Regulatory Notice 10-42

SEC Approves Amendments to Establish Regulation NMS-Principled Rules in Market for OTC Equity Securities

Effective Dates: FINRA Rules 6434, 6437 and 6450: February 11, 2011; FINRA Rule 6460 and NASD Rule 2320: May 9, 2011

Executive Summary

Effective February 11, 2011, and May 9, 2011, are new FINRA rules that extend certain Regulation NMS protections to quoting and trading of over-the-counter (OTC) Equity Securities. For OTC Equity Securities, these new rules:

• set forth the permissible pricing increments for the display of quotations and acceptance of orders;
• require firms to avoid locking and crossing quotations within an inter-dealer quotation system;
• establish a cap on access fees imposed against a firm’s published quotation; and
• require an OTC Market Maker, subject to certain exceptions, to display the full size of customer limit orders that improve the price of the marker maker’s displayed quotation or that represent more than a de minimis change in the size of the market maker’s quote if at the best bid or offer (BBO).

 

The text of the amendments can be found in the FINRA Manual at www.finra.org/finramanual.

 

Questions regarding this Notice should be directed to Racquel Russell, Assistant General Counsel, Office of General Counsel, at (202) 728-8363.