Financial Industry Regulatory Authority

FINRA to Propose Additional TRACE Reporting

On December 4, Bloomberg reported the Financial Industry Regulatory Authority will publish for comment a proposed rule that would require additional reporting to its Trade Reporting and Compliance Engine for certain securitized and collateralized debt offerings. Tracing Debt.

ATS Reporting Obligations

On November 21, the Financial Industry Regulatory Authority reminded alternative trading systems and ATS subscribers of their trade reporting obligations in TRACE-eligible securities. FINRA Regulatory Notice 14-53.

Fixed Income Clearing Corporation

Membership Category for Credit Unions Approved

On December 4, the SEC approved the Fixed Income Clearing Corporation’s proposed amendment of the clearing rules of the Mortgage-Backed Securities Division of FICC in order to establish a membership category and minimum financial requirements for “insured credit unions.” SEC Release No. 34-73735.

ICE

Proposal to Clear Additional Sovereign CDS Approved

On December 4, the SEC approved ICE Clear Europe’s proposal to clear additional credit default swaps (“CDS”) contracts that are Western European sovereign CDS contracts referencing the Kingdom of Belgium and the Republic of Austria. SEC Release No. 34-73737.

Revisions to CDS Pricing Policy Proposed

On December 3, the SEC provided notice of ICE Clear Europe’s filing of proposed revisions to its CDS End of Day Price Discovery Policy to incorporate enhancements to its end-of-day price discovery process for CDS Contracts. ICE Clear Europe proposes enhancements to its cross and lock algorithm to improve the consistency of prices and reduce the sensitivity of the final end-of-day level to a single Clearing Member’s submission. Comments should be submitted within 21 days after publication in the Federal Register. SEC Release No. 34- 73731.

Proposed Amendment Regarding Use of Initial Margin is Approved

On November 21, the SEC approved ICE Clear Credit’s proposed amendment of ICC Clearing Rule 402(j) to provide further clarity regarding ICC’s obligation to return any Clearing Participant’s House Initial Margin used as an internal liquidity resource. Under Rule 402(j), ICC may, in connection with a Clearing Participant default, (i) exchange House Initial Margin held in the form of cash for securities of equivalent value and/or (ii) exchange House Initial Margin held in the form of cash in one currency for cash of equivalent value in a different currency. The proposed rule change clarifies that the exchanges involving a Clearing Participant’s Initial Margin in its House Account will occur on a temporary basis and that ICC will reverse any such exchange as soon as practicable following the conclusion of event which gave rise to the liquidity need. ICC states that the duration of the liquidity event will likely be significantly shorter than the amount of time necessary to complete the default management process for the event which gave rise to the liquidity need. The proposed rule change will also delete general references to ICC’s liquidity policies and procedures and instead will use the defined term “ICE Clear Credit Procedures” throughout the ICC Rules. SEC Release No. 34-73666.

International Securities Exchange

Modifications to Opening Procedures Proposed

On December 4, the SEC provided notice of the International Securities Exchange’s filing of a proposed rule change that would modify the manner in which the Exchange’s trading system opens trading at the beginning of the day and after trading halts and to codify certain existing functionality within the trading system regarding opening and reopening of option classes traded on the Exchange. The Exchange proposes to amend Rule 701 to modify the opening process by providing away market protection at the open and making system changes to limit instances where an options class goes into an imbalance state which prevents the Exchange from determining the opening price in a timely manner for that options class. The Exchange also proposes to amend parts of Rule 701 to more clearly describe the manner in which the trading system functions with regards to the rotation process for regular orders. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 8. SEC Release No. 34-73736.

International Swaps and Derivatives Association

ISDA Launches Principles on CCP Recovery

On November 25, the International Swaps and Derivatives Association announced the publication of a set of key principles on the adequacy and structure of central counterparty (“CCP”) loss-absorbing resources and on CCP recovery and resolution. ISDA Press Release.

Municipal Securities Rulemaking Board

Amendments to Professional Qualification Rules Proposed

On December 1, the SEC provided notice of the Municipal Securities Rulemaking Board’s filing of proposed amendments to MSRB Rules G-1, on separately identifiable department or division of a bank; G-2, on standards of professional qualification; G-3, on professional qualification requirements; and D-13, on municipal advisory activities. The proposed rule changes would establish professional qualification requirements for municipal advisors and their associated persons and make related changes to select MSRB rules. Comments should be submitted on or before December 26, 2014. SEC Release No. 34-73708.

NASDAQ OMX Group

Changes Proposed Relating to the NASDAQ Opening and Halt Cross

On December 4, the SEC provided notice of The NASDAQ Stock Market’s filing of a proposed rule change that would modify the NASDAQ Options Market Chapter VI, Section 1 and Section 8 to update or add definitions, which include Current Reference Price, NASDAQ Opening Cross, Eligible Interest, Valid Width National Best Bid or Offer, Away Best Bid or Offer, and On the Open Order. The purpose is to also make changes regarding: the criteria for opening of trading or resumption of trading after a halt; NASDAQ posting on its website any changes to the dissemination interval or prior Order Imbalance Indicator; the procedure if more than one price exists; the procedure if there are unexecuted contracts; and the ability of firms to elect that orders be returned in symbols that were not opened on the NASDAQ Options Market before the conclusion of the Opening Order Cancel Timer. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 8. SEC Release No. 34-73739.

Retail Price Improvement Pilot Approved

On November 28, the SEC approved NASDAQ OMX BX’s proposed 12-month pilot program to attract additional retail order flow to the Exchange, while also providing the potential for price improvement to retail order flow. The Program would be limited to trades occurring at prices equal to or greater than $1.00 per share. All Regulation NMS securities traded on the Exchange would be eligible for inclusion in the Program. SEC Release No. 34- 73702.

IPO Workstation Proposed

On November 25, the SEC provided notice of The NASDAQ Stock Market’s filing of a proposed rule change to offer the new IPO Workstation. NASDAQ recently filed a proposed rule change to offer the IPO Indicator as an enhancement to NASDAQ Workstation subscription at no additional cost. The IPO Indicator is designed to assist member firms in monitoring their orders in the NASDAQ Halt Cross process leading up to the launch of an initial public offering. NASDAQ is now proposing to adopt Rule 7015(i) to offer the new IPO Workstation, which will provide subscribing member firms with stand-alone access to the IPO Indicator service, at no cost at this time. Comments should be submitted on or before December 23, 2014. SEC Release No. 34-73683.

National Futures Association

Annual Affirmation Requirements

On December 3, the National Futures Association reminded members that the CFTC requires any person that claims an exemption or exclusion from CPO registration under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), or an exemption from CTA registration under 4.14(a)(8), must annually affirm the applicable notice of exemption or exclusion within 60 days of the calendar year end, which is March 2, 2015, for this affirmation cycle. Failure to affirm any of the above exemptions or exclusions by March 2, 2015 will be deemed a request to withdraw the exemption or exclusion and, therefore, result in the automatic withdrawal of the exemption or exclusion on March 2, 2015. NFA Notice I-14-34.

Prohibition on the Use of Certain Electronic Funding Mechanisms

On December 1, the National Futures Association advised that the CFTC has approved NFA’s Interpretive Notice entitled “NFA Compliance Rules 2-4 and 2-36: Prohibition on the Use of Certain Electronic Funding Mechanisms.” The Interpretive Notice prohibits NFA Members from permitting customers to fund their futures or forex accounts with a credit card or other electronic methods tied to a credit card. The prohibition applies to new customers as well as funding made by existing customers. The prohibition is effective January 31, 2015. NFA Notice I-14-33. See also NFA Press Release.

NYSE

Longer Period Designated to Consider Proposed Removal of Quote Mitigation Plan

On December 2, the SEC designated January 19, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NYSE Arca’s and NYSE MKTS’s separately submitted proposals to remove their exchange quote mitigation plans from their respective rules.

Amendments to Rules for Limited Liability Companies Proposed

On November 21, the SEC provided notice of the New York Stock Exchange’s and NYSE MKT’s individually filed proposals to amend their respective rules to add limited liability companies as eligible member organizations and delineate the information limited liability companies must submit to the Exchange as part of the membership process; eliminate the requirement that a member corporation be created or organized, and maintain its principal place of business, in the United States; and make additional related amendments to update its membership rules. Comments should be submitted on or before December 19, 2014.

New NYSE Supervisory Rules

On November 26, NYSE advised members that the Exchanges have adopted a new set of rules concerning supervision modeled on the rules of the Financial Industry Regulatory Authority. The Information Memo summarizes key changes to the Exchanges’ rules regarding supervision resulting from these amendments. Members are also advised to review FINRA’s March 2014 Regulatory Notice 14-10, which describes its consolidated supervision rules (upon which the Exchanges’ supervisory rules are based). Most of the new NYSE rules were effective December 1, 2014. NYSE Information Memo 14-11.

Longer Period Designated to Consider User Information Proposal

On November 21, the SEC designated January 5, 2014 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding NYSE Arca’s and NYSE MKT’s separately proposed amendments to their respective rules to authorize the Exchange to share any User-designated risk settings in Exchange systems with the Clearing Member that clears transactions on behalf of the User.

OneChicago

Guidance on Bilateral Trades Proposed

On December 2, the SEC provided notice of OneChicago’s filing of proposed Notice to Members (“NTM”) 2014- 33, which provides guidance to market participants regarding bilateral block and bilateral Exchange of Future for Physical (“EFP”) reporting. NTM 2014-33 provides guidance relating to four aspects of bilateral block and bilateral EFP reporting. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of December 8. SEC Release No. 34-73715.

The Options Clearing Corporation

Amendments to Clearing Fund Rules Proposed

On November 25, the SEC provided notice of The Options Clearing Corporation’s filing of a proposed rule change to permit OCC to collect additional financial resources from its clearing membership by increasing the size of its Clearing Fund on an intra-month basis when OCC determines such action should be taken so that the Clearing Fund is sufficient to protect OCC against potential loss under simulated default scenarios. Comments should be submitted on or before December 23, 2014. SEC Release No. 34-73685.