Exemptive Relief from Certain Trade Reporting Requirements Related to Regulation NMS

May 21, 2007

 

On May 10, 2007, NASD filed an immediately effective rule change with the SEC to adopt new Rule 5150 and amend Rule 9610 to provide NASD with authority to temporarily exempt members from certain new NASD trade reporting requirements for the Alternative Display Facility (ADF) and the NASD Trade Reporting Facilities (TRFs) relating to Regulation NMS (Reg NMS).1 Specifically, Rule 5150 provides NASD with exemptive authority to address implementation issues concerning: (1) the self-help modifier; (2) the qualified contingent trade modifier; (3) the sub-penny modifier; and (4) the modifier used to distinguish between inbound and outbound intermarket sweep orders. Firms should review NASD Notice to Members 07-23 for more information about the new required Regulation NMS-related trade reporting modifiers.

To seek exemptive relief, firms must submit a written request to NASD, which:

  1. identifies the specific new Reg NMS-related trade reporting modifier(s) (i.e., self-help modifier, qualified contingent trade modifier, sub-penny modifier or the modifier used to distinguish between inbound and outbound intermarket sweep orders) that the firm is unable to implement in a timely manner;
  2. explains why they are unable to complete the necessary systems changes by the applicable compliance date;
  3. provides an estimated completion date for the outstanding systems work and full compliance; and
  4. provides any additional information and supporting documentation that is relevant to making a determination that there is good cause for such an exemption and that it is consistent with the protection of investors and the public interest.

To formally request exemptive relief, members must email or send via regular mail their written request addressing each of the criteria specified above to the following address:

 

NASD
Market Regulation
Regulation NMS Modifiers
9509 Key West Avenue
Rockville, MD 20850
Attention: Matt Pikel
Email: regnmsmodifiers@nasd.com

 

With a copy to:

 

NASD
Office of General Counsel
1735 K Street, NW
Washington, D.C. 2006
Attention: Matthew Adeola
Email: regnmsmodifiers@nasd.com

 

Members should note that NASD will only grant such an exemption on a firm-by-firm basis for good cause shown after taking into consideration all relevant factors, and only if it is consistent with the protection of investors and the public interest. In addition, it should be noted that NASD does not intend to grant exemptions under Rule 5150 except in exceptional circumstances and only where the requester has demonstrated that it has made best efforts to comply in a timely fashion with the new trade reporting requirements related to Regulation NMS and there is a specific, limited problem or issue preventing the member from achieving full compliance. NASD will exercise such exemptive authority on a temporary basis and, as set forth in the new rule, NASD will determine the duration of any exemption, which shall not exceed six months.

1 NASD's authority to provide such an exemption will automatically sunset one year after the Pilot Stocks Phase Date, scheduled to occur on July 9, 2007.