FINRA and MSRB Propose Mark-Up Disclosure
On November 17th, the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board released companion proposals that would require disclosure of pricing reference information on customer confirmations for transactions in fixed income securities. The proposals are substantially similar but seek input on factors unique to the corporate and municipal bond markets. Under the two proposals, bond dealers in retail-sized fixed income transactions would be required to disclose on the customer’s confirmation the price of certain same- day principal trades in the same security, as well as the difference between this reference price and the customer’s price. Comments should be submitted to FINRA and the MSRB on or before January 20, 2015. MSRB Press Release; MSRB Regulatory Notice 2014-20; FINRA Regulatory Notice 14-52.
New Data Feed Proposed
On November 14th, the SEC provided notice of BATS Exchange’s, BATS Y -Exchange’s, EDGA Exchange’s, and EDGX Exchange’s individually filed proposals to establish a new market data product called the BATS One Feed. The BATS One Feed would disseminate, on a real-time basis, the aggregate best bid and offer of all displayed orders for securities traded on BATS and its affiliated exchanges and for which the BATS Exchanges report quotes under the Consolidated Tape Association Plan or the Nasdaq/UTP Plan. The BATS One Feed would also contain the individual last sale information for BATS and each of its affiliated exchanges. In addition, the BATS
One Feed would contain optional functionality which will enable recipients to elect to receive aggregated two- sided quotations from the BATS Exchanges for up to five (5) price levels. Comments should be submitted on or before December 11, 2014.
Chicago Mercantile Exchange
Proposed Changes to CDS Risk Model Withdrawn
On November 18th, the SEC provided notice of the Chicago Mercantile Exchange’s withdrawal of a proposed rule change relating to CME’s Risk Model for credit default swaps (“CDS”) as it applied only to broad-based index CDS products cleared by CME and would not be applicable to security-based swaps. SEC Release No. 34- 73627.
Financial Industry Regulatory Authority
Changes to Research Analyst Rules Proposed
On November 18th, the SEC provided notice of the Financial Industry Regulatory Authority’s proposed adoption in the Consolidated FINRA Rulebook of NASD Rule 2711 (Research Analysts and Research Reports) with several modifications as FINRA Rule 2241. The proposed rule change also would amend NASD Rule 1050 (Registration of Research Analysts) and Incorporated NYSE Rule 344 (Research Analysts and Supervisory Analysts) to create an exception from the research analyst qualification requirements. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of November 24. SEC Release No. 34-73622.
Debt Research Conflicts of Interest Rule Proposed
On November 18th, the SEC provided notice of the Financial Industry Regulatory Authority’s proposed adoption of new FINRA Rule 2242 (Debt Research Analysts and Debt Research Reports) to address conflicts of interest relating to the publication and distribution of debt research reports. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of November 24. SEC Release No. 34-73623.
FINRA Proposes “Pay-to-Play” Rule
On November 14th, the Financial Industry Regulatory Authority published for comment a proposed rule that would establish “pay-to-play” and related rules that would regulate the activities of member firms that engage in distribution or solicitation activities for compensation with government entities on behalf of investment advisers that provide or are seeking to provide investment advisory services to such government entities within two years after a contribution to an official of the government entity is made by the member firm or a covered associate. The proposal corresponds to Rule 206(4)-5 under the Investment Advisers Act of 1940, which includes a provision that, upon its compliance date, will prohibit an investment adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to a member firm to solicit a government entity for investment advisory services on behalf of the investment adviser unless the member firm is subject to a FINRA pay-to-play rule. Specifically, FINRA is seeking comment on three proposed new rules: Rule 2271 (Disclosure Requirement for Government Distribution and Solicitation Activities); Rule 2390 (Engaging in Distribution and Solicitation Activities with Government Entities); and Rule 4580 (Books and Records Requirements for Government Distribution and Solicitation Activities). Comments should be submitted on or before December 15, 2014. FINRA Regulatory Notice 14-50.
FINRA Proposes Additional OATS Reporting Requirements
On November 14th, the Financial Industry Regulatory Authority published for comment proposed amendments to the Order Audit Trail System (“OATS”) rules that would require member firms to report additional information to OATS. Specifically, FINRA is proposing to amend the OATS rules to require members to identify non-member broker-dealers when reporting orders received from such entities. And FINRA is also proposing to require alternative trading systems to provide FINRA with additional order book information using existing OATS interfaces. Comments should be submitted on or before January 13, 2015. FINRA Regulatory Notice 14-51.
SEC Approves Increase in Arbitrator Honoraria
On November 14th, the Financial industry Regulatory Authority announced the SEC has approved amendments to the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes governing the payments that FINRA makes to its arbitrators for the services they provide to FINRA’s dispute resolution forum, as well as the fees assessed to the parties for arbitration proceedings. To fund the increase in the payments to arbitrators, the SEC approved amendments to the codes to increase certain arbitration fees, such as the arbitration filing fees, member surcharges and process fees, and hearing session fees. The amendments are effective for arbitration cases filed on or after December 15, 2014. The arbitrator honoraria and fee increases will not apply to arbitration cases filed prior to the effective date. FINRA Regulatory Notice 14-49.
International Securities Exchange
Changes to Strike Price Intervals Proposed
On November 18th, the SEC provided notice of the International Securities Exchange’s filing of proposed amendments to its rules governing the Short Term Option Series Program that would extend current $0.50 strike price intervals in non-index options to short term options with strike prices less than $100. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of November 24. SEC Release No. 34-73633.
Longer Period Designated to Consider Proposed Changes to Information Barrier Rules
On November 17th, the SEC designated January 2, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding the International Securities Exchange’s proposed changes to its information barrier rules. SEC Release No. 34-73614.
NASDAQ OMX Group
Longer Period Designated to Consider Proposed Optional Functionality
On November 18th, the SEC designated January 4, 2015 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding The NASDAQ Stock Market’s proposed amendment of NASDAQ Rule 4751(f)(5) to provide a new optional functionality for Minimum Quantity Orders. SEC Release No. 34-73621.
Stocks Named for Fee Pilot
On November 17th, Reuters reported NASDAQ OMX Group has named the 14 companies whose stock will be part of a pilot program testing lower fees and rebates. Fee Pilot.
National Futures Association
FINRA to Raise Exam Fees
On November 19th, the National Futures Association advised that the Financial Industry Regulatory Authority will increase its fees for the administration and delivery of NFA’s qualifications examinations on January 1, 2015. NFA Notice I-14-31.
On November 19th, the National Futures Association advised of the Financial Crimes Enforcement Network’s issuance of an advisory announcing that the Financial Action Task Force had updated its list of jurisdictions with strategic AML/CFT deficiencies. NFA Notice I-14-30.
Change in Reporting Hours Proposed
On November 14th, the SEC provided notice of OneChicago’s filing of a proposal that would expand its Trading Hours for bilateral block trades and bilateral Exchange of Future for Physical (“EFP”) trades. Currently, bilateral block trades and bilateral EFP trades are permitted to be reported to the Exchange beginning at 8:00 AM (CT) until 4:00 PM (CT). Under the proposed change, market participants would be permitted to report these bilateral trades beginning at 7:00 AM (CT). The closing time for reporting bilateral block trades and bilateral EFP trades would remain unchanged at 4:00 PM (CT). Comments should be submitted on or before December 11, 2015. SEC Release No. 34-73599.