Chicago Mercantile Exchange
Longer Period Designated for Consideration of Proposed Risk Model Changes
On October 1st, the SEC designated November 16th, 2014 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding the Chicago Mercantile Exchange’s (“CME”) proposed changes to its risk model for the clearing of broad-based index credit default swaps which share the same Guaranty Fund with single-name CDS in the event the CME launches clearing of single-name CDS. SEC Release No. 34-73283.
Longer Period Designated to Consider System Functionality Proposal
On September 25th, the SEC designated November 14, 2014 as the date by which it will approve, disapprove, or institute disapproval proceedings regarding EDGA Exchange’s proposed amendment of Rule 1.5 and Chapter XI of its rule book to include additional specificity regarding the current functionality of the exchange’s system, including the operation of its order types and order instructions, and to describe certain new system functionality. SEC Release No. 34-73217.
Financial Industry Regulatory Authority
Disapproval Proceedings Instituted for Proposed Definition of Arbitrator
On October 1st, the SEC instituted proceedings to determine whether to approve or disapprove FINRA’s proposed changes to the definition of “Non-Public Arbitrator” and “Public Arbitrator.” Comments should be submitted within 30 days after publication in the Federal Register, which is expected during the week of October 6. Rebuttal comments should be submitted within 45 days. SEC Release No. 34-73277.
On September 30th, FINRA published for comment its proposal for the implementation of the Comprehensive Automated Risk Data System (“CARDS”). CARDS would provide FINRA with the data necessary for it to identify and respond to potential high-risk areas and suspicious activities not currently found via its existing surveillance programs. Comments should be submitted on or before December 1, 2014. FINRA Regulatory Notice 14-37; FINRA press release.
Increase in Arbitrator Honoraria Approved
On September 29th, the SEC approved FINRA’s proposed amendments to its Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes to increase certain arbitration filing fees, member surcharges and process fees, and hearing session fees for the primary purpose of increasing arbitrator honoraria. SEC Release No. 34-73245.
Insuring Against Awards
On September 29th, Reuters reported that FINRA will not require broker-dealers to carry arbitration insurance.
Form U4 Procedures Proposed
On September 26th, the SEC provided notice of FINRA’s proposed adoption of FINRA Rule 3110(e) (Responsibility of Member to Investigate Applicants for Registration) in the consolidated FINRA rulebook. The proposal streamlines and clarifies the rule language and adds a provision to require members to adopt written procedures that are reasonably designed to verify the accuracy and completeness of the information contained in an applicant’s Form U4 (Uniform Application for Securities Industry Registration or Transfer). In addition, the proposal adds Supplementary Material .15 (Temporary Program to Address Underreported Form U4 Information) to FINRA Rule 3110 (Supervision) to establish a temporary program that will issue a refund to members of late disclosure fees assessed for the late filing of responses to Form U4 Question 14M, subject to specified conditions. Comments should be submitted on or before October 24th, 2014. SEC Release No. 34-73238.
SEC Approves Hearing Panel Proposals
On September 26th, the SEC approved FINRA’s proposed amendment of Rule 9231 to establish a category ofpersons eligible to serve as Panelists on a Hearing Panel or an Extended Hearing Panel that includes persons currently serving, or having served previously, on a committee appointed or approved by the FINRA Board. The amendment also makes a conforming amendment to Rule 9232, which establishes criteria for the appointment of eligible Panelists to Hearing Panels and Extended Hearing Panels. The rule change provides FINRA with a larger pool of individuals with experience and expertise that could serve as Panelists. SEC Release No. 34-73230.
Proposed Payments to Unregistered Persons Approved
On September 25th, the SEC approved FINRA’s proposed adoption of FINRA Rule 2040 (Payments to Unregistered Persons) regarding the payment of transaction-based compensation by members to unregistered persons, and Supplementary Material .01 (Reasonable Support for Determination of Compliance with Section 15(a) of the Exchange Act). SEC Release No. 34-73210.
Individual Snapshot Reports
On September 25th, FINRA announced it has made available via the Internet snapshot reports for individuals registered as a broker or investment adviser representative. FINRA Information Notice.
ICE Clear Credit LLC
Clearance of Additional Standard Emerging European and Middle Eastern Sovereign Single Names Approved
On September 25th, the SEC approved ICE Clear Credit LLC’s (“ICC”) proposed adoption of rules that will provide the basis for ICC to clear additional credit default swap contracts. Specifically, ICC is proposing to amend Section 26D of its Rules to provide for the clearance of additional standard emerging sovereign single name constituents of the CDX Emerging Markets Index. SEC Release No. 34-73220.
International Securities Exchange
Amendments to Information Barrier Rules Proposed
On September 30th, the SEC provided notice of the International Securities Exchange’s filing of proposed amendments to Rules 810 (Limitations on Dealings) and 717 (Limitations on Orders), which govern information barriers. The proposal would amend the portion of the rules that address the limitation on the flow of information between a member’s Electronic Access Member (“EAM”) unit, which handles the customer/agency side of the business, and its affiliated Primary Market Maker and/or Competitive Market Maker unit, which handles the proprietary side of the business. Amended Rule 810 would allow EAMs to know where and at what price its affiliated market makers are either quoting or have orders on the order book and to use that information to influence their routing decisions. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 6. SEC Release No. 34-73261.
NASDAQ OMX Group
Revisions to Open Outcry Priority Are Approved
On October 2nd, the SEC approved NASDAQ OMX PHLX’s proposed revisions to the priority afforded to in- crowd participants respecting crossing, facilitation, and solicited orders in open outcry trading. SEC Release No. 34-73291.
New Optional Functionality to Minimum Quantity Orders Proposed
On September 30th, the SEC provided notice of NASDAQ Stock Market’s proposed provision of new optional functionality to minimum quantity orders that would allow a market participant to designate a minimum individual execution size and allow users to avoid interaction with smaller orders resting on the book. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 6. SEC Release No. 34-73266.
National Futures Association
Notices Regarding Forms PQR and PR
On October 1st, the National Futures Association advised it has made minor changes to the CPO Form PQR. The changes, which are effective for the quarter ending September 30, 2014, will be available in the EasyFile system on October 6, 2014 along with an updated PQR template with expanded help text. There are no changes to the CTA Form PR this quarter. NFA Notice I-14-26.
Amendments Regarding Use of Technology to Monitor FDM Forex Customer Liability Requirements
On September 30th, the National Futures Association reminded members that NFA Financial Requirements Section 14 requires Forex Dealer Members (“FDMs”) to calculate daily the amount owed to customers for forex transactions and hold assets equal to or in excess of that amount in a qualifying institution in the U.S. or money center country (“Forex Funds Depository”). NFA recently amended NFA Financial Requirements Section 14 to require FDMs to instruct any Forex Funds Depository holding these funds to report the balances in these accounts on a daily basis to NFA or a third party designated by NFA. The amendment also provides that the Forex Funds Depository must comply with this request in order to be an acceptable depository for retail forex assets. NFA Notice I-14-25.
Proposed Changes to Order of Priority Are Approved
On October 1st, the SEC approved NYSE Arca’s proposed revision of the order of priority of bids and offers when executing orders in open outcry. SEC Release No. 34-73282.
Sharing of User-Designated Risk Settings Proposed
On October 1st, the SEC provided notice of NYSE Arca’s and NYSE MKT’s separately proposed amendment of their respective rules to authorize each exchange to share any user-designated risk settings in their systems with the clearing member that clears transactions on behalf of the User. Comments should be submitted within 21 days after publication in the Federal Register, which is expected during the week of October 6.