The Securities and Exchange Commission is seeking comments on a NASDAQ proposal to amend Rule 4611(d) to adopt a modified rule for member firms that provide “Sponsored Access” to NASDAQ’s execution system.
NASDAQ’s proposal to amend Rule 4611(d) would define Sponsored Access as taking one of three general structures: Direct Market Access, Direct Sponsored Access and Third Party Sponsored Access. Direct Market Access occurs where the Sponsored Participant’s orders pass through a member firm’s systems before reaching the exchange. Direct Sponsored Access occurs where a Sponsored Participant is provided direct access to NASDAQ through a dedicated port. The proposal would require member firms to obtain contractual commitments from each Sponsored Participant provided with Direct Sponsored Access. Third Party Sponsored Access occurs where Sponsored Access is provided through a third party, such as a service bureau. The proposal would require member firms to obtain a contractual commitment from the service bureau to obtain from each Sponsored Participant a contractual commitment for the benefit of the member firm.
NASDAQ is also proposing that member firms be required to ensure that the Sponsored Access front-end or other functionality includes controls that systemically limit a member firm’s financial exposure and ensure compliance with applicable regulatory requirements. NASDAQ is proposing that member firms be required to ensure that their compliance units receive timely reports of all trading activity by their Sponsored Participants sufficient to permit the member firms to comply with applicable SEC and NASDAQ recordkeeping and reporting requirements.
Comments are due by February 19.