Financial Industry Regulatory Authority
T FINRA Rule Review
On December 9th, the Financial Industry Regulatory Authority issued two rule reviews which assessed the effectiveness and efficiency of FINRA's rules governing communications with the public and FINRA's rules governing gifts, gratuities and non-cash compensation. FINRA Press Release. On December 10th, Reuters described the reviews’ findings. Recommendations include revising the rules on gifts and non-cash compensation brokerages may give to employees and the rules on the use of social media. Recommendations
RACE Amendments Proposed
On December 5th, the SEC provided notice of the Financial Industry Regulatory Authority’s filing of a proposed amendment to the FINRA Rule 6700 Series (Trade Reporting and Compliance Engine (TRACE)) that would require members to identify transactions with non-member affiliates, and to change how FINRA disseminates a specific subset of these transactions. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73762.
Fixed Income Clearing Corporation
Change in Novation Time Proposed
On December 11th, the SEC provided notice of the Fixed Income Clearing Corporation’s filing of a proposal to move the time of novation applicable to certain transactions submitted to the Government Securities Division and Mortgage-Backed Securities Division to earlier in the clearing process in order to provide members with additional legal certainty that FICC will be their legal counterparty with respect to their guaranteed trades for purposes of members’ regulatory capital requirements. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 15. SEC Release No. 34-73805.
Amendments to Rules on Insolvency and Ceasing to Act Proposed
On December 8th, the SEC provided notice of the Fixed Income Clearing Corporation’s filing of proposed amendments to the rules of its the Government Securities Division and the rules of its Mortgage-Backed Securities Division concerning insolvency and ceasing to act. The amendments would simplify in certain respects FICC’s process in a cease to act situation and provide greater legal certainty for FICC and its members, particularly in an intra-day cease to act situation. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73787.
End-of-Day Revisions Approved
On December 8th, the SEC approved ICE Clear Credit’s proposed revisions to the ICC End-of-Day Price Discovery Policies and Procedures that incorporate enhancements to the price discovery process. SEC Release No. 34-73790.
International Swaps and Derivatives Association
On December 10th, the International Swaps and Derivatives Association discussed its November, 2014 paper entitled “Principles on CCP Recovery”, which makes recommendations concerning the adequacy and structure of central counterparty (“CCP”) loss-absorbing resources and on CCP recovery and resolution. ISDA highlights the paper’s findings on the need for: more transparency regarding the risk management standards and methodologies used to size CCP loss-absorbing resources; standardized, mandatory stress tests; CCP “skin-in-the-game”; a plan in the event a CCP’s loss-absorbing resources are inadequate; and an effective default management process. derivatiViews.
Municipal Securities Rulemaking Board
MSRB Best Execution Proposal Approved
On December 5th, the SEC approved the Municipal Securities Rulemaking Board’s proposed rule changes which establish a requirement that brokers, dealers, and municipal securities dealers seek best execution of retail customer transactions in municipal securities. SEC Release No. 34-73764. See also MSRB Press Release (announcing SEC approval and setting a December 7, 2015 effective date)
NASDAQ OMX Group
Longer Period Designated to Consider New Solicitation Mechanism
On December 8th, the SEC designated January 29, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NASDAQ OMX PHLX’s proposed adoption of new Exchange Rule 1081, Solicitation Mechanism, that would introduce a new electronic solicitation mechanism pursuant to which a member could electronically submit all-or-none orders of 500 contracts or more (or, in the case of mini options, 5000 contracts or more). SEC Release No. 34-73791.
Directed Order Additions Proposed
On December 8th, the SEC provided notice of NASDAQ OMX BX’s filing of a proposal that would add definitions of “Directed Order” and “Directed Market Maker”, as well as provisions concerning the designation of an order as a Directed Order and DMM market making obligations. The proposal also revises priority rules to provide for a DMM participation entitlement. Finally, the rule makes certain clarifications to the text of rules governing Lead Market Makers. Comments should be submitted on or before January 2, 2015. SEC Release No. 34-73784.
Amendment to Continued Listing Requirements Proposed
On December 11th, the SEC provided notice of the New York Stock Exchange’s filing of proposed amendments to its continued listing requirements in relation to the late filing of a company’s annual report with the SEC as set forth in Section 802.01E of the Exchange’s Listed Company Manual. As amended, the Late Filer Rule would (i) expand the rule to impose a maximum period within which a company must file a late quarterly report on Form 10- Q in order to maintain its listing and (ii) clarify the Exchange’s treatment of companies whose annual or quarterly reports are defective at the time of filing or become defective at some subsequent date. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 15. SEC Release No. 34-73821.