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Printer-Friendly Exemptive Relief from the OATS Reporting Requirements Pursuant to NASD Rules 6955(d) and 9610(a)

On September 28, 2005 the SEC approved amendments to the OATS Rules (see Notice to Members 05-78). These newly approved amendments contain a provision that permits NASD to grant exemptive relief from the OATS reporting requirements for manual orders in certain circumstances where, for example, reporting of such information would be unduly burdensome for the member or where temporary relief from the rules (in the form of additional time to achieve compliance) would permit the member to avoid unnecessary expense or hardship. Members should note that exemptive relief is only applicable to the transmission requirements of the OATS Rules (NASD Rule 6955). Firms that are granted an exemption pursuant to NASD Rule 6955(d) must still record all order information required by NASD Rule 6954 and maintain such information in an electronic format. NASD may request such information on a periodic basis during the course of its routine surveillance activities.

UPDATE: On March 30, 2006, the SEC approved further amendments to the OATS Rules that expand NASD's OATS exemptive authority to include electronic recording requirements. As amended, NASD has the authority to grant exemptive relief from the OATS electronic recording and reporting requirements for manual orders to members that meet specified criteria.

Firms that meet all of the following criteria and can demonstrate that the transmission of OATS data to NASD would be unduly burdensome are eligible to request an exemption.

Any exemptive relief granted would be for a period of no than longer two years, depending on the particular facts and circumstances. At or prior to the expiration of a grant of exemptive relief, members continuing to meet the criteria specified above that can demonstrate that OATS reporting continues to be unduly burdensome may request a subsequent exemption. Member firms must submit their application for exemptive relief no later than February 1, 2006 to ensure that the exemption can be reviewed and processed by NASD prior to the May 8, 2006 implementation date. After May 8, 2006 member firms that become subject to the OATS Rules must submit their application for exemptive relief prior to receiving orders in NASDAQ securities.

Firms that have previously reported data to OATS are eligible to request exemptive relief pursuant to NASD Rule 6955(d).  Members should note, however, that such requests would only be granted in exceptional circumstances. NASD's exemptive authority under Rule 6955(d) is not intended to be used for temporary system or operational issues/problems.

To formally request exemptive relief, please complete our request form and return via fax, email or regular mail, along with supporting documentation, to the following address:

NASD, Market Regulation Department/OATS
9509 Key West Avenue
Rockville, MD 20850
Fax: 240-386-5139
Email: OATS Phase III

With a copy to:

NASD, Office of General Counsel
1735 K Street, NW
Washington DC 20006
Attention: Matthew Adeola