Statement Regarding New Rule to Enhance OTC Equities Transparency
Ray Pellecchia (212) 858-4387
The Financial Industry Regulatory Authority (FINRA) is pleased to announce the U.S. Securities and Exchange Commission's recent approval of FINRA's proposal to expand its transparency initiative for over-the-counter (OTC) equity securities. Under the newly approved rule, FINRA will supplement the alternative trading system (ATS) volume it currently publishes with all other equity volume executed over-the-counter by FINRA members.
The rule is designed to bring additional transparency to this area of the financial markets, as part of an ongoing effort to help enhance investor confidence. With this initiative FINRA will expand its volume transparency to all of the OTC market, enabling market participants and investors to better understand a firm's trading volume and market share.
Under the new rule, non-ATS volume will be published on the same schedule as that for ATS volume: a two-week delay for NMS stocks in Tier 1 of the National Market System (NMS) Plan to Address Extraordinary Market Volatility (i.e., those NMS stocks in the S&P 500 Index or the Russell 1000 Index and certain ETPs) and a four-week delay for all other NMS stocks and OTC equity securities.
In addition, a firm's aggregate non-ATS volume for each month would be published on a one-month delayed basis. For firms that execute fewer than 200 non-ATS transactions per day on average during the reporting period, FINRA would combine and report the volume for all such firms on an aggregated, non-attributed basis.
This change – the timing of which will be announced in an upcoming regulatory notice – will be the latest in a series of FINRA measures that increase public visibility into off-exchange trading. In May 2014, FINRA began requiring that that each ATS report to FINRA its aggregate weekly volume information and number of trades, by security, in equity securities. And in June 2014, FINRA began providing the information to the public. Prior to FINRA making that data generally available, ATS volume was provided primarily to professionals, based on voluntary reporting to market information vendors by some (but not all) ATSs, on an aggregated, monthly basis.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.