notice 10–42 (September 2010).
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display the order. FINRA believed that
the proposed rule change would benefit
investors by facilitating the display of
customer limit orders under FINRA
Rule 6460, which generally requires that
OTC Market Makers fully display betterpriced customer limit orders (or samepriced customer limit orders that are at
the best bid or offer and that increase
the OTC Market Maker’s size by more
than a de minimus amount).13
Specifically, FINRA proposed that the
minimum quotation size required for
display of a quotation in an OTC Equity
Security would fall into one of six tiers
rather than the current nine tiers. Under
the current rule, the tiers are as follows:
• $2500.01 per share and above, the
minimum quotation size is 1 share;
• $1000.01 through $2500 per share,
the minimum quotation size is 5 shares;
• $501.01 through $1000 per share,
the minimum quotation size is 10
shares;
• $200.01 through $500 per share, the
minimum quotation size is 25 shares;
• $100.01 through 200 per share, the
minimum quotation size is 100 shares;
• $10.01 through $100 per share, the
minimum quotation size is 200 shares;
• $1.01 through $10.00 per share, the
minimum quotation size is 500 shares;
• $0.51 through $1.00 per share, the
minimum quotation size is 2,500 shares;
• $0.0001 through $0.50 per share,
the minimum quotation size is 5,000
shares.
Under the new proposal, the tiers are as
follows:
• $175.00 per share and above, the
minimum quotation size would be 1
share;
• $1.00 through $174.99 per share,
the minimum quotation size would be
100 shares;
• $0.51 through $0.9999 per share,
the minimum quotation size would be
200 shares;
• $0.26 through $0.5099 per share,
the minimum quotation size would be
500 shares;
• $0.02 through $0.2599 per share,
the minimum quotation size would be
1,000 shares;
• $0.0001 through $0.0199 per share,
the minimum quotation size would be
10,000 shares.
Based on its study of the Order Audit
Trail System (‘‘OATS’’) data for OTC
13 FINRA Rule 6460 was adopted as part of an
effort to extend certain protections in place for NMS
stocks to quoting and trading of OTC Equity
Securities. See NMS–Principled Rules Approval
Order, supra note 4. In approving FINRA Rule 6460,
the Commission noted that ‘‘FINRA’s limit order
display proposal marks a positive step in efforts to
improve the transparency of OTC Equity Securities
and the handling of customer limit orders in this
market sector.’’ Id.
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Equity Securities, as described in the
Notice, FINRA believed that the
proposed modification to the current
tiers would result in the display of a
larger number of customer limit orders,
potentially increasing from 50% to 90%
the number of customer limit orders
eligible for display in some tiers.14
FINRA stated that, for securities priced
at or above $0.02 per share, the
reduction in minimum quotation size
requirements would cause a greater
percentage of customer limit orders to
be displayed, and that the proposal
would continue to require that
displayed quotations represent a
minimum aggregate dollar value
commitment to the market.15
FINRA believed that the proposed
revisions are appropriate because they
would simplify the price and size tier
structure of FINRA Rule 6433 and
would facilitate the display of customer
limit orders consistent with FINRA Rule
6460, while still recognizing the utility
of requiring that quotes in lower-priced
securities represent a minimum dollarvalue commitment to the market. FINRA
also believed that the proposed
revisions would benefit investors by
increasing the percentage of customer
limit orders that would be eligible for
display under Rule 6460, thereby
improving transparency and enhancing
execution of customer limit orders.
Further, FINRA proposed to expand
the scope of the Rule to apply to all
quotations or orders displayed in an
inter-dealer quotation system, including
quotations displayed by alternative
trading systems (‘‘ATSs’’) or those
representing customer trading interest.
FINRA noted that ATSs have become
increasingly active in the over-thecounter (‘‘OTC’’) markets and believed
that the expansion of the scope of the
Rule would ensure that minimum
quotation sizes were observed
consistently by all members displaying
quotations on an inter-dealer quotation
system. Finally, FINRA noted that the
proposed rule would incorporate the
requirements of FINRA Rule 6434
(Minimum Pricing Increments for OTC
Equity Securities), which, among other
things, prohibits members from
displaying a bid or offer in an OTC
Equity Security in an increment smaller
than $0.01 if the bid or offer is priced
$1.00 or greater per share, or in an
increment smaller than $0.0001 if the
bid or offer is priced below $1.00.16
14 See
Notice, supra note 5.
For securities priced under $0.02 per share,
FINRA recognized that more substantive dollarvalue commitments to the market would be
required.
16 See FINRA Rule 6460(b)(8).
15 Id.
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Federal Register / Vol. 77, No. 15 / Tuesday, January 24, 2012 / Notices
FINRA remarked that other existing
requirements and obligations are not
being altered by its proposal. Each
member would continue to be required
to honor its quotations to the full
quantity displayed in accordance with
FINRA Rule 5220 (Offers at Stated
Prices), which generally provides that
no member shall make an offer to buy
or sell any security at a stated price
unless such member is prepared to
purchase or sell the security at such
price and under such conditions as are
stated at the time of such offer to buy
or sell.17 Likewise, member obligations
pursuant to FINRA Rule 5210
(Publication of Transactions and
Quotations) continue to apply. Among
other things, FINRA Rule 5210 generally
prohibits members from publishing,
circulating, or causing to be published
or circulated, any quotation which
purports to quote the bid price or asked
price for any security, unless such
member believes that such quotation
represents a bona fide bid for, or offer
of, such security.18
III. Comment Letters
The Commission received seven
comment letters on the proposal from
four commenters.19 In addition, FINRA
submitted two responses to the
comment letters.20 Commenters
generally were supportive of the goal of
making additional limit orders eligible
for display under FINRA Rule 6460.
However, two commenters, in five
separate letters, objected to the portion
of the proposed rule that would revise
the minimum quotation size
requirements.21 Specifically, these
commenters expressed concern that
FINRA’s proposal lacks sufficient
economic analysis to demonstrate that
the proposed revisions to the minimum
quotation size requirements would
improve liquidity or lower transaction
costs for investors. On the other hand,
one commenter suggested that FINRA
consider reducing the tier sizes for
minimum quote sizes even further than
proposed in order to provide greater
transparency to all market
participants.22 One commenter
supported the Rule to the extent that it
would help prevent manipulative
practices, but otherwise addressed
topics unrelated to the proposal.23
srobinson on DSK4SPTVN1PROD with NOTICES
17 See
also Rule 5220.01 (Firmness of Quotations).
also Rule 5210.01 (Manipulative and
Deceptive Quotations).
19 See supra note 6.
20 See supra note 7.
21 See OTC Markets Letter I, Knight Letter I, OTC
Markets Letter II, OTC Markets Letter III, and
Knight Letter II.
22 See Shatto Letter.
23 See Hamlet Letter.
18 See
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One commenter expressed the view
that the proposal could have the
unintended consequence of negatively
impacting the market by removing
meaningful minimum required dollar
value levels of displayed liquidity by
market makers.24 According to the
commenter, because the proposed levels
are significantly lower than currently
required levels, the proposal potentially
could cause a severe degradation in
trading efficiency, particularly in less
liquid securities, and thereby fail to
meet the proposal’s desired goal.25 The
commenter provided a table to detail the
change to the minimum dollar value
required to be displayed by market
makers under the proposal.26 The
commenter believed that its table
illustrated a significant decrease in
dollar value of liquidity that market
makers would be required to offer at
each tier level.
In addition, the commenter believed
that, under the proposal, market makers
would be required to quote insignificant
dollar values, thereby creating
additional operational and trading risks,
without providing real value to the
market.27 The commenter further
expressed concern that any increase in
costs to market making liquidity
providers could result in the departure
of market makers and thereby could
cause an erosion of liquidity.28 The
commenter recommended further
economic analysis to study the expected
impact of the proposed tier sizes on
market liquidity (including trading,
clearing, related costs, locked markets,
access fees, trading efficiency and
market participant behavior), and
requested that the Commission conduct
an analysis of the data.29 The
commenter suggested that, if the
Commission were inclined to move
forward after such analysis, a limited
pilot would allow for the assessment of
the proposal’s impact on market quality
while minimizing the effects of any
unintended consequences.30
In another communication, the
commenter reiterated its belief that the
proposal would have serious negative
consequences to the OTC marketplace
and investors, including a significant
reduction in liquidity, inferior pricing
and increased vulnerability to gaming
and frontrunning.31 The commenter
24 See
Knight Letter I.
Knight Letter I at p. 1.
26 See Knight Letter I at p. 2.
27 See id.
28 See id.
29 See id.
30 See id.
31 See Knight Letter II at p.1. The commenter
noted its agreement with the views expressed in
OTC Markets Letter III. Id. The commenter also
25 See
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3517
expressed concern about the
consequences likely to result when
concepts and rules from the NMS
market were applied to the OTC market
despite different trading characteristics
between NMS securities and OTC equity
securities.32 The commenter again
requested that the Commission evaluate
the costs and benefits associated with
the proposal.33 The commenter pointed
to the prior analysis by the National
Association of Securities Dealers, Inc.,
FINRA’s predecessor, in connection
with tier size reductions in Nasdaq
securities and suggested that FINRA
consider a similar approach for the
current proposal.34
The commenter expressed the view
that non-NMS securities are
significantly less liquid than NMS
securities and that the proposed rule
change would have an adverse impact
on both dealers and investors.35 The
commenter believed that the only
possible benefits resulting from the
proposal would accrue to firms that
provide little or no liquidity, as those
firms would pick-off dealer liquidity at
the expense of investors.36 The
commenter further noted that market
makers like Knight generally do not
charge competitors or broker-dealer
clients commissions or mark-up/markdowns.37 The commenter indicated that
market makers would continue to pay
costs to access liquidity under the
proposal and that there was a likelihood
that market participants would gravitate
to posting quotations at the minimum
tier size as they currently do today.38
Finally, the commenter reiterated its
concern that costs could increase for
self-clearing firms under the proposal
and that costs would be more
burdensome in the case of non-DTCC
eligible securities (physicals) because
those costs were driven by the number
of settlements as opposed to number of
trades.39
Another commenter expressed the
view that the reduction of minimum
quote size requirements ‘‘has not been
shown by FINRA to benefit investors
and has a significant risk that it will
included a modified version of the table that was
in its prior letter. See Knight Letter II at p.3.
32 See id.
33 See Knight Letter II at p. 2.
34 See id. (citing Securities Exchange Act Release
No. 40211 (July 15, 1998), 63 FR 39322 (July 22,
1998) (Order Approving a Proposed Rule Change to
Permanently Expand the NASD’s Rule Permitting
Market Makers to Display Their Actual Quotation
Size)).
35 See Knight Letter II at pp.2–3.
36 See Knight Letter II at p. 3.
37 See id.
38 See id.
39 See Knight Letter II at pp.3–4.
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Federal Register / Vol. 77, No. 15 / Tuesday, January 24, 2012 / Notices
degrade market quality.’’ 40 The
commenter further suggested that
Regulation NMS-type rules are not
appropriate in the context of smaller
issuers.41 The commenter believed that
the immediate effect of the proposal
would be less displayed liquidity, even
if the actual liquidity were larger,
because quotations typically are
submitted at the minimum size.42 The
commenter believed that this potential
effect would lead to more volatility and
would increase realized spreads because
orders ultimately would be filled away
from the inside quote, thereby raising
the cost of trading.43
The commenter believed that the
analysis provided by FINRA was not
compelling, and cited to public
commentators that generally have
suggested other Regulation NMSprincipled rules have harmed the
market for smaller companies’
securities.44 The commenter asserted
that FINRA’s statistical analysis
concerning the additional percentage of
customer orders that would be
displayed under the proposed rule
change was flawed, including because it
ignored FINRA’s quote aggregation
rules.45 According to the commenter, at
a minimum, FINRA’s analysis required
further study.46 The commenter
recommended that the Commission’s
staff review the actual effect of the
proposed rule change on the display of
limit orders.47
In another communication, the
commenter again expressed concern
that FINRA’s analysis was flawed.48 The
commenter suggested that the proposal
represented a large change in market
structure and could negatively impact
capital formation for small businesses.
The commenter again requested that the
Commission’s staff conduct its own
economic analysis concerning the
proposed rule change.
The commenter reiterated its views in
its third letter.49 The commenter again
stated its belief that Regulation NMStype rules were not appropriate for the
OTC market.50 The commenter again
suggested that FINRA’s analysis did not
reflect existing customer order
aggregation requirements; 51 did not
provide information regarding dollar
40 See
OTC Markets Letter I at p.1.
id.
42 See OTC Markets Letter I at p.3.
43 See id.
44 See OTC Markets Letter I at p. 2.
45 See id.
46 See id.
47 See OTC Markets Letter I at p. 3.
48 See OTC Markets Letter II.
49 See OTC Markets Letter III.
50 See OTC Markets Letter III at p.5.
51 See OTC Markets Letter III at p.7.
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41 See
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and share volume relative to tier sizes; 52
and did not analyze the proposal’s
potential impact on market orders or
proprietary quotes.53
The commenter remarked that
FINRA’s letters responding to the
comment letters failed to address
Section 3(f) of the Act,54 which requires
that whenever, pursuant to the Act, the
Commission is engaged in rulemaking,
or in the review of a rule of a selfregulatory organization (‘‘SRO’’), and is
required to consider or determine
whether an action is necessary or
appropriate in the public interest, the
Commission shall also consider, in
addition to the protection of investors,
whether the action will promote
efficiency, competition, and capital
formation.55 The commenter believed
that changing tier sizes or quote
increments potentially could have a
variety of dynamic effects on the OTC
market.56 The commenter stated that it
reviewed data relating to all trades in
OTC equity securities that occurred on
October 27, 2011, concerning share
volume, dollar volume and number of
trades in relation to the existing and
proposed tier sizes.57 Based on its
review, the commenter believed that the
proposed rule would not significantly
increase liquidity but would impose a
direct cost on investors, particularly
investors placing marketable orders.58
The commenter believed that the
proposed rule change would lead most
market makers to reduce their quote
sizes and display less liquidity.59 The
commenter further believed that an
extensive decrease in displayed
proprietary liquidity would
‘‘overwhelmingly offset the benefit of
the increased number of customer limit
orders displayed.’’ 60
FINRA provided two responses
addressing issues raised by the
commenters.61 In both of its responses,
FINRA noted that the purpose of
allowing smaller displayed quotes was
to allow for the greater use of limit
orders by investors.62 In FINRA
Response II, FINRA reiterated that the
proposed rule change was associated
52 See
OTC Markets Letter III at p.8.
OTC Markets Letter III at pp.2–3.
54 15 U.S.C. 78c(f).
55 See OTC Markets Letter III at pp.2–3.
56 See OTC Markets Letter III at p.4.
57 See OTC Markets Letter III at p.5. The
commenter selected October 27, 2011 for its review,
because that day had the highest trading volume of
any day that month and, according to the
commenter, presumably also had the highest
amount of investor liquidity for that month.
58 See OTC Markets Letter III at p.6.
59 See id.
60 See OTC Markets Letter III at p. 7.
61 See supra note 7.
62 See FINRA Response I at p. 1.
53 See
PO 00000
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with the FINRA limit order display rule,
which recently had extended a
fundamental investor protection to OTC
equity securities.63 FINRA explained
that the existing minimum quotation
sizes reduced the benefit of its limit
order display rule because the higher
existing levels ‘‘act to restrict
transparency of a large number of
customer limit orders.’’ 64 Addressing
commenters’ concerns about reduced
liquidity, FINRA noted that the lower
minimum quote size would allow for
the display of a greater number of limit
orders. FINRA believed that the larger
number of quotes would increase
competition, and increased competition
would improve liquidity.65 FINRA
noted that, although the role of the
market maker had been reduced in NMS
securities, liquidity in NMS securities
appeared intact.66
FINRA noted that, to the extent
commenters had concerns that
processing smaller quotes would not be
economical, the proposed rule change
would not mandate the use of smaller
quote sizes.67 In FINRA Response I,
FINRA questioned the notion of the
proposal resulting in additional costs to
process additional orders and added
that, to the extent that the proposed rule
might result in additional transactions,
the costs of clearing such additional
transactions would be negligible.68
FINRA further remarked that, with
respect to other concerns about
transaction costs, FINRA’s mark-up rule,
which governs execution costs, is still
applicable and is not being modified by
the instant proposal.69
In FINRA Response II, FINRA
disagreed with one commenter’s
suggestion that the percentage of
customer limit orders currently
displayed under the FINRA limit order
display rule already was in line with
FINRA’s estimate of the number of
customer limit orders that would be
displayed under the proposal.70 FINRA
63 See
FINRA Response II at p. 1.
64 Id.
65 See FINRA Response I at p.1 and FINRA
Response II at p. 5, n.17. Two commenters stated
that market makers might react to the proposed rule
change by reducing their quote sizes. See Knight
Letter I at p.1–2 and OTC Markets Letter I at p.3.
66 See FINRA Response I at p. 1.
67 See FINRA Response I at p.1 and FINRA
Response II at p.5, n.17. One commenter believed
there would be costs associated with the
operational complexity of clearing increased
volumes of smaller trades in non-DTC eligible
securities. See Knight Letter I at p. 2.
68 See FINRA Response I at p. 1. One commenter
believed that the proposed rule change would
increase transaction costs for investors. See OTC
Markets Letter I at p. 3.
69 See FINRA Response I at p. 1.
70 See FINRA Response II at p. 3. One commenter
believed that the FINRA analysis failed to take into
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believed that, contrary to the
commenter’s assertion, broker-dealers
were unlikely to be in a position to
aggregate multiple investor OTC equity
orders to reach the existing display
thresholds, because OTC equity
securities trade infrequently and at
widely varying volume each day.71
FINRA also noted that, in any event,
price transparency should not depend
upon the expectation that other OTC
orders might be placed at the same price
and around the same time.72 Finally,
FINRA noted that a more recent sample
of relevant data further supported its
position that the proposed rule change
would increase the display of customer
limit orders from 50% under the
existing minimum quotation size
requirements to 90% under the
proposal.73
In FINRA Response II, FINRA stated
its view that the chart contained in
Knight Letter I was not useful because
that the chart did not accurately align
tier and price points and therefore did
not allow for an appropriate comparison
of the current and proposed rules.74
FINRA provided a comparison of
similar price points and ranges to
demonstrate that the proposed rule
change would increase the dollar values
for two proposed lower price point tiers
and decrease dollar values for three
proposed higher price point tiers, while
the dollar values of one proposed price
point tier would remain unchanged.75
FINRA believed that its proposed
structure was better for investors, more
consistent with the national market
system, and represented more
meaningful minimum displayed
liquidity at the lowest tiers.76 FINRA
disagreed with the suggestion in Knight
Letter I that its proposal would degrade
market quality or have far reaching
effects on liquidity and efficiency in the
OTC markets, noting again that the
commenters provided no supporting
data linking these alleged harms with
the proposed rule change.77 FINRA
reiterated that the likely impact of the
proposed rule change would be greater
displayed customer limit orders, as
customer orders may be smaller than
market maker orders, and that this
increased display would result in
increased price transparency.78 FINRA
noted that the Rule only prescribes the
account aggregation requirements. See OTC Markets
Letter I at p. 2.
71 See FINRA Response II at p. 3.
72 See id.
73 See id.
74 See FINRA Response II at pp. 3–4.
75 See FINRA Response II at p. 4.
76 See id.
77 See FINRA Response II at pp. 4–5.
78 See FINRA Response II at pp. 5–6.
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minimum sizes required for display,
and that market makers may choose to
display a quotation at the proposed
minimum or in excess of the proposed
minimum, as they do today.79
In FINRA Response II, FINRA further
noted that several comments were not
germane to the consideration of the
merits of its proposal. For example,
FINRA did not believe that there was a
nexus between the proposed rule and
the extension of certain other national
market protections to OTC markets, as
stated in the OTC Markets comments,80
or between the proposed rule and the
problems of locked or crossed markets,
access fees or other issues, as suggested
by Knight Letter I.81
Finally, FINRA Responses I and II
also addressed the comment process
more broadly. In FINRA Response I,
FINRA stated that Knight Letter I and
OTC Markets Letter I made
‘‘unsupported, at points unrelated and
somewhat vague comments that on their
face raise questions and ask the
Commission to do the commenter’s
homework.’’ 82 FINRA remarked that the
‘‘commenters should bear some burden
beyond naked assertions that a rule
would have a deleterious effect when
those assertions are neither supported
by reasoned argument and/or devoid of
factual data.’’ 83 FINRA stated that no
SRO is required to undertake an
economic analysis of its rule
proposals.84 FINRA stated that the
standards for approving proposed rule
changes are set forth in the Act and
should not be modified arbitrarily.85
FINRA believed that a comment lacking
a sufficient basis to demonstrate a
connection between the proposal and
market quality should not factor into the
Commission’s approval process.86
FINRA indicated its view that it would
be inappropriate for the Commission to
give undue weight to unsupported
assertions in evaluating the proposed
rule change.87
79 See FINRA Response II at p. 6; see also FINRA
Response I at p. 1.
80 See FINRA Response II at p. 6. One commenter
believed ‘‘NMS-type rules are harmful when
applied to smaller companies.’’ See OTC Markets
Letter I at pp. 1–2.
81 See FINRA Response II at p. 6. As noted above,
one commenter requested that the Commission
examine the impact on trading, clearing (e.g., the
operational complexity of clearing increased
volumes of smaller trades in non-DTC eligible
securities), related costs, locked markets, access
fees, trading efficiency and market participant
behavior under the proposed reduced tier sizes. See
text accompanying note 29 supra.
82 See FINRA Response I at p. 2.
83 Id.
84 See FINRA Response II at p. 7.
85 See id.
86 See FINRA Response II at pp. 7–8.
87 See FINRA Response II at p. 7.
PO 00000
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Fmt 4703
Sfmt 4703
3519
IV. Proceedings To Determine Whether
To Disapprove SR–FINRA–2011–058
and Grounds for Disapproval Under
Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 88 to determine
whether the proposed rule change
should be disapproved. Institution of
such proceedings is appropriate at this
time in view of the legal and policy
issues that are raised by the proposal
and are discussed below. Institution of
disapproval proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described in greater detail below, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change
to inform the Commission’s analysis
whether to approve or disapprove the
proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act, the Commission is providing notice
of the grounds for disapproval under
consideration. In particular, Section
15A(b)(6) of the Act 89 requires that the
rules of the association be designed,
among other things, to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, 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. In addition, Section
15A(b)(11) requires that FINRA rules
include provisions governing the form
and content of quotations relating to
securities sold otherwise than on a
national securities exchange which may
be distributed or published by any
member or person associated with a
member, and the persons to whom such
quotations may be supplied.90
FINRA’s proposal would adjust the
minimum quotation size requirements
in FINRA Rule 6433 to simplify the
Rule’s tier structure; facilitate the
display of customer limit orders; and
expand the scope of the Rule to cover
quotations by ATSs or quotations
representing customer trading interest
that are displayed in an inter-dealer
quotation system. FINRA believes that
its proposal would benefit investors of
OTC equity securities because the
proposed revisions to the Rule’s tier
structure would result in the display of
a greater number of customer limit
orders for these securities than currently
occurs under the Rule. In FINRA’s view,
88 15
U.S.C. 78s(b)(2)(B).
U.S.C. 78o–3(b)(6).
90 15 U.S.C. 78o–3(b)(11).
89 15
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the benefits to investors are reduced if
the Rule’s minimum quotation sizes are
too high and thus act to restrict
transparency for customer limit orders
for OTC equity securities. FINRA based
its conclusion that a larger number of
customer limit orders would be
displayed under its proposal on its
analysis of a recent sample of OATS
data.
Two commenters favored the
proposal. On the other hand, the
commenters that are an OTC market
maker and an inter-dealer quotation
system, respectively, disputed the need
to revise the Rule’s current tier
structure. One of these commenters
argued that FINRA has not adequately
demonstrated that revisions to the
minimum quotation size requirements
for OTC equity securities would benefit
investors and instead countered that the
proposal would degrade the quality of
the market for these securities. The
other commenter that objected to the
proposal believed that the proposal
could impact market liquidity and
increase costs to market makers, which
could result in market makers’
departure from the OTC market. Both of
these commenters urged that the
Commission undertake an economic
analysis of the anticipated effects of the
proposal as part of its consideration and
suggested that, if the Commission
decided to move forward on the
proposal, it should consider placing the
proposed changes to the Rule’s tier
structure on a pilot program.
The Commission believes that
questions are raised as to whether
FINRA’s proposal is consistent with the
requirements of Section 15A(b)(6) of the
Act, including whether the proposed
adjustments to the minimum quote size
requirements would prevent fraudulent
and manipulative acts and practices,
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, protect
investors and the public interest, and
with the requirements of Section
15A(b)(11) of the Act, including
whether the proposed rule change
would produce fair and informative
quotations, prevent fictitious or
misleading quotations, and promote
orderly procedures for collecting,
distributing, and publishing quotations.
While investors who place customer
limit orders that are smaller in size than
the Rule’s current minimum quotation
size requirements would benefit from
the proposed revisions, market quality
for OTC equity securities potentially
could be affected if the proposed tier
sizes are not calibrated appropriately.
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The Commission believes that the issues
raised by the proposed rule change can
benefit from additional consideration
and evaluation.
VI. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data and
arguments with respect to the concerns
identified above, as well as any others
they may have with the proposal. In
particular, the Commission invites the
written views of interested persons
concerning whether the proposed rule
change is inconsistent with Sections
15A(b)(6) and 15A(b)(11) or any other
provision of the Act, or the rules and
regulations thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval that would
be facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.91
Interested persons are invited to
submit written data, views and
arguments regarding whether the
proposed rule change should be
disapproved by February 14, 2012. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by February 28, 2012.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–FINRA–2011–058 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2011–058. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
91 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Pub. L. 94–29
(June 4, 1975), grants the Commission flexibility to
determine what type of proceeding—either oral or
notice and opportunity for written comments—is
appropriate for consideration of a particular
proposal by a self-regulatory organization. See
Securities Act Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://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 available publicly. All
submissions should refer to File
Number SR–FINRA–2011–058 and
should be submitted on or before
February 14, 2012. Rebuttal comments
should be submitted by February 28,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.92
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–1276 Filed 1–23–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66175; File No. SR–
NASDAQ–2012–004]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change
Relating to the Listing and Trading of
Shares of the Emerging Markets
Corporate Bond Fund of the
WisdomTree Trust
January 18, 2012.
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 January 4,
2012, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
92 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 77, Number 15 (Tuesday, January 24, 2012)]
[Notices]
[Pages 3515-3520]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1276]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66168; File No. SR-FINRA-2011-058]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Instituting Proceedings To Determine Whether To
Disapprove Proposed Rule Change To Amend FINRA Rule 6433 (Minimum
Quotation Size Requirements for OTC Equity Securities)
January 17, 2012.
I. Introduction
On October 6, 2011, the Financial Industry Regulatory Authority,
Inc. (``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend FINRA Rule 6433 (``Rule''), which governs
minimum quotation size requirements for OTC Equity Securities.\3\ The
proposed rule change is designed to simplify the Rule's price and size
tiers; facilitate the display of customer limit orders under new FINRA
Rule 6460 (Display of Customer Limit Orders) (``FINRA limit order
display rule'');\4\ and expand the scope of the Rule. The proposed rule
change was published for comment in the Federal Register on October 20,
2011.\5\ On November 17, 2011, FINRA consented to extending the time
period for the Commission to either approve or disapprove the proposed
rule change or to institute proceedings to determine whether to
disapprove the proposed rule change, to January 18, 2012. The
Commission received seven comment letters on the proposal from four
separate commenters,\6\ as well as two responses
[[Page 3516]]
to the comment letters from FINRA.\7\ This order institutes proceedings
under Section 19(b)(2)(B) of the Act \8\ to determine whether to
disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ ``OTC Equity Security'' means ``any equity security that is
not an NMS stock as that term is defined in Rule 600(b)(47) of SEC
Regulation NMS; provided, however, that the term `OTC Equity
Security' shall not include any Restricted Equity Security.'' See
FINRA Rule 6420(e).
\4\ See Securities Exchange Act Release No. 62359 (June 22,
2010), 75 FR 37488 (June 29, 2010) (Order Approving NMS-Principled
Rules for OTC Equity Securities) (``NMS-Principled Rules Approval
Order''). FINRA Rule 6460 became operative on May 9, 2011.
\5\ See Securities Exchange Act Release No. 65568 (October 14,
2011), 76 FR 65307 (``Notice'').
\6\ See Letter from Suzanne H. Shatto, dated October 20, 2011
(``Shatto Letter''); Letter from Naphtali M. Hamlet, dated October
21, 2011 (``Hamlet Letter); Letter from Daniel Zinn, General
Counsel, OTC Markets Group Inc. to Elizabeth M. Murphy, Secretary,
Commission, dated November 10, 2011 (``OTC Markets Letter I'');
Letter from Michael T. Corrao, Managing Director, Knight Capital
Group, Inc. to Elizabeth M. Murphy, Secretary, Commission, dated
November 16, 2011 (``Knight Letter I''); Letter from R. Cromwell
Coulson, President & CEO, OTC Markets to Craig Lewis, Commission,
and Kathleen Hanley, Commission, dated November 18, 2011 (``OTC
Markets Letter II''); Letter from Daniel Zinn, General Counsel, OTC
Markets Group Inc. to Elizabeth M. Murphy, Secretary, Commission,
dated December 30, 2011 (``OTC Markets Letter III''); Letter from
Michael T. Corrao, Managing Director, Knight Capital Group, Inc. to
Elizabeth M. Murphy, Secretary, Commission, dated January 13, 2012
(``Knight Letter II'').
\7\ See E-mail from Marc Menchel, FINRA to John Ramsay, David S.
Shillman, and Nancy J. Sanow, Commission, dated November 30, 2011
(``FINRA Response I''); and Letter from Stephanie M. Dumont, Senior
Vice President and Director of Capital Markets Policy, FINRA to
Elizabeth M. Murphy, Secretary, Commission, dated December 23, 2011
(``FINRA Response II'').
\8\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposal
FINRA proposed changes to the minimum quotation sizes in FINRA Rule
6433, among other things, to simplify the Rule's price and size tiers;
facilitate the display of customer limit orders under new FINRA Rule
6460;\9\ and expand the Rule's scope. In its filing, FINRA noted, among
other things, that currently FINRA Rule 6433 requires every member
functioning as an OTC Market Maker \10\ in an OTC Equity Security that
enters firm quotations into any inter-dealer quotation system that
permits quotation updates on a real-time basis to honor those
quotations for certain minimum sizes (``minimum quotation sizes'').\11\
---------------------------------------------------------------------------
\9\ See NMS-Principled Rules Approval Order, supra note 4.
\10\ OTC Market Maker'' means ``a member of FINRA that holds
itself out as a market maker by entering proprietary quotations or
indications of interest for a particular OTC Equity Security in any
inter-dealer quotation system, including any system that the SEC has
qualified pursuant to Section 17B of the Act. A member is an OTC
Market Maker only in those OTC Equity Securities in which it
displays market making interest via an inter-dealer quotation
system.'' See FINRA Rule 6420(f).
\11\ See Notice, supra note 5.
---------------------------------------------------------------------------
In its filing, FINRA explained that OTC Market Makers currently are
not required to display a customer limit order unless doing so would
comply with the minimum quotation sizes applicable to the display of
quotations on an inter-dealer quotation system.\12\ FINRA noted that,
although a customer limit order may improve price or size by more than
a de minimus amount, if the order is for an amount less than the
minimum quotation size set forth in the Rule, the member is not
required to display the order. FINRA believed that the proposed rule
change would benefit investors by facilitating the display of customer
limit orders under FINRA Rule 6460, which generally requires that OTC
Market Makers fully display better-priced customer limit orders (or
same-priced customer limit orders that are at the best bid or offer and
that increase the OTC Market Maker's size by more than a de minimus
amount).\13\
---------------------------------------------------------------------------
\12\ See Regulatory Notice 10-42 (September 2010).
\13\ FINRA Rule 6460 was adopted as part of an effort to extend
certain protections in place for NMS stocks to quoting and trading
of OTC Equity Securities. See NMS-Principled Rules Approval Order,
supra note 4. In approving FINRA Rule 6460, the Commission noted
that ``FINRA's limit order display proposal marks a positive step in
efforts to improve the transparency of OTC Equity Securities and the
handling of customer limit orders in this market sector.'' Id.
---------------------------------------------------------------------------
Specifically, FINRA proposed that the minimum quotation size
required for display of a quotation in an OTC Equity Security would
fall into one of six tiers rather than the current nine tiers. Under
the current rule, the tiers are as follows:
$2500.01 per share and above, the minimum quotation size
is 1 share;
$1000.01 through $2500 per share, the minimum quotation
size is 5 shares;
$501.01 through $1000 per share, the minimum quotation
size is 10 shares;
$200.01 through $500 per share, the minimum quotation size
is 25 shares;
$100.01 through 200 per share, the minimum quotation size
is 100 shares;
$10.01 through $100 per share, the minimum quotation size
is 200 shares;
$1.01 through $10.00 per share, the minimum quotation size
is 500 shares;
$0.51 through $1.00 per share, the minimum quotation size
is 2,500 shares;
$0.0001 through $0.50 per share, the minimum quotation
size is 5,000 shares.
Under the new proposal, the tiers are as follows:
$175.00 per share and above, the minimum quotation size
would be 1 share;
$1.00 through $174.99 per share, the minimum quotation
size would be 100 shares;
$0.51 through $0.9999 per share, the minimum quotation
size would be 200 shares;
$0.26 through $0.5099 per share, the minimum quotation
size would be 500 shares;
$0.02 through $0.2599 per share, the minimum quotation
size would be 1,000 shares;
$0.0001 through $0.0199 per share, the minimum quotation
size would be 10,000 shares.
Based on its study of the Order Audit Trail System (``OATS'') data
for OTC Equity Securities, as described in the Notice, FINRA believed
that the proposed modification to the current tiers would result in the
display of a larger number of customer limit orders, potentially
increasing from 50% to 90% the number of customer limit orders eligible
for display in some tiers.\14\ FINRA stated that, for securities priced
at or above $0.02 per share, the reduction in minimum quotation size
requirements would cause a greater percentage of customer limit orders
to be displayed, and that the proposal would continue to require that
displayed quotations represent a minimum aggregate dollar value
commitment to the market.\15\
---------------------------------------------------------------------------
\14\ See Notice, supra note 5.
\15\ Id. For securities priced under $0.02 per share, FINRA
recognized that more substantive dollar-value commitments to the
market would be required.
---------------------------------------------------------------------------
FINRA believed that the proposed revisions are appropriate because
they would simplify the price and size tier structure of FINRA Rule
6433 and would facilitate the display of customer limit orders
consistent with FINRA Rule 6460, while still recognizing the utility of
requiring that quotes in lower-priced securities represent a minimum
dollar-value commitment to the market. FINRA also believed that the
proposed revisions would benefit investors by increasing the percentage
of customer limit orders that would be eligible for display under Rule
6460, thereby improving transparency and enhancing execution of
customer limit orders.
Further, FINRA proposed to expand the scope of the Rule to apply to
all quotations or orders displayed in an inter-dealer quotation system,
including quotations displayed by alternative trading systems
(``ATSs'') or those representing customer trading interest. FINRA noted
that ATSs have become increasingly active in the over-the-counter
(``OTC'') markets and believed that the expansion of the scope of the
Rule would ensure that minimum quotation sizes were observed
consistently by all members displaying quotations on an inter-dealer
quotation system. Finally, FINRA noted that the proposed rule would
incorporate the requirements of FINRA Rule 6434 (Minimum Pricing
Increments for OTC Equity Securities), which, among other things,
prohibits members from displaying a bid or offer in an OTC Equity
Security in an increment smaller than $0.01 if the bid or offer is
priced $1.00 or greater per share, or in an increment smaller than
$0.0001 if the bid or offer is priced below $1.00.\16\
---------------------------------------------------------------------------
\16\ See FINRA Rule 6460(b)(8).
---------------------------------------------------------------------------
[[Page 3517]]
FINRA remarked that other existing requirements and obligations are
not being altered by its proposal. Each member would continue to be
required to honor its quotations to the full quantity displayed in
accordance with FINRA Rule 5220 (Offers at Stated Prices), which
generally provides that no member shall make an offer to buy or sell
any security at a stated price unless such member is prepared to
purchase or sell the security at such price and under such conditions
as are stated at the time of such offer to buy or sell.\17\ Likewise,
member obligations pursuant to FINRA Rule 5210 (Publication of
Transactions and Quotations) continue to apply. Among other things,
FINRA Rule 5210 generally prohibits members from publishing,
circulating, or causing to be published or circulated, any quotation
which purports to quote the bid price or asked price for any security,
unless such member believes that such quotation represents a bona fide
bid for, or offer of, such security.\18\
---------------------------------------------------------------------------
\17\ See also Rule 5220.01 (Firmness of Quotations).
\18\ See also Rule 5210.01 (Manipulative and Deceptive
Quotations).
---------------------------------------------------------------------------
III. Comment Letters
The Commission received seven comment letters on the proposal from
four commenters.\19\ In addition, FINRA submitted two responses to the
comment letters.\20\ Commenters generally were supportive of the goal
of making additional limit orders eligible for display under FINRA Rule
6460. However, two commenters, in five separate letters, objected to
the portion of the proposed rule that would revise the minimum
quotation size requirements.\21\ Specifically, these commenters
expressed concern that FINRA's proposal lacks sufficient economic
analysis to demonstrate that the proposed revisions to the minimum
quotation size requirements would improve liquidity or lower
transaction costs for investors. On the other hand, one commenter
suggested that FINRA consider reducing the tier sizes for minimum quote
sizes even further than proposed in order to provide greater
transparency to all market participants.\22\ One commenter supported
the Rule to the extent that it would help prevent manipulative
practices, but otherwise addressed topics unrelated to the
proposal.\23\
---------------------------------------------------------------------------
\19\ See supra note 6.
\20\ See supra note 7.
\21\ See OTC Markets Letter I, Knight Letter I, OTC Markets
Letter II, OTC Markets Letter III, and Knight Letter II.
\22\ See Shatto Letter.
\23\ See Hamlet Letter.
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One commenter expressed the view that the proposal could have the
unintended consequence of negatively impacting the market by removing
meaningful minimum required dollar value levels of displayed liquidity
by market makers.\24\ According to the commenter, because the proposed
levels are significantly lower than currently required levels, the
proposal potentially could cause a severe degradation in trading
efficiency, particularly in less liquid securities, and thereby fail to
meet the proposal's desired goal.\25\ The commenter provided a table to
detail the change to the minimum dollar value required to be displayed
by market makers under the proposal.\26\ The commenter believed that
its table illustrated a significant decrease in dollar value of
liquidity that market makers would be required to offer at each tier
level.
---------------------------------------------------------------------------
\24\ See Knight Letter I.
\25\ See Knight Letter I at p. 1.
\26\ See Knight Letter I at p. 2.
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In addition, the commenter believed that, under the proposal,
market makers would be required to quote insignificant dollar values,
thereby creating additional operational and trading risks, without
providing real value to the market.\27\ The commenter further expressed
concern that any increase in costs to market making liquidity providers
could result in the departure of market makers and thereby could cause
an erosion of liquidity.\28\ The commenter recommended further economic
analysis to study the expected impact of the proposed tier sizes on
market liquidity (including trading, clearing, related costs, locked
markets, access fees, trading efficiency and market participant
behavior), and requested that the Commission conduct an analysis of the
data.\29\ The commenter suggested that, if the Commission were inclined
to move forward after such analysis, a limited pilot would allow for
the assessment of the proposal's impact on market quality while
minimizing the effects of any unintended consequences.\30\
---------------------------------------------------------------------------
\27\ See id.
\28\ See id.
\29\ See id.
\30\ See id.
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In another communication, the commenter reiterated its belief that
the proposal would have serious negative consequences to the OTC
marketplace and investors, including a significant reduction in
liquidity, inferior pricing and increased vulnerability to gaming and
frontrunning.\31\ The commenter expressed concern about the
consequences likely to result when concepts and rules from the NMS
market were applied to the OTC market despite different trading
characteristics between NMS securities and OTC equity securities.\32\
The commenter again requested that the Commission evaluate the costs
and benefits associated with the proposal.\33\ The commenter pointed to
the prior analysis by the National Association of Securities Dealers,
Inc., FINRA's predecessor, in connection with tier size reductions in
Nasdaq securities and suggested that FINRA consider a similar approach
for the current proposal.\34\
---------------------------------------------------------------------------
\31\ See Knight Letter II at p.1. The commenter noted its
agreement with the views expressed in OTC Markets Letter III. Id.
The commenter also included a modified version of the table that was
in its prior letter. See Knight Letter II at p.3.
\32\ See id.
\33\ See Knight Letter II at p. 2.
\34\ See id. (citing Securities Exchange Act Release No. 40211
(July 15, 1998), 63 FR 39322 (July 22, 1998) (Order Approving a
Proposed Rule Change to Permanently Expand the NASD's Rule
Permitting Market Makers to Display Their Actual Quotation Size)).
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The commenter expressed the view that non-NMS securities are
significantly less liquid than NMS securities and that the proposed
rule change would have an adverse impact on both dealers and
investors.\35\ The commenter believed that the only possible benefits
resulting from the proposal would accrue to firms that provide little
or no liquidity, as those firms would pick-off dealer liquidity at the
expense of investors.\36\ The commenter further noted that market
makers like Knight generally do not charge competitors or broker-dealer
clients commissions or mark-up/mark-downs.\37\ The commenter indicated
that market makers would continue to pay costs to access liquidity
under the proposal and that there was a likelihood that market
participants would gravitate to posting quotations at the minimum tier
size as they currently do today.\38\ Finally, the commenter reiterated
its concern that costs could increase for self-clearing firms under the
proposal and that costs would be more burdensome in the case of non-
DTCC eligible securities (physicals) because those costs were driven by
the number of settlements as opposed to number of trades.\39\
---------------------------------------------------------------------------
\35\ See Knight Letter II at pp.2-3.
\36\ See Knight Letter II at p. 3.
\37\ See id.
\38\ See id.
\39\ See Knight Letter II at pp.3-4.
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Another commenter expressed the view that the reduction of minimum
quote size requirements ``has not been shown by FINRA to benefit
investors and has a significant risk that it will
[[Page 3518]]
degrade market quality.'' \40\ The commenter further suggested that
Regulation NMS-type rules are not appropriate in the context of smaller
issuers.\41\ The commenter believed that the immediate effect of the
proposal would be less displayed liquidity, even if the actual
liquidity were larger, because quotations typically are submitted at
the minimum size.\42\ The commenter believed that this potential effect
would lead to more volatility and would increase realized spreads
because orders ultimately would be filled away from the inside quote,
thereby raising the cost of trading.\43\
---------------------------------------------------------------------------
\40\ See OTC Markets Letter I at p.1.
\41\ See id.
\42\ See OTC Markets Letter I at p.3.
\43\ See id.
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The commenter believed that the analysis provided by FINRA was not
compelling, and cited to public commentators that generally have
suggested other Regulation NMS-principled rules have harmed the market
for smaller companies' securities.\44\ The commenter asserted that
FINRA's statistical analysis concerning the additional percentage of
customer orders that would be displayed under the proposed rule change
was flawed, including because it ignored FINRA's quote aggregation
rules.\45\ According to the commenter, at a minimum, FINRA's analysis
required further study.\46\ The commenter recommended that the
Commission's staff review the actual effect of the proposed rule change
on the display of limit orders.\47\
---------------------------------------------------------------------------
\44\ See OTC Markets Letter I at p. 2.
\45\ See id.
\46\ See id.
\47\ See OTC Markets Letter I at p. 3.
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In another communication, the commenter again expressed concern
that FINRA's analysis was flawed.\48\ The commenter suggested that the
proposal represented a large change in market structure and could
negatively impact capital formation for small businesses. The commenter
again requested that the Commission's staff conduct its own economic
analysis concerning the proposed rule change.
---------------------------------------------------------------------------
\48\ See OTC Markets Letter II.
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The commenter reiterated its views in its third letter.\49\ The
commenter again stated its belief that Regulation NMS-type rules were
not appropriate for the OTC market.\50\ The commenter again suggested
that FINRA's analysis did not reflect existing customer order
aggregation requirements; \51\ did not provide information regarding
dollar and share volume relative to tier sizes; \52\ and did not
analyze the proposal's potential impact on market orders or proprietary
quotes.\53\
---------------------------------------------------------------------------
\49\ See OTC Markets Letter III.
\50\ See OTC Markets Letter III at p.5.
\51\ See OTC Markets Letter III at p.7.
\52\ See OTC Markets Letter III at p.8.
\53\ See OTC Markets Letter III at pp.2-3.
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The commenter remarked that FINRA's letters responding to the
comment letters failed to address Section 3(f) of the Act,\54\ which
requires that whenever, pursuant to the Act, the Commission is engaged
in rulemaking, or in the review of a rule of a self-regulatory
organization (``SRO''), and is required to consider or determine
whether an action is necessary or appropriate in the public interest,
the Commission shall also consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.\55\ The commenter believed that changing tier sizes
or quote increments potentially could have a variety of dynamic effects
on the OTC market.\56\ The commenter stated that it reviewed data
relating to all trades in OTC equity securities that occurred on
October 27, 2011, concerning share volume, dollar volume and number of
trades in relation to the existing and proposed tier sizes.\57\ Based
on its review, the commenter believed that the proposed rule would not
significantly increase liquidity but would impose a direct cost on
investors, particularly investors placing marketable orders.\58\ The
commenter believed that the proposed rule change would lead most market
makers to reduce their quote sizes and display less liquidity.\59\ The
commenter further believed that an extensive decrease in displayed
proprietary liquidity would ``overwhelmingly offset the benefit of the
increased number of customer limit orders displayed.'' \60\
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78c(f).
\55\ See OTC Markets Letter III at pp.2-3.
\56\ See OTC Markets Letter III at p.4.
\57\ See OTC Markets Letter III at p.5. The commenter selected
October 27, 2011 for its review, because that day had the highest
trading volume of any day that month and, according to the
commenter, presumably also had the highest amount of investor
liquidity for that month.
\58\ See OTC Markets Letter III at p.6.
\59\ See id.
\60\ See OTC Markets Letter III at p. 7.
---------------------------------------------------------------------------
FINRA provided two responses addressing issues raised by the
commenters.\61\ In both of its responses, FINRA noted that the purpose
of allowing smaller displayed quotes was to allow for the greater use
of limit orders by investors.\62\ In FINRA Response II, FINRA
reiterated that the proposed rule change was associated with the FINRA
limit order display rule, which recently had extended a fundamental
investor protection to OTC equity securities.\63\ FINRA explained that
the existing minimum quotation sizes reduced the benefit of its limit
order display rule because the higher existing levels ``act to restrict
transparency of a large number of customer limit orders.'' \64\
Addressing commenters' concerns about reduced liquidity, FINRA noted
that the lower minimum quote size would allow for the display of a
greater number of limit orders. FINRA believed that the larger number
of quotes would increase competition, and increased competition would
improve liquidity.\65\ FINRA noted that, although the role of the
market maker had been reduced in NMS securities, liquidity in NMS
securities appeared intact.\66\
---------------------------------------------------------------------------
\61\ See supra note 7.
\62\ See FINRA Response I at p. 1.
\63\ See FINRA Response II at p. 1.
\64\ Id.
\65\ See FINRA Response I at p.1 and FINRA Response II at p. 5,
n.17. Two commenters stated that market makers might react to the
proposed rule change by reducing their quote sizes. See Knight
Letter I at p.1-2 and OTC Markets Letter I at p.3.
\66\ See FINRA Response I at p. 1.
---------------------------------------------------------------------------
FINRA noted that, to the extent commenters had concerns that
processing smaller quotes would not be economical, the proposed rule
change would not mandate the use of smaller quote sizes.\67\ In FINRA
Response I, FINRA questioned the notion of the proposal resulting in
additional costs to process additional orders and added that, to the
extent that the proposed rule might result in additional transactions,
the costs of clearing such additional transactions would be
negligible.\68\ FINRA further remarked that, with respect to other
concerns about transaction costs, FINRA's mark-up rule, which governs
execution costs, is still applicable and is not being modified by the
instant proposal.\69\
---------------------------------------------------------------------------
\67\ See FINRA Response I at p.1 and FINRA Response II at p.5,
n.17. One commenter believed there would be costs associated with
the operational complexity of clearing increased volumes of smaller
trades in non-DTC eligible securities. See Knight Letter I at p. 2.
\68\ See FINRA Response I at p. 1. One commenter believed that
the proposed rule change would increase transaction costs for
investors. See OTC Markets Letter I at p. 3.
\69\ See FINRA Response I at p. 1.
---------------------------------------------------------------------------
In FINRA Response II, FINRA disagreed with one commenter's
suggestion that the percentage of customer limit orders currently
displayed under the FINRA limit order display rule already was in line
with FINRA's estimate of the number of customer limit orders that would
be displayed under the proposal.\70\ FINRA
[[Page 3519]]
believed that, contrary to the commenter's assertion, broker-dealers
were unlikely to be in a position to aggregate multiple investor OTC
equity orders to reach the existing display thresholds, because OTC
equity securities trade infrequently and at widely varying volume each
day.\71\ FINRA also noted that, in any event, price transparency should
not depend upon the expectation that other OTC orders might be placed
at the same price and around the same time.\72\ Finally, FINRA noted
that a more recent sample of relevant data further supported its
position that the proposed rule change would increase the display of
customer limit orders from 50% under the existing minimum quotation
size requirements to 90% under the proposal.\73\
---------------------------------------------------------------------------
\70\ See FINRA Response II at p. 3. One commenter believed that
the FINRA analysis failed to take into account aggregation
requirements. See OTC Markets Letter I at p. 2.
\71\ See FINRA Response II at p. 3.
\72\ See id.
\73\ See id.
---------------------------------------------------------------------------
In FINRA Response II, FINRA stated its view that the chart
contained in Knight Letter I was not useful because that the chart did
not accurately align tier and price points and therefore did not allow
for an appropriate comparison of the current and proposed rules.\74\
FINRA provided a comparison of similar price points and ranges to
demonstrate that the proposed rule change would increase the dollar
values for two proposed lower price point tiers and decrease dollar
values for three proposed higher price point tiers, while the dollar
values of one proposed price point tier would remain unchanged.\75\
FINRA believed that its proposed structure was better for investors,
more consistent with the national market system, and represented more
meaningful minimum displayed liquidity at the lowest tiers.\76\ FINRA
disagreed with the suggestion in Knight Letter I that its proposal
would degrade market quality or have far reaching effects on liquidity
and efficiency in the OTC markets, noting again that the commenters
provided no supporting data linking these alleged harms with the
proposed rule change.\77\ FINRA reiterated that the likely impact of
the proposed rule change would be greater displayed customer limit
orders, as customer orders may be smaller than market maker orders, and
that this increased display would result in increased price
transparency.\78\ FINRA noted that the Rule only prescribes the minimum
sizes required for display, and that market makers may choose to
display a quotation at the proposed minimum or in excess of the
proposed minimum, as they do today.\79\
---------------------------------------------------------------------------
\74\ See FINRA Response II at pp. 3-4.
\75\ See FINRA Response II at p. 4.
\76\ See id.
\77\ See FINRA Response II at pp. 4-5.
\78\ See FINRA Response II at pp. 5-6.
\79\ See FINRA Response II at p. 6; see also FINRA Response I at
p. 1.
---------------------------------------------------------------------------
In FINRA Response II, FINRA further noted that several comments
were not germane to the consideration of the merits of its proposal.
For example, FINRA did not believe that there was a nexus between the
proposed rule and the extension of certain other national market
protections to OTC markets, as stated in the OTC Markets comments,\80\
or between the proposed rule and the problems of locked or crossed
markets, access fees or other issues, as suggested by Knight Letter
I.\81\
---------------------------------------------------------------------------
\80\ See FINRA Response II at p. 6. One commenter believed
``NMS-type rules are harmful when applied to smaller companies.''
See OTC Markets Letter I at pp. 1-2.
\81\ See FINRA Response II at p. 6. As noted above, one
commenter requested that the Commission examine the impact on
trading, clearing (e.g., the operational complexity of clearing
increased volumes of smaller trades in non-DTC eligible securities),
related costs, locked markets, access fees, trading efficiency and
market participant behavior under the proposed reduced tier sizes.
See text accompanying note 29 supra.
---------------------------------------------------------------------------
Finally, FINRA Responses I and II also addressed the comment
process more broadly. In FINRA Response I, FINRA stated that Knight
Letter I and OTC Markets Letter I made ``unsupported, at points
unrelated and somewhat vague comments that on their face raise
questions and ask the Commission to do the commenter's homework.'' \82\
FINRA remarked that the ``commenters should bear some burden beyond
naked assertions that a rule would have a deleterious effect when those
assertions are neither supported by reasoned argument and/or devoid of
factual data.'' \83\ FINRA stated that no SRO is required to undertake
an economic analysis of its rule proposals.\84\ FINRA stated that the
standards for approving proposed rule changes are set forth in the Act
and should not be modified arbitrarily.\85\ FINRA believed that a
comment lacking a sufficient basis to demonstrate a connection between
the proposal and market quality should not factor into the Commission's
approval process.\86\ FINRA indicated its view that it would be
inappropriate for the Commission to give undue weight to unsupported
assertions in evaluating the proposed rule change.\87\
---------------------------------------------------------------------------
\82\ See FINRA Response I at p. 2.
\83\ Id.
\84\ See FINRA Response II at p. 7.
\85\ See id.
\86\ See FINRA Response II at pp. 7-8.
\87\ See FINRA Response II at p. 7.
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IV. Proceedings To Determine Whether To Disapprove SR-FINRA-2011-058
and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \88\ to determine whether the proposed rule
change should be disapproved. Institution of such proceedings is
appropriate at this time in view of the legal and policy issues that
are raised by the proposal and are discussed below. Institution of
disapproval proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described in greater detail below, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change to inform the Commission's analysis whether to
approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\88\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice of the grounds for disapproval under consideration. In
particular, Section 15A(b)(6) of the Act \89\ requires that the rules
of the association be designed, among other things, to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, 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. In addition,
Section 15A(b)(11) requires that FINRA rules include provisions
governing the form and content of quotations relating to securities
sold otherwise than on a national securities exchange which may be
distributed or published by any member or person associated with a
member, and the persons to whom such quotations may be supplied.\90\
---------------------------------------------------------------------------
\89\ 15 U.S.C. 78o-3(b)(6).
\90\ 15 U.S.C. 78o-3(b)(11).
---------------------------------------------------------------------------
FINRA's proposal would adjust the minimum quotation size
requirements in FINRA Rule 6433 to simplify the Rule's tier structure;
facilitate the display of customer limit orders; and expand the scope
of the Rule to cover quotations by ATSs or quotations representing
customer trading interest that are displayed in an inter-dealer
quotation system. FINRA believes that its proposal would benefit
investors of OTC equity securities because the proposed revisions to
the Rule's tier structure would result in the display of a greater
number of customer limit orders for these securities than currently
occurs under the Rule. In FINRA's view,
[[Page 3520]]
the benefits to investors are reduced if the Rule's minimum quotation
sizes are too high and thus act to restrict transparency for customer
limit orders for OTC equity securities. FINRA based its conclusion that
a larger number of customer limit orders would be displayed under its
proposal on its analysis of a recent sample of OATS data.
Two commenters favored the proposal. On the other hand, the
commenters that are an OTC market maker and an inter-dealer quotation
system, respectively, disputed the need to revise the Rule's current
tier structure. One of these commenters argued that FINRA has not
adequately demonstrated that revisions to the minimum quotation size
requirements for OTC equity securities would benefit investors and
instead countered that the proposal would degrade the quality of the
market for these securities. The other commenter that objected to the
proposal believed that the proposal could impact market liquidity and
increase costs to market makers, which could result in market makers'
departure from the OTC market. Both of these commenters urged that the
Commission undertake an economic analysis of the anticipated effects of
the proposal as part of its consideration and suggested that, if the
Commission decided to move forward on the proposal, it should consider
placing the proposed changes to the Rule's tier structure on a pilot
program.
The Commission believes that questions are raised as to whether
FINRA's proposal is consistent with the requirements of Section
15A(b)(6) of the Act, including whether the proposed adjustments to the
minimum quote size requirements would prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general, protect
investors and the public interest, and with the requirements of Section
15A(b)(11) of the Act, including whether the proposed rule change would
produce fair and informative quotations, prevent fictitious or
misleading quotations, and promote orderly procedures for collecting,
distributing, and publishing quotations. While investors who place
customer limit orders that are smaller in size than the Rule's current
minimum quotation size requirements would benefit from the proposed
revisions, market quality for OTC equity securities potentially could
be affected if the proposed tier sizes are not calibrated
appropriately. The Commission believes that the issues raised by the
proposed rule change can benefit from additional consideration and
evaluation.
VI. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data and arguments with respect to the
concerns identified above, as well as any others they may have with the
proposal. In particular, the Commission invites the written views of
interested persons concerning whether the proposed rule change is
inconsistent with Sections 15A(b)(6) and 15A(b)(11) or any other
provision of the Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral presentation.\91\
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\91\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------
Interested persons are invited to submit written data, views and
arguments regarding whether the proposed rule change should be
disapproved by February 14, 2012. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
February 28, 2012.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2011-058 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2011-058. This
file number should be included on the subject line if email 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 (https://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 available publicly. All
submissions should refer to File Number SR-FINRA-2011-058 and should be
submitted on or before February 14, 2012. Rebuttal comments should be
submitted by February 28, 2012.
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\92\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\92\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1276 Filed 1-23-12; 8:45 am]
BILLING CODE 8011-01-P
