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6439. Requirements for Member Inter-Dealer Quotation Systems

A member inter-dealer quotation system (whether or not also an alternative trading system or “ATS” as defined by Rule 300(a) of SEC Regulation ATS) that permits quotation updates on a real-time basis in OTC Equity Securities must comply with the following requirements:
(a)  The member inter-dealer quotation system must establish, maintain and enforce written policies and procedures relating to the collection and dissemination of quotation information in OTC Equity Securities on or through its system.  Such written policies and procedures and any material updates, modifications and revisions thereto must be prominently disclosed to subscribers within five business days following the date of establishment of the policy or procedure or implementation of the material change and provided to prospective subscribers upon request.  These policies and procedures must be reasonably designed to ensure that quotations received and disseminated are informative, reliable, accurate, firm and treated in a not unfairly discriminatory manner, including by establishing non-discretionary standards under which quotations are prioritized and displayed;
(b)  The member inter-dealer quotation system must establish non-discriminatory written standards for granting access to quoting and trading in OTC Equity Securities on its system that do not unreasonably prohibit or limit any person in respect to access to services offered by such member inter-dealer quotation system.  Such written standards and any material updates, modifications and revisions thereto must be prominently disclosed to subscribers within five business days following the date of establishment of the written standards or implementation of the material change and provided to prospective subscribers upon request.  A member inter-dealer quotation system must make and keep records of all grants of access including (for all subscribers) the reasons for granting such access and all denials or limitations of access and reasons (for each applicant) for denying or limiting access;
(c)  Member inter-dealer quotation systems that do not automatically execute all orders presented for execution against displayed quotations for which a member subscriber has a Rule 5220 obligation must establish, maintain and enforce written policies and procedures reasonably designed to address instances of unresponsiveness to orders in an OTC Equity Security.  These policies and procedures must, at a minimum, specify an efficient process for:
(1)  monitoring subscriber unresponsiveness;
(2)  subscribers submitting to the member inter-dealer quotation system complaints regarding potential instances of order unresponsiveness;
(3)  documenting the subscriber’s rationale for unresponsiveness; and
(4)  determining specified steps when an instance or repeated order unresponsiveness may have occurred;
(d)(1)  Member inter-dealer quotation systems that do not automatically execute all orders presented for execution against displayed quotations for which a member subscriber has a Rule 5220 obligation must report to FINRA the below order and related response information for such orders in an OTC Equity Security.  The following information must be reported on a monthly basis in the form and manner prescribed by FINRA:
(A)  MPID-level Aggregate Information.  The member inter-dealer quotation system must provide to FINRA aggregated information per member subscriber market participant identifier (MPID) across all symbols quoted by the MPID during the preceding calendar month; specifically:
(i)  Total number of marketable orders presented for execution against the MPID’s quotation;
(ii)  Average execution (full or partial) time for marketable orders presented against the MPID’s quotation based on the time an order is presented;
(iii)  Total number of full or partial executions based on the time a marketable order is presented that are within the following execution timeframes: < 5 seconds; ≥ 5 seconds and < 10 seconds; ≥10 and < 20 seconds; and ≥ 20 seconds;
(iv)  Total number of marketable orders presented against the MPID’s quotation that did not receive a full or partial execution; and
(v)  Average response time of the highest 10% and highest 50% of the MPID’s response times for marketable orders (for full or partial executions);
(B)  Order-level Information.  (Implementation date to be announced)
(2)  Member inter-dealer quotation systems are not required to report to FINRA pursuant to this Rule any of the items of information specified in paragraph (d)(1)(B) of this Rule if, at a minimum, the items specified in paragraph (d)(1)(B)(i) through (xi) are subject to reporting to the Consolidated Audit Trail under Rule 6830;
(e)  The member inter-dealer quotation system must make available to customers on its (or its affiliate distributor’s) website a written description of each OTC Equity Security order- or quotation-related data product offered by such member inter-dealer quotation system and all related pricing information, including fees, rebates, discounts and cross-product pricing incentives.  Such information must be made available at least two business days in advance of offering the data product.  The website page(s) describing the OTC Equity Security order or quotation data product offerings and all related pricing information must be kept accurate and up-to-date with respect to the required data product descriptions and pricing information.  Member inter-dealer quotation systems are not precluded from negotiating lower fees with customers, provided that the member inter-dealer quotation system discloses on such website page(s) the circumstances under which it may do so; and   
(f)  The member inter-dealer quotation system must provide FINRA with prompt notification when it reasonably becomes aware of any non-de minimis systems disruption that degrades, limits, or otherwise impacts the member inter-dealer quotation system’s functionality with respect to trading or the dissemination of market data.  Such notification must include, on a reasonable best efforts basis, a brief description of the event, its impact, and the member inter-dealer quotation system’s resolution efforts.
Adopted by SR-FINRA-2020-031 eff. Oct. 1, 2021.

Selected Notice: 21-28.