Order Granting Application by The Financial Information Forum and Security Traders Association for an Exemption Pursuant to Rule 606(c) of Regulation NMS Under the Exchange Act From Certain Requirements of Rule 606 of Regulation NMS Under the Exchange Act, 47625-47627 [2019-19469]
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Federal Register / Vol. 84, No. 175 / Tuesday, September 10, 2019 / Notices
and enforce written policies and
procedures reasonably designed to
effectively measure, monitor, and
manage the liquidity risk that arises in
or is borne by the covered clearing
agency, including measuring,
monitoring, and managing its settlement
and funding flows on an ongoing and
timely basis, and its use of intraday
liquidity by addressing foreseeable
liquidity shortfalls that would not be
covered by the covered clearing
agency’s liquid resources and seek to
avoid unwinding, revoking, or delaying
the same-day settlement of payment
obligations.51 FICC believes that the
proposed rule change would be
consistent with Rule 17Ad–22(e)(7)(viii)
because the GCF Repo Allocation
Waterfall MRA would be a committed
arrangement that would be available to
avoid unwinding, revoking, or delaying
same-day settlement obligations. All
transactions entered into pursuant to the
GCF Repo Allocation Waterfall MRA are
designed to be readily available to settle
same-day cash obligations owed to nondefaulting Netting Members in instances
where existing resources (i) may not be
readily available after 4:30 p.m. to
permit timely settlement or (ii) are
maintained primarily to settle the
outstanding transactions in the event of
a default of a Member and its entire
affiliated family.
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III. Date of Effectiveness of the Advance
Notice, and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
that the proposed change was filed with
the Commission or (ii) the date that any
additional information requested by the
Commission is received. The clearing
agency shall not implement the
proposed change if the Commission has
any objection to the proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
received, if the Commission notifies the
clearing agency in writing that it does
not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
51 17
CFR 240.17Ad–22(e)(7)(viii).
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earlier date, subject to any conditions
imposed by the Commission.
The clearing agency shall post notice
on its website of proposed changes that
are implemented.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the Advance Notice
is consistent with the Clearing
Supervision Act. 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–
FICC–2019–801 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–FICC–2019–801. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 website 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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
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47625
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FICC–
2019–801 and should be submitted on
or before September 25, 2019.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–19538 Filed 9–9–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86874]
Order Granting Application by The
Financial Information Forum and
Security Traders Association for an
Exemption Pursuant to Rule 606(c) of
Regulation NMS Under the Exchange
Act From Certain Requirements of
Rule 606 of Regulation NMS Under the
Exchange Act
September 4, 2019.
I. Introduction
The Financial Information Forum
(‘‘FIF’’) and Security Traders
Association (‘‘STA’’) have filed with the
Securities and Exchange Commission
(‘‘Commission’’) an application for an
exemption from certain requirements 1
of Rule 606 of Regulation NMS under
the Exchange Act.2
This order grants the following
exemptive relief from certain
requirements of Rule 606, subject to
certain conditions, which are outlined
in greater detail below: (1) All brokerdealers are exempt from the requirement
to comply with Rule 606(a) until
January 1, 2020; (2) all broker-dealers
that engage in self-routing activity are
exempt from the requirement to comply
with Rule 606(b)(3) until January 1,
2020; and (3) all broker-dealers that
engage in outsourced routing activity
are exempt from the requirement to
comply with Rule 606(b)(3) until April
1, 2020.
II. Background
On November 2, 2018, the
Commission adopted amendments to
Rules 600, 605, and 606 of Regulation
NMS under the Exchange Act.3 The
1 See letter from Christopher Bok, Director, FIF,
and James Toes, President & CEO, STA, to Brett
Redfearn, Director, Division of Trading and Markets
(‘‘Division’’), Securities and Exchange Commission
(‘‘Commission’’), dated August 2, 2019 (‘‘FIF/STA
Letter’’).
2 17 CFR 242.606.
3 See Exchange Act Release No. 84528 (November
2, 2018), 83 FR 58338 (November 19, 2018)
(‘‘Adopting Release’’).
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Federal Register / Vol. 84, No. 175 / Tuesday, September 10, 2019 / Notices
amendments to Rule 606(b) added a
new disclosure requirement, set forth in
paragraph (b)(3), that requires a brokerdealer, upon request of its customer, to
provide specific disclosures related to
the routing and execution of the
customer’s NMS stock orders submitted
on a not held basis for the prior six
months, subject to two de minimis
exceptions. The Commission also
amended the customer-specific
disclosure requirement in paragraph
(b)(1) of Rule 606 to apply to NMS stock
orders submitted on a held basis, NMS
stock orders that are submitted on a not
held basis and the broker-dealer is not
required to provide the customer a
report under paragraph (b)(3), and NMS
securities that are options contracts. In
addition, the Commission amended the
quarterly public order routing
disclosure requirement in Rule 606(a) to
apply to NMS stock orders submitted on
a held basis, among other things. The
Commission also amended Rule 605 of
Regulation NMS to require that the
public order execution report be kept
publicly available for a period of three
years.
On April 30, 2019, the Commission
extended the compliance date for the
amendments to Rule 606 to begin
following September 30, 2019, to
provide broker-dealers with time to
implement fully the systems and other
changes necessary to comply with
amended Rule 606.4
FIF/STA request that: (1) The data
collection period for Rule 606(a) be
extended to commence on January 1,
2020; (2) the data collection period for
Rule 606(b)(3) for broker-dealers that
engage in ‘‘self-routing activity’’ (as
defined below) be extended to 180 days
following the issuance of Commission
staff responses to frequently asked
questions regarding amended Rule 606
(‘‘Staff FAQs’’); and (3) the Commission
delay the Rule 606(b)(3) reporting
requirement for broker-dealers that
engage in ‘‘outsourced routing activity’’
(as defined below).5
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4 See
Exchange Act Release No. 85714 (April 24,
2019), 84 FR 18136 (April 30, 2019) (‘‘Rule 606
Compliance Date Extension Release’’). The original
compliance date set forth in the Adopting Release
was May 20, 2019. The Rule 606 Compliance Date
Extension Release did not extend the original
compliance date for the amendment to Rule 605.
5 See FIF/STA Letter, supra note 2, at 2. We note
that Commission staff issued the Staff FAQs on
August 16, 2019. See Responses to Frequently
Asked Questions Concerning Rule 606 of
Regulation NMS, https://www.sec.gov/tm/faq-rule606-regulation-nms. The Staff FAQs are not a rule,
regulation, or statement of the Commission, and the
Commission has neither approved nor disapproved
their content. The Staff FAQs have no legal force
or effect: they do not alter or amend applicable law,
and they create no new or additional obligations for
any person.
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According to FIF/STA, broker-dealers
and other industry stakeholders are
unable to meaningfully comply with
amended Rule 606 within the current
implementation timeframe.6 FIF/STA
set forth several implementation
challenges that they state would affect a
broker-dealer’s ability to comply, in
particular, with the Rule 606(b)(3)
requirement that it provide customerspecific reports of data regarding its
handling of customers’ not held NMS
stock orders.7 In addition, according to
FIF/STA, these challenges are greater
when a broker-dealer must report the
information required under Rule
606(b)(3) for orders handled using the
order routing systems of another brokerdealer (‘‘outsourced routing activity’’)
than they are for orders handled using
a broker-dealer’s own systems (‘‘selfrouting activity’’).8 Self-routing activity
for the purposes of this exemption is
when a broker-dealer receives a
customer’s order and routes it (or child
orders thereof) to venues using its own
systems. Outsourced routing activity is
when a broker-dealer receives a
customer’s order and utilizes the
systems of another broker-dealer to
route it (or child orders thereof) to
venues.
With respect to the quarterly public
reporting requirement in Rule 606(a),
FIF/STA state that ‘‘the majority of
606(a) provisions are implementable
within a relatively short timeframe’’
after the issuance of requested
guidance.9
III. Order Granting Conditional
Exemption
Rule 606(c) 10 authorizes the
Commission to conditionally or
unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of this section, if the
Commission determines that such
exemption is necessary or appropriate
in the public interest, and is consistent
with the protection of investors. The
Commission, by the Division pursuant
to delegated authority,11 is granting a
temporary exemption from reporting
obligations under Rules 606(a) and
606(b)(3) to provide additional time for
broker-dealers to complete the
development of systems and processes
6 See
FIF/STA Letter, supra note 2, at 1–4.
id. at 4–8.
8 See id. (using the terms ‘‘look through
information’’ or ‘‘look through data’’ and ‘‘non-look
through information’’ or ‘‘non-look through data,’’
respectively).
9 See id. at 2.
10 17 CFR 242.606(c).
11 17 CFR 200.30–3(a)(69).
7 See
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necessary to begin collecting the data
required by the rule. As described
below, however, the length of time of
the exemption from reporting
obligations under Rule 606(b)(3) differs
based on whether a broker-dealer is
engaged in self-routing activity or
outsourced routing activity.12
A. Amended Rule 606(a)
The Commission has determined that
providing broker-dealers with an
exemption from the quarterly public
reporting requirements of amended Rule
606(a) relating to held orders and
options orders until January 1, 2020 is
necessary or appropriate in the public
interest, and is consistent with the
protection of investors. While the
Commission previously extended the
compliance date for the amendments to
Rule 606(a), FIF/STA note that a few
open items remain before
implementation efforts are finalized.13
The Commission agrees with the
importance of what FIF/STA describe as
consistent, complete and accurate
reporting across broker-dealers
complying with all aspects of amended
Rule 606(a). As FIF/STA state, complete
and accurate data will ‘‘provide
customers with the value the Rule
intends.’’ Pursuant to this exemption, a
broker-dealer has three additional
months from the current compliance
date to comply with amended Rule
606(a) and therefore must begin
collecting the amended Rule 606(a) data
for the first quarter of 2020, and the
public report of first quarter 2020 data
is required by the end of April 2020.14
B. Rule 606(b)(3) for Broker-Dealers
Engaged in Self-Routing Activity
Further, the Commission has
determined that providing a temporary
exemption from reporting obligations
under Rule 606(b)(3) for not held orders
for a broker-dealer engaged in selfrouting activity is necessary or
appropriate in the public interest, and is
consistent with the protection of
12 The Commission is not issuing an exemption
from any other provisions of Rule 606. Accordingly,
compliance with Rule 606(b)(1) and the obligation
to provide, upon request, customer-specific reports
on routing of the following securities is still
required to begin following September 30, 2019: (1)
NMS stock orders submitted on a held basis; (2)
NMS stock orders that are submitted on a not held
basis and the broker-dealer is not required to
provide the customer a report under paragraph
(b)(3); and NMS securities that are options
contracts. See Rule 606 Compliance Date Extension
Release, supra note 4.
13 See FIF/STA Letter, supra note 2, at 9 (noting
that compliance efforts continue with, e.g., options
reporting and the capture of aggregated fee
information for orders).
14 The Commission is granting the exemption as
requested by FIF/STA. See FIF/STA Letter, supra
note 2, at 2.
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Federal Register / Vol. 84, No. 175 / Tuesday, September 10, 2019 / Notices
investors because it will provide
additional time to finalize development
efforts. Specifically, the Commission
believes that further time will allow the
industry to complete implementation,
ultimately allowing broker-dealers to
provide customers with consistent,
complete, and accurate 606(b)(3)
reports, as described above.15
Accordingly, a broker-dealer engaged in
self-routing activity is exempt until
January 1, 2020 from the requirement to
start collecting the data required by Rule
606(b)(3) for such activity. For customer
requests that are made on or before
February 15, 2020, a broker-dealer is
exempt from the requirement to provide
a report for self-routing activity covering
January 2020 data until seven business
days after February 15, 2020. Pursuant
to this exemption, a broker-dealer has
three additional months from the
current compliance date to prepare to
collect the data required by Rule
606(b)(3) for self-routing activity, and
has extra time in February 2020 to
prepare the first report relating to selfrouting activity for January 2020 data.16
While the Commission is not granting
the specific relief requested by FIF/STA
and is instead granting a shorter
extension, the Commission believes that
this new date should provide selfrouting broker-dealers with sufficient
time to finalize their internal
development efforts.
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C. Rule 606(b)(3) for Broker-Dealers
Engaged in Outsourced Routing Activity
Finally, the Commission has
determined that providing a temporary
exemption from reporting obligations
under Rule 606(b)(3) for not held orders
for a broker-dealer engaged in
outsourced routing activity is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors. This exemption will provide
additional time to coordinate and
finalize development efforts, including
among third parties.
As also is the case for broker-dealers
engaged in self-routing activity,
discussed above, the Commission
believes that further time will allow the
industry to complete implementation,
15 See FIF/STA Letter, supra note 2, at 9 (noting
that compliance efforts continue with, e.g., options
reporting and the capture of aggregated fee
information for orders).
16 Under Rule 606(b)(3), if a customer requests a
report on the first of the month for example, the
broker-dealer is required to provide the report
within seven business days of the customer’s
request. Under the relief provided herein, however,
if a customer requests a report of January 2020 data
on February 1, 2020, the broker-dealer is not
required to provide the report within seven
business days of February 1, 2020; instead, the
broker-dealer is required to provide the report
within seven business days of February 15.
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Jkt 247001
ultimately allowing broker-dealers to
provide customers with consistent,
complete, and accurate 606(b)(3)
reports.17 Specifically, to comply with
Rule 606(b)(3), broker-dealers may need
to develop systems to pass the data
required by Rule 606(b)(3) from an
executing broker to an introducing
broker. To the extent that any brokerdealers that handle outsourced routing
activity require additional time to
complete development of specific
portions of their systems, e.g., the
required XML schema and PDF
renderer, the Commission believes that
the six-month exemption it is granting
today provides sufficient time to finalize
that development. Further, the
Commission believes that this
additional time should permit brokerdealers that outsource their routing
activity to third parties the additional
time needed to finalize updating their
routing arrangements with such parties.
Accordingly, a broker-dealer engaged
in outsourced routing activity is exempt
from the requirement to start collecting
the Rule 606(b)(3) data until April 1,
2020 for such activity. For customer
requests that are made on or before May
15, 2020, a broker-dealer is exempt from
the requirement to provide a Rule
606(b)(3) report for outsourced routing
activity covering April 2020 data until
seven business days after May 15, 2020.
Pursuant to this exemption, a brokerdealer has six additional months from
the current compliance date to prepare
to collect the data required by Rule
606(b)(3) for outsourced routing activity,
and has extra time in May 2020 to
prepare the first report relating to
outsourced routing activity for April
2020 data.18
Accordingly, it is ordered, pursuant to
Rule 606(c) of Regulation NMS under
the Exchange Act,19 that:
(1) Broker-dealers are exempt from the
requirement to comply with amended
Rule 606(a) by the current compliance
date of October 1, 2019 and instead
must begin collecting amended Rule
606(a) data for the first quarter of 2020.
The public report of first quarter 2020
data is required by April 30, 2020.
(2) Broker-dealers engaged in selfrouting activity are exempt from the
requirement to start collecting the data
required by Rule 606(b)(3) until January
17 See FIF/STA Letter, supra note 2, at 9 (noting
that compliance efforts continue with, e.g., options
reporting and the capture of aggregated fee
information for orders).
18 The Commission notes that FIF/STA did not
request a specific alternative compliance date for
the Rule 606(b)(3) reporting requirement for brokerdealers that outsource routing services. See FIF/
STA Letter, supra note 2, at 2.
19 17 CFR 242.606(c).
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47627
1, 2020 for such activity. For customer
requests that are made on or before
February 15, 2020, a broker-dealer is
exempt from the requirement to provide
a report for self-routing activity covering
January 2020 data until seven business
days after February 15, 2020.
(3) Broker-dealers engaged in
outsourced routing activity are exempt
from the requirement to start collecting
the Rule 606(b)(3) data until April 1,
2020 for such activity. For customer
requests that are made on or before May
15, 2020, a broker-dealer is exempt from
the requirement to provide a Rule
606(b)(3) report for outsourced routing
activity covering April 2020 data until
seven business days after May 15, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–19469 Filed 9–9–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86861; File No. SR–CBOE–
2019–035]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change To
Amend Rule 6.49A Concerning OffFloor Position Transfers
September 4, 2019.
On July 3, 2019, Cboe Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘Cboe Options’’)
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 proposal to amend
Rule 6.49A concerning off-floor position
transfers. The proposed rule change was
published for comment in the Federal
Register on July 23, 2019.3 The
Exchange submitted Amendment No. 1
to its filing on August 6, 2019.4 The
20 17
CFR 200.30–3(a)(69).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86400
(July 17, 2019), 84 FR 35438.
4 In Amendment No. 1, the Exchange removed the
proposed change to permit off-floor risk-weighted
assets (‘‘RWA’’) transfers. The exchange then filed
that material as a separate proposed rule change
filing. See Securities Exchange Act Release No.
86603 (August 8, 2019), 84 FR 40460 (August 14,
2019) (SR–CBOE–2019–044). When the Exchange
filed Amendment No. 1 to CBOE–2019–035, it also
submitted the text of the amendment as a comment
letter to the filing, which is available at https://
www.sec.gov/comments/sr-cboe-2019-035/
srcboe2019035-5917170-189047.pdf.
1 15
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]]>Agencies
[Federal Register Volume 84, Number 175 (Tuesday, September 10, 2019)]
[Notices]
[Pages 47625-47627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19469]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86874]
Order Granting Application by The Financial Information Forum and
Security Traders Association for an Exemption Pursuant to Rule 606(c)
of Regulation NMS Under the Exchange Act From Certain Requirements of
Rule 606 of Regulation NMS Under the Exchange Act
September 4, 2019.
I. Introduction
The Financial Information Forum (``FIF'') and Security Traders
Association (``STA'') have filed with the Securities and Exchange
Commission (``Commission'') an application for an exemption from
certain requirements \1\ of Rule 606 of Regulation NMS under the
Exchange Act.\2\
---------------------------------------------------------------------------
\1\ See letter from Christopher Bok, Director, FIF, and James
Toes, President & CEO, STA, to Brett Redfearn, Director, Division of
Trading and Markets (``Division''), Securities and Exchange
Commission (``Commission''), dated August 2, 2019 (``FIF/STA
Letter'').
\2\ 17 CFR 242.606.
---------------------------------------------------------------------------
This order grants the following exemptive relief from certain
requirements of Rule 606, subject to certain conditions, which are
outlined in greater detail below: (1) All broker-dealers are exempt
from the requirement to comply with Rule 606(a) until January 1, 2020;
(2) all broker-dealers that engage in self-routing activity are exempt
from the requirement to comply with Rule 606(b)(3) until January 1,
2020; and (3) all broker-dealers that engage in outsourced routing
activity are exempt from the requirement to comply with Rule 606(b)(3)
until April 1, 2020.
II. Background
On November 2, 2018, the Commission adopted amendments to Rules
600, 605, and 606 of Regulation NMS under the Exchange Act.\3\ The
[[Page 47626]]
amendments to Rule 606(b) added a new disclosure requirement, set forth
in paragraph (b)(3), that requires a broker-dealer, upon request of its
customer, to provide specific disclosures related to the routing and
execution of the customer's NMS stock orders submitted on a not held
basis for the prior six months, subject to two de minimis exceptions.
The Commission also amended the customer-specific disclosure
requirement in paragraph (b)(1) of Rule 606 to apply to NMS stock
orders submitted on a held basis, NMS stock orders that are submitted
on a not held basis and the broker-dealer is not required to provide
the customer a report under paragraph (b)(3), and NMS securities that
are options contracts. In addition, the Commission amended the
quarterly public order routing disclosure requirement in Rule 606(a) to
apply to NMS stock orders submitted on a held basis, among other
things. The Commission also amended Rule 605 of Regulation NMS to
require that the public order execution report be kept publicly
available for a period of three years.
---------------------------------------------------------------------------
\3\ See Exchange Act Release No. 84528 (November 2, 2018), 83 FR
58338 (November 19, 2018) (``Adopting Release'').
---------------------------------------------------------------------------
On April 30, 2019, the Commission extended the compliance date for
the amendments to Rule 606 to begin following September 30, 2019, to
provide broker-dealers with time to implement fully the systems and
other changes necessary to comply with amended Rule 606.\4\
---------------------------------------------------------------------------
\4\ See Exchange Act Release No. 85714 (April 24, 2019), 84 FR
18136 (April 30, 2019) (``Rule 606 Compliance Date Extension
Release''). The original compliance date set forth in the Adopting
Release was May 20, 2019. The Rule 606 Compliance Date Extension
Release did not extend the original compliance date for the
amendment to Rule 605.
---------------------------------------------------------------------------
FIF/STA request that: (1) The data collection period for Rule
606(a) be extended to commence on January 1, 2020; (2) the data
collection period for Rule 606(b)(3) for broker-dealers that engage in
``self-routing activity'' (as defined below) be extended to 180 days
following the issuance of Commission staff responses to frequently
asked questions regarding amended Rule 606 (``Staff FAQs''); and (3)
the Commission delay the Rule 606(b)(3) reporting requirement for
broker-dealers that engage in ``outsourced routing activity'' (as
defined below).\5\
---------------------------------------------------------------------------
\5\ See FIF/STA Letter, supra note 2, at 2. We note that
Commission staff issued the Staff FAQs on August 16, 2019. See
Responses to Frequently Asked Questions Concerning Rule 606 of
Regulation NMS, https://www.sec.gov/tm/faq-rule-606-regulation-nms.
The Staff FAQs are not a rule, regulation, or statement of the
Commission, and the Commission has neither approved nor disapproved
their content. The Staff FAQs have no legal force or effect: they do
not alter or amend applicable law, and they create no new or
additional obligations for any person.
---------------------------------------------------------------------------
According to FIF/STA, broker-dealers and other industry
stakeholders are unable to meaningfully comply with amended Rule 606
within the current implementation timeframe.\6\ FIF/STA set forth
several implementation challenges that they state would affect a
broker-dealer's ability to comply, in particular, with the Rule
606(b)(3) requirement that it provide customer-specific reports of data
regarding its handling of customers' not held NMS stock orders.\7\ In
addition, according to FIF/STA, these challenges are greater when a
broker-dealer must report the information required under Rule 606(b)(3)
for orders handled using the order routing systems of another broker-
dealer (``outsourced routing activity'') than they are for orders
handled using a broker-dealer's own systems (``self-routing
activity'').\8\ Self-routing activity for the purposes of this
exemption is when a broker-dealer receives a customer's order and
routes it (or child orders thereof) to venues using its own systems.
Outsourced routing activity is when a broker-dealer receives a
customer's order and utilizes the systems of another broker-dealer to
route it (or child orders thereof) to venues.
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\6\ See FIF/STA Letter, supra note 2, at 1-4.
\7\ See id. at 4-8.
\8\ See id. (using the terms ``look through information'' or
``look through data'' and ``non-look through information'' or ``non-
look through data,'' respectively).
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With respect to the quarterly public reporting requirement in Rule
606(a), FIF/STA state that ``the majority of 606(a) provisions are
implementable within a relatively short timeframe'' after the issuance
of requested guidance.\9\
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\9\ See id. at 2.
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III. Order Granting Conditional Exemption
Rule 606(c) \10\ authorizes the Commission to conditionally or
unconditionally exempt any person, security, or transaction, or any
class or classes of persons, securities, or transactions, from any
provision or provisions of this section, if the Commission determines
that such exemption is necessary or appropriate in the public interest,
and is consistent with the protection of investors. The Commission, by
the Division pursuant to delegated authority,\11\ is granting a
temporary exemption from reporting obligations under Rules 606(a) and
606(b)(3) to provide additional time for broker-dealers to complete the
development of systems and processes necessary to begin collecting the
data required by the rule. As described below, however, the length of
time of the exemption from reporting obligations under Rule 606(b)(3)
differs based on whether a broker-dealer is engaged in self-routing
activity or outsourced routing activity.\12\
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\10\ 17 CFR 242.606(c).
\11\ 17 CFR 200.30-3(a)(69).
\12\ The Commission is not issuing an exemption from any other
provisions of Rule 606. Accordingly, compliance with Rule 606(b)(1)
and the obligation to provide, upon request, customer-specific
reports on routing of the following securities is still required to
begin following September 30, 2019: (1) NMS stock orders submitted
on a held basis; (2) NMS stock orders that are submitted on a not
held basis and the broker-dealer is not required to provide the
customer a report under paragraph (b)(3); and NMS securities that
are options contracts. See Rule 606 Compliance Date Extension
Release, supra note 4.
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A. Amended Rule 606(a)
The Commission has determined that providing broker-dealers with an
exemption from the quarterly public reporting requirements of amended
Rule 606(a) relating to held orders and options orders until January 1,
2020 is necessary or appropriate in the public interest, and is
consistent with the protection of investors. While the Commission
previously extended the compliance date for the amendments to Rule
606(a), FIF/STA note that a few open items remain before implementation
efforts are finalized.\13\ The Commission agrees with the importance of
what FIF/STA describe as consistent, complete and accurate reporting
across broker-dealers complying with all aspects of amended Rule
606(a). As FIF/STA state, complete and accurate data will ``provide
customers with the value the Rule intends.'' Pursuant to this
exemption, a broker-dealer has three additional months from the current
compliance date to comply with amended Rule 606(a) and therefore must
begin collecting the amended Rule 606(a) data for the first quarter of
2020, and the public report of first quarter 2020 data is required by
the end of April 2020.\14\
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\13\ See FIF/STA Letter, supra note 2, at 9 (noting that
compliance efforts continue with, e.g., options reporting and the
capture of aggregated fee information for orders).
\14\ The Commission is granting the exemption as requested by
FIF/STA. See FIF/STA Letter, supra note 2, at 2.
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B. Rule 606(b)(3) for Broker-Dealers Engaged in Self-Routing Activity
Further, the Commission has determined that providing a temporary
exemption from reporting obligations under Rule 606(b)(3) for not held
orders for a broker-dealer engaged in self-routing activity is
necessary or appropriate in the public interest, and is consistent with
the protection of
[[Page 47627]]
investors because it will provide additional time to finalize
development efforts. Specifically, the Commission believes that further
time will allow the industry to complete implementation, ultimately
allowing broker-dealers to provide customers with consistent, complete,
and accurate 606(b)(3) reports, as described above.\15\ Accordingly, a
broker-dealer engaged in self-routing activity is exempt until January
1, 2020 from the requirement to start collecting the data required by
Rule 606(b)(3) for such activity. For customer requests that are made
on or before February 15, 2020, a broker-dealer is exempt from the
requirement to provide a report for self-routing activity covering
January 2020 data until seven business days after February 15, 2020.
Pursuant to this exemption, a broker-dealer has three additional months
from the current compliance date to prepare to collect the data
required by Rule 606(b)(3) for self-routing activity, and has extra
time in February 2020 to prepare the first report relating to self-
routing activity for January 2020 data.\16\
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\15\ See FIF/STA Letter, supra note 2, at 9 (noting that
compliance efforts continue with, e.g., options reporting and the
capture of aggregated fee information for orders).
\16\ Under Rule 606(b)(3), if a customer requests a report on
the first of the month for example, the broker-dealer is required to
provide the report within seven business days of the customer's
request. Under the relief provided herein, however, if a customer
requests a report of January 2020 data on February 1, 2020, the
broker-dealer is not required to provide the report within seven
business days of February 1, 2020; instead, the broker-dealer is
required to provide the report within seven business days of
February 15.
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While the Commission is not granting the specific relief requested
by FIF/STA and is instead granting a shorter extension, the Commission
believes that this new date should provide self-routing broker-dealers
with sufficient time to finalize their internal development efforts.
C. Rule 606(b)(3) for Broker-Dealers Engaged in Outsourced Routing
Activity
Finally, the Commission has determined that providing a temporary
exemption from reporting obligations under Rule 606(b)(3) for not held
orders for a broker-dealer engaged in outsourced routing activity is
necessary or appropriate in the public interest, and is consistent with
the protection of investors. This exemption will provide additional
time to coordinate and finalize development efforts, including among
third parties.
As also is the case for broker-dealers engaged in self-routing
activity, discussed above, the Commission believes that further time
will allow the industry to complete implementation, ultimately allowing
broker-dealers to provide customers with consistent, complete, and
accurate 606(b)(3) reports.\17\ Specifically, to comply with Rule
606(b)(3), broker-dealers may need to develop systems to pass the data
required by Rule 606(b)(3) from an executing broker to an introducing
broker. To the extent that any broker-dealers that handle outsourced
routing activity require additional time to complete development of
specific portions of their systems, e.g., the required XML schema and
PDF renderer, the Commission believes that the six-month exemption it
is granting today provides sufficient time to finalize that
development. Further, the Commission believes that this additional time
should permit broker-dealers that outsource their routing activity to
third parties the additional time needed to finalize updating their
routing arrangements with such parties.
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\17\ See FIF/STA Letter, supra note 2, at 9 (noting that
compliance efforts continue with, e.g., options reporting and the
capture of aggregated fee information for orders).
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Accordingly, a broker-dealer engaged in outsourced routing activity
is exempt from the requirement to start collecting the Rule 606(b)(3)
data until April 1, 2020 for such activity. For customer requests that
are made on or before May 15, 2020, a broker-dealer is exempt from the
requirement to provide a Rule 606(b)(3) report for outsourced routing
activity covering April 2020 data until seven business days after May
15, 2020. Pursuant to this exemption, a broker-dealer has six
additional months from the current compliance date to prepare to
collect the data required by Rule 606(b)(3) for outsourced routing
activity, and has extra time in May 2020 to prepare the first report
relating to outsourced routing activity for April 2020 data.\18\
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\18\ The Commission notes that FIF/STA did not request a
specific alternative compliance date for the Rule 606(b)(3)
reporting requirement for broker-dealers that outsource routing
services. See FIF/STA Letter, supra note 2, at 2.
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Accordingly, it is ordered, pursuant to Rule 606(c) of Regulation
NMS under the Exchange Act,\19\ that:
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\19\ 17 CFR 242.606(c).
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(1) Broker-dealers are exempt from the requirement to comply with
amended Rule 606(a) by the current compliance date of October 1, 2019
and instead must begin collecting amended Rule 606(a) data for the
first quarter of 2020. The public report of first quarter 2020 data is
required by April 30, 2020.
(2) Broker-dealers engaged in self-routing activity are exempt from
the requirement to start collecting the data required by Rule 606(b)(3)
until January 1, 2020 for such activity. For customer requests that are
made on or before February 15, 2020, a broker-dealer is exempt from the
requirement to provide a report for self-routing activity covering
January 2020 data until seven business days after February 15, 2020.
(3) Broker-dealers engaged in outsourced routing activity are
exempt from the requirement to start collecting the Rule 606(b)(3) data
until April 1, 2020 for such activity. For customer requests that are
made on or before May 15, 2020, a broker-dealer is exempt from the
requirement to provide a Rule 606(b)(3) report for outsourced routing
activity covering April 2020 data until seven business days after May
15, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(69).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19469 Filed 9-9-19; 8:45 am]
BILLING CODE 8011-01-P
